Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
All right, let's stay with the tech space and move over to Xai, which is Elon Musk's ai startup. It's raising more financing than initially planned, and Ed Ludlow, our Bloomberg Tech co host, joining us from San Francisco to give us a little more context here. Xai is backed by a number of big companies, including in Nvidia.
Tell us how much money it's raising.
Yes, So it's a very specific mechanism where a special purpose vehicle will split between about twelve and a half billion dollars of debt and seven and a half billion dollars of equity, use the funds to go out and buys specifically in video GPUs. Xai then basically rents or leases those GPUs from the investment vehicle over a period of five years. Is what we've been reporting and is our understanding. And as part of that, we have broken the news that Nvidia is going to contribute about two
billion dollars to the equity piece. But basically what it means is that the investors own the GPUs, they get guaranteed return because Xai has to pay them a fee or a rental fee over the course of the term. But Xai doesn't take all the debt onto its balance sheet, and so this could be a bit of a template, you know, for how these mega infrastructure deals go going forward.
Where is Xai ed in this Ai story here?
What's the feeling in the inally?
Yeah, it's very hard to place because Xai and in particular Elon Musk move very quickly, and they have two specific data enters. One is more complete Colossus one, and what we're reporting around this financing is the chips for Colossus two, which they started building in March. And so from an infrastructure standpoint, Jensen Wong has talked about this, saying that he's betting Elon Musk can get to one giga what of capacity first, because that's what Elon Musk does.
On the actual output side, their large language model and GROC.
We don't have as much evidence or data of the user base and usership of GROC like in the enterprise setting, for example, we don't know it about how that particular software that Xai develops is in a competitive environment against like an open Ai or Enthropic, but largely noises from Xai themselves, but others in the valley talk about how it's somewhere that people really want to work, you know, they want to go and work for Elon, and in the talent war context, that's you know, a big story.
Okay, thanks for that context.
One thing you mentioned when explaining this deal that Xai has put together the fundraising is that in Video is one of the backers, but the SPV, the special purpose Vehicle, is going to then go out and buy in Video chips. This all feels kind of circular, incestuous if you want to put it in another way, is this going to create problems? I mean, are people raising their eyebrows over this? That this all feels very like I'm putting money in so that you can go then buy some of my other stuff.
So important. Jensen Wang, the in Video CEO, went on another network an hour ago and basically confirmed our reporting that in Video was going to participate that he wished he could have put more money into this what he called, you know, fundraising, But he also talked about the idea that this mechanism was not traditional venture and it nor
is it straight vendor vendor financing. The circular part is the is the bit that people are most focused on, because on page it's in Vidia saying here's two billion dollars, which we know Xai is going to use indirectly through the SPV to buy two billion dollars worth of Nvidia chips.
But Jensen Wog did go on to say in that interview that if you take, for example, the open ai deal announced in the last ten days, that's a one hundred billion dollar agreement over many years, and according to Nvidia and Jensen Wang, there is no mandatory requirement that open Ai used that.
Money.
I'm pausing, guys, because we actually have no idea if it's cash. We have no idea if it's just equity. But according to Gensen Wong, it's not mandatory for open Ai to use the proceeds to buy in video gear. They are free to go out and do other deals like they did with AMD.
Stay with us. More from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intelligence podcast. Catch US Live weekdays at ten am Eastern on Apple Coarclay, and Android Otto with the Bloomberg Business app, Listen on demand wherever you get your podcasts, or watch us live on YouTube.
A new administration had a lot of industry saying, hey, maybe we're gonna get some deregulation in our business with this Trump administration. One of those industries is a television broadcast industry. There are limits on how many stations you can own nationally. A company can own nationally, there's limits on how many stations a company can own it in a particular market. But there was recently those would be
loosened and maybe significantly. And actually some couple M and A deals have been announced in anticipation of those rules loosing. So let's check out with the expert here, Matt Schuttinghelm, these immediate litigation analyts for Bloomberg Intelligence.
He's down there in DC.
So, Matt, my FCC they meet I think sometime this month. Are they going to loosen TV ownership rules?
Yeah, there was some expectation that the deregulatory actions could start as early as this month for the TV broadcasters. Unfortunately, for the industry, it doesn't look like October is going to be the month for movement on that national ownership cap. Brendan Carr, the FCC chairman, put out the agenda for the FCC's monthly meeting, and this item was not listed on that agenda. Now, he could still add it as late as seven days before the meeting, but that's unlikely.
Typically these things are announced three weeks before, so I still expect the FCC to move pretty quickly on this. The FCC took comments on this earlier in the summer. It really should should be a pretty simple order to write up to ease that thirty nine percent US ownership limit. It's just a matter of getting it done. And also the FCC is, you know, eighty percent of the employees are off right now because we have a government shutdown which could be impacting things.
Okay, So which companies, first of all, are most affected by this. Paul mentioned that there was some deal making and anticipation of this. We know that next Our Media made a bid for Tegna. It was a six point two billion dollars all cash deal. Is that the most glaring example of companies that are directly affected.
That's the biggest one Scarlett Sinclair is also a big name in this space. Scripts Gray Media also big owners of TV stations. But the one you pointed to, the Next Star TEG deal is the biggest one. Is six point two billion dollar deal announced in August. And as we as we said, currently the LAG limits you to basically reaching thirty nine percent of US households. That deal would let Nextstar reach seventy eighty percent of US households. So the deal only can move ahead if this rule
is changed. If the rule is eased by the FCC, there's no way the FCC can approve the deal without a change in that rule making first. And so that's what we're really waiting for is action on to ease those rules. And then we're inevitably going to have a court fight on that question because there are wrong arguments on both sides of that one. One side says, look, the FCC might like to do that, but this is Congress's role to ease that thirty nine percent US cap.
The FCC can't do it itself. I think there's going to be a tough fight on that. The FCC probably can win it, but it's coming.
It just seems kind of silly in digital world here that there are ownership caps for traditional broadcasters which are fighting for their lives in the world.
Of cord cutting. I mean, the economics seem like, why wouldn't.
You do it?
That's exactly the case that the National Association of Broadcasters have been pushing with the FCC really for many years, but they've really raised the volume on that argument recently,
and it's really resonating with Republicans at the FCC. I think Brendan Carr, the FCC Chairman, is really sympathetic to that argument that look, in this world of all forms of new media online, all the ways that can get media today, and most of those are largely unregulated, that the traditional TV broadcast industry would face these these strict limits on how many stations they can own in local markets in each you know, in Chicago, in New York,
in DC, and a national cap. Both of those don't really make as much sense, according to NAB and I think that that argument is really resonating with Republicans. Republicans have a majority at the FCC, so they're likely to do their best to move ahead to ease these rules if they can.
That's for traditional broadcasting, then you've got the streamers right. Skydance, which is of course the owner of Paramount Global is or was reportedly planning to make a bit for Warner Brothers Discovery that actually hasn't come through yet, but that is something that is outside the FCC's jurisdiction. The SEC plays no part in any of this.
Well, so it's it's a debated point that some have pushed to say, Look, maybe the FCC should be regulating those over the top video providers like YouTube TV, like these streamers. Again, the problem though, is that the FCC is confined by a law that was written in nineteen thirty four and then updated in nineteen ninety six, and it's often a struggle for the FCC to extend its authority to online providers. And so the Obama FCC was actually ready to move ahead with a rulemaking to do
just that, but it never went anywhere. And I think the reason is when you read the law, it's really a stretch to say that the FCC can reach those new online providers the way it has traditionally regulated broadcasters.
Stay with us. More from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intelligence podcast. Catch us Live weekdays at ten am Eastern on Apple Coarclay, and Android Auto with the Bloomberg Business app. Listen on demand, hover you get your podcasts, or watch us live on YouTube.
One of the big movers of late, of course, is Dell,
and that's because of its AI server business. That part of the business has really taken off, and we want to bring in now Wujin Ho Bloomberg Intelligence senior technology analysts on the highlights from Dell's investor day and Ujin One of the things that Dell did was kind of layout a vision as Ed Ludlow was telling us an outlook, a plan for the next couple of years, which I find remarkable given that this is such a fast moving industry that you know, companies need to update their guidance
every quarter, and this company is talking about it's guidance out to twenty thirty.
Yeah.
Hey, Scarlet, so I know how you ended the last segment with Kyle Bunga. I'm going to start this segment with to get you got to get a Dell, right, So look, this is this is a very seasoned management team. They have a tendency to give out three to four
year guidance plans. I think the surprise here is what's driving that seventy nine percent growth outlook for from twenty twenty six to twenty twenty twenty thirty, And it's going to be AI servers, right, And one of the things that they said at the analyst day that AI servers are going to grow at a twenty to twenty five percent compounded rate. I think there was some skepticism there heading into the print in terms of is there an
AI bubble? And by laying out a twenty to twenty five percent AI server growth going through twenty thirty off of already high numbers, shows that there is some durability to the aserver demand.
All right, I'm looking at the ANR function for Dell Technologies.
Twenty three buys on the wall street.
Six holds and no cells. So it looks like the streets buying off on what on the message here? So when you get an analyst meaning together, it's a big day for a company. They put a lot of time and effort in putting getting their senior management together, putting together presentations, presenting a vision here.
What were some of the two or three.
Takeaways from you from this Investor Day yesterday.
Yeah, So the one highlight here is the a server demand, their durability of a sever demand. But more importantly, and we talk about this all the time, you know, Paul, It's about earnings and cash flow, right And at the end of the day, we're talking about EPs growth about fifteen percent, and how do we get to that fifteen percent? We're talking about eight percent of the sales growth dropping
down to the bottom line. But given all of that cash generation that they're given, all that cash generation, there's going to be a fair amount of capital returns through buybacks, So you're going to get a lift on EPs there. So share olders aren't going to be happy from an EPs standpoint, and we're already seeing that from evaluation standpoint, because it is lifting from an eight to ten times PE to about fifteen times growth, which makes it into a one times.
Peg Wogin another story that we're tracking here and that I've been fascinated by, is this idea of legacy tech companies finding their feet in this AI wave, whether it's Oracle, whether it's Dell, and now.
Cisco as well.
Cisco is releasing a new chip and networking system to connect AI data centers, and this is a move that pretty much puts it in more direct competition with Broadcom. How big of an opportunity is this for Cisco? And should Broadcome be worried?
Yeah, so we published and react this morning, and essentially I don't think Broadcom should be fully worried. There's a couple of things that I'll say, Right, Cisco is actually one of the biggest chip networking chip manufacturers globally, but more for their legacy enterprise IT chips. Right, they produce their own chips that powers their own networking gear. They're fairly newer to the game in the networking chip side. From a revenue standpoint, it's really not a big driver,
but it may be able to push more boxes. A couple of things that I'll say, They did about one billion dollars in AI back end revenue, but to put that into context, you know they're doing about fifty five to fifty six billion dollars in total sales. So you know, from from an overall percentage of AI as an overall percentage of sales, it's still about two to three percent
of total sales. Are they going to challenge Broadcom? I doubt it, but I do think there'll be a second source to the cloud providers versus Broadcom.
Which in your coverage area.
What's your best AI play, because I'm sure you get that call from clients all the time.
You know, I mean I have a handful. Dell was one, you know. Hp is another one to take a look out for. They have an analyst day next week. But from from a networking standpoint, Arista has actually been one of the high flyers from from a from from a networking standpoint, so I will look at Arista and people have been taking the AI networking angle and using Arista as one of the tools.
I like that Arisa.
I haven't heard that one come up yet, you know, HPE or HPQ Just to clarify, oh, HPE.
So think of it as a mini Dell and a mini Cisco in one.
Stay with us. More from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Let's get back to the market here, the auto business in particular, BMW took some guidance down here today's citing week demand out of China.
That can't be good.
So let's get the latest on what's happening in the global auto space. Here, Steve Man joins his Bloomberg Intelligence Global autos and Industrials research analysts. So let's start with the BMW news here, Steve, BMW cuts annual guidance on week China sales and tariff costs.
What's going on there?
Yeah, it seems like it never It seems like it's a never ending cycle here. What's happening to BMW in China is not new, It's not new to them. Everybody, every foreign automaker is actually facing the pressure there. It's a hyper competitive market. Pricing has been spiraling down, and you know, the the automakers, the local automakers there are actually gaining a lot of traction with the consumer. Consumers there are you know, tech savvy. They're looking for tech
heavy vehicles. And even though the foreign automakers are you know, redesigning the screens to make it look jazzy, colorful, but it's still I think lacks the capabilities that the consumer wants over there.
Are there any foreign automakers that are holding on to market share.
Not really, I mean relatively speaking.
I think the Japanese are a little bit better, but they are still losing market share, you know, like companies like Ford has you know, dwindled down the operation to a minimum over there. Even other European automakers like Pugio Citron, you know, they've essentially exited that market. So you know, the Chinese local automakers like by D and j Ly are really coming out with really attractive product and at prices that are you know, hard to beat.
Yeah, I remember a long time ago it seemed like every Chinese government official was in a black Audi. Audi was like the car, the foreign car in China. Those are those days are long gone, aren't they?
Those days are long gone. You know, when chi Jin Pain came in and.
Started cracking down on corruption, those types of exhibition of wealth is pretty much disappeared. And you know, then the consumer there are actually getting more sophisticated, right, They're looking for value for money.
And over the past couple of.
Decades, you know, the low automakers have actually learned quite a bit from the foreign automakers setting up shops there and They've learned a lot about product design, They've learned about a lot about manufacturing, and obviously the local automakers there have an advantage, right they understand the consumer over there and what they want, really want.
Switch Gears, Steve Ta Tesla. They've launched their cheaper version. I guess it's under forty thousand dollars. What's your reaction, what's the market's reaction?
Yeah, I think the market is somewhat disappointed because Elon Musk has projected, you know, for the last few years that they would introduce a vehicle that's twenty five thousand dollars or maybe even cheaper. Obviously there's inflation, but I think the market is expecting something more price competitive. But in any case, it is a cheaper model. It's about, you know, six seven thousand dollars cheaper than the higher the next variant up for the Model Y Model three.
Really look, it's I don't.
Think it's going to make a huge impact on Tesla sales, given that a lot of sales being pulled forward right just before the end of the seventy five hundred EV tax credit. But it does create a more intense competitive market in the US. Look these vehicles are actually directly competing with the likes of the Chevy Equinox EV from GM and the Ford Monkey. So you know, I think, you know, we got cheaper vehicles coming in in a softening market, so it's going to be interesting to see.
Wait, so the Ford and the Chevy cars, those models you cited, those are the cheapest on the market right now.
What do they retail for right now?
Yeah, they're around thirty three thirty four to thirty five thousand.
Okay, which is the same five thousand then?
Uh no, well not yet. I think we'll have to see.
It looks like, you know, GM will is expected to launch the Chevy Bolt if you remember, Chevy Bolt is you know, one of the most popular.
GM EV's, and it's like a relaunch pop.
Yeah, it's a relaunch redesign with new battery, a lower cost structor. Now, I don't think that vehicles are going to get down to twenty five thousands. It looks like it's going to be below thirty thousand.
So what I mean, are you an EV person?
No, because I don't have a garage, and so if I don't have a garage, how am I going to charge this vehicle point.
You know, I want the hybrid route for the most recent I like the.
Idea of a hybrid route, but apparently those I don't know the car parts, but it's easy to steal, and therefore you can be lauch you know. Thanks.
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business app. You can also want us live every weekday on YouTube and always on the Bloomberg terminal
MHM