Bloomberg Tech is alive from coast to coast with Caroline Hide in New York and Eva, though in San Francisco.
This is Bloomberg Tech coming up.
Alphabet hits a record high as Google dodges the sale of Chrome in a key antitrust ruling.
Plus Apple benefits from Google's legal win but loses out on the AI talent wars Again. We discussed the latest key researcher jumping to rival Meta.
And the rolls.
Royce CFO joins US stateside as the British engineering giant goes off to AI fuel's data center demand for power tech.
But first we check in on these markets.
The power higher on the day.
Ed reprieve from yesterday's sell off as we see boniols come back a little bit, and we focus on well, pretty woeful data when it comes to the jobs data. But does that mean the Fed Canandian cut. We're up more than a percentage point, But dig into the individual movers because they're big.
Yeah, our top story is Google.
The key headline that you need to know is that they will not have to divest or sell Chrome. They will be allowed to continue paying in particular Apple twenty billion dollars per year for placement of search, but there is a lot that they're still required to do in the remedy section of that key and trust ruling. The stock for Alphabet pairent of Google on track for its biggest jump since April record high Alphabet Apple.
Is also pushing a lot high. Later in the program, going.
Too detail, let's start with a Google piece and bring in our guest character.
Yeah, let's bring in Sarah Forden because we want to blow by blow account about what the legal win is here. You're in DC, our legal team leader, Sarah, just walk us through why there seems to be such a win for Alphabet.
Ah.
Yeah, absolutely. I mean this was a huge win because primarily, I mean the judge in the end didn't give Google much more than a slap on the wrist, and there was a lot of fear and concern that this was going to completely reshape the tech market, the search market, and instead it's almost status quo. I mean, they don't have to break off Chrome. They can keep paying the money to Apple to be a deferred default search engine.
But the only caveat there was that it can't be exclusive, so that opens up things for Apple a little bit more and they have to do some data sharing, but it's very limited. It's a one time shot at sharing the data, and it's just search data, not advertising data. So they're still looking at how that's going to work technically, and they'll have to report back to the judge. But at the end of the day, it's not a huge change or a huge blow for Google.
Sarah.
Google's response and it's statement with celebratory basically, and that largely focuses on Chrome.
They do not in the data sharing part.
Their concern is privacy because they don't want to share data with rivals like Perplexiopenai, dot Go, etc. There's still some mechanics here. September tenth is a key date the parties need to write down on paper something that appeases this judge. But in the ruling, the judge also talks about generative AI being key to the outcome of this case.
Explain that.
Yeah, So that was very interesting because the way the judge handled the initial trial and even the remedy portion of the trial made a lot of people think that he was going to be much tougher, But at the end of the day, his ruling was very conservative and he said the main reason was that that he said the generative AI was really changing the shape of the market, and he didn't want to get out ahead of that, and he didn't want to issue ruling that was going
to really disrupt the market, change the money flows, inhibit innovation in any way.
Bloomberg, Sarah Forden, who leads the ns trust team out of DC and all things legal, thank you very much. Let's talk through the market reaction. Jeffrey's analyst Brent Hill joins US. Now the stock's up eight point six percent record high, but that's only the biggest jump since the first.
Week of April.
Your colleagues on the street, many of them have raised price targets or calls on the stock.
You have not in response to this ruling.
Why and what is your main takeaway from it?
So for the last ten years in tech, we maintained that any regulatory in insertion into these stocks are really not founded. So watching what happened to Meta was Zuckerberg watching what happened with Microsoft. There's been no breakup ever, and so we've always said that an illegal case like this, that there's always a remedy, and that the companies are too big and that the regulators want one thing and the tech companies want one thing, and they'll find a
way to meet in the middle. They have found a way to meet in the middle. And so our view is that again, in any situation, you buy these stocks on the sphere, and that worked for Microsoft and at work now for Google, we are a one hundred percent hit rate. This isn't the game I'm creating. This is the game we're playing in and that's been the rule book. So
our view is like it's there's been no change. This company's growing their EBITDA at a mid to high team multiple and the stock train at fourteen times and it
traded it twelve times just a few months ago. So there's really no knee jerk reaction from us because the reaction for the last ten years has been the same reaction and any legal case that we've had when we talk to our clients, which is they'll figure out a way and the inherent value is higher for what they're doing than what the street is embedding.
Well, brands now will change.
Well, Google needs to find a way to continue to compete even with a little bit of data sharing. What do you make of that part of the agreement and what it means versus rivals, particularly in general to AI.
Look, I mean we are starting our searches in perplexity and open AI, and then we're going to Google. We're not going away from Google. Google is still part of that. But the way we as consumers are looking for information I think is changing. And so I think this pressure on Google is good. It's going to bring their game out. You know, It's not like Scottie Shuffler likes to go out and play golf against himself. He wants justin Thomas.
He wants the other players, whether it's Tommy Fleetwood competing against him, that makes him better. So I think many of these AI companies are making Google better. And we've said this for a long time. There's more horsepower underneath the hood. Google has done a terrible job of popping the hood and showing us what's behind the hood, and we think you're going to see that. So you know, Gemini is doing a good job. We think ultimately that many's AI.
Competitors are a good thing.
And I think this came into obviously the judge's ruling, which is there's a lot more competition now than there was a few years ago.
We're going to go very deep on the Apple portion of this later in the hour, but the basics of it are is that Google's still allowed to play pay Apple twenty billion dollars a year and others to be the default search basement.
How big is that for Google? That result?
I think it's I mean it's huge, it's it's it's a big thing. And I think Apple has said that they are also looking at evaluating Gemini, they are evaluing other AI tools. But I think ultimately what happens is, look, even if they had to divest the browser, they didn't get this, Everyone's still going to go back to Google. Right, We're going to go to opening perplexity to do different searches,
but we ultimately end back up in Google. You can't complete the loop without Google, whether it's map information or hours about a business you're trying to visit, or you're trying to figure out, you know what time does the vet close? You know, like, there's just things that you need Google for and it's the best way. And so it really didn't matter in our opinion if they had
to divest the browser or what's gonna happen. It's the consumers are going to defect their behavior, and the behavior is you go to where you get the best information, and that's the best information today for a lot of the consumers is in Google. So again, I think the world is shifting. There's no question. I think this pressure
is going to be good. But I think again, if you take a picture of a car in California, which I did for my son, and you want to figure out where a Toyota four Runner with different colors is at, and Gemini will tell you the dealerships where that car is available in perplexity or or check gvtal to tell you the dealerships, it won't tell you where the exact car can be found. So I think there's examples of where Gemini is actually better than the other systems. And again,
we're gonna have multiple agents. We're gonna have multiple AI systems that we all embrace that work in concert with each other. And again I think that's what we're seeing in our survey work. When you talk to your own usage, when you look at you talk to your friends, we're using multiple tools. This isn't going to reduce the need for Google.
We're at your price target for alvabet I believe. So do we see ongoing growth for alvabet.
You seem to be talking a.
Very bullish case for why it's going to win out in this competition.
Yeah.
I mean Stock's up twenty two percent now and it's outperforming Amazon and many of the other names. The sen and AI was too negative, and on this court ruling it was too It was too negative. So we've had a nice snap back. And again, as we've seen in many cases like Oracles up fifteen, Stock gave back fifteen points recently. I mean I would say that I think clearly Stock's reflecting a lot of the good news now and that's honestly kind of again where our price target
was set. So we didn't predict this, but I certainly think there Again, just go back to the playbook for the last two decades in tech, the rule is every time, going forward, in every conversation we have going forward with you guys, the big tech investigations lead to basically nothing, and they are great buying opportunities. It's been that case for two decades.
So that's the That's what I think we've got to continue to take away right big texts trying to help consumers, governments, trying and protect and they ultimately find a way to have peace and in this new AI world.
And I think that's exactly what we got.
Brenville Anst Jefferies. Great to have you on.
Thank you.
Coming up software companies, well, they're offering the government steep discounts to line up contracts.
We'll discuss next. That's pretty bad tech.
Service Now is aiming to boost its contracts with the US government by offering federal agencies discounts, but as much as seventy percent on its software. Bloombo's Brody Ford breaks the story and joins US now. Service now wants adoption of its AI tools, right, but just explain the mechanism. What does a federal government agency need to do to get that seventy percent discount?
Yeah, so service now makes effectively it helped desk software. You say, oh, dang, I lost my laptop. I need a new one. Instead of going and finding somebody, you know, you just put in a ticket with service now over simplification. But it makes these kinds of things simple in the workplace. Essentially, the federal government has been saying, for these software tools we use, why don't we centralize our negotiations and try to get the best discount we can from these software vendors.
And so Service Now is just the latest of these steep discounts. They say, if you upgrade, if you expand your business, we'll give you a discount. Government gets a discount and Service now gets effectively new business because in a couple of years that pricing might go back to normal.
And is that the positive here because Service now is in what seventy five percent of government agencies, So they take this hit to margin in the short term for long term reward.
Yeah, I'm sure that is the bet there. May right, they're saying that we can land some new business, get them to upgrade to our better systems, We'll take the margin hit for a little while. Then in two or three years, you know what are we going to charge them. Then it's unclear how these discounts will stick.
Will they stick, But.
For now, the government and these vendors are saying it's a bit of a win win situation. I mean, government buying of software is a famously fragmented and chaotic process, and they're trying to improve that a bit.
Bloomberg's Brodie Ford, it's a great read. Thanks so much for explaining it. Look for more on software expertise here, let's bring in Hillary fresh Year is the senior research analysts for software and IT services at clear Bridge Investments, and Hillary, Look, it's not just Service Now. Microsoft has also been discounting. We've seen slacks have two pass a
salesforce and indeed some of the providers of cloud. Is this something you build into the models at the moment that for the time being they're going to have to offer more for less.
Sure, well, I think yes, it's part and parcel of actually doing business in the current era with the government. But the government has such antiquated systems, they have so much to do with respect to digitizing their environments that, as Brodie said, I think it's a big opportunity for the vendors. And recall that the margin on incremental software is incredibly high, so they can afford to give more
for the same amount initially to get more in the end. So, in fact, I think it's been a source of upside for some of these models. We actually saw that in Service Now few quarters ago.
Oh, Hillary, you said in this current environment in Carolina, and I was discussing this morning at.
The desk about how that last.
Earnings period, there were a number of names where government contracts were track so closely. How crucial is it that a software name is on good terms with this administration and able to get through that procurement process.
I think it's very important and beneficial. Most of the vendors we track are doing a pretty good job of it, and I actually I think most investors haven't imputed much benefit from government near term in their models to so to the extent that comes through, I think that could be a source of upside for some of them.
So then how should investors adjust maybe how they model some of these names. Is there a lot more upside in some of these shares that come directly from top line growth from government sales that you're not yet seeing baked in overtime?
Yes, over time, potentially next quarter. I don't think that's an immediate term phenomenon for many, But we saw Salesforce had booked one hundred million dollar government contract recently to the end of the quarter. That's actually a very small relative to the total, but it's indicative of a thign. It's an indicative of the government starting to purchase following DOGE cuts, where the vendors saw some immediate term pain in the prayer a few quarters, and.
That's important considering we've got Salesforce numbers coming out after the battle on September the third, and I'm interested well, so today I'm interested in the growth or the winners and losers here because in many ways, Salesforce has been beaten up this year, unlike many other tech names, because we're that it's losing out to Genai competitors.
Is not something you're seeing.
Yes, the entire SaaS complex has been really beaten up on investor concerns of our disintermediation.
And it's funny.
We've seen rolling recognition of GENI beneficiaries, starting with semis and hardware, data center, power, hyperscalers, etc. Most recently the data platform names, but SAS has been left behind, and I believe in that ving investors are assuming that SaaS is very much a zero sum game, meaning for any GENI winner, there are going to be multiple incumbent losers. But there are a few things I think about when
thinking through that which I'd be happy to discuss. One of them is that over the next five years we're going to see so much more opportunity in software and even in SaaS than we've been seen, there's going to be far more workloads to address farmer software written, and the incumbents who are moving quickly and executing will be
a big part of that. Second, these vendors are probably going to generate more revenue from GENNI before we see any actual real distancetermuniation from their businesses and their variances depending on the sub segment. But that's something to think about. And then finally, the valuations have been crushed, as you
pointed out, so it's an interesting stetup. There's still a fair amount of mutum uncertainty, but as we moved through the year, that narrative could shift similar to but not exactly to the extent that we saw in a in a Snowflake a year ago or a Mango DV more recently, but to a less.
Find that so fascinating.
I was in Europe for the UK for much of the last thirty days and a lot of the software names had a rough period. There's a lot of empsystem like how the no Code Low Code player survives right, And I'm interested in salesforce earnings right because there's the hype.
Of the AI headline.
Do you see that materially like growing these businesses?
Now?
Are they good at AI or are they just good at marketing?
They'll some of them will be good at both. I think salesforce will be good at both. Cogin is a very different discipline. Co gen doesn't have to be right out of the You have a world of developers who can spend all the time they save actually generating code or remediating the code after it's been written. When something is customer facing or even broadly employee facing, it has to be accurate, secure, compliant, trust it. It can't run off the rails. It can't expose proprietary data or expose
the organization to liability or security vulnerabilities. So that just translates to slower adoption in the enterprise in particular and commercial organizations. But the incumbents have incomacy advantages, They delivering distribution advantages. They have a lot of hooks into every system. They can make things work together. They own the workflows, the data fabric, the business logic. There's a lot there that they can work with and IMPUTYI on top of it.
So it just means they have a fighting chance and they're moving a whole lot faster this time around than they did in cloud. But it's going to take time. We're not going to see it immediately. It'll take time.
Henry Fresh Deep Insight.
We thank as senior research analysts for software and IT services at Clearbridge Investment.
Cato Networks is announcing its first ever acquisition, buying Israeli startup aim Security, which specialized is in enterprise AI security tools, going to bring in Cato CEO Sho Kramer.
And you know this is interesting.
You've been on the show regularly throughout the year, We've talked about M and A and now you've done some what's the rationale here?
Well, the nationalist that AI transformation is going to dominate enterprise investment in the next decade. It's going to be bigger and faster and more impactful from a business perspective than even digital transformation.
And it creates a huge security challenge because it's a completely new security sect that needs to listen to all these tens of thousands of conversations in plain language and decide what is.
Appopulate for the enterprise according to some policy. So this is a whole new category in security is going to be huge, and SASE is the best place to put it. SASE is the network. Security is a cloud service that sits and listen to all these conversations. So we've obviously jumped in early into this and bought a security that specializes for the last three years in building these security sets.
Is it about the talent that you need to bring in when you've already got an annual recurring revenue run rate of three hundred million dollars. You're building fast too. Why can't you do it organically?
Because the market is happening at late that is unprecedented. There's a huge pressure both from the board that's is AI as most important business initiative as well as from employees that the AI is the most important productivity initiative And the SISO that, as we talked last time, is in its predicament as it is from a budget and from a polational from a gunity perspective, now has to face AI and needs to deliver a secure journey and it needs to and they need to do it now.
So developing three years now, what AIM has developed in the last three years is not going to cut it. Enterprises need it now and need a broad solution and a deep solution and that's what we bring them.
Schlima.
We only have a minute left, but a crew has come in and giving you an additional fifty million on top of the three point fifty you did in June. Did you need the money for this piece of M and A or why are you taking that extra capital.
Because we can. Because I think that with this acquisition, Kato is becoming even more exciting to investors. And you know, we always have a second closing plan and and we have we have we have enough cash in the bank to get to profitability without compromising our aggressive golf targets, with or without this fifteen million, but showing a stronger balance. It is always a good thing.
Saline's Shomo Kramer. So it's great to catch up with you. Co found the CEO Cato Networks as it makes its first ever M and a.
Welcome back to Bloomberg Tech.
The data center power demand is growing exponentially thanks to AI and the UK's biggest engineering company, Rolls Royce is seizing that opportunity. Best known for its jet engine business, We'll Royce is also one of the pioneers of small nuclear reactor technology. Was recently chosen to build three units in the United Kingdom. HIT to talk through the power systems growth along with civil, aerospace and defense is a company's CFO, Helen McKay.
It is wonderful to have you here, Helen, while you're in the US talking to investors.
But I'm interested in what you tell them at the moment, particularly about SMR technology. What is the opportunity here for you as a business.
Huge opportunities you see in SMR, the size of that market. We think the addressable market is about four hundred equivalents of their SMRs. Huge opportunity coming forward. As you think about how we're going to support energy resilience going forward, it has to figure we have a leading position in that market. As you said, we won the contract with the UK government for the first three small modular reactors. We've actually won a contract with the Czech Republic for
up to six. We're in final stages with Sweden for their small module reactors, and we're actually looking at entry positions in the US. I mean the US market. You have a nuclear ambition to go from I think it's one hundred gigawatts to four hundred gigawatts by twenty fifty massive opportunity. And we've been building nuclear reactors for submarines, for nuclear submarines for more than sixty years, and our small modular reactors are the largest on the market as well.
You've really been selling into government and it's interesting at the moment that for us, it's all about the hyperscalar demand as well. And we have seen this nuclear renaissance bear fruit. When you've got Amazon with x Energy, when you've got Alphabet going with Chairostpower, do you talk to the hyperscalers or is it more about the US government giving your defense leaning No soo.
Absolutely we're talking to the hyperscalers right now. Where the initial focus is on governments and utility companies, but the hyperscalers are absolutely talking to us and interested in this. If you think about, as you said earlier, the growth and AI the that's going to be required to provide that continuity and resilience, SMR will absolutely figure in that. So those conversations are underway across the globe, not just in the US.
Helen we spent a lot of time in the last year speaking to Oklow and x Energy, the kind of the more small nimble startups in SMR on this program.
What's the Rolls Royce advantage?
What makes your technology better than the newcomers to the field.
Fantastic, So thanks for the question. So we've been in this area for more than sixty years.
Yeah, we have built.
Nuclear submarines with nuclear reactors, which is consistent technology with SMRs for the U for the UK Navy, So we've got leading technology, proven technology. It's based on proven fuel supplies as well. In addition to that, SMR is the largest on the market at four hundred and seventeen megawatts. That means from a cost and efficiency perspective, it's one of the more efficient, actually more comparable with energy and wind, but importantly more consistent, so it doesn't have latency issues.
And very importantly ere SMR construct eighty percent of it can be modular built, so you can construct it in the factory and if you think about almost like a Lego block and then you take it to build it on site. So it means the construction is much shorter and it means the risk factor faster, yeah, is much lower as well. So we do have that leading position with that distinctive technology.
Helen.
In the defense tech context, the political and strategic environments like really changed, not just the United States, but like Western allies overall. Could you just kind of give me your outlook for your next gen military turbo fans combined psyco engines and what's changing for you.
So, as you say, lots of activity in relation to investment and defense at the minute, both in the US and in Europe. And we've got a very strong position in the defense business, not just in what we provide for military operations, but actually how that shows up in our energy business within power systems. We have a very strong governmental position there. We have got leading positions in
Germany and Europe. We have got leading positions in land and naval, and with the spending particularly that's happening in Europe when people are talking about increasing natal commitments, where we expect to see that show up in the short term is actually in land and then naval. You know, in our power systems business that governmental business is twenty five percent of our revenues. So we're very well positioned YEP to support that growth and to capture those opportunities
going forward. So short term that's where we see it will show up. In longer term, we expect to see it show up in our defense business, but very exciting.
I mean, talk to us about the positioning for the long term opportunity here. Because you're the CFO, you're thinking about how to finance all of this that has been some reporting around the.
SMR part of the business.
Maybe you think for outside funding even talk of an IPO of that unit.
What are you thinking about longer term to finance all of this?
So SMR, we're not ipo ing that, just to be clear. So we're investing right now to support growth across all of our businesses. But if I maybe focus on the governmental business, just within the last six weeks, we've actually invested more than one hundred million pounds in the US alone to support the growth of expanded production, be that in defense or data centers.
Do you have to because of the administration investment on the No, Yeah, the US is an important market for It is very important that we continue to grow our position here.
It's one of our home markets. So it's the right thing for us to do. But across our business, since we put our transformation together, we've actually increased investment each year. Yeah, while we've delivered this results and we're investing now for the longer term, some of the investments that we're doing in our investment defense business, the platforms and the programs won't come into operation until the twenty thirties. So the long term growth is happening right now.
Helen ros Royce is so aligned with Airbus.
But the strategy of this president administration is to use Boeings like a negotiating tool, you know in international markets.
How do you see that playing out?
Do you participate in a US administration that's focused on Boeing if you're so close to Airbus? By the way, massive aviation like a care about the propulsion as well as the fuselage which aircraft cone on.
I mean.
So what I'd say is we have got a very good and strong relationship with the US administration and we've got a very good relationship with Boeing and Airbus. So that's how we lead into that. We've had a presence in America for more than one hundred years. We have got five thos people across twenty six states that work for rules Royce. It is one of your whole markets.
So that is how we.
Approach those relationships with the administration in the US, and it has worked incredibly well. And it will remain a very important market for us going forward.
Helen McKay, CFO Rolls Royce, thank you so much for joining us on Bloomberg Tech. Let's get back to our top story, and that is Google it does not have to divest Chrome. The shares are up almost nine percent, biggest jumpson's April record high. There's the second part to the story, which is that Google's able to continue paying partners for placement of search. Apple is the main part of that story. Its shares are also higher and in the balance and remainder.
Of the show.
We're going to go out to bloombergs Mark German and understand the Apple piece of this story.
What else is coming up?
Karen plenty more, particularly when it comes to funding and in the world of general to AI. The CEO of you dot Com joining us to discuss the company's latest one hundred million dollar funding round.
This is Bloomberg Tech.
AI search company u dot Com has closed a one hundred million dollar Series C funding round that values it at one point five billion dollars, fueled by the AI boom, and it shift in focus to enterprise customers. Use dot Com co founder and CEO Richard Socials with us in San Francisco. The environment has changed, The landscape has changed. Every time you come on, it's changed. But did that sort of make this round necessary? What do you need the funds for?
We're scaling, Our customers are scaling. The LM infrastructure that we need to keep these AI and agents up to date is increasing. The needs for it are increasing, so that's why we raise it to support our customers like Harvey, the Nih abduct, Dot Go, windsurf Telegraph, the German Press Agency DPA. There's so many customers now that want this technology and need to get the LMS to.
Be up to date.
Many founder CEOs from the show saying we're scaling, I think that there's like a lot of value in explaining what that reads in material real terms, like you're hiring better talent, you need more compute.
What is it? Yeah?
For us, it's definitely more compute, but also the talent. Those are basically the two biggest factors. The more mbdigpus but also more scraping infrastructure to really build out the best search index for lms. You know, Google build an amazing search index for people to decide, oh, which link should I click on.
But LMS search differently.
They can search through hundreds of different websites, right, they can read the whole text or certain lurbs of each website to then give you a summary of those answers. So all of that is different and needs investment.
Richard, I mean you are one of the heroes in natural language processing. You're like the fourth most cited researcher in it. You've been studying it for years. I must envisage that you've had some calls for your talent IU and wanting to purchase your company. Have you been fending off Meta and the like so left, right and center.
There's definitely been interest in you dot com and our team for the last like five years. But we're here to really build an enduring company where people can get answers, build their own agents, transform their companies, and so we're not that interested in that.
It is such a fair space though. Everyone's in on the enterprise. The large language model developers that you use open AI, they're trying to get into enterprise, and just recently the judge Meta ruling on alphabet for example, and the fact that they're going to have to share data. How does that benefit you? Because you started your journey in AI search.
Yeah. I think in consumer there will be a few usually monopoly or throw our polies, right, But an enterprise there's so much open space, right. There are so many different companies that need up to date information to make their lms more productive over both web data but also internal search, internal data, and you need to have all of that be composable as an API infrastructure. And so that's kind of what we're focused on and where we
think that is. Indeed, the killer app for lms is their productivity in enterprise.
Our executive producer Jackie Lopez was talking about how it's just beautiful timing having you on the show today. Let's be honest about it. You know, with the Google decision last night, it's coincidence. I was trying to think what is richards socialst thing and you've always been basically talking about Google in the context that people are building different and better stuff and both consumers and enterprises are more open to using a different technology. I think that's a
fair summary of your position. But how has the ruling changed things? You know against your the ideology of recent years.
Is so in many ways it's a good ruling now of course, as a startup, when this ruling will really come into effect is important. They might appeal the ruling. It'll take years probably for it to really materialize. That's infinity in AI and startup time. So we're still just focused on building the best APIs and also enter in solutions for our customers, and we don't really think this will materially affect us over next two or three years.
Now.
Of course it will affect other consumer companies, but again, in many ways, this is an index that was built for people to decide which flew a link to click on AIS, and people through their AIS and through their agents will search very differently into the three years.
Well, what's interesting is one of your clients that we just showed is dut dot Go and it's all about search. So how does its end exposure affect you and how do you think about continuing to serve are the AI winners or broadening out to more of the blue chips.
Well, yeah, I think the values of privacy are actually very useful for both consumers and for enterprise, and so we're really excited to keep partnering with companies like that that both want to get search results but also feed those search results into lms, and we're doing that over a billion times a month. There's actually no other AI startup I know of that is at that scale a billion times where our answers either are shown directly to a user or are given to an LM to then
majorly effect what that LM says. In fact, it would say that many people underestimate that whole search infrastructure layer. Whereas the lms themselves are going to get commoditized more and morts open source pressure for them, but the search you can't open source search index.
We want to thank you, Richard Shosha, wish we had more time, CEO and co founder Review dot Com. Fascinating fundraise, fascinating business model.
Come back soon. We hope.
You've got to get back to the key story of the day, and one of the move is on the back of it, Apple up almost three percent. That's as it rises alongside Alphabet the Court of Course ruling that Google can continue to pay partners for keeping Google's Search on their operating system. So more on Alphabet's impact on Apple. Let's get to Mark German. It is a big lift and it's a relief because it helps Apple's bottom line.
It's a relief for Apple, it's a relief for Google, but it's also relief for the whole technology industry. Right the US government is scrutinizing all of them, meta.
Google, Apple.
Of course you have the European Union involved, obviously that's separate. But this ruling yesterday sets some pretty nice precedent. Don't forget Apple. They're going to try on a couple of years now for what they've done to consumers according to the US government. Right, So if Google's getting off scot free for things that probably are much worse than what Apple has done according I mean, in my viewpoint, I think Apple is going to be okay in a couple
of years too. So that long term headwind that's been but also the short term headwind of losing potentially twenty billion a year from this Google deal that's also been mitigated.
Well, Mark, just really quick, because I also want to get to a story you broke yesterday. It's the services part of Apple's business that the streets focused on this morning in the context of the Google ruling.
Yeah, that's exactly right. I mean, like I said, the Google deal right now brings in over twenty billion dollars a year for Apple, and that's just one of two twenty billion dollar per year potential headwinds. The other is the app store. Obviously, the EU is trying to rip up the business model there. You have a judge in California who ruled that developers can spin users towards the web to complete transactions, which obviously means Apple loses it's
fifteen to thirty percent. So the services business, nearly half of it was potentially under fire over the over the next twelve months. Now the Google one's resolved, we'll see what happens with the app store.
What's interesting is Judge Meta basically said genera to AI has changed the game here.
Jeneraiti AI is changing the game when.
It comes to talent, and just talk to us about how we really are seeing Apple lose out in that respect.
It feels like, well, there's a talent war right now and Meta is leading the pack. You have Open AI and Anthropic in there. They're all trying to hire each other's top academics and researchers in the AI space. A little edge can do a lot. The big question for me is how quickly does this stuff all become commoditized and Apple's bed is well pretty soon because they are working on some extensive AI partnerships right now, and they've been looking at a number of companies to acquire, so
they believe they're going to play in here too. But for now, they're bleeding talent on an almost weekly basis. Every two weeks, I have a story coming out between two and five different major AI players at Apple leaving for Meta. Yesterday, I had a story about four departures over the last week or so, including the head of AI Robotics research going to Meta to their new robotics department. You also have two people going to Open Ai and another person going to Anthropic, and a lot of the
people on Apple's LM team they're interviewing out. So you're going to see more departures in the near future, but for now, Apples looking at ways to replenish that talent pool by buying or partnering mes Monk.
What is a notable move for Apple of almost three percent of Google ruling, But also check out his reporting on the talent departures. Another AI story, Open Ai is agreed to buy product testing startup Statsig for one point one billion dollars in an all stock deal want to bring in Bloomberg's AI reporter Rachel Metz. It's not the biggest deal that open AI's done.
It's not small either.
Why does open ai need statsig?
Open ai is working to build out its products. It's consumer products also, it's B to B products, and this is, in the company's view, a really good way to do that. They bought this company that helps companies test products that could do things like ab testing, so you can have people trying out different things with features that you might want to launch, and this is something that they see as really valuable to the future of products like chat GPT.
The CEO moves over become CTO of Applications reports into Fijisimo. Rachel, What did the deal look like from a talent perspective, because they've been getting more and more extraordinary as times gone on between AI companies.
Yeah, so as far as talent, as you mentioned, the CEO of statsig is going to take on this new role underneath Fijisimo. Figisimo is in charge of opening Eyes Applications at this point, and they also it also led to a whole bunch of other changes that you see that were announced at the same time. Open the eyes sort of shuffling around a number of people in management. So now the company's going to have two chief technology officers. Previously it had one, mirror Marati. She's been gone for
a while and started her own company. Now they will have two, one on the consumer side and one on the B to B side. So it's going to be interesting to see how those two people are in charge of different things, how they all work together, and what it means as far as growth in their business.
Rachel and lots happened in the last month, Like GPT five, we have more m and a news.
We have a lot of talent news.
Could you just update the audience where open ai currently kind of stands in all the chaos of reorgs and newsflow.
I mean a lot has been a lot has been going on, and I suspect we will we will see more. I mean we have to remember that this is a company that's undergoing a lot of change. It's not a young company at this point. I mean it's been around for about ten years. However, things have been chanting very rapidly over the past few years, and chagbt is continuing
to grow and grow and grow. It's got over seven hundred million users weekly users at this point, so I would expect to keep seeing things move around as a company continues to try to figure out what's going on, and as the industry continues to shift with other companies such as Meta, I'm trying to poach people on paying extremely large amounts of money for employees. It's going to be an interesting ride.
And we're here for it as a you Rachel Metz, so good to have you on on the latest bit of M and A and Open AI. I meanwhile, that does it for this edition Opening by Tech, But we've got to look in at what the market's been up to.
It has been a bounce back since yesterday.
Yeah, now's that one hundred bounce back. Whether it's short lived or not. Apple and Alphabet the main stories. Apple, I think is kind of big, like it's a strong reaction on a stop where a standard deviation Okay, forgive me that one one sigma move is two percent. We'll keep tracking the top story recap on the podcast. We've had some absolutely terrific conversations today on what has been a massive story from San Francisco and New York.
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