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This is Bloomberg Technology with Caroline Hyde and Ed Ludlove.
I'm Caroline Hyde of Bloomberg's World Headquarters in New York and Imed Lovelow in San Francisco.
This is Bloomberg Technology.
And we are counting you down to the launch of Boeing's much anticipated Starliner in Cape Canaveral. The crew of two will be the first astronauts to travel aboard the so called space taxi. And this launch look has been plagued by problems, delayed twice already in the last month due to a number of technical glitches. The craft key to NASA's plans to take Crewe to and from the International Space Station, and a lot is riding on.
This d Yeah, this has been ten years in the making. Boeing's been working on Starliner since twenty fourteen when NASA first awarded the contracts as part of the Commercial Crew Program, and it's massively behind schedule, seven years, delayed, one point
five billion dollars or more over budget. Carro and we may finally be here and The important context is that in that time the contract was also awarded to SpaceX, who have flown NASA's staff to the ISS nine times and four private missions, and you can see how far behind Boeing has fallen.
Let's just talk about the people. What we're seeing on board at the moment, veterans, as we say, this will be both of their third time going to the International Space Station, and what we've got Sunny Williams, Barry Butch Wilmore, can you tell us a little bit more?
Yes, Suny Williams, hugely experienced astronaut, three hundred and twenty two days in space, first time in two thousand and six through seven, second time twenty twelve, a number of spacewalks. Butch Wilmore one hundred and seventy eight days in space. He will be the commander of this mission, been a pilot aboard previous missions. And it's a different system to SpaceX, right, It's a very different system. They have side boosters, a main booster, a second stage booster, and then the.
Capsule star liner on top.
So there is a lot here that is not as tested as thoroughly as the SpaceX system. But we're getting closer to this happening, kra and have to say, I've been skeptical that we would get here, given the multiple delays, even in the last month alone.
But star Liner looks clear for launch.
Ten nine, eight, seven, six, five four three two one. Ignition and liftoff of Starliner and Atlas five carrying two American heroes, drying a line to the stars.
For all of us.
Chick Mader butch boom where they're calling down to the Michigan Control here in Houston, that the spacecraft has begun rolling into the right attitude for its asset, and it got its navigation and control officer here in the room seeing good debt on it.
The stocking massing through max Q or the uh point of maximum dynamic dynamic pressure where the forces of air friction or highest which in sunny will shortly be passing through Monck one, or the speed of sound.
We've passed through max Q or the moment of maxima mero dynamic pressure or stress on the complete craft. One point six million pounds of frust generated by the main booster and on the side of that the two solid rocket boosters. And that's the next thing that's going to
happen Caro. We're about ninety seconds into this, but at the two minute and twenty second mark, those solid rocket boosters, the two smaller boosters on the side, generating three hundred and forty eight thousand pounds of f us each, they will separate and drop off back to Earth and we continue on our journey relying on that main booster for about two minutes or so, and we can pick up from that continuing.
We of course are going to be keeping an eye on Starliner, but just talk to us all about also about United Launch Alliances here they of course providing the thrust the rocket, and this is ultimately two working seamlessly together.
Here.
This is a really important milestone because the Atlas five system has flown around one hundred times, the majority of that under the ULA umbrella, and a lot of the setback is the integrated system. And I believe that what we just saw there was the separation of the solid rocket boosters, those two that dropped off of the side. But this is the first time that we've had some serious human spaceflight under the ULA umbrella with Atlas five, and it's part of a much bigger integrated system along
with the star Line. A capsule for which Boeing is responsible. Interesting, the shares up three tenths of percent. I'm not sure what you'd expect. Maybe a relief rally, maybe not, because of how many years behind schedule we are and how many billions of dollar over budget we are. But yeah,
it's an important milestone for that combined system. But we add the context that in the meantime since twenty fourteen when NASA first awarded the dual contracts to SpaceX and Boeing, SpaceX has made this routine and done it many more times.
And let's just run through some of the differences here of what we're looking at compared to SpaceX in terms of the nuances of how the flight has approached the fact that we're not seeing a reusable rocket here, and indeed very small amount of size.
Differences, really excellent questions. I mean, they're very different launch systems. Falcon nine has a fully reusable booster. There are ways that they're similar. So the total thrust at sea level with Falcon nine is about one point seven million pounds. The total combined system of CST one hundred is about one point six million pounds of frus. They will both travel at similar top speed, so on its way to its next stage is of separation, which I'll get to
in a second. We're traveling maybe seventeen th seventeen thousan five hundred miles per hour, similar to Falcon nine. Falcon nine does not rely on those two additional side boosters or the two additional solid rocket boosters like the CST one hundred system does. And then there are additional stages of separation and flipping them with bits of paper all over the place here because I want to make sure
we get this right. Four minutes in and the next key milestone is that the Atlas booster, that main booster, will cut off its engines, and from there the centaur, which is the secondary stage, will separate off from the main booster.
So ultimately we're waiting for that four minutes thirty four mark when we do see that separation.
And as we can see.
Thus far, four minutes thirty two seconds in ed, this seems to be going smoothly and much to the release of here we are.
We can take a look.
And that was a separation, correct, That was the Atlas center of separation. From what we understand, we're what but four minutes and fifty seconds.
In exactly that's what is called Centaur or basically the second stage booster pulling away from the main Atlas booster in a stage called Becho or Atlas booster engine cut off. The next big sort of milestone is in about ten minutes time, i'd say, which is where Starliner, the capsule sitting atop of Centaur, will separate on and send those two astronauts on their way. But it's just incredible the
images that we've seeing. You know, space is hard, you know, and Boeing has come in for a lot of criticism. It is one point five billion dollars over budget, as we say, the stock now modestly lower.
Basically flat.
But everything is nominal, as they say in the space industry, it's going to plan and we finally got here.
We have and space is hard, it's costly, and we want to go to someone who really understands the intricacies of trying to work with private and public integration of getting more humans to the International Space Station station as an airs with us exert of KORRO for more.
Senior fellow at Harvard's Belfare Center.
Former White House Assistant Director for the Space Policy former NASA executive as a I don't know who else would be more perfect on a day such as this to weigh in and thus far this is going successfully. How important is this to the US space ecosystem?
It is critically important.
You know.
What we're seeing here is American ingenuity, and the success of this launch so far indicates that we continue to lead as a nation because we're no longer in a space race today. We've got over ninety space programs globally, and so continued leadership is important for the US to keep our edge, to continue to pioneer.
And this is just a beautiful site.
Frankly, as you contributed in your career to dozens of different NASA missions since twenty fourteen when NASA first awarded those contracts, and the much bigger picture of the commercial crew program, it's been super frustrating to see Boeing take ten years to get to this point. SpaceX has pulled ahead, pulled ahead massively. How will that have gone down inside of NASA? How is staff at the agency going to be viewing this moment?
There's a lot of celebration and a lot of relief because what you're seeing here is the resilience of scientists and engineers over as you mentioned, a decade, and one of the critical skills an engineer has is the ability to be disappointed for three seconds and then move on to find a solution to the next problem. And we witnessed it for this launch in particular, over the last month.
And that's what's happened over the last decade. And NASA is experienced at this because over sixty years of putting together missions and spacecraft, we've had our share of challenges, and so we understand and we are frankly cheering going on today.
I'm very helpful with you just sort of outlined some of the ways in which NASA feels its own issues. When I just want to outline some of the concerns we had had leading up to this particular launch. There was a pressure valve that was a concern with the ULA side of the equation. The rocket had a small helium leak that seems to have been deemed not a worry, and so therefore that helium leap didn't need to be fixed for this mission to continue.
Then previously we saw.
Of course, the whole mission was called off but four minutes before launch, and that was all based on a launch computer being somewhat delayed. There is so much intricacy when it comes to these sorts of humongous, very costly launches as in A and I want to understand from real perspective, how important is to have more private players in the game. How many more do we need than ultimately the geopoly we have at the moment, as many.
As we can have.
You know, this is a very challenging business, and we continue to support lots of smaller companies, lots of rocket companies that are focused on launching cargo, smaller cargo, smaller spacecraft into space. And there is a lot of exciting opportunities,
not just in the US, but in other countries. And it's important because when we have launched become more ubiquitous, then the idea of space tourism becomes even accessible and your children may one day, you know, take a field troup to space because the opportunities to fly are available and accessible.
For our Bloomberg Technology audience, what we're looking at on our screen is a computer generated image giving the approximate status of the star liner caps you are attached to the stent or second stage booster in about five minutes time, those two will separate in the star Liner capsule as an A will continue on its journey to the International Space Station, about a twenty four hour process. The International Space Station makes me think a lot about the future.
It's due to be decommissioned in twenty thirty, and so today is a massive success. Credit to Boeing to finally achieve this. As it stands, the stockdown four tenths of a percent, But it seems like the star Liner system has a limited shelf life. They might get what six missions before ISS is decommissioned or so do you see a future for Boeing in the passage of humans from Earth into orbit and beyond.
Yes, So most.
Companies don't share some of the research and development that they are currently working on while they are completing other complex missions. And as you notice, this is an effort that is combining multiple companies ula Boeing and other thousands of smaller businesses and contractors who have helped to make this happen. And so with the retirement of the International Space Station in twenty thirty, we are likely to see not just commercial US owned space stations replace the International
Space Station, but also increase commercial launch activity. So the space sector continues to be described as emerging as a technological space. However, what we've seen and.
What we've witnessed is that.
It takes sometimes thirty years to emerge, and so some of these companies continue to work on this, including Boeing, and they might surprise us with what they have in store for future commercial space stations.
Asn't your focus is often sustainability here efficiency Ultimately, how sustainable is Boeing ula visa v what we see from SpaceX? How much do you think that ultimately sustainability can be achieved and a clean process of putting a whole ton of satellites into low Earth orbit as well?
Sustainability is a very tough challenge in space, and rightly so. Reusable rockets are more sustainable than a rocket with a single use. However, we have to think about the systems that are developed. If this has six flights in it, and after a development cycle that was at least ten years long, getting at least six launches out of it is a helpful start to a future where we will, with hope, had an increased amount of reusable rockets. Now
with spacecraft and satellites in space. We have a whole slew of regulatory rules around when satellites can deorbit so that they don't end up a space debris or space junk. And so we have a process in place, and companies do help to mitigate and help to ensure that we have as little debris as possible in space while we try to clean up everything that's there currently.
As any I'd like to spend a moment thinking about the men and women of NASA, and particularly the control staff at the agency. What's kind of interesting about CST one hundred is that it is NASA control teams that are running the mission alongside Boeing. SpaceX has its own
control teams. So for your former colleagues and friends at NASA, it's also been a very long journey for this system and project, even though we focus on the Boeing component of it, just explain sort of the depth of talent and those colleagues you know that have worked on this project.
You've got people who have been at the agency for at least two decades, people who have worked in mission control for three decades. You've got people skilled in physics, in chemical engineering, and aerospace engineering, in a plethora of engineering disciplines who have time and time again supported even the Shuttle program and are today supporting this Boeing Starliner. You've got colleagues who have helped to ensure that the International Space Station and the astronauts had visit it and
remain in constant communication with Houston and the ground. And you've got lots of NASA leaders who have been with the agency, some for almost four decades. So there is this continuity and in engineering and leadership that we see at NASA today.
As I know, we're just about to start witnessing I believe a key moment star line of separation as it ed coming up.
Yeah, star line of separation coming up where the star line a capsule separate from the central second stage. That's probably happening as we speak. But as you can see in your screen, we're relying on a computer generated image. So any second there is your computer generated representation.
What timing that was?
We planned that one, and before that you had had the central main engine cut off happened prior to it. There's a really important technological distinction, right carry between what we're so used to with SpaceX and Falcon nine and this CST one hundred system, which is the only reusable part of CST one hundred is the star line of capsule. The secondary booster's main booster centaur are not recoverable in
the same way that the Falcon nine booster is. But as we I keep saying, let's repeat it one point a time, so far everything is nominal, meaning everything is normal. This is going to plan bowing stocks down four tenths of percent modestly. But it's now a twenty four hour journey from this point to the International Space Station, it is.
And asne this is such I'm sure contained exuberance and euphoria going on in Cape Canaveral at the moment, But there is much to look forward to, not only, of course, these within the next twenty four hour process, these two veteran astronauts arriving at the International Space Station.
But you mentioned how maybe ed andized children.
Will be visiting these outer parts of space soon enough on a consumer basis.
And I think what's happening over the.
Weekend, and Virgin Galactic I think is still planning for their net particular trip. All you seeing things going as well as you'd like.
Yes, this is extremely challenging. We have to remember that astronauts have typically been marines, the best of the best, and they train for at least a decade at.
NASA before they fly.
And the fact that we could simplify that process to allow citizens and non marines and non air force pilots and non rocket scientists to fly and even conduct some experiments on some of these flights is really encouraging because as we continue, it reminds me of the first days of history and the first.
Days of aviation.
But as we continue to see these flights happen, then what we hope to see is against school field trips to a future private commercial space station or trip around the and that is exciting to behold. I believe we will see that in this generation.
We're looking at your live shot right now, and we've been relying on sort of computer generated images. It's interesting or I observe that we don't have the sort of as a reliable camera feed with Starliner and CST one hundred is perhaps we do with Falcon nine. Even so, everything from the NASA feed tells us that we're nominal so far as we've really enjoyed having you with us
on Bloomberg technology for this launch. Just your parting thoughts on this moment, but I guess also whether or not it will be a catalyst for broader progress in commercial space beyond what we've we've relied on SpaceX to bring.
Now, the global significance of this is large. We have young engineers locally who and nationally who will be inspired, but we also have rocket entrepreneurs who will be inspired, and other nations to start their rocket programs and companies to join space agencies and other countries who may decide this is the time to start their own space program.
And so with this inspiring and exciting successful feat, we can only hope to see more involvement globally, and what that means for the commercial space sector is more resources and a multiplication of capital, and more interest in space from investors and others who are interested in technology.
We're at large over sixty ness emissions and programs. You're involved with yourself, twenty years of course of US government service. Perfect guest to live through some of these incredible images that we see now of what's occurred with the ULA and Boeing. As Ana Zokora, thank you for joining us senior fellow at harvard'st Welfa center. Let's get back to hearth. What's happening with the markets. Very briefly, we're saying, well
going on the downside. On the high side, is NAS that big tech leading the charge up more than one point two percent some mixed data today Service is still showing really resilient US economy, but maybe some calling jobs market data helping feed a bond market rally that we see down three basis points on the tenure important Rake cup happening in Canada. The dollar is hied versus the looney. We're currently upper quarter of percent. But then dig into individual stocks for US.
Yeah, earning is a big part of the story.
CrowdStrike beating in the quarter, really bucking the trend of a pullback in cyber spending one of the beneficiaries of Microsoft missing the mark there, and then HPE surging. There's a clear tailwind from AI infrastructure build out.
We've talked this about this a lot.
It's not just the chips, but it is the casing and the rest of the server components, which HPE is a contributor to those names. Wow, that was fabulous. I really enjoyed doing that with you, Caroline. What a moment in commercial space flight will be right back. This is Bloomberg technology.
Indian Prime Minister Lorandra Modi has won crucial backing from two key allies in his coalition, allowing him to form a government and extend his decade in power. Joining US now is Giant Krishna, a non resident senior Fellow at the chair in US India Policy Studies over at the Center for Strategic and International Studies and Giant what maybe will have to change in the next government under Modi is perhaps more of an equal distribution of economic progress,
particularly when it comes to the jobs market. And I'm interested as to whether technology will be a solve for that in some way.
Yeah, I would reckon.
So see, this is going to be a collision verman because the BJP, which is led by the Prime Minister Movie, has not got a majority of its own. They have got two ninety three seats along with other partners which contested the elections together, and the opposition Alliance has got two hundred and thirty two seats. So it's not a clear majority. It's going to be it's a return of the country to collision politics. Many would think that you know,
technology decisions, business decisions, reforms would get slow down. But that may not be the case all the time. If you look at the history of Indian politics, the collision governments have delivered better on reforms.
The most transformative.
Reforms if you look at which have happened since the last seventy six years when India became independent, have been in the year nineteen ninety one, when the government it was a minority government actually not even a collision government head by the Prime Minister Nasimau with doctor Manmuhan saying the former Prime minister who was the finance minister, and when the financial economic reforms happened in the country. Those
have been the most transformative reforms. But I think most of the collision governments have delivered better actually on the reforms process and have met the business expectations better cont ready to the contrady to the popular belief.
So we've just been carrying Boeing's mission on cs T one hundred into space. I think we're going to get to India's space ambitions. We've reflected on this program about Modi's open arms to those working in artificial intelligence, but he ran on business friend friendly policy platform right in the coalition scenario. Is he going to be able to carry through with that as he would otherwise have done where he'd have a majority himself.
So I would believe so if you look at the Prime Minister Mody's party BJP's election manifesto, you know, they've talked about the many things they've talked about, artificial intelligence mission, the mission, they've talked about having a national quantum mission.
And since you're talking about space, they've talked about the first human spaceflight mission that you know, government is voted to power and they have been voted to power although with the majority they're going to embark up on they've also talked about having an Indian astronaut on on on Moon, you know, and the Prime Minister has been very upbeat about you know, the space mission.
Uh.
You know, if you look at the American company SpaceX, you know their their their parties with the Indian government. There have been some changes in the FDI policy, the the foreign direct Investment policy to accommodate you know, the the genuine business aspirations.
So I would I would.
Feel that, you know, there's a huge amount of focus uh in in several areas, differ difference technologies, semiconductors, space, telecom and and and various sectors. There's a huge amount of and I don't think that's slowing down at all with the with the colligen government, which are we you know, government having a majority of its own Just.
Briefly, we talk about India a lot in the context of homegrown big technology services companies, but largely big companies coming to India to invest. What about the bench capital ecosystem, what about startup culture? Is that going to be flourishing under in the new government?
Do you think?
See?
Uh, you know, I mean one thing is very clear, whichever government comes to power in India. I mean there is a certain continuity in the in the in the economy, in the in the in the in the space reforms process, you know, in being friendly to the business community and and so on and so forth.
I don't see that slowing down, you know, at all.
So I think, you know, there there are several sectors, you know, if you look at difference itself. So one difference is India should not no longer be seen as a as a low cost back office destination.
I think I think.
Major financial powers all over the world have to look at cope co developing and co producing with India.
I think that is gone of the days.
When when you know uh, you know you, you give imponents to us, we assemble it leveraging our cheaper manpower and delivered. I think, I think we have to have a role in in in the development process, in the research and development space and then coal manufacture.
I think that is going to be a.
Genuine win win between developed countries like the US and India.
That's what I would feel, you.
Know, Giant Krishner of the Center for Strategic and International Studies important conversation on India.
Thank you.
Intel.
It's just agreed to sell a forty nine percent equity interest in a plant that's building an Ireland to Apollo Global Management eleven billion dollars. Intel will have a fifty one percent controlling interest in the joint venture and will retain full ownership and operational control of it.
But Rimos dandy Berger sat down with.
Apollo Co President Scott Kleinman on the sidelines of the Super Return private equity event in Berlin to ask him about it.
I think you're going to see more and more of this from Apollo, absolutely more from a follow but but in general, just the need for this type of capital is insatiable.
Okay, that was the finance side. Let's get the chip side with Inveagh in King. Look, this is quarter pack Gelsinger's plan of smart capital. Intel's money, the government's money, and then someone else's money to achieve a transformation.
Yeah.
I mean the key thing and what you just said is Intel's money. And the simple factor is Intel doesn't have that much money anymore. It has more than fifty billion dollars in debt, it has negative free cash flow, and as we've seen, its earnings have been under pressure. So it needs external capital to protect that balance sheet as much as it can. Hence arrangements like this.
It's interesting in that we've seen other interesting relationships being born. You've got NXP of course, chip maker over in Europe teaming up with TSMC to be building out in Singapore. Are we just going to have to see more coming together of capital and.
Alliances like this because it's so expensive.
Yeah, no, you nailed it.
I mean these things this is not a hobby, right, I mean these things cost. A plant can cost twenty billion dollars and its useful life is not that long, right. A bit like me, right, you know, ideas and it's gone right. You need to put a lot of money into this.
Need more money into Ian King.
Yeah, no, I mean that, you know, the cost of capital is really important when you're in an expansion is phase like Intel is in right now. And you know, Gelsinger has a lot of pressure on him on all sides, so he's absolutely going to have to do more of this kind of thing.
And the customer masie in and we heard any more in terms of orders of these future well supplies being made?
Yeah, I know.
And again that's that's the big question, right. We need a big customer, We need an in video, we need even an AMD to say, hey, Intel, we want to give you orders for all of these brand new factories that you're investing in, for all of this great new manufacturing that you're putting in place. So far, we haven't heard that. Intel's explanation as well, they don't want us to talk about it. But trust me, we've got plenty.
We've got plenty lined up and at the moment the market is kind of in a wait and see moad on that one.
You say, we need an invidio so important to be crystal clear about Intel's talking about He's talking about customers, so it can be a contract manufacturer for them. And at the same time, Gelsinger wants them to have their products be at the cutting edge, the ones that they offer for PC data center.
How do you pull off both exactly?
And that's attention that is at the heart of this project, right This is a company that has been brutally competitive for multiple decades, that has made every other company out there suffer in its wake, and now it's saying, hey, guys, give us your best stuff.
We'll make it for you.
Bloomberg z E and King, who leads our semiconductor coverage here at Bloomberg Technology, and Intel continuing to be in the news headlines on all sides of this business, the foundry of fab and then the product side as well. Welcome back to Bloomberg Technology. Ed Ludlow in San Francisco.
Caroline Heid to New York, which check on these markets for you, because we are up, up and away. You're looking at the NASDAK today. We're currently still up more than a percentage point one point four percent.
On the Nasdaq one hundred.
As well, Big Tech managing to lead a charge amids mixed economic data. It's like cooling of the jobs market, which probably helps demand for bonds.
At the moment, fels coming down.
Will we see the fud FED able to cut later into the year. We're off by four basis points four point two eight's where we trade on the tenure. There's still resilient services sector and business activity here in the United States. Bitcoin on the one point six percent, we're at a seventy one thousand level. If we're clips to seventy two thousand, we go to more record highs.
Well, we heard, of course from some of.
The key players at Galaxy Digital yesterday saying that we can be at one hundred thousand dollars by the end of the year. Move on, have a look at what's happening on the micro The individual names are on the move. I shine it like a sort of an AI theme and indeed a chip theme as well.
We stick with the ASML.
There's of course Dutch company trading here in the US in terms of its ADRs, but also over in Europe on the higher side more than seven percent. This is we see that yes, it will be delivering its latest equipment making facilities over to TSMC. When you Intel have already taken delivery in Oregon in December. Then we want to see the latest versions of the CHIB equipment being shipped over TSMC. Thats just us high as Cisco though just add an investor event and am as a kind
of mixed on. Basically, this is a show me story, a tell me story, a still longtime investment coming from Cisco to ensure that they are the networking gear of choice when it comes to getting in the likes of focus. On AI particularly, we're down two point eight percent. Some worries about how much really AI will add to their overall profitability in the here and now, and I want to talk about AI adding to a profitability and revenue in the here and now.
Because boys are helping Hpe.
We're up eleven percent after its numbers came out and ED this is clearly a sign of.
Revenue returning to growth for the quarter.
We're also seeing, of course, the idea that AI systems is where we're really seeing almost a billion dollars in revenue being done on a quarter, the fact that they're tripling their enterprise AI customer base. But we want to see how much margin is coming out of that ED too.
I think that's exactly the focus of the market this morning. Luckily joining us to discuss is Hewlett PACKARDT Enterprise CEO Antonio Erry. I look at HPE and the stock performance, and you're not getting the credit that Dell is or super Micro. I see Jensen one, pat Michael Dell on the back and say, if you need a scalable service solution,
you phone Michael Dell. But your margins are better. Are you finally starting to get some credit for the role you're playing in the AI infrastructure build out?
Well, good morning Ed then, Caroline, great to be here with you today.
I completely agree with you that HB is not getting the do credit for the potential of what we do for AI and the results we have been delivering, including this past quarter. So when we think about our quarters, number one, we beat the revenue and we beat EPs, nong appps, and that was all driven by the I system revenue conversion to a point, Karaba made almost a billion dollar week, exceeded nine hundred million dollars, and we have a terrific pipeline which is a multiple multiples of
the current backlog. And now we start seeing the uptick in enterprise which obviously HP has a significant presence, but the reality is that we have unique capabilities. When I think about the capabilities HP has in this particular inflection point AI number one, we now have to run AI a scale we have done it for decades, has been more than a supercomputer now in generative AI, and that comes on the back of our unique expertise in IP intellectual property, so we know how.
To build these systems, have to cool it.
And then we have a unique manufacturing footprint for water cooling. As we think about the next generation of silicon will require one hundred percent of really cooling and HP is one of those companies can do it at all.
And the last panel list is the services piece.
And when you talk about profitability of AI, think about.
As a complete pull through.
Is not just the infrastructure side, is also the services side. And we had a very solid margin performance in our AI systems, which is part of the server segment, where we deliver eighteen percent growth year over year and we deliver an eleven percent operating profit in the guidance we provide eleven to thirteen.
We'll CFO talking about prudent cost discipline. Is that what helps with the margin as well, Antonio, because look, let's call out JP Morgan, the analyst over there this morning saying the results in the outlock echoed similar AI server story of revenue with limited margins. They're not hearing you on the fact that you've got stronger margins.
I think it's a combination of three unique things, Caroline. Number one is prudent business discipline. We have been on that journey for our own time. We pursue deals that we can add value, that we see path to prof fit ability, and that we can drive pull through.
That's number one. Number two is our complete portfolio.
And so one of the key areas that I think the market doesn't understand is that we don't.
Just ship servers.
We actually ship the server we installed, and in many cases we run it as a part of our HP green Lake platform and that includes an enormous amount of services. That's why you see HP green Lake also growing rapidly and the fastest growing area of HP green Lake this passport, which grew thirty nine percent year over yere is actually AI and last panel list is our ongoing brutal management or cost across the company. And also we are now deploying AI in our own company.
Ah, that's interesting.
So you're deploying within your company, Jenners Fay, I'm sure, but who's coming to you? Who are the clients, because I'm actually surprised that where else have you been focusing if it's not enterprise?
Well there is.
I think about AI in three unique Segmentsnumber one, obviously, is what I call the model builders. These are the people who are building the models and need an enormous amount of acceleraty the computer to train the models from hundreds of billions of parameters to now obviously a trillion plus parameters. And in that we also mentioned yesterday that Microsoft is extending the Azure AI cloud to HP infrastructure and to serve the clients. And one of the clients
just happened to be Open AI. So that's a great example of it. But there's also other service providers like Scale, Weil in France and many others we support. That's one segment, and obviously that's what a lot of the demand has been. The second segment, which is growing now, is actually sovereign cloud, and the third is enterprise.
Antonio, there is an interesting tension happening in your industry and with your partners. You know, Lisa SU and AMD and Jensen and Vidia principally have the GPUs and CPUs right, but they want to be systems vendors, and so in the context of a server, there's not a lot left over after that. But they don't have the experience in the sales channels that you guys operate in. Business is
big and small enterprise. How are you able to convince your investors that you can all grow together when you know that your biggest partners on the tech side want to do more stuff themselves.
Yeah, and we have obviously decides of experience in doing so.
I think it's a multiple things. Number one. Obviously, we work with them to make sure their IP with our IP deliver.
A better experience and a better performance. And so we co engineered a lot of things and going to see here with Nvidia in particular, are the HP Discover in Las Vegas an enormous amount of innovation. We'll bring it to the market, so I hope you can join us and take a look at that. But also with AMD, obviously we have long standard relationship. In fact, some of the large supercomputers within the plant and of energy has been built together.
With A and D.
What we will bring is the infrastructure expertise, so it's not just the silicon building a server and even we're chatting before the calls actually about the whole infrastructure and in that now we have unique ip when it comes down to air cool mixed cooling and directly could cooling, that's very hard to do. Second piece, you need the manufacturing.
Capability to do so.
HP today has one of the largest water cool manufacturing food print in the world. Okay, and as you follow the roadmap that will be necessary in last panel list obviously is the services piece because this system required a lot of maintenance and a lot of kind of TLC if you will, and HP knows how to do that scale.
So Antonio Jensen one will be on stage with you and he'll give you a public endorsement.
Is that right?
No, I think what's going to happen is Jensen and I are super excited to announce solutions together that will advance the adoption. There's amazing technology and obviously that's where the two companies come together, but also doing in a spectacular venue which will be at the Sphere, and so the way we're going to showcase all that innovation is going to be very engaging and I think you know the first of a kind.
It's been spending some time in Las Vegas going again. You're back on the Enterprise CEO, Antonio and Narry. It's great to have you with us today. Thanks for joining on the earnings. I mean, while coming up, we're going to talk about the private side of investment right now. Ken elephants with us his partner at Sorrence and Capital for today's VC Spotlight. As next this is really technology.
The biggest thing we're going to see in our lifetime from today will be the picks and shovels driving AI, and that's around the data center space. Go figure out how to get exposure to hyperscalers, which we think will be the biggest winner in what AI and data storage will do for the world.
He manages the money of the tech billionaires. Iconic founding partner taveshmacm there speaking with David Rubinstein on this week's Bloomberg Wealth episode about some of those AI investing opportunities. Let's to dig into how AI is changing everyone's landscape for VC investing the Spotlight with Ken Elephant, partner at Sorenson Capital, Ken, I imagine even in the focus era that you have in cyber it's all about general to AI.
Yeah, pleasure to be here, Thanks for having me.
Yes, As you said before the break, I'm a partner here at Sorts and Capital. We're an early stage and growth stage venture capital firm with over one point five billion dollars of assets under management. We focus on investing in enterprise software and I focus on the cybersecurity part of that. So AI is a big thing, like you mentioned, and certainly in security, AI is an important aspect. There's really two areas where AI can be applied in security. The first is is that AI needs to be used
inside of security products. So imagine today most enterprises have a security operations center.
What happens is is you have a network.
Security person, you have a host security person, you have a cloud security person, and all these people need to work very closely together to stop attacks.
AI can be.
Used to really leverage all of the information make it a lot quicker to respond to these alerts.
So that's one way.
Yeah.
The thing that I've struggled on the stand for a few weeks now for bench capsists that invest in the cybersecurity space, at the early stage is what's missing out there? There's so many cybersecurity companies. We just talked about Carlstrike doing well in an environment where cyber spending is down. So what is it specifically you're looking for?
Yeah? Great, great question.
So there's two two theses that we have at Sorensen in terms of investing in security startups. One is is we like to invest in terms of where the puck is going, and the other is is we like to invest in companies where we think the legacy vendors are not innovating. So let's talk about where the puck is going. We have two recent exits in our portfolio. The first one is a company called Talent Security.
They invented the secure.
Browser that was acquired by Palato Networks for about six hundred and twenty five million dollars. The reason this was important is because work was changing inside the enterprise employees who are accessing applications and data through the browser, and the browser was unsafe. Yeah, and this is a huge problem when you're working on unmanaged devices like your tablets
or your personal device at home. So that is an area that is brand new, it's an open space and it really fit well with pal alto becase Palato is really good on their secure edge solution.
Ken I believe as well as z Scala acquired air Gap as well. So you've had these two M and A exits which are really interesting. Is it all about M and A in the moment in terms of exits given where the public markets are at the moment.
What we try and do here at Sworns and Capital is build companies that are long term sustainable companies. And if you're solving a problem, you're going to get many acquisition offers along the way. And in this case, the acquisition offers were a really really good.
Win win fit.
And to your question about air Gap, what air Gap does is it was acquired by z Scaler in April and the founders saw that unfortunately, enterprises are going to get breached and we saw that today with TikTok right. When you get breached, that is a problem. But the biggest problem is when at ransomware or malware moves from system to system inside the enterprise.
That's called east west traffic.
Now, this was a really good fit for z scaler because z scaler is really good at north south traffic, meaning protecting traffic that's coming outside the enterprise into the enterprise. So there's always going to be the security gaps in platform companies that our startups are really well positioned to help fill, and we can fill it through partnerships or in some cases acquisitions and in some cases IPOs.
And as you know better than I do, you know, to go.
Public, you need to have really good reputable earnings and revenue growth.
Serence and capital partner ken Ellifan on a subject that is top of mind for a lot of our audience around the world.
Thank you.
It is time for talking tech and first up, eBay is dropping American Express cars as a payment option. Do you to quote unacceptably high fees? The two companies have been broad in negotiations around the fees charged, with an American Express stating that the fees were comparable to its competitors. The change is set to take effect August seventeenth. This
one we talked about earlier. NXP Semiconductors is teaming up with the company partly owned by TSMC to build out a seven point eight billion dollar chip plant in Singapore. The move comes as customers demand diversification amid geopolitical tensions Construction of the facility is set to begin in the second half of this year, with production starting in twenty twenty seven. And Alphabet has named ann At Ashkenazi as
its new CFO. Ashconazi spent twenty three years at Eli Lilly, where she served as CFO and executive VP for the drugmaker since twenty twenty one. She replaces Ruth Parat, who announced her departure last year. Ashconazi's new role will be effective July thirty.
First, Caroline, let's get more on the announcement. Davey Albert joins us helping give the context of the news. And it was a long baton handing over the Was the process.
Going, Yes, yes, this process took quite a while, almost a year.
So.
Ruth Partt announced that she was stepping down as Alphabet's CFO in July twenty twenty three, and we've been waiting for her replacement and it's finally been announced. I think this is a great picka for Alphabet, you know, it gives them some credibility and boosts them particularly in the healthcare industry where there are many generative application generative AI applications that are possible.
Let's just think about you exactly.
Just coming from Eli Lily now the most valuable pharmaceuticals company out there, the applications are clear from healthcare. What else can she bring to the table from an Eli Lily. There must be sort of an R and D for an investment ideal here as well.
Yeah. Absolutely.
You know, Alphabet has really shifted its focused and turned to generative AI as its mission and the thing that it's pouring its investments into. But as it's done that, it has also kind of let some of its moonshot healthcare efforts languish a little bit.
And I think that.
Anat can bring, you know, some revitalization to to those efforts.
So we'll see how it.
Goes, Hey, Davey, It said, as you know, every quarter for the last year, I got to ask Ruth Porat when they would have a UCFO, and each quarter she would also point out, like she's doing other stuff, you know,
while they're looking for a new CFO. She's technically been president and chief investment officer, and in that time, like Alphabet's done really well, you know, with Porat still there, what do we know about the kind of big picture plan for her and what she's going to be focused on or where she's going.
Yeah, well, Ruth Porat is a pretty legendary figure in the tech industry. She oversaw Alphabet's restructuring when it kind of Google blew up its corporate structure and created these tiny companies under Alphabet, and she's also grown the company and it's cloud and YouTube businesses in particular. They're a force to be reckoned with at this point, and Alphabet says that they will have a combined annual run rate of one hundred billion by the end of this year.
She's also been overseeing the other bets sector of the company and sort of pushing the company to sort of enact greater fiscal responsibility. So I think we'll see more of that from her, and she will very likely work hand in hand with a not to make the company even more successful as it turns out.
I find that super interesting because you're absolutely right, like fiscal responsibility, discipline, but also give everything that Alphabet needs on the AI side, which was largely data center growth, infrastructure spend. Maybe that's an area that Annat Ashkenazi doesn't know as well, you know, the Google Cloud portion of the business she needs to get grips with.
I think that makes a lot of sense.
Ruth has really proven herself through her track record of being able to sort of responsibly allocate resources and generative AI, as you point out, is an incredibly expensive endeavor.
So Alphabet is really in the.
Top tier of companies that are competing for talent and also need to continue to invest resources into data centers and other tech infrastructure. So I think we'll see some of that from Ruth as well.
I love the quote in your story coming from the Mazooho analyst saying that this gig is probably one of the best in corporate America. So don't question why she is leaving one rocket ship that is Eli Lily to go to Google. I just wanted for a moment, well hate to shine a light on it, but there are a lot of really great female CFOs in the tech sector. I just think about MESA, Microsoft, I mean, in video, so many of these juggleles have females in the finance role.
Yeah, that's I mean, it's a welcome development, especially for an industry that has struggled with diversity issues and high lighting top female leaders over many years. So you know, I think this is a pretty good choice for Alphabet and We'll see how it goes.
She has big shoes to fill here.
She does, and the shoes remain on campus too, which is kind of interesting how that dynamic will play out. But some female shoes. Deavey Alba, thanks for breaking it all down. That does it though.
For this edition of Bloomberg Technology ED. What a show.
Yeah, what a show.
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