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This is Bloomberg Technology with Caroline Hyde and Ed lud Love.
Welcome to Bloomberg Technology.
I'm Caroline Hyde in Bloomberg's World headquarters in New York. There is a lot to get to this hour, but let's start with some of the political turmoil in France, that no confidence vote that could topple the country's current government Blouemost. Caroline Conan is there for the latest in Paris debate finally getting underway. But for our global audience and our technology audience, Caroline, for listen to.
What we expect in the next hour or so. So the debate just started.
Here behind me inside the National Assembly, you've got Erie Cokrel at the moment speaking, is the leader of the far left group in the National Assembly, and this is the group that is proposing this motion of no confidence in order to topple Michelle Bannie's governments and make Michelle Bannie's government collapse. That vote could happen in the next couple of hours, and we're pretty sure of the outcome
as we speak given the national value. So the far right party of Marin Lupen has said that they will back this motion of no confidence even if it was presented by the far left, So the two extremes joining forces in order to overthrow this Banne government.
We can see the impact on the euro, we've seen the impact on the price of French debt. But for those that are running businesses for a technology audience that cares about the French technology startups, for example, what does a change or collapsing government mean for them?
Of course, the main question is that we're going to have a twenty two twenty five budget and what is left in this budget. There will probably be some special laws in order to roll over the twenty twenty four budget, but.
That means a lot of help and.
For example, a reduction of contributions from companies in order to hire lowest income employees. These are not going to be automatically indexed on inflation, meaning that it's going to be harder. It's going to cost more for those companies to hire some of those employees. So technically, in the short term it's a little unclear. But in the longer term, if there is still no budget over the next few weeks before the end of December, that will have a big impact on companies.
That will because we'll.
Have this twenty twenty four budget saying the same we had any increase.
Carolyn, We thank you so much for the latest from Paris. We'll come back to you on any of the breaking news, but first let's kind.
Of check on the markets, because despite.
Political termol worldwide, it fails often. ZAC is at a record high, the S and P is at a record high, and we have tech to thank for it.
In large part.
We see Salesforce also at a record high, up eight point seven percent off the back of its earnings, really managing to pull out the power from its AI agent force focus.
We're looking at Octa, this is.
Application software company also rising at one point up more than thirteen percent. We're now up five percent on the back of a beaten raise for its earnings after the bell yesterday. And Marvel Technology it's now up some twenty percent, sawing its world to a record high. This is the chip company had better than expected results and stronger earnings forecast as well. What's notable is also Marvell's CEO Matt Murphy said on the call that he is committed to
the company despite being a potential contender. We understand to lead Intel and that is where we want to go next. Because Intel's search for a new CEO is the focus for many at the moment, and is it going to be focusing heavily on outsiders. The chip maker is considering candidates such as Matt Murphy, but also the former Cadence Design System CEO Lip Bhutan, who actually recently quit the board of Intel, as bringing in Bloomberg's Ryan Gold for
more Ryan. Is it surprising to see Intel not go to its own bench.
Carol, I think it is when you think this is the first time since nineteen sixty eight when Intel was founded, that they will actually sort of think about looking outside. I think that kind of gets to the heart of what it means to be in semi conductors right now. Semi Conductors takes a lot of expertise, It takes a load of nows and you know, some of the decisions that were made excuse me, over the years, you know, and the pet even the Bob Swan Krasnich before him.
You know, these are decisions that will pay if you make them, might in ten years time.
That's how long it takes.
To get some things over the line in semiconductors and to go out and think about who your next CEO is. It's not only easy toss.
Well, many are going to look at Pat Keilsinger didn't actually get that much time. He came from VMware EMC, but he was in many ways an Intel life though he had started his career there. And what therefore is really the attractiveness of this role at the moment, Marvel, for example, Matt Murphy doing a great job showing the power of a strategy. Is it not going to be that appetizing a role to be taking on right now?
I think it's a it could be a poison chalice. I think some people do you as a poison cholie, just given the challenges because when you think about am dference and it's a big rival to Intel. It made the decision to go Fablus years and years ago. Intel is still you know, still a fab chip company.
It'll be more of a fast.
Exactly, and you know rival t SMC and we all know how that went. So whoever comes in has a massive challenge on their hands. That said, though you know the fact that we were probably sid them at Murphy is being considered, lip bout ten being considered. Let's remember that lip Boo is a big advocate for you know, making Intel more sort of industrially manufacturing sound, so you
know that could be interesting. But you know there are many others too, because we're told, for instance, when we talk to sources that anyone who puts their hand up who has a remote degree of expertise in semiconductors will likely be considered. And you know, I can tell you that Spencer Stewart that's running the process to higher than UCO. Right now, they're saying that we're probably going to look for four or five candidates and then shortliss to one to two.
Which can we get a timeframe?
I think they're looking to this as soon as.
Possible, Ran keeping us up to speed. We thank you Rangel there. Meanwhile, let's just.
Get a deeper look at the chip space tech market more broadly, turning one of t RO prices with US managing the Science and Technology Fund more than nine billion dollars under management there and basically, you look like you're in every chip name apart from Intel in many ways, Tony, is that right? And and how are you looking at the ecosystem and its strength.
Yeah, I think that's a great question.
You know, when you look at our holdings, we currently are focused on the compute aspect of things, and so looking at AI, you know in video is a big holding as well as Marvell and Broadcom.
On my view is that the compute.
Tam is growing significantly as the foundational models are kind of growing exponentially every year, and so the chip Coneys that had the scale, the expertise of tape out the leading edge, you know, are I think going to be advantageous in terms of capturing this compute TAM. So I think, you know, I like the space long term. But you know, we are selective in our in our holdings here, you know, specifically those three especially well.
Let's talk about Marvel for example, would it be a worry as the leader did jump ship to Intel.
Well, I think Matt Murphy has created created a ton of value over the years. You look at when they picked it up, it was in the sub ten billion dollar mark cap, and he's over the years, I've done a lot of great m and A and capital allocation, spun businesses off, acquired a world class custom team that is right now delivering a lot of AI custom uh compute ships for like the likes of Amazon, for example, and so you know, I think that it would be
a concern if you jump ship. I do think it's it's uh, you know, He's put a lot of work in to Marvell.
He's got a.
Great team there and they're kind of firing on all cylinders coming out of the last few years. So you know, from my perspective, it seems like he does have a lot of good reasons.
To stay at Marvell.
And so I'm you know, I'm taking his word what he said last night kind of face value here.
Looking at your top ten holdings, Marvel is one of them at the end of October is about two percent of the fund. The top holding is in video, as you mentioned. Interestingly, we had as CEO Matt Garman on the show Well on the pro across our network yesterday and we're going to be playing out a bit of that sound later. But Amazon is the best points contributor to the NASDAC. Today they had a whole raft of
chip announcements. What does that mean for Invidia? What does it mean in terms of their own customers building custom silicon?
Yeah, I think I don't think that story is anything new. It's just generally the evolution of compute. Essentially, you have the new workloads that need more general purpose in video chips, and then over time, as the workloads get bigger and they mature and stabilize, you kind of bring in the custom compute.
And so, you know, I.
Think the two kind of coexists, and they have co existed over the last decade, and so going forward, I think of them as kind of you know, kind of symbiotic relationship in some ways, and that it is just an evidence that the chipped kind of TAM is increasing in the compute TAM, and the demands continue to increase because you the workloads are argating to be so big, you it, then it makes sense to have a custom chip.
But you know, what's what's special is that, like you know, previously kind of five ten years ago, we thought AI would just be you know, subject to just only like identifying what's a cat and what's not a cat.
I can mentioned. So now it's like.
Transformed into something that we no one could have thought about or predicted.
So, you know, I think that it's just we've had this debate.
Before of like but I think what you've seen is that both kind of Nvidia and the custom chip providers have done well as the TAMA has increased.
I am not a cat forever to be part of Internet's story. What then, about in Vidia's valuation at these levels You're talking about how finally we're getting the return on investment from an application layer perspective of AI. We're actually using it in our everyday life. While work life can in video grow in terms of its own valuation, Have we priced it all in?
Yeah, I think that's a great question.
I mean, three point three four trillion dollars that's marketcap
right now is pretty astounding. If you look at like the profitability in the in the free cash flow, I mean, it's kind of pretty reasonable, like thirty thirty five times forward earnings, and so while the stock price has gone up a lot, I think that when you look at evaluation, it's not an extreme at one hundred times earnings, which I think that says the market You're saying there is a little bit of concern of like how sustainable the
numbers are, whether profitability can continue to be at these levels, and so, you know, I think the valuation in that face value is actually relatively moderate. You know, given its history and its growth, it.
Is extraordinary just to take a step back and think that on this day we're at a record high for the NAST, that one hundred apples at a record high. We've got Nvidia continuing to rise in terms of market cap, and then you have the salesforce numbers and its own record high in terms of share price today, what do you make of their application of AI agent force and whether actually it's going to make the more profitable as well as getting revenue off the ground.
Yeah, I think it's an exciting time in tech in that you know, AI could be this next productivity revolution and so, you know, kind of uncapping labor as we know it with digital agents and digital labor that essentially doesn't need a sleep, doesn't need to take breaks, operate twenty four to seven, and can operate alongside humans.
And so I think that's what's really exciting.
And all these software companies are now kind of seeing the opportunity and going after and everyone wants to be the platform where you soar your data, you operate and so whether that's Mirosoft Service now you know, Salesforce, like
I think it's a bigger opportunity. And so we've kind of seen, you know, the first year of chativity or to be dominated by the chip companies like Invidia dominate infrastructure layer and so now I think that we're seeing it on the appware, which is really exciting because you need to see it in the appwere for kind of the chip companies to continue doing well, and you know, I think we are kind of seeing that in the last kind of earning season.
Get we've seen that shift, as you say, movement from all in on chips then shifting into software. But boy, is it playing out in some of the valuations. I'm looking at Palenteer training at one hundred and eighty times future earnings that had been the darling of the AI story. Will other companies rip to to get to those sorts
of valuation levels or is Palenteers overdone as well? You talk about how are at this crucial moment where AI is going to disrupt the workforce, But I feel that the market's been trying to price that in for quite a while.
Yeah.
Absolutely, and I think that not every company can be like what Paluneer is doing. I think to do AI is really really hard, and they've been the AI leader for the last decade, and I think I think of them bringing AI to the government and the the the enterprise, and so I think what's special about them is that they've got this like very centralized ontology for AI, and then they can kind of customize that for clients and clients can build on that.
So I think them as like a platform.
And you think about what the United States government is trying to doing now is to be more efficient, and part of that is bringing AI and technology to automate things and to modernize people's peoples are processing and data. And so I don't think every company can be like Puenteer.
I think there's like some special ones in kind of the AI software kind of madcaps area, like you know, kind of like app love in for example, or AX, and I like, you know, where there's like specific vertical application where AI can be applied and really drive a lot of automation and in intelligence.
I love that you take us out to some of the different names as well. Tenuang of t row Price brilliant to have you one.
Thank you.
Last week, Bloomberg reported that the FTC is investigating into Microsoft, which is focusing on how the tech Giant is bundling its Windows operating system with other software as well as its dominance in cybersecurity. Now reports from the Information are saying that the agency is asking about Microsoft steel with open Ai, which grants the course the cloud giant exclusive right to run the startup models on the cloud servers, as.
Well as of the company's revenue and trust.
Lawyer David Belto shows us now he previously worked as former policy director of the FTC's Bureau of Competition, someone who's well versed in how long these.
Investigations could go on and with what right they take.
So the way which the FDC is pursuing Microsoft, does it seem significant to you?
I think it's very important. You know, that Microsoft case brought by the Department of Justice in the late nineteen nineties was critical to the expansion and growth of the Internet. Many of the things that we benefit from in competition on the Internet are specifically because of that earlier case.
What's interesting is, of course we've heard back from the Microsoft Deputy General Council Ruma Ali, who put on LinkedIn saying on behalf of Microsoft, the FDC Inspector General to investigate whether the FDC management improperly leaked confidential information about a potential anti trust investigation. How do you see these sorts of investigations involving and becoming publicly known before Indeed, Microsoft has a chance to ultimately lead the way here.
I'm extraordinarily skeptical about whether or not the agency would there would be some kind of leak from the agency. That's extraordinarily unusual. Third parties, however, who receive civil investigative demands can disclose whatever they want, and maybe this is a situation where one of those parties disclosed information to the press about the requests it had received from the TC.
Of course, this is wide ranging.
It would see Bloomberg initially reporting on how it's going to be focusing on the way they intertwine their operating system and also their dominance and cybersecurity. Now the information talking about the open Ai Microsoft deal, I want to just take a listen to a conversation I have with the AWS CEO yesterday, Matt Garmon talking about how he'd like to offer his own AWS clients access to open aiye models but can't at the moment.
Just take a listen.
I believe that we would love open ai models inside of aws. Absolutely, it's we listen to our customers and if that's something the customers want.
We're absolutely game.
Obviously, with the partnership, it takes multiple sources, and there's probably some complexities in there, as you allude to, but I think in the fullness of time as likely.
Is the case.
So there in lies some of the issue that maybe the FTC is investigating this relationship with open Ai Microsoft and whether it should be indeed broken open a little. It seems as though Matt Garman is positive that it will. Do you think that ultimately that be done by self regulation or actual FTC regulation.
No, I think the FTC is going to take a serious look at this relationship and the potential of that relationship to foreclose other forms of competition other rivals. They're going to take a very close look at the nature of the agreement between open ai and Microsoft.
Do you think though, that a lot of these cloud companies are having particular relationships with some of these very powerful generative AI models. Is that something that's generally going to be looked at across the board.
Yes, but it's always important to realize that Microsoft is dominant. They're dominant in cloud computing, they're dominant in certain software categories, vital software categories, and when the firm takes that dominance and extends that dominance to other product markets and for closes competition in those markets, that violates the antitrust laws.
I feel though AWS would have something to say about as you're being all that dominant. They feel that they have owned a lot of the market. I'm sure that even other areas Oracle fields that they've got a key state Google as well. Can you have broader provision less oligopoly like cloud operations when this ultimately is incredibly expensive to offer.
I think that's one of the considerations that's kept in mind here. But we see many markets where there are not contractual arrangements that for closed competition, where competition flourishes. And it's specifically those arrangements like the arrangement between Microsoft and open Ai that will receive in ten scrutiny. And you know, especially because Microsoft is so dominant in cloud.
Computing and dominant in cybersecurity and in many ways they're reporting is such that this investigation started because some of the failings to do with cyber when it came to federal provision is that what sparked all of this, David, how do you think this is going to weather a transition into a new administration?
First of all, that suggests one of the real advantages of having a federal Trade Commission that deals with both consumer protection issues. They are failure to provide cybersecurity adequately and competition issues. I think this is an investigation that won't lose any steam in a new Trump administration. The kinds of legal issues here about when bundling is legal
and illegal. I think there's a pretty strong consensus between Republican and Democratic and I try some forcers, so I expect this investigation will go full throughout in the next administration.
David Balto, former Policy director of the Bureau of Competition at the FTC, thank you for your time. Now coming up, David Ellison is dying big changes to Paramount.
We're on that next. This has pretty big technology time now for talking tech.
First up, big changes may be coming to Paramount Global. According to sources, expected CEO David Ellison is exploring combining Paramount's TV units, investing more into streaming, and overhauling its top management. This is all expected to come when it's merged with Skydance. It's finalized next year. Plus Meta is
looking towards nuclear energy to fuel its AI ambitions. The parent company of Facebook is asking developers to submit proposals to deliver one to four gigawatt's reactors, studying in early twenty thirty. For scale, one gigawa of electricity is enough to power seven and fifty thousand typical homes and millionaires. Ab O'Neil's Iliad is set to sell half of its data center business to French infrastructure fund INFRA via Capital.
Partners, and the company is in exclusive.
Talks to sell fifty percent stake in iLiad's Opcore for total enterprise value of nine hundred and four million dollars. Coming up plenty more when it comes to data centers. My conversation with Amazon Web Services CEO Matt Garmon on the company's major plans for AI. What's going to power it? That's next? This is Blue Meg Technology. Welcome back to Blue Meg Technology. I'm Caroline Hide, New York. A quick check on these markets that are at new record highs.
The NASDAK, the S and P five hundred apples at a record, Amazon's at a record.
You've got across the board.
The key companies that are coming out with earnings also raising to new record highs Marvel coming out with its numbers that beaten raise and we see it at.
A record high, and so is Salesforce.
So move on as the Nazaq one hundred goes up nine tens percent, we in large part are being helped by the latest numbers that out of CRM, Salesforce up nine percent. Of course, its third quarter earnings looking strong. This is his AI agent Force comes through with a bang that adding thousand people to go out and sell this in particular. But we're seeing eight percent growth in
their earnings as well in terms of revenue. Let's break it all down with Bloomberg Intelligence analyst Anna rag Rana, and I mean many were questioning the valuation the share price of Salesforce going into this earnings report, but they managed to vindicate it.
Yeah, Caroline, if you look at the results, the margin number was above expectations, but other than that, everything else was generally in line to what people were expecting. But I think the real push is people are really buying Mark Bennehoff's agent for story and the potential for that down the road to add revenue. You know, it's not going to add revenue for the next twelve months to
a point where it's going to move the needle. But I think after that it should start to add, you know, a good momentum to the overall revenue base.
Executive VP Mike Spence is saying it was quote a good number of the amount of deals that they signed with Agent Force.
What does a good numbers look like?
Do you think, yeah, on the call they said something about two hundred deals or so. But at the same time, those two hundred deals are not moving the needle when it comes to the bookings data, and we don't think that's going to happen. I think what you're seeing right now is a lot of value realization by the street that says, Okay, at the end of the day, Salesforce
is going to be a net beneficiary of GENNI. I think this is the biggest discussion around almost the entire software space, is what companies will benefit over the next two to three years or longer and which one's going to be you know, not so much. And I think that's where salesforces people are getting convinced that, you know, they have their act together because previously.
People are worried about that act, right arag We were seeing a concern about Mark Beniov's desire to keep on doing M and A, perhaps not thinking about profitability. They made big layoffs, they've streamlined the business, but then they're still splashing three and forty four million dollars on zoom In's startup acquisition.
Do you still like them adding on tucking in when they can.
Yeah, the small acquisitions don't bother me one bit because that doesn't really impact the free cash flow. It's really the big ones that worry because that's going to change the momentum of the margin improvement. You know, we just looked at it the day he announced that it's not going to be any more M and A, it's going to focus on margins. Just from that point till today,
their margins have gone up by ten percentage points. That's a very big number by any standard, And frankly speaking, when you look at a company like Microsoft or Oracle, salesforce has a long way to go before it can reach those numbers. So there is still more potential for margin improvement. As long as they they can get their organic growth rate up, you know, people will like it.
Operating margin I think coming in at about thirty three point one percent.
And what of Microsoft, what of.
Competitors in this agent offering and co pilot offering that we hear so much about.
So when you look at Salesforce, the two of their biggest products are sales Cloud and service Cloud. Service Cloud is a lot to depend on people who are looking at, you know, back office and customer support functions. This is where the agents are really going to benefit because think about it, if you are calling a human to get transaction done or taking care of your work, it's going to cost the company or the end market, whether it's an airline or a phone company, a lot of money.
If you can get that done through an automated chat pot that can actually execute the operation for you, that can change your phone plan without getting a human being involved, that can return your stuff and refund you the money before you know, without getting any human involved in it. That's a very big cost benefit for the end customer. And that's really where Salesforce is going right now.
Through meg Intelligence analyst Anna Ragrana, thank you so much.
Talking of application of AI.
Amazon It's trading at a record high today after its cloud divisions annual Reinvent conference and it rolled out there yesterday. Powerful new chip arrays a large language model to compete with leading rivals. Mark Garman Awico joined us after his stage appearance and we started discussing the massive cluster of homegrown chips. He says, we'll quintuple the processing path for its AI partner, Anthropic.
Take a listen.
That is the first innovation is our Amazon designed custom silicon that gives us really unparalleled performance for generative AIA capabilities. And then we build these together with high performance networking that we also build in house. And then of course they'll be cooling and heating and power that we need
to go to go build the data centers. But it really starts with that silicon down at the level, and we innovate on the entire back of AI to make sure that we can control everything that goes into those clusters.
Can you talk to us a little bit compare and contrast here.
This is about less dependency on Nvidio GPUs too many ways doing an alternative for your clients. What sort of cost saving will clients get? What sort of energy and efficiency will they get?
Yeah?
Well, first of all, I think we like to think of it as a supplement to in video GPUs and Vidia has a fantastic product that team has done an outstanding job executing, and we think that the vast majority of workloads are going to continue to run in VideA processors for a long time. But customers want choice, and they want choice that can give them some lower cost options, and we think that for certain workloads, for many workloads, Trainium two can give customers thirty to forty percent cost
performance benefits over today's GPU powered instances. And so we think that that's a huge win for customers, particularly as they're looking to lower the cost from Generator I workloads. But we'll be great partners with Nvidia and continue to lean in on building great technologies together with them for a long time.
Train to Trainium two available, Training three in the works, and all of this is as Nvidia at the moment, it's estimated has about ninety five percent market shared. Do you agree with that sort of number they have and what sort of area do you think that that will come down to?
Yeah, I mean, I think it's probably higher than that. I think that the vast majority of workloads in generative AI today run on in Vidia technology and they've absolutely been the leaders in that space. But we do think we hear from customers that they want choice, and just with our processors where we're type partners with Intel and with AMD, but we decided to go build a general purpose processor called Graviton, and it's been hugely successful with
our customers. But we also provide lots of Intel and lots of AMD processors in our cloud today and those businesses continue to grow. So I expect that our usage of Nvidia will continue to grow from our customers and that choice is really going to be powerful. And as you see this explosion of generative AI usage, I think there's going to be plenty of business for multiple different people to be successful.
I keep partners Intel. How concerned have you've been about the change at the top?
Oh, it's okay.
I wish pat the best.
You know, he's no patent.
He's been a good partner of ours. But we've been partners with Intel for a long time. It's been eighteen years since we launched our first Intel instance when AWS and EC two first launched, and we'll continue to be great partners with Intel, and they have a great technology team there and we look forward to continuing to roll out the latest technologies from Intel for our customers to be able to use, and he've been.
Continuing to roll out, as you say in video offerings. Last time you're on, we're talking about Blackwell. Of course, many have been frustrated, perhaps by some slowness to market there. When do you anticipate that Blackwell will be unfolding? And how difficult has it been to ensure the supply side is there?
Well, They've obviously had some manufacturing things that they're going through, but we're very excited about it. I think the early
returns and the early looks at Blackwell look fantastic. We expect almost a two and a half times gain in the compute power that you get from Blackwell that we saw from H one hundreds, and so I think it'll be a really material jump for customers once we get those out, and you know, I think those will be early next year, and we're excited about putting them into gun customers hands, and we'll get them out there as soon as they're available.
Investors, though they find it wild, this whole frenemy existence that's going on. Do you truly think that investors here think, oh, we want to see in video dependency as well as AWS having its own offerings. Is that something you think everyone can swallow or do you think ultimately there will be a broadening out other than just in video winning all.
Look, I do think it's a partner if you think about AWS. We started from the very beginning thinking about this partnership mindset, and we built the entire business around AWS thinking about how AWS would have services and our partners would have services, and that there's plenty of space for all of us to really grow and build our businesses. And that is true for software providers, it's true for
service providers, and it's true for technology providers. And so I think that we've proven time and time again over the last eighteen years that AWS can have products and our partners can have products, and then as we make them all available, that the whole pie gets bigger. And so I think there's plenty of opportunity for both. And so it really isn't I think it makes for a fun narrative that it's either or, But we're great partners
with n Video. We will continue to be, and this is all about making the pie get bigger.
Fighting the Frenemi discussion my conversation with AWSCO Matt Garmon Coming up plenty more on AI and the investment opportunities. Liney Lyman underscore VC managing partner can be joining us.
This is really my technology