Meta Cable Expansion Stalled by Iran Conflict

Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive from coast to coast with Caroline Hyde in New York and Vla Low in San Francisco.

This is Bloomberg Tech coming up.

US Defense Secretary Pete Hegsev gives an update on Iran.

As we near the end of week two of the war.

You know, the new so called not so Supreme leader is wounded and likely disfigure.

Class.

Adobe CEO Shantanu and the Ryan will resign amid skepticism about the company's ability to thrive in the AI era, and the S ANDP is considering changes to rules governing how companies join its index, which could fast track SpaceX's entry after an IPO. Let's get to markets, and this is what the financial markets look like this Friday. It's a kind of continuation of the broader theme of the week.

There is slight.

Pressure on equities and asat one hundred is modestly lower, basically flat. And you see Brent crude, the global benchmark for oil above one hundred dollars a barrel. With a micro focus of what's happening in the Middle East and the Gulf, there has been some other news flow and earning considerations around that. When it comes to the tech sector, we can get to those later in the hour, but right now it is very much the macro and what

Yeah, hey, and good morning. While as you mentioned, the US is threatening Iran with fresh attacks, the latest suggestion that there is going to be no let up in this conflict. We heard from President Trump in a post on truth Social earlier where he said that the US maintains unlimited ammunition and has quote plenty of time.

Plus.

We heard from the US Defense Secretary Pete Hegseth and a briefing to reporters earlier today where he confirmed the US and Israel have hit more than fifteen thousand Iranian targets and says that Iran's one way drone usage is now down ninety five percent, that.

The United States is decimating the radical Iranian regimes military in a way the world has never seen before. Never before has a modern capable military which Iran used to have been so quickly destroyed and made combat ineffective, devastated from.

An operational level. We know that insuring safe passage through the Strait of Hermus remains a top priority, as Secretary Hegseth went on to say, quote, We've been dealing with it. Bloomberg News is now reporting that several back channels have been opened between US allies and Iran about reopening the straight Those sources caution that they are not optimistic that

Tyler Kendall, thank you.

With the war in Iran continuing to Royal Region, Meta has announced its pausing part of its major internet expansion efforts in Africa, specifically work on a key underwater cable system that would have run through parts of the Middle East, including Oman, the UAE, and Saudi Arabia. Here with the

Right well, because of the war in Iran and the missiles that have been coming across the Persian Gulf, Meta well has been kind of forced to take the decision to stop building part of this enormous cable system that's been building for.

A while called to Africa.

They've actually built the bigger part of it around the continent of Africa, but last year they were forced to sort of delay work on a section running through the Red Sea because there were whothy missile attacks on ships there.

And when they.

Did that, they said, it's okay, We've still got this other section going through the Persian Gulf, and that's the part that we're talking about now. Well, now, because of the missile attacks there, the boats that install cables have issued of what's called a force measure notice saying they can no longer continue to meet their contractual obligations due to obviously the massive safety concerns, And so that means this part of this very important new high capacity fiber optic cable is on hold.

The bigger picture for Meta, what is it that they were trying to achieve in Africa in the region more broadly in laying down basically what is updated infrastructure.

Right, they want to bring a huge amount more connectivity to the Middle East and Africa, and I think they will. You know, they've already succeeded that partially, but this huge section both in the Red Sea and now in the Persian Gulf means that this additional capacity that was going to really help sort of fuel the data center build out that's happening in the region is not to be available, at least in the short term.

Bloomberg's Olivia Solon thank you another meta headline. The company is reportedly delaying the role out of its latest AI model after internal testing showed it underperformed compared with rival systems. That's according to a report by The New York Times. This is how equity markets reacting to that meta under pressure down almost three percent. Then, you know, looking at the trading, particularly in the pre market, alphabet Pairent of Google is up percentage point now but had been up

What do you interpret from that?

Sure ed?

So you know, when we think about both of these stocks. You know, we try to look at things in the context of the long term versus some of these short term moves that we're seeing in markets. You know, we do see these dislocations from time to time, but over the long term, we know that the growth rates for both of the stocks are very high and they're you know, they've got high quality balance sheets supporting the growth that they're trying to accomplish.

Right now, we're trying to digest still ongoing data, largely rearing relating to earnings, and I think just before the earning season hit, you had many people in the markets come out and say, this is this is what we will will judge momentum by simply earnings performance in aggregate at this point when it comes to particularly the hyperscalers, but our focus on AI. What was it that you learned from the earnings season?

You know, earning season provided a lot of incremental information just regarding the overall buildout of AI and where we are and the focus that investors have on that return on investment that everybody wants to see, just given how much CAPAX is being spent by the overall hyperscalers. But you know, we also saw that earnings wasn't everything, you know, especially in the software space in which earnings continue to go higher and yet the multiples got destroyed.

So the software space interesting.

I guess if you look below the index level and take a look at January, February, now March, what was it you saw in investor behavior and the attitude towards the tech sector?

Sure, so you know, it really depends on some of the macro economic data that we've been dealing with, some of the geopolitical data. To January and February, we clearly saw that sell off in software and it reverse in March as a little bit of a flight to quality again, seeing a little bit of a balance from something that had sold off quite a bit and less cyclical per se. And you know, you saw the safety of the mag seven as well. During this sort of geopolitical conflict that has been going on.

What's dominating the news cycle is war in Iran. Again, you know, from the technology investors' perspective, what is the incremental data, the soft data, the macro level data that you're tracking to make decisions with the portfolio.

I think from our standpoint, it's clearly the duration of this conflict, which is going to be key. I think everybody else has talked about this, and it's the one thing that nobody really can forecast. If it's short, it's great. If it's a little bit longer, it's a little bit more detrimental. There's key raw materials, especially for semiconductors that could sort of offset some of the production issues that we've seen in the past, and so, you know, really

AI is still the dominant theme for.

You absolutely, especially when it comes to technology and for the overall market, it's just the overall contribution from the hyperscalers and capex and what that means for the overall US economy and globally as well, and you know, just the use cases and the workflow changes for a lot of enterprises. I think is the predominant sort of you know, issues that we're all trying to figure out over the next several years.

Okay, so next week we either do or we don't have a big macro event, which is in Nvidia's GtC conference. You know, it's so difficult to gauge how that moves the need or are you genuinely sort of braced for it is a big item on the calendar or kind of noise really and hype around what's happening.

You know, it's really going to depend on what kind of information sort of comes out there. You know, in video stock has been a little bit range bound for the last several months, and hopefully, you know, if they have some sort of big announcement, perhaps it moves the stock. But I think that the bar is high. You know, you've seen Earning's growth of over seventy percent, and you

Right.

You know, at Nvidia GtC and DC we got that surprise half a trillion dollar figure from Jensen one which was literally on a slide behind him and a little more information than that. Yoko Yoshioka wealth Enhancement grew. Great to have you back on the program, Thank you very much.

Some news.

Amazon plans to use chips from startups Cerebras alongside its own training and processors.

It's a combination that.

The companies say we'll be able to better run AI software. AWS will begin offering a new service based on the arrangement in the second half of twenty twenty six. According to a statement, financial terms weren't disclosed, and when that headline hit, By the way, there was a little move lower in nvideo to session lows, but it kind of bounced back after Okay, coming up. Leadership uncertainty at Adobe overshadows otherwise pretty steady results. We're going to discuss that next.

The news.

The company announced on its earnings call that Shantanu Nuran, who served as CEO for.

Nearly two decades.

Is stepping down the stock has already been under pressure anyway, down over thirty percent on the last year or so. Is it faces concerns about its ability to thrive in the AI era. Let's get to it. Bloombok's Brodie Ford is here with us. I mean, this is not a new story with Adobe and whether it is managing well transition into the AI era.

But we'll start with Shantanu.

You and I exchanged emails about well what happens next? So tell us you know, there's an effort to find a successor. And I guess did we get any insight as to why Shantanu's decided to take this decision at all?

Yeah?

Well, Shantanu was a legend, right, I mean, he was in that seat for eighteen years, and he gets a lot of credit for turning Adobe from a company where you just buy a photoshop or another product tool in time to one of these recurring subscription businesses that is just normal, but at the time was quite novel.

But at the end of the day, I.

Think he was seen as a CEO of that era and the AI era. A lot of these SaaS companies are needing to undergo a transition or reinvention, and it appears that he or the board or somebody decided that he might not have been the right person to lead that transition.

There were some data points in the earnings themselves, you know, customer behaviors for example, particularly about images, things like that. What did you learn about the AI story for Adobe?

People that are using AI within Adobe products? But the big risk for them is that the cost of content creation has gone down a lot. A lot of the hit creative programs are not made by Adobe, right. I mean, Adobe's valuation for a long time was based on being really kind of the only game in town if you were a professional, and every day that becomes a little less true. And that's what they have to reckon with.

We said at at the start of the segment, so we should probably go back to it that actually earnings were okay. You know, if you if you can move past the news that the CEO of the last two decades is moving on, what did the numbers say about the business.

It's quite similar to a lot of the big sass names, whether it be Workday or Salesforce, that they're seeing steady growth slight decelerations some uptick of their AI products, but at the end of the day, it's just not enough to convince investors that AI will be an additive and not a competitive force against their business.

Being Boss Brady Ford all across the software space, thank you very much. Another news item, a jury in Los Angeles will soon decide the outcome of the high stakes social media trial and the claims that sites like Instagram and YouTube are dangerously addictive to young people. Final arguments just concluded after roughly four weeks testimony from medical experts, a whistleblower, and Mark Zuckerberg himself. The jury of seven women and five men is set to begin deliberations today.

And thanks so much for having me on, And it's a reason that we're incredibly excited about.

We're already working with so many of the fastest growing companies based in Europe. We think about companies like eleven Labs, to great companies started by European founders like Stripe in Versell, and I would say Europe is having a moment and we want to be there for it and bring so much of it be brought to American companies, to the companies operating in that region.

That's an interesting point.

Like when you posted the news this morning on different social platforms, you know, one of the interesting points of discussion is what is the competitive landscape like for you in Europe and how is it different to in the US? Like in America? And correct me if I'm wrong, but you go up against kind of the big banks. Is that the same in Europe or is it a different industry there?

In many ways, it's very consistent, I would say, whether it's the US or even in Europe. Classically, if you were a bank you were able to move money, and if you weren't, you could sell weird after market software to do your expenses or pay your bills or things like that. And the result was probably what most people still feel of. You know, one hour a month, you have the worst hour slowly doing your expenses across different systems. And part of what we proved out in the US is it doesn't have to.

Be so hard.

You know, we've created cards where you tap them and your expense report is done for you, your books are closed for you. And the result is that companies spend less. The average business spends about five percent less, and the average business on Ramp grew last year by about sixteen percent, which is multiple times the US average.

And so just as we've brought this to the US, we.

Want to bring that same innovation and more to the great companies being built and operate out of Europe.

Operate out of Europe. But like Lot's, it's a global world. Is a funny thing to say, but you know, many of your customs or clients, right they would have a footprint operationally in different jurisdictions like the US and Europe. And you know, is this kind of therefore about like the multinational client that you're trying to go after.

It's a bit of both.

I mean, so for today, let's say you're a multinational leader like a Shopify or like a CB. You can issue cards today locally and make payments all around the world in Europe, in Asia, in Latin America, you name it.

Ramp is able to do that.

But part of what this acquisition brings is the capabilities to serve European headquartered or based companies without operations in the United States, and so they're able to benefit from that same global infrastructure. But it really allows us to reach a much larger market.

Talking a little bit about RAMP the company, the startup and you running it, you have like the who's who list of investors. And what I find interesting is not common, not unique to you. You know, it's come up a lot recently. You sat on a lot of the money that you raised for quite a long time. You've gone out and done an acquisition. You know what's that like, you know, deciding to spend the funds raised.

It's look, with everything we do, just as we're trying to help our customers get more from every dollar an hour, we want to too and I think you're exactly right. The business has raised more than two billion dollars of equity capital, the vast, vast majority of it is still on balance sheet, and RAMP is even generating cash even as we're one of the fastest growing companies in the world.

Now interesting, would you would you give me a number on that, you know, any sort of financial metric on the health of how it's going.

You know, I would say this, We've had four straight quarters of accelerating growth. The businesses call it doubling every year, which is really an outlier. And last year, I believe together we shared that last summer we passed more than a billion dollars a year in revenue and US dollars, and so we've seen that growth rate even accelerate.

So it's quite unique.

You run a tight ship and you know you're trying to grow RAMP, and I really appreciate you know, sharing the dates are on that point.

The landscape's very interesting.

Like Brex selling to Capital One as an example, over many years on the show, the guys of Brex would never have said that that would be the case. How do you feel about ramps independence, you know, long term and where it fits in a big sea of large financial players.

I think it's a really special thing. If you talk to let's say a finance leader of a company, let's say with five hundred employees, their finance suite looks like a mess. There we find there's something like twenty tools on average, something for cards and for bill payments, something for ar something for expenses, something for procurement, something for approvals.

It's horrific.

And part of what we've done is collapse that and really simplify it. And I think that has first made us unique in the market and allowed us to grow even faster than the largest financial institutions.

And so we're excited.

We're over two percent of all the corporate and small business card transactions in the US, and well.

We're very excited about that.

We look forward to taking on the next ninety eight percent and delivering something better.

Eric, we just have thirty seconds.

But looking at Block as an example, will you reduce headcount because of AI?

Look, we have salespeople who were closing two three times the dollar value of deals than we did last year. And from my vantage point, when you have people who can do that, you want to hire as many as you can as.

Fast as possible.

Eric Lyman Cram is really great to have you back on Bloomberg Tech.

Thank you very much.

Now, coming up on the show, changes to rules governing the S and P five hundred could rocket SpaceX onto the index. We're gonna have details on that Bloomberg story. Next it is halftime. These are the markets, and this is Bloomberg Tech. Welcome back to Bloomberg Tech. I'm Ed Ludlow, SMP dal Jones Indices considering changes to how companies join the S and P five hundred.

That's all.

According to sources, the move could potentially fast track elon musk SpaceX onto the lists after it's expected to be a blockbuster public market daily later this year. Bloombergs car Porto is here with the details. It's a big story that the team broke and tried to explain in detail the considerations that are happening. And they are considerations, So let's start with that. What have we learned in our reporting?

Well, yeah, it's important to note that no final decisions have been taken on this. However, should S and P decide to change its rules its committee, it would be absolutely momentous. Who would you excuse the pun put rocket fuel on the trading of SpaceX as a new company.

You and I did a story together yesterday. It was complicated, in part based on regulatory filing, in part the people we spoke to. But in short, SpaceX's acquisition of Xai has closed and there is some ownership cans that took place.

Explain it to our audience.

Well, I wish we had half an hour, But in short, it's effectively tiding up the balance sheet, putting different pieces of equity into different boxes. Tesla's investment in Xai has been rolled over into SpaceX. Some of the early investors who've been with Elan for a long time across different companies, those like Vallar and DFJ have also had the stakes in SpaceX slightly increased as part of these changes.

It's all designed to make your.

Equity term sheet look a little bit more normal as you approach the IPO process, which we still expect to happen this summer or into Neil Autumn.

Okay, Bloembos card Border part of the team that's done a lot of reporting on I guess mechanics of what's happening with SpaceX ahead of an anticipated public market debut.

Let's get an investors perspective on all of it.

Peter Singlehurst leaves the private company's team at Bailey Gifford an investor in SpaceX, but other names that I guess we've talked in the text of being potential blockbuster IPOs down the line. Anthropic is another example. Peter, you welcome back to the show. I think it's the first time we've had the opportunity to speak since SpaceX acquired XAI. And I guess just what's your reaction to that, How you guys felt about it, the interpretation of the rationale behind it.

I think when you step back and you consider what has made SpaceX such an incredible business over the last ten years, it's their ability to drive down the cost of launch. It's the deflationary nature of their business. And when you look at other hardware categories where we've seen that historically, such as Moore's law in transistors or Flatley's law in genomics, when you drive down cost.

By order of the magnitude, it.

Opens up phenomenal unforseeable use cases, and we're seeing that in the domain of space now. Starlink has been the first application of that, and we think there's a statable case that data centers in space could well be the next application that opens up as you drive down that cost of launch. Now it's early days for that, it remains unproven, but if that is to be something that is feasible, being vertically integrated into an LM model such as the Rock model will be an advantage for SpaceX.

At the time that the news came that SpaceX would acquire Xai, we did some reporting that essentially XAI operates as a subsidiary of SpaceX in parts. There's also itar considerations, but there's also xai's financial situation, which is the debt burden and its rate of cash burn. How did you feel about SpaceX taking on that balance sheet?

Essentially, I think if any business is going to take on a company that has those necessary capex requirements, it needs to be a company that's in a very robust financial position, and SpaceX is in a privileged position of having not only a very strong balance sheet, but having

I think could be a strong combination.

Kyle did I think a pretty good job a few moments ago explaining the sort of technicalities of a transaction closed like this. But the big picture is the net result of Tesla now having literally a financial stake in SpaceX because of the investment it made of the series of XAI that being rollover in SpaceX, the Elon Inc. Story is kind of coming together. How do you feel about that?

You know, the proximity of those two giants.

I think there's always been a complicated web of interconnections between Elon Musk's companies and we saw this as Tesla owners when they acquired solar City. Ultimately, what will drive shareholder returns will be to strong execution and growth of these businesses. And at the time of the Solar City acquisition by Tesla, it was controversial, but in the end it turned out not to really matter because Tesla was such a phenomenally successful business and we believe that dynamic

We're showing kind of the rest of your portfolio of private company investments, and I get that's actually split across a you know, more than one trust, right, But what those companies all have in common is the staying private longer. Many of them have done tenders or secondaries. Explain, you know what's happening in that private markets, in that private market that's supporting that theme.

Yeah, So there is a two kinds of transactions that we see happening in the later stages of the private markets. We are continuing to see very large primary capital rounds where companies are raising capital to invest in their businesses. And they're it's businesses such as anthropic such as and ill such as Wave that are raising billions of dollars to invest in the huge market opportunities that they have. But that capital that they're raising is going into their

Peter, we've been very focused on anthropic and anthropics relationship with the US government, with the Department of Defense. My understanding is that there's like this group of investors that basically applaud Dario Ammi Day for having redlines, but also you know that there's this belief that there is a commercial advantage in holding that moral high ground. They would cite the data of Claud's placement on the different app stores and downloads activity after the Pentagon labeled it at

I personally wouldn't contextualize it within the realms of moral high ground. I think this actually comes down to business culture. So one of the things that we really focus on when we diligence business is the cultures of organizations. And then we're not looking for good cultures or bad cultures. We're looking for effective cultures, and we're looking for cultures that will be instrumental in driving the performance of businesses.

Sacrifices to maintain cultures.

And so where we see companies and we're seeing this in the case of Anthropic making sacrifices and taking difficult decisions to act in ways that are congruent with their cultures.

We applaud that.

Because we think it enables companies to survive and thrive in the long term.

Peter Singlehurst, head of private Companies at beg IF it has been great to have you back on bloom Betel. I really appreciate the depth that we went into across some of the companies in the portfolio. Now coming up in the show, we're going to speak to Lucid's c FO. Topic with Sayid. After a kind of difficult day for the shares yesterday, simple story invest Today, they told us about the future and more about their plans for Robotaxi.

It's good to see you.

I want to start, actually if I may, with the environment that we're in and just the supply chain impact, but also the financing impact that you're seeing from the war in Iran, because of course Saudi Arabia and different Saudi entities are your biggest backers. What are you saying on your desk right now?

Well, for the moment, I mean, the disruption that we have seen have been rather minimal. So we have not noticed major disruption as far as our supply chain and so for we did see some tactical adjustment of some of the logistic costs of the shipping companies hav indeed increased some of the pricing, but as far as our operation is concerned, we didn't see any disruption for the time being. So we will need to see long term if the events and the tension are for too long,

The big headline for you in the Finance Org was a timeline or a plan to get to positive free cash flow. Yes, I'd kindly ask for a little bit more detail. What is the timeline on that and mechanically, what are the levers you can use to achieve positive free cash flow.

So we have two important linstones. The first one is the gross margin positive and this is expected to happen in the medterm and you should read the midterm basically the next three years. And the free cash flow positive expected by the late decades.

So this is the plan that we have.

This is the guidance that we have provided yesterday during our investor day. So several levers that we will be activating to get there. First of all, I mean we are in an industry where scale is important. School scale coming out of mid size is one of the key catalysts to allow us to go to break even margin and cash flow positive. So that's the first liver. The second one is the margin improvement and the additional revenue streams that we will be adding.

To our top line.

So the margin is expected to improve on the back again of the scale. The various improvements that we're doing not only in terms of constraining the bill of material or constraining some of the cost lines that we have in the company. It's also about simplifying what we will be bringing to the market. Going forward. So when you work on a platform with the ninety five percent part communality over time, this is how you leverage the cost and this is how you constrain it and you accelerate

So we are so focused right now on the business model for Robotaxi for all the different conduits of what is a web of partnerships. Right you have announced Project Lunar purpose Built Robotaxi to see that. But what I want to understand is at volume, there's a financing risk and an execution risk from taking the vehicles off the production line and then a fleet operator taking them. So who takes on that burden? Whose balance sheet gets that done?

Well?

There are different models and these models are not meant to be static. So I mean speaking about what exists and what we already know. So the first deal that we have done with our partners with Nuru and Uber was a deal, which was based on the assumption that Lucid provides the technology and the platform, and the car or provides the software and the AI autonomous driving capabilities,

We're having a finance conversation, which is, you know it's appropriate you are the CFO. I wonder like how interesting the mechanisms can get, Like, you know, Uber has a financial interest in this, the capital light models. So do you see maybe private equity or the banks coming in

Yeah, so obviously, I mean the gold standard in these kind of businesses is too secure recurring revenues. So this is how you spread the risk over time, and this is how you give confidence on the validity of the business case. Having said that, I mean we are also staying away from whatever is associated with the capital intensive business. So I don't think that we will ever have a model where we own the assets we generate revenue out

I think that this will create.

New business models and new operators who will start joining the overall value chain over time.

And that's the bit that our audience really wanted to understand. You say, Licid TFA, it's great to have you on Bloomberg Tech.

Thank you know.

Coming out, we're going to talk about US government effort to enlist Silicon Valley in its AI warfare ambitions.

Stick around. This is bloombag Tech.

The Trump administration's decision to blacklist Anthropic after its dispute with the Pentagon to spark debate about how the government does business with the technology sector and buys AI. Here's what the CEO of Dell, whose biggest customer is the US government, told Bloomberg.

We're kind of a foundational provider of the infrastructure. What I can say from our standpoint is, obviously we have various controls and systems to make sure we're selling to the right, you know, to to the authorized users.

But we, you know we I don't think.

A company can dictate to a sovereign government what it does with its tools.

It's also costs a spotlight on efforts to enlist Silicon Valley into the government's vision for AI warfare. That's the focus of the forthcoming book from Bloomberg's owning Katrina Manson Project Maven, Katrina joins us. Now the timing of of this book, the recent reporting that you've been doing, this is the story right now the use of technology in the government's relationship with the technology sector. I guess take us inside what you've written and the conclusions that you've reached.

Thanks so much. I think the thing that I've discovered is that this effort to bring AI to war that started in twenty seventeen with Project Maven, and then we learn much less about it after Google workers protested and Google obviously didn't renew its contract. But the effort kept going in two key ways. We already publicly know about.

Bloombergs Katrina Manson, author of the new book Project Maven, Thank you very much, and it's due out very soon later in this month. That does it for this edition of Bloomberg Tech. Actually, since we've come on air, this is what financial markets look like. Now's that one hundreds now down half of percent, a big move higher in the US tenure yield, and again Brent crewed the global oil benchmark.

We're above one hundred dollars a barrel.

We focus on the war in Iran and the tech ology sector. Check out the podcast for the recap. You know where to find it. This is Bloomberg Tech.