Nvidia Opens AI Ecosystem to Rivals, Apple’s AI Struggles
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Live from San Francisco, this is Bloomberg Technology coming up. Big tech volatile after Moody's downgrades America's credit rating. And NVIDIA allowing customers to use rival chip makers in an effort to expand its AI ecosystem. And why Apple has been spending billions of dollars on AI and still hasn't managed to crack.

the code. This is what financial markets look like across major averages. We've paired some of the early declines in Monday's session, but the story broadly is tech is pulling us down and leading us lower. And that centers particularly on semiconductors and AI infrastructure names. In terms of the single names that we're watching, you have

Stocks like Tesla under pressure. Nvidia has actually paired a lot of its decline from the open. It was down 2% at one point. Nvidia is at the heart of the news cycle, and it's going to be at the heart of today's program as well with a lot of news out of Taiwan. Let's get to the big picture on technology and financial markets. Here to break down the tech moves, Bloomberg's Ryan Vlastelica. Ryan, what's going on?

Hey, good morning. Thanks for having me. So there is a lot of uncertainty, a lot of volatility in the market today. You mentioned the Moody's downgrade. I think that just speaks to the level of political uncertainty in particular. This, of course, comes in the back of all the back and forth on tariffs and the trade war. There is just so much uncertainty in terms of policy. And the implications of this, I think, are for a lot of people to just continue sort of selling the U.S., look for defensive areas, look for safety. In that case, that means a lot of big tech

names, especially since tech has been pretty strong over the past couple of weeks. So this could just be some profit taking, but I do think it underlines how uncertain people feel about the economic outlook. The MAG-7 have a sort of disproportionate impact at the index level, but it's AI infrastructure and semiconductors where I see most weakness basically this Monday. Why is that?

Yeah, so I think this is an area that is very much tied to the trade situation, given just sort of the nature of the products that we're talking about here. There's still a lot of uncertainty about chip restrictions and all these other kinds of things. And this also comes on the back of people still continue to want to see more return on all this AI-related spending that is going on. There's just a lot of concerns maybe that has there been sort of a bottleneck

in AI infrastructure. So I think this is an area where because these group have done so well, because the outlook is so debated right now, it's just a very natural place for people to be taking profits, especially on any kind of sort of negative headline that you see cross the wire.

Bloomberg's Ryan Vlastelica with the market moves this Monday. Thank you. Let's get more on markets. Hilary Frisch, Senior Research Analyst for Software and IT Services at ClearBridge Investments is with us. Last week, the tailwind was in all of the headlines about the billions and billions of dollars of AI infrastructure deals, the United States and the Gulf nations, NVIDIA, Supermicro, Dell.

But that's the area of weakness this Monday morning. Is it just a little bit of a reality check on how soon some of that investment will be felt?

That's a good question, Ed. It may be a reality check. It may just also be profit-taking. We went from overbought to severely oversold to overbought again within just about the span of a month. The tech sector in general has had a very strong run recently, and we can talk more about why that's the case. But I think investors are just looking, saying, okay, we can take some profits at this point.

Well, and part of why that's the case is earnings, right? I think we're still a little bit digesting what the net takeaways from the calendar first quarter earnings were. What were your main takeaways from that period? Sure. Well, first of all, I think what was notable was just how resilient Q1 results were.

And it wasn't just in Q1, it was in the subsequent weeks through to the quarterly reports. And that encompassed a period of tariff-related headlines and uncertainties. So that was refreshing and encouraging. And it wasn't just AI or a series of

AI proof of concepts at the expense of all else, which is largely what it felt like last year. It was AI strength plus real core business strength, and that was refreshing. Now we're coming up upon April quarter earnings reports, and I could imagine that some of those companies who would have had to close their quarters in the midst of tariff uncertainty might see some variability, might have seen some pausing in spend, but overall the underlying results are very encouraging.

What I found super interesting about that earnings period in technology is you have like primary data and secondary data. The primary data like the commentary and what's in the earnings statement. But some of the secondary data we were tracking, for example, in the AI infrastructure space was leases, data center leases. And that caused all kinds of noise going into the prints. And we had to decipher what it was that was the truth, you know, based on executive comments. How did you navigate that set of data?

tons of noise in the space. That was probably maximum noise that we've seen in a long time. But it's fascinating. Starting with the underlying demand trends, you saw hyperscale vendors reaffirming CapEx plans. You saw some of them increase them. Microsoft in particular talked about rising near and long-term demand signals.

which could actually cause them to prolong their investment in long-lived assets, meaning land and buildings, which they've been engaging in over the course of the last 18 months at least. So how do we marry that up with data center lease cancellations?

It's interesting, Microsoft in particular makes a lot of use of leases. They came from behind relative to the strong demand signals they're seeing in getting that requisite capacity to be able to fulfill AI and other demand for the next five, 10 years. So they were building rapidly. Within that, they signed a ton of leases across the globe, which was a brilliant strategy, by the way, because it froze

It froze some of those opportunities to competitors. And then within that, I think they decided that they didn't want to be the sole source of training for open AI. And also within that, there were power constraints. And I think they realized that these leased facilities wouldn't be up and running until '27 to 2029. And in that vein, they could actually shift to some degree to own data centers as well as leased data centers. And you're seeing that kind of across the board.

But in the end, some of the data center lease capacity we were hearing was 5x what you were seeing signed on for by an Amazon, for instance, for the rest of the ecosystem. And last time I checked, Microsoft wasn't 5x the size of an Amazon. So basically, they were giving themselves optionality. And in retrospect, they're still building and there's still demand.

And again, a part of the higher capex reflects the higher cost of doing business because of the impact of tariffs to supply chain. I've been thinking a lot as one does about year to date performance of the hyperscalers. And it's interesting, right? If you just say hyperscalers, Microsoft, Amazon, Alphabet, Microsoft stock is up more than 8% year to date. The other two names have been under pressure. We of course kick off with Microsoft Build

We also talked last week about some of the difficulty Microsoft has in reaching its own goals because of its relationship with OpenAI. This is something you've been thinking about as well.

Yes, well first of all with respect to relative performance, I think you're almost seeing from a cloud perspective in the other two what we saw with Microsoft for the end of last year and early this year, which is that they're behind in getting capacity and that is constraining cloud growth. So it hasn't been a demand issue, it's been a supply issue. Second of all, Microsoft has been very tailored to open AI, they've been diversifying but the two are quite aligned.

I'm not sure I view it at all in terms of their not being able to realize their goals. I think their goals are to focus on their own compute capabilities for their customers and to add in OpenAI and other LLM vendors, but especially OpenAI as part of that equation. I think it was a deliberate decision not to focus solely on training. That would have crowded out a lot of the other exciting and high margin endeavors Microsoft can engage in its core customer base.

And in the meantime, it's a highly symbiotic relationship. Microsoft's infrastructure was originally built in AI to around open AI and the related infrastructure. It has InfiniBand throughout. It has some tremendous capabilities. And I believe the two companies want to continue to work together.

Hilary Frisch, Senior Research Analyst at ClearBridge Investments. Thank you for joining us. Now coming up, NVIDIA announces new AI products as the computing giants descend on Computex 2025. We'll go out to Taiwan next. This is Bloomberg Technology.

Discover how one of China's largest financial services companies serves 240 million customers with AI-powered solutions. Hear from Ping An's co-CEO and chief scientist. We're on a goldmine of data integrated to provide tailored solutions to our customers. Public domain tax, 3.2 trillion tokens, 7.5 billion images. Tune in to our technology-powered growth podcast.

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We're outside the venue here where Jensen Huang just kicked off Computex for 2025. This is one of the biggest tech events in Asia and Jensen Huang, the founder and CEO of NVIDIA, was on stage for 90 minutes talking through his vision for AI and the products that are going to be needed to sustain it. Today we're announcing that Foxconn, Taiwan, the Taiwanese government, NVIDIA, TSMC,

We're going to build the first giant AI supercomputer. The focus was on greater AI applications, so specifically the integration of AI into products like humanoid robots, also autonomous driving vehicles. On the product front, we did get an update on the next generation GB300 system that is expected to come in the third quarter of this year. Also, NVIDIA is going to be offering a new version of the complete computer's

that it provides to its data center customers. Now what that means in a nutshell is that it's going to be opening its AI servers to chips from other companies. This is its names like Microsoft, Amazon. They try to design their own processors and accelerators. In Taipei, I'm Annabel Droolers, Bloomberg News.

For more on Computex and NVIDIA's latest reveal, Bloomberg's Ian King joins us here in San Francisco. What we're talking about is NVLink Fusion. You and I have sat through many briefings about NVLink Fusion and read and written about it, but it's a high-speed interconnect. You can connect lots of GPUs, and in this case, also CPUs. The main point here is NVIDIA is saying if you are

a hyperscaler perhaps with custom silicon, then we can allow you into data centers where we dominate. And it kind of opens up this place where everyone is not only and solely reliant on one single name, which is NVIDIA.

I think the other way to look at this would be it's a business decision, right? If you have your biggest customers who are essentially creating rival efforts, rival efforts that may one day mean that they need less of you, why not make it easier to actually work with you? Say, hey, great, yeah, you've got a great CPU, come work with us. Hey, you've got a great GPU, come work with us. This is a way to keep people in NVIDIA's

ecosystem and to stop them going elsewhere. That's the pitch. Computex is a really big deal and NVIDIA seems to have dominated it in more recent years. What else did we learn about things of substance that they're actually doing, if at all, anything of substance? Well, Computex wasn't a big deal up until NVIDIA basically made it a big deal again when they started using it on this worldwide trip that they do to keep

the AI momentum going. As I show it, it was definitely fading away. So they put a lot of updates of things out there, robotics, new servers, new designs for data centers, and basically just trying to keep the momentum of this massive AI infrastructure build-out going. Is there anything else happening at Computex that is not NVIDIA related? Well, our old friend Cristiano Amon actually appeared on stage with... Qualcomm, yeah. Qualcomm, right? The Qualcomm CEO.

As we reported a long time ago, they want to get into the data center with their technology. This is part of his diversification. And if you can't beat them, join them. So he's there saying we'll work with NVIDIA as a step towards a data center strategy. And that is very pragmatic. And we'll see how it works out. Okay, Bloomberg's Ian King, who leads our coverage of semiconductors. Thank you very much. I want to stay on that news out of the way.

out of Computex in Taiwan and bring in Michelle Guider. She's the CEO of the Crash Institute for Tech Diplomacy at Purdue. She's also served as Assistant Secretary of State for Global Public Affairs under the first Trump administration between 2018 and 2020.

For me, away from the technology news, the absolute key piece of importance was Jensen Wan talking about his relationship with Taiwan and Nvidia's relationship with Taiwan. The basic plan is to build a supercomputer for Taiwan, but he was kind of at pains to point out that this is in partnership with TSMC and other

and other leading names that are Taiwanese champions. Purely from a geopolitical perspective, how crucial was that or how high level was that for Jensen Huang to say such a thing?

It's very important. And NVIDIA, with Jensen Huang at the helm, has been on quite the tech diplomacy tour, the chip diplomacy tour, really over the past few days and the past week, including in Taiwan, as you referenced, where they're talking about building a supercomputer. Taiwan is a very strategic partner, a trusted partner of the United States. It's very important for our shared security. And that's right off the heels of

Some major deals announced in the Gulf over the weekend and late last week with Saudi Arabia, with the UAE, who also want to be global capitals when it comes to artificial intelligence. There's going to be more sharing of advanced chips there. So all of that is really important as the United States seeks to secure trusted partnerships with important partners across the globe when it comes to advanced semiconductors.

Michelle, those deals with Gulf nations, how concerned are you that they can act as sort of backdoor indirect access for China to US technology?

It's definitely a concern among some in the U.S. government, including in Congress. But I'll say the big picture is we have to do two things. One is maximum proliferation of American technology, including our semiconductors, because if it's not our technology, it's going to be our adversaries' technology like China. So max proliferation is really important.

At the same time, we also have to have maximum security controls to make sure that those technologies, including chips, don't get diverted toward adversaries like China. Those two things have to happen. It can be done, but it requires that companies and the U.S. government and our allies, by the way, work really closely together. And that's what tech diplomacy is all about. And I think you see the White House, the Commerce Department, as well as leaders in Congress with the new CHIPS Security Act, making sure that those security controls are in place.

Jensen Wang's text diplomacy, I think, is worth lingering on. Taiwan is clearly important to NVIDIA, and we remind ourselves that the mainstay of TSMC's lead-edge fabrication is in Taiwan. But China is also important to Jensen Wang, whether that market is close to him or not. Is he getting the balance right?

Well, it's interesting that you mention that because on this tech diplomacy tour, there were the deals announced in the Gulf. There's the news in Taiwan today. But let's also not forget that he announced a new research center in Shanghai just a few days ago. And it's no coincidence that all of these things are happening in the same time. And look, he's got a global business to run. He definitely has multiple interests that he's trying to meet. What we have to make sure from a U.S. national security standpoint is that all of that doesn't endanger

American national security and give some of our most advanced technologies to China. So the role that he plays in working together with our government, we have to make sure that business objectives meet national security objectives, and it can be done, but we have to be working together in order to do it.

In January of this year, Anduril's co-founder, Parmalaki, told me point blank that they are preparing for a scenario where China invades Taiwan at some point in the coming years. It is one severe outcome. Take that argument and extrapolate it out to AI infrastructure and semiconductor manufacturing and Taiwan's role in everything that we've just discussed.

Well, it's a reason that we have to make sure Taiwan's resilience and the U.S. resilience when it comes to these critical sectors like semiconductors is really strong. And so partnerships like with NVIDIA, TSMC is investing another $100 billion here in the United States to build out its fabs, to build out advanced packaging facilities, all

All of that has to scale so that we have some more strategic partners. And it's also with other allies like Japan, like Korea. SK Hynix is investing in an advanced manufacturing facility for semiconductors at Purdue Research Park, where the Kroc Institute is. All of that has to happen more deeply and at scale in order to make sure our shared resilience and security, because we have to be prepared for a scenario like that. But rather than just try to slow China down, we have to make sure that we are turbocharging

our own supply chains, our own resilience, and our collaboration with our allies. Michelle Guiders, CEO of the Cracking Institute for Tech Diplomacy at Purdue, thank you very much.

OK, take a quick look at shares of Alibaba and Apple. The New York Times reporting that the Trump administration has raised concerns over a potential AI deal between Apple and Alibaba that would allow the Chinese firm to make its AI available to use on iPhones in China. We will track that story as we go. We stay on Apple. The tech giant promised a bold leap into AI.

But instead, Siri has been left stumbling and the company's AI ambitions are lagging behind rivals. It's the subject of the latest Bloomberg Big Take and its author, Mark Gurman, joins us now. This is a deeply reported piece about the people inside Apple working on AI, the rollout of Siri and Apple intelligence. But if you could just summarize the piece, how would you summarize it?

I think the best way to summarize it is that Apple has a history of coming into emerging areas late. You saw that with tablets, smartwatches, MP3 players, even smartphones. But they've come in and then they've destroyed or vanquished the competition. We've seen that with the iPod, the iPhone, the iPad, and the Apple Watch.

With AI, not only were they late compared to many of the competition, but they're not the best. In fact, it's fair to say of all the big technology companies, they're behind more than anyone else. And there are philosophical issues, management issues, prioritization issues, financial issues,

perhaps even innovation issues and many questions that led to this point. Apple was caught off guard when ChatGPT launched in 2022. There are questions about how a company of Apple's scale and expertise could have not seen this coming. Then there are questions of how they released with all their resources products that appeared so rushed to market. And this story takes a deep look at the how and why about all of that.

I remember, not necessarily 2011 specifically, but 2011, 12, 13, early editions of Siri and being like, "Wow, Siri, what is this? This is astonishing." And then quickly it just fades away. At the heart of your reporting is the hiring of a key executive in 2016. Who is that person and why do you follow that executive's passage through Apple?

Yes, John Gianandrea, he was the head of search and AI at Google until Apple hired him in 2018, so about seven years ago. And he runs the show when it comes to AI, or at least he did run the show when it came to AI. For the last several years, he was in charge of Siri, in charge of foundation models, LLMs, AI testing, AI infrastructure, teams designed to annotate and train data to determine how well the LLMs and the different AI technologies are working.

And him coming to Apple was very exciting for the company. They thought they would turn into an AI powerhouse. Instead, the one person in charge of AI oversaw as the company completely missed the boat on this technology. But as they get into the piece, it's not him alone. Marketing issues, finance issues, and software issues. Bloomberg Smart German with the latest Bloomberg Big Take. It is an absolutely must-read on what's happening inside Apple with AI. Thank you very much.

Welcome back to Bloomberg Technology. Ed Lovelow here in San Francisco. So stocks have paired some of the declines, but the story in the session has very much been AI infrastructure, semiconductor names under pressure. There was the impact of Moody's credit rating downgrade for America from Friday night. But actually, I think a lot of it is a reality check from all of the headlines of last week about all of the billions of dollars of investment in AI infrastructure. Microsoft, the exception to the rule, are

up half a percent. There is a lot going on right now in the technology industry. There are several events either underway or due to take place this week. Computex, we talked about. NVIDIA, the focus of that. Google IOS coming up. Dell Technology World coming up. And then there's Microsoft Build. And I think that's a good place to start. Let's get to what we can expect from Microsoft Build and bring in Anurag Rana

of Bloomberg Intelligence. You've done a little preview piece of research for Microsoft Build. And I think that you, like everyone, are kind of expecting Microsoft to talk about how we're actually going to be using some of the AI tools that they charge us for. Yeah.

Yeah, you know when you look at the AI infrastructure space, Microsoft has really made a name for themselves by saying, "We will focus a lot more on inferencing rather than training." And this is where a lot of the innovation I think is going to come from. They're going to come from new products that are going to be launched throughout the ecosystem, more focus on small language models,

and that may or may not use that much of GPU use out there. And I think that's the way they want to focus on is the company that is more focused on inferencing than training.

What's so important about Bloomberg Technology, this show, Anurag, is like lots of people that watch it are either already at one of those events, on their way to it, or they'll be tracking it closely. They're developers or they are workers in the technology industry. And a part of your research is focusing on the lower cost, large language model. Why is that important? Why does it impact all of the people across the world of technology that are watching this program right now?

So, one of the most important things for us is how do you get this technology to be used throughout the masses, whether it's on the consumer applications or on the enterprise applications. So, when you look at even Microsoft's co-pilot subscription, it's at $30 per user per month.

With that high rate, we think the adoption rate is going to be a lot lower than if they bring it down. You can extrapolate that on the enterprise use cases also. Currently, we are in a phase where running a large language model costs a lot of money. Now, over time, the cost of computing will go down.

or token usage. And I think this is where one of the ways you can do that is by using a small language model that does one specific task and one specific task very well. And for that, you really don't need that sophisticated of a hardware to run it.

Anna Aigrana of Bloomberg Intelligence. Let's catch up at the end of the week when all of these events are out the way and we can assess what was said. There is more AI news out of the Middle East and Europe. NVIDIA and Abu Dhabi investment vehicle MGX are partnering with French firms to build Europe's largest AI data center campus. The moves follow a week of AI announcements. We've been over them during the hour.

during President Trump's visit to the Middle East. And that includes plans by Saudi investment fund, STV, to launch a $100 million AI-focused fund with backing from Google. STV General Partner and COO, Luca Barbi, joins us now from Riyadh.

Congrats on the fund. You're one of the biggest sort of private growth equity venture firms out there in terms of money under management that's focused on like a very specific domain. What do you want to do with this fund? And what is the unlock of everything that happened last week? Because your region is so under the microscope with all of the infrastructure investment that's taking place.

Thanks for having me. STV is a private technology company. We invest in technology in the Middle East. We have 1.5 billion of assets under management. And last week we announced a thematic fund for AI.

So our thesis is that it's time to invest in the application layer. The Middle East has proven itself being able to build a technology company. Today we have 15 unicorns in the region and more in the pipeline. In our portfolio we have nine companies that are preparing for IPO. And so there is enough knowledge, there is enough momentum, there is enough infrastructure to compete and play a role in the AI arena.

The fund will be focused on the application layer, as I mentioned. There are a number of use cases that are immediate, relevant, and can find tangible application in the market, especially with customer service or enterprise automation or legal. This is where we are focusing today. Right. We talked about Google backing this fund. Which other notable LPs and investors have you managed to get behind you?

Most of the things are still in the making, so we'll disclose names in the new course, but we have a number of institutional investors that have been with us before and will come also in the AI Fund. And I think also the time is right to attract international investors in our fund and in general in the region.

A big factor in the Gulf is the activity of the sovereign wealth funds. So you think about Saudi Arabia, for example, we covered a lot last week on the show Humane. How does that impact your ability to do deals? Do you kind of get muscled out by either the public investment fund or another vehicle like Humane? Or are you looking at different company sizes and targets for your investments?

Well, the partnership between private and public sector so far has worked quite well. Even in the most recent announcement that we had last week, most of this money and capital will be deployed in the infrastructure layer. So large project costs billions of dollars to develop data center, to develop also and localize LLM models. So this is actually favoring the initiative of the private sector

And as I mentioned before, we will focus more on the application layer. So this is actually reinforcing our thesis that investing in AI in the application layer in this region will make more and more sense as the infrastructure will be comparable to what we see in the most developed markets. President Trump's visit kind of put Saudi's name out there. Even if you forget the infrastructure layer right now, are you worried about valuations a little bit given how much interest and energy there is

into looking at Saudi Arabia as an investment opportunity.

It's always a challenging job. There is a lot of volatility that we have observed across different cycles, so we need to deal with it. We need to put forward our reputation as long-term, credible investors that can help on a number of value-adding activities, in particular to integrate companies in our ecosystem, talking to government, regulators, large players, and make things happen. So we believe that smart and experienced entrepreneurs will value that.

Actually, we welcome the Trump visit. I think the world is more and more noticing what's happening in our region in the Middle East.

So far, things have been under the radar, but I think, especially in our sector in technology, the growth is exponential. And I would expect in the next three, five years to become the success case of the Middle East in tech to become more visible. And so it will be more global capital and more global investors. I see we enter the market and play a role next to us.

Luca, you talked about some of the unicorns in the region and some of what's in your portfolio. You must be excited about some exits this year. Any case studies where you see an IPO or even M&A giving you a nice exit? Absolutely. So, look, I mentioned 15 unicorns so far, right? Five of those 15 have been materialized in the next 18 months.

This is why I was talking about the exponential shape of how things happen in technology. In our portfolio we have other four candidates. One of it is actually already a unicorn, it's TABBI, Buy Now Pay Later. They raised recently around 3.2 billion dollar valuation and has a credible path to be listed in the Middle East Stock Exchange in the next 18 months.

So we need more of this success case to prove ourselves and the rest of the global audience that the market is big enough, the entrepreneurs are innovative enough, and the capital can be put at play with attractive ROI.

Luca Barbi, general partner and COO of STV. Great to have you here on Bloomberg Technology. Thank you very much. Now, coming up, we're going to talk to Lux Capital's Josh Wolfe about the firm's helpline for academics and scientists and the state of research in this country. This is Bloomberg Technology. 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. One major UK retailer discovered a single point of sale outage cost them around $1 million in lost sales during a single lunchtime. Now, using TeamViewer's digital workplace platform, the same company is able to identify and fix those issues before they even happen. But proactive troubleshooting isn't just about the incremental improvements.

is about fundamentally reimagining how work happens for everyone. And the companies that move first get competitive advantages in terms of efficiency, productivity, and innovation. To find out more, visit bloomberg.com forward slash teamviewer.

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

As the US public sector pulls back on funding for research and development, some big name private sector names are stepping in. That includes Lux Capital. Managing partner Josh Wolf is here. Lux Capital's portfolio includes names like Anduril and drug discovery company Icon Therapeutics. What you are doing, Josh,

is a $100 million commitment for basically a helpline for American scientists, American researchers whose work might otherwise be taken from underneath them because of the lack of funding. That's absolutely right. You go back 80 years.

American competitiveness started with that of a bush. You have this great thing, the endless frontier. That is what gave us competitive advantage. We attracted the best and the brightest from German Jews that came here and made sure that we had the atomic bomb, went to the Institute for Advanced Studies at Princeton. You go through the Cold War in the 80s, attracting Russian emigres so that we can have the best and the brightest scientists in the world. All of our academic institutions being funded.

Then you fast forward to 2005, you got Norm Augustine, previously head of a major defense company, writing The Gathering Storm, which was basically like the clouds are gathering and we are starting to lose, particularly to China. Today, I would call it a perfect storm. You've got politicization at universities. You've got massive federal cuts. And that is not a political thing between the Republicans and the Democrats. That is the past 22 years we've had –

major funding cuts in federal government. We are at the lowest level in science funding from the government since 1997. Why does this all matter? We are competing with China. This is not a left or right or red or blue. It is a past versus future thing. And with those funding cuts and the politicization and the problems that scientists are facing, the lifeblood of venture capital, the lifeblood of innovation is this. So we're stepping forward and saying at least $100 million, we're going to be doubling down on early stage venture creation around scientists.

Josh, I discussed this exact issue with Michael Kratios recently, director of the White House Office for the Science and Technology Right. Just listen to how he summarized funding right now. If you spend a lot of money on the wrong things, it's worse than spending a little money on the right things. So we're making sure that the biggest priorities for the nation, things like leading artificial intelligence, leading in quantum information science, that we continue to fund those areas and make sure that our universities are a big part of that agenda.

How Mr. Kratios would summarize it is that it's how and where you spend money, spend but research funds rather than the volume. Your reaction to that and I guess the lack of knowledge right now and the direction that this administration is going in terms of committing to growing R&D budgets?

Well, first of all, I have a lot of respect for Kratios. I think he's doing a great job across many things. I would say as it relates to funding the things that are evident and obvious, science and the funding for it is not a slot machine for strategic returns.

This is about the slow burn of serendipity. We never knew that COVID was coming, but thank God we were able to have messenger RNA, mRNA vaccine that was there. We would have been late to the game if we were trying to fund it when the moment happened. So when we're talking about the things today that matter, AI and quantum, which I'm super skeptical about, and some of the cutting edge areas in robotics and aerospace and defense,

Those kinds of things are the things that we've been funding for 10 years. So the venture industry has been funding it for 10 years, which means that the breakthroughs have come from science and academia, and that's 15 years ago. So the things that we should be funding now are this slow burn of serendipity that 5, 10, 15 years hence, folks like us from the private sector come in, identify and take the risk and put in risk capital behind the human capital.

behind the human capital and the intellectual capital of intellectual property and patents owned by the US and owned by our government and licensed to the universities and to the researchers and then ultimately to the startups that can create multi-billion dollar companies doing exactly what great Kratios is saying. So I do not agree that we should be funding the here and now. We want to own the future, we should be funding the future. And you never know where it's gonna come from. If we did, it wouldn't be science. - Josh, you at the start of this conversation pretty clear this is about competition with China.

Right. And I recall a conversation I had with Jensen Huang in March where he basically said, look, 50 percent of AI research is being done either in China or by Chinese researchers in other domains.

Is it as simple and clear cut as the Chinese government just being willing to commit capital and do what it takes kind of attitude for them to come out on top? Or is it different to that? What is the domain for the competition here?

It is a geopolitical domain. It is a cultural competition. Cultures get what they celebrate. When we're celebrating celebrities like Kardashians and Paris Hilton and TikTok and nonsense, and they are directing their youth to go after the cutting edge that will define competitive advantage,

to let them dominate in biotech, in aerospace, in breakthrough materials, in space itself, in life-saving drugs. Today, most of the world depends on the American biotech industry. You go back to Conan Boyer on the West Coast that launched Genentech and helped to create this vibrant industry, unleashing cancer diagnostics and drugs, immunotherapies and GLP-1s for weight loss.

All of that came from basic, undirected science. It's absolutely critical. You go to aerospace, and again, the atomic bomb, thank God it was built here and not somewhere else through our Manhattan Project. That was massive, directed scientific research with lots of unknowns where we had Germans and Austrians and British all coming here to work so that the Allies could have superior advantage.

So we are fighting and losing right now in nearly 40 of 44 critical technology areas where China is dominating. And Jensen from Nvidia is 100% correct. 50% of all AI graduates today are coming from China. That's not a 2023 or 2024 decision. We're in 2025. This was a decision from 15 years ago. So the decisions we're making today about long horizon science is what is going to give

Venture capitalists like us, the ability to go into early stage science and do what we do. We've done over 20 companies de novo from university research, but that wasn't research that was done a year ago. It was research that was funded 10, 15 plus years ago. Being able to back Nobel Prize winners like Richard Axel, where we funded them in Calliope or all kinds of other companies, critically important that the science research funding is there now so that us venture capitalists in the private sector can step in tomorrow.

I just want to go back to the luck science helpline before we run out of time. And it used to be that you would require those researchers to have their work 90, 95% scientifically proven before you commit capital. You've lowered the bar to 50% scientifically proven. What are the risks with that and the motivation for doing so? We have about a minute left.

Lowering the bar for the science risk is raising the stakes. Before, we would want to only take market risk, technology risk, people risk, product risk, financing risk, science risk we wanted funded by the U.S. taxpayer and by the university. Now we're saying if it's not fully baked, it's okay if it's half baked. If it's down to 50% ready and it still needs money from the private sector in a private lab, in a venture-supported company, we're willing to take that risk because the stakes are that high.

The profits for the scientists, for us, for our limited partners are that high. It's worth doing. We're not talking about a huge amount of money. We can't do it alone. We're leading this effort. We're inviting our venture peers who can be scientifically minded to create syndicates of American greatness here to come along for the ride. Lux Capital Managing Partner, Josh Wolf. Thank you very much for coming back on the program.

Anthropic has cultivated a reputation for taking issues such as safety and responsibility seriously, more seriously than the company from which it has sprung, OpenAI. But can it keep up while remaining so focused on safety? Bloomberg's Shireen Ghaffari joins us for more on her Businessweek story. I look at Anthropic, and as you know, I spend a lot of time talking with Anthropic as well,

Over several years, I feel like they have managed to move quickly, but it's this kind of repetition of safety. What are you talking about in the business week piece? Right.

Right. If you think about just even a few years ago, right, Dario Amadei, the CEO of Anthropic, was someone who really had an academic background. He had worked at OpenAI and Baidu, Google, but largely spent his time as a biophysics researcher, right, running experiments. And so now he's in this position where he's actually running a $61 billion startup while trying to balance that sort of academic commitment that he has to his ideals around safety. In the piece...

What do you report on how they're getting that balance right, running a business versus the safety responsibility? Right. So they have some impressive numbers. I mean, the latest annualized revenue projections they have are $2 billion, and that's double what it was at the beginning of the year. So that's nothing to, you know, bat an eyelash at.

At the same time, they're going to have to keep racing at this very fast speed to keep up with DeepSeq, to keep up with OpenAI, with Google. And so how do you sort of balance that when sometimes you do have to take a step back? That's going to be the challenge, I think, in the years ahead. When I speak to computer scientists or even people in the enterprise software space, I think what

And for them prop it gets a lot of credit for and what they're good at is coding agents and Those sorts of domains how have they done well there and what are their products? What is it that the anthropic sells to the world? Yes, so another nugget in this piece is that one of the biggest sources of growth for them recently has been through their coding agents and sort of coding technology and that's essentially software that helps

engineers write their code. And that is, on the one hand, a huge boon to them because if they have the best software for that, they're going to get big contracts. On the other hand, it also provides a complication in terms of what does that mean for the future of work? What does that mean for employees even within Anthropic whose jobs are going to change? You know, Amaday told me we don't want to slow down. We don't want to have to fire our employees because of our product, Claude Code. But that means we may have to slow down.

hiring in the future, right? So I think he's being quite open about the trade-offs here. Very quickly, just 20 seconds. Where are Anthropic? Where's home for them and who are their biggest investors?

So they are based here in San Francisco, actually where Dario Emede is from. And their biggest investors are folks like Lightspeed. You know, Eric Schmidt was an early investor who I talked to. Google and Amazon, of course, who also partner with them on the infra. Bloomberg's Shireen Ghaffari with, frankly, a must read in Businessweek. Thank you very much. That does it for this edition of Bloomberg Technology. Don't forget, check out our podcast. So many of you listen to this show online.

As a podcast, you know where to find it. It's on all of the Bloomberg platforms, as well as on Apple, Spotify, and online on iHeart. From San Francisco, this is Bloomberg Technology. ♪

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