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This is Bloomberg Tech coming up. Elon Musk's XAI taps big name investors, including Nvidia in a curious piece of financing for GPUs. Bloomberg breaks the story wide open.
Plus, Tesla unveils cheaper versions of its top selling EV models.
Will it help with falling sales numbers? We'll discuss.
We sit down with the UK Minister for AI to discuss increased investment between the UK and US on tech innovation and a whole lot more.
First, that's check in on these markets that rally once again, if you're looking in then aw's that one hundred ed It is your key players, it is the in video's mds. We're talking so much about the relentless intertwining of generative AI players at the moment in the market. But what's notable is we still are thinking about fundamentals. We are still thinking about how far we've come from the lows of April.
But what are you looking at underneath the hood.
Let's get to our top story overnight, Bloomberg broke details of a financing mechanism that Xai is using for the GPUs that are going in Colossus too. Our understanding from sources is that an SPV or special purpose vehicles formed. They use debt inequity to get the capitol by the GPUs. XAI rents or leases those GPUs from the investors and pays them that fee over time. In Video is involved, it's getting involved in the equity piece. This morning, in
Video CEO Jensen one confirmed a whole chunk of our reporting. Carrow, this is very complicated. Let's get into the specifics.
Let's do exactly that.
Sticking with the two key players in Video and Xai, bloom most common.
ROYO is with us.
You help break the story with Ed and I just want to get to grips of how creative this financing actually is. How often do we see SPVs being set up to buy GPUs and use them as underlying assets.
Hi, thank you for having me. We've seen aspvs in the past before used for other type of assets. It's quite common in Wall Street to basically use assets as collateral instead of putting corporate debt, but it's becoming much more interesting and much more common to see tech giants basically do this type of deals because they don't want to put a lot of debt on the corporate balance sheet. So I think we're going to see more of these in the future.
Common It's been a busy couple of days chasing this one, right. So the structure is twenty billion dollars, most of it is debt and there is some equity in there. And this morning in Video's CEO Jensen One went on another network and in an interview essentially confirmed in vidious participation. Just give us the rest of the details that we put in that story.
Sure, So it will be at least twenty billion of capital basically to buy the chips that xa I will use for this data center in Memphis. And there's going to be like a variety of Wall Street investors in the dead We know Apollo is in a diameter. We reported as well. The equity will have a number of
investors as well, including Valor, who's leading the financing. But yeah, and Videos invested in the equity, which is really interesting given that they're basically using that money to buy their own chips.
Where do we go from here?
I mean It's really difficult because I feel there's a lot more reporting to be done. The piece of the mechanism that I'm trying to get my head around is that there's an SPV and Xai rents and leases the chips. We think over a five year period, what are the investors get in return, Like are they going to get a stake in Xai? Are they just being paid rent basically? And then that covers their debt obligations.
What do we know, Well, well, from what do we know, they get the least payments, which is how they can amortiz with debt overtime. So basically you get like yeah, like monthly quarterly payments for the financing, so you kind of like pay down the debt that way. But the idea from what we understand is basically at the end of it, you still have like the chips that have some value right after the five years, so that stays within that SPV.
I would say just very quick that we haven't heard from Elon Musk or Xai, Gensen, Wang and Nvidia haven't responded to us formerly other than declining to comment, so we'll keep a track of this one. Bloomberg's Carmen a Roya. It's great to work with you in the newsroom. Thank you. So that latest funding on Nvidia into ex Ai only adds into what is now complex web of aideals that
have been occurring. It's the topic of today's Big Take, looking at the circular transactions happening within the AI market. Bloomberg's Ai editor Seth Figgerman joins us, Now there is this big one trillion dollar headline figure and if you draw up a mad web with red string on a ball of where everything's going, it all kind of touches in Nvidia and open Ai. Give us the top line of the big Take.
Well, we did try to draw that mad web of red string and our graphic, and also thank YOUEV for the extra newspeg overnight with the great scoop on video. But yes, I think ultimately we have seen something resembling circular or interconnected deals for a lot of the A boom. But it's getting to the point where it's harder to ignore.
There are just dozens of investments and business partnerships and chip agreements primarily that all lead back one or two steps are moved to Nvidia and open Ai, and the size and scope of these have just grown exponentially, particularly as open ai itself has kind of gone from saying we're going to spend billions to possibly trillions on the
infrastructure of the support this sect. Also, I think, as in Vidia has become a four point five trillion dollar company that's very eager to keep the good times going by spreading the money around.
Seth talk about the good times and really whether anxiety is vindicated here.
The worry on open aiyes front, is that at the moment.
It's loss making, and so how does it eventually pay this back? But you have to bet on its growth and its ability to get revenue. Nvidia has the money, and that's in many ways why Goldman, for example, is saying this is not like the dot com era, even if we are seeing these complex web of integrations and relationships.
I think both things can be true. You know, ultimately, a lot of what's backstopping the AI boom, as we know are these very big tech companies with very healthy
balance sheets and massive cash stockpiles, including in Nvidia. On the other hand, I think the graphic makes quite clear and the story itself that increasingly a lot of these companies are very bound up, particularly open AI affirmed that while it's a decade old and a household name everywhere, has never turned the profit and plans to spend you know, hundreds of billions if not more, including through debt. So you know, I think both things can be true. Is
it in Vigia about to go bust tomorrow because of this? No? But is there a heightened exposure to all these companies because they're tethering themselves to a handful of you know, fast growing but still unprofitable AIS startups. Yeah, there's a risk in.
Meg Seth Fiegeman, thank you for talking us through what is an amazing piece of data journalism as well.
Go read it the Big Take.
Let's get more investor analysis now, though carrosh life for more as chief market strategistic BIMO Private Wealth has one hundred fifteen million dollars in assets under management.
And Carol, I'm interested in.
There's a great line in that Big Take coming from Stacy Ragson over at Bernstein saying basically, Sam Altman is either going to drive this economy lower, We're going to see the world economy tank or he's taking us to the promised land.
Which way are you seeing it going?
I'm not sure it's either or First off, thanks for having me. I'm joining you from Toronto today. Or we're doing a Female Eurasia Group US Canada summit. So there's a lot of discussions on AI and other things like that going on here.
But I'm not.
Sure it's all good or all bad. It's someplace in between, and there are a lot of things to watch. I love the Big Take already. I caught it in the middle of the night and sent it out to a number of co workers, especially the graphic in they're showing that circular nature that's very much like some of the stuff we saw go on in previous bubbles. But as your reporter commented on, you've got right now. It's backed by big companies with very solid balance sheets, and they're
generating revenue off of that. The one thing that we keep in mind for our investors, though, is that you've also got a very concentrated stock market because of that circular nature and the interrelated deals that they're all doing. If investors start questioning one, you could get a ripple effect, but it would be a rip effect. Perhaps you lead to some sort of pullback, which we haven't had since April, but we don't see it rippling through the economy and
taking known major suads of the economy. So it's a very nuanced answer, but it's it's rarely ever all black or all.
White, Carol.
What we are trying to see though, is actually who takes the most the profits available from all these deals in video clearly massively revenue generating and profit generating. But then you think of Oracle and some of the questioning about how much of a margin they make on a three hundred billion dollar contract for open AI. How much do you have to do the due diligence on individual names right now?
Well, I think you really do it.
The market's not much because I mean one of the phrases we've been using all week is the market seems to be acting like no news on economic data or anything. No news is good news, and off we go to new highs. But you have to be very discerning. But we've always been a combination of top down and bottom up in what we're looking at things. And you also have to, especially in a diversified portfolio, realize you might be over concentrated even if you're doing individual securities. If
you own a passive index fund. If you own an AI specific or a technology specific ETF, you've concentrated it even more. And so it's doing some of that and it's stepping back and doing some good portfolio hygiene looking back perhaps at where we started the year, taking some of those games off the table and shifting them around
to other sectors that are potential beneficiaries. Because we have energy, we have nuclear, we have a lot of things that have to happen for those for the switches to go on in those data centers.
Carol, you've had a decorated career of markets as a chief investment officer. I just want to run the mechanism that I reported overnight passed you again a special purpose vehicle where you have both debt inequity pulled together by a group of investors who buy GPUs and then in this case XAI rents those GPUs or leases them from
the special purpose vehicle. I haven't heard of this structure before, but just as a structural consideration in financial markets and the debt load and where it's placed, how do you react to that?
I think it'll be a really interesting earning season because I'm sure a lot of analysts will be asking those detailed questions because we're starting from a place with a lot of those companies other than perhaps Oracle, as I understand it, we're starting from a place of pretty pristine balance sheets. You also have tax benefits that accrue to
some where. I'm not sure exactly how their accounting works in terms of who's expensing everything, who's capitalizing some but you have to capitalize less stuff now, so if you've got the earnings to support writing it off, it's less damaging to the balance sheet. But it is indicative of the fact that Wall Street staffed up at the end of less year with an awful lot of deal making people that I've had a lot of time to think
really creatively about how to put this stuff together. So as an investor, it makes a job that much more difficult because to your point, you really have to figure out what's on the balance sheet, what's not on the balance sheet.
Carol, there's a lot we don't know as well, like the tax consideration.
I'm trying to get after it.
Oracle one hundred billion dollar is a debt swinging to negative free cash flow for the first time since nineteen ninety two. I've been tracking the data do you.
Yeah, we track some of it, and we've got a lot of analysts in our global asset management and capital markets units that get really specific about that. I don't as much anymore on a macro basis, but I listened really hard, and I asked the questions, and I started a couple of months ago asking the some of the
research teams, how are they financing these deals? How are they dealing with you know, when does it shift to debt, because at the time it was all coming out of cash flow, and I wanted to understand too, what goes right through the income statement so it's never showing up on the balance sheet Because an Nvidia chip isn't going to last twenty years, and anything less than twenty years you can technically write off against earnings in the period you do.
It twenty years.
So most investors I speak to you say try five years. Carol Stone. Right, you've been brilliant. You've been brilliant. We're really grateful for your time here, BG Tech, be MO, Private Wealth Corosh Live.
Thank you.
Now, coming up on the program, we're going to take another look at Tesla's cheaper, cheaper version of its top selling EV models and if it can help with falling sales numbers.
That's next. This is Bloomberg Tech.
Kees Left just unveiled new cheaper versions of its top selling models, priced it under forty thousand dollars to make them well more affordable in an effort to counteract the loss of US incentives for electric cars.
One of the most croterd L who covers Auto's joins US Now for more.
How much cheaper? Let's get specific on some of the price data and what you're losing for that.
Yeah, you know, it's somewhere in the range of eleven or thirteen percent cheaper relative to what the base model three and Model Y we're costing prior to this. However, when you take into account the seventy five hundred dollars text credit that's gone away and what it would have cost you to buy those base models, you know, even just you know, a week ago or so, these models are are you know, two thousand dollars more expensive and
for less content? So you lose a second row screen, you lose ambient lighting, you have less battery range, slower accelerations, So you know, will this be helpful for the incremental consumer who was maybe on the sort of line of being able to afford versus not being able to afford a Tesla. I think it does help Tesla's you know,
business in that regard. But it's also a case of, you know, not necessarily a slam dunk if you're a consumer, because you're giving up a lot for you know, for for a lower price, and you know, there is a real sort of value equation here here to do.
We reported about twenty four hours ahead of time that there would be a standard model Y. We did not report that there would also be a three, and there was. But I think if you could recap some of the reporting we did on where they engineered out cost, because the reaction on social media at least has been like, hold on, so if you engineered out seventy percent of whatever, why is it only thirteen percent cheaper.
Yeah, it's a really good question. And I think, you know, I go back even to April of last year and when you were reporting on the sort of idea that a twenty five thousand dollars Tesla was sort of falling
by the wayside. You know, Tesla sort of came right out and sort of responded to those reports by saying that they were going to introduce more affordable models, and they sort of alluded to this idea of taking some elements of this next generation you know, vehicle that they were going to sort of incorporate into their existing lineup. I don't get a whole I don't really get much of a sense that they've actually done that.
Here.
It feels more like they've just decontented these vehicles. And so, you know, to the extent that I have questions for Musk and the management team, it's how much are you actually sort of innovating your vehicles versus just taking things out and then you know, charging consumers less because you've taken cost off of your own cost of goods sould And you know, that's pretty unclear at this juncture whether they've actually, you know, done things with the batteries, with the motors.
Or have they just taken away content.
Yeah, yeah, I mean the engineering side, that's what we had heard. Blue Bells creator ow our Global Autos editor, thank you so much. Let's continue the conversation with Steve Wesley, founder and managing partner of the Wesley Group, a venture firm with seven one hundred million dollars of assets, on the massive management but we go to Steve because at one time Steve sat on Tesla's board and shaired their
audit committee. He's also been involved at state level finance at a high level for a long time.
You heard all of the reporting.
I'm sure you've been on Tesla's website and looked at the vehicles. The story here is the impact that is seventy five hundred dollar federal tax credit was having on the EV market in America?
Is it not?
Well, it's going to have a big impact. Look, the big question here is this is a step in the right direction. Tesla's bringing prices down, But at thirty seven K for the Model three, is that low enough to attract the new class of buyers? And step back a bit. Thirty seven k it's less than the average US internal combustion and engine vehicle, which day stands at forty eight k. But can Tesla's new model compete with the EV from Volkswagen at hyunda A and the US at twenty seven thousand?
And how are they going to compete with those twenty thousand dollars Chinese evs that bid is bringing into Europe. So I think there's a chance the new slim down Model Y. It's going to bring in some new buyers for sure, but how much is it going to cut into the premium market and are they going to end up ahead at the end of the day. Looking forward,
battery prices are going to continue to drop. This may be a stopgap measure, but Tesla, I believe, still needs that twenty five thousand dollars model to get into new developing markets and attract for first time entering buyers in the US.
You know, Tesla considers itself a technology company and the leader in global engineering. Right when you were at Tesla, it was about Model S principally and like that was value for money because it was so performant and had all of these bells and whistles with it. I guess the root of my question is why would they release this vehicle? You know, to many people, it doesn't live up to that engineering or technology value that Tesla's given historically.
I think you put your finger on the problem. Tesla's a premium vehicle. They charge a premium and people expect to have the latest and greatest, and I don't think they're really seeing that. You see these other brands like VIEID with twelve models and Swagen and the eight I Think and General Motors with ten ge Whiz. Tesla has only had five models in its history, and the cyber truck barely accounts because that was a flop. People want
to see new technology, new products coming into market. I really think they need that twenty five thousand dollars car. But they've got to do both. They not only need to bring new models and lower cost cars to market. At the same time, they have to deliver on this promise of getting full self driving out there, staying competitive with Weemo. They've got some things to prove.
Stee that is the technology that they're now betting on. The innovation cycle moves towards robotics and wards to automation. How integral is the cash cow of car sales to you.
Well, again, they've got to do both. When you have a company that's trading at a two hundred and fifty price to earnings ratio, that's nosebleedy high. I mean, gosh, in VideA is only at fifty to one. So they've got to show that they can not only bring new
products to market, stay in the ballpark price wise. I'm not sure a four k reduction really gets them there and get licensing in new cities so they could show that their full self driving is going national and hopefully international, and that they're going to be a deliver on this humanoid robots. They've got a tough road ahead to show that they can stand up to the evaluation they currently have.
Now aren't argue with one point trillion dollar market cap, but I'm not sure investors will buy that for.
A long I mean, briefly, you just mention the valuation difference between Nvidia and Tesla, but we know that Jensen Wang saying I wish I put more money into Xai, for example in the SPV because he wants to back anything Elon does. Steve, what would it take for you to be interested in buying back into Tesla as a shareholder, Well.
You'd want to see real progress full self driving. You know, just as the world's going all electric, it's going autonomous faster than people realize. You're going to see that in the next year with way moost growth. The question is is Tesla going to be right in there as a
major competitor or not. At the same time, you're absolutely right, we're heading into this new world of autonomy in everything from the factory floor to vehicles, and people are going to want to see this new humanoid robot can tessly be cutting edge at new areas. Now, who wants to bet against Elon Musk for all he's developed at SpaceX Starlink and frankly you've got to give him credit for
reinventing the auto industry. But the last three years have been lean and you look at three years of flat revenues. People need to hear that new story and I think they need to hear it soon.
Steve Westley of the Wesley Group always great catching up with the thank you now coming up. SoftBank gets in on robotics, talking of it in a new deal, furthering Masochi Soun's growing bets on the emerging tech and AI.
Do's something that tech time now for talking.
Tech and first up SoftBank as we used to buy ABB's robotics unit, which supplies industrial arms and robots to manufacturers in a factuck four million dollar deal.
And this is says Softbag CEO.
Masayoshi's son aims to build data centers across the US in partnership with Open Ai and Oracle Plus.
Ali Baba has set up an.
In house robotics team part of its effort to develop physical AI. The team sits within the unit responsible for the company's main AI foundation models units. Leader Justin Lynd says the focus will be motormodel models, which he predicted would become foundational agents.
Okay, coming up, we're going to speak with Kristin Smith, Solana.
Policy Institute President.
As signs of some Bitcoin support begin to fade a little, a big crypto segment coming up next from San Francisco and Los Angeles.
This is Bloomberg Tech.
Welcome back to Bloomberg Tech if you're just joining us, So I thought'd give you a little bit of a flavor of what tech's doing in financial markets. And now's that one hundred up about a percentage point. There's buyers for stocks in tech right now. It's mostly the chip name, so they're pushing us higher, but some megacaps as well. And of course we've been talking all morning about what's happening with Xai and Nvidio and some other folks. And I'm sure we'll do a bit more. And there are
one million bitcoin headlines on the Bloomberg terminal. That's not an exaggeration. If I had time, I'd read them all to you. But are about one hundred and twenty two thousand, five hundred dollars per token on bitcoin. Bitcoin's five this year right, rising thirty percent year to date, with the help of easier monetary policy. By the way, a lot of FED speakers over the next couple of days and also a week of dollars played its part, But the
cryptocurrency's rally is poised to fizzle a support fades. A part of that is some of that headline that I was talking about on the Bloomberg terminal.
Joining us now as.
Kristen Smith, Solana Policy Institute President. Oftentimes when you come on the program, something has happened. It might be a piece of legislation or someone has said something. There are many news stories tangentially linked to bitcoin right now, but I don't see like one single catalyst that's holding up an entire crypto industry.
Well, I do think there is one common thread right now among the crypto industry, and that's that this year we have seen tremendous progress on the public policy front. We've had a very strong leadership by the White House with the executive orders, We've had the stable coin legislation, the Genius Act sign into a lot this summer, and then we have the SEC's Project Crypto, which is issuing
guidance for how securities laws apply to this space. And so I do think as we look across crypto generally, but specifically to Bitcoin and also Solana, which I care deeply about, we have this common thread of it's okay if you're an asset allocator or if you're in exchange or a bank to be looking at this sector because it's going to be a part of our financial future going forward.
Kristen, we have a government shut down.
We do, we do well. Crypto markets never sleep, but the government what the agencies do? Yes, I listen. I'm not going to allow to you. It is a short term setback to have the federal agencies shut down right now, particularly with the SEC and the CFTC. We have over ninety percent of the staff furloughed at those agencies right now, and so that means routine things like approval of new S ones or S three's have a real impact, particularly when it comes to things like Solona exchange traded products
which are on the cusp of going live. We just need to get the corporate finance staff at the SEC back. Or Similarly, new IPOs in the cryptospace like bitco are impacted by the shutdown. But Congress is working, the Senate is in and the legislative discussions are continuing there, and so I think this is a short term set back and as soon as the government opens up, we'll be back on track.
What's interesting is some of the froth or the constant headlines, a million of them as ed references, but they were all about digital asset treasuries at one point.
And that seems to have cooled a lot.
I'm even looking at Strategy, the office formerly known as MicroStrategy now off by about seven percent in the last few days alone. Is the wind coming out of that particular trade sales?
Well, I think there was a lot of interest over the summer, and I think there is continued interest and there will be some consolidation. But if you step back, if you look at digital asset treasuries, what's going on here is that for a long time, there were no way for traditional investors to access exposure to crypto assets, and digital asset treasuries have kind of filled that void.
In the more favorable regulatory environment, and I think what we're seeing these digital asset treasuries do is, yes, they are accumulating the token, but they're also participating in the network. So in the case of Solana, they are staking it. These stats are operating validators, and they're trying to be good stewards of the treasuries in ways that are a little bit more expansive than an ETF will be able to do once those are approved. So I do think
dats are going to continue to play a role. I think will likely probably see some consolidation among the dats going forward. But I think if you think about it, for a long time, these treasuries were held largely with foundations that were limited in what they could do, and you know with the treasuries of tokens they were sitting on. So I think the dats are new and innovative model, but it's also a way for investors to have a
different option for getting exposure to these assets. And with something like Solana, we think this is going to be the future rails for finance, and so it's a great way to get exposure to the asset class.
I'm looking at Silana up one hundred percent in the last six months alone, Kristin. But this isn't just an American story. This isn't just about regulatory clarity in America. They see global assets. What are the countries are doing it right right now?
Yeah, Well, I think Dubai is one hub that is particularly strong. I think Switzerland has also had a lot of interest, and there's incredible excitement coming out of different parts of Asia, and so yes, I think the fact that this is a global technology is what makes it so compelling. It means that you can have anyone who has access to a phone on the same set of rails and provide the same access to investors or access to investment opportunities, and so I think it's a really
exciting potential. And I think as the US continues to move along and get these good policies in place, we're going to see more competition and maybe even a bit of freeing up of some of the more restrictive policies around the globe. But we are seeing competition, particularly out of the Middle East and Asia.
Christian Smith said on a policy it's always great to have you back on the show.
Thank you.
Coming up, we continue the story of what's happening elsewhere outside of the US because it's the UK Minister of Aisha and Narayan is joining us.
We're talking about the leeds.
And the founders actually gathering in San Francisco for the Tech Week upon US right now is a grupo tech.
San Francisco is host to Tech Week, bringing companies and leaders from around the globe. The discussion dominated by AI.
Shocking.
Joining us now is Kanishka Narayan, UK Minister for AI and also Parliamentary Undersecretary for the State in the Department of Science, Innovation and Technology and Minister welcome to the program. We heard you know it's timely your visit s F. Tech Week is a tech week, but you come here with a large delegation of both on the policy side but the companies themselves. Why what is it that you hope to get out of being here?
Well, I think AI is a central focus for us in UK. It as a fundamental part of our growth mission. And one of the things I'm most focused on here is to talk up the UK US Tech Prosperity Deal. It is a historic deal in its scale. We have a record set of investments, the biggest ever investment by Microsoft and cumulatively tens of billions getting into the UK and deepening our collaboration. But fundamentally on scope, the UK and US have a deep history of a special relationship.
We are renewing and rewiring.
That for the AI economy, mister Narron, the United Kingdom, as Europe is, is very dependent on very large American technology companies making investments and innovating. Is that a fair statement to your mind? And how conscious is your government of a dependence on both the software and hardware side. What American companies are doing well?
Again, I think in any marriage you talk about mutual dependence and a mutual sense of recognition and acknowledgemental strengths. In Britain we have an amazing AI economy. In particular, we have deep Mind, the home of a bunch of transformer models. We have a great chip design company in arm located in the UK, and we have a budding sense set of entrepreneurs for the future of AI as well. And so we have a lot to offer to the analysis.
But of course we want to do it when recognizing the deep transfer of the US has That's why I'm here opening the doors for UK and US businesses to work more closely together.
Kenichika.
You mentioned great names, but Deep Minds Open, owned by Alphabet and Masioshi Son in Japan generally controls ARM a little bit of it trades, and it trades on US indices.
And I'm interested from.
Your perspective therefore, how much you're likely to see AI rewire that how much does the UK want them to be dependent on the UK or you ultimately all still about trade independence on other nations too well.
I think Caroline as a great question, but the fundamental thing I'd say is that we want to be open to the world in terms of business. So if people want to come and invest in fantastic talent and fantastic businesses in the UK, we are open for business. At the same time, of course, we want to make sure that people coming through our universities, people wanting to build businesses, have capital, have compute, and fundamentally have a deep community of.
Support in the UK as well.
A lot of what I'm here to do is to try and be the drum for that and to make sure that we're attracting the best folks to come and build in the UK as well as built in the UK for countries abroad and.
Can get across the UK. I think that's what's really interesting.
There's been this focus on it, not like the services sector all being dominated in London, but spread out. I'm really interested in the AI growth zones. Have you thought about any more of the cities or the towns that are going to benefit from these data centers and really how much it does benefit those living there, because data centers don't add that many jobs, they're a big.
Stuck on power and water.
Well, this is a really really critical question, Caroen, because in the last wave of software and as a former assass investor, I saw a huge amount of the gains and the jobs concentrated in a very small number of places for a small number of people. The whole point of what we're doing on the AI revolution with our growth zones program is to spread opportunity right across the length and breast of Britain. And I represent a constituency in Wales which has a beating heart of the compound
semiconductor industry. As exactly as you say, we are creating five thousand jobs in the northeast near Newcastle for Premier League followers. They'll know it very well and we are keen on making sure that whilst it's the case that there are some jobs with data centers, that that's the start or the end of the journey. We want to create a ton of jobs in adapting and using computed from data centers, not just building them.
In South Wales formerly known as Newport Way for Fab now known as Vishay, I think that's right. I've got a newspaper clipping on a board in my kitchen about that, Minister. The financing of the infrastructure projects in the United States are getting interesting, to say the least. We are reporting on mechanisms where investors make a special vehicle raised capital XAI in that example, leases the capacity the US government
has taking a stake in Intel for example. Caroline and I have been talking a lot about n scale recently. What options does the UK government see in accelerating the build out, but also any direct mechanism that you might be considering financially or otherwise to support those initiatives.
Well, the broad thing I'd say is what is happening I think across the market in terms of financing is a recognition that there is very significant value creation and value uplift from building out AI infrastructure, and so that is the starting point for what is going on in the market, and whether we invest in companies or whether we invest more indirectly is an open question. The fundamental thing that we're focused on is making sure we create
a fantastic scale of AI infrastructure. We have the right level of compute and we have talents that can make the most of it. N Scale is a great example, the largest ever Series B in Europe for a British company building outside of the United States, outside of the United States building building out in the UK. You know, I don't think there was a direct financing requirement there at all, and so we're not going to be playing with taxpayer money where.
It's not required.
What we are focused on is doing everything we can, and I speak to the founders of NSCARE regularly as well, everything we can on permitting, on planning, on wider support to make sure that the value uplift of AI is captured in the UK.
This UK government has net zero obligations and so with AI, could you explain to our global audience many people, by the way, watch this program in the United Kingdom, how you're going to have an energy policy that supports AI and its energy demands well.
Look, I think we have two things that we want to make sure we do.
We have a clean power mission by twenty thirty, which is critical to what we ran the election on. We have a deep democratic mandate for and we have an AI revolution that we want to make the most of as well. The trick here is to make sure that the two of those reaffirm each other. We are building AI infrastructure in places with renewable energy, and in turn, we are using AI to make our renewable energy build out way more efficient as well.
Minister, it's a tough time for governments around the world when it comes to spending versus the size of their deficits or they're borrowing. And it's interesting that Andrew Bailey, of course, the leader of the Bank of England, just this week, talking to Bloomberg and the Economy written large saying the UK must invest more in the AI if
they're going to ride this wave. What do you, as someone who understands investment, tell the capital markets of the UK, and indeed pension funds and those that are base there in terms of actually driving capital investment not just coming from the big US players into the United Kingdom.
Well, Caroline, I think this is a central question.
And the thing I say to everyone in the capital markets in the UK and abroad.
Is two things. One, it's time to put risk on.
We want to try and make sure that we are investing in the future of our people in the UK, the future of our kids growing up and wanting to build fantastic AI companies, and I want the capital markets to be deep partners in that mission.
But the second thing is there's not a one.
Way ask, it's a two way exchange and the offer from government is a very clear one. We are laser sharp focused on making sure that when you invest with a clear sense of taking on more risk in AI infrastructure or we will be there hand in hand clearing the way for you in terms of making sure it's an efficient and easy.
Build risk one.
Kanishka and Iran, it's been great speaking with you. Enjoy your time in San Francisco. The UK Minister for AI now talking with AI Andthropic. It will open its first office in India, becoming the latest American AI company to expand in the rapidly growing market, known for, of course, its engineering talent, and Robert plans to hire a team to help build unique local applications will advance its capabilities in Indian languages ed okay.
Coming up in the program, we're going to speak with Zendex CEO about new AI capabilities the company's launching and how it feels it differentiates itself and what is a very crowded AI powered service market. Final block of the show coming up this is Bloomberg.
Tech customer relationship management provider Zendesk. It's unveiled new AI capabilities with its platform, aiming to offer clients tangible business results from an AI upgrade.
These include new video.
Voice tools as well as of course new AI agents.
To help streamline workflows.
Let's talk about all of this with zens CEO Tom Egemeier. Tom tangible, talk to us about what is tangible?
How do you measure it?
We measure it by something called automated resolutions. So the only way we charge one of our customers is if we solve the problem for their consumer, the business they're dealing with, or the employee.
They're dealing with.
And so it's a really unique model where it's all about AI actually working, not AI theoretically working.
What does it allow your customers to do that they can't with rivals or that they haven't done before.
Tom, It's really simple.
Our customers are wanting a complete platform where sometimes they're going to want their customers to self serve, sometimes are going to want AI agents solving the problems, and sometimes they're going to want human agents solving the problems. Our platform is an end to end platform that our companies that we work with can choose how consumers, businesses, employees interact with them, and we have that whole platform, Tom.
The promise and utility of an agent, everyone repeats time and time again is its ability to communicate outside of the system you're building. Right, It needs to be able to actually meaningfully, meaningfully access other systems. How hard has that been to build? Like, there's a real data and security challenge there.
That's the core strength of zdesk. We're going to process about eight hundred billion API requests this year on pace for a trillion next year, and so the core foundation in our architecture is connecting to other systems, and so that's why we're now going to finish the year at about two hundred million dollars of aiarr twenty thousand customers that are both aid and unpaid. We believe the largest
customer service AI provider in the world. And the reason, we think is that foundational element of security API requests connecting to different systems, because I totally agree with you, Ed, it's all about connecting to different systems.
So you're going to run a trillion API request next year, how does that reflect in your operating costs? And literally give me more on the revenue number that I think you just flick that.
Yeah, we're going to end the year about two hundred million dollars of arr for AI, and that is not allocating part of our existing revenue to AI. That's our new AI products that we've launched in the last two years, AI agents, AI Copilot.
And quality assurance.
We really believe those API requests are key. And how does that work is that we've got a foundational architecture that is dedicated to not just conversations, but making sure that you can have actions from our AI agents, and those actions are key to getting things done, key to getting those resolution rates up, automated resolution rate.
And we think that's what differentiates us.
I really feel it's your private equity background that leads you to bring us so much tangible, hard evidence whether it's what actually the clients are using it for on whether it's not your arr numbers but using your pee brain right now.
I mean, we keep.
Talking about a bubble, an AI bubble. The worry about future productivity and actual revenue streams from these startups.
Tom, what do you say to those that are non believers?
What I say to those that are non believers is what I tell my kids that are twenty three and twenty. You have to learn AI to succeed in the business world for the next twenty or thirty years. You need to be an AI prompt engineer yourself.
We believe there's a.
Course hype about AI right now, but that the fact that we're doing We just passed a trillion tokens with open Ai.
They announced it two days ago at their developer conference.
We're one of only about twenty or less companies that are doing that.
That tells you the hype is not hype.
The hype is real because we're able to go automate up to eighty per We have customers that are automitting eighty percent of interactions.
Already with higher customer satisfaction.
So of course there's hype about this, but there's actually tangible results that our customers are seeing with their consumers, businesses and employees.
Tom, great to have you back on the program, CEO of Zendesk.
We really appreciate your time. Thank you, Caro.
I think we better go back to the broad idea of circular financing.
But the XAISPV debt thing.
You know, I'm just looking at markets, at what's up, and like not drawing a cause or link, but there seems to be a lot being placed in what Jensenmong said on another network this.
Morning, and what he said is, oh, by the way, yes, we give money to these companies, and he wish you'd give more, perhaps to Elon Musk, but that they don't have to buy just En Vidio and GPUs. I think it's interesting that AMD's traveling so.
Hard today and that is exactly where my mind was at. And AMD is kind of the outperformer in this session. We have a lot more to come this week. But yeah, six percent gain two in videos two percent. I think he couldn't have been any more clearly.
Last thing. We're still concerned about debt.
Yeah, I think more broadly.
Sorry, you just cut out a little bit of their ed, but at the moment. I think we've got to keep on talking about where the investment a cycle is going and keep questioning it because we are healthy balance of cynicism and reality. But that does it for this edition of Bloomberg Tech Head.
What for you got Tomorrow?
Yeah?
Huge balance of the week remains. We'll be live from Bloomberg screen Time in Los Angeles, speaking with the absolute best of the entertainment industry.
And then something big happens after that.
And Friday, Yeah big.
After that we switch gears and go all in on defense tech, speaking with the leaders of Android, Palenteers so many more. You do not want to miss out on a phenomenal rest of the weekend.
This was a big show. So recap the podcast.
You know where to find it on the Bloomberg platforms, online, Apple, Spotify, iHeart and as lows have you told me at open hourdem Day you listen to the show as a podcast when you drive to work. Love that from LA and San Francisco. This is Bloomberg Tech