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All right, and what can be I guess another one of these circular financing deals in Vidia Corporation today and announce it's vested an additional two billion dollars in core Weave cloud computing firm and key customer to speed up an effort to add more than five gigawats of AI computing capacity by twenty thirty. There's a lot going on there. Let's check in with anaag Rana. He's a technology analyst to Bloomberg Intelligence. An Rok, thanks so much for joining
us here. What's your reaction to this additional investment buy in Nvidia into core Weave.
Yeah, if you go back in history and see when Gorviv was going public, it was having a hot time getting a good pricing, and then in Vidia kicking and said, you know, we're going to be a part of this particular ripo. And I think what's happening here?
Is this.
In Vidia is creating the chips, and code Weeve is helping them sell the computing using those chips. Two different public that's out there now. At this time, Codevieve has a massive backlog of orders, but it you know, needs to get funding done in order to convert that into data centers and then capacity. Now you know, in Vidia isn't giving them money straight away, but it's basically saying, you know, we have confidence in this in this company, and it would help then Code Weeve go out and
raise capital from outside. So I think it's a little bit more like spreading the Nvidia ecosystem, is what that's happening right now.
Looking at your research note, note that corew've has fifty billion dollars in remaining performance obligations. What does that mean?
Yeah, basically it's this is kind of the contracted revenue they have on hand, which means, you know, Microsoft has said, you know what, I'm good for ten turn out of that. For example, Meta has a deal with them, so they have this backlog of all these orders. But you know, unlike other companies, you just can't go out and fulfill the demand. You have to create a very large data
centers using a radio chips. It then starts to work out or runs and then you realize that fifty billion into revenue over the next several years.
So what's the gating issue here for Coreweve? Is it more access to more data centers? What's kind of the gating issue for them to fulfill that revenue?
Multiple gating factors. One is actually the data center itself. For that, you need land, you need power. You know, the chip side is okay at this point because in radio is there. But then also you need capital. I mean code Weave is not a company like Microsoft or Amazon that has unlimited capital to create these data centers. It has to go in the market and raise capital. Before they went public, I mean their cost of capital
was north of ten percent. Right now after they went public, I mean the cost of capital has gone down to about eight percent. But the entire new clouds are in, whether it is code we or whether it is Nebus, really depends on private credit lending or lending by other banks to really come up with the funding to create these data centers.
So I also see in the news here today that Microsoft unveil's latest AI chip to reduce reliance on in video what's going on there.
So this is something that's going on with all hyper scale cloud providers, you know, whether that's Google with its CPUs, Amazon with its chip, and now Microsoft launching. I mean, they have one chip, but the first generation was not you could say, did not do that well in terms
of you know, reception from customers. What Microsoft is hoping here right now is, you know, for training, they'll still use the more powerful in video chips, but for you know, running, let's say a copilot, they could get around and use less powerful chips and big band. If they do that, they actually save.
A lot of money.
You know, in our math, we think if if Microsoft is going to spend you know, somewhere north of one hundred and forty billion dollars this year, more than fifty of that is going to go just buying chips, and so you know, it's it's a very big ticket for them and they everybody needs to be doing this frankly in house.
So what's the next thing we should be looking for? We get earnings coming up this week. An Aaraj just gives a little preview kind of what you think the market's keying on this time around.
The biggest thing we want to know is where are the use cases, what kind of AI adoption we are seeing across different sectors, And that's I think was going to probably be the most important thing for us. We
have already seen that infrastructure spending is very high. Everybody has that big AI factory in place, but is the demand coming from you know, non LLLM customers to deploy those And that's really I think that one of the biggest focus areas for us going into this earning season and probably all of twenty twenty six.
So what's the what do you think is the best positioned kind of the big tech names that you follow for twenty twenty six year, because there's probably as much concern in the marketplace that this could be a year where the AI story begins to disappoint.
Perhaps.
Yeah, I mean, if you think about it, the three companies that are probably most i mean better position than the others are really Microsoft, Google and Amazon, because not only do they have an emerging AI infrastructure business, but they also have a legacy cloud business. And one of
the ways you deploy this technology is using cloud. So if you're building an application using one of the lllms, you're hosting it in one of these cloud providers, and we've already seen that and improvement in growth rates for Microsoft and Google, and I think this year we see that improvement coming in for Amazon as well.
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Let's redrive into your little healthcare here we can check in with Sam Fizzelli joins us in Bloomberg Intelligence. He's over there in London covering all the healthcare stuff for us. Sam, what's front of mine as you go into earning season this season for investors in some of the biotech and big cap big farmer companies.
Yeah, so, Paul, I think what people hope to hear and expect to hear is that all that MFN stuff is behind us, All the negotiations have happened. They're not worried about any any talk of it anymore. And of course what people are also looking for is what farmer is doing. Looking into twenty eight twenty nine thirty with some patent expiies. How good does their pipeline looking? Are
they still solidly behind it? It's a tid have any negative things to day the pipeline and also listen out for m and A right MNA is what there this solution to some of these issues they might have with their patents are and thatfore that's what biotech investors are looking for in terms of what are the kinds of commentary.
Remember or we just had this up and down yo yo with Revolution Medicine share price where there was a rumor that Merk might be wanting to buy them, and a JP Morgan they said, look, we got tens of billions of dollars to put to work. And of course that's a sort of number that people were thinking about Revolution Medicine and apparently they've walked away from each other. So we've done a lot of analysis on that. But that's the sort of thing people are going to be looking for.
I didn't realize that Mark was this price sensitive.
I mean, how how much more particular how much more price sensitive are these big tech not big tech sorry there In a way they're kind of like tech companies, big pharmer companies going to be at this stage of M and A.
Yeah, I mean there's price and price though, right. I mean, what we calculated here is that at about a thirty billion dollar value for Revolution Medicines. The only way it would have worked is if you had the largest number that we might be out there already with in terms of sales going out to twenty thirty five, and assume a massive cash generation out of that, something in the region of sixty seventy eighty percent cash conversion doable. Novel had a few years of having like almost one hundred
percent cash conversion. The point is that doesn't usually work a in a standard farmer company. So we just thought that number was too much, and it turns out to be what the company came out, not too much, but too hard to justify. I mean, Revolution Medicine is a classy company, it's got a great pipeline. Probably it's got to change the fate of many people with pacreatic cancer.
We'll have to wait and see the data. So there's a lot going for them, but price sensitivity, and we've thirty billion dollars a small amount of money.
M and A in twenty twenty six am so we expect it to be another robust year in the healthcare space.
Yeah, yeah, yeah. I mean biotech was pretty good last year in terms of farmer buying them and some biotech buying each other. We had gen Map buying mirrors, so I think that would be still the case. Whether this stal happens or not, whether it happens at one hundred and ten dollars a share or whatever, or never happens. There's plenty of food assets out there. What also we're
looking at for twenty twenty six is IPOs. We've had a couple already holding above the issue price, and I think people are hoping maybe we get twenty to twenty five IPOs in twenty twenty six.
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David Wu has been one of my favorite guests for years. He was the head of inter interest rates and Economic research at BAVA for many many years. One of our long term guests, and then he retired. He had told me even before he retired that he was planning to write a book. And this book is now about to be published.
So David Wu joins us right now.
He is a founder of strategist of Unbound Retail on his new book, Mary Go Round Broke Down, a novel of guilt, greed and globalization.
David, good to speak with you.
You now live in Israel, You've written this book, it's about to be published. Except the world is very different than what it was when you first started writing this book.
What stage of globalization are we at right now? Isn't it just deglobalization?
I think, you know, honestly, Scarlett, I think is as dead as Dodo actually. And the way I look at this is that I'm just hoping and I know it's over. I'm just hoping that, you know, we're not going to throw out the baby with the bath water. And this is the reason why I wrote the book, by the way, because I now want to basically take the war the
battle organization to the general public. This is why I wrote it as a novel as opposed to another policy book, because I want to basically explain I want to basically make accessible the story of globalization to every person in the stry, regardless their background, so that we can make a decision about which part we want to keep and
which part we want to part with. So that that's really the purpose of the book, because I think, you know, to be honest with you, I think for the world to be a better place, there's never been more important for everybody. I'm talking about everybody to understand the workings of the world.
So David, to the extent that globalization is at the very least losing prominence in global trades, some people would say the ear of globalization is over. I don't know what's changed in the last several years, because it really seemed to be on a post World War two pretty solid trajectory, right.
I think for the most part, I think, you know, the honest truth is if you look at what's going on, right, I mean, we all knew the US has not only been the guaranteur of the root based global order that it's been in place for whatever seventy years, let's call it dapts, right, and the US has also been, you know, the biggest beneficiary. Now, so the question is why all of a sudden, the US wants to walk away from
this root based order. I think the answer is pretty obvious, which is that the US was the main beneficiary as long as the US economic and military domination was total, and it's become very clear that this is no longer the case. And therefore the US decided that, you know what, we want to be able to reposition ourselves in a competitive way. This is why we want to basically do
away with the rules. And this is why, in a way, you know, the I mean, the whole Medora's extraction from Venezuela, it was not about the US is trying to go down to Venezuela to promote democracy. I mean, this is really about an oil grab. It's about the US. I mean, it's China no longer the US that is the dominant trading partner for South America, the biggest sovereign lender, and then US decided that's it, that's what we're going to do. So I think, not point of view, this is what
it is. I mean, it's not about globalization or not. It's about the global you know. I mean, I think it's about the group based international order that has come to an end. I mean, I'm sympathetic to the view of you know, Mark Karney, who declare it this thing.
Is over right.
And to the US's credit or to President Trump's credit, he never pretended that this was about promoting democracy in Venezuela. Right, It was always about oil, and he was pretty upfront about that. So in your book, David Merry, Go Around, Broke Down, you have a number of different characters to really tell the story of globalization from their perspective. There's a director of a failing factory in China, a trader in London, a Japanese housewife who learns and.
Perfects the yen carry trade.
A Mexican artist who becomes an undocumented worker in the US. Which is your favorite first of all to write about, Which is the one that you think can survive in this next stage of globalization slash d globalization?
You know, the honest truth is and I'm embarrassed to say this is of course the hedgeflon manager.
I knew it said in a way it's very sad.
It's very sad. I mean, this is what we have a K shape economy right now. You know, people the world could be going to para shape, but somebody is gonna make some money basically on their way down. And that's what it is. I mean, this is why, like you know, I think, not put of view, it's actually the financialization of a global crisis that's making a lot of people very rich. And I'm not just talking about obviously,
you know, the hedge funds, whatever. I mean, everybody's trying to milk this cow because what is really going on. Also part of this is that ironically, you know, as Trump tries to dismantle the order his the only thing that he cannot dismantle is the stock market. That's the honest true. This is why talk is taking Trump less and less time to taco and because at the end the day, for him to go out there and win trade wars, he needs the U s stock market to cooperate.
I mean, the honest truth is if the US economy would have gone into a recession last year if it hadn't been for the stock market. So not put of view, like, that's just what it is. And so people get it. People get it. This is why every everybody and their
grandmother's overweight stocks. Everybody in the grandmother's overweight goal, so basically buying stocks and buying gold has become the Trump traits of basically a second term, and it's about how he's going to dismantle the world, but he has to tackle when the stock market even has a little basically coughing context.
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