From Marhard where Innovations, Money and Power Collie in Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hyde and Ed Ludlove.
I'm Caroline Hyde and Bloomberg's world headquarters in New York and Ourmed Ludlow in San Francisco.
This is Bloomberg Technology.
Coming up in Vidio.
Boy Knock said out of the park with earnings that blow past estimates.
Shares they're still at that all time high. We'll bring you the details.
Class will have full market coverage and cover the other tech names reporting results like Snowflake and China's may Twine, and we.
Talk all things artificial intelligence with CEO's of Twilio and Hugging Face. But we start with the AI story that is pervasive for the entire.
Market there and in Vidio.
Even though it comes off of its highs that we're trading what in excess of six percent higher earlier in the day, we're still at a record. We're up more than one, almost at two percentage points higher. But extraordiny where some of these price targets have been moved to one one hundred dollars one price target from Rosenblack.
We're looking at four hundred seventy nine.
This could still double Edits an amazing set of numbers.
Yeah, let's get right to the numbers, right. This is the third consecutive quarter where Nvidia's guidance for the current fiscal quarter was way ahead of expectations.
Revenue in the.
Fiscal third will be sixteen billion dollars plus or minus two percent, as you see on your screen.
In the second quarter just gone.
Data center is everything ten point three billion, way past the expectations of almost eight billion. And if you look at the commentary Carrow, the growth is coming from the United States. It's the hyperscalers in the enterprise company. But it was also interesting to note that China accounted for twenty to twenty five percent of data center revenue, which is well within its historic range.
I mean, the fact that we're seeing it firing on all these cylinders, whether or not we're seeing it at being a data center story. I thought what was interesting in a Morgan Stanley note just saying the pervasiveness of the small companies, small cloud providers that want to be in on an AI, not just the huge hyperscalers as well.
Yes, it's a really good point because for example, AMD, a competitor, right opened up two percent in this morning's open. It's now down almost eight percent, a swing of ten percent. The market sees yields rising ahead of Jackson Hole, but how much of that is the strength in response on Nvidia? You know they are direct competitors for GPUs in the service space. In Vidia, You're right, it's off session highs.
What's so interesting in that Morgan Stanley note, By Morgan Stanley's estimation, in Vidia is only meeting fifty percent of the demand that's out there. So when they talk up supply improving as well, it gives confidence that the outlook longer term is strong.
And I think you've raised this point and it's one worth dwelling on the analyst reaction the price targets one after another being raised or.
No single sell on this stock. Just look at that graphic.
Values tripled beyond three a trillion dollars of market cap. The final sell final analyst throwed in through in the tow which was morning Star really quick. They did give us a note of caution and said on China that even if US technology export restrictions are increased in the near term, there won't be an immediate effect, why because demand around the world for the HGX server designs is
so great. But long term they called it basically the removal of opportunity and what is the world's key market for data center and also electronics, So China is a long term question.
Yeah, yeah, and is for armholdings as we approach that particular IPO, and it is for this particular company as well, the exposure to the demand there.
Yeah.
Well, we got the numbers out the way, but I think we have to look forward. Let's bring in JP Scandalios, Franklin Equity Group portfolio manager one hundred and twenty five billion dollars in assets, and you guys hold and video across multiple funds. Let's just start with the simple question, what was your take from this?
In Nvidia earnings print.
Certainly and thank you for having me. As you guys alluded to, you went through the numbers that kind of growth, we just we just don't see eighty eight percent sequential growth and one hundred and forty one percent quench growth in that all important data center business that you referenced, which is now seventy six percent of total revenues five ten years ago, and I've been covering the group for about thirty years.
Five ten years.
Ago in the video was a gaming company and now, as you said, it's all about data center. So there's two things here, right, fundamentals outstanding, huge beat huge rays. It's like The Godfather too, the sequel was as good as the predecessor. So nothing there, and I think Abigail alluded to it. There was a lot of you if you had been paying attention, I'm sure you were during
the quarter. Expectations we're so so high, and there's a lot of people who get uncomfortable with parabolic growth like this. We're much more comfortable on Wall Street with steady or linear growth, and this kind of growth. People optically right away say well, this can't continue, and certainly there is a law of large numbers. But they are so well
positioned for the foreseeable future. I suspect fundamentals will remain very strong, and ed you mentioned it, they conveyed that they're getting additional capacity and they have more demand than they know than they can address.
I'm interested more broadly with the fact that the competition. Is this why we're seeing the likes of MD fall off. Are people feeling that really this is the winner that takes all or is that more a sign of market and gyrations that's happening on the day.
I think it's the former.
I think.
Lisas who has done an excellent job at AMD, and I think AMD, given their limited resources, went after the CPU and especially the data center CPU market first, and they're doing really nicely. They're a relative to Intel, especially when you compare it to again five or ten years ago. I think now they've just gotten with their I three hundred. They're coming into the data center GPU market and the
issue is can they gain some share? And I think there was some expectation throughout the quarter as that product comes to market that they would gain share. They're not, you know, the killer of Nvidia, but they're going to
gain some share. And I think with such strong results from Nvidia, and not just the results but the guidance of course, but also their product lineup, they're just canvassing between inferencing and training, between the networking on the Finneban side and Ethernet that I think some investors who are saying this is going to be a real uphill battle climb for AMD, that'd be my guess.
I mean, and it feels as though many a betting in video is the only picks and shovels out there at the moment, but only from a product perspective of offering, but just the breadth of where their customers are coming from.
That's why the level of Intel's so key. Caroline right, just I'm really sorry to interrupt JP. Just point out one thing, you know, loads analysts ask collect cress, give us detail which product, right, is it H one hundred. It's broadly HGX server tip right, And I think Jensen made the point that, you know, H one hundred is not just a single chip, it has a trillion transistors in combination. You don't just sort of hand it over
to the customers. But did you hear enough from them that the pipeline of future products maintains that technology lead?
JP? You know I did.
I think HGX is just getting started, right, and Grace on its own, and Grace Hopper CPUGPU combination is just coming to market now. There are Ethernet product Spectrum just coming to market, Bluefield their DPU Bluefield three kind of just getting going. And then you add on top of that all their software offerings. So yes, I don't think this was like, Okay, that's the game over and now time to move on. And Carolyn brings up a great point.
To some degree, there's just not many AI companies, especially generated A companies that are monetizing this robust trend today, and so there is a scarcity value there.
JP.
I think we need to look at what collect Cress had to say about China long term that if you know US X technology export controls are in place long term, she's calling it a lots of opportunity in that market the US semiconductor maker is how seriously do you take that warning?
I take it very seriously. I've done several meetings with in a podcast with Chris Miller, who wrote the book Chapurs that has often cited, and there's public funds we own GSMC as well. It's one of my major concerns just because very difficult to analyze the political back and forth between China and the US and how far our government will go and how far their government will go.
And so to your point, I try to address it with adjusting my terminal growth rate, because as you say, if you take out that economy and that market, certainly it will be a lower terminal growth rate over time, and it's just a we will see what happens, but certainly something to follow, as if we don't have enough to follow. In the semiconductor industry, another thing to watch very closely.
Well said.
One thing that many an investor was following was the buyback enormous Where else could they should they be allocating that money at these sorts of price points to be buying back their stock? Is it because they believe the stock has got yet further to run, as some analysts do.
Why not more in R and D?
So they spend they already spend a lot hot well, a tremendous amount in R and D, And so I'm willing to give them a pass there if you will. I think what it says. One thing it says is M and A again going back to China, that M and A is going to be very difficult to get approved through all these regulatory bodies. And so you turn around and you say, well, what else can we do with it? Well, we have four billion left in our
buy back. Let's add twenty five billion to that. I think it's sending a message to the market that they're very comfortable even at these prices, that their prospects are so strong and they outlook so positive that they're willing to buy back their shares, And you're right. It's again, it's like the results. The sticker tag is a massive number, but you're talking about a one point one trillion dollar
market cap company. So at the end of the day, the number of shares that they'll actually buy back, it's great to see, don't get me wrong, but put it in a little context, I guess, yeah, hey.
I have the stocks undervalue, or they got nothing to spend on JP scandalios the Frank collectority. Great to have you here on bloem. It's analogy.
So further news, regarding, of course, the plane crash that presumably killed the Wagner founder Progosion, we're hearing from Putin himself saying an investigation into Progosion's death will be completed. Overall, he's saying overall that there are concerns and indeed an investigation will be completed, expressing condonencis over the Progosion jet crash and saying he was a talented man and a businessman.
More on that global news throughout the day.
But meanwhile, let's just return to technology and China's mag one in particular seeing its fastest pace of sales growth two years. That's like it's a large part to a rebound in dining, in travel demand. Bloomberg's Isabel Lee is here with more and for many that's a hard thing to swallow around all the narrative that China is slowing, the consumers weak, the housing crisis, the wealth crisis.
It's kind of a good report and it takes some analysis because yes, the Chinese economy is slowing down, but because it's slowing down, consumers are shying away from big ticket items expensive so far something like that, and they're leaning more into the little pleasures of eating out or traveling.
May to One is a giant in the delivery business, and this bounce back and travel and eating out really help its earnings dis quarter, especially after the COVID pandemic when we know that China had years of stringent lockdowns. So salesloras are better than expected at thirty three percent and may to One swung from an operating loss earlier a year earlier to an operating profit. So it's really good news for this report. But again we also focus on the outlook and the outlook is kind of shaky.
Investors are saying that, you know, maybe we won't see the same growth.
We are expecting a slowdown.
So it's still kind of a double edged sword when it comes to these Chinese companies, But for now it's kind of good news, so we'll take it.
Yeah, there's so much analogous with this May to One report and what we saw really playing up AI as well, while the macro conditions improve our big banks. To Bloomberg's Isabel Lee out in New York, another company we are watching, Cloud Software provide a snowflake displaying signs of caution after its sales out looked for the third quarter came in line with expectations. Bloomberg's Brodie Ford has everything on the software beat. Bradie, what's the story with Snowflake.
Snowflake's one of those really interesting companies where it was just growing like crazy a year or two. We're talking, you know, doubling every year in terms of revenue. But of course, like every other software company out there, I hit this point where all of its customers said, WHOA, our budgets with you have.
Grown insanely and so what's really.
Been hitting Snowflake is something that's been hitting AWS or Microsoft Azure is that their customers are saying, how can we trim our bill a little bit? And that's really what's been impacting Snowflake. You know, they're still growing pretty heavily, right, I mean we're talking like about around thirty percent revenue growth, but at the end of the day, they're really having trouble with those big customers because they want to trim their budgets.
It's interesting reading through the analyst reactions and Barkley is saying, look, after two quarters of life, we're down your guidance. The fact that's unchanged, yep, it is actually a pretty good sign. Why are we there for seeing a set off? Why are people seeing more caution around this than optimism instability?
It's a good question because there's a funny dynamic.
Where as you said, it's stabilized, and that's what Amazon said, and people loved it. They said, Okay, it's not getting worse, but it's stabilized. I think people just want to see a reacceleration. But something very funny that happened last night is the results came out.
People said that I don't know about this.
They were selling off then in video hit in vidio hit, and they had an insane result, and everyone said, oh man, I mean that's a good sign for AI.
And you know what, Snowflake, they'll use that for AI. So it's all good.
And so there's a lot of different factors here. Investors want to see growth come back, but sometimes this AI demand might be enough to bring Snowflake up with everybody else.
Brady just having a great time after the ending spread track.
In the aftermark.
I mean, to your point, we opened four percent higher in this morning session of Snowflake, we're down three and a half percent and one point down, a big swing. A lot of that is the market broadly. Snowflake is like this layer on top of the hyper scalers, right on top of cloud, and they've been trying to tell an AI story that the market wants to make sense of.
Have you made sense of it?
So yeah, there's an interesting thing. Where As you said, Snowflake is a company that helps people organize their data and prepare it for multiple uses.
One of those uses could be AI.
Of course, every company that's back end data management right now is saying, hey.
Hey, we'll help you with AI. Don't worry.
We got you, And I think a lot of investors are saying, well, you can't all do this, And so that's kind of the question with Snowflake, right, I mean, do they have a really unique positioning as it relates to AI.
Some people say they do. Some others would say no, no, no, we'll do it instead. So I think the jury is still all out on who really will be.
Able to own this data organizational business as it relates to AI and training large language models, the.
Pigs and shovels.
The infrastructure is well and truly owned by one, but it feels as though the rest of being scribbled over when it comes to the software application prodi forward brilliant, Thank you so much. Meanwhile, coming up, look the impact of the SEC's crypto crackdown on one of the oldest digital asset exchanges.
All the details next from San Francisco. I'm from New York.
I'm sprinkling in Washington. This is bringing back technology.
Time for talking tech.
First up, Walmart is planning its longest distance drone deliveries yet by teaming up with Alphabet's Wing. It's going to be at two Dallas areas stores. They've got FDA approval to drop off food and other household essentials as far as six miles away from that store and vin Fast Auto. It is seeing a head scratching surge, giving the money losing ev startup a bigger market cap this time than City Group. By the way, fame shortshare seller Jim Chainos
is even calling the stocks valuation quote insane. Plus Bitstamp, one of the oldest digital asset exchanges, will discontinue staking services in the US following a crackdown on their products by the SEC. The move takes effect on September twenty fifth.
Caroline all eyes of course on that story and let's just dwell on it Frommtionnani Basek is here for more on that latest story and what's the read from market on it.
The region of the market is that this is just another player here that you're seeing not able to engage in the staking service when we are watching a coinbase clearly fight the issue, and we've seen the volatility kind of a hover over the market when it comes to of course, this means more for ethereum than it does for say Bitcoin.
However, without staking.
You don't have that proof of stake model working out the way that the market was so excited for. Remember the exuberants that surrounded this kind of new model that was supposed to be less energy dependent than the mining history, that was supposed to potentially have more favorable economics for a wider array of people, given that the control would be changing in terms of the way that it is held over time. So a lot of questions for the
model itself. But remember coinbase has been still sticking to the staking model. While we have seen now Kraken as well as Bitsdams start to throw on a towel.
The other piece of news than headlines that we've seen across this morning is FTX court filings. What's the latest with FTX Shanami.
Now, this is really interesting because you were watching them look to Galaxy. Remember this is still a bankruptcy process in which the FTX and John Jay had John Ray I'm sorry, had looked over and looked to Galaxy Asset Management. This is a business run by a fellow named Steve
Kerz that would oversee a certain amount of assets. What happens from here, so a certain amount of these assets will be essentially liquidated and sold so that they could shore up money to pay the creditors back over at FTX. There is a fee that Galaxy would take, although from now until the court approval, things could definitely change from here. But there is an aspect of this as well where they don't want to get rid of that bitcoin and ether right away as well because the value in the
price could change. So while a certain number of these tokens can be sold into the market, there will be a number here that are going to be held managed and hedged in order to maintain the most value for the firm.
Remind us there have been some credits of frustrations, to say the least, about the fear that they were losing money because some of these assets weren't being.
Sold off in a meticulous amount.
Yeah, and the idea here is that they would give it to somebody who would have the ability to manage these assets in the most profitable way. At the end of the day, remember time value of money. If you're not getting your money back today, how long do you have to wait and what happens to those assets? It would Bitcoin, ether and some of these tokens continue to
decline in value. That is of course a concern for the creditors, which is why they are holding some of that Bitcoin and ether and hedging the exposure rather than selling that off right away as they are looking to do with some of these other tokens.
To mind ourselves, sorry, Carol Bloomberg Technology that the whole point of this story is about whether people get their money back or not. You know, people that had assets with not just the US, but multiple jurisdictions. We at a place where we can answer that question. Shanale, it's early.
I think it's early. And the reason it's early is even with these assets in itself, like I said, it's a court process, So it's not even that Galaxy is taking over those assets tomorrow and selling them off into the market and giving them money back to the creditors right away. It will take time and there is friction as they look. It's not the only assets that FTX has, so it will take time to see what ultimately we'll
be recouped. Now, if they do sell these assets at a decent price, there could be some money, of course, and a certain degree of funds reclaimed for creditors, but even the creditors would expect that it would be materially less than what they walked in.
With Shanale all over that story, all over the chrystosphere for us today.
Welcome back to Brimog Technology. I'm Caaren Hide in.
New York at our Meed Ludlow in San Francisco. Carry Let's check on the markets and Videa's the big story and the market from a technology sector perspective of opened higher and a's that one hundred has swung from a pretty modest gain in the first hour of trading, we're now down one point three percent. The story's kind of evolving towards Jackson whole Friday when we hear from fed chair Pale yields to creeping higher and Vidia pretty much one of the only names now in the technology sector
that is still in the green. Earning's a big part of it. As we've covered right we had Snowflake now disappointing to the downside. There is one stock that is frankly on a hyperbolic trajectory and we're not really sure what's going on.
But let's quickly talk about.
Vin Fast because at current gains, the company listing via spack just a week ago has a market cap and more than one hundred billion. At one point in the session, it had a market cap and more than one hundred and twenty billion. So if you took four General motors and throwing Rivian for good measure, and combined them, you have vin Fast that's only delivered a thousand vehicles here in the US, and then record all of them. I have a lot of experience covering ev companies went public
vice back. This one makes no sense to me either. And then I guess finally, in the name we're looking at is Twilio. Twilio out with a new kind of suite of AI powered products on the data management side. I think what's interesting about this story is they're kind of responding to what is customer demand. The news was out twenty four hours ago, the stock closed around two
percent higher. It's now down about two percent. But again, consider the broader market and where we're going in the tech sector in particular.
And so many ed have said the amount of productivity gains, the real value is going to be in proprietary data, and well, maybe you access it through Twilio. We're priased to say, we've got the CEO, Jeff Lawson, to talk about the roll out of your new products and ultimately that end user demand. What are your customers wanting to have when it comes to accessing and making the most of their customer data.
Well, look, I think we all know that you know, AI is going to transform so many parts of business, and it all comes down to the quality of the data that you're going to bring in feed AI. That's
going to provide proprietory outcomes for companies. And so the way we look at it is if companies are able to take all the information they know about their customers, write every click, every scroll, every propensity to buy all that information and feed it to an AI, it can make those companies ten times better at serving their customers and do it at a tenth of the price. That's because you can take make your marketers ten times as
effective by designing and executing marketing campaigns automatically. You can make your contact center ten times as effective by automating so many of those conversations.
You make your sales team.
Ten times as effective because you can automate so many of those early conversations. And so because of this, we think companies that combine their customer data with advanced AI are going to be able to get ten times better at a tenth of the cost.
Jeff, I hear you, and I hate to sound in any way jaded around this AI euphoria, but I feel like everyone's making an announcement about how they can supercharge their clients using adswercial.
Intelligence and generative AI. Why is your offering different?
It really all comes down to the data.
And we have a segment which is the leading real time CDPs.
CDP is a customer.
Data platform and what it does we work with leading companies. It allows them to ingest all the signals that they get from their customers. Now, mind you, this is all first party data, but every website, visit, every click, every scroll, everything, people buy everything they don't buy right, and turn that into a profile. That's an understanding of that customer. And when you take an understanding of your customer and then
feed it to AI. And the reason why I am so bullish on AI is that you look at chat GPT, right, you look at a lot of these applications are getting built viz our computers that can reason like you can look at chat GPT and it will reason its way through solving a hard problem in the way that a
human would do it. Now you feed it knowledge of your customers you can say, reason through how to target my customers to get better offers in their hands, reason through how to design a marketing campaign that's going to do better than maybe one that a human would design. And I think we are going to see great success with those as being able to do those amazing things.
Like Caro, I'm jaded too.
You know, we handle a lot of headlines in this way, the way that Caroline has been describing. If you take in video, it's like the picks and shovels of the AI chain. You and I've discussed this before, but if you think about the large language model underlying algorithms, you're basically technology agnostic because you're working with both open ai and Google. Why is that beneficial to you to say, oh, we'll work with anyone where we can benefit.
Yeah, well, it's the right model for the right use case, and so we have partnered. We partner with Google for certain use cases. We've partnered with open ai yesterday around our AI personalization engine, and we're going to partner with others as well. And the key thing is taking the right model, the right technology to go solve.
The right problem.
But I do believe this is day zero of AI, and so it is at the infrastructure stage.
That's why you see in video right posting the results they are.
Well, we look at it as companies today, they are getting their data AI ready because they know this rule is coming and they need to get all of their customer data into a format where and these use cases become a reality, they're able to combine it with the powers of large language models and actually get these kinds of outcomes.
I actually wanted to ask you if you could walk us through how Twilio is a management team came to this decision because in the second line of our story, in the first paragraph, it says Twilio is responding to customer demand. So is this just a case of customers kicking down your Doorjef and saying we need this, make it for us please.
Well, if you think about it, if AI is able to get ten times better results, which I firmly believe at one tenth of the cost of prior solutions right where you needed humans to go do all the work, well guess what the economic incentives for companies to invest in this technology are going to be undeniable? Right if you can get a roughly one hundred x outcome by investing in a technology. Every company is going to need it if they're going to survive and thrive in this
AI powered world. And so that's why every conversation that I have with customers today is all about AI, because companies are asking the questions, how is this going to radically transform my business in my industry in the coming one, two, five, and ten years, and they're building in their starting those investments today.
Caroline, the conversations that you and I have every single day are all about AI, but with investors principally.
Yeah, and on that note, a more sensitive question I suppose for Hujef, and that point is you've got customers knocking down your door, have you got investors knocking down your door asking how you're managing to capitalize on this moment? In particular, I ask because we are the lookout for activist investor interaction. Of course, some of your expire that's happened in terms of your founder's shares means perhaps you're a little bit more exposed.
Well, look, without dual class shares, we are in the category of nearly every public company that exists. So I don't think it's really a newsworthy story. But we have been very active participants with our investors, understanding what they want from us as a management team, and doing a substance of actions representing the needs and the desires of
our shareholders. And so we've taken a major actions. We've taken the company from really focused on growth and never making a substantive profit to a company that's now throwing off, you know, more than ten percent non gap operating margins in just the course of six months. And so I think that is from amazing progress that we've made listening to the needs of investors, responding and taking substantive actions while we're investing in this exciting new roadmap around AI and customer AIA.
Jeff, I like that you take us there, that you almost remind us of the macro picture that you're trying to navigate right now. It is one where people want to see not growth at any cost, but growth at profitable costs here and I'm interested in what you're seeing from clients. Yes, there's AI euphoria, but are people pulling back? Are people reticent, worried, nervous to spend?
Well?
Companies are rightly looking at their investments and saying these are the right investments. Have we invested in the right software and are we getting an ROI from these investments?
And I think in the cases where they're not.
Seeing an ROI, they may be pulling back or they may be reducing think abouts.
SAD SaaS is seat.
Based for most companies, and so if you know, with all the layoffs that have gone on and a lot of companies, you need fewer seats, right, So there's those things happening. But at the same time, companies are looking at this moment with technology still continuing to grow, the economy is still doing fairly well, and AI right around the corner. They're saying, how do I make sure I have the right investments to fuel our growth going forward while looking at some of the older investments and saying
are those still the ones that we need? And so I think we're seeing a lot of that. And the nice thing about our business model is that we're usage based, right. We're not selling seats and we're not selling there's no such thing as shelfware in a usage based model, and so all of the money that companies pay.
Us today is value that they are getting.
And I think companies that sell seats or companies that have had a history of selling shelfware i e.
Software the company didn't really need.
Those companies are struggling because those clients are pulling back.
In their investments.
Jeff, it's great to see you in person. Have you here on set.
AI in San Francisco seems like a big story to me. You seem to be spending more time with CEOs of other companies doing things. Can you talk a little bit about whether or not what's happening with the an has actually brought some of the tech industry here back together a little bit absolutely.
I mean, look, San Francisco has become the center of the AI universe. You've got open Ai, their headquarters, has done in the mission right, You've got a lot of companies participating in this AI revolution right in this area and in the broader tech community. And look, I think that the advent of what we're seeing with large language models, computers that can reason, this is going to be bigger than the mobile revolution we saw, give or take fifteen
years ago. This is probably about as big as the advent of the internet on what it means for business, what it means for society.
And so that's why you see a lot of excitement, a lot.
Of energy, a lot of developers going to work, building, exploring what's now possible. And that's the energy that I feel sitting here in San Francisco and inside of Silicon Valley.
Jeff Lawson, Twilio CEO, you were the first ed board I did when I moved here from London. I think it was five and a half years ago. Now, it's good to have you back here in the seat. Carrie coming up here on Bloomberg Technology Salesforce another name here in SSET. Get me in on with a funding round for Hugging Face. We're gonna have more details on that next and Hugging Faces CEO Clem DeLong joins us Sunset.
I think you have some more breaking news as well.
We do.
Let's talk about document management. Boy, we've done data management. We've of course done all the areas in which companies are optimizing their data. But let's talk about managing your documents.
Dot Box.
Actually Singling could be charging you a little bit more for it. New cloud storage plan fees are going to be announced later Thursday. We understand they're going to be ending their unlimited cloud document storage for customers at one point we went positive and then we sat back down again.
From New York and from San Francisco, this is blame Meg Technology, all right.
Some big funding news in the world of AI, with Salesforce leading a financing round in Hugging Face, giving the company a four point five billion dollar valuation. The startup, which helps companies store and use AI software, has risen as one of the main players in the field. CEO clemmed Along joins us now for more on that round, along with Bloomberg's Rachel Metz. Rachel leads our AI coverage and reported on this round.
Rachel, take it away.
Good morning, Clem.
Why don't you start off by telling us.
A little bit about this funding round. Why did you go with this group of investors which includes as at Salesforce, There's Google in there, Amazon, a bunch of big name tech companies.
Yeah, we're super excited about the secret system around. I think it's pretty unique. I haven't seen in the past around with so many big players around around the table. We have Salesforce, we have Google, we have Amazon, we have Nvidia, Intel, md IBM, quad Com. I think it's
a good signal for Hugging Face. Obviously, with this CAF like collabority platform that all these people and most of the AI builders are using, but also for open source AI in in general, which is kept like a trend that we've seen developing for the past few months.
One of the things that I'm curious about is how your company pivoted from its initial product. Initially, when I first met you years ago, you guys were working on a chatbot. So how did you go from chatbot to an AI platform that tons and tons of companies and individuals used to share their AI models to a lot of people.
It was quite quite a journey. It's really kept like the community, the companies, the users that really drove us right. We were building this conversational AI, and we were lucky to have like work for quite a long time on the underlying infrastructure for this conversational AI, which including the ability to like have a lot of different models, a lot of different data sets, and build a system that makes sense.
And when we.
Started to kind of like share some of that with the community, something really wonderful happened, which is that open source contributors started to come in and kept contribute to the platform that we released. In open source researchers started to camp like share their models. So most of the open AI models that you've heard of today have been added to the platform, like Bloom for example, Lama to Lama, Lama two, Lama code that has been released today, Stable diffusion.
All these models have been added by the community, and that's really kept like what drove us to go from this camp like end use kate to providing the platform for all ail builders.
Time Also interesting though, is it feels like there's this inherent sort of tension. You've got a community, an open source community, and at the same time trying to build an enterprise business that makes millions and millions of dollars investors. How do you treat your community within this sudden moment.
The good thing is that we can look at other examples. Right, if you look at GitHub, they've done that quite well at much larger scale than we are now. Right they have over one hundred million users. They are kept like the main platform for software engineers, similar to us being the main platform for AIAI builders. The way we approach that is by kind like setting a clear boundary and campt like a public and camp like.
A strategy that when users.
Are contributing for example, publishing models in the open for others to use. It's free and it's always going to stay free, right, But when it's a company that is using for the private commercial gain without contributing to the community, it's fair that we make money out of that. And the money that we make there is funding all the open source and all the free products that we can offer to develop the commun do clem.
I want to go back to the investors again and talk about not just the money but the strategy. I understand this is an all cash round, but you share investors with some pretty big AI companies taken VideA for example, which is backed Inflection AI. When the stuffer, Sallyman came on to beat Bloomberg Technology of Me, he didn't care about the cash. He cared about all the GPUs that he'd secured from Nvidia. Is there any strategic or compute advantage to this group you've assembled.
So all these companies they are using massively hugging Face already and contributing massively to hugging Face. Collectively, they have over ten thousand team members using the platform and they've shared over one thousand open models on bugging Face. So we plan to complict double down on that. However, something that we wanted to do during this round is to make sure that there's no strings attached. There's no commitment on our sides in exchange to this this investment, so it's a pure.
Cash deal, really separated.
To some of the other commercial collaborations that we can have with these with these companies, of course, having them aligned with us on the cap table is a good strategic advantage to keep developing our partnerships with these companies.
I'm really curious to know what you're planning to do with some of this money. We spot you and I spoke the other day. You said you're going to put some of it in the bank.
What are you going to do with.
The rest of it?
Yeah, we really think that, you know, we're on the long term technology trend here. Even if AI is all the rage right now, we're pretty early. Ultimately, we believe it's going to be the default paradigm to build or tech. So in this perspective, we're still early. So we want to make sure that you know we're here at building on the long term right in the next ten years.
However, we're going.
To use it of this money to keep growing the team. We're one hundred and seventy team members right now and we're planning to keep hiring quite a lot. And as you know, hiring in AI right now is very competitive, especially for the best people in science and engineering that we're looking for taking place.
Really great to have some time with you, Clem DeLong. We want to thank you hugging face CEO on the latest round, and of course the person reporting on all of that and asking brilliant questions, as Rachel Metz, we thank her for all of her work. And look, let's just stick with AI. We're just talking about Lama. Of course,
let's talk about Lara a little bit more. Meta just launching a new artificial intelligence coding tool called code Lama and uses Generator AI surprise surprize to help developers work faster by suggesting lines of software code. One of those ASH accounts joins us now, So it's a monetization coming in here.
Yeah, exactly right.
They're taking Comma and they're allowing people to actually use it for commercial use, which is an interesting play because you have some companies that will be able to use it for free and then make money off of it, and then Meta might also charge some of the larger companies, so there's a couple different ways that they can make money. But it's a really good opportunity for companies that want us a cheap or free sort of tool to be able.
To make money for free.
Caro Asha, I'm just going to say it. This looks very similar to Microsoft's get hub. In fact, they're basically the same.
Is that fair? Asia?
I think that's fair, and that's part of I think the play here, right. I know Meta has talked about wanting to make things open source and available to sort of like democratize access, but you can't help but avoid that comparison to gethub, right, like, this could be a way to undercut GitHub if companies can use code Lama and then not have to pay for gethub. I mean you have to take a look at that too, all.
Right, Blomberg's Asia counts and all things matter.
I've had enough already tonight of a guy who sounds like Chatchy BT standing up here.
Ool chat ChiPT getting a shout out presidential hopeful there, Chris Christy. I mean he was attacking at the time the other fellow candidate, vik Gramaswami, and this was more about what he well, the way in which he says that climate change is a hoax, for example. But interesting that technology was so ingrained in last night's Republican predessidential debate.
That was the big takeaway for me. I think, you know, he said that he sounded like chat GPT, but I think you and I have both been over the search data on Google Trends, right, So, Ramaswami, I think was the most searched of the participants overnight. There's the data that's astonishing.
You know.
I think he's kind of come into the public consciousness because of last night. And at the same time, Caro, you have a completely different on air discussion happening on the platform X.
Yeah, I mean the rub for Fox, I suppose, having said goodbye to Tucker Carlson and then at exactly the same time he's busy interviewing Donald Trump f used to come on the overall debates in an interview on X. It was sort of counterprogramming, which of course is still being fought out at the moment.
Yeah.
And from X's perspective, you know, video on that platform, it raised a lot of questions. When I last looked at the tweet, the videos post to it said two hundred and ten million views, But does that really mean two hundred and ten million people watch the full forty six minute thing.
We have to find out, And I.
Wonder how Ronda Santas felt about it all of course, having announced his run on X well, it was formerly known as Twitter at that point, right, and it well wasn't the most slick introduction as it happened, full of tech issues at that point.
But meanwhile, no tick issues here. That does it for this edition of Bloomberg Technology.
Yeah, massive week, massive show, all about in video, So don't forget to recap on our podcast, Apple, Spotify, iHeart and our Bloomberg platforms. We have one day in a mega week to go from over in New York and here in San Francisco.
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