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China opens a probe into Nvidia regarding anti monopoly laws.
That's the global tech.
War escalates this adding to broader geopolitical risk.
Weighing on US tech stocks.
We get the market impact and Alphabet reveals new details on the progress it's made in quantum computing.
But first we check in on Invidio. Top story for the day.
We're currently shaving off a cool one hundred billion dollars in terms of market capitalization for what is the most valuable company out there and listed in the United States, down three percent.
Why Moores about.
An investigation, a probe being opened up by China about a deal and acquisition.
It made back in twenty twenty.
But this really fits into a context of global tit for tap between China and the US. Peter Elstrom joins us. Now just go into the intricacies of this particular investigation regarding a deal made years ago.
Yeah, this was a bit of a surprise. We got this news last night from state television in China, where CCTV disclosed that the Agency SAMR has opened this probe into Nvidia and what it calls potentially anti monopolistic behavior. It's a little curious because, as you say, they're focused in or They mentioned specifically a deal that they did four years ago to buy a company called Melanox. It's
a company in Israel that makes networking equipment. China had to approve that deal when Nvidia decided to do it, and they did approve it, as you mentioned in twenty twenty, but they did with seven different conditions about invidious behavior going forward. That included giving the customers in China access to product information from Melanox and product access for Invidia's
own chips. Now it's not exactly clear what they're going to dig into in this case, but as you noted, in Vidia has been this company at the heart of the US China conflicts over technology. Washington has cut off in Vidia's ability to sell its most advanced chips into China, so they're really at the heart of this conflict between the two biggest economies.
In the world.
Now it's worth noting that the US Justice Department itself is looking for information to in video and potentially violating anti trust laws. It's not the only country investigating in video, but set the context of what other companies are being focused in on on this tip for tap, because Micron, for example, is having difficulty with its relationship with China.
This just does seem to be around the context of China trying to be one up on what respond to the US limitations of technology into its country.
Yeah, as you say, the anti monopoly concerns around in Vidia are quite broad. It's not just China, it's also the United States. France here has taken a look at it. That's because they have essentially a monopoly one hundred percent share, almost one hundred percent share in the most advanced chips to train AI models. But you're exactly right. Also, there's this broader trade conflict that we've seen that creates all sorts of problems for companies in between the US and China.
In Vidia still sells a lot of chips into China. It had sold more in the past, but two years ago we got this news that Washington was going to cut off their ability to sell the most high end AI chips used to train AI models. Those restrictions have been steadily tightened since then, so in Vidia has suffered because of that.
But it's beyond that too.
It's the chip equipment makers that have been restrained, ASML here in Europe has been restrained from selling their most advanced gear. So in response, Beijing has taken a number of actions that we're seeing them retaliate in kinds of ways where they cut off a couple of minerals that are very important to the chip industry, in the defense industry,
in particular Gallium and Germanium. So they're beginning to show that they also have some cards to play some lovers the poll in this broader trade conflict.
Peter Elstrom always bringing us the context.
Thank you so much, and look, let's just stick with China and the US. Because President elect Donald Trump said he did have an exchange with Chinese leader Jijingping in recent days, the first clear indication of direct contact between the two men since Trump's reelection in November. Here he is in an interview with NBC's Meet the Press with Kristin Walker.
Have a listen, I.
Had any agreement with President she who I got along with very well, we've had communication as recently as this week, and I had communication with him where they were going to give the death penalty to anybody sending drugs into the United States.
Let's get out to Mike Shepherd in Washington, and that was notable. The fact that conversation has already started in the environment where we're seeing actually China having to respond to its own economic issues, particularly as they have to look to what Trump might do to their economy come twenty twenty five.
Well highlights the uncertainty surrounding the US China relationship as we enter this change over here in Washington. On the one hand, Trump is coming in with very much a hawkish agenda towards China when you look at his promises during the campaign to impose tariffs of as much as sixty percent on Chinese goods and his follow on promise to put ten percent tariffs on Chinese goods over his complaint is mentioned in that interview over the flow of
fentanel from China into this country. But at the same time, Beijing is sort of looking to the change in administration as possibly a way to engage with an incoming president who has shown a tendency to be a little bit more transactional. Maybe they can engage with him in a way they have been able to with President Joe Biden
and his team. So they have signaled that. And in fact, when you were talking just now with Peter about some of the restrictions that China recently imposed on some of those sensitive critical minerals like gallium and germanium, their statement also included an overture to the US that we look
forward to engaging more positively at some point. So there is sort of a we don't know which exactly which way this is going to go, but the direction of travel, based on the people in Trump's team, looks to be pretty.
Tough, tough, and particularly around tariffs. Just take listen to what he said in that particular interview on tariffs too.
I can't guarantee anything. I can't guarantee tomorrow, but I can say that if you look at my just pre COVID, we had the greatest economy of the history of our country, and I had a lot of tariffs on a lot of different countries, but in particular China. We took in hundreds of billions of dollars and we had no inflation.
Finding that to consumer impact in terms of inflationary pressure.
But businesses are eyeing this very closely.
To Mike, they should be, because businesses really are consumers. A lot of those goods that are coming in from China as key inputs to their industries and key components, and an increase in tariffs would not just hit consumers at the end of the very end of the supply chain, it would also hit businesses and they would have to think about.
Well, what do we do with our costs?
Do we pass those along? And from that interview you really get the sense that Trump is not inclined to back away from any of those pledges. He was pressed during the interview about the impact on consumers and he insisted that no, there was no cost to consumers. He was asked that he said so twice during the interview that there is no cost, and he actually tried to tout the benefits of it, and moreover, he actually pointed to tariffs as a way to gain in other areas
when it comes to non economic policy as well. So it'll be interesting to see how he approaches this not only as an economic tool, but maybe as a way to gain leverage in other policy areas, including immigration and who knows what else.
Who knows what else Mike sheppin, We appreciate it now, all of this geopolitical risk, but we haven't even mentioned Syria yet. There's also this week the likelihood of another sticky inflation print here in the United States. All of it is sending US tech stocks lower on the day, despite, of course, what had been a bit of optimism around stimulus potential from China.
That's going to market take.
Brian Cosman is with US portfolio manager at GQG.
You'll read on the.
Market trends, look any of these latest issues in video China giving you pause, Brian.
Yeah, So further starts in terms of technology. We did have a very heavy waiting to a lot of technology names earlier in the year about in terms of our US secuity portfolio, more than fifty percent of the portfolio was in it and also communications services types of names. And we have seen a lot of hype kind of build up in a lot of these technius. In recent months, we've adjusted and gotten a little bit more of a
neutral posture at this point in time. So, you know, coming back to in Vidia specifically, they do seem to be still garnering the majority of economics within sort of this capital cycle and its tech cycle that we're seeing at this point in time. And I think you're seeing that in terms of the power and their ability to sort of you know, capture the market and sort of you know, circle of wagons, if you will, in that sense.
With regards to China, they do have a slightly reduced exposure to China then they've had in recent years and months, and I think that's because you're just seeing the overall strength in the other areas that they're selling through to the hyperscalers and things like that. So China's now fifteen sixteen percent of their revenue at this point in time.
So I think this is a little bit less of an issue than maybe what we saw a couple of years ago when you saw some of those US restrictions sort of pulling back you know, in video's ability to sell into China.
So ultimately, the valuations when we're still seeing in video and excess of three trillion dollars that's been dedicat by the extend to the market opportunity despite some curtailment to China for example.
Yeah, so when I think you look at in video, you look at sort of the hardware implication and sort of the technology that they have, and they have a better mouse trap in terms of the GPUs that they're selling into folks, and I think you're seeing that in terms of the strength of their business. But I think goes underappreciation is the software element of the thesis as well. That gives them a lot longer tail in terms of the ability to continue to sell through that software angle.
The thesis pulls up the margin structure of the video over the course of time. People talk about kudos or being that base software layer, and then these software stacks that they're building on top of this. This all creates a very system wide approach and it's hard to sort of disrupt. That creates really good economics for them, and I think there's a plenty of hetero for them to
continue to grow on an ongoing basis. I think it gives a little more stickiness than maybe some of their peers, even within the GPU space.
Interesting, Brian take us there for to software more broadly, we have seen the shift out of perhaps chip stocks semi conductors into the software space. Thinking how generative AI is going to make their valuation suddenly ever more inflated.
Is that the right way to go?
Yeah, So, in terms of the software names, we have seen so multiples really inflate and sort of expectations go up. In terms of the ability for these folks to sort of capture the economics from GENAI and things like that, I think we're still in early stages. I think we need to see where some of the impacts are going and where folks are able to sort of monetize the economics of how generative AI work. I think enterprise is a little bit slower to adopt and it's going to
take some time to get there. Where we see the impact more immediately is on the advertising space. So we are seeing that by using sort of GENAI, using this unstructured data to predict what people want to see, what people want to sort of buy in terms of the advertising and things along those lines, matching up that media content with those advertising components. That's an area where we're seeing real returns at this point in time. The economics
are actually going in that direction. So that's more of where our focus has been on a your to day basis and where we're positioned in the portfolio at the moment.
Interesting of course, we've seen Meta outperform on the back of that alphabet as well.
Brian, What was so interesting about what you said.
Earlier was that the fact that you have gone more neutral, and I'm interested as to therefore are you putting allocation into other AI tangential industry groups if it's not just all about semiconductors and software right now.
Yeah, So when I describe sort of the neutral posturing, I think that's the overall sort of exposure that you've seen in the portfolio has come down. We still have higher conviction calls in those select names like an Nvidia, like a Meta, even like a Microsoft, a little bit lesser extent in our portfolio. You see some fairly decent sizing in those anes. Lean knows is a tech show and a tech program that we're talking about, But we are seeing some more interesting areas and some of the
more boring areas of the economy as well. So consumer staples to some extent utilities, not necessarily because they're defensive by nature, but quite frankly because they're a little bit or less trend. The multiples look more attractive and you're getting a little bit more in a bank for your buck, so to speak. In terms of the returns, you get to a high single digit, low double digit type of return with a divid and eel on top of it
for a reasonable multiple. You don't have to worry about the higher So it's almost like a barbell approach, if you will, having some of these punchier names, some of these higher conviction names within the tech ecosystem where we are seeing the economics coming through, and then you're seeing some of these other things where we can get some really good quality compounding at a reasonable price.
Diversification key no matter who the audience is.
Brian Kersman, we thank you, GQG portfolio manager there, appreciate it. Meanwhile, let's just check in on super micro shares for a moment. Jumping earlier in the training session, we're now up just two percent.
But all of this after the battle.
Server makers said that the Nasdaq has granted the firm more time to become compliant with listing rules. Ultimately, this is all regarding whether or not they've got time to serve their teen filings.
Take whose filings.
We're seeing that the company has now been given till February the twenty fifth the file. It's financial report for the fiscal year ended June thirtieth alphabet, and it's revealing new details on the progress it's made in quantum computing. The exponential advancements are being done with a new Willow quantum chip that is helping overcome some of the biggest challenges in the field. Now the next step is of course coming up with real world use for all the
theoretical power. Here to talk about all of it, hartman Naven here's the vice president of Engineering at Google as well as a founder and manager of the Quantum Artificial Intelligence Lab, And the biggest challenge thus far has been.
Ultimately error correction. Can you just talk us through what you have just achieved.
Yeah, The biggest news for today is that we developed a new very high quality quantum ship and this enabled to break through computations. And one is an error correction where we showed for the first time that as we use more cubits, the error rate comes down, and it
comes down exponentially. The second important achievement breakthrough achievement, is that we did benchmark computation took just five minutes on our new chip that would take the top supercomputer ten septillion years to perform, so ten septillion audience may not know that's one with twenty five zero. So it's a mind bogglingly long time and it.
Took five minutes.
What I want to understand is what this benchmark test is benchmark random circuit sampling?
What does this prove?
Yes, So this benchmark problem we often say, it's not a problem that people on mainstream have yet, but it's a suitable benchmark to compare different quantum processors to each other, or to compare quantum processors quantum chips against classical computers.
What's so mind boggling about quantum more generally is that we have been talking about it for decades, but it always feels another five, another ten years off.
Is it different this time? Hartlett?
Yeah, Queen computing is definitely not that field. There's a steady progress, and our new chips that we just released a Willow will form the basis to start doing useful computations that will enable or solve problems that humankind has.
Let's talk about those problems.
Then everyone immediately goes to healthcare drug discovery. Is that the most obvious place with which this sort of computing is going to be helpful.
So the well understood killer application of Queen computers is to model systems where quantum effects are important, and that
is more often the case than you may think. For example, if you want to understand how drugs pharmaceuticals bind to cells, or if you want to design a nuclear fusion reactor or something as mundane as improving the batteries for an electric are all these engineering challenges involve quantum problems, and their quantum processes are just the tool of choice to solve those problems.
Put it in the perspective of generative AI, the hype that our audience that we have had over the past couple of years.
What does quantum mean for that? Is it?
Is it superior even in its effects versus generative AI, and does itself the same issues in terms of energy and infrastructure.
I wouldn't compare it in those terms. AI as well as quantum computing will be the most transformative technologies of our time. But there's a lot of cross fertilization between AI and quan computing. So AI can help work for quantum ships to work better and vice versas. There are many key computational tasks in AI where a quantum ship will just be the tool of choice to handle laws.
It's a phenomenal step.
Please come back as you start to apply the significance of this computing. Heartment name and he's the VP of Engineering at Google and founder of the Quantum Malt Official Intelligence Lab.
Meanwhile, coming up, we're going to.
Be discussing the limits of power grids and how they're running up against the ambitions of both Big Tech and Wall Street when it comes to generator of AI. What we're just finishing on conversation there on. Meanwhile, just check
in on some key stories today. Comcast one of those, off by seven percent, key drops on the SMP at the moment and the Nasdaq shares sliding, and this after the Comcast Cable president's CEO David Watson is saying is projects broadband subscribing losses and more than one hundred thousand in the fourth quarter, hurricans Helene and Milton causing around
ten thousand broad band losses. We're also looking at Vivendi Big News out of France, as this company does look to break itself apart, saying it's very likely though it would drop out of the CAC forty after it did indeed approve that three spin off listing December the sixth, Steek investors approving that and plans spin off of three multi billion euro units.
This is bluembg technology time now for talking tech.
First up, Hello Fresh, But it's facing allegations that one of its facilities in Illinois used migrant teen labor chars fell after ABC News reported it is under investigation by the US Labor Department along with a staffing agency that hired employees for the facility, plus Finance Holding CEO Richard Teng told Bloomberg that quote, the future is bright for crypto and encouraging other countries to follow the lead in the US just.
Take a listen.
Yeah, Now, very crypto friendly president in the States and extremely smart strategy appointing AI in crypto za on that front because this tool represents the most innovative technology for the future.
And Jack Maher made a rare public appearance Sunday to Mark and Group's twentieth anniversary, spoke optimistically about the future of the company while acknowledging its challenges and also the hype around the company's AI powered products. Let's just talk about AI a little bit more because Blackstone has been big data center investor and its ambitions are huge, but
not everyone is into it. After it bought data center developer QTS in twenty twenty one, it's turned it into a major profit driver for the firm.
But around Fairttville, Georgia.
The data center has stirred discord in the community over its unprecedented power needs. No most Josh Saul is here with more to deliver. This sort of infrastructure impacts real people, real citizens', real ground.
Yes, people in Fairville were unhappy when the local power company came around and started knocking on the door saying they wanted to buy easements. Basically wanted to run big transmission lines through their yards. And that's because these data centers take so much power. The one that QTS is building in Georgia will take about as much power as a million horns.
Wow, what does this mean in terms of scaling that across different states, different towns, Because there's not only just one data center in.
Georgia right now.
Exactly, Georgia isn't even one of the hotspots. It's not. It's not data center Alley, it's not it's not in Arizona. So it means that there'll be more and more of this more power infrastructure being built all over the US and people unhappy when power lines runs run across. But at the same time, data centers in AI we all use all the time, so there's certainly no indication that it's going to slow down.
So is there a price point or is there just money recompense what happens?
It seems like pretty much all the systems are set up for more data centers to get built faster and faster. Power power companies have a lot of power sorry to build transmission lines across in order to provide electricity, So it seems like most of our systems and most of the profit and in centers are set up to have more data centers and more transmission lines at a pretty rapid pace and.
More discord perhaps among communities. It's great reporting. I urge you to go and read the story in full.
Welcome back to Blue Megtechnology and Karen Hide in New York.
As the course of the show continues, we've actually seen a build up in risk a version surrounding tech. At the moment, we're off by seven tenths of a percent all fixation on the CPI print that inflationary print here on Wednesday in the United States. What does that mean for FED policy going forward? What about the geopolitical risks that are currently affecting in video for example, once again a new probe being announced by China that tip for tach continues to build anxiety.
We're seeing though, Crypto off by about two percent.
No, we're still in a ninety eight thousand level close to that one hundred, but then too seeing a little bit of a sell off as we get out of those riskier assets. Move on to some of the individual movers that I want to shine a light on. I mean, PDD don't remember there is some optimism, particularly around in China and its own monetary policy, fiscal policy stimulus, some of the most positive that we've seen in more than
a decade. According to Morgan Stanley, we're up some eleven percent as Chinese names do well off the.
Hints coming from the politboro.
We're looking at work Day up six percent this as we get new announcements of who and who is in and out of the next S.
And P five hundred.
It's a real and we're seeing Workday software company up six percent because it will make the S and p five hundred everyone, or rather I hope app love and it's Investibatis thought it might, but it's down fourteen percent as it doesn't make the cut. Meanwhile, let's just talk about Reddit as well. Currently testing a new AI powered chatbot called Reddit Answers to help users find information and surface discussions from across the platform's forums. That's why I
am Bluemokes Asia Council. What's so interesting is I feel as a user, you and I use Generator AI of Googles. I often get Reddit citations and I'm being pushed to Reddit more and more. But this is about keeping people within the platform absolutely.
Like you said, right, you search on Google and you end up on Reddit. Sometimes I search Google specifically, so if I'm trying to find la versus San Francisco, I might search for that and then add Reddit at the end, and that's how I find stuff on the site. Because sometimes on Reddit site it can be a little bit difficult to find things. They have like one hundred thousand communities, billions of posts, and so with this new chatbot, you can just search on the Reddit site and find all
the things that you're looking for. It or give you a summary or give you links, and it just makes the experience a lot easier.
What's so interesting is Reddit, of course have been signing deals with generative AI companies Google for example, and getting money for its own website and data to be used by these generative AI large language models.
What then are they doing in terms of their own lms to build its products? Are they agnostic? Are they using one or a couple?
They're using a few, so they have their own models. They also use models from Open AI and Google. So they have really interesting partnerships with these companies where they're using their large language models. But then, like we mentioned, if you go on Google and you find Reddit results, that's because of a partnership that they have with Google that allows Reddit posts to appear in Google searches. So
it's a mixture of all those different things. But they're definitely building their own models.
Internally, and then they're using some from some of these other companies, becoming evan more integral to the business model generator of aiish accounts. Great to have me, thank you.
Now let's just stick with social media a little bit more because TikTok's Chinese parent company, bite Dance now faces of course a ban in the US next month as a result of a federal appeals court decision Friday, But the ruling has sparked opposition from civil liberties groups and users, with only thirty two percent in fact of US adults supporting the ban according to a recent Pew survey. Let's bring in Annapam Chandra is professor of law at Georgetown University.
And what's so interesting is this is of course ban or divest. You have written at length prior to this talking about some of the legal issues, perhaps with the government arguing, highlighting in particular, two key sentences in the briefing to the DC circuit that you thought basically cast doubt on the national security arguments.
Didn't you just go through them for us?
Sure?
So, I think some of the key issues in the case revolve around whether or not there is in fact national security risk from the app, and the nationaleus risk, as the government tells us, is that the Chinese government might manipulate the app to push Chinese propaganda, or that
it might manipulate the app to surveil Americans. And in order to avoid this, the United States government has negotiated has been negotiated for the last handful of years with TikTok to kind of locate the data entirely within Texas essentially and also put all these controls over that data. But the United States government has been dissatisfied with the level of protection. But the US government says that it has no information that there has in fact been any
Chinese government manipulation of the app. So it's all speculative, and that's part of the difficulty for the government in this case.
But is potential and speculation enough ultimately to argue that we're protecting citizens here exactly?
The Circuit Court of Appeals believed it was that the government had was uncomfortable, did not trust Bitedance, did not trust TikTok, and therefore could move to ban it from the country if it's so decided. And so I think that is in fact the question now that we'll be posed to the Supreme Court of the United States. Should the Supreme Court take the case.
Can you give us context ugus examples in the past where we've really seen court side with a government in this way around national security that even though it is theoretical in nature, it's important enough to overcome any well rights to free speech.
So this is a very unusual case. There's nothing that is on all fours with this case. The closest case involving foreign propaganda in the United States is a case from the nineteen sixties involving literally Chinese communist propaganda, and the Supreme Court unanimously in that case said Americans have a right to receive Chinese communist propaganda if they so want.
So.
There's not an ideal case. I think if cases around national security, like the Pentagon Papers case, where the US government said it's too dangerous for the New York Times to reveal the secret history of the Vietnam War, and the Supreme Court said, actually, no, we don't believe that it's not a kind of immediate risk that you are pointing to. And that's what the TikTok's argument is going to be to the Supreme Court.
Do you think that it's argument will carry weight if indeed it does get to the level of the Supreme Court.
Well, if it goes to the Supreme Court, I think the same question is going to be before those judges as was before the DC Circuit. Do you defer to the judgment of the political branches of Congress and the President when they insist that there is a national security risk and there's no other way to protect Americans than to ban the app.
What's so interesting is it feels as though perhaps the worries coming from the user base have diminished significantly, and as we're just saying just a third of US users or in the US population supports such a ban, So is there context as to how that might need to change.
I mean, you're no.
Marketing expert, but it almost feels as though the government needs to go out and make its case.
A little louder.
The government tried to make its case for the last six months. So the ban has been in place, has been you know, the law has been in place threatening this ban since April, and so since that time, we've seen the government say that China controls this app and therefore it's unsafe. But Americans have continued using the app, so they you know, Americans have decided that they don't feel unsafe despite the government's use. In fact, Donald Trump
started using the app. In fact, Joe Biden started using the app, Kamala Harris started using the app. Every politician is now using the app, despite it's the fact that it's apparently possibly prone to foreign manipulation, though the government again has said we have no evidence of that thus far.
January in the nineteenth.
Therefore it gets banned, it has to be sold during foresee that being the outcome.
Here, I think that's becoming closer and closer to the likely outcome that TikTok goes dark on January nineteenth.
And it's great to have some time with you. Thank you. Anamam Chandra is of Georgetown University Law Center.
Meanwhile, let's talk about a network of Facebook accounts posting more than forty one hundred political ads against Romania's pro EU presidential candidate while also promoting far right figures. Digital threat research groups reset tech and check First say the posts were.
Viewed by nearly two hundred million times.
Facebook's parent company Meta did not comment on the report, but says it has not seen any evidence of major incidents on its platforms in Romania. Now coming up, Lily Lyman underscore VC Managing Partner.
Is here with a look VC funding where it's heading next. In twenty twenty five, this Bloomberg technology.
Investment strategies of major multi billion dollar firms and then small specialized VC funds, Well, they're showing that venture the asset class is kind of bierfurcating.
Here heading into the new year.
According to Linny Lyman, who is managing partner at Underscore VC, joining us now from Boston and nearly the theory here is that you're getting two very different strategies, not both of particularly complementary.
That's right, Carolin, It's great to be here. Thanks for having me again. I'm Lily Lyman. I'm at Underscore BC. We are a community driven early stage venor from BC here in Boston. We invested the preceed and seed stages in the world of B to B software. In your questions, the right one. We're seeing the emergence of two very different strategies in venture, and it's bifurcating the market in
a way that almost looks like a barbell. On one hand, you have these big, multi billion dollar multi stage venture firms that our megafirms. They're really sort of financial institutions at this point, and I hear LPs refer to these as venture beta. On the other side of the spectrum, you have smaller funds, more specialized targeted strategies. That's where we at Underscore play and it's because our that's our belief of where you can still get venture alpha that
three to five even ten x return. What's happened over the last eighteen months or so, though, is we're seeing a heavy concentration of LP dollars going into the megafunds. So eighty percent of capital rais last year went to established managers of firm sizes over five hundred million, and the representation of these firms is increased, so it's gone from about two percent to twenty five percent in the
venture market. And that overrepresentations has a lot of implications for LPs, for managers and for founders.
Okay, let's talk about what means for onto school VC. Ultimately, you're going to see more consolidation aman among the seed the pre seed stage or actually do need the breadth of more focused funds, and it's actually in consolidation that you have in the middling.
I think what it means is for I think we're going to see, you know, more specialization at the earliest stages, so firms like ours that you need to really lean into differentiation and get to founders early and also back perhaps non consensus, non not obvious both founders and ideas
because that's how you can capture true alpha. What's happening with the multi stage strategy at the at the seed stage is that they play more of an index game and putting out a lot of a lot of checks and then backing the ones that are that are winners.
But the implications of that is that.
They're not always very pre sensitive in that and it can dilute the entire early stage class if you can't know counter that and and really dig in and go earliest and non consensus. So that's how we've been thinking about it in order to counteract some of the implications of the multi stage indexing model at seed stage.
It kind of takes me back to when Softbad first unveiled. There are one hundred billion dollar fund and everyone feeling that the vision FuMB was just going to give enormous amounts of money to individual founders or companies that sort of drown out the rest of the competition. Is that what happens or is it just more that it inflicts valuations. What is a real impact on those very early stage bets.
I think it can have multiple impacts. I think, on one hand, the indexing can impact valuations for everyone, and so it can actually dilute the returns across the board. And but on the other hand, if you can get in early, or if you can do you know, invest in sort of non consensus, I think you still can generate that.
That real alpha.
I think part of the implications are questions for founders as well. I think we're seeing founders think a lot about who do they bring around their table at which stages of company building. You know, in the in the market peak during the zerp era, there's a lot speed dating, there's a lot of capital that went out of the door very quickly, and then two years later we had a much tougher environment and it was hard for founders.
And so I think we're seeing founders, both new founders and sophisticated founders, think about, you know, what kind of investments and investors do they want around their table for each stage of company building, and thinking more about this question of alignment. You know, what does that check mean to that firm and how does that infer how they'll show up during the company company building process.
I'm assuming that most founders you're seeing are having to lean into generative AI, even if they are not an AI specific company.
But what does that mean, in terms of trying to.
Uncover the least covered areas or the particularly non consensus builders and founders you want to find.
We're certainly seeing a ton of opportunity in AI and and you know, over thirty percent of venture capital this past year went into AI companies, and we expect that number to increase next year. But what we're seeing is is companies that are AI native, both in their products that they're offering, but so in terms of how they're being built. I think one of the things that makes this time particularly exciting to be an investor at the earliest stages is companies are being built with a new model.
I think with a new capital structure you can do a lot more things more efficiently. Engineering can be much more efficient, sales and marketing can be much more efficient, and so I think there's a mentality of you do more with less, achieve more with less, and so in many ways, you know, outside of a certain bucket of types of investments like foundational models and infrastructure, I think where we invest a lot of the applied AI vertical AI applications, I actually think you can build pretty big
companies with a totally different capital structure given the increased efficiencies of building with AI itself.
How many of them are in Boston? Are you looking across the US?
We invest across the US, but we're very bullish on Boston. So over half of our capital is deployed here here in Boston. And it's because this is an ecosystem that continuously produces the top talent in the world. It continuously produces some of the top research and development the world, and increasing you know, it consistently solves really hard problems, so things like healthcare and biotech and life sciences and
financial services, and so cybersecurity and energy and climate. So you know, these three factors are you know, are part of what gets us very excited to invest in the bus and ecosystem, particularly in this age of applied.
Ailey Lyman, great to have you, managing partner of Underscore VC, Wishing well for the rest of the year. Meanwhile, Elsewhere and VC, a startup founded by the former lead researcher of Open AI, is raised forty million dollars in funding.
Waveforms AI.
It makes AI audio software that improves verbal interactions with machines, and is one of several AI companies developing.
More human length voice features. Bloomberg's Rachel Mets is here with more. It's come out of stealth.
There's only five people there, but it's got quite a head evaluation already.
Yeah, this is It's still a pretty small company. They don't have a demo to share publicly yet, but they are working on software to improve the kind of interactions that people have with computers when we're speaking to computers.
And this is all around Alexis Kono, who was very senior at open Ai. So I assume that even though small and without a demo, people are betting on him his expertise in his background.
Yeah, he has quite a long tale of experience working on voice computer human interactions and he was pretty instrumental in helping Opening Eye build its advanced voice mode. This is the more recent version of the voice mode that works with chat GPT that is meant to feel more lifelike than it had in the past, more feeling like you're having a conversation with an actual person than with a computer business model.
I mean the fact that we don't have a demo, but ultimately, how is this company going to be returning value to its vcs?
That is a great question. What they told me is they are going to be releasing at some point products that are both B to B and also consumer oriented. So you might imagine something like an app perhaps that would be for consumers from the company to kind of give people a sense of what their technology is and how it works. But then also perhaps they might work with other companies to let other companies use their software as well.
And the San Francisco based yes, that is true. They are based in San Francisco.
Rachel Matz all things open ai and ex open ai.
We appreciate it, thank you very much.
Indeed, Oracle stock having its best year since nineteen ninety nine. It's all thanks to the momentum of its cloud business. We'll find out if that momentum will continue when the company releases its earnings today after the closing bell.
Luberg's Brodie Ford with a preview. I mean, what an extraordinary chart.
It's just done so well because people are now like, oh, the cloud thing, it's actually relatively doing well compared to competitors.
There were many years that people would make jokes to me about Oracle's cloud about how we know, will this ever actually be a serious player, And within the last two years, the answer has become yes, right, And a large part of that is because the AI workloads are so demanding that the traditional giants like AWS and Azure just don't have the capacity, right, And so it's become that Oracle's cloud is seriously taken as the kind of fourth hyperscaler, and it's been able to grow in such
an accelerated way that very few other software companies can you know, compete with.
It's got some I wouldn't call it a key Man risk, but certainly I'm talking about Uber as a client, but also TikTok, and we've been talking a lot about some concerns around the deal around TikTok.
Absolutely right. I mean, yeah, we saw the court ruling that the there's increased odds that TikTok could go ahead and go poof, But there is you know, at the end of the day, if anybody buys TikTok, the odds that you say, hey, let's go ahead and switch out
our cloud infrastructure. Nobody wants to do that, right, I mean, so it is a risk for Oracle, But you know, when TikTok was one of their only marque customers two years ago for OCI, it was a bigger deal today, they have a lot of customers, and I think the risk isn't quite as acute as it once was.
What about other things in infrastructure and cloud provision, i mean software, other services.
What else are they managing to do well on?
Yeah.
Well, one that's really interesting is that for a long time they really tried to get you to run their key iconic database software on prem and kind of control that. And they finally said, you know what, you could run
it on Azure, you could run it on AWS. And that's kind of been a pretty big exciting thing for investors that you know, a lot of the world is on AWS or Azure and they want to use the Oracle database and so being able to kind of update that customer segment, you know, breathe some growth into the database segment, which you know dates back to the late seventies. That is another thing that's been exciting folks about a Oracle.
But a lot of it is probably priced in when you're looking at an eighty percent run up and the shares. So what do you tend to hear in these calls post earnings.
Oh god, we're building data centers across the world, you know, no one's ever seen a data center build out like this, right, I mean that's.
The general energy informative. Yes, absolutely, I.
Mean the amount of hype right now about the AI fueled data center buildout is massive, right. You see you sat pricing the shares. You know they are near an all time high. And so the question is so much that how quickly are they going to be able to convert demand into actually offering these services, because you know they just like Microsoft and Amazon, they can't get these centers up quick enough. They can't get enough chips to deal with the demand.
Well, despite the run up, they've got twenty five buys, fifteen holds and not a single cell rating.
Bodie Ford, all things are coole.
We'll be checking in on him tomorrow, I'm sure, after those earning drop. But meanwhile, that does it for this addition of Blomberg technology. You don't want to forget a podcast find out on the terminal as well as online on Apple, Spotify, and iHeart this is Bloomberg technology.