Tesla’s FSD Factored in Fatal Crash, GlobalFoundries Boosts US Production
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Bloomberg Audio Studios. Podcasts, radio, news. 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 San Francisco, this is Bloomberg Technology. Coming up, President Trump says Chinese leader Xi Jinping is very tough to make a deal with. Tech responds to his late night social media post. Plus, Global Foundries, the biggest U.S.-based provider of made-to-order chips, announces a plan to spend $16 billion to bolster domestic production.

And Bloomberg makes public for the first time dash cam footage and details from the late 2023 when a Tesla using FSD was in a fatal crash. But first, we check in on these markets. And we're tentatively higher. Look, we've once again got bad news being good news. Slower services than expected in terms of economic data. Slower jobs growth than expected means will the Federal Reserve give some push to the economic perspective? NASDAQ 100 trades up.

some three-tenths of a percent. Ed, go on ahead. What's moving this market? Yeah, we've got some big stories in the show today. Let's start with one that's coming up very soon. Global foundry is up 2%, an accelerated and expanded investment in the United States for cutting-edge production capacity. Tesla is down under pressure. A big Bloomberg report making public for the first time some dash cam footage of a crash in 2023 when a Tesla using FSD struck and killed someone.

We will get the details later. And then HPE, Hewlett Packard Enterprise, up 6 tenths of a percent. Strong revenue growth. Tariffs are an impact. And then there's the activist investor question. We speak to the CEO later in the hour. Important conversation. But let's get back to what has been really the focus of the markets this morning was President Trump doubling down on tensions with China. In a post on Truth Social overnight, the president called Chinese leader Xi Jinping very tough and extremely hard to make a deal with.

For more, Bloomberg's Kayleigh Lyons is standing by. Kayleigh, what is the impact on corporate America and indeed tech America at that?

Well, it's going to depend, frankly, on how the president and President Xi decide to move from here. As Trump says that China is proving, and Xi specifically, very tough to deal with, it seems he's also proving tough to get on the phone. As the White House has for days now said that a phone conversation between Trump and Xi will happen in the near future as they try to sort out what both sides have accused each other of as being violent.

Thank you.

on rare earth supply. They control about 70% of that market and those rare earths are needed for a lot of national security purposes in the U.S. Obviously, advanced technology around things like fighter jets, for example, or nuclear control rods. These are things that the U.S. and many U.S. companies actually need access to in order to do their production work. And the U.S. is saying that China is keeping

from getting those materials not moving as quickly as the U.S. desires. China, on the other hand, is accusing the U.S. of also violating the agreement as we have seen a further ratcheting up of export controls in different areas, including around jet parts, but also chip design software, for example. We continue to see an expansion of the areas in which the U.S. is not allowing export into the Chinese markets. And all of this raises the risk that if an agreement cannot be

made or kept to that tariffs between these two largest economies could go higher again, which obviously have massive implications for companies that are reliant on Chinese imports in order to make their goods.

Bloomberg Balance and Power host Katie Lyons, thank you very much. Just days after leaving his position in government, Elon Musk has been criticizing President Trump's signature legislation, his big, beautiful tax and spending bill, calling it a budget-busting abomination. The tech titan's public condemnation pits him against the president at a critical time as Trump is personally lobbying holdouts on that bill. Cara.

Now let's look at how the U.S. government is affecting American chip sector, which, of course, is something that President Trump has been vocal about. Global Foundries is the biggest U.S.-based provider of made-to-order chips. Today, announcing plans to invest $16 billion to expand its chip manufacturing and advanced packaging capabilities across facilities in New York and in Vermont. I'm pleased to welcome CEO Tim Breen to the show.

Tim, how much is this a reaction to the geopolitical landscape and to Trump's desire to bring manufacturing to the US? Yeah, well, thank you for having me. So it's really a long-term trend where we see the needs for the technologies that we make here in the US just growing significantly as semiconductors play a broader role in kind of every aspect of our life, from the cars we drive, the phones in our pockets, even satellites in space and the data centers we're building around the world. And that role is growing, and obviously that needs to be met by increased investment in

And the U.S. has an imbalance between what is designed here and what is created here from innovators, like the ones mentioned in our announcement today, and what is manufactured. And, you know, GF is doing its part to grow that capacity. And that's a long-term investment for us and part of a long-term trend. And there had been long-term signals that you were making this investment. I think it was late last year you talked about the $13 billion over the next 10 years. So how much of this is net new? Is the $3 billion in terms of R&D the real new bit here, Tim?

Yes, so we're building on our existing plans and those plans are already underway. So this is a great chance for us to go faster, go bigger and also bring more innovation. And I think especially the changes we're seeing with the role of AI, both in the cloud, in the edge and all of the connectivity in between just means we need to be ready for the demand that's coming our way. And so, yes, it's more building on those investments we've already started.

I've studied your capital expenditures and basically you average about $1.4 billion every year. So I'll go back to Caroline's question, the $16 billion. What's new in it? What is the composition of that funding and where does the funding come from?

yeah so we have a clear plan to fund this over the coming years and i think you know obviously our capex investments based are based on customer demand and so we'll be able to accelerate those as that demand materializes and we're seeing that renewed interest in us-based manufacturing from you know many of these companies we've talked about and so we'll be able to modulate our capex investments to match the demand and obviously that's what we try to do as a company qualcomm is a pretty high uh

digits customer for you, right? And when the news broke within minutes, there's an email in my inbox and a quote from Cristiano Amon. It's interesting because you are listing many partners and customers as beneficiaries of this initiative. Which customers are you going to prioritize and why?

You know, we have a number of great companies that have supported this announcement and then, you know, in many cases they've been our partners for, you know, decades in some cases. And so Qualcomm is a great example of a company that's always prioritized global sourcing, having optionality and definitely producing here in the U.S. And it's a true anchor for us in our U.S. factories, especially in New York. And so I think we're going to be continuing to work with all of these customers to meet their requirements. And those requirements are changing, right? They're bringing new technologies to market. They're penetrating new markets on their own. Qualcomm, a great example of

penetrating new industries like automotive, which is again a strength for us. And so very happy to support more of that right here in the US. It's more expensive to do things here in the US. How much are costs likely to go up? How much more can you charge by bringing your manufacturing here?

Well, manufacturing scale matters. And that's why for us building on existing factories that have already been up and running with good yields, with high quality makes it more efficient. And so when you've learned how to do it now for in the New York case over a decade and even longer in Vermont, you know how to do it at a better cost structure. And obviously investing more gives you that scale advantage.

But the other advantage for customers is that they have flexibility. They have optionality in where they manufacture. And so they can do one design and have it made all over the world for the requirements they have for different markets, including here in the US. So actually, we think this for them actually represents a cost saving over the long haul. Tim, there's also reports out of Germany this morning that you are investing there. What's the latest with that?

Yeah. So today's announcement is very much focused on our U.S. plans, and it's clearly the area we see the biggest mismatch between supply and demand. And so it will be a large part of our investment plan going forward. We have a great facility in Germany and Dresden. We'll continue to upgrade that and expand it over time. Nothing like the scale we see in the U.S. in terms of new investments in the short haul. But again, a great opportunity to meet what our European customers need out of that facility.

Tim, do you need more from the government in terms of funding? You got money from the CHIPS Act late last year and of course that's been in many ways talked down by the current administration. Do you need more funding from the government or is this the way to do things with capital partnerships and indeed with capital expenditure from yourself?

I think all of these investments always need to be done in partnership. We're really grateful for the support of this administration. They've been impeccable partners. They understand our business and where we're going. We get great support from them in various different forms, and not just for building the supply, but also encouraging the demand to come back onshore. And I think that's a super helpful partnership for us. Obviously, we can't do this without our customers. That's the reason we exist. And so them being a part of this story and bringing back that demand to the U.S. is also an essential part of underwriting these investments. And so, look, it's all about partnership.

Tim, what's Apple's role in this and how are you going to be working with them differently as part of this expansion?

Yeah, I think Apple's been very clear that, you know, for them, there's a huge amount of semiconductor content that goes in all of the incredible devices they bring to market. And, you know, if you took your iPhone out of your pocket and opened it up, you'd find an incredible array of different technologies in there. Many of them are technologies that GF produces and some here in the U.S. and some we'll bring back to the U.S. as we go forward. And so, yeah, they're obviously very keen to see more domestic manufacturing. And the fact we have such a longstanding partnership means we know each other well. We know we do well together and they're keen for us to do more, as they've indicated.

Global Foundries CEO, Tim Breen, great to have you on Bloomberg Technology. Thank you very much. Now coming up, federal regulators are investigating whether Tesla's full self-driving system is dangerous after a fatal crash involving the technology in late 2023. 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.

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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.

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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 Elon Musk touts driverless robotaxis in Austin, federal regulators are investigating whether the system it calls "full self-driving" is dangerous, even with a human behind the wheel. That's after a fatal crash in November 2023 involving a driver using the system.

Bloomberg is publishing images and partial footage of that crash for the first time. We should warn the audience the content you're about to see, which Bloomberg News obtained via a public records request, may be disturbing to some viewers. A Tesla Model Y with full self-driving engaged round the curve at highway speed. The sun was low. The visibility was poor. The car didn't stop.

Moments later, the Tesla using FSD hit 72-year-old Jonah Story, who was standing, helping direct traffic at the scene of an earlier crash outside of Phoenix. She was pronounced dead at the scene.

Bloomberg's Craig Trudell, who broke the story with Dana Hull, joins us now for today's Bloomberg Big Take. And I think the most important question, the question that we are getting most is why is it important that we release the details of a crash that happened in November of 2023? Craig. Yeah, there's a lot of pushback on that, you know, for the obvious reasons of, yeah, it's now June 2024, right? And yet, we're

What makes this crash very significant for Tesla is the fact that this is something that led to a federal investigation. This investigation is ongoing.

This speaks to the complexities of the way that the US has approached regulating this technology. I think when you listen to Elon Musk talk about his driverless ambitions, he talks about regulatory approval and gives this impression that there are these hurdles that Tesla needs to overcome.

clear, as long as you're making your cars with things like steering wheels and other components that a sort of quote unquote normal car has, you can put a car on the road today and say, we think this is ready to be driverless. NHTSA doesn't have to say safe or unsafe, thumbs up or thumbs down. And what they are doing is picking up on

crashes that are reported like this one, picking out patterns in them. In this case, this crash along with some others, there were consistencies in terms of conditions that the system seems to have trouble dealing with.

And NHTSA is saying, look, we need to investigate this and whether or not your system is safe in these conditions. And that is a risk for investors and obviously worthy of reporting, putting aside the fact that this is a tragic situation and 40,000 people die on U.S. roads every year. That's a worthy ambition to try and change that if you're Tesla.

You know, it's rare that we look at those deaths as closely as we had the opportunity to here. It's emotional for 71-year-old Jonas Story's family. It is for Carl Stock as well, who is the Tesla driver.

Push us forward though on the technology front here though, because there are key differences between, for example, LiDAR with Waymo and what Tesla has been using. And is in any way an interpretation as the technology and how it reacts to low sun and certain of those themes that you're seeing among these crashes?

Yeah, that's a really key aspect of this story because Elon Musk has sort of taken this view that all Tesla needs is cameras, that it doesn't need more expensive radar and even more expensive LIDAR sensors. And he's kind of out on a limb in this regard. Waymo has a very different approach. They, of course, offer a system that

does not have to be supervised, whereas full self-driving to this point needs to be supervised by a human. And Waymo, because it's offering that level of capability and taking that approach of we want to put cars on the road without anybody behind the wheel, they have a much more robust, much more expensive sensor set. And I think part of the sort of question here is, is there...

sort of a safety shortcoming if you're relying on these cameras, especially in conditions like this one. You can see from the video footage that it's quite hard to see what's ahead from the cameras on the front of this Model Y. And you really don't see the pedestrian who was tragically killed until the very last moment. Craig Trudell, phenomenal reporting. We thank you for bringing it to us.

Epic Games 2025 edition of its Unreal Fest conference just kicked off yesterday in Orlando. The game developer showed off the tech behind The Witcher 4. This was everywhere and also showed off some of its AI creator tools. Bloomberg caught up with CEO Tim Sweeney for an upcoming episode of The Circuit with Emily Chang. And he weighed in on the competition in the AI space and also Apple's strategy.

Well, AI is interesting because Google's Android operating system is open to third-party AI assistance. And we're seeing some really robust competition there as Perplexity and others provide solutions. Apple so far has been closed.

Not only are they stifling other companies from producing AI software that works as integrated into iOS as Siri does, but they're failing to deliver their own AI. And that's very unfortunate. I think iOS is an area where the entire ecosystem, the entire platform should be opened up to third party competition. Apple should get out of the way and let awesome developers make awesome software. And then let the best win.

Now let's talk about the wellness industry. It's forecast to hit $9 trillion by 2028, according to a study from Global Wellness Institute. But today, a leading software provider for businesses in that sector have announced a major rebrand to bring three companies, MindBody, Booker, ClassPass, under a new parent brand called Playlist.

Play a CEO, Fritz Lammann joins us now. And Fritz, why do this? What is it that you're going to be able to do in terms of efficiency here when you're bringing these three names in a closer alignment?

Well, you teed me up beautifully there. You know, we have built three highly successful different brands, ClassPass, which gives people a way to book fitness spas and salons and even food and beverage take out increasingly. Booker, which is vertical SaaS that's powering businesses that run spas or salons or appointments.

And then Mindbody, whose bread and butter is giving kind of the operating system to the wellness industry, are mostly studio fitness owners, but also PT and others serving up wellness. And so it didn't make sense for us to have a brand that was just one of our three successful businesses.

And really we wanted to sort of say, hey, look, we are now building a common platform of AI tools, an app partner ecosystem, consumer distribution that can let us go serve experiences businesses.

So, yes, wellness businesses and the fitness and beauty and spa and salon world, as we already do. But our aspiration, we believe we've earned the right to go even bigger and to build software for anybody delivering great experiences in their town and to give consumers apps that help them discover and book this stuff and really give them a playlist for their life, if you will.

So how much bigger does it get? You're already in 40,000 salons and spas, 73,000 gyms and workout places and across 30 countries. How much does this enlarge your total addressable market?

I mean, again, you teed me up beautifully there. The wellness economy is massive, right? In the U.S., it's over $2 trillion. And so I think we'd be fine. Our investors would have a great outcome, hopefully, if we continue to execute within the wellness vertical. But the fact that we built these, our scale has allowed us to build this industry-leading

AI stuff, this consumer aggregation so we can help these businesses get more reach and distribution and not have to pay social media companies crazy ad rates to get users. The fact that we have a big partnerships ecosystem so you can take advantage of premium tools that are built into our software. We want to go much bigger. There's 20 million small businesses in the US and only a sliver of those are wellness. We think it substantially increases our addressable market.

Fritz, what's the total active user base of the combined entity? How many people now will be on that platform?

I can't speak to the specifics on even though sharing metrics and our financials is my favorite topic. The powers that be have prevented me from sharing any specific details. But we're reaching tens of millions of consumers in the US. We're operating in 31 countries across multiple verticals. And we want to get an order of magnitude bigger in terms of our impact and our reach. IPO, get the name out there.

You know, we can't really comment on our plans. We have investors who are super long-term focused. And right now, we're in a position where we don't need to raise capital. And so, you know, we'll keep an eye on the markets and see how they evolve and see where the world takes us. Right now, we're just focused on how can we touch as many businesses and help them achieve their potential as we can? How can we help as many consumers get out of their screens and truly kind of build the anti-tech tech company where instead of manipulating you and

damaging your mental health we're trying to get you off your screens and into your city having rewarding experiences so that's our focus for now. Fritz Lammann, CEO of Playlist thank you very much for joining us. Music

Welcome back to Bloomberg Technology. I'm Caroline Hyde in San Francisco today with you, Ed. And I am Ed Ludlow. It's great to be back together. Markets are moving on geopolitical headlines and other things. Take it away. Yeah, and actually we're sort of trading tentatively higher on the NASDAQ ball broadly, but I want to get into a couple of names right here right now because Apple actually managing to shake off what is yet another downgrade. This one coming from Laura Martin over at Needham, putting it

Putting it to a hold, we've now got 20 holds on Apple, and we're actually racking up a few sell ratings. We're up 0.4%. The issue here for Needham is, once again, the lack of AI spontaneity and grasp of generative AI within the overall offering, and indeed, therefore, a slowing of a sales cycle, potentially, with the next round of phones. So we're up 0.4% there. CrowdStrike actually coming off of our lows. We're still down 4%. At one point, we were down by some 7% pre-market. This is as numbers actually met, exceeded expectations.

expectations for their fiscal first quarter, but not good enough when it comes to perhaps where we're seeing ARR compared to this time last year. The net new ARR hasn't recovered from, of course, what was a massive wipeout, blackout that CrowdStrike caused in July of 2024, Ed.

Okay, let's go to another one of the top stories. Salesforce's agreement to buy Informatica for $8 billion came a year after initial talks collapsed, but then the acquisition target lost a third of its market value. The result, according to Salesforce executives and people close to the negotiations, is evidence of the software giant's more disciplined approach to deal-making and its patience. Bloomberg's Liana Baker leads the deals team.

This is just like a classic Bloomberg tech story. This is what happened behind the scenes. Two things, Salesforce learning the value of patience, and then the two people at the helm of those companies probably played a big role.

If you look at where Salesforce stock has been since the Informatica deal was announced, it's not doing too well. It's actually down more than what Informatica is worth. So Mark Benioff here is sort of defending the deal to Wall Street. And Salesforce is using words like discipline and patience to show that they're a different acquirer than they were just a few years ago when they bought Slack.

when later they came under in the crosshairs of activist investors. So they're trying to show that they're a different sort of M&A acquirer now, still a serial one, but maybe not paying as much as they would have even a year ago when they first started talks with Informatica.

And the need for Informatica became ever more necessary in a way as generative AI just became the focal point for Salesforce and for Mark Benioff. But how did they therefore keep the conversation alive? How did they show this discipline over the course of 12 months?

So we reported in the story that the CEOs stayed in touch. As you know, when two companies come together, it's kind of like a marriage. It takes a while to get comfortable. And we also know that there was interest in Informatica, not just from Salesforce. We reported that Cloud Software Group, a big privately held...

a private equity-backed company was also interested. And Mark Benioff did say, "We were lucky to get this company because it does seem like it was a competitive auction." Goldman Sachs was working with Informatica, JP Morgan was working with Salesforce, and it just took a long time to come together, but it did accelerate ahead of our scoop. They had a handshake agreement before we reported it a few weeks ago.

Yeah, I forgot that handshake with Amit. We thank you, Leanna Baker. It's been great reporting throughout. Let's discuss it further with someone who has a lot of focus on that particular deal and others. Brian Ruder, he's co-managing partner and co-CEO of Pamira, who's an investor in Informatica. And what's so interesting, Brian, is perhaps you say that a dollar back today is worth more than a dollar back perhaps a year ago. How has liquidity changed? How has this deal-making changed?

Yeah, I mean, the probably, thanks Caroline, Ed, good to see you guys. The environment for private equity has been really tough in terms of getting liquidity back to investors. You've had extending investment horizons for a lot of businesses. That's usually actually good news in the case of like an Informatica, which we've been invested in for a decade at this point, kind of leading to this transaction.

But it's been very hard to get liquidity. And actually, this kind of liquidity to our investors is particularly valuable because it's coming from a strategic, it's an all-cash transaction. It's not private equity to private equity, which from an LP's perspective is fine, but also it tends to be left pocket, right pocket. They might actually be an investor in that private equity fund that's buying from

the private equity fund that they're an investor in as well. So this is particularly precious DPI. As we say, distribution of paid ends, like real liquidity relative to the value of what's in the fund. So we're very proud, very happy with this transaction at this particular point in time, especially. And so how repeatable is that? How many strategic buyers are

out there with the guts, the determination to keep following these sorts of processes? We think strategic activity, certainly the interest that we're seeing is very high in the kinds of businesses that we back. And I'd say for our investment philosophy, it's really strong. Informatica is one of these great stories of really product-led growth that we try to back for long periods of time. And that's what actually strategic buyers want. They're not trying to buy in

EBITDA optimized gutted private equity portfolio. What they want is really well invested product sets. And so if you have businesses that are doing that like we do with our technology portfolio, it generates a lot of strategic interest. So we expect that's, it's certainly very active today in terms of dialogue and we expect that's gonna continue.

I was really looking forward to this conversation because of the private equity lens rather than what is more common on the show, which is venture-backed deals. But what they have in common, right, is the exit environment and what types of exits are on the horizon. Do you see Salesforce, Informatica...

as a sort of starting gun and signal of more activity to come in different formats. I'm particularly thinking about this administration and the regulatory environment that would allow something like that to happen. Yeah, I mean, we think what a lot of the strategic big strategic buyers that we see are looking at is actually generally pretty appreciated currencies in their own stock price, a lot of liquidity, and then the need

and the excitement to really get their story together for the emerging and kind of really accelerating AI landscape and Informatica is exactly that. So you want to find businesses that are going to help, you know,

codify kind of what you're going to be able to do in that AI world. And Informatica is like right in the middle. So for those, like if you have assets that kind of bolster that story and there's like so many companies that are out there in the private ecosystem today, you know, it's a bit of a smorgasbord. Is $25 a share good? It's great for us. Yeah. I mean, this has been more than $6 billion back to our investors. Wow. It's a very, very significant, large, multiple billion dollar investment.

I ask that because of the reporting, right, that, you know, one year on from their initial talks, a big factor was the downward pressure on the stock that allowed them to proceed. And I don't know how you view it. You might say, well, what might have been at $30 or $35? I don't know.

Yeah, I mean, there's a lot of volatility in the world today. You see it kind of everywhere. What we focus on is like the point, what matters to us is the point to point over 10 years, not over 12 months. And over that period of time, I mean, the really cool thing about Informatica, and there's a lot in there, is that the products that Salesforce is buying with this company are really,

overwhelmingly products that we created with the management team post the going private in 2015. So the cloud business was really zero at the time we invested in them. We saw a team that we really thought could build a next generation cloud data management platform. That's guiding, the company's guiding to more than a billion of ARR this year from a starting point of zero. Not a lot of private equity backed software businesses can say that they've done that. So from that kind of point to point level, like we're thrilled. Our investors are very happy with the transaction. And look, it's a very good home.

I think Salesforce will get a lot out of Informatica. I like the way you said there's a lot of volatility in the globe right now because you're a global footprint kind of PE. In fact, for Ed and I, we think about your European chops because that's the place that we come from. I'm interested as to how, therefore, the landscape differs. We talk about U.S. exceptionalism. Is that...

Where the deals are going to happen? Is it global in nature? We think a side effect or kind of a very direct consequence of what's going on in the world today, and particularly in this country, is that the commitment that we see in Western Europe about investing in Europe is very high. It's about the highest that I've seen it in my investing career. And so...

that's going to have really interesting benefits to the economies there, to the innovation pace. And frankly, it's overdue. I mean, look at all the hyperscalers based in the U.S.,

We are looking more at bringing the best of Silicon Valley into Europe, as we've always done. And there's never been a better time, in our view, to have a very deep European origination network to be able to invest behind where a lot of that innovation is going to come. We were just showing actually some newsletter coming out of our European colleagues, Mark Bergen, who's writing about how this glimmer of hope is in the returns that are yet to be born in Europe for the VC community, for the PE community. What

What needs to get done here in terms of actually starting to see IPOs for darlings like Revolut or actual exits? Is it going to be actually your kind of companies that help foster the M&A side of things? Yeah.

But we're here in Europe and we think the capital base that we've got to be able to invest in the businesses that are really growing and really building the next generation of innovators and disruptors in Europe, that's a very fine thing to be. There will be plenty of capital now from us and folks who look like us in the private markets. And the private markets really do need to come around again in Europe and kind of open the way that they are opening in the U.S. pretty successfully now as well.

But there will be, we think, with what we have, like plenty of private capital to be able to pick up those companies at the same time. Brian Ruder, Premier, a co-managing partner, co-CEO. Great to be all together here in San Francisco. Thank you very much. So coming up, the CEO of HPE, Antonio Neri, joins us to discuss the company's earnings and why it expects to see a reduced impact from tariffs. That's next. This is Bloomberg Technology.

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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.

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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.

Yet more announcements of investment in the U.S. by big data center players. This one, Amazon coming out saying they're going to be investing $10 billion in North Carolina at the moment. It's expanding its AI infrastructure, creating, we understand, about 500 new high school jobs. What's interesting, though, Ed, here, is the commitment to reskilling, the training, the education programs, the fact that they want to be really bringing about more engineers in particular. That is what a lot of people have been worried about.

This move to generative AI, this move to manufacturing, where is the skill base? Here's Amazon committing $10 billion, a lot of AI hardware and infrastructure, but with that, some support for skills as well, Ed. Yes, we're thinking about where their data centers are on the East Coast and Southeast Coast, particularly of this country.

Okay, HPE says tariffs will have a smaller than expected impact on sales this year. AI revenue also beat Analyst estimates, but the company continues to face headwinds, and that includes an activist investor. HPE CEO Antonio Neri joins us now. I find what you said about tariffs and how that's reflected in the numbers so interesting because the hyperscalers, for example, told us that one reason capital expenditures were raised in that period

is the reflection of the higher cost of doing business because of tariffs. For you, it's like almost the opposite story. Yeah. Good morning, Ed. Thanks for having me. Look, we raise our guidance for a number of factors. Number one, because of all the work we have done throughout a very diversified supply chain, we find ways to mitigate the tariffs. Obviously, the USMCA plays a role in that.

But at the same time, we know we are performing better in many of our businesses and we have had a number of targeted actions to continue to mitigate any impact from the tariff. And that's us today as we know it.

But the reality is that the original impact we communicated at the earnings call in Q1 now is significantly lesser. And therefore, together with the cost actions, together with the better performance of the business and the lesser impact on tariff, we raised the bottom range of our guide by $0.08.

Antonio, is it possible for you to quantify for us the sort of sales channel impact that you provide for NVIDIA? So we talk endlessly about all of the projects, domestic and overseas, and NVIDIA's involved in, the great build-out. But as you know so well, and I spend hours tearing servers apart, nothing happens without HPE and others assembling the designs. I just want a number on it. That's the thing.

Yeah, well, hard to put a number, Ed, because, you know, many of these build-outs are happening as we speak, and it takes a little bit of time to go from a, you know, an agreement with a customer working with us in NVIDIA to building and deploying it, and then eventually putting it in production. But I can tell you...

Look, we have a deep, long-standing relationship with NVIDIA. We are covered in all segments of the market, whether it's these big, large build-outs in the service provider space, whether it's sovereign or enterprise. And one of the things I'm really proud is that the work we put together with NVIDIA last year when we announced the NVIDIA Computing by HPE and our private cloud AI is growing very rapidly. In fact, one-third of...

of the net new orders we booked in Q2 were from Enterprise.

But at the same time, we are completing one of the largest deployments on the GB200 as we speak, and that's a very large deployment. And then we said that our backlog grew quarter over quarter. Now it's $3.2 billion. On a cumulative basis, for the last two years, we've booked over $9 billion, and we have multiples of the backlog in our pipeline.

That one billion that you attributed to AI in particular is good, but it's not as much as Dell, for example. I hate to put it so on the nose in that way, Antonio, but how much is perhaps Elliot on your board or others around you sort of saying, look, capitalize on AI even more?

Yeah. No, that has nothing to do with the previous quarter we booked ourselves a very large order, which is the one we are deploying today, and that was not, Dell didn't do that. So this is a lump in business, and you will see us also talking about some of the large orders we may get in the current quarter or subsequent quarter. So, you know, this goes back and forth, but ultimately you have to play with discipline.

And our goal is to grow in the AI and the rest of the business with a capital structure that works because the reality is that there is revenue growth, then there is profit accretion, and then there's working capital. And that working capital is something you have to watch very, very closely because the timing

from winning a deal to the time of revenue recognition in these large deals can be long and therefore you impact cash flow from operations. So we're trying to balance all of that while we deliver on our commitments both on the revenue growth and on the EPS growth. Well, you delivered in terms of 6% revenue growth on the quarter. We appreciate it. Antonio Neri, HPE CEO, for joining us.

The enterprise gets a lot of attention when it comes to AI adoption, but consumer technology is poised to be upended by AI as well. At least that's according to today's VC Spotlight guest, Anne Badesky, a partner at NEA. And Anne joins us now on set, San Francisco. I mean, like...

You know, ChatGPT is the easiest example, the lowest hanging fruit. You know, the user base is all of us going on our iOS-based app saying, oh, sorry, or thank you, or please could I ask this question, crashing the GPUs. But I think that's kind of what you're looking for in your thesis, right? The next version of that.

Well, thank you so much for having me on. And you're exactly right. We're at the beginning of an incredible new consumer AI renaissance. If you think about it, we're now in the third sub wave of the AI super cycle. 2023 gave us large language models. 2024 gave us multimodal, the ability to generate voice, video images. And 2025 is now the year of agentic capabilities and applications. Incredibly exciting time to build

the new generation of consumer category creating companies. If we look back, companies like Uber, Spotify, Netflix, we cannot imagine living without these consumer products today. And we're at the beginning of a new wave of consumer applications today. - I don't know about Caro, but I feel like the stories we're covering in this domain are largely early stage companies. They are moving so fast.

Yes, we are early, but what's really exciting right now is how quickly consumers are adopting AI tools, AI applications. The stats are absolutely remarkable. We're seeing faster consumer adoption than any of the prior tech waves. If you look at it today, 80%

of consumers already use zero-click search, AI search, for over 40% of their searches. And Gen Z, which is always the tip of the spear for new consumer products, 93% of Gen Z knowledge workers are using two or more AI tools every single day. So consumers are experimenting, they're hungry for new tools, and they want more.

Who isn't adopting fast enough? I mean, sometimes there's a hand-wringing element that maybe there's a gender divide as well. Is that something you see burn out in some of your data research? Yeah, we're starting to see more research reports on consumer adoption. One of the interesting disparities is that if you look at mainstream U.S. consumers,

Only 27% of U.S. consumers are using AI tools regularly versus, let's say, 79% among AI experts, really, the people who are building and working in Silicon Valley today. So there's an interesting trust and awareness gap that still exists, and that creates the perfect opportunity for consumer product companies to come along, make AI useful, make AI really relevant in people's everyday lives. They may not even know it's AI behind the scenes. They're just going to be incredible new consumer products.

And they have to be trusted brands. Trust is a really important element in building consumer-aided products. I mean, well, Apple is a trusted brand, and it seems to be being really slow, and it's getting stalled in China by regulators. How much do you need the juggernaut of Apple and, indeed, Google and Android to push through generative AI and AI every day? And then you get more 11 labs, 12 labs, companies that you're backing to build into that.

Well, I think those companies are incredible distribution partners and their investment in the AI ecosystem, the infrastructure, the GPUs, the model capabilities is really important. But ultimately, startups are always the best position to take risks, to innovate, create magical new products that people love. And I think it's incumbent on these large players to find the right partners in the startup ecosystem. Can I ask about that really quick? I wanted to get your reaction to Johnny Ive.

and OpenAI because the bigger picture question is, is there a world beyond the smartphone interaction or PC interaction informed factors? When you look for a company, they're developing for, I don't even know what,

Well, so far we have not needed a new device for hundreds of millions of consumers, right, to try these new AI tools. But the interesting thing is I think the desire for an AI native device, and many companies have it, not just OpenAI, is also a signal that we want a more open ecosystem.

one where developers can freely build AI native applications that connect to our devices. So will there be new AI native devices, whether it's eyewear or something on your lapel that records-- That didn't work. Yeah. We'll see them very, very soon. Anne, it's great to have you here. Great to have her in the studio. Anne Bodetsky, partner at NEA, All Things Consumer AI.

That's it for this edition of Bloomberg Technology, though, Ed. But we've got some big conversations to have today. Yeah, tune in tonight as the Tech Summit kicks off in San Francisco. First, with a conversation with Alphabet CEO Sundar Pichai. And we'll be on the road tomorrow for a special edition of Bloomberg Technology live from the Summit. Don't forget the podcast from San Francisco. This is Bloomberg Technology.

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