From Marhart where Innovation, Money and Power Collie in Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hyde and Ed.
Lud Love.
Live from New York and San Francisco.
This is Bloomberg Technology Google. It's in the crosshairs. Bloomberg reports Washington is thinking about breaking up the Search Giant after that Landmark, Antitrust.
Win, Big Tech, Nvidia and Bitcoin ETFs. In focus is the thirteen f filing sit insight on the secretive world of hedge funds tech holdings.
An earning season.
It continues, we push our head to Cisco as a company cuts costs and jobs amid a shift to aid head.
Yeah, let's get right to Alphabet, the parent of Google shares a down three and a half percent after a slow start at the open within two standard deviations. The headline that Bloomberg's reporting is that DOJ officials and attorneys are assessing a bid to break up the Search Giant, and as you know, Caro, there are many other options being discussed at actions that could be taken. We also are going in later in the show to talk about
the pixel event. Right the hardware game from Google is that a part of the stock story this morning not really clear, but it's a big headline where the nuance is important, and it's a big.
Market cap erosion seventy one billion dollars on the day. And of course yesterday the Department of Justice, well we were understanding from Bloomberg's own reportant are potentially considering a bid to break up Google following the Landmark court ruling that found that the company monopolized the online search market.
Let's get into it in Mosley and Nylan has been bringing us scoop after scoop in Washington, DC, And just how likely, how realistic is that we go back to two decades ago in the Microsoft fight.
Yeah, so the Justice Appartment is considering recommending a breakup. They have a couple options on the table to see if they could require that Google sell off the Android operating system that's the hardware that you guys were talking about, the Chrome web browser, or potentially AdWords, which is the platform it uses to sell the text ads that appear at the top of the search results page.
It's all going to be up to the judge.
Though, he's the one who gets to choose the remedy. And you know they did had proposed breaking up Microsoft back in the day, and the courts just didn't go for it, and instead Microsoft ended up being under a consent decree that went on for more than ten years. So that's sort of what they're mulling. Should they try and propose a breakup that's sort of like pain a lot upfront and that it's over, or should they do something that goes along for oversight for many, many years.
You know, Leah, the stock is down more significantly in this moment than it was in after hours when the story broke. There are many factors behind that. There's not much research out in response. What's interesting about the reporting is sources are giving us into an insight how the DOJ works, right, So tell us who they're speaking to, who they're soliciting information from, and kind of the things on the table, so to speak, of where they might go next.
Yeah, So the Justice Department doesn't make this decision in a vacuum. They're consulting with a lot of third parties who've been impacted by Google's behavior, So obviously other search engines, but also like advertisers, people who advertise on Google, you know, lots of other websites that could be impacted by this. One thing that they are very interested in is Google's move into AI. They're a little bit concerned that Google could use some of its dominance in the search area
sort of to leapfrog other companies and AI. So that's one thing they're also looking at.
Are there any sort of.
Restrictions they need to put on Google's development there? One possibility is sort of requiring that any information that they collect for the purposes of search is not allowed to be used for purposes of AI.
So this is just the beginning.
You know, there's going to be a hearing next month to sort of set up the procedure for how this remedy gets put into place. But you know, these are some of the initial thoughts that they have been thinking.
As you say, it's just the beginning, and Alphabet and Google itself are going to fight this. How open to political persuasions? Is this going to be like we're looking at an election in November? Would anything change on the back of that.
That's the other possibility. You know, if there is a Trump administration next year, there will be all new folks. They might have different ideas about what they should see her. But the one thing you do need to remember is this case actually started in the Trump administration. It was the Trump administration's folks on antitrust in twenty twenty who brought the original case.
So the Trump.
Administration, a second truck administration would probably want to continue pursuing a remedy against Google. They might just have different ideas about how to go get about it.
Most Leah Nylan reporting out of Washington, d C. Thank you very much. That was the reporting. Let's get the reaction sell side first. Dan I is from Webbush writing this on the subject to break up of the big tech business models is highly unlikely down the road. Although business model tweaks and heaviest scrutiny of M and A will be front and center, there's also the sort of industry and academic perspective. Christina Kafara is the co founder
and vice chair at Competition Research Policy Network. You're an expert in this field, so let's start with the likelihood that the DOJ launches an initiative or bid to break up Google.
Thank you, Ed and Caroline, it's a pleasure to be here. The likelihood reflects the viewing side of DJ and will broadly held outside that Fundamentally, the purpose of all of these actions needs to be to restore or to induce competition. It is pointless to have just an opinion or a judgment that tells us that Google is a monopolist. We have a number of those in Europe. We have failed, however, in Europe to follow that through and implement measures remedies
that were really capable of increasing competition. So the question is to what extent will the judge, as Leah was saying, just that you feel the appetite and the opportunity to push the remedy following his decision into a real that can create that competition.
So Christina, on the word appetite, You forget that there are people behind this story. Our reportings based on anonymous sources. But we're trying to infer the thinking of DOJ officials and attorneys. Why in this moment might they feel this is realistic as a course of action, if not a breakup, but the other potential actions that Leah reported on just a moment ago.
The reason why it is now a salient moment for this kind of action is that there is a global sense that anti trust action against big tech and Google in particular has not delivered, and fundamentally, because the reaction is being too timid, we haven't adopted measures that were capable of inducing competition. So the Department to Justice follow what Jonathan Canter said. He called this decision mount rushmore
of anti trust historic monumental. This is the time when we need to get serious about whether we use anti trust. There's a real industrial policy tool to create competition in sectors where we have failed so far with half witted measures, and or we continue to do something which is marginal targeted and very prescriptive, but at the same time does
not deliver competition, which is the goal here. So the Department of Justice will feel that this is this salient moment at which to pursue this kind of aggressive.
Christina is a gender three and a half percent fall in market cap and share price. It's a big move on the day, but it certainly doesn't reflect the idea that it will be broken up. So is this in any way realistic And what do you anticipate will actually be the real soulce here?
The markets never really anticipate that antitrust is going to do very much. And this is the text is the outcome of this case in which the judge is delivered a very thoughtful, very wealthul opinion. Is it going to be serious or is it going to be again nibbling at the margin of the problem. So I think markets are just waiting to see. Of course, the prospect of breaking up Google is very ambitious. On the other hand, if we don't do it now, then when how are
we're going to create competition. A judge that just simply mandates that Google can no longer pay for exclusivity on Apple Os Samsung should note that this kind of measure is going to be performative, is not going to deliver anything of substance.
What would be substantive from your perspective, Christina, Is it about going into all the which ways that Google basically impacts the ecosystem and trying to unravel it, Because that's a herculean task.
It is at qli N And in fact, I fear that we might end up with proposals that are at rue Goldberg machine of various little measures, of various attempts to deal with the control points that Google has. There is no question that the tentacles have gone deep in multiple control points, and unless we addressed those choke points, then we are not finding a solution. Redlining a contract prohibiting exclusivity is not an answer. So breakup is difficult,
but there are precedents in the US. Of course, you have done add the most significant president there and it unleashed competition and innovation. Of course, there will be massive challenges because Google will not take this line down. There will be possibly years of challenge. But fundamentally, you have an ecosystem in which you have YouTube and Google Search, which are the two most important websites that people actually use.
And then you have the same company owning the most important browser, Chrome, and if you allow all of that to be under the same umbrella, the incentive of this company are continually to use all of these pieces of the technology to favor itself, to drive revenues for itself in ways that cement their monopoly, continue continually forevermore without allowing anyone to come in with Microsoft Office opened twenty billion over five years to be able to be on Safari instead of Google Search, and.
We have to leave it here. But we really appreciate the nuancewer perspective. Christina Kafara, co founder and vice chair of the Competition Research Policy.
Network, we thank her. Meanwhile, coming up thirteen F filing.
Season, we'll discuss the latest and what those hedge funds have been up to.
This is blue meg technology.
It is so called thirteen F filing season or moment.
What does that mean?
It's where investment managers where hedge funds are forced to disclose what their US equity holdings have been in the previous quarters. It's a snapshot, but it's an interesting one, and we break.
It down Bloomberg's Hemma palma.
Much is being made of some holdings of bitcoin ETFs?
Yes, what do you make of the reporting there? Yes, so it's kind of interesting.
The SEC, if you recall, approves spared ETFs with bitcoins earlier, and so we had seen some buying. It looks like Goldman Sachs bought about four hundred million of it.
Now.
The thing to keep in mind with thirteen and f's is it gives us some clarity, but not full clarity, So we don't know which part of the bank necessarily bought it. We also don't know intentionality behind trades. So is it a bullish bed fundamentally on these ETFs and bitcoin or is it an opportunity to capitalize the volatility of the trade or is it a shorts against longer hedge along that against shorts you might hold, but it is interesting to see some significant buying in that space.
Lindsay and New York's going to bring up the Nvidia chart.
I think it's an interesting case study, right, because the data is backward looking. You want to go into the dark world of hedge funds and particularly stock picking funds, right. So the headlines I see is that a number of funds increase their position in Nvidia. It's interesting because it's the period ending June thirtieth, and as you see on the chart, we hit high on I think June eighteenth.
What have you learned so far through.
The Yeah, So that's one of the key themes we're looking at for this thirty and f season is how were funds, especially stock pickers, positioned just ahead of the time that we then saw in July and then got worse in August. So we did see some nominal buying of Navidia. Wisconsin's pension bought a little bit, UBSS Management bought a bit Co two trimmed their position in Nividia slightly.
So it's interesting to see how funds were positioning their books ahead of what was a very tumultuous several weeks.
What else are you managing to peel back in terms of some of the key players when it comes to technology names, the CO two is the D one.
Precisely, so KO tow some interesting movement there. They slashed their alphabet position by thirty eight percent, I'll be prescient exactly, and they also slashed a salesforce position by about sixty percent, so two prescient moves ahead of this downturn. They ditched their Instacar position entirely, trimmed Meta, trimmed Navidia, so some really interesting moves ahead of this volatility that we saw.
They started about six new positions. One of them is in g g Vanova, which is a company we're hearing a little bit more about that's the spinout from GE that's more energy focus. So they started a new position in that company that stock us up about thirty seven percent.
Hemy you've done a really brilliant job of explaining the basics, you know, to the audience around the world on Bloomberg technology. Many of them will not understand thirteen f So we went over stock picking in directional bets. There's a lot more to come, right, we can't in aggregate say this is what the story was, just explain basically how it will play out over the next couple of days.
Yes, so hedge funds are required to file these thirteen F positions, which shows their positions as of the end of the second quarter, and so what that means is we get a bit of a backwards.
Looking view into these funds.
They have to file it by the end of day to day. Oftentimes we see these filings coming in later in the day as maybe some funds procrastinate till ear later in the day, so we get more of an aggregate sense of how funds were positioned later in the afternoon. So tomorrow we'll have a little but more clarity in whole as to like what the positions were with what the popular buys and the more popular selling trends were.
But keep in mind, even though this data is backwards looking, it's still helpful because hedge funds are notoriously secretive about what stocks are in and so this gives us some insights into what and how they're thinking might be across the sector, but especially in tech, which is precisely interesting these days.
And interesting on this program. Bloombergs Hemma Palmer, thank you very much. Let's talk about markets more broadly. Core US inflation ease for a fourth month on an annual basis in July, keeping the Fed on track to lower interest rates next month. How's that going to impact the technology sector and technology stocks? Joining us now is Rob Howeth, senior investment strategists at US Bank Asset Management. It feels they're like there's been some anxiety of.
Late in the market.
So I think back to that fateful Monday after the boj We talked a lot about the yen carry trade. But what to you all mind is the principal driver in financial markets right now, particularly when you focus on technology and the equities market.
Good morning, yeah, good morning. In the end, it is spending. Right what we've seen really drive tech stocks. I think for the bulk of this year is much higher investment in technology infrastructure to support artificial intelligence. I think the question before US as we look ahead is not is that going to continue? But does it broaden out? Is the consumer still healthy enough to increase goods spending which puts further pressure on technology infrastructure or we've seen fairly
light auto sales. We've seen the consumer weakening, I think, and they've been focused this year so much on services. Some of the news we're seeing indicates some a lack of clarity on services spending into year end, and does that pivot into goods spending like on autos or other durable goods that we know have lots of chips in them as well? So does that put more pressure on technology infrastructure as we look into year ed That's not clear to us, but it's a question we have.
Well, there are many days until August twenty eight for notable date because Nvidia reports earnings, and that may answer some of your questions. What's your approach to that. It's a single name that's driving the entire market at the moment.
It's a single name that remains important to be in portfolios and at a market way, we would say, But our approach is we think this rally really has to broaden out a little more. We're looking more towards an equal weight SMP five hundred position because we think that
there needs to be more beneficiaries than just technology. If this economy is really holding up as well as the data would indicate, right we're seeing softer inflation, but we're seeing still low unemployment, still good wage growth, still good GDP growth, and so we need to see more beneficiaries of this economic activity beyond technology as we look into the year.
Well go across asset class for US as well.
Should you be only thinking of equities in the tech space, what about fixed income?
What about their corporate bonds?
Fixed income is certainly extremely attractive. We're looking a little more at getting more credit exposure in our in our fixed income portfolios, whether it's a high yield municipal bonds for taxable investors or below investment grade corporate credit. I think the interesting thing in the technology space is often they're so cash rich that that you're getting high quality bonds there as well. So we would look to get some credit exposure at this point in portfolios because the
economy is holding up fairly well. The interesting thing is investors. Investor sentiment is still very robust in credit compared to equity. Right, We've we've seen softness in the equity market here of late, but that that credit sentiment has stayed very strong. So there's not a lot of expectations there yet that this is a slowing economy.
Well pay with so good to catch up with you. Thank you very much.
Indeed, senior investment strategists of US Bank Asset Management across the essay classes for US.
Time for AI and action.
How is artificial intelligent artificial intelligence being implemented right now?
We can speak to a founder about it.
Minisong, co founder and CEO of elise AI, who's just announced that you're raising money. You've got a billion dollar valuation and it's all about helping renters.
Am I correct? How are you helping rentors with AI?
Yes, that's exactly correct.
So elise AI is an AI technology company based in New York City that serves the housing and healthcare industries. Both of these industries experience significant operational challenges because the day to day operations are largely managed by arcane and manual processes. So we provide AI technology that allows our customers to automate the most important and business critical functions.
So in the housing industry, for example, we provide an AI that helps renters with all of their needs from looking for an apartment, to touring, to handling their maintenance requests to even renewing their leases. And this helps housing providers be able to serve more renters, faster and better,
and also at a lower cost. And today our AI is already used by over seventy percent of the largest property management companies in the US, and we've also expanded into the healthcare market, So in the healthcare industry, our AI similarly automates the day to day workflows like scheduling appointments that allow our customers to manage their businesses more effectively.
Seventy five million dollars billion dollar value. Congrats, there's a lot of people sitting behind you. Who are they, what are they working on? And what are you going to use those funds for? Because you seem pretty busy already.
We are extremely busy.
So we're at our office headquartered here in New York City, and behind me are a bunch of really really talented engineers, product and many people that are supporting new customers every day in transforming their businesses using AI. So we're using the funding to expand our team and help more customers and build more innovative products to create efficiencies in their operations.
We've got about thirty seconds Sapphire Ventures led the around others point seventy two Divco West.
How is it like they're raising funds?
It was surprisingly really easy.
I think there's a lot of funding available for great businesses solving really important problems, and we're really excited to I've partnered with.
With people who understood how the industry should be.
Minnesotan co founder and CEO of elise A I, thank you.
Very much, Welcome back to bluemot tenology.
I'm Caroline Hid in New York and Amed Lodlow in San Francisco.
Quick check on these.
Markets said, because, well, the whipsawing of Nvidia means that we're now currently flat on the Nasdaq one hundred index. It had been training lower now and video pushes up higher. Also BROADCLM doing some heavy lifting at the moment. Basically, we are seeing a flat date calm after the CPI anticipation, and we do get a print that basically shows the federal reserve is still likely to be able to cut as.
The market had anticipated.
Tenure yield just dies down a little bit two basis points, so we're seeing buying a.
Bond Bitcoin THO just off by two and a half percent. We're now at about fifty nine thousand.
We since been training in that range of about sixty thousand of late move on, have a look at what's happening on some individual names, and as I mentioned in video, has been dictating sort of the way that the benchmark has been going, and we're up more than a percentage point. We are, though seeing ten Cent interestingly doing ten Cent music here. Maybe I gave the wrong particular focus, but
Tencent has been giving us it's earnings. Going to delve into that in a little bit, but really thinking about how this juggernaut when it comes to gaming, when it comes to chat, when it comes to overall well fintech as well, has managing to push up is overall revenue. We're seeing Alphabet though, really the drag on the market today, and we're going to delve into not only what has been a DOJ discussion.
We understand from reporting.
At Bloomberg that maybe they're anticipating breaking up Alphabet that what weighs down three and a half percent. But this is after some important announcements. Yesterday, ed the really showed off its AI prowess, which in many ways is what regulators are worried about.
Yeah, this is the hardware story.
Google announced that they're rolling out upgraded smartphones ahead of Apple's u iPhone release in a push to sell AI. Joining us to break it all down from yesterday's event fresh off location is Bloomberg's Mark German. It's a simple story where we have updated line of pixel phones and one pixel fold phones. But what Google is trying to convince us of is we need that hardware for the best integration of Gemini and use of Gemini the generative AI tool in the real world.
What did you make of it?
All?
That's right?
I mean, these Google launches they've been happening since twenty sixteen, are so interesting, right, these phones. They announce parts of the phones, they post pictures of them on their website, they tweet them out. There are so many leaks of these devices. People go hands on with them before they're announced. So by the time that they actually announced these are older formal event, the phone has already essentially been announced, right, so we had long anticipated what these AI features are
going to be. There are some interesting things here, and why I think it's so interesting is how tightly they've integrated everything, and the timing obviously couldn't be better. We had the news about the DOJ looking to break up the company. How do you break up a company that is now so tightly integrated. And it's so interesting that they made the decision to fold their Devices group and Android group together just a few months ago.
Mark, that is exactly.
Also, the push ahead from regulators is worrying that the amount of the web, the ecosystem that alphabet Google controls allows AI offering to be that much better than anyone else's, is it? How much would we likely to see that Google can now go head to head in a smartphone arena where they have five percent of the market in the US.
You know, it is their competitive advantage, right.
They've built Google Search.
They built it, you know, Sergey Brin and Larry Page, they built it from the ground up twenty thirty years ago. And they built this network, this web crawling system, this amazing search engine that can now power these really incredible artificial intelligence features. And now that prowess, that technology that they spent decades building up is now being held against them, right, And so I don't think that the government should be
holding that against them. Their ability to build a better product because of how many decades and how many billions or more they've spent to develop this technology, and to your point, this is much more advanced than what Apple has. Apple is very new to this AI game, using same similar models to what Google was doing.
Now, well, Les's compared contrast, right, because the market's important. You know, there are roughly a couple billion monthly active users of all of the Google applications, but they're only shipping I think ten third party data ten million handsets a year, nothing really compared to the scale of iPhone. You cover Apple better than anyone on the planet. Is it going to be a real competition on the handset side?
Based on what you saw, well, it depends how you look at it.
The features ten times better if you're using the Google platform, if you're using a on Epixel, your AI experience, how much embedded AI you're getting, is going to be far far better. But if you really think about it, Apple is going to become the biggest mobile AI player overnight right in October when Apple Intelligence launches as part of iOS eighteen point one, a few weeks after the iPhone
sixteen launches. But I've been using Apple Intelligence for weeks now as part of the eighteen point one betas there's not a lot there. You're getting summaries of text messages, you're getting summaries of emails, You're getting some notification prioritization. But there were some pretty cool demos from Google. You can have the phone answer phone calls on your behalf. You can go through trees when you make a phone call. It can re edit images for you. It can place
you in a completely different environment. It can do things on your behalf. It could create resource reports. It's really day and night what you're getting between.
Apple and Google.
Bloomberg's chief correspondent for Everything Consumer Electronics, Mark German, thank you so much. Another story we're tracking is gaming ten cents. Revenue growth accelerated after the release of their blockbuster game this summer. Join us to take a closer look is Bloomberg's Henry Wren. I mean, basically it's an earning speed, but specific performance of one title has us very optimistic about a rebound for the gaming industry at large in China.
Good afternoon to you in London. Yes, indeed, so.
Tensen's gaming revenue has definitely been a highlight for the quarter. The domestic gaming revenue grew by eight percent in the second quarter, and that's the fastest growth pace that Tencent has seen for the segment in at least two years. The key catalyst, as you said, has been the Dungeon and Fighter mobile game, which was released in May. However, Tencent is also saying that it's seeing stronger grow stronger momentum across its evergreen games, so namely the Peacekeeper Elite as well.
As Honor of Kings.
So it's not just one game outperforming, but in the meantime some other older titles have been seeing stronger attractions as well.
Tencent is such a juggernaut though, and the fact that it has so many people using weed chat and still manages to add to that as extraordinary. Do we get any sort of detail on how that're betting on AI and how that's going to revolutionize some of its products other than the gaming side.
Yeah.
Interestingly, actually, in this press conference that we've had with Tencent, the details with AI has been pretty scarce. The company has said that it's using a twe year model for its new AI assystem. However, apart from that, we actually haven't got too much details. It seems that the company's mindset has been rolling slowly with AI to get ready for its AI tours instead of rolling rapidly like you know alphabet that we have just discussed.
Henry Wren, what are we going to do without you?
We appreciate the sum up of what is a massive story today. Meanwhile, let's just talk a little about ed tech startup by you. It's back facing the potential insolvency after India's top court order to stay on a ruling allowed it to evert acruptcy. Now that means the startups insolvency proceedings can we start at least until the Supreme Court further decides on the case. Next week coming up, we're going to deep dive in the world of VC CRVS.
Max Gazora is with us to talk about artificial intelligence valuations. Are they too heavy? We're also talking the economy and more. There's a BLUEBD technology.
Code Rabbit, an AI powered platform focusing on the code review process, just announced it's completed a sixteen million dollar Series A funding round led by CRV. The round also included participation from Flex Capital, Engineering Capital, and prominent angel investors, including Olivier Pommel, CEO of Data Dog, another CRB backed business. Let's bring in Max Gazor, the general partner of CRB
for more. In today's VC Spotlight, we can get into code Rabbit, but I just reflect in the first instance, while we try and make sense of what's happening in private markets. That on the one hand, sixteen million dollars might have been quite a large Series A in periods gone by, but at the application layer, foundation, model layer, otherwise, it's not that big in this context of the last year.
Good morning, what do you make of thatness?
Yeah, well, we've had a very busy summer. Code Rabbit was an investment we announced this morning. We've also announced a deal called Napkin last week, and it's been.
One of our busiest summers on records.
So the early stage private investment market for startups is very active.
Most that's concentrated in AI.
It is completely independent of what you see with the volatility in the public markets. So we're still very active investing across a number of different categories. I'd say one of the more interesting themes is that the investment shift has focused slightly from infrastructure into applications, and we're seeing a very wide breadth of domains that we're funding these days.
A code Rabbit AI powered code review. There are some things that are out there that are sort of analogous with that, But would you mind going into the round itself, like how competitive it was, what it was like getting something done this summer relative to last summer for example.
Yeah, my partner Read Christian led that deal. Code Rabbit is a repeat founder. They're focused on AI using a for improving code quality and code reviews. It was a competitive round and like many other deals that we see, we have to show up with very strong conviction, do work and you know, get to conviction on a category. It helps to have a prepared mind, which we do, and I think our portfolio in the developer tools, in
developer ecosystem space helps us win those deals. So we were early investoring companies like Data Dog, like Verseell and a number of other high flying companies that I think helped to seal that deal.
How many of those high flying companies in your portfolio are going to be able to exit in the next.
Year or so, do you think, Max?
You know, Carolyn, it's a very good question.
Last time I was on the show, I was very enthusiastic about the prospects for IPOs this year.
I think the reality is.
That in the first half of the year, we had a situation where tech was ripping, it was low volatility, We had some moderately to you know, very successful IPOs, and we still didn't see a lot of activity. Now, with the second half of the year, with all this volatility in the backdrop and an election cycle, I think it would be you know, challenging to expect a lot more activity with the IPO window opening, and so our
expectations are a little bit tempered. We think that these are very high quality companies and if it's not a public offering, we are seeing very creative deal making going on behind the scenes. So we expect that, you know, our focus is on building great companies, and we expect that the exit opportunities will emerge if we focus on building very durable companies, and so we're very patient and very resilient.
Creative to say the least.
There was just a graphic showing that some of the customers of your portfolio companies are character AI and that's been a literally creative exit of late. I'm interested, though, Max like this rather gross acronym I keep coming across at the moment is ROAI. Basically, what is the return on investment of artificial intelligence. Everyone's trying to understand in the public market, what do you think it is in the private market.
Well, the reality is is if you listen to what public markets or public companies are saying, they're saying that the demand is there.
We don't quite understand the.
Return profile yet, which is I think a fair place to be. What we are seeing is the return on investment is much much higher in the application domain, and that's why a lot of the activity that you've seen has shifted into that domain versus infrastructure, which is sort of a picks and shovels business and much harder to measure our OI. You know, you had a previous guest on in solving problems in the real estate domain. You know,
code Rabbit is solving code of view problems. The number, the breadth of application use cases and the ability to solve those quickly and deliver customer values much stronger there.
You're an early stage investor in pot and you know, actually, I was really curious by Carrier bringing up character AI. There are new methods of exit so to speak, aqua higher and you can then eive a transfer IP or you don't like. In inflections case, the IP was fully transferred to Microsoft in characters case.
I don't think that it was.
But do you then think differently about your like ten year time horizon when you invest in a startup, if you see a potential, so you sign creative.
It's a very good observation. It's a it's an interesting time. Let me just give you some anecdotes we've seen just in the last couple of weeks. There's you know, four acquisition discussions. There's discussions of direct secondaries, there's discussions of tender offers, there's discussions of continuity funds for venture firms, you know, seeking liquidity. And I'm even going through a situation now where there might be a merger of equals, which is the first time I've seen something at that
scale in a private company. So it just gives you a visibility into what's going on in our world. There's a lot of creative dealmaking, you know, discussions going on behind the scenes. I think some of this is in part due to the lack of IPO window being open. But the good news is that these are all very good companies and the founder for the most part, are very patient exploring things opportunistically.
Can you tell us through the merger of equals.
Is I would love to that's that's for a different time on.
Set, Come on back when it happens, Mexica Zoo I thank you general partner at CRV.
Intel.
It's slashing jobs, it's expenses and a bid to turn around the business, and it's just sold its holdings in chip Technology Creator Armed during the second quarter. Now the company reported it in a regulatory filing Tuesday, and it no longer owns the one point one eight million shares it held three months earlier. This is Intel, of course, has been struggling to regain its footing in an industry at once dominated ed more on companies cunning jobs.
Yeah, there's a lot to discussing the landscape. Cisco plans to report its fiscal fourth quarter performance, providing fresh insight into where the corporations are back to investing in their computer networks, joining us to discuss Bloomberg's Ian King and you take those two stories and aggregate. Right, It's it's a landscape and environment thing. The winners and losers of what's happening. Cisco is interesting because they would say we're relevant, We're a part of this.
Earnings will tell us whether they are or not.
Yeah, I mean it's a transition story for Cisco. They're kind of promising that as an organization that they're transitioning into more sort of relevant for today technology and less focused on what they used to be good at. So kind of a wait and see. It's not going to be a one day thing for them. Intel probably less.
So yeah, just go go into Intel for a moment because just the fact that they're having to sell off such holdings, that they're trying to cut costs to such an extent, this seems very painful. We were just talking the other day about how they're cutting their marketing spend acting an event.
Yeah, I mean it doesn't. I mean we don't know the precise details because Intel wouldn't comment other than outside of the filings. But it's not a good look, right, I mean, this is not something that they bought as a massive investment to make a huge amount of money on. Given the nature of the company, it's probably going to
have been a sort of strategic purchase. The fact that they decided to sell that and the fact that if you look on their balance sheet that the actually made losses on some of their equity investments not a good look, and it seems to indicate that they really need any cash wherever they can get it.
Right now, could we end on that?
Just the basics of the balance sheet, you know, Pat Gelsinger's approached has been what he calls smart capital, partnering with strategics, taking public or government money, and then the balance sheet to fund what he's trying to do.
How is that part going.
Well, I mean it depends on who you speak to. Some of the analysts are talking about Intel and its access to capital. Moodies, as you know, downgraded the last week. There are a couple of runs above junk now unfortunately for them, so that's obviously going to raise their custom capital. But in general, to be talking about Intel and its access to capital is new territory for the chip industry. I mean, this is a company that just was a wash with cash for so many decades and now it's a concern ian.
King with a fascinating beat. We thank you so much.
Meanwhile, Secret code names billboards deal drama. This is just a window into the kind of competition for data supremacy between data breaks and Snowflake joining us now. But he wokes Brodie Ford, who has a fascinating deep dive into a rivalry started as frenemies, not so much at all in the tech industry.
We love a good old fashioned rivalry, and we haven't seen them like this in a while. I mean, two companies that are really just going after each other, right, I mean, they each kind of have cute nicknames for each other when they go and try to steal each other's business. They incentivize sellers to go after each other, right.
I mean what really underlines all this is these are companies that maybe aren't household names, but they are required when you want to get your day in order to go use it for AI.
Right.
And so I mean pretty much name any company you can and they're gonna be customers of one or two, most likely both of these vendors.
Brady, remember in March, long time ago, but you and I did that story about Ali Gotzi basically saying that Frank Slutman left is of the competition, which is kind of wild at the time. There are some pretty scoopy bits within the feature valuations deal making.
Just give us the rest of that stuff.
Yeah, I mean, one interesting one is that Snowflake was ready to purchase a startup for six hundred million, and then you know, Data Bricks comes in and ends up spending almost nearly two billion to buy it. And that's an unreported detail. Another interesting element is that while everybody understands on some level these two companies are a threat to one another, what isn't quite understood is the looming
risk of the hyperscalers. Microsoft is, you know, their cloud infrastructure is what a significant chunk of Data Bricks revenue is coming from customers on there? And Microsoft said last month, hey, data Bricks is a competitor now, and Data Bricks has spent a lot of time and energy recently quietly toughening that competitive stance.
It's interesting again and again in the story there's this fighting among what is the cheapest offering?
Yeah?
Right, will price come into it when you've got Microsoft is the juggernaut that's just so easy to integrate with, probably for everything.
Well, what's funny is most will say that it purchasers don't fully spend on price. They do want functionality at the end of the day. Yeah, the easiest thing to dig your competitor on is a look how expensive they are. That's an easy bit of fun you could throw at the wall, and so it's not surprising that every single company involved is saying this.
Lindo's Brady Ford check out that deep dive in that feature on Bloomberg dot com.
Thank you Wednesday, Caro completed it in the bag.
How can that be done?
For this addition of Bloomberg Technology so much to digest the fact that we're still an earning season that we've braced the Cisco says it all.
Yeah, for August Newsflow, things going pretty well. Don't forget to recap on the podcast. You know where to find it Bloomberg Terminal as well as on Apple, Spotify, and iHeart Caro and the team in New York City, me and the team in San Francisco.
This is Bloomberg Technology.