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Alphabet, Amazon, Meta, and Microsoft all out with earnings and big AI dreams.
Four companies ED are expected to spend as much as seven hundred and twenty five billion dollars in twenty twenty six, but the key question being whether that massive spending is providing tangible results. We'll discuss throughout this hour, and we fixate on these numbers.
And you said it best. It was in seventy seconds. The fire hose ensued last night and Alphabet is the clear winner. We're at a record high.
Google really posting strength in its cloud division one than sixty percent growth. Yes, they are opping their capital expenditure to one hundred and ninety billion dollars. Amazon also committing its capital expenditure. Look all together, this is actually growing GDP. We saw the numbers for the US economy strengthen on the business outlaws that Amazon puts to work with again,
growth in its aws twenty eight percent growth. That was enough, but still maybe we're coming off of our near record highs in that stock.
All four have the capital expensure story in common alphabet, Amazon and Microsoft. They had the cloud growth metric in common. Azure grew forty percent in the quarterer. Their briefing modest acceleration of cloud growth in the second half of this year. Meta is the outlier. It is down nine percent on one point, on track for its biggest drop since October. It told us the capital expenditures up to one hundred
and forty five billion dollars this year. It gave us an outlook for sales that was in line with consensus. But then there was not that one extrametric about how AI is being justified, how the payoff is translating to them with their go to market.
Yeah, let's try and translate therefore, because yesterday's frenzy and offered eight glimpse and just how some of the world's biggest tech companies are doing in AI. And this is what some of the big tech leaders had to say post earnings release.
Looking ahead. Our ability to invest in this moment and stay at the frontier, you know, I think puts us in a strong position, and I think we are doing it based on tangible demand signal sphere, seeing.
Nobody has a better sort of chips across AI and CPU workers in aws with training and Gravitan.
And we're unusually well positioned for this AI inflection.
We're in the early stages of experiencing.
From CEOs to the investor. Take Ioka.
Yes, that's portfolio consulting director at Wealth Enhancement Group, who I'm pleased to say has exposure to all of the four names. I Okay, let's start with a winner. Alphabet blew the market away. Is it justified the increase in.
Spending absolutely, you know, they continue to see this exponential demand in AI, whether it was through Google Cloud or through their backlog doubling quarter over quarter. So yes, the spending is definitely justified. And they've been doing a great job of being a low cost token provider for AI. So we continue to think that there is some momentum here with Alphabet.
And in many ways that's because of the vertical integration one that is replicated over at Amazon and we're seeing a huge backlog more than three hundred and sixty billion dollars worth of coming to business for Amazon and AWSKA. What did you make of Amazon's numbers in the flywheel effect.
Sure, Now, it's great to see that acceleration in AWS growth. I mean we're talking big numbers here, and so to see an acceleration of AWS growing twenty eight percent year every year versus last quarters twenty four percent, we haven't seen these kinds of acceleration in these growth rates from AWS in quite some time, and so it's really nice to see, and it really sort of doubles down on the demand that everybody is seeing on the AI front.
MG, give me the capital expenditures numbers for all four and let's show shares of Nvidia, and now YOURKO explain this to me, right, the overall CAPEX environment has been raised for twenty twenty six. Nvidia, which you think would be the biggest beneficiary, is down three and a half percent in the in the session and one of the biggest point drags at the index level.
Why so, I think there was so much conversation yesterday regarding you know, whether it's Trainium, Graviton, Google talking about their TPUs, you know, customs, Silicon and you know, the sort of shift as we move more towards inference that is really going to be a benefit to you know, things like companies like Broadcom right, and so I think perhaps people are thinking that Nvidia isn't going to be
the beneficiary as this infrastructure continues to build out. But I do think Nvidia is going to be the base layer here and you're going to continue to need to build out those large language models. You're just going to get that added additional benefit from CPUs as well going forward.
So I wanted to take that sort of halftime pause before we move on to the other two Microsoft and Meta Microsoft, I guess it was an issue of language, right, they showed forty percent Azure growth and said modest acceleration into the second half of this year. The stock is actually down more than you might think it would be.
Absolutely with Microsoft, you know, I think it was still a very solid earnings growth number, and it's it's you know, it got caught up and a lot of the software downdraft that we saw in the first quarter of this year. But Microsoft is continuing to you know, deliver solid earnings. We think that, you know, this is a great opportunity to continue to own these shares and that acceleration you'll
see in the back half. I think Copilot is you know, one of the AI use cases in which enterprise are going to gravitate towards first, and so we continue to think there's some value there.
So you would be adding to Microsoft in this weakness because actually it was one of the only names that was down on the year leading into these numbers.
Absolutely. I mean, you know, I think the biggest issue for all of these companies is the free cash flow numbers. You know, as the CAPPAC spend continues to rise, you know, despite these double digit revenue growth numbers that they're posting along with solid profit margin and expansions, the free cash
flow continues to sort of dwindle. And I think that's the biggest issue in terms of how much do you pay for these companies as that free cash flow continues to be pressured and how long will it continue to be pressured.
Okay, so let's the three of us try and unpick what happened with Meta. The stocks down ten perent on track for its biggest drop since October thirtieth. The outlook for revenue in the current period was a range of fifty eight to sixty one billion dollars, basically bang in line with consensus, and then there wasn't another number right, There wasn't another metric Yoko that said all of this investment into AI is paying off.
You know.
I think we saw some nice numbers in terms of ad pricing. You know, that was up twelve percent, and so I think it was it was solid, but not great. I think it wasn't a blowout or some sort of acceleration there. And then we haven't had some you know, great efficiency numbers or any kind of quantifiable, tangible numbers coming out of news Spark and what that means.
So you know, just I.
Think there's a little bit of impatience relative to investors for Meta, but I think that that's going to come around and again metas in control of that cat back spend, so they can dial it back if they need to. I think the higher CAPBAC spend does reflect a lot of the additional costs that you're seeing from an in perspective, whether it's energy or memory chips, those are all flowing through, So I'm not sure they're intentionally spending that much more.
I think a lot of this is that cost a push that is impacting CAPBAC spend.
Yees seasonly talking about those component PRICESCO pushes forward you alsow an a Apple comes after the bell. Can they show some resilience that they can compete in the AI space even if they're not having to invest in the same solch fog.
Yeah.
Now, Apple's been, you know, a great follower in technology, right. They tend to perfect the user experience when it comes to new technology, and so we continue to think that they're working on that, whether it's with new enhancements to Siri, and you know, we do think that they continue to be very diligent when it comes to their free cash flow, and you continue to see that they're not spending as much when it comes to this arms race for ai.
Oyoko Yoshioka from Wealth Enhancement Group, thank you very much for joining us on Bloomberg Tech. Another story out of Asia. Overnight Samsung shares actually kind of modestly lowered down two percent, but record profits over the March quarter. In fact, we're talking about the chip division where profits sored forty eightfold.
It's a story about AI spending, just as we've been discussing, but also what Bloomberg's now call calling the memory chip super psychle Samsung exposure to both on the fab side, on the memory side, as well shares kind of in career pretty muted Cara.
Now Quilcom's got exposure to both, and this is a story of trying to pivot into the world of AI spending and more away from the complete exposure it had to mobile phones up seventeen percent, stop us down after hours. The volatility is extraordinary. We've all focused on this mystery leading Hyperscala Customs silicon engagement that they've got that they say is on track initial shipments later.
This calendar year.
This is the pivot that many want to see in the Avesta base. Yes you're in automotive, Yes you're in the phones, Yes you're in the IoT space, but are you in data centers? They're saying they're going to be soon. And look at the CEO, Christiano Amon's going to be joining us later. This out to tell us a little bit more what a ride Now coming up, we're all's going to be diving into anthropics ride, the push to ramp up fundraising, weighing a fresh round that would value
the startup more than nine hundred billion dollars. That was your conversation that you had ed with Anthor. Well, you've been helping focus on throw. But you're also be having a conversation with the Stripe president John Collinson.
After the company.
Announced new AI tools and a new partnership with Google.
There's a blueberg Tech.
Anthropic has begun weighing a fresh funding round that could value the AI developer at more than nine hundred billion dollars, according to sources, potentially over taking long time rival open Ai is the world's most valuable AI startup. Bloomberg's and the Sasha Mascaraneus part of the team that break the story with us. Now, I think we've got to be very specific with this. This is investors going to Anthropic and saying, let's do this, but take that and give us the details that we have so far.
Yeah.
Sure.
So last week we talked about unsolicited term sheets getting headed Anthropics way at around an eight hundred billion valuation.
Which we said Anthropic rebuffed. They basically said no, thank you exactly.
The update now is that Anthropic is actually engaging in those conversations at her nine hundred billion valuation even higher. But no term sheet has been signed. So this is not one of those deals where we expect to see a press release.
The ink dry by end of day.
This is one of those deals where Anthropic is hearing his offers and is responding to the investors that have approached them, And it comes in the backdrop of you know, Google and Amazon putting tons of capital into Anthropic at around a three hundred and fifty billion valuation. So to me, this is a really interesting example of there being kind of two tales of capital raising at the same time.
Yeah, Natasha, why the change of hot? Is it a change of hot?
Is there a need that the fool they could tap the public markets because we're all been talking about an IPO for this.
Year, you know.
It's it's pretty much the standard dance in AI fundraising these days, is how I see it. When investors approach a company with an offer to invest a million, things could be you know, wrong, so to speak. It could be the wrong investor, the wrong price. With Anthropic, we all know very clearly that they need capital to fund their compute needs. It's why they've brought on so many strategics.
It's also what financial investors are frankly, you know, taking advantage of by saying, listen, we'll come to you before you go public. We'll offer you a fresh you know, tranch of capital, get it all ready and then go public. And so is it a change of heart? I would say, yeah, It's different than them completely ignoring the offers. These are serious investors that are approaching them with real capital offers. The next thing to break is who they'll accept and
at what price. Like we said right now, it's at above a nine hundred billion valuation, which if accepted, would surpass their biggest rival, Open AI.
Natasha Mascariness.
It's great reporting along Psyde colleagues, including ed we appreciate it.
Now.
Sticking with anthropic, the National Security Agency has been testing the startups new AI model Mythos to find cybersecurity vulnerabilities in popular software, including Microsoft products.
Now.
That's according to a US official and a source who say that an essay officials studying the Mythos model, well, they've been impressed. Right speed is sufficiency in searching for potential security flaws it.
White House officials have spent months preparing a memo that outlines requirements for AI deployment by national security agencies.
Sources help bloombag.
The wide ranging policy will touch on issues that have been at the center of the feud between the Pentagon and Anthropic. Let's get more with Bloomberg's Maggie Eastland in DC. Maggie, what are you reporting?
Yeah again, Ed, as you said, the White House is preparing this National Security memo. It aims to essentially set one standard for how a swath of agencies can work with and contract with AI companies. But what's especially interesting is it addresses each of those key fault lines that we saw come up as Anthropic and the Pentagon we're in this very tense feud that resulted in a legal supply chain designation.
So the fault lines, let's dig in.
Does this end up allowing federal agencies a workaround here, an ability to keep on using Anthropics technology.
Some officials said that they do view this as a workaround now. One senior official that we talked to disputed that, but they one of the key terms here is this idea that it directs agencies to diversify the model companies
that it's working with. Now, some view this as a way that the Pentagon could drop some of the more extreme legal measures that would force it to fully excise Anthropic and instead point to this memo, which says that the supply gene risk can be dealt with simply by working with other AI providers, which the Pentagon is already doing in its agreements with open Ai and Xai.
Totally fascinating reporting Bloomberg's Maggie Eastland, thanks for bringing it now to another closely watched AI story. Elon Musk is set to take the stand again today in his lawsuit over open AI's pivot from a charity to a for profit business.
Now.
Elon Musk became visibly irritated during cross examination yesterday, clashing with open AI's lawyer over the exact amount he contributed to the startup. Now, the billionaire is set to wrap up his testimony today, and we followed by his longtime well maybe we call him Fixer and Neuralink CEO Joed Burchill.
Stripe is partnering with Google to let businesses transact inside of AI mode and the Gemini app. This was part of a slew of announcements made a Stripe's annual customer conference. We cut up with stripe president and co founder John Collison.
I think when people talk about this it seems really far off, and maybe part of that is, you know, the the examples people give almost sounds incredibly far off where it's like, oh, I'll just have my AI agent plan my entire summer vacation. You know, in transfer, it's like, no, you love planning to the subberfication, you want to do that yourself. Whereas if you say, okay, you just give your AI this is the recipe I'm making tonight by
the things I don't have in the fridge already. Like that's the kind of delegation that you know, people are much more comfortable with, and so we think people and AI services will kind of work their way up the trust curve. Where again, it's already the case that the research you're doing, the research you're doing, you do within
the AI app. You're probably still confirming that directly, but it might get the case where you're allowing the AIS make small decisions for you and especially as it gets to know you. And so again, on the developer side, imagine you're building a website and you need a hosting provider or you need to buy a domain name for us. Today it's the case that you go and you like find the domain name buying service yourself, and you could
go fill out the form and everything like that. You just want a domain name, you can get it for multiple providers. You'd probably be okay with cloud code or Codex or cursor, you know, whatever you're using actually choosing how to buy a domain for you. And so it's already the case that people are doing a lot of interactive buying with AIS where they're improving the final step. We think people are already starting to have a little bit in a huge amount of what we announced today
is those little decisions. People are delegating them to the ice buying your domain name. Again, it's the example I would give, and then as they start to see that it works really well, people will just give them more and more.
Rope.
Google has not historically led in payments. The partnership that you've been through today and the changes in integrating Stripe in to AI mode in Gemini, does that change their fortunes in that market.
I mean, I think Google has done a phenomenal job in commerce generally, and I mean again, Google pay is very large and successful within the Android ecosystem, and so I don't think that will be quite a fair characterization. I think they've done a phenomenal job enabling commerce. And again, this is a new tool in the toolbox for them where now they're enabling within Gemini these amazing agenda commerce experiences, which again we think just has to be the future
because it's so much more convenient for consumers. It's never been the case in technology when you get a way more convenient way of working for consumers. But they picked the less convenient one.
It's never happened.
That was Strike President co founder John Collison, creat interview ed. Now we've got to get back to earnings. We're going to be getting back with them with Brad Erickson from OBBC Capital Markets. To believe Alphabet's future growth and multiple expansion are constrained some extent not constrained on the market right now, are we alphabet best point added to to then as that one hundred leads the way and we're at a record high.
We're trying to find the common story between all four companies, right, Capital expenditures is probably it, but I think that you know what all four companies said is that they are constrained in capacity, right, they cannot build the infrastructure that
they need quick enough to service. In the case of alphabt Amazon and Microsoft external demand and one thing carry you probably get this right, you know, Meta is internal demand for workloads, not necessarily something that's consumer facing, and it's.
Getting more expensive.
Maybe the one hundred and forty five billion dollar that they guided to gets less banned for the buck when memory prices have sawed, when component prices have sawed. This is something that we saw Susan Lee really talk about the fact that pricing pressure is going up, and so maybe that impacts how much capex they have to spend. What's interesting there is the kapux is firm for the infrastructure layer.
Why then is Nvidio down.
It seems as though a lot of them are talking up their own inn house chips.
Things could be true. It could be that the TPU is coming for them, as outlined on the call last night. It could be sell the news, and it could be Qualcom, which we'll get to later in the programs. They are the data center business.
Welcome back to Bloomberg Tech and let's take a look at today's big number. We've talked about it already, seven hundred and twenty five billion dollars. That is how much Amazon, Alphabet, Meta, Microsoft together alone are expected to spend in twenty twenty six, upping their AI spending plans after their March quarter, but with still a key question when will we see return
on all this AI spending. Well, we saw it from Alphabet and people are applauding the numbers because Google Cloud on farm more than sixty percent growth and we're seeing really it doing the flywheel effect because they're vertically integrated business model and the fact that you people are using their AI tools up seven percent record high Amazon, that fly will effect are still there. They create and have customs.
But of course they're also making moves on Cloud Aws twenty and eight percent growth.
But maybe we come off near.
Record highs on that share price down five percent is Microsoft and.
That's more interesting.
Yes, they also are spending more, leaning into one hundred and ninety billion dollars spend for the year. They're also, though maybe not managing to ramp up the asual growth as much as people anticipated, but it's still going to be a healthy forty percent in future quarters. It's at thirty nine percent of this particular quarter. Move on and see what's happened. In terms of Meta. I'm afraid we are not applauding Meta's commitment to capital expenditure because they don't have a cloud offering.
Thus yet let's just have a little listen to what Mark Zuckerberg really had to.
Say about well, where his spending is going yesterday.
We are increasing our infrastructure capex forecast for this year. Most of that is due to higher component costs, particularly memory pricing. But every sign that we're seeing in our own work and across the industry gives us confidence in this investment. That said, we are very focused on increasing thefficiency of our investments.
Let's get into it with RBC's Internet analyst Brad Erickson, whose pre earnings report flagged metas quote elevated investment cycle.
And yeah, that's what we got.
Meta is a company that operates social media platforms and it makes money from advertising, and at the same time it will spend at the high end one hundred and forty five billion dollars in infrastructure to support its work in AI. For me, there just wasn't that number that explained this is the result of that investment. This is how our AI work is getting traction with the world. Is that your tape, Brad, Yeah, I.
Think that's a very fair way to sort of look at it. You know, each quarter that ticks off with all of these companies, right, we fair or unfair, We have to evaluate kind of what have you done for me lately relative to that spend. And clearly the cloud commercial cloud vendors last night are the ones showing sort of the best return, particularly with that margin upside, whereas
with Meta you've got a deceleration. Just start there, right, the revenue was fine in the quarter, but you do have a little bit more deceleration in their guidance for Q two, And then they were the only ones to raise the capex guide at least on an organic basis, Right, Amazon and Google. Google had to raise their capex, but it wasn't It was because of an acquisition, not because
of higher component pricing. So yeah, it's just a tough combination for you know, kind of that next day stock reaction.
I use Meta AI. I'm sure Caroline uses Meta AI too, but I don't pay for it. I use it within the Instagram app for example. Or I'm awarer of ray Ban metas and you know voice based assistant version of Meta AI. A parallel example was Alphabet giving us data quarter on quarter for Gemini's enterprise growth. You know, Meta doesn't have that sales channel, so what is it that Mark Zuckerberg can say other than meuse spark The latest
model is making ads better that will convince the street. Yeah, let's keep going with this.
Yeah sure, yeah, I mean there's always going to be optimization, right, They drive you know, more content recommendation gets people staying on there for longer, they show more ad impressions, they find people with better ads that convert more. So there's all sorts of value creation that's still going to happen there.
But yeah, I kind of agree with you. I think, you know, clearly, on the enterprise, there's a far more compelling argument for you know, enterprise developers adopting things like Gemini or Anthropic or chat GPT, where I think the
idea though, that we're kind of broaching for people. We call it born on Meta, and what it means is we actually think there's big opportunities that are probably underappreciated for meta to almost start to like help small businesses start exist and execute entirely on meta.
We think that's a possibility in the future.
Right today, you start a small business somewhere else, you come to Meta to market.
It's certainly helpful for the business.
But they've only participated in kind of that advertising portion of it. Imagine if meta ai started like helping you idate, originate, literally start businesses on the platform that were specifically geared around success with the ads. Right, Like, there's a connection there that I think the Superintelligence group is aiming to make.
And I think it's subtle at this point, but it's a topic we're kind of trying to elevate for people because I think that might be the more compelling way that they use meta AI in the future.
Briefly, there was lip service given by in a statement Susan Lee that there's the regulatory overhang and that could impact future revenues. How much is that What if you at the moment, Brad, you.
Know, that's a you know you're here to it referred to as kind of the big Tobacco moment. I mean that would be relative to kind of social media usage broadly in today's world, that would be such a seismic change.
It's a risk. We worry about a lot of stuff on stocks.
That's something that's completely out of sort of everyone's control at this point. But yeah, if that happens and they are forced to kind of throttle usage for users below a certain age. It will absolutely meaningfully impact the business. It's also just one of those things. A it's totally unpredictable.
Be you know, there will be like years of appeals involved, and so I don't want to say a fine or a settlement looks more likely, but historically we've seen that be kind of the primary outcome of these types of situations.
Obviously's Internet analyst Brad Erics. I'm really glad we could dig into metal with you, Thank you very much. Indeed, look, we've got more earnings Apple reports later today its first release. Is the iPhone maker really announced the hardware chief, John Turners, will succeed the CEO, Tim Cook.
Let's get the details of what to expect.
Mumbo's Mark Gumman like almost is it a sideshow of the earnings?
Yeah, I mean this is going to be quite interesting.
Right a week ago they announced that Tim Cook is stepping down September first, being replaced by John Turnis.
As we anticipated.
I'll be looking out for any other new color on the transition. If Turnus is going to speak and gives some insights to Wall Street for the first time, I'm going to be interested.
To see how that all gets split.
Up.
Obviously, from a numbers perspective, we're expecting some pretty numbers, right, thirteen to sixteen percent year every year revenue increases. What Apple guided a few key factors in there. The biggest one is pent up demand for iPhones seventeen, Pro and
Promax that launched last September. Obviously, but there were some supply chain constraints through the tail end of the first quarter, which means that some sales led into the second quarter, so we'll see a bit of an iPhone increase because of those products.
And then they had their wave.
Of new Mac and iPad and iPhone seventeen launches very much at the tail end of the March quarter, which obviously contributed as well. The MacBook Neo has been a strong seller, so you're likely to see a big jump in Mac revenue as well.
Mark, I think we're showing Apple shares up modestly half percentage point, treading water until tonight, but we should probably address how much of a leading indicator Qualcomm is right they told us that the Android market in China will bottom in Q three. Memory pricing is clearly an issue. What data do we have about Apple facing similar issues?
You know, the Qualcom stuff is interesting. Actually, it's hard to put two and two together at this point, just because the android market is not selling well in particular parts of the world like China. You know, there's no telling if that means that the iPhone is also not selling well. It's possible if the android market is not selling well because people are buying iPhones instead. So I probably wouldn't read too much into.
It, Okay, bluebos Mark Gunman on deck after the market closed today for a big Apple print, Thank you very much. One three seven Ventures as raised seven hundred million dollars split across two new funds. The firm has put money behind some familiar names like Anderil, Gusto Ramp, and SpaceX. Justin Fishner Wolfson, founder and managing partner at one three seven.
Joins us here in San Francisco. Good morning.
This is interesting how you've done this.
This is.
Two funds where each sub's a purpose. It takes your assets on the management to fifteen billion dollars. And I mean this justin with respect. Your firm's gone a little under the radar and now here you are arriving at this moment.
I mean, I think we've just been focused on investing. So maybe I think within the venture ecosystem people know us.
I want to talk about one of the funds in particular. I find this very interesting. The idea of some of the capital is that you offer liquidity right to founders, that you back their employees in different forms, why specifically earmarks some money for that.
So if you kind of rewind the clock, right, we started the firm about sixteen years ago, and you know, our thesis was that companies were going to stay private longer, and the challenge of companies staying private longer was going to be that founders, executives, employees were going to need liquidity.
Like working capital. I mean, look, if.
You start a company when you're twenty five and then you know you end up being thirty five, right, Like your life is different, Maybe you want to buy a house, right in the same way, like all these companies need more growth capital, right, And so we've seen the availability of that expand in the private markets. And so you know, our general view is if companies stay private longer, they're going to be more opportunities to invest in them.
And opportunities.
Boy did you take you first invested in SpaceX for example, in twenty ten, you've written two dozen checks. It tells me into SpaceX since how much now do you own a SpaceX if you're.
Able to do that.
I mean, I think at this point where I think we own well over ten billion dollars, So it's a it's a pretty big position for us. And we've had a lot of conviction in the business over the last fifteen sixteen years.
So yeah, we're excited.
I mean, if you were in in twenty ten, what sort of returns can the LPs be expecting on this?
Oh gosh, some of those some of those investments I think are probably like kind of X investments at this point.
It's interesting. You know, ten billion dollars of position is SpaceX I think would be around one percent of the company. Yeah, but you've got a decision to make. So if we're right and Bloomberg's reporting that a label the rook is always right, Bloomberg is very often right. But we're reporting that SpaceX, you know, goes public in late June and evaluation of let's up to two trillion whatever, it ends
up raising seventy five billion dollars. You keep talking about the whole point of the firm is to invest in companies over that longer time horizon. In that case, companies were staying private longer. What do you do for your LPs or for your firm in an IPI scenario? Do you stick with it or what's the strategy?
I mean, I think the exciting part about SpaceX is like the next twenty years of the business. And so I agree with your question. I think it's a hard decision. Ultimately, let's see where we get to. Right, We'll find out
what the company price is at. As you know, these things tend to happen that night before, right, So I think there's a lot of information between now and when the IBO happens, and I think we're going to be happy with all outcomes, but we're sort of excited for the next couple decades.
I wanted to look backward a little bit. You know, the first investment around twenty ten. You had already had a history of SpaceX from your time at Founder's Fund. But if you did do two dozen checks over fifteen sixteen years, what was that like. We make a lot on this program of Google and Fidelity Founders Fund coming in in these bigger rounds, but you were able to participate.
I mean, I think really the thing that we did is consistency.
Right.
We were excited about the business, We had conviction about the business, and so we kept investing, right, and some people wrote it one check and that obviously was a huge outcome. But we kind of showed in your We showed up, you're in, you'ar out, and that's really paid off.
And now new people show up SPV access to retail. Is that what naturally has to happen if we're going to get these companies staying private longer, what's the tension there?
I mean, once the company is public, obviously everyone will have an opportunity to invest in it. I think, you know, as we've seen more capital become available in the private markets. I mean you've seen, you know, some of the large crossover funds get involved. So I mean there's just there's an incredible increase in the amount of capital available in the private markets relative to you know, ten or fifteen
years ago. And so I do you think some of these things are sort of the natural evolution of the private markets.
Well, I SPVs, Sorry, I just wanted to you know, I want to get an answer to your question because on the show, we talked a lot about claimed ownership of company SpaceX as a prime example, but Anderils sorts about this as well. There are people out there purporting to have a position, but they bought in through some SPV structure ahead of an IPO. What's the reality of that. What happens when when the real ownership becomes clear?
Well, I mean, I think the greater concern is just fraud in the private markets, right, and so just because people there's clearly been fraud in the SpaceX market, in the andro market, and you know, so I think that people need to be thoughtful about why who they're partnering with and who they're doing business with, because I think we'll find out, I don't know, a year after the IPO, when people think they're getting shares and they don't get them, right,
what actually happened that as of a lock up period. There'll be some kind of lock up period or whatever. But I just think it takes a while for people to like actually actually start demanding the shares that they thought they owned. And I think that's going to be an unfortunate consequence of you know, some somember of bad actors in the market and a.
Big claim and one I'm sure regulated to be looking at one Blue Meg will continue to report on justin Fishtahls and it's great to have some time with the founder managing partner at one three seven Venture Now investors look at how they're cheering Qualcomm's entry into AI, sparking the biggest inter day rally after their earnings since October. This is after the company revealed it will ship custom aichips to a major hyperscaler later this year, joining US now.
Qualcom CEO Cristiano a'mon, who is the Hyperscala Christiano.
I'll tell you all about it on June twenty four. It's going to be It's going to be three days after my birthday, June the twenty fourth.
We've got to hold on to But what does this signal about? You have been a man who's committed to telling the market that you are expanding the market. It's not just about mobile phones while Qualcom has really dominated the market share, but chips now in automotives, in IoT, but really in the data center. What sort of town, what sort of expansion of Colcom's business will this.
Mean for you?
Yeah, look, you know this is a great question, and I want to maybe start the answer by saying, you know why we're not anybody you know bet on qualcom diversification efforts. We started as a mobile company. If you look at what we're doing right now, we expanded into PC, we became one of the largest providers of semiconductor to automotive, We're going to industry, we're going to robotics, we're going to broadb in a networking and I think the data
center was a natural thing. We have been working on this for the past couple of years. We've been consistently saying we're building assets, we acquire companies psy Alpha Wave, we have a pretty good CPU, a very good accelerator. We're not a small company. We shipped forty billion chips, So I actually I don't know why people will bet
against Qualcom, but I think it's okay. We're just being on this road to execution like we have done on the other business, and we're very exciting because I think what's really happening right now as we enter this next phase of AI. We went from training to inference now agents, which actually would generate demand for tokens. It provides an
opportunity across the entire Qualcum business. All of those devices where people are going to have agents running, where there's phones and PCs, they're auto, they're going to go to an upgrade cycle, and then from the assets that we build create opportunity for data.
Center Christiano, specificity is so important here you said, and you can correct me if I'm wrong. You said it was an asick product, which I think the markets looked at and is a little bit surprised. So you are not doing your own chip, you're not doing merchant silicon, your own designs for market. You're doing an a sick with someone.
So we have said that our data center product and I need to make sure I don't front run my investor day, but trying our data Yeah, I understand that my data center. My data center product offering includes twe vectors. One is CPU. We are developing a CPU and we're very flexible. We can provide we can provide a full so SoC we can provide chip. So that's one asset. The other asset is an accelerator. We have the accelerator with innovative memory architecture. We don't need HBM for the
disaggregated inference. The other one is the ability to do custom chip, which when we acquire Alpha Wave, they have both a lot of IP which is important for CUSTOMERSIC as well as a custom chip team. When you put everything together, it creates a lot of opportunities for Qualcom. Now here's what is important to understand. The data center market is highly concentrated. Is correctly there are but six
to eight companies that represent the majority of it. And when you see what's happening in the market right now, a lot of solutions are becoming bespoke. They're no longer just merchant solutions. So I think as Qualcom entered the space, you should expect that we will offer a lot of flexibility and we'll leverage our supply chain and our design capability to do spoke products. And I think that's what we're doing.
Four to six companies. That's interesting. So this depends on your definition of hyperscaler. Like, for example, Meta is not a cloud computing company, but it operates at hyper scale its own data center infrastructure. So maybe that's what we're talking about here, the definition of what is or is not a hyperscaler.
Look, I'm just gonna cut to the chase. We're talking about a large hyperscalers. You should be thinking about one of the large cloud companies day we have today. It's a scale business, so I think that's what we're talking about.
Oh, getting closer.
The potential customers therefore are four to six, but they're huge and maybe they're even more than that. So just can you get specific about how big the opportunity is for this particular part of the business, how much you think it could ramp up revenues, So that's something you're able to push ahead before the investment meeting.
Look, we're not getting I don't want to get ahead of our skis. We're executing. We're very pleased with the engagement and what we said is it will be material in fiscal twenty seven. Now, if you look at the skill of the Quocom revenue base, so I think you know, anything material to Qualcomm is probably in the multiple of billion dollars in physical twenty seven. But look, we're just starting and we're very happy with the progress we're making.
Christian, I think back very fondly to when you and I are on stage together at the Bloombog Tech Summit. I think it was three years ago now, and we talked about the world where we switch to inference running on device. But actually Qualcomm's story has really changed in that time. Right, So in this world where we're moving to inference and we're moving to a gentic how are you positioning Qualcomm?
Right?
The CPU is important, but you must think differently to how you did three years ago.
Look, frankly, it's it's actually playing out actually the way we thought. And I know we have a limited time. But when you start running agents, and when you start running things like open Claw and a bunch of other claws, Actually, what is fascinating to see what's happening in the phone industry. Every Android OEM right now is launching their own claw. And the way agents work, they actually operate your device
for you. So what you're going to see at the end, you're going to see a lot of activity in the cloud, and you're going to see also activity on the device and it's all going to magically work. I almost like to say this, I am sure you have probably two hundred apps on your phone or close to that. We never have a discussion, we never have a discussion about how much each app is doing on the cloud or doing on the device.
It just works.
And I think that's how we see those agents working. They look at your data, they look at things on your device, they do things for you, and they do stuff on the cloud. And I think that's why I believe this actually builds into the Qualcom assets and the factor are present everywhere our engagement with the cloud companies right now they look at our devices at endpoint for AI, and that's also exciting. I think we're talking with all the AI companies about their new and exciting devices.
What's less exciting is when supply chain disruption. But you were really clear with investors and they liked it quickly. With thirty seconds memory, you see an endpoint at least in China.
Yeah.
Look, the reality is everything needs memory, and AI drives more memory demand. If we drove a lot of the men of the data center, it CAUs a crunch on the consumer electronics. The good thing is we now see the bottom, as I said in the call, where under shipping market demand, we look at customer activations of devices and cell thual data, we see how what the demand is.
That's now we can call the bottom and you know there's going to be more supply and more suppliers and we'll see how this is going to play out.
The market is taking this really serious. See Qualcomm having its best day since April twenty nineteen. Qualcom's Christiana, I'm on. Thank you very much, Caroline, that I don't know for me in the ten years I've been here in extraordinary Technology earnings twenty four hours and that does it for this edition of Bloomberg Tech.
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