From Bahart where Innovation, money and power Collie in Silicon Valley, Nbon.
This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
I'm Caroline Heinder Bloomswelta Quarters in New York and I'm Ed Ludlow in San Francisco.
This is Bloomberg Technology coming up.
Yet more earnings courage for you. Ahead will break down all you need to know about. Cisco is the largest makro of computer networking equipment, and it is tumbling after its numbers.
And we'll have more on Ali Barber's results as the e commerce giant falls after abruptly ending a planned spinoff of its cloud unit.
Details ahead class Apex.
It continues in San Francisco, tex CEO's They Dying with China's President will bring you the takeaways from the executive's dinner, but first let's check in on these markets. The takeaways are what a little bit of moon music shifting In terms of the rampant rally, we've seen NASAC off by some three tenths of percent on the day.
We actually had some pretty well.
Depressing, shall we say, macro economic data. But is that good news in terms of whether the federal Reserve will go in terms of interest rates, many feeling that the jobless claims on the rise, Many feeling that the factory output on the downward.
Well, all of.
That speaks to the fact that the federal Reserve cannot hike yet again, and indeed, maybe we'll see cuts in the second half of next year. We therefore see a bid coming into the bond market. We're off by some six basis points. Looking at Brent crude really down four point five percent, let's call it this. As we see the inventories build up. That's more of a signal of maybe cooling demand. What does that mean about global economic growth? Have a look at what's happening in terms of our
risk asset of choice. I'm looking at bitcoin and still we trade within this general thirty six thousand dollars level, but we're off by some three percent on the day.
And what if you've gone in terms of the micro.
Well, in the context of China, it's both the micro and the macro.
This is shares that Ali Barber.
The news is that they have decided not to spin off their cloud unit. Commentary is that they have been impacted by US technology ker export curbs. We're going to dig into that later in the program with our reporters on both the.
Macro and micro China.
For the ADRs of Ali Baba, the US listed shares on track for their biggest drop in more than a year. We'll get very specific in that later in the show. Here in the US, Cisco, that is the name that we are looking at. They gave this forecast for the fiscal second quarter ending in January that was well below street expectations. What Cisco said was, this is not macroeconomic
pressures or headwinds. They have big enterprise customers working through backlogs and networking equipment and that's why they're not ordering. But those orders should re accelerate. Do we buy what Chuck Robbins is saying?
Joining us now?
Pyper Sandler's senior research analyst, Jim Fish neutral rating on Cisco fifty dollars price target. I was reading your note and, as far as I can tell you, one of the few that basically is calling a downturn in this networking equipment market.
What was your takeaway?
Yeah, Caroline, ed great to chat with you again. It feels like it's been only about a month since we caught up on Cisco given the splug field. But look, I think there's we agreed and we don't agree at the same time with what Cisco's saying. Now our checks heading into this print and even some of its peers on Calendar like Arista and Juniper and F five and sort of the networking space overall, we started to see a downtick and sort of.
What enterprises we're looking to order.
And really the key theme I think for us heading into all these prints, including last night, was digestion.
That's the best word you can use.
You've had orders from twenty twenty one and twenty twenty two pushed into calendar twenty three, and you're just seeing that digestion of orders. And meanwhile, when budgets start to get tighter, networking tends to be the first thing that you try to run, hotter and squeeze as you can get away.
With it for some time. So we're a little bit skeptical that we could see.
At an acceleration again in product orders in their fiscal second half, especially when you start to think about budgets getting set for calendar twenty four roughly.
About now with a lot of CIOs and heads of it.
Jane you mentioned that the last time we were on we're talking about the Spunk deal. Does that, therefore thesis still make sense, the diversification not just hardware networking gear, but getting into the software, getting into sort of longer term payments from clients.
Absolutely, Caroline.
It's a great part of really why they need systems. I'm sorry, why why Cisco needs Splunk. And overall it will help with that recurring revenue piece. It'll remove the lumpiness of Cisco's current business. But at the end of the day, even with Splunk, you're still going to have the cyclicality that Cisco has to deal with, given that networking piece the biggest part of its business at this point.
Talk op AI a little bit.
I mean, they did seem to be saying that the appetite is there. They're building what a billion dollars of orders that they see in their line of sight. Is that enough to offset what we see is basically managed decline or managed digestion as you say, for the next few quarters.
Yeah, I mean, it's a nice narrative to have, But we did this kind of back to basics piece around networking, specifically switching and routing not too long ago.
And you dive deep into.
You know where could AI spending on switches be, essentially and you see estimates out there calling for about ten billion ish and even Chuck mentioned that last night, with seventy five percent of it expected to be on Ethernet as opposed to Navidio's Infinite Band being the.
Other roughly twenty five percent.
But even when you talk about, say ten percent of Cisco's switching business a few years from now being AI driven, that's a small part of Cisco's networking business. When you're talking about a thirty billion dollar plus networking business on its own.
You're talking about wide and wireless whatever, connects, devices, news data from a to be. But what jumped at me about your note versus others is the end customer we're talking about in Cisco's argument, big enterprise customers, right, not SMEs. And I kind of think of it like the pandemic. Right coming out of the pandemic, we all had an
excess of hand sanitizer and toilet paper. Bear with me, but it seems like a lot of these big enterprise companies they just have an excess of the networking and routing gear. Do you see that as evidence that that Chuck Robbins presented.
Yeah, no, that's definitely showing up in our customer conversations, and as Chuck also pointed out, it's also showing up with some of the largest channel partners in those conversations as well. So, look, you just have a glut of equipment sitting there that needs to be deployed, and I don't disagree it's going to take at least a couple
of quarters. And it's more of the concern for US is does this start to stem into the SMB commercial base as well, where that can be actually more macro sensitive as you think about moving ahead, And it doesn't really leave a whole lot of wiggle rooms still when you think about roughly thirty percent of their businesses that commercial line, and we've already seen struggles on the carrier side that started popping up earlier this year.
Cloud.
It depends a bit on your exposure to which hyperscaler, let's say, but overall, enterprise was essentially that last leg of the stool that was holding most of the space up and it just now you're starting to see that down cycle of networking really come about here. And specifically add to your comment, on wireless land. Keep in mind, this has been wireless land's been one of the strongest part of networking over the last year plus. And what
we're seeing is it's actually twofold one. You've gotten a lot of those access point up it's already and so Cisco Morocki for example, has really benefited been growing double digits for quite a while here. But secondly, when you look at why they needed to upgrade those access points, it's because of exactly what I'm sitting on right now with Zoom or in other cases Microsoft teams, where that sucks up so much bandwidth at all these campuses and
branches that you needed to upgrade those access points. And so now you've kind of gone through that, and those applications themselves are trying to reduce down their bandwidth by over twenty percent in the latest version, so you just haven't slow down in that space.
In particular, it's why I ask if attentions turned to SMBs, because loads of folks use SMBs as their kind of lead indicator for the health of an economy in this In this context, Jim Fish, Phypisandler seeing a research and this greates catch up.
Rocks by US sanctions.
Huawei unveiled a new smartphone in August with five G capabilities and a cutting edge process or. A teardown of the May sixty pro revealed the chip powering the device was produced by China's Smick. This raised questions about smick we s miic's capabilities and the effectiveness of US LED controls.
Check this out.
This at first glance is just a smartphone, but once you know what's inside, it becomes clear it's so much more than that.
So what really changed everybody's view of this device was what was at the heart of it, the microprocessor that was designed and manufactured in China.
It's at the center of tensions between the world's two biggest economies. The phone made by Chinese tech giant Huawei represents a breakthrough by Beijing as it tries to escape Washington's controls on its access to technology and establish a self sufficient chip industry. If those US controls had been successful, then a smartphone as advances this simply should not be possible without important key components.
China now is more capable than ever of building advanced technologies.
And it worried US officials, who are more concerned about advance chips going into military equipment than smartphones. It left them wondering how exactly did China do It.
Can catch that full documentary on the Bloomberg and on Bloomberg dot Com tonight five pm and indeed tomorrow on YouTube. Meanwhile, let's stay with the theme of China shares of Ali Baba actually slepping pretty hard after China's largest e commerce company called off a spinoff of its giant cloud business. But I mean, in fact, the US is tightening chip cubs. Of course, all of this links, but please to welcome
to the show. Henry ren over in London as well, Lee, who sat right next to me here and Henry, I start with you. It feels as though its first dividend just wasn't enough to offset the fact that now that some of the parts perhaps don't look quite so valuable.
Yes, indeed, so it's a double whammy situation for alibah Bau this quarter. So its core business of selling goods to Chinese consumers is not posting the exciting revenue that
we've been seeing for last quarter. But more importantly, as you line out that the company scrapped its plan to spin up its cloud unit, it's that before that it's going to relinquish its control of the cloud unit and send out the cloud unit as dividend to shareholders, but not materializing for now because the company called off the plan, although the company did issue a cash dividend, but it's seen as just a minor offset to the disappointment because
investors were really expecting that the company would issue this special dividend after the spinoff, and as we know that the cloud is the second biggest segment for Ali Baba, So it's definitely a day of disappointment, a double whamy situation for Ali Baba Shaholders Today team.
The timing of this is just extraordinary. We're going to go to our reporter at APEC later in the show, but you know, a centerpiece of what happened last night was President g and Biden talking about kind of closer economic cooperation while Biden saying we're going to stay competitive, is about what are we learning through these earnings out of Ali Baba about the health of the Chinese economy right now.
So this definitely doesn't look good because, as Henry said, many were really banking on the breakup of the six Baby Baba's optimism, we're surrounding it. They were saying that Beijing probably has the approve, Beijing probably gave its approval signal because this wouldn't happen. That many dubbed it as the most radical change in history. And it even looks worse because they cited the US restrictions on as one of the reasons why they weren't going to continue this.
And as we know, President Biden and Presidency has met their first time in a one year, and that's as relations between the two nations are there. I say, at the all time look. Oh and while there were no really big major headlines, there were small wins, but no one was really expecting a major concession. And some analysts told me that the fact that this meeting is happening is more than enough because the optics is important. But to your point, a lot of investors were really disappointed.
As Henry said, it's a big disappointment for everyone. And if you look at Alibaba ADRs, they're now falling to the most in more than one year.
And I think it's notable given that actually we saw JD manage to be, we saw ten Cent managed to be even with some stiff competition coming from the social apps coming in and the smaller businesses as well. Does this really reflect a consumer under pressure or.
Does this also reflect competition. I think it's both, but.
It's really more of the tepid demand that we're seeing. China hasn't seen the big recovery that they were poping on and that global investors are really really banking on after the COVID pandemic, and you could see that Presidencies even trying his best. He visited the Central Bank of China just a few weeks back to show that, you know, he's on top of this, but so far, and we also have foreign investments in China, but they're really all time low. So it's really kind of a complex picture.
But it's really not a monolith. As you said, ten Cent is doing well, JD is doing well at least based on last month, but so far, for now, optimism is still not evident in Chinese.
Investors always think about Ali Barbars like analogous with Amazon. Right, you got your e commerce component and then the news today being the cloud component, and Henry you were writing this morning's street rap. Vali Barber, what's the kind of cell side specific takeaway? From the numbers, but also the different parts of the bids.
Yeah, so from the numbers perspective, the e commerce part of the business is still occupying more than fifty percent of Ali Baba's core revenue.
However that part is slowing.
So we saw some revival trends in the last quarter, which shows that Alibaba might be again its momentum again when its competitors like pindle Do or the price aggressor as well as live streaming e commerce platforms like going like quite a show, or like entering the space and grabbing the market share. But it's not it's not happening once again this quarter because the sales has been a
bit disappointing and for analysts it's a disappointment. And on the other hand, as we said, it's now scrapping it's planned to spin off the cloud unit. It's also scrapping its plan to IPO, it's.
Freshupul, which is a grocery shipping chain.
It's another disappointment for analysts as FOP so a lot of things to digest.
FULI Barbi inverstrously.
And as we pointed out, that disappointment reflected in shares. The ADRs down nine percent biggest dropping more than a year, and the stock trading at its lowest level since May. Bloomberg's Henry Ren and Isabel Lee the dream team back together.
Thank you now coming up.
APEC continues here in San Francisco as China's president dines with the CEOs of some pretty major firms. We're gonna bring you all those details next. This is Bloomberg Technology. Okay, time for talking tech and first up. Shares of Hello Fresh falling today after the mailkit delivery company shocked investors by cutting its twenty twenty three e bit dar Guide and HelloFresh was down as much as a record twenty four percent eraising nearly seven hundred and eighty million dollars
of market value. The changes to it outlook come just three weeks after it reaffirmed its targets, and Lenovo says it expects to see revenue growth this quarter generated from personal computer demand in China that the world's largest PC maker says it's investing a lot of money into AI optimized devices, something that CEO says could drive another round of PC replacement. Plus, semiconductor firm Sapien is unveiling its
latest artificial intelligence chip for Data cent. It's the startup backs by South Korean firm sk Group is ramping up its offering to compete with.
The likes of Nvidia and others.
Sapient will be conducting testing for major customers before it begins mass production in the first half of next year.
Carrot, Well, let's turn attention to what's happening in your city at the moment.
Ed.
Of course, APEC underwearing way in San Francisco, and Arey Horden has been there throughout talking to some big names and attendance, and notably there were some big executives and attendants at a dinner with Jijingping last night. It's notable we've got some reporting at the moment saying that Tesla CEO in a Musk is no longer actually going to be in today's lineup of speakers at APEX. That's largely because he endorsed an anti Semitic post on X his
own social media site. We'll talk about that later about Marie. But who have we seen and why have we seen these certain executives with Shijingping.
Well, I have a full list of who sat at Shijingping's table last night where you saw a number of ceo stand up and applaud him, the likes of Ray Dalio,
Larry Fink, Tim Kirk, all of them. You see them on the screen there in attendance to meet with Shijingping where one Republican official, Mike Gallagher Wisconsin, who chairs the China House Select Committee, said when he was at a protest against the Chinese Communist Party this weekend, said that executives were paying as much as forty thousand dollars or a company paying as much as forty thousand dollars for their CEO to be able to go to this dinner
and sit with the President of China. But I think more importantly we should also look at what the President of China said yesterday. He really struck a more conciliatory, duvish tone. Part of this was the fact that he is dealing with a fragile economy at home. We've seen a huge hit to foreign direct investment into China, and it looked like he was trying to set a path forward to be more welcoming when it comes to US
businesses this summer. Gina Ramundo, the Commerce Secretary, when she was in China, said that she told Chinese leaders that what she hears time and time again from businesses, and that China is becoming more uninvestable.
So Shijingping yesterday.
Said that he has no plans to unseat the United States, and he'd also said that he doesn't want to see China in a hot or cold war.
Now, it remains to be seen.
If this is going to assuage some of these business concerns.
So I imaged on the other side of the table and the negotiation, President Biden was asked a very specific question about whether he viewed Jijiping as a dictator.
What was his response, Well, Biden has said it before, he said it yesterday, and he will probably say it again, especially as we get into the November twenty twenty four presidential election. He said, Shijingping is a dictator, and then he explained it's a very different system in China than the one we have here at.
The United States.
This comment, though, came after Biden fielded a number of questions in the press conference, and then he took some ad hoc questions as he was leaving that press conference. I think the main takeaway from the White House is Biden's k not going to back away. Have asked this again, especially as the rhetoric gets heated before November of twenty twenty four. But the main takeway from the White House is they feel that this was a way a deliverable.
These two individuals met, and Biden really just wants to get the relationship in a better place where he can pick up the phone in a time of conflict.
AMH, real quick? What's left to come on the agenda? While Biden's in town well waiting.
To hear from Biden, he's going to be addressing apex CEO's there'll be a family photo and then this evening he's going to be looking a little bit more forward to the iPath, which is this water down trade deal, not the DPP but iPath, the Indo Pacific Economic Framework. One thing to note about this is potentially some pushback that Biden administration is going to see because the trade pillar has been ditched. It was potentially going to be announced at this forum and it's not all right.
Bloomberg'sa Marie hoarding over from DC in San Francisco for apeg.
Wellcome out to bloom teen onogym.
I hid in New York and I'm ed Lovelow in San Francisco.
Two movers.
I want to check back in on one for the first time. Palo Alto Networks, a name that we've not mentioned yet. We're talking about largely software in Palo Alto Networks case, it's trying to jump on this AI bandwagon, but it missed estimates in its fiscal first quarter and lowered its full year guidance, which has hit the shares you can see down almost six percent. And revisiting Cisco right, We've covered it in debt furlier in the show, but the stock is down more than eleven percent, on track
for its biggest drop in almost eighteen months. And the concern here is that its outlook for its fiscal second quarter came in well below what the street was expecting. The answer from Cisco customers are working through a backlog on networking equipment. The concern from the cell side hold on, We're worried about the health of that market and what the mecroeconomic conditions are. But two big movers, similar spaces and those having an impact on the broader market.
This Thursday, carrac.
Yeah, and we want to dig in on the broader market.
The appetite of corporate spending, right, now, particularly when it comes to the application.
Of cybersecurity, of defense, and.
Indeed in a world where AI is helping and hindering. With all of that, we want to talk with Lane mess CEO at Deep Instinct, and of course you yourself were former CEO of Palo Alto Networks. We were just hearing about some of the PATS earnings that aren't living up to expectations, even though there seems to be this rampant demand for cyber protection in the here and now.
What do you make of the fact that Palo Alto Networks, for example, isn't managing to lean into perhaps that growth in that particular area.
Well, I can't say that they're not leaning into the growth. First of all, I have to commend Nikesh and the team there. What they've done with the company post my time there has been very good. The focus of palow out there was a platform play, and the platform play is to really give you a protection around accessing your infrastructure and the threats that might hit it.
The other aspects are how do you guard the door?
Platform players are going broad, they're not going deep, and that's where the AI focus needs to come in. Deep Instinct goes deep and as you can appreciate, I got off my bench to do this because the challenge of AI is really becoming paramount.
One thing we've reflected on this year is that when we're talking about AI and the context of cybersecurity, it's as much a tool for the threat actors as it is for your customers. Right, people trying to ward against cyber threats. Who is making the most progress the threat actors or those trying to defend against them.
Well, I think a lot of people were caught off guard. Many of the platform players have machine learning models, but to really get ahead of the threat actors, you have to have the more sophisticated technology. It's a think called deep learning, and I won't get into the specific science of it, but it acts similar to a brain in the fact that you've got to count this in fact infinity parameters that you're checking against, so you can create
a predictive capability and get out ahead of the actors. Now, Deep Instinct has been developing this capability for ten years.
So when AI became in vogue.
In terms of the things you could do from a salesforce enhancement, customer support enhancement, a lot of the security companies, including some of the ones you noted, were still focused on broadening their coverage but not going deep into the more advanced sophisticated deep learning algorithms. That's what we do with the ninety nine percent efficacy. But the main challenge right now is protecting data. So everybody's looking to protect data,
everybody's looking to attack the data. You can't fight fire unless you have fire to fight fire, and deep learning is going to be the answer that most of the security companies and platform players are going to have to focus on. That's what we focus from ground up one hundred percent.
Your choice of words. That very interesting. Twenty four hours ago we had the Rubric CEO, your industry colleague on people sitting here on the show.
Have a listener to what.
I know people will cyber attacks have gone beyond human comprehension. You have to fight fire with fire, and as attackers are leveraging AI to generate more codes to actually attack you, you have to apply AI to understand what the heck is really going on.
You guys are changing notes or the no, no, actually, Bipple, he's a very good friend. In fact, I'm an investor in Rubrics, so and they're addressing the very big challenge storage recovery, and it's something that went unnoticed for a long time. It's something we focus heavily on. There are people are focusing on the eder, the endpoint, CrowdStrike, Sentinel one. They almost accept the fact that you're going to have a breach, and then they help you clean it up.
But you cannot accept the breach anymore. You have to get out ahead of it. And I and Dipple share a lot of views. But the secret is in the technology and the uniqueness of the deep learning framework work.
And let's talk about therefore prevention having to take center stage rather than just be dealing with the aftermath Lane. We are at our hearts a technology show. What is it about deep learning that can go there? Unlike other applications that we're seeing from rivals or indeed AI more.
Broadly, Yes, rivals and most security companies are using the AI term very loosely, and they focus on machine learning. These are models that are made by humans and trained, trained on millions of feeds. But at the end of the day, the models are only sophisticated as a people who design them. The algorithms are not sophisticated. And the best comparison is compare if you would chat GPT to text learning Deep Instinct to cybersecurity.
It's that level of quantum leap.
Interesting use of analogies there. We really appreciate some of the time that we've just had with you in Deep Instinct, CEO and similarly investor in all areas of cybersecurity and air applications.
We thank you so much for your time.
Wean while coming up, we're going to talk about more of investment, particularly in the world of AI men and adventures, raising one point three billion dollars to advance oftificial intelligence startups.
On that next with partner Matt Murphy ed.
What have you got, Let's go to space real quick. I'm looking at shares of Amazon modestly lower ten to one percent, But the company actually confirmed this morning that the two prototype Kuyper satellites it currently has in orbit are functioning one hundred percent is intended. That is important because they now can start a broader mass production pro program to build out the constellation literally make the satellites
and then get them into orbit. Remember, this is a be competitors to SpaceX is Starlink, which we've talked about a lot on the show this week, but all going well so far. For Amazon's own satellite based internet future. This has been botechnology one point three five billion. That's how much Menlo Ventures has raised in new capital to fund promising AIS startups. This new capital will be invested by its flagship venture fund, Menlo sixteen, as well as
Menlo Inflection three and affiliated funds. Melo Ventures partner Matt Murphy joins us now for more. Matt, I think you'd argue that you've got a good track record both of investing in AI and early stage right, but there's clearly some near term momentum here. Explain how quickly you raise the funds and where you raise them from.
It was mainly our standard LPs been good long term partners with us. We had positive net dollar retention, which in kind of the world assassin means that you raised more, you increased your base of capital from those who were already with you.
But we did add a number of additional LPs.
I think the reality is that we've been through kind of a bumpy time in the venture business. But if one can promise the kind of focus around this opportunity, the ability to win be in great companies and build a portfolio around AI. It's very compelling to new investors and existing investors.
What's been so interesting is instead of VC money going into a lot of these AI startups, particularly the foundational model types, we've seen money come from big tech.
Ultimately, how have you discerned.
What is the right sort of reward structure that you need to see from companies that are sort of wrapping around AI, perhaps not building their own models, or indeed whether it's those that are building, how do you discern what is the best VC backed company?
Yeah, I mean, I think there's really two massive opportunities right now.
One is kind of this generative AI stack.
So in technology trends, like when a bunch of companies moved to the cloud, we had a whole rebuilding of infrastructure, and that's exactly what is going on here in AI. And then you look at the application layer and we feel like the application layer is a ten year trend.
There are a bunch of companies that are i mean.
The entire portfolio you mentioned a lot of big companies or at this like perfect intersection of technology readiness and kind of CEO company readiness. There's this real move to kind of adopt AI as fast as possible. We'd say that the application opportunity is really a ten year opportunity, and maybe even some of the best applications will be built in a couple few years. Is the technology matures and entrepreneurs imagination and comfort with deploying these technologies evolves.
But right here now we feel like there's the biggest opportunity in picks and shovels. So it's those kind of infrastructure building blocks obviously in nvidial like anthropic and open AI. But there's a whole big middle there that has to happen well for applications to be built. So it's picking models,
training models, observing models, optimizing models. There's just a whole big body of work that's coming together right now that's going to make all of this easier and accelerate the application innovation even more so.
Of course, I mean Meno aventures itself one of the oldest vcs from the Bay Area. I mean, is the founder you want to backcoming from the West coast? Is it now dispersed throughout global opportunities?
Now the venture business has gotten more global, but San Francisco's definitely having another renaissance.
The Bay Area.
We have the most AI talent, i'd say, in the world, and people are kind of flocking back to be part of a lot of these companies. So there are many pockets of venture capital these days. Obviously New York's been a big hub. Some good infrastructure opportunities and application companies there La Seattle, Austin, et cetera, Boston.
But San Francisco for AI is definitely the upper center.
I want to go back real quick to that that kind of ten year time horizon that you're outlining. It's kind of like bench capital one oh one. But across the startup curve, loads of folks come on this show and say the reality is ninety percent of these startups are going to fail. AI startups nine zero percent. Do you share that kind of outlook.
Well, I think that the numbers are a bit better than that. I mean, I think about fifty percent of companies you know failed, don't don't don't return capital. There is a gold rush right now and rightfully because the opportunity is so big, I mean, and just to put that in perspective for you, Historically in venture if you went from zero to one the first year, one to three, three to ten to third year, that's really good by
you know, classic venture standards. We're seeing companies in our own portfolio not to be named, but going from zero to twenty and zero to one hundred in one year. So rightfully, there's a gold rush around this market, and there will of course be some things that don't stand the test of time, but we're more leaning into it optimisticly that we're seeing signals that this is the fastest moving ecosystem we've ever seen.
Adventure Matt.
When a founder comes to you with the pitch deck and it's super shiny and exciting, how much emphasis do you put on their access to compute? You know, like capital is one thing, but their ability to actually you get the resources to build the thing that they tell you they're going to build.
Yeah, I feel like that problem has been a little bit overhyped. I feel like Jensen's going to ramp up production and a number of other companies are come forward, coming forward with GPU GPU capabilities. The main issue right now is people really figuring out the way to do
something innovative. I think the application layer especially, there's a lot of bolt on things, and there should be because you can take a current application, apply an LLM to it and makes the application smarter better when in the history we had this opportunity for a computer to do reasoning and writing at the level that it's doing right now.
So all those things are super exciting, but there's kind of early stages for imagination of what's possible, and that's really what we're going to see involve and accelerate over the next couple of years. So I'd say as we look at entrepreneurs, it's less about can you get access to compute?
I feel like that'll be solved.
It's more about what are you doing that's distinctive that others can't do well?
You made the right bets in the past. I think Ruber, Roku, Poshmark, to name but a few. We thank you so much, Matt Murphy for bringing on where you see the next sort of opportunities for menlo ventures.
Billionaire Elon Musk endorsed an anti Semitic post on x that attacked members of the Jewish community for pushing quote hatred against white people. Also point out that we've heard in the last hour that Musk's name is no longer on the lineup as speakers at apex here in San Francisco. We do not know the reason why his name is no longer on that list of speakers, and here at Bloomberg News we will chase that throughout the day. Let's
bring in Bloomberg's big tech editors, Sarah Freyer. What do we know about this post and Musk's response to it?
Well, this has this post had echoes of the great replacement theory, one of the things that has motivated some of the shootings in the Jewish community of past years. And Musk responded to it saying that it was the truth.
And then he built on his comments. He related them to his dissatisfaction with the d L, the Anti Defamation League, which is a group that is probably the biggest fighter of anti anti Semitism in the world, a nonprofit, and then he brought into his comments back and said, you know, I'm not just talking about the ADL, but anyone who espouses anti white rhetoric and anti Asian rhetoric. So I think we have seen a bit more from Musk his
concern about anti white rhetoric. And of course this is a very charged time to be saying those sorts of things. There is ongoing violence in the world. He is running a massive communication platform. He has more than one hundred and forty million followers himself. So I do think that you know, when he does this, it is news and.
Talk about of course, that this isn't the first time. It was last year the American Jewish Committee actually sort of really pushed on Musk to apologize previously for a deleted controversial tweet as they were then known post once again that made satirical comparisons at the time. And I'm interested in the fact that he in particular has been sort of blaming the ADL, the Anti Defamation League for a slump in his own advertising right.
And I wonder to this end.
Like what how we try and balance Mosque says is pro free speech, and actually he said at the time against Annie's anti semitism in of any kind, but yet he continues to perhaps walk a very difficult line.
Yeah, I think I think when people hear the words anti semitism, they sort of cringe and say, oh, that's not that's not me. But then when you look at the actual content of his tweets and the people that he has been responding to, remember on Twitter, who you respond to actually affects the algorithm to the weight of his following where he replies to people even to say things like hm or interesting that can then amplify those voices, and we've seen him do that a number of times.
I would say this most recent post is maybe the most explicit that he's been so far about his concern over anti white sentiment. But I do think that it's something that is affecting his company.
Like you said, more than.
Half of advertisers are off the platform. He is wholeheartedly blaming the anti deformation leaf for that. They had a bit of a patching up since then, but now it sounds like he's back to criticizing.
Them so far.
Thank you for breaking that particular news point down. And we want to keep on discussing the fact that ad advertising revenue has been under pressure at X more and most broadly, and let's talk about that with Rachel Timographs course, founderacy of e Commerce Enablement and analytics software provider Makemac and Rachel Ultimately, are you hearing from any of those clients and discussion that you're having that people are willing to come back to X in its current form, in
the current environment in which we see it.
So Ever, since Musk took ownership of Twitter last fall in twenty twenty two, at MCMAC, we've essentially seen a ninety percent decline in brand traffic. In May of twenty to twenty three, when Linda Racirino was stepping in, we actually saw some hope where brands were like, Okay, here's someone who understands brand safety, and we're going to try a few dollars, not five hundred thousand, not a million
dollars in advertising buy. But I'm talking about publicly traded companies saying hey, we'll try fifty thousand dollars in Twitter ad spend and see how it works.
But Musk is voltile.
Yep, I'll I'm sorry to intrup. He's keep going.
Musk is Boltle, and every single time he does something like this, we see a massive decline in Twitter traffic. So there is a direct correlation to his activities and brand AdSpend.
Rachel, one of the things we've been been tracking on the X platform from a technol perspective is a world you know well, which is video. They put a huge emphasis on video as a strategy to bring back creators and then bring back advertisers.
How do you see that going? So this is the interesting thing. When we saw brands retest the water with Twitter essentially around May and June of twenty twenty three, we actually saw strong results. So I can tell you that the investments that they have made in their ad products aren't improving the ad products, but it's not enough for these brands to want to be associated with his volatile behavior. Brand safety trumps any investments that they're making in their ad products.
And to reflect on Linda Yakarino, she has really been trying to ampart the focus on brand safety. Have any of the moves they've made thus far made a mark on the clients?
Unfortunately?
I feel that Elon's brand is bigger than brand and anything that he does puts a heart to the advancements that they're trying to make.
We want to thank you McK macfounder always so to the point and also bring us real data on all of it. Found our CEO Rachel Photographs. We thank you so much from Brooklyn. Meanwhile, that does it for this edition of Bloomberg Technology YEP.
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