From Mahart.
We're Innovation of Money and Power co line in Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hyde and Ed Love Love.
Live from New York and San Francisco. This is Bloomberg Technology coming up. China Tech stocks on a tear after Beijing's push to boost growth.
And the CHIPSAC gets a boost too with a bill headed to Biden's desk that cuts red tape.
And we discuss all things MNA, the City Group's head of Tech Deals. But first let's check in on these markets, and we start with the move of the day. Ed, it is China Stocks, it is China Tech Stocks, and we shine a light on the Golden Dragon Index. Here we are up more than six percent. What does that mean? It is the biggest move in more than a year, and we're up training at the highest level in more
than three months. Stimulus to the Chinese economy. It helps some of the key names that you're watching.
Yeah, and understandably those two key names at Ali BARBERANJD dot com e commerce focus names, but also multifaceted tech companies. Actually two of the names on the index in positive territory. Year to date, many of them are not. We will go to our reporter later in the hour to talk about the impact of stimulus on China tech. I'm also looking at chip stocks at the index level. The socks is up for a second day so far this week.
Intel what might happen to it is dominating headlines. But there's also some newscare about progress i'd say about onshoring the industry here in the United States. Bring us that story.
Yeah, let's dive in.
Because the US House approved legislation that would exempt some chip manufacturing projects from federal permitting requirements. It's a bid to speed up the buildout of the US semiconductor industry from moos. Mackenzie Hawkins joins us. Now, so what they don't have to take certain environmental.
Boxes, right, So, whenever our projects get money from the federal government in excess of two thousand dollars, which every chip company that's getting money from the Biden administration is getting well north of that, they have to go through the National Environmental Policy Act permitting process, which basically requires all federal agencies to review the environmental impact of their major actions and also opens up projects to significant litigation.
There's been concern in the chip industry from companies like Intel and Samsung and Taiwan Sumi connecting manufacturing company, that this could produce months or even years of delays on projects that the companies and the Biden administration have said are critical to national security. So the bill that the House passed yesterday, it's passed the Senate last year, so it's going to Biden's desk, would exempt some of those
projects from federal environmental review. They'd still have to go through state local permitting processes, which companies say can be a headache. Environmental groups say are bedrock climate law. But this is a significant red tape cuttake at the federal level.
Mac.
What you do so well for our audience around the world is that there's billions of dollars coming from the Chips Act, and lots of names on paper sound to benefit. But building a fab takes a long time and it takes all that money. Is there any evidence that actually something is started in America, that there's some infrastructure popping up around the place.
So we've seen more money put into chip factory construction in the past four years, kind of leading up to the package of.
The chip stack.
When folks thought Hey, this subs package might be coming, and of course after its enactment and during its implementation then we saw in the two decades before that. So companies are absolutely committing real money to these construction projects, but they also need to wait and see market conditions before they decide when and how and at what level
to fully build out their projects. You see, companies make commitments to one fab or two fabs, but they have sites that could accommodate eight and that of course depends on customer demand. But in terms of the construction process,
that's where the permitting stuff really comes into play. And so for companies that have been waiting to secure environmental permits or have been going through that process alongside actually putting shovels in the ground, this could be a really big deal in giving them confidence of their construction timelines for projects of that in many cases are already well underway.
Bloomberg's Mackenzie Hawkins with the latest and the flow of dollars from the CHIPSAC Thank you very much now, As misquite McKenzie discussed, Intel is one of the chip companies that's pledged to invest billions into US chip capacity. But the top story for this industry right now is reports that rival Qualcomm has approached Intel over a friendly takeover, and Bloomberg reporting that money manager Apollos offered billions of dollars to Intel in an equity like investment.
The stage is set.
What happens next?
Let's discuss with Phil Dury, head of Technology and Communications Investment Banking at City Group. When I woke up on Monday morning, I was still recovering from the weekend where I was recovering from Friday. In a headline where one of the biggest chip makers, Qualcomm, it's reported we're going for Intel. Well, in this environment, does that deal happen? Well, you probably won't be surprised that. I'm not going to
comment specifically on the deal. What I would say Intel has a storied history dating back to nineteen sixty eight.
They've got a.
Collection of phenomenal assets. The company is clearly going through a transformation. Pat and his team have been pretty clear in the plans that they have outlined, including some significant
CAPEX reduction. Well I would say is I'm not surprised that there's speculation around a number of interested parties, whether that be strategic or whether that be private equity who is looking to invest quite meaningfully across a whole artificial intelligence ecosystem, which we've already seen, and we've already seen Apollo obviously work with Intel.
As well.
Island that neither Intel nor qualcom commented on that reporting. And the other piece of reporting was Apollo, which has an existing relationship with Intel and against Strategic in the sense that they had co invested in a specific project. Why is an Intel attractive to a name like Apollo. It is a duration bet. It's infrastructure, you know, in the world of AI, it's building something physical and waiting for the payoff later.
Yeah.
Look, I think this is long term generational investment. Funds like Apollo take and extremely long term view beyond the frankly, the more of a short term nature of the public market. And when we look at M and A and the trends that we've seen over the last year, and MNA activity is up quite meaningfully off two very low years in twenty twenty two and twenty twenty three, and we're seeing strategics much more active. Right City advised on AMD
and ZT Systems. We advised on IBM and Hashi Corp. So not as transformational necessarily as intel as we're talking about, but we're definitely seeing strategic be more proactive as it relates to growth vertical adjacencies. Where we've seen public equity, most private equity, most activia today is on dislocated public market valuations. What we haven't seen so far is the huge number of private companies with high watermark valuations in
twenty twenty one starting to come to market. But time results in valuation compounding, and that's where we do have high expectations for twenty twenty five and twenty twenty six, and it's already happening.
Phil Today news of one of the biggest take privates in the software area.
We've got Blackstone.
Vista Equity making an eight billion dollar take private offer to a company called Smartsheet. Is that the sort of software long term revenue that they want to be digging into. Where do you see other opportunities in the take private field?
I think, Caroin, that's exactly spot on. We anticipate that we'll see more of this, you know, I think that artificial intelligence embedded on two years of data points in enterprise software is going to start to become really, really interesting. When we think about the first quarter of this year, the AI investment boom, if you will, focused on hardware, focused on chips where and actually we saw weakness in software. That weakness driven by a diversion of enterprise funds towards AI.
But now we're starting to look forward. We've got more data points and we're starting to see a pickup an activity for enterprise software with embedded AI and how that can really be a catalyst for enterprise. So I think you're spot on. I think we'll see a lot more of this in twenty twenty five and twenty six, and we'll start to see that private supply come to market as well, which is held off for now because companies were very well capitalized. Private equity hasn't had to do anything.
But now there is some pressure around DPI, and I think we'll see a more vibrant cell side as well as an active byside that.
Sort of pigeonholes the positive side of making deals and taking private there's the negative side of stressed assets.
I mean almost Intel might be that story.
But we're looking today at Liberty Broadband. Of course, key Billion m Malone trying to place together some of his stressed streaming and cable assets.
I'm looking at Liberty Broadband.
And Charter Communications seemingly getting towards some sort of merger deal.
Here.
I'm going to see more of that mergers because they have to to survive because of industry pressure.
I think you'll see combinations for sure. I also think you'll see you'll see companies looking to carve and split and break out very valuable assets as well.
There's no doubt we're in.
A moment of time driven by AI, which is causing corporations to look and reflect about how they're going to crystallize and maximize the valuation for their companies. That can result in adjacent combinations, but it can also result in illumination of value through carve outs through split offs. You know, we've not talked about activism, but you know, we think this will be a theme that activists will focus on
over the next couple of years as well. We're definitely going to go through change, and we're going to go through change through a greater sense of certainty. On the geopolitical this year has been a year of transition, more elections than we've ever seen in the past. Obviously, we've got a big one coming up. We will have a lot greater certainty on both the macro and the geopolitical
when we get into twenty five and twenty six. So yeah, I believe we're going to see more activity for a host of reasons.
You mentioned AMD and ZT. What was the other one that you mentioned that you advised on.
IBM and Hashiko?
What is unique to both of those as they got done? And so I know you won't comment on Intel and Quilcom the idea of but in the context of what happens in November antitrust, you know, in this environment, do deals of that scale on paper, Intel ONQUO proceed.
Well, the data is going to show a mixed bag of results, right. We also advised on the Broadcom VMware deal which went through. Obviously Microsoft Activision went through, but
there are examples of deals that haven't gone through. What it means is just look, there's a lot of focus, a lot of preparedness that's going on early on with advisors and corporations in terms of how certain can we be with regard to global antitrust decisions, cities role positioned there, we're operating one hundred and sixty countries.
It gives us a good.
Global spotlight on how regulatory bodies are going to react.
But you're right.
All you can do is building contingencies early on in case deals break. But it can be a distraction when you know MNA is announced and it takes twelve, eighteen, twenty four months to complete.
Sometimes the lawyers for is when Phil Drury, thank you had a Technologogy Communications investment banking City Group coming up. Roku remains loyal to the hardware that put the company on the map when the company's streaming ambitions then, and.
I actually want to go back to Liberty Broadband. We mentioned it in that conversation, but the specifics are that Liberty went back to Charter with a counter offer, and that's kind of what's pushing up the shares twenty seven percent.
I'd also point out.
Like it's a big move, but Liberty is a company the carry that you also pointed out has been under a brid of pressure, the stockdown significantly over a period of time. This deal pretty dry one actually in truth, but it's one the market's paying attention this morning. This is Bloomberg Technology. Roku says the company remains quote very committed to its set top boxes as it veils a
new faster version of Roku Ultra streaming box. This even is the electronics industry shifts to smart TVs with built in streaming tech For more Bloomberg Smart German joins us. Now, I find this story so interesting for two reasons. I have a Roku TV still believe it or not, alongside the Samsung Smart TV. But that sort of set top box is such a small part of their business, like they're keeping it going.
Why, Yeah, the set top box is a very interesting thing for Roku. Right, that is their namesake, that is how they made their money, that is how they developed into a brand. Now for them, it's two things. One, it's all about content, that's their platform business. Two it's all about integration of the Roku operating system into TVs you buy off the shelf at Target, at best Spy, at Amazon, you name it.
But the set top box is still interesting for them, right.
They don't make a ton of money off these things. They cap out at one hundred dollars per piece and their money losers, but they believe it brings content which they're making a lot of money off of, including from advertising, into more people's homes. And it's a lot cheaper for consumers to get into the Roku experience, to get into the smart TV experience if they have an older TV by buying one of these hunred dollar boxes versus going
out and buying a new several hundred dollars TV. Right, there's a lot of overlap between the experience you get from a set top box and a smart TV. One just requires you to buy the whole TV, the other requires you to just plug a box into your hdmiport.
We're looking at one year chart of Roku. We now moved to an interday, but it has been under pressure. The earnings haven't been pleasing investors.
Is this part of drumming up support from the investor.
Base they've been suffering.
I don't think the investor base is entirely happy or fixated on the set top box business. I think if you're investing in Roku at this point, it's because of the content business, the advertising, the platform, the integration into smart TVs and other products. This is a bit of moving away from that focus that I think investors are wanting to see. But at the same time, this is a cheap way to bring more people into the ecosystem
and gather more support for its platform and more users there. Right, the majority of sales at this point are via first party and third partiesmar our TVs. But adding more people to the user base, more people that can be exposed to Roku content, is not necessarily a bad thing. Just to hope for investors is this doesn't take away from the core competency that is the thing actually making the company money.
Marc German, We thank you. That's about Google now.
It says it has seen faster progress in artificial intelligence as a result of a closer collaboration between its cloud
computing unit and its AI research lab. Google Cloud struct deals to weave its latest AI models into popular consumer products, sharing more than seventy five customer stories, one of which was the social app Snapchat, which we'll start using Google's generative AI model to help power Snapchat's AI chat Thot New Mags Asia accounts joins us for more to deal with open AI, but they started leaning more into Gemini.
It seems like yeah, so snap originally released their chatbot just last year and it started off using models from open Ai. As you mentioned, the reason they also started testing and using Gemini is because when you go on Snapchat, a lot of the time you're communicating through videos or images, and they felt like Gemini's models were really good at doing that and being able to do images, videos and texts or at the same time.
So that's why they started using Gemini as well.
Heicha.
I think I'm right and saying, you were at Snap the other day and you've kind of seen the latest gen of hardware from them, and this is heating up, Like meta, it was a surprise story that at least the ray bands and your interaction using a voice based AI assistant would take off. You know, I've had experience with it.
How real is this for Snap?
Like, do they really think this is going to be the future for them?
I think they do.
I mean they're spending a lot of money, right They are supposed to spend up to one point five billion dollars I believe this year, which is about half of their expenses on things like infrastructure.
To support all of these new tools.
If we're thinking about artificial intelligence, augmented reality through glasses, machine learning, all those sorts.
Of things, they're really doubling down on this.
So if you think about AI, it's not just a chatbot, but it's AI and the glasses as you mentioned, and it's AI obviously to rank and recommend content to create new experiences.
So they're really betting.
On this is a key part of the company and a key part of their future.
Bloombergsats accounts all across the Snap story.
Thank you very much, time now for talking tech.
First, up writing assistant software maker Grammarly is announced it's adding a new CFO and CTO bolstering the AI startups management now. According to Grammarly, both new executives actually assisted their previous.
Companies in the igo process.
Family is currently valued at thirteen billion dollars plus. Boeing when it bumps up its pay proposal to striking workers to thirty percent now that's sweetened from the twenty five percent rejected earlier this month, still less than the forty
percent sought by the workers' union. Boeing said the terms of the pay proposal are final and valid till the end of the day of September the twenty seventh, and TikTok will be shuttering its music service in November, ending an experiment to compete with Spotify and Apple that started back in twenty nineteen in a statement released TikTok Music will be shutting down on November the twenty eighth, and customer data will be deleted.
And what have you got?
Another news story, Elon Musk and his social platform X lost a legal fight over unpaid severance to a former Twitter employee who was laid off when Musk took over in twenty twenty two. Now remember back in July, X defeated a lawsuit alleging that at least five hundred million dollars in severance pay was owed to about six thousand laid off employees. Let's discuss with Bloomberg's multi Nayak In long story short about two thousand employees said that they
were short changed when they were let go. We spoke to some of them, like over the last couple of years. What are the specifics of this case.
So this is happening separate from the court proceeding, in that this is happening in arbitration behind closed doors. So this was a private arbitration proceeding. And as you said, there are more than two thousand employees who have brought complaints against the company, but they have proceeded in arbitration and are fighting against the company. So now we received actually last week, the first ruling in one of these arputuation proceedings and looks like it was a win for
the worker. And there are you know, thousands more of these complaints that will still be arbituated. But fifteen cases we know so far have been arbituated, and we're waiting for rulings in other cases as well.
How seismic is this one off ruling? Will it forceultimately for X to settle in a broader number?
Of course, it definitely is a good sign for the employees because you know, one win could lead to more wins, and that potentially allows their attorneys to you know, sit across the table with Twitter and Mask and say, hey, listen, we're winning all these cases. Maybe it's just easier if we just settle this and you know, get done with this dispute once and for all. So it's definitely a good positive sign. And you know, this is the first
of many cases. And now that you know we are seeing the first ruling being a positive one, it is possible that this sort of trend will continue for the other arbituation proceedings as well.
Multi if it's the first of many, would you take us into the sort of mystery world of technology severance disputes. There are many people interested in this, right the lawyers are incentivized to get their clients some pay. You know, I remember the early days. It must take over in just the chaos in some of the chat forums of what was happening.
What's it like covering these Well.
Yeah, so you know, this particular arbitation proceeding is happening closed doors. So unfortunately, I wish I could be a fly on the wall, but I can't. I'm not allowed to, you know, enter. But but just in talking to attorneys, these are very very sort of different from port proceedings in that, you know, the rules together, evidence, all of that tends to be a little different. But you know,
it's just very very private. We don't get to and even this memo that we got, you know, Kurt Wagner, our tech reporter who reported this story with me our sources, sheared memo and that's how we got to know about this ruling. So we were no unless the attorney sort of went to port to enforce the ruling. So yeah, so all of this happens closed doors. But in court,
you know, when we do have these disants. Of course, there's a lot of drama, and you know, if they go to trial, you get to see a lot of you know, inside information about what happened behind the scenes in terms of, you know, the chaos that happens behind the scenes at these companies and all the different players that sort of maybe need decisions that potentially you have heard the employees names the employees, could you know all to share how they feel about how they were.
Shortchy Multi, gotta go, Bloomberg's Multi, Nayak, Thank you. This is Bloomberg.
Welcome back to Bloomberg Technology. I'm Caroline Hyde in New.
York and I'm Ed Ludlow in San Francisco. If you're just joining us. One of the big stories in technology today is the US listed shares of Chinese technology companies. The news is the Chinese government coming with a big stimulus package to kickstart the economy. So you see e commerce names like JD dot Com, Ali Barber doing really well, but at the index level, then aw's that Golden Dragon index now on track for its best day since January
of twenty twenty three. Let's set out to Bloomberg News reporter Henry Wren, who's in London and covers China tech stocks, and some of these names have underperformed year to day. Recently, Henry, they've rebounded. But a big stimulus package that helps the Chinese economy will help some of China's tech sector as well.
Yeah.
Indeed, what we see today is Chinese authorities really made a concerted push to help boost the economy as well as stock markets. These stimulus measures can be seen in three buckets. One is providing more liquidity to the economy in terms of cutting rates, lowering banks reserve requirement racials. Second is about helping the housing market, including lowering the mortgage rates for existing mortgages. And the third part, which is probably the most eye catching part, is about providing
direct to liquidity support to the stock market. The Central Bank has pledged eight hundred billion remen bee of initial liquidity and it has said that it's con letering in terms of providing a stock stabilization fund. So all those measures putting together really help boost investor sentiment in terms of Chinese internet stocks that we've been seeing today.
Yes, Ed, why e commerce? Why those names j D and Ali Barba doing so well?
Henry, Yeah, because as we as we know that all those Chinese internet companies as well as those e commerce companies have been highly related to Chinese consumer spending, and we've been seeing them under quite heavy pressure recently given the Chinese economic slowdown.
We've been hearing.
Those companies executive talking about China's necro pressure being PDD, being JD, being Ali Baba for example. Ali Baba's e commerce business just screwed by single digit in the past quarter, as well as the Value Champion PDD for example, it was a stock market Darling, but in August it's issued a warning and said that growth has been slowing and
need to be investing more. Competition has become more intense, so we see the stocks really under pressure, and those Miles's pressure measures could be seen as the first step if the authority is getting more serious in terms of boosting the economy.
Henry, we know these companies so well here in the United States too. They have global pushes taming for example, how much are their revenues still so focused on China or how global is it becoming?
Yeah, it really depends on companies, right, So when we are talking about PDD for example, like it has a big global push in terms of expanding to US market European markets for its team will brand. However, for that international business, it's under pressure as well because the US government is having its new rules in terms of curbing those cross borders small packaged shipping as well. So the domestic market, the local market is really key for those companies.
Even though Ali Baba has its you know, international push as well, the local market is still key because the timo and talbail business for Alibaba for example, is still about two thirds of its revenue generation. So the local really matters. And what we've been seeing today in terms of the stimulus pressure, stimulus measures really helps the investor sentiment.
What's the next catalyst then, Henry, how much are people saying you can continue to buy?
On the fiscal side, I would say so, we've been seeing lots of measures on monetary side, for example, in terms of cutting rates, in terms of you know, lowering down payment ratios or cutting rates for existing mortgages.
But on the fiscal.
Side, it's people what really cares about because the problem with China's economy is not just about lack of liquidity in the economy. It's about you know, lack of consumer demand it's about a weak consumption among Chinese consumers. We have the national holidays coming up, and it's really about, you know, how to help Chinese consumers to buy more,
to shop more. So the focus for investor in next it's really about on the fiscal side, whether the fiscal more fiscal policies for or will come through us.
Well, Henry Wren, thank you very much. Indeed. Meanwhile, in the.
Political sphere, former President Donald Trump has been.
Discussing China, accusing the nation.
Of failing to honor a deal to buy fifty billion dollars worth in.
US agricultural experts.
Trump vowed to raise the matter with the Chinese president's Usinping. If the Republican nominee returns to the White House. Both Trump and Kamala harris A vowed to take a tough stance against.
Beijing ed Meanwhile, the UN General Assembly is in full swing in Manhattan, and China a key discussion for President Biden in his address that's going to read on where things stand with Bloomberg's National security reporter Nick Waddens and Nick. President Biden was speaking just ahead of this program starting. What did he say, particularly in the context of the things that we care about here, technology, AI and anything relating to national security.
Well, I mean, what you saw really was this sort of a valedictory address for President and Biden. A big thing he said was listen, don't cling to power. Sometimes you have to do what's right for your country, and remember that you serve the people, not yourself. So a bit of a shot across the bow there. It was interesting.
He did feature AI pretty prominently in his speech. It was mostly a look back, but really one of the few places where he actually looked forward was saying AI has a lot of promise, but they're in inherent dangers to it and essentially seeking a cautious approach. But you know, the big thing here, the message that he may not want to send but that is sort of inescapable, is the fact that he's going to be off the stage
literally and metaphorically in just a couple months. So there's not a lot he can say to look forward given the uncertainty around who's going to succeed him as president.
Let's talk about what therefore.
Kamala Harris has been saying in recent days it fundraises here in Manhattan as well about AI, I wanting to foster it around crypto And it's interesting it's not just world leaders in town. You know, Musk is in town, he says, getting an award from the Italians. There's also Sam Altman at an event with him last night, and he's speaking with Sextrey Blinkn about regulating AI.
So while are we hearing much more about.
The discourse of governance of artificial intelligence?
That's a really big theme this week, in part because what you've seen is Secretary General Guterris is basically saying, listen.
We are not able to make any progress.
And any of the issues that the UN was founded to help with, so peace and security. So what we're going to do is try to stake a claim on issues that matter for the future, AI and climate. But of course the big challenge there is the UN can say what it wants. It has no enforcement mechanisms. This will all have to come through national laws. In fact, it was one of the big things he did last week Guterres said, listen, we got to not use AI in military targeting.
This is just crucial.
But all the evidence we're getting is that countries with the ability to use AI in that way are doing so already. You're seeing a situation where the US and other countries is you, for example, are essentially disregarding these UN warnings and it is still just very early days.
Nick, you've been at this a long time, respectfully in China first and then DC. In your experience, what tangibly comes out of these weeks? I know a lot of tech CEOs, the meeting with world leaders, So what explains our audience the substance of it?
Right, So, I mean, the big thing on ANGA is you really should not focus on what's actually happening at the UN. There are speeches, you can get a sense of the mood, prevailing trends, things like that, But where you really see the action is on the sidelines, the bilateral meetings, the backroom deals, the hotel conversations. As Caroline mentioned,
Musk is here, Sam Altman is here. World leaders are going to swing states in the US after they're at the UN trying to sort of figure out get a sense for the horse race of what's going to happen in the future. So you may see some backroom conversation around a potential Ukraine peace plan that Zelenski's putting forward, conversations with Iran, stuff like that, But it's really not focusing on the un but looking at the networks that these leaders are trying to build out with tech titans
like Elon Musk and Sam Moltman. That's really where the action is.
Remax's National Security bringing us tech. We thank you. It's Nick Wadams coming up.
We dive into the world of AI investments with Kafaao Safar Adventures partner And what are you looking at?
So kind of break well, what you share is at Bank of New York Melon moving close. It's rolling out custody services for the bitcoin ether held by ETF clients. This after a review enabled the company to avoid treating the assets as a balance sheet liability.
This has been by technology.
Fractal Analytics is said to be considering filing for an IPO and as soon as November to raise five hundred million dollars. That's, according to sources. Known as India's first AI unicorn, The company is seeking evaluation with some three and a half billion dollars in a share sale. Discussions are going on at the moment and the size of the IPO and it's timing could change.
With ed there's certainly one to track. Okay, it's time for VC Spotlight and we will talk about investing in AI. Sapphire Adventures announced last summer their commitment to AI by investing more than one billion dollars in AI focused enterprise startups. Kathy Gaoer Safire Adventures joins US. Now one billion is a commitment. I guess the easiest place to start is how did that go and how did you go about deploying the capitol?
Yeah? Absolutely, First of all, great to be here.
Ed.
Sapphire Adventurers were focused on investing in B to B companies at the mid to late stage, so we're really looking for companies product market fit, are generating revenue and that are proven businesses with AI. There has been so much innovation and there's been waves of adoption.
So what we saw.
Really was in twenty twenty three it was a year of experimentation. This year twenty twenty four was a year of ROI validation and people actually starting to play with these tools and getting use out of it. And we believe that next year twenty twenty five will be the year of widespread enterprise adoption. Now that being said, we've been very active in twenty twenty four and have made several AI investments already.
I sent some sort of tension out there maybe between the bench capitalist and large tech companies that are making very similar investments or they're developing technology themselves. And one of your historic portfolio companies is MuleSoft. Bear with me, but I picked that casely because ultimately Salesforce went on to acquire mule Soft. It was an interesting exit, right, how do you find that next kind of mule Soft type company?
But in the AI context, I think.
This conversation is so interesting when we're talking about GENAI companies. Right, In many ways, the incumbents, whether Salesforce, Microsoft, Amazon, you name it, they are all actively investing in young AI startups because you're trying to ensure that their future will have AI in it. As an investor, what we look for closely are companies stand alone that we think are amazing businesses and can go all the way to IPO.
But we also consider other exit paths, including to M and A. So we pay a lot of attention to companies that we believe hold strategic real estate.
For many of the large tech players.
Kathy, what are the valuations like in this space that you're trying to put money to what you say, You've done a company of deals in twenty twenty four already, they hih.
That's a great question, Caroline. The short answer is yes. The reality is that AI is so consensus right now, which arguably means it's a really difficult time to invest because evaluations are so high. So if a perfect deal that means a perfect valuation. I think our approach and my approach at Sapphire is you have to take a
differentiate approach to investing. And because AI it's still in the early stages of manifestation into different types of companies, you have to take a leap of faith on some dimension. So for me, for example, the leap of faith that I'm taking, which is based again on data and research, is that industries that have historically been technology laggards in terms of adoption are now going to adopt technology in mass. So two examples are a lot of different verticals right
so manufacturing, construction, healthcare, legal. These are companies and industries that are still operating on pen and paper and on mainframe computers. And the second one is really small businesses, the backbone of the US. Over eighty percent of US businesses are companies under ten people that have historically not been able to research the latest and greatest when it comes to technology.
I love what you said before about the validation with Carney at the point where you have to validate the return on investment. I don't feel like we've had that yet, and I'm wondering whether you're seeing it in the startups you've backed and how you're measuring it.
Kathy, that's such an on point question, Caroline, I think we've already started that phase. I'll give you an example. Sapphire recently backed a lease AI. I know Mino was on the show a couple of weeks ago. That was a Series D company. What elise AI does is owns the entire conversation, end to end between a prospective tenant or tenant and a residential building. A lot of their customers are sophisticated residential real estate companies. They do a
lot of internal benchmarking. They don't just trust the lease to show their own benchmarks, They actually do it in house, and the data shows significant improvements in accuracy, significant improvements and actual results, including customer satisfaction.
Some of the news of late has been open AI's big primary at a very high valuation. Then reports about and fropic getting itself organized, and one report I spotted was that the minimum check for the open AI round is an examples, two hundred and fifty million dollars. What's the trickle down effect of that for you?
Can you explain that question a little bit?
Yeah, so everyone's clamoring to get into very small concentration of names, including through SPVs. Does that kind of open up the field for you to sort of have access to more startups where people aren't paying attention or is it just that you kind of have to say, oh, do I need to be involved in this round even if it's a stretch for me at growth stage?
Great question, And look, at the end of the day, as investors, it's our jobs to allocate capital in our fund construction, and that means thematically what we invest in. There's always going to be great deals out there, but we have to find the best use of our capital
based on our strategy. So I think it's a great thing for companies like Sapphire right other investors are busy chasing these mega deals in these ultra late stage companies, or they're going super super early HIGHPAI companies that may not have a lot of revenue. That leaves more greenfield for companies like Sapphire that again are focused on that mid to late stage company proven.
And by the way, it's not just Ai.
There's plenty of amazing companies out there that aren't Genai native companies.
And if more investors are looking only at Ai, I say, that's great for us.
Okay, name one that isn't to do.
With generat ai that has been exciting to be able to get into at least analyze, you know.
I think one interesting way to play the broader Genai strategy is to think about companies that are leveraging Genai for themselves.
So I'll give you an example.
Metabol which is a Sapphire portfolio company, is a software platform that allows clinical trials to be performed in a decentralized manner. It's not a gen ai native company, but they're actually actively using genai technology to vastly improve implementation time. So Medical is working with the largest life sciences companies in the world, and implementations can take a long time
because of the complexity. But now converting a thousand page trial document in a way that is automated and someone without technical expertise can set it up.
Is a game changer.
Kathy go aefave Inches, thanks so much for joining so much. Meanwhile, that AI is here to say, we know that and it can't happen without nuclear Apparently it's according to the Constellation Energy Ceoes Dominguez, these comments coming off to the company decided to reopen that nuclear reactor in Pennsylvania, with Microsoft agreeing to purchase the energy for two decades in order to.
Power the AI boom.
The Constellation CEO sat down living no Miskati Greefel yesterday's talk about the deal.
Just take a listen.
Earlier this year we started talking to Microsoft about it. We had partnered with Microsoft on different products before, so they made sense as a client. Of course they have the need, so.
The relationship was there, and of course we see the culmination of that now.
I'm curious.
I mean, when it comes to the nuclear industry, you have bipartisan support, you read a lot of academics and other thought pieces that nuclear just makes so much sense, But there's still that reputation cloud, if you want to call.
It, hanging over it.
I'm curious when you think about the industry now versus when you were spun out of Exelon in twenty twenty two.
How has it changed.
Oh god, it feels like ten years, right, it's really thirty one months that we've been And back then the thought was, you know, there wasn't going to be a catalyst. It's always one of these things where in retrospect you think the pieces are coming together. Electrification of the transportation sector, home heating industry. We're on shoring a lot of industry
now to deal with supply chain issues. But AI was the thing that just really drove the load projections to a point where you said, without nuclear it's not going to happen.
Let us head to the Bloomberg philad the piece Earthshot Prize, which is happening right now on the sidelines of.
The United Nations General Assembly.
Bloomberg's Alex Steel, David SASAA join us and it is all going on at the Plaza Hotel today.
Alex, I have to.
Say, this is quite a set up here at the Earthshot Summit at the Plaza Hotel. This is sponsored, as you mentioned, a co hosted by Bloomberg Philanthropy's, but the whole goal is about trailbasing solutions and innovators to help our planet. And later on today there's also going to be the Goal Business Forum, where you have Bloomberg Philanthropy's teaming up with the World Bank and the IMF to kind of go through some of the big topics of our time, and in that is most definitely.
Going to be AI and how to globally regulate that.
We heard from President Biden earlier at the UN talking about the AI security and how to help that conversation on a global level and rupport. We'll be speaking with Eric Shaftsper later on today, the President and CIO over at Google, and Damien just kind of got stuck in here, yeah, radio, but he kind of dug it.
He was into it.
Central Bank's ambassadors, heads of state. I mean, it's all happening here. And what's interesting is we're talking to people like the European Investment Bank, We're talking to the Monetary Authority of Singapore. We're getting a sense of how they're financing sustainable development, how they're financing climate change solutions. And it's really an unbelievable vibe here. Alex I'm just happy to be here.
Yeah, and everyone's really positive. Obviously, Guys in terms of the financing and the technology, but the real information kind of comes down on the ground, like can companies really make a return when they go green? And where and how did they do it? And what that long her from outlook w ends up being guys.
Money Talks, Bloomberg Z, Alex Steele, Damien Sasa loving the energy down there, Thank you so much. Meanwhile, that does it for this edition of Bloomberg Technology. Clearly some key conversations still coming up later today.
Ed.
Yeah, don't forget to recap on the podcast. You can find it on the terminal as well as online on Apples, Spotify, and iHeart. This is Bloomberg Technology.