From Marhart.
We're Innovation, Money and Power Collie in Silicon Valley, NBN.
This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
I'm Caroline Heyde of Bloomberg's world headquarters in New York, and I'm an adler in San Francisco.
This is Bloomberg Technology coming up.
Amd rallies on AI optimism, as the company says it's artificial intelligence chip will generate billions next year.
Plus, the UK Summit on AI Safety is underway in London with attendees including Kamala Harris and Elon Musk. Will bring you the big takeaways and interviews from the event, and.
We'll push you ahead to the Federal Reserve rate decision due out later this afternoon and look at the central banks impact on you guess, the AI startups. But first let's check in on these markets, because well, we do have some movement ahead of the all important decision, but many are thinking, yes, rate's going to stay at that twenty two year high for yet another month. We're seeing the NASTAC up some seven tens of percent. Maybe it's
actually some of the economic data, Ed that's weighing on. Well, the bad news being good news once more, if we're seeing some of those factory orders coming in worse than expected, if we're seeing jobless claims actually just ticking up more, indeed, job openings starting to open up a little bit, maybe this is something that we're trying to get, this mixed picture of where the economy is really going. Whatever the case,
we're seeing some buoyancy in tech. We're seeing some boyancy in the bomb market, yields falling that of course as we get a hint that actually will see a slowing of pace of growth in the amount of bonds that will be issued on the long dated end by the US Treasury, so lack of supply means yiels fall down. We're seeing the VIX indexs just lower a little bit. There's some calming over, of course, still concerns over geopolitics.
Move on to what's happening in the world the crypto though, because on the day, even as VIX pulls back, options protection maybe lower a bit. Even though we heard the Apple maybe ticking up a little bit ahead of its earnings, we're looking at crypto just on the downside by about a percentage point. This as we see the dollar treading water at thirty four thousand the end.
What are you watching on the micraft AMD?
This is the big technology story of the day, at least from a market mover perspective. We're up always eight percent, on track for the biggest jump since May. The story the MII three hundred. AMD's AI accelerator on track to start production and shipments in the final three months of
the year. Four hundred million dollars of revenue in the current period coming from its AI accelerator two billion dollars of revenue the company season four year twenty four, and AMD is saying this will be the fastest of its products to ever hit one billion dollars of revenue. This is the direct competitor to Nvidia's h one hundred. We're talking about a GPU that ships is an assemble component for hyperscalers, data centers, and large AI startups to train
LM's large language models and foundation models. And that's despite giving its current period forecast five point eight billion to six point four billion dollars, the midpoint of that range
was below Street Can census. The concern for them separately is a slow down in gaming CHIT sales, but AI to the rescue and It's funny because the stock fell in after hours during the earning school, it was week during pre market trading, and it's gone off like a rocket during the main session this Wednesday in Certaly.
Has let's stelve into someone who's perhaps benefiting from the rocket. Evana de Leskas, with our CIO of Spear invested AMD a key holding. I'm interested in how you balance out that narrative that there is weakness, particularly in Europe when you're coming to desire to get into industrial chips. There is worry about China, but AI is still the bright spot.
That's right, Caroline. So we see AI as a pretty big opportunity. And it's not just on the GPU side for AMD, it's across the board data center spending. So we believe they're going to benefit from this YouTube the Milano, but also from their CPUs as well, like the Berghama and Gene And that was really the big surprise this quarter.
Investors had expected that AMD's guidance was very aggressive for the second half of this year, but they were able to deliver and guide to still fifty percent growth for the data center segment overall.
Now thinking more about a two billion run right by the end of it. I'm interested as to whether you think these two players and Video and AMD are going to be the ones that take all. Whether the market is going to be so large that vast the time of one hundred and fifty billion or so that we can still see entrance taking market share.
So we do see new entrants coming in. However, AMD and in Nvidia have the early start, so they're going to be able to capture significant part of the market share. We're going to see some of the cloud vendors develop their own solutions as well, so we see them benefiting from this trend. Amazon has some new products that they're introducing, but in Nvidia NAMD will be able to capture a big part of market share as their first movers in this market.
If our AMD shares are up eight percent, as I said, on track for the biggest jump since May, and a lot of the cell side talking about the Mi three hundred being the.
Catalyst for the stock.
Right, your ETF includes both AMD and Nvidia. The Mi three hundred is a direct competitor to the H one hundred, which is already out there in the real world in volume.
So how do you play this?
How do you consider the composition of the ETF going forward.
So we see data center as a trillion dollar market that is going to need upgrading, right, so we see opportunities for multiple players. The shares of Nvidia have styled out recently due to China concerns and also people just being cautious on the AI being hype versus reality. But we do believe that we are going to see significant investments, and we do think that these companies are going to be able to compound at over fifty percent GIGER over the next few years.
The story of Nvidia over the course of twenty twenty three is a stock up almost one hundred and ninety percent, So you expect AMD's stock to track like Nvidia story did with the h one hundred if they can prove that they can scale up mi I three hundred in the same way that Nvidia did.
Well in Nvidia really got oversold at some point in the cycle, so a lot of what you're seeing here in terms of the move is from really depressed levels. So we do see similar upsite from here for both in Nvidia in and AMD.
I mean, what's really interesting is, of course you set up and launched sprx in large part to find the undervalued areas of particularly B to B industrial use of tech. Talk to us from a macro perspective geographically, where you are worried about because there was serious signs of some European slowdown is not going to be long lasting. Do we think that that can be offset by the satiable demand for artificial intelligence?
Yeah, well, Caroline. Interestingly, technology is going to be one of the least sensitive to the economy sectors. So while you're going to see some movement like, for example, in consumer technology, we see some downside in autos. We're seeing a lot of negative data points on the EV side. We saw similar impact on semiconductor companies that sell to autos.
So we believe that consumer is going to be where the downside is going to be in the near term here driven by the economy and really high interest rates. So those areas of the economy are going to be more sensitive and that's what we are avoiding. However, enterprise just went through a down cycle in spending. Companies already cut their budgets to a pretty low level, so we see those comps being pretty favorable position going into twenty
twenty four. So areas like cloud data infrastructure, cybersecurity. We think those are going to be good areas to be into it next year.
Ivan, I always wanted to ask you how much you nerd out, how deep you go on the details on a product like this. Right, we're going to look at some pictures of the Mi three hundred. You know, a lot of the work in the market this morning is based on what Lisa Sue had to say. Do you go through the specs of these semikinduct and go with your own conviction call based on deep research or do you just go based on the commentary of executives.
So we do very fundamental deep research, and what where we differentiate ourselves is that we read data across the value chain. So we're going to be talking to companies like Microsoft that are going to be partnering with companies like Nvidia. We're talking to smaller cap companies that sell liquid cooling to the data center segment, that are selling casings to the data center segment. So we gather these data points from multiple sources and that gives us confidence
in where the data center spending cycle is going. So it really is not about just following what management is saying. Is really trying to understand how they're positioned in the ecosystem by getting data points from the supply chain.
Even doing that sort of deep research touts shore cet development. Millennium Global companies with global perspectives give us the global take on how much MPD is going to be exposed to China and the continues when it comes to top in technology, Well.
China is going to be a big risk to both AMD and Nvidia, and we're going to see how the geopolitics. We don't necessarily make geopolitical calls, so we're going to see how that evolves over the next few years. But it's a pretty large market and both the AM and VDIA are very well positioned there because they're really the only game in town. And the consumer side in China of enterprise companies is pretty large and there are pretty
big consumers of this product. So if they're shut down from this market, we do see the upside going maybe five years out being really cupped and we see earning stalling out then. But for the next three years, we do see strong demand just from US domestic hyperscalers and enterprises. We've not really seen enterprises participate in this cycle yet, so we do see pretty significant near terms upset in the next two to three years.
Vana de la Lasco Beer invest great to catch up with you, and thank you for that technical expertise as well.
We appreciate it.
The UK Summit on AI Safety is underway, and earlier on Bloomberg caught up with the CEO of Google's Deep Mind about the future benefits of artificial intelligence to stick a listen.
I think the message that we bring is one of cautious optimism. Obviously, we're working on this technology because we think it'll be one of the most beneficial technologies to society ever. But it does come with attending risks, as all transformative technologies do, and I think we need to take those seriously, ranging from the near term risk to the longer term technological risks, and I think we need
to start an international dialogue about that now. So it's fantastic to see this happening in the summit, and.
There is divergence from policymakers, but there's also divergence and quite passionate splits within your own community.
You're very aware of this.
The head of AI at Meta Anderkut saying name checking in saying you're them hungering, there's maybe regulatory capture.
Going on here.
Your response to that critique, because ya, look isn't alone. There are others who say, quote unquote, that is preposterous to talk about some of these existential risks fearmongering. Is that what you're doing, Dennis, though, of course not.
And there's equal luminaries on the other side of the camp as well, including some of Yan's fellow Cheering Award winners, And we've all known each other for a long time actually for the academic community, and as far as sort of regulatory capture and other things, I think that's pretty preposterous.
We've been myself and Shane Leger, one of my other co founders of d Mine, have been talking about AI safety since we were post docs and academics in two thousand and nine, so before we'd even started our companies. So I think it's comes from a genuine, actually uncertainty around where the technology can go. It's more enormously powerful, we know, and that's why we all work our whole
lives on it, all of us. We think it can being incredible benefits to science and medicine and climate and environment and can actually help us and help society face of our greatest challenges and solve some of those challenges. But you know, in terms of where the technology is going to go and the capabilities that will have, there's a lot of uncertainty around that, and I think it's good.
There's disagreement and even amongst the academic fraternity, and that just shows you that's why we have to proceed with cautious optimism. You know, we want to make sure we get the benefits of the innovation and the promise that the technology clearly holds. But we've got to be doing a responsible way, I would say, using a scientific method, trying to have as much foresight on the technology as possible, so we predict ahead of time what the unintended consequences might be.
I guess for some it's the emphasis, and the Deputy Prime Minister himself, speaking to us earlier, said this is very much the summit focused on frontier technology, so the next models, the deep mind and others may be going out with the next twelve months or so. Others would say, look, we need to focus on the more prosaic risks of the here and now, the misinformation.
Data security.
Those issues are not being given enough weight with the critics would say.
Yeah, I don't agree with that. I mean I think that that Actually, even in the summit, there's many sessions on the near term Rizz and all of us in the frontier labs are also thinking a lot about near term harms and how to mitigate those.
Demss Hassi bis CEO of Google Deep Mind there. Bloomberg's Tom McKenzie joins us now from the ground at the AI summit, of course, conducted that conversation. It's kind of like a who's who in the world of AI. Elon Musk is there, right, Tom. But from a political perspective, the world's leaders have not turned up. So how much is Richie Schunach leaning in on Elon Musk of all people being there?
Well, Elon Musk, certainly. Look a lot of your friends and Caroline are on the ground today. Sam Moltman's here, of course, have opened AI. Elon Musk is here, Eric Schmidt is here. You have deep minds, demsocivists, of course, so they already have bought the power lists in terms
of those driving the innovation within technology. But you're right, Look, there's on the edges maybe a little bit of disappointment that you don't have the French president here, that you don't have the German chancellor, but I will suppress this. The UK government, they say, look, we're actually pretty relaxed.
You've got vonder lyon the European Commissioned President, You've got the Vice President of the United States kind of house is here, You've got the Japanese representation, you've got Chinese representation. So they would say, look, the leaders are here, and crucially those executives are here in al must certainly helps the UK and it's kind of pr efforts, certainly, And what they have mons achieve is sign off on this
communic A twenty eight different nations. And that's no mean feet right, getting China on board with the US, with the UK on signing off on the need to protect against what they describe as these catastrophic risks.
Yeah, and there was much made of China being part of this conversation, but it needs to be a global agreement, a global narrative. If we're going to have guardrails here, Tom, what do you expect to actually be coming out in terms of hard regulatory policy? Already We've been hearing from the US already enacting in executive order for example.
Yeah, so you've you've got the Communica, which is a consent census around protecting against some of these risks.
But that's all it is. It's a consensus.
There's no regulatory concrete action that comes on the back of this. They'll be hoping that that follows. In six months time, South Korea will host their summit, then six months after that it'll be France. But look, you're absolutely right. There is a divergent picture when it comes to the regulatory response, whether that is the euai AT that they hope to put into lawn next year, or the executive
action of the US or China's own regulatory regime. And it's interesting because you speak to certain people like Demis, but also Inflection CEO as well, the Inflection AIICO saying, look, we need to have kind of a global oversight body and others push back on that. We spoke to the Senior Vice President and IBM said, that's just not going to happen. You're not going to be able to get that global consensus. You need to work through the agencies
that already exist. So look, there are divisions in terms of that regulatory framework. How it works the implementation, but there are also divisions amongst executives themselves, take executives in terms of how you define risks and how you define the regulations that are needed to contain some of them.
RIK.
So the gap is huge at a time of course, when we know the innovation is coming through at a very rapid pace, whole load.
Of so much true to be done. There's a couple of more days. Of course, it's today, it is tomorrow, and of course it's all important. X discussion going on between Enol Musk and Mishi Sunac after the event. Tom McKenzie on the ground for us over there in buckingham Shaw. We thank him very much for it. Meanwhile, coming up funding, an AI scientist, former Google CEO actually is in the UK at the moment. He's also been lending a hand to a nonprofit with ambitious plans to build an aisystem
capable of scientific research. We have more on that next.
Ed, what's you got?
Yeah, just a real quick look at shares of Wayfair, another one that had been lower and then suddenly book Off it goes higher, up five percent, and lists really impressed with the profitability in the e commerce context. In the fintech context, with this stock up five point four percent. This has been bog technology. Here's talking tech first Up. We Work shares slumping by as much as fifty percent today after a Wall Street Journal report about its plans
to file for bankruptcy. A spokesperson for the company said it would quote not comment on speculation and interest. Internet companies in Southeast Asia, like seeing Grabber, facing their slowest growth in years. Researchers say online spending is expected to rise by eleven percent this year, but down from twenty percent a year earlier, in its lowest rate going back to twenty seventeen. This comes as consumers in the region
pull back on their spending. Plus, new emails shown in the DOJ lawsuit against Google are shedding new light about the blurry line between search and advertising. In twenty nineteen, the former head of Google Search raised concerns that his team was quote getting too involved with ads. After Google internally declared a code yellow amid revenue concern, speculators world that its search team has sometimes been pulled into the
advertising side of the business. Google has pushed back on that very IDEA.
Caroline Now, speaking of Google, the former CEO of that business Searchmith, but he's mentioned further into the non profit space by lending his funds his expertise to an AIPAD research initiative called Future House, who mergs Jacki Davilas joins us in Washington with a great story all about Basically, they're assuming that the scientific process in and of itself needs to be accelerated by AI, not just the actual finding of scientific breakthroughs, that's very Caroline.
What Future House really wants to do here is not just advanced breakthroughs like the alpha fold protein folding breakthrough that we saw in the last couple of years that really cracked open AI's potential in science. What Future House wants to do is actually advanced the process itself. Now, a lot of us kind of have to go back to that high school, you know, laboratory where we were learning about how to create a hyphe doing the research,
and then ultimately testing that. But there's a lot of bottlenecks here that Future House says they can solve, starting with the ability to make new hypotheses at a greater scale and much faster, perhaps more accurate than humans can.
And the way they want to do that is with this AI scientist, So they plan to kind of build their own AI system that can ingest thousands and thousands of papers at a much bigger scale than a human scientist can, and eventually start to semi autonomously come up with hypotheses of its own.
What's interesting about this story is there are loads of startups and big companies working on applying AI and the sciences by technology farmer drug discovery. This is a non profit and it's focused in academia. Tell us who the people are behind Future House.
Jackie that was by design ed Now, of course, Eric Schmidt is by far the largest backer here. The organization plans to have is backing for at least the first five years. It expects to spend about twenty million dollars in the next her up until next and a lot of that funding is going to go to talent and building what's called a wet laboratory, much like what we would see in an academic institution or even some of
these industry led research labs. But the reason it's a nonprofit is because it doesn't want to have the pressure to make money or pump out products, and so that's where you have Eric Schmidt saying he wants the incentives really aligned to advance the research itself, not having its attention diverted by you know, other priorities that perhaps might come from investors or the market itself.
All Right, thanks to Bloombox. Jackie Dablos out in DC.
Then welcome back to blom meg Technology.
I'm Caroline Heard in New York and I'm ed Ludlow in San Francisco. A quick check in on European markets. The equities market in Europe has just closed.
The stock six.
Hundred Europe, which is kind of this continent wide gauge of equities up for a third straight day seven ten to one percent. A lot of the trading that's going on in Europe, or did go on in Europe throughout Wednesday session was kind of ahead of the Fed, a drum beat to and treading water towards this afternoon's FED decision, because of course Fed and rates policy has an impact on the global economy. But there was also some pulled back in some of the sort of benchmark European yields.
We're looking at the German ten year burned two point seventy five percent on its yield, and euro dollar slipping for a euro against the dollar for a second straight day.
Remember for one week only.
We're checking in on these European markets because of the time difference and how exciting it is, Caroline, and.
Indeed it is all kind of dictated by US macro policy. Let's dig in on what's happening in the US markets right now. We are up wells seven tenser percent, let's call it on the Nastak one hundred. Interesting desire to be getting into technology names on a day where perhaps we had some mixed data coming out from the US. I mean, overall, we're trying to be reading the tea leaves of what's been disclosed. When it comes to job openings,
actually climbing, the US factory gauge slumping. Nevertheless, some movement towards some of the tech names Bitcoin. On the downside, the dollar stays flat, but we do remain at about thirty four thousand elevated level US tending yield though. This is what to watch while markets rallying twelve basis points to the downside. This is the Treasury said it will sell one hundred and twelve billion dollars in longer term securities,
actually sort of slowing that growth of issuance. But notably, we are thinking that the Federal Reserve is going to be holding those interest rates steady and a twenty two year high. Of course in their meeting today, maybe they could hike later in the year. What does that policy mean for sort of hearts and minds in terms of allocating capital, tools, technology names in private sector and the
public sector. We want to discuss the FED conversation. It's implication, but again for AI investors and how should they be thinking about monetary policy. And pleased to say, Joe Chow's with us. He's the co founder and managing partner over at Millennia Capital, and someone who worked with the FED knows how to think about the implications of valuations of companies.
And you actually think, look, this AI, some call it a mini bubble, is not a bubble if you're looking at where interest rates ultimately.
Are exactly and in our view the AI super second which just starting this year, this is year one, and that the bubble is not going to peak or burst for like the ten years in Nerview. There's a couple of reasons for why. If you look at historical tech bubbles like the crypto we had ten to twelve years of loose monster policy, and in two thousand and one when the dotcom bubble burst it we had ten years
of fiscal policy fiscal surplus. So usually these tech bubbles, InnoVision bubbles tend to form when you have one of these following conditions. Loose Mountter policy, strong markets. We're strong economy, and in twenty twenty three we have anything but that we have time Mountter policy. With QT we have a very difficult market. And my point is, if AI has been this bigger important, then imagine when the FEN normalizes and when the markets kind of resume, then that how big AA bubble could become.
I'm interested. You're obviously backing some of the key names that we talked a lot about on the show, the coheres of this world, the stability AIS, and there's some management concerns with that business. I'm interesting now one a day where we see Olive AI, for example, once worth four billion dollars valuation in twenty twenty one when it last raised some funds and now it basically sales off
folts of the business and has to fold. What is this distinguishing factor between companies that can't make it through and companies that can.
Yeah, So you know, I've been having these conversations with a lot of investors and founders. So basically I've been asked what is AI, and I said, AI is software squared. Think about how big impact internet and software have had on our lives, business and consumer lives as can be much much bigger. So by the same token you can you can you can value a software company on a price to revenue, on a price to growth profit e bit of free cash to LTV CACT and all these
operating metrics. You would value an AI company by the same token, and you would value kind of like the company based on long term DCF and so yes, some of these AI companies are overvalued, but that's because they're growing fast, so the growth rate price the earnings earnings growth or revene growth is justified, or because the total addressing market is big, or there's such a strong mode.
So some of the companies that you know are not sustainable may not exemplify one of those our characteristics.
Joe, Caroline and I were reflecting this morning on a conversation we kind of had throughout the year, but it started within a COSTLA that ninety percent of these new startups. In other words, ones that were founded this year in the AI domain won't survive. But I kind of like it's a conversation that I've always had covering bench capital. Right, you look at your portfolio, aren't ninety percent of they're not going to make it anyway?
That's the power leventry capital is not every company is going to make it. But when I take a step back and I work at the ecosystem, you know, I'm really really excited about this juncture where AI has really introduced a lot of life back back into the ecosystem, where AI has created this whole new green field in which many new companies will be born and there will be many useful applications LBW built in cancer research, in healthcare services and et cetera. And so not every company
is going to make it where the ones. But you know, I compare this twenty twenty three moments. It's sort of where we were in twenty ten for the cloud, and twenty ten was when we were coming out of the GFC, when markets were recovering, and maybe the.
Two thousand and two moment.
And so the companies that do that will stay, that will survive this sort of kind of wash out our poise to stay and you're seeing some of the most impressive growth numbers from open AI, from n RAPPID, from cohere, and we're really confident to say that the aida markets are to stay and that it's going to have a huge impact on our business consumer lives.
There's been a debate this week about what's going to be bigger for global financial markets, the FED this afternoon or Apple earnings on Thursday evening.
Let's stick with the FED.
If you are a venture capitalist or you're a long term private investor, why do you care about monetary policy? Why do you track rates in the direction to travel for rates?
Well, there's two things. One is venture capital assets are just equities and that's no different than public equities. It's just that public equities trade, you know, move every mill second, but venture capital ascess don't move. But if you're you see you need to understand where rates are, where discount rates are going, and what the exit markets will look like. And that's going to impact sort of evaluations your portfolio.
And the secondly is is you know, let me say this now that the FED is done, where you're done and you know in my view, the only direction the federal funds rate is going to go absent any sort of blackswan events in the next few years is downwards.
You know, when now we're at five point five and a little bit higher, you know, absent you know, blackswan events, the federal funds rate will kind of go down from five to five and a half, maybe three to four percent, maybe maybe two percent, And so we're discount rates to kind of compress by twenty pips points twenty pips. That's going to leave to equity valuation expansion, and that's going to be a healthy movement for the public markets in
tech and private markets and comparables. So you know, that's why we're really decided about this juncture is the FA's almost done, we're starting a new business cycle, and AI is really introduced a lot of new activities in the market, and so this may be actually want to be one of the best comet to invest in AI.
That is an answer that I think Caroline addresses a lot of the questions that are global technology. Audience has Joe Chow and Leniar Capital. Great to ab back on Bloomberg Technology. Thank you coming up here on the show will continue the conversation on AI and talk regulation and investment in the space. That's the next conversation, Caro.
Meanwhile, let's talk about desire to be spending money on big deals. Some news crossing the wire that will endeavor. You know, the company of talent agency and behind an ultimate fighting champion as well, but a private equity firm, silver Lake, is turning to its closest partner in the Middle East to back one of its own largest ever buyout deal proposals. The pfirm is and talks to team with Abu Dab's well Fun Mumbadulla in a potential takeover
of Endeavor. Just check out the shares popping two and a half percent Endeavor so far. Not commenting this is bloombog technology Now. Business officials told a Senate panel on artificial intelligence that Congress must take a more active role in regulating the use of AI, particularly in the workplace, so more and how the technology is impacting the workforce. That's just bring in Bloombergs to a Constancy's got a
great story reading on at the moment. The myriad of state by state, region by region rules that are coming in. I think of here in New York in particular, but nothing from a federal level that's protecting the worker, right.
Right, So, and that's what these these folks from the business community were really calling for, because if you have this patchwork of local and state regulations, it can make it really difficult for companies who are developing new technologies to figure out how to how to even proceed. So some some folks were calling for federal action on this, on this in particular, looking at AI and hiring. I
think that's a big one. And as you mentioned, there's a New York City law looking at bias in AI software that you know, in order to regulate those sorts of of programs being used for employment decisions.
Now there in comes the ongoing issue with regulation and new technology, which is do you stifle innovation? How much you're seeing this put in the push being discussed at a Congress.
Level, Yeah, so that was a big part of the conversation at the hearing yesterday.
And I think that.
There are you know, it's it's really tough for lawmakers to figure out how to proceed here because I think that there are, you know, arguments on both sides that you know, on one side, folks say that you know, AI has holds a lot of risk for workers and may even result in displacement of people's jobs on a large scale. And then on the other side, people say
that's really not going to happen. You know, we're going to see people shifting into new jobs, We're going to see people learning new skills, and so it's hard to know for Congress at this point in particular, you know, how exactly they should proceed, how tightly they should be regulating versus letting that companies do their.
Own thing, the ongoing debate. Joe Constance is great to have you, thank you very much indeed on that important story, and it's something that's been discussed in the UK right now as well.
In it is and that's the topic of discussion in today's VC Spotlight. We're going to hone in on investing in art official intelligence, but with the context that right now in the United Kingdom there is an AI summit underway joining us. James Wise, a partner at Borders and Capital big presence in the UK and Europe. Ben what does the summit like this actually mean, James, for the
ecosystem of startups working on AI in the UK. In particular, is there any actually tangible action that will come in supporting that industry.
Well, overall it's a very positive thing, right.
We want to see international collaboration, we want to see regulation that's clear and forward thinking. But obviously our aperature here is really how is this going to affect entrepreneurs on a day to day basis coming into the market and their ability to raise capital.
And what we're looking at is how will.
Regulation of models or access to the tools open source solutions affect the desire of entrepreneurs to try innovating in this space and the ability of investors to really make a difference and help build big businesses.
Here, what this summit has done is literally put in front of the camera the talent in the UK, you know, deep mind being the obvious example. Are there any particular advantages or strengths that you feel the UK has in the field of artificial intelligence, be it academic or be it the private sector.
Yeah, that we have a broad range of software successes right, whether it's in fintech, or it's in detech or even in the life sciences. And actually what we're seeing is research and AI now proliferating through inter industrial applications and being taken up by leading software businesses to make a difference for.
Users and ultimately that's what matters.
Having people here is fantastic, but making sure that they work on an international level is still.
Going to be important.
You know, the UK is a great market, but when we invest in businesses here, we're not investing in UK business to win in the UK. We want them to be impactful on the global scale, and that's why having something like the Global AI Safety Summit is incredibly beneficial.
It's interesting, of course, summary investments include Writer and we've interviewed founder of that business who's permanently jetting across from London to SF and back building a global AI business. One of valuations like James in the UK, because we're just talking about how they're pretty elevated here in the US.
Yeah, well, look, the amount of money from venture investors going into AI has grown significantly in the UK over the last year. It's grown by about seventy percent. AI has now just overtaken fintech this year in terms of the main area that vcs are putting dollars, and obviously that creates competition and it drives up valuations for early
stage investments. I think what's different about AI investing right now versus some software valuations driven maybe a couple of years ago, is that revenues are really following right There is incredible demand both at the enterprise level and at the consumer level for these new tools. Now we need to make sure that demand convert into usage and that people really get benefit out of it. But a lot of the high valuations you're seeing are actually underpinned by very fast growing revenues.
I put to you a question that we just had a chat with Joe Chaw about, and there's one company, for example. We're starting to get a view of these companies actually failing now. We had Olive AI, one of these companies that was worth four billion back in twenty twenty one and is now selling off parts of the business and basically unwinding. How do you discern a mote?
How do you decide which company is the one that's going to be able to push through when a lot of the firepowerin AI is costly and ends up being owned by some of the big oligopolies. Shall we say?
Yeah?
And AI is an incredibly broad term, right.
What we've seen over the last year is an explosion in the capabilities of generative AI, and in fact that's completely ruined the business models of some businesses that were building their own models at scale, and so there's going to be disruption, there will be failures.
You know.
What we're looking for right now in a period of very fast technical change and innovation are founders and product team so who can adapt and deploy these new technologies to find ways to really bring the value for the customers. You know, I think you did a great summary earlier of AMD's new earnings and forecasts.
We all know the storage.
VideA right now, a lot of the value is being captured at that level, at the cloud level, with the hyperscalers or with the chip producers.
What we're looking for is the.
Businesses who can navigate through this changing landscape and capture value by providing services to people. James, you raise a really good point because many of the founders at Caroline and I speak to you, the first thing they think about when they wake up literally is compute. It's expensive and it's hard to secure. The UK startups have access to that compute.
Yeah, it is a challenge.
You know, the UK locally has about a sixth or sixth in the world in terms of the amount of compute that has nationally well behind the US and China.
However, you know, we do have some local centers.
We've just announced in the UK funding for an exoscale computing center as well, which will help, and international funds like Bolderton have relationships with the likes of end VideA and others so that we can provide access to cloud. You know, this weekend in London we're providing access to
three hundred hackers. I think it's the biggest hackathon in the agathon con Alert two tools for free of charge, you know, subsidized byers and the providers to help them start getting on the scale and learning how to use these tools. And I think things like that, and things like deals with en Video here in the UK means that entrepreneurs here can compete and lead in the field.
Remember to invite us to your hackathons. James Wise of Borders and Capital, thank you very much. Like coming out there on the show. Meta set to be hit by a privacy crackdown in the EU over its trove of personal data that it uses to target users with ads.
Join us more. Our Big Tech editor Bloomberg.
Sarah Fryer, So, the mechanics of this are interesting and important. What they're saying as you can't take the data from your big platforms and use it in how you target those users with ads.
Right, they're saying that the data collection at this scale at which Meta has done it across Facebook, Instagram and a Messenger is beyond what consumers have agreed.
To and.
Takes away their choice. And so what Meta has done is they've operated or they've released this free version, this ad free version, thinking that that would satisfy regulators and say, you know, we're giving users a choice here, they don't
have to have ads. It's a sort of calculated move on metas part, but because people probably won't use that one that said, regulators aren't sure that that necessarily satisfies them, and Meta saying that, you know, they have had discussions over the course of many months trying to get to a place where they can still operate in Europe, but it looks a little tenuous right.
Now, Meta saying this statement is so white, Sarah. They've been aware of this plan for weeks and we were already fully engaged with them to arrive at a statisfy factory outcomfortable parties. But the band is unjustifiably ignores that careful, robust regulatory process. So when next, Because this is really stemming from Norway, right, they've already come down in this way. They're already getting fines on a daily basis. How harsh could this get?
I mean it could It could be something that we see in all of Europe. We could see that this ad free version gets maybe deeper scrutiny as to whether it collects data. Still, I think, you know, users aren't is concerned about whether they have ads or not compared to how much data is taken from them. So so I think that that's that's what will come to next.
Already Meta has pulled back from Europe. Remember that Threads, the new Instagram platform, wasn't launched there, so they are they are trying to be a little bit more cautious in the region, and that's difficult for the company because it is one of their more lucrative ad regions around the world.
So far, great to break that down. We thank you the ongoing focus of regulators on Meta. Meanwhile, let's talk about regulation here in the US when it comes to crypto and indeed, while a trial that's going on we all know the Crypto Ford trial of FTX coming to a close this week. After Sam mcmnfred finished testifying, prosecu just make their final pitch to the jury promotion. Alibassek is going to be back at the courthouse tomorrow and people have been like getting there at one to two
in the morning. May seem to get into this courthouse. What are we anticipating. How quickly could any sort of judgment be made him?
Well, it could be as early as the end of this week, it could go into next week in theory here because the jury has to deliberate, but they are looking to get to a conclusion. What you're going through today is we have Sam mcmanfried who wrapped up his own testimony just yesterday, and now today you're watching the prosecution really come in with closing remarks using Sam Bankmanfried's
own testimony against him. So what they are now saying is you saw him come in early to his own defense, very clear worded, very clear headed, and a day later you saw him walk into the prosecution stumble over many definitions, stumbling over many things that the prosecution put right in front of him, books articles as to what he had said, and then watching him either not remember or deny what has been written or said about him.
What was SBF's defense beyond basically saying I wasn't a very good CEO.
Well, that's the main defense, isn't it. This idea that they didn't have the right risk management in place. And the idea here was not just that, you know, he wasn't a very good CEO, but he was trying to show that he wasn't actually there or responsible for certain amounts of the decisions made over at Alameda while Caroline
Ellison was running it. That's the distance he tried to create from himself, because remember, he's trying to convince a jury, many of which were not aware of what had happened the last year a couple of years at FTX. Were not aware of many of the inner workings of the crypto industry, and we're not aware of a lot of you know, what was allowed and what was not allowed in terms of margin loans, as he has said, Alameda
had taken from FTX. But the prosecution is coming down hard and going against him in terms of the discrepancies in how he had shown what had happened over in FTX.
Shanana Bess can be back at that courthouse in New York. We thanka Meanwhile, that does it for this suggation of BlueBag technology today.
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