Microsoft and Meta Allay Investors’ Tariff Fears; A Court Deals Apple an Epic Blow
43:04 Share

Possibility surrounds us in digital innovation, evolving markets and disruptive ideas. And while promises can inspire dreams, proof is the catalyst for transformation.

Developers like you are building the future, but you need the right tools to move fast and go further, right? That's where Microsoft comes in. With Microsoft, you can do it.

With tools like GitHub Copilot, VS Code, and Azure AI Foundry, you have everything you need to push the limits and bring your ideas to life faster. And with security, compliance, and responsible AI built in, you can focus on what matters most, building the next big thing. Learn more at developer.microsoft.com slash AI.

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, Microsoft surges on the back of strong quarterly sales and profit growth despite economic uncertainty. Plus, Meta also jumping on the company's ad sales, laying investor fears about the impact of tariffs. And Apple takes an epic blow from a federal judge on its App Store sales commissions as the tech giant gears up for its own earnings later today.

But first, we check in on these markets, which are in risk-on mode. We're up more than 2% on the Nasdaq 100. Best day in all of a week at the moment as we see those earnings news flow into the risk sentiment. We're seeing Bitcoin also up 2.4%. Interesting news that Morgan Stanley's E-Trade might be offering Bitcoin and more broadly crypto to its retail investor base. That's a big one.

But Ed, dive underneath the hood. What's going on in the micro? Yeah, big technology earnings performance and Meta is the place to start, right? This is a big gain and the story really simple. Outlook of the core business for the current period strong, raising the guidance for the range on capital expenditures, commitment to advanced compute access across the company. But there is a nuance there that also the higher costs of doing business because the tariffs is having an impact. Great discussion ahead. And then Microsoft. Wow.

Look at the gain, 33% top line growth on Azure Cloud. Also discussion about the commitment to spend on data center, but there is some evidence that all of the prior investment is now materializing in the spend on their cloud business. Let's get some more Microsoft results. Ted Mortenson, Managing Director at Baird. 33% top line Azure growth is 4% beyond what the street said.

But within that, there's a 16% contribution from AI. Those too many are just numbers, but they do seem to be evidence that the investment to date is now starting to translate to top line gain. You nailed it, and thanks for having me. The bottom line, if you look at that, that's actually 35% in constant currency.

What Amy Hood alluded to is most of that upside is just the global 2000 migrating to cloud. And right now on Azure, they can't even keep up with demand on Gen AI. That guide of 34 to 35% was way above the street.

Let's talk about unable to satisfy current demand. There's an interesting, is it caution coming from Microsoft that look, they're willing to be underserving in terms of supply because they are starting to normalize their spend in terms of capital expenditure.

I think they're trying their best to provision a lot of this next generation equipment, specifically NVIDIA GPUs. There is just so much demand. If you even look at some of the metrics that OpenAI put out last week of having a run rate of $174 billion in revenues, the

The demand is just outstripping supply, plain and simple. And their provisioning of new data centers with this next generation, Gen AI, stack infrastructure, is just they just can't keep up with demand. And that's a very good problem to have. Yeah. So can we strip away that noise? We had note after note, analysis after analysis, that in some way Microsoft was curtailing data centers, whether it be through leases or renegotiation. Is that

happening or is this the ebb and flow of doing business, Ted?

I think on the call they tried to get to the root cause of this misinformation. I think you got a lot from the sell side that fiscal 26 CapEx will moderate. It can't go at the same level at 24, 25 when they were building long-term assets. And they define long-term assets as data centers with a shelf life of about 15 years. Those are shells. And the other shells that they're building, they have to be hooked up to utilities.

And I think the big thing that the street was kind of missing is time to power. They are somewhat restricted on these next generation data centers on just getting the power capacity needed to fuel the Gen AI loads. So...

Fiscal 26 will moderate. It's normal. It can't grow at 50% plus forever. And I think where the street maybe got it wrong was some of the analysts on the REIT side that were picking up some weakness. And quite frankly, that's a good data check, but probably not put in the right context if you understand core technology and what's happening in GenTIK AI.

Ted, my relationship with Microsoft is I grew up learning how to use a computer on their operating system. And more recently, I'm a gamer. Two pieces of news out today. One, Xbox Pro is going up because, not just on the hardware, by the way, on the titles themselves because of tariffs. But I always go to the Bloomberg terminal and look at the split of cloud and just like software revenues. They're still quite good at selling software that you can otherwise get for free somewhere else. Is that fair? Yeah.

That's fair. And I think, you know, you look at Microsoft and they have a huge advantage as well as Oracle in relationship to the other cloud titans, whether it be Meta, Google or Amazon. They already have the enterprise customer. So when you control the enterprise customer to begin with from previous customers,

revisions of whether it be Excel, Word, Outlook. And now you have a CEO, Satya Nadella, which is a visionary in tech that should be at the top of the list of CEOs that actually get the migration to Gen AI. Now you can leverage that entire base through Gen AI. And what's different on Microsoft that I think

They brought this up on previous calls is Microsoft has a Gen-AI stack that they've created over the last multiple years that's written once. It's unbelievably scalable. And when you leverage apps on top of that, you've got a model that few can touch. Okay. Let me jump in real quick. While this is all happening, Microsoft's a big contributor.

The NASDAQ is now pushing to 2%. The S&P 500 is pushing higher. A big part of that, I know Microsoft's not sort of where it was at the open, but it was on track for its biggest gain since 2020. And I think that for all the sort of negative sentiment around the world about cloud computing and tariffs, it's a pretty astonishing moment in time in the earnings context, isn't it? Yeah, and I think therein lies what's phenomenal about this guidance, Ted, is the fact that we got it.

And what is it that we're starting to see? Is it that companies, despite macroeconomic headwinds, just see the shift, whether it be to on-prem to the cloud, whether it's movement from non-Gen AI to Gen AI, it's just so mission critical that they have to stick with Microsoft right now.

That's the right question. I mean, there's two aspects. All the global 2000 has to migrate to cloud, to lower cost. And that's what you do in a recessionary or a decreased growth environment.

More importantly, what Microsoft said on their call last night was a little bit eye-opening on the guide of Azure being up 34% to 35% next quarter. Yeah, gross. And they're bringing the cost down on these models 2x and their tokens, the Gen EI agent tokens,

are off almost 50%. So the street had this huge debate on ROIC, return on invested capital, while Microsoft's reducing costs of Gen AI for broad adoption. And if you're in the S&P 500, if you're not migrating to Gen AI, you put your whole model at risk from an operating margin perspective.

Ted Mortensen, Baird Managing Director. Fantastic to have your voice today. Thank you. Let's just shift to Meta now because shares are also jumping following really resilient ad sales in the face of tariffs. Take a listen. We've had a strong start to the year. Our community keeps growing with more than 3.4 billion people now using at least one of our apps each day. Our business is also performing very well. And I think we're well positioned to navigate the macroeconomic uncertainty.

Mark Zuckerberg talking about the ability to navigate. Let's get up to Evercore ISI scene imagine director Mark Mahaney now. And I pick up where Ted left us. The return on invested capital. Is this bearing dividends? Is the integration of generative AI throughout the ad offering vindicating that spending that actually they up for this year because of tariff costs? Well, Caroline, I'll give you a couple of points on this. You know, one, I think...

A meta is proving to show that at the app layer, the application layer, that you can get a good ROI return on AI spend. I thought the way Zuckerberg laid out the earnings call last night, the five areas of focus for AI for the company, and then the returns they're getting kind of within each areas of those focus. And they're applying AI to improve their ads platform. Well, the application of AI has allowed conversion rates to rise about 5%, which is a big number.

for an ad platform that's that huge. On the user side, they're trying to improve engagement. They're trying to make the content more personalized, more relevant. Well, they were able to show that the application of AI has led to a 7%, 6% increase in time spent on both Instagram and on Facebook.

on Facebook. So yeah, I think they're proving that they can use AI to improve the service and actually monetize it. Like you can get a return on all that AI spend. I want to be careful though. I think, you know, extrapolating from Meta to other companies, this is a tricky thing to do. One, very few companies have spent as much money and as effectively as Meta has. And in Meta's advertising platform, it's just more resilient. I'm not at all sure that these companies are out of the weeds or out of the, you know, or

out of the danger zone when it comes to the impact of tariffs. - Their argument, right, is that the time spent metrics are evidence of the resiliency in like tough economic environment. I felt like this story evolved over the course of this statement hitting to the end of the call. And this is the quote from Susan Lee on why.

So the capex range gets raised and we're all thinking commitment to AI, even though they said it goes to the core of business. Then Susan gets asked about tariffs. And this is the answer. The higher cost we expect to incur for infrastructure hardware this year really comes from suppliers who source from countries around the world, goes on to explain uncertainty relating to trade negotiations. We're working on mitigations. The capex range got raised because it's more expensive for them to build the data centers, Mark.

Ed, you just nailed it. I think that's absolutely true. I'm nailing it all day today. Keep going, Mark. Thank you. I think there are two reasons. One is that I think they are getting more aggressive, offensive. They've seen the return that they're getting on their AI spend, and they're leaning into it more. The second reason, however, is that costs are rising. And I don't know if you noticed this, Ed, but she was very careful never to use the T word, i.e. tariffs. Didn't use it. It's a political statement these days, and nobody wants to get involved in politics. So...

So she was very careful about how she answered that. But yes, the costs of tariffs are a tax, they're inflationary. And if you're buying a lot of infrastructure hardware, like Meta clearly is, and so are the other hyperscalers, by the way, your costs are going up. So my guess is that Amazon may have to raise its capex and Google's going to come back to us in having to raise its capex. And Microsoft next year will probably have to raise its capex numbers because the infrastructure costs are rising. Look, Susan Lee was employee number 40 at Meta.

She's a CFO, but she gets the business. And what she was explaining was that the compute needs are across the business. In other words, we're not just doing this for the training of a frontier model. They've got people in marketing. They've got people in the ad development business that are demanding for access to the compute. Do you have conviction that Susan Lee is getting that right in the numbers that she gave you last night?

Yeah, I think so. Look, we've had three years now of really aggressive deployment of AI to boost the ads business, to boost the platform for advertisers and for users, but also to roll out some new things like meta-AI and then meta-AI devices, maybe Ray-Ban, meta-Ray-Bans, maybe AI.

and also to boost the WhatsApp business. And so I think they've shown that they can get a good return on this. I mean, they're good cutthroat capitalists like a couple of these other companies, and I think they're making rational business decisions. They're probably leaning a little bit more heavily than other companies, but it's paying off for them. I think you'll see other companies look at what Meta has done, and I think they're going to lean into AI as well. I know we kind of drifted away from the AI revolution earlier this year. I think we're going to come back to it. I think Meta is going to give us good reasons to do that. Yeah, they're bringing out Meta AI app.

as a standalone, we've seen also the levers being pulled in terms of advertising when it comes to threads, how does that filter into WhatsApp and other offerings more broadly, Mark. But you said you can't read across from Meta into perhaps other social media companies like Snap because Meta ends up being like the port of safety in that respect. But read across to Amazon in terms of cloud and indeed you say that Amazon might have to raise their spending on infrastructure spending in that respect, but where else does AWS take us in terms of growth?

Well, I just think if it's, if it's, if the infrastructure hardware is more expensive for meta, it's more expensive for everybody. And so that's going to be the case with, uh, Amazon too. Uh, I think they're going to, uh, they may well have, I mean, I think the direction of AWS CapEx is going to go up, uh,

But things could change quickly in this tariff environment. For now, those hardware costs are going higher. And so that's going to probably be reflected in rising capex spending. And just a point on Meta, I think their model is more resilient.

Also, we haven't really seen the dramatic economic dislocation. Our checks indicated that you started to see some ad verticals really soften in the month of April. We still have the whole year ahead of us. So I don't think Meta is out of the woods. My only point is that relative to almost every other ad platform, they're more insulated, they're more resilient than anybody else.

Even if there's a sharp economic downturn, they're not going to be immune to it. And markets the Chinese retailers that pull back in ad spending. What about Amazon's e-commerce business?

I think that's going to be TBD. I think the March quarter is going to be fine. Google gave us a fine March quarter. Meta just did. And I think Amazon will, too. We haven't seen any sharp fall off yet in consumer spend. But prices are rising. They're going to be rising materially. Those dolls are going to be more expensive on Amazon. And so exactly how Amazon handles that, whether they're going to eat margins or defend market share. And my guess is that knowing Amazon, they're going to defend their market share. So they're going to be willing to

to take a hit to margins, that could be a downside to the stock. So it depends. Prices are rising on Amazon. That's not a good thing for the Amazon ecosystem. Mark Bahaney, Evercore ISI Senior Managing Director. Good to have you back on the show. Thank you very much. Now coming up, Qualcomm becomes the latest chip maker to offer a cautious sales outlook in the face of trade uncertainty. We'll have more on the company's earnings next. 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. 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 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.

Breaking news that's moving markets. Bloomberg reporting the U.S. is weighing a potential easing of restriction on Nvidia sales to the United Arab Emirates. That's according to sources who say President Trump could announce the start of work on a bilateral chip deal during his upcoming trip to the Gulf. Nothing.

has been decided officially, according to our sources. They emphasize that the debate over chip trade rules for the UAE and other countries remains ongoing in Washington, but the stock spiking on that report to a session high of 5%. Competition for Nvidia, close as a home. Investors are going to be paying close attention to Amazon's AI business when the company releases its earnings later today. A key part of its AI growth strategy is Tranium, the company's custom-designed chip. I got a tour

of the AWS facility where they're made and designed. Have a look at this. This is AWS Annapurna Labs in Austin, Texas. Amazon does all of its custom AI chip design in the US, and most of it happens here. Amazon bought Annapurna 10 years ago. Today, the team designs and tests custom hardware and software that power AWS data centers worldwide. We looked at Tranium, Amazon's AI chip

for training and inference. Annapurna doesn't just design the chip, they oversee computer, electrical, mechanical, thermal, and software engineering for the entire server. AWS sales reps focus a lot on price for performance to win business for the chip. So today, Tranium 2 delivers up to 4x the performance of Gen 1. That required reducing component count, improving power, cooling, and networking across the server. In Austin, there's a quiet lab

for chip validation testing from the wafer level to boards. Then there's the noisy room where full servers are stress tested. Tranium is still in its infancy, but it helps reduce Amazon's reliance on AI chip leader NVIDIA. It could also give AWS more control of its own destiny in the market that NVIDIA dominates. Next up is Tranium 2 at scale. Project Rainier, built with Amthropic, will run hundreds of thousands of these chips, and that project goes live this year.

Let's stick with chips. And in fact, the worst performer on the NASDAQ 100 is Qualcomm. This after the biggest maker of chips for smartphones gave a soft revenue prediction for the current quarter amid concerns that tariffs could hurt demand. For more, let's bring in Bloomberg's Ian King. I feel for Cristiano and Qualcomm because they beat on the previous quarter, but it really is that sort of middling guide.

Yeah, no, you're absolutely right. The guy at the top end wasn't bad, right? I mean, it's really all they've done is say what everybody else said, which is, hey, we had a really good quarter. Things are going OK for us. Look, we're doing better than even what we said. But, you know, maybe we're not so sure about what's going forward. And these things are beyond our control. Everybody else said the same thing, but they're getting beaten up a lot harder. Ian, very quickly, Qualcomm, Android in China. What was the story?

Yeah, I mean, this is really important. This is a massive market for them. So in a way, they're a test case. Like more than 40% of their business comes from China. They said it went well.

Well, we keep an eye on China and the business there. Bloomberg, Zee and King keeping it short for us as well. We love it. Meanwhile, Roblox reporting earnings before the bell. Larger than expected jump in active users for the first quarter, benefiting from efforts really to attract new players and keep as they grow older and using the service longer. Shares you see up 4%. Bloomberg Intelligence Senior Analyst Manleep Singh is here with us.

And this is a company that is managing to steer us for growth again in spite of macro uncertainty. They've got the users there. Yeah, I mean, I think Roblox is a defensive name like a Netflix is where people still need entertainment. And, you know, in this case, they cater to the younger demographic, the 13-year-olds. But now older.

Older as well. And they have that native content. So when you think about why TikTok did so well, because they had the creators.

Gaming creators are on Roblox. This is the platform where they curate the content and in this case they have a very successful model in terms of payouts that they give to those creators. So it's all user generated content. They don't have to spend a lot in terms of getting branded content and paying content costs. And look, it's a very small company when it comes to the

spent on the platforms 80 billion plus hours annually compare that to Netflix hundred billion around and they monetize very less compared to all the other platforms that are out there so from that perspective I would say there is so much room to monetize that our spent on Roblox when it's still a five billion dollar revenue run rate company at the end of the day through advertising and licensing Bloomberg intelligence senior analyst mandy seeing thank you very much

♪

Let's check in on the shares of Tesla because, well, the chair, Robin Dunham, has been denying reports from the Wall Street Journal that alleged the company was looking to replace Elon Musk as its CEO. We're currently up 1.7%. A strong denial. Is there smoke without fire, though, Ed? Yeah, that is the critical question. All you need to do is go to Tesla's regulatory filings, Form 10-K, and they spell it out very clearly, this idea about key man risk. Every single regulatory filing has the Elon Musk...

They are highly dependent on his services. They acknowledge that he spends time at all these other companies. I know that succession planning is always in the background of the Tesla board. And it's the role of corporate governance. Exactly. I think what's interesting is I continue to hear...

that Elon Musk also plans to spend a lot more time on XAI. That's a really big project for him, a priority because he wants it to be competitive against OpenAI for obvious historical reasons and anthropic. But this is a clear denial by Tesla posted on X to the official Tesla account, citing the chair,

of the report that the board was looking to find a replacement. Not clear of succession or a reaction to the state of this year. I mean, don't you think it would be a failure of corporate governance if at some point they weren't thinking who on earth could, if forced to, lead a business such as Tesla? What people forget is that beyond Elon Musk, there are many other generals of the company running the place day to day, and the company is still the leader in many of the fields it's in. He's a good delegator. Right.

Welcome back to Bloomberg Technology. I'm Caroline Hyder, New York. I'm Ed Ludlow, right next to you. Let's talk about some of the biggest movers in markets, and it continues to be Microsoft, actually, from a sort of points perspective and percentage perspective. The story is simple. Top-line growth on its cloud unit of 33% beyond what the streets saw, but evidence that all that spending on AI development is translating into sales, and that

is a pretty clear image on your screen. Away from kind of the earnings context, there is also litigation and antitrust consideration in two other names, right? We are, of course, talking about Alphabet, the parent of Google and Apple. We're going to get into detail on those stories, but I think interesting that Apple basically flat, we acknowledge that it's treading water probably ahead of earnings after the bell car, but Alphabet,

I don't know. I don't draw a causal link. There's some buoyancy there. Buoyancy, maybe it's the meta numbers and what that feeds into advertising resiliency. But we also, of course, got a very strong pushback from Pichai, of course, the leader of Alphabet and Google, against any sort of de facto breakup of the company as we consider remedies to what is deemed a monopoly place within search. Leon Nylund's here to break it all down. In court, finally, Sunop Pichai getting up there and saying, look, any

of these remedies, whether it's sharing our data or whether it's actually spinning off Chrome, you're breaking us apart and it's too much. Yes. So he took the stand yesterday in the Justice Department's trial. This is the three-week trial that's supposed to determine what the remedy is for Google's illegal online monopoly in search. The Justice Department has proposed, as you mentioned, that Google be required to spin off the Chrome browser and also that it be required to share a lot of the data that it collects

about users and the web with rivals. And Sundar Pichai pushed back on that remedy in particular pretty hard. He said, you know, that, while not an actual breakup, would be a de facto breakup of the company because it would allow all

of their rivals to effectively reverse engineer their technology and use all of the sort of things that Google has built up over the past several years to gain its sort of share in search. Lee, I said that Apple stock was flat because it's treading water ahead of the market.

close when it does earnings, maybe there's downward pressure from a critical court decision. A federal judge ruled that Apple violated court orders by not opening up the App Store to third parties. You've been tracking that story as well. What are the need to know details about it?

Yeah, so this goes back to the long-running litigation between Apple and Epic Games, the maker of Fortnite, which sued the company back in 2020 over its App Store. And even though it lost most of the counts in that case, the judge did find that Apple's App Store violated California state law over antitrust and ordered Apple to make some changes to its App Store policies, in particular, allowing

developers to link out ie make it easier for users to buy digital goods and services on their own websites as opposed to within Apple's ecosystem Apple didn't really love this introduced some new policies in January of last year that it was still going to charge a 27% Commission on things that people purchased outside of the App Store if they took advantage of these links well at

the judge held a series of hearings both last year and this year

and found that the changes that Apple made were deliberately anti-competitive. She said in a very blistering opinion that was released late last evening, she said, you know, every single time Apple had a choice, it chose the most anti-competitive option. And on top of that, she found that some of the executives who testified at the hearing lied on the stand, and she recommended that the federal government open a process

investigation into whether they should be held liable for criminal contempt of court. Right. I mean, on fire was Gonzales Rogers saying that if they thought that this court would tolerate such insubordination, it was a gross miscalculation. Apple comes back though, Leah, and says, we strongly disagree with this decision and we're going to appeal it. So what next?

Yes, so Apple is going to appeal. She said in her decision that Apple needed to make immediate changes. They are likely going to try and appeal that to the Ninth Circuit to put that on hold at least through the appeals in this. We'll see if the Ninth Circuit agrees because they have already reviewed this case one time and found earlier that her decision was solid.

So they could put this on hold while Apple appeals. If they do, it's going to go through the appeal process and we will not probably have a decision until sometime mid to early next year. Or they could say, this should have gone into effect last year, and so they could let it go into effect while Apple appeals.

Bloomberg's Leon Nylund out of D.C. Thank you very much. Let's get more on Apple, but specifically what investors expect from its earnings report later today. Let's bring in Carolina Milanesi. She's the president and principal analyst at Creative Strategies. Bloomberg's Mark Gurman, who, let's just be honest, is probably the leading correspondent and journalist covering Apple in the world, says don't look back at the quarter gone or the numbers.

It's really about the long term and what Apple communicates on how it adjusts supply chains in the face of trade policy presently. What is your thesis on that?

I agree with Mark. It's really about what Apple is able to do from a manufacturing perspective, a supply chain perspective, to make sure that they are not so subjected to whatever the administration decides to do on the tariff side. We know that they are planning to shift

their production to India as far as iPhones that are coming to the US. But that doesn't happen overnight. So anything that they're able to disclose, and obviously Apple always keeps their car very close to their chest on things like this, but the street needs reassurance that they have a plan. And it's the same for AI, actually.

Apple is historically the master of the bottom line, right? Profit and margins, irrespective of what's happening around the world. But it's likely, I think you and I discussed this the last time you were on the show, India long-term flying handsets out of that nation into the United States. It all costs money moving something from place A to place B. How do you see them explaining their ability to protect themselves from those costs?

There's a couple of things. One is that this is Tim's cook, bread and butter. He is an operational guy. He has been entrenched in supply chain organization for a very long time. He's also a very good diplomat. So I think that while moving supply chain and production to India is one of the core things that they can do, he's also very good at dealing with problems.

whether it is at home or in China. So I think these are the other thing that we'll see happening. But we also have to remember that Apple is becoming more dependent on revenue coming from services. And so we might see some give from a price perspective on the actual phones and other devices, thinking that they can recoup some of that from the services side. Now, we might be a good diplomat,

but many might feel that potentially they have dropped the ball from an AI perspective, Carolina. And I've got one note land in my inbox coming over from Link's equities, think that Apple is struggling to stay relevant. Is that too much of an assumption to be making right now because of Siri and the lackluster rollout of Gen AI?

Look, at the end of the day, I think that what people are picking up is the fact that Apple made promises from an AI perspective and they're not delivering quite yet. That's a reality. What is a reality as well is that consumers are still not going into a store asking for something that is AI driven. And they're still very much focused on hardware when they're looking specifically at smartphones.

So there is some grace when it comes to the opportunity that Apple has, but it's interesting to see the excitement around the statement that Pichai made yesterday or the day before around Gemini getting to Apple before the end of the year. Yes, so that cross-pollination. Look, maybe that's AI winning out for Apple longer term. They don't always do it first, but my goodness, they end up doing it best in the longer term, Carolina. Do people have the bandwidth to hold on to that view?

I think so. I think that there's going to be two realities. One is that Apple and Siri and what Apple Intelligent itself is going to deliver to consumers is much more personal. But what people are really excited about now is the more general AI. And that's where Gemini, ChatGPT, and the other providers come in. And to your point, Apple does usually come in later in the year.

in the market with a solution that then pleases consumers because of the way that they package it together. - You're both making historic references to Blackberry and the smartphone market, I think. What's the one area where Apple is indisputably king?

Oh, I think it's simplicity, to be honest with you. It's the fact that at the end of the day, when talking about packaging things together, that when they deliver it to consumer, the simplicity they use to deliver that solution is what is enticing consumers to stay where they are. The other one is obviously marketing. They're good at that. We'll have to see how much they can dial up that services side of the equation throughout. Carolina Milanese, it's always great to have you, President and Principal Analyst at

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.

Uncaught Capital has just raised $300 million that will be spread across two funds. The early stage investment firm, who made a name backing the likes of Poshmark Postmates, Eventbrite and Fitbit, are looking for its next big startup, focusing on AI. For more, Andy McLaughlin, Uncaught Capital managing partner, joins us now. Caroline and I have noticed something. Let's start here. Every day, literally, the daily cadence, we are delineating.

delivering news about a new fund that's closed. What is the big picture macro driver of that activity, Andy, and in your case, specific to you?

That's a great question, Ed. I think it really comes down to LPs, so investors in funds, looking for ways to deploy capital into managers who have a knack and a history and a track record of having found breakout companies before they were obvious. And I think as seed investors, that's what we have to be world-class at. We have to be able to see around the corner and see the things that most other people can't see. Is Andy...

almost the seed and the very early stage, the harbour in the storm at the moment. Is that where you're getting the interest from LPs?

I think that's right. I mean, when you invest as early as we do, and this is often inception stage or very short afterwards, you are insulated from the global macro a little bit. And of course, there are going to be knock-on effects from the tariffs that will affect maybe some of our later stage portfolio, companies who are thinking about maybe going out for an IPO in the next year or so. But I think for the very, very early stage, I mean, it's just given people the steely determination to put their heads down and to just build.

I think more broadly we're thinking about therefore where it is impacting your later stage investments, the follow-on investment that you've given and goodness, I mean you've been found in 2004 as a VC company so you've got long-term bets coming to fruition. What are you thinking about the exit market right now? Because Annie, correct me if I'm wrong here, but a lot of the exits you've had at Uncork have kind of been M&A. You haven't had that many landmark IPOs.

Yeah, I mean the IPOs that we talk about, obviously Fitbit was the first, SendGrid, Poshmark. Postmates had filed for IPO before they were taken out. And I think there's been lots of talk in the industry over the last even like two weeks around if IPOs aren't happening and if M&A is still slow or they were beginning to see kind of the drip of deals happening again, actually a lot of liquidity is probably going to come from the secondary markets. And I think as early stage investors,

we have to be thinking always about how we can begin to realize liquidity for our investors. Because honestly, if we don't give them capital back, they won't give us more in the future. Okay, so let's show the portfolio names you highlighted again. What do they have in common when you think about, okay, you want to look at the next great startup at the early stage, but as I read out at the beginning, in AI?

Yeah, I mean, I think firstly on AI, you know, AI is pervasive today and it will only become more pervasive. I think, you know, people are still talking about AI native startups. I think you wind the clock forward not very long and all of a sudden, you know, talking about AI is going to be talking about cloud where it's just assumed that you're building using AI.

And in terms of the companies that you highlighted, I think that really the two things are that these were early bets on founders that had a particular point of view on how things should be done. And secondly, they were opening new markets. I mean, people obviously now think about Uber Eats and they think about DoorDash, but Postmates was the very first on-demand food delivery app in North America.

Fitbit was the first consumer-grade wearable that could track steps and fitness. So although these are different types of businesses, different business models, that kind of one thing kind of runs through all of them. Andy, there's some data that's been doing the rounds on X, and it's about early-stage investing and how the pool is dominated by few players. Andreessen Sequoia, Vin Odin over at Coastler.

What's that like for you in that environment where there's a high concentration of activity from just say half a dozen to a dozen slightly larger firms?

Yeah, I mean, we typically see those as the firms that will follow on from us. I mean, yes, they all have seed programs. Yes, they're all doing seed investing. But, you know, when you're trying to deploy a multibillion dollar fund, you can't be slinging two, three, four million dollar checks all day long. So, you know, we see them as partners. And I think one of the things that we love about seed investing is that we have our place in the ecosystem. We can be very collaborative with our co-investors at our stage.

and then work with the names that you've mentioned later. And I think as I talked before about our challenge and opportunity is we have to be able to pick things before they're obvious. As soon as they're obvious, a Koestler or an Andreessen or a Sequoia will swoop in and pay big money for it. So for us, it's all about spotting the things that aren't there yet.

Andy, it's been great speaking with you. Thanks, Andy McLaughlin. Thank you, Caroline. On court capital, great to have you. Meanwhile, let's just stick in the world of VC because Washington actually hosted business leaders and VCs and lawmakers for the Hill and Valley Forum with a focus on tech and national security. Bloomberg's Anne-Marie Horden spoke with Lux Capital Managing Partner, Josh Wolf, on why the rest of the world should not rely on Chinese AI models.

The first thing starts with the chips. So we said, "Okay, we have to restrict chips onto China." And unfortunately, one of the great lessons of innovation is that necessity is the mother of invention. So we restrict them, they're still going to find ways to route around. Now whether DeepSeq was trained through, in a technical term, these diffusion models where they sort of copied some of the other foundation models and built on them doesn't matter. What matters is really efficiently on presumably less GPUs, meaning they don't need as many chips, they were able to do things that some of our best models couldn't do.

And so that was a wake-up call to say, is the future of AI going to be smaller models? Is the future of AI going to be different chip architecture? And how are we going to compete on that? Now, my own personal view is that open source is going to beat closed source. That these large companies, OpenAI, Anthropic, and others that have raised tens of billions of dollars, most of which have accrued to Jensen and NVIDIA because he sells the chips.

That in the future, what's going to happen is the companies that have the longitudinal silos of data, meaning people that have a lot of big data, big data, which everybody was talking about 10 years ago, didn't materialize to a lot, are the ones that will be able to use free open source models on their proprietary data. So that might be pharma companies with their clinical trial data. It might be Bloomberg with their repository of financial information. It might be Meta with their WhatsApp chats and Instagram and Facebook posts. It might be Elon and Tesla and X with all the Twitter posts.

So, those are the people that I think are going to be advantaged and that's what we should be focusing on. How do we compete with China? Not on the chip side, not on the model side, but on the applications and the use of the data to actually do stuff. On the chip side though, Jensen Wang, I caught up with him very quickly when he was coming into the conference and I asked him about how far behind is China and he said, "Is China behind?" He thinks they're very, very close. So, how do we make sure that they don't surpass America?

Well, I think it's going to be about the use cases. So, number one, we don't want the rest of the world using Chinese models because Chinese models will approach an asymptote of truth but not truth. There will be no search about Tiananmen Square and Xinjiang and the Uyghurs and these kinds of things. And so we want the world using open models that are made by companies like ours, like Hugging Face, that are the open source repository for all the best AI models. That, to me, is something that trends closer to truth, and those are the kinds of systems that you want people using AI for.

They're going to come up with their own ship systems. They're going to come up with less good but much more numerous of them, and they're going to find ways to beat us in that domain. They're going to come up with their own models, again, to their own policy prescriptions and what Xi Jinping wants. The key is how do we get our kids using it early? How do we become advantaged as individual humans using AI to be more productive? That was Josh Wolfe, managing partner of Lux Capital Speaking with Anne-Marie Hordern.

Time now for Talking Tech and first up, Robinhood saw retail investors flock to the financial service platform as the President Trump's tariffs really roiled markets. Companies saw net revenue jump 50% from a year earlier to $927 million, but crypto revenue fell behind, maybe reflected in the stock move. CEO Vlad Tenev spoke with Bloomberg earlier about their strength in April.

April's continued to be incredibly strong across the board. I talked about futures already, but equities and options are at or near multi-year highs and net deposits has continued to be remarkably strong.

Plus, Instacart has acquired US grocery e-commerce platform Winshop. The latest acquisition adds to the delivery company's growing numbers of software businesses, which now powers over 600 brand sites. Turns, the size of the deal were not disclosed. And Visa says it's enabling AI agents that will help browse products and make purchases for consumers, cutting the time and energy customers spend on shopping. We spoke with Visa CEO Ryan McInerney exclusively, who had this to say about the program.

What we have announced is a set of tools that give agents the capabilities to go make payments on your behalf. Think of that as AI enabled visa credentials and also the rules and the capabilities that will provide trust. Trust that consumers will have in their agents, trust that merchants are gonna have that they're gonna get paid and trust that financial institutions will have that you've actually empowered your agent to make those purchases on your behalf.

And you can watch more of that conversation with the Visa CEO online at Bloomberg.com. Ed.

That does it for this edition of Bloomberg Technology. But let's recap the kind of biggest stories in markets. Microsoft and Meta resilience and strength and growth of their core businesses while committing to spend on AI. NVIDIA now pairing some of its gains after a Bloomberg exclusive that the U.S. is weighing easing chip export curbs for NVIDIA to the United Arab Emirates. We'll continue to track that story, Caro, throughout the day. But we've got so many more earnings to come after the bell. The all-important

Apple down three tenths percent. We get that epic loss when it comes to that fight in the courts regarding the app store. But what will they say in terms of pull forward from consumers? Amazon up two and a half percent. Will they deliver eight percent growth in revenue and Reddit up more than four percent? Maybe a read across from Meta there. Do not forget to check out our podcast, though. Find it on the terminal as well as online on Apple, Spotify and iHeart. This is Bloomberg Technology.

Developers like you are building the future, but you need the right tools to move fast and go further, right? That's where Microsoft comes in. With tools like GitHub Copilot, VS Code, and Azure AI Foundry, you have everything you need to push the limits and bring your ideas to life faster. And with security, compliance, and responsible AI built in, you can focus on what matters most, building the next big thing. Learn more at developer.microsoft.com.

Hiscox Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at Hiscox.com. That's H-I-S-C-O-X dot com.

There's no business like small business. Hiscox Small Business Insurance.