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This is Bloomberg Tech coming up. Open ai is close to finalizing the first phase of a new funding round that could bring in more than one hundred billion dollars plus. Mark Zuckerberg testified in a landmark social media trial and said it is quote very difficult to enforce Instagram's age limits, and the DOJ is taking a closer look at the potential impact of a sale of Warner Brothers Discovery on
theater chains. We'll get the reaction from Netflix co CEO Ted Sarandos at twelve thirty pm Eastern right here on Bloomberg.
Okay, let's get to the top story.
Open ai is close to finalize the first phase of new funding that could bring in more than one hundred billion dollars, according to sources, that could boost its valuation to eight hundred and fifty billion dollars post money. The first round of strategic investors include AI heavy hitters Amazon, SoftBank, Nvidia, and Microsoft and Overnight. When we broke this story in Japan, trading, SoftBank jumps as much as four percent end the up
closing down up sorry, two point six percent. I think the usadrs are actually a little softer team effort that led the way by Bloomberg, Surrey and Gafari, who's been tracking this story for a little while. Now, I think let's get into the details, right. It isn't that straightforward to understand, so let's call it phase one, the strategic investors.
What do we need to know?
So phase one are the major companies that are going to be partners investors in open AI. So names like Amazon, which as we've reported, could invest up to fifty billion, SoftBank up to thirty You also have Microsoft in Nvidia and others. So that is the first kind of part of this round, securing those allocations, and that could come as soon as the end of this month. Then they'll move on to the vcs, sovereign wealth funds and other financial investors.
Yeah, I think you know the sources that I've been speaking to in that next bucket, the sovereigns. The bench CAFEUS is probably a line around the corner, so to speak, of people who want an allocation. Here, there's some interesting detail that I want to get to with you. So like Amazon, for example, a first time investment at that scale super interesting. But also there's some kind of technology agreement as part of this, right.
That's right.
So part of the deal, as we reported, is that this will involve an expansion of Opening Eyes partnership with Amazon on using their cloud compute to run Opening Eyes products, as well as the chips Amazon Trainingum chips to be used in Opening Eyes development.
I think it's also important to be sort of transparent with the audience. These numbers have moved around a little bit, right, and so particularly like some of our reporting on what the pre money valuation would be, how we're kind of getting to that post money valuation of eight hundred and fifty billion dollars. Again, just give us the specifics that we need to know.
Sure, there's been a lot of numbers out there, and of course with a deal this big that's been in talks for months, right, things kind of can shift. But you might have heard the seven hundred and thirty billion number in terms of open AI's potential valuation in this round, that is still the you know, as far as we know it today. The pre money valuation being discussed for open a eye. But with around this big once you add in that money, obviously the post money valuation could
go up significantly. So what we're hearing is now that once you add up all the you know, strategics, which could easily top one hundred if things go well, and then you have the financial investors, you could get to that eight fifty post money valuation.
I just want to point out to the audience that all of the companies we've mentioned either declined to comment or didn't respond to our request for comment. And for what it's worstren Overnight Bloomberg Seslan that Amin spoke to Chris Lahane and put it to him our reporting about this round, and he didn't answer the question. Frankly, what
is consistent is the broader context. Open ai has said for a little while it's compute constrained, and in other words, you know, if it had more access to compute, we know about its ambitions to build more infrastructure, it could do more things, It could release more products, it could broaden API access, et cetera. Paint a little bit more of a picture for us in that respect.
Yeah, if you think about it, open ai has hardware ambitions. They have to build out all these data centers that they promised with stargate. They have to go and train these models that become bigger and bigger in terms of the amount of compute needed to get to what they want to you know, call it agi right, So I think that there's there's obviously a lot of room for them to expand and go beyond just chat GPT into
other business lines. With this as well as just this, there's this fierce horse race to make the next big model.
They have the anthropic Google Xai.
Everyone is going after the same price here, so they need to be constantly investing in the best development to get a had and stay ahead.
Bloombag Shrien Gafari, thank you very much. Sticking with open ai, the Chat GBT maker is partnering with Tata Group and its tech services arm Tata Consultancy Services on a massive deal that could then could speed up open AI's enterprises option. As part of the deal, TCS will develop a one hundred megawatt data center that may be expanded to one gigawa.
Tata would also.
Infuse Ai throughout its operations, and the pair will work together to build agentic solutions for specific industries. The deal was announced while Open AI CEO Sam Altman was in New Delhi for the India AI Summit, where he told the crowd early visions and versions of artificial general intelligence may not be far off.
India's largest democracy is well positioned to lead an AI, not just to build it, but to shape it and decide what our future is going to look like. And it's important to move quickly on our current trajectory. We believe we may be only a couple of years away from early versions of true superintelligence.
Altman wasn't the only tech leader making that kind of prediction. Demisa Sabis, head of Google Deep Mind, said AGI could be five years away. And if having all these AI leaders in one place singing the praises of the technology was giving you the impression of unity, think again. There was this moment when former colleagues turned rivals Sam Altman and Anthropic CEO Dario Amoday awkwardly refuse to clasp.
One another's hands.
It happened during a photo op orchestrated by India's Prime Minister Neurendromodi.
Okay.
As trees race to keep pace with the AI boom, investors are increasingly turning to energy as the next big opportunity. Tortures Capital Senior portfolio manager Rob Dummel joins us now, and actually, you know, let's go back to the top story. You know, a one hundred billion dollar or more rounds from open AI where the lead investors are Amazon, SoftBank,
Microsoft and Nvidia. You know where that capital is going to go, right in terms of infrastructure as somebody that is trying to seize the opportunity in the energy sector supporting that build out.
Your reaction to the reporting, Yeah.
Thanks for having me.
So when we look at that at Tortoise, and we've been focused on infrastructure for a long time, and when we see more capital going into AI, you know who who's going to win out of that? Well, AI fundamentally it's two things. It's data and it's and it's energy. And so so we created an AI Infrastructure Fund here at Tortoise. It's an active ETF that focus is on the data infrastructure. So, so who's going to win from perspective? You need more data storage, right, you need you need
more cabling, you need more liquid cooling. So the companies that provide that to the data centers, and you're gonna need more data centers as you highlight them, and you're gonna build more of those. Those are the companies that are gonna going to benefit from from this hundred billion dollars of spend. Now, you also need energy, you need electricity, right, and so's that's where the electrification infrastructure is going to
be really important. And so companies that have electric generation in the areas where these data centers are going to be built are going to win as well.
Rob.
Earlier this week, I had an extended conversation with Mary Daily, president of the Federal Reserve Bank of San Francisco, very focused on I guess the inflationary impact of what's happening in the data center build out, the argument that the hyperscale is PG and E right. The utility in Northern California argue is it will lower electricity prices at the wholesale level because those those mega cap tech names take on the capital burden of modernizing the grid, but also you know, paying up front.
Could you just weigh in on that.
Yeah, No, I think it's an absolutely valid point. Is something we all need to keep our eye on. And Mary has some great points, and you have some great points as well. There's some really innovative solutions that are happening. And right now, you know, we're investing in a company like Williams Companies, who owns the largest natural gas pipeline network in the US. They're actually helping to try to reduce retail electricity prices by building electric generation to support
AI data center buildouts. But the contracts that they have are between Williams, who's going to build electric generation, and the Hyperscalers basically ultimately. And so why does that matter? It matters because that from a cost perspective, the cost of that electricity generation to develop AI is going to be put upon the Hyperscalers, not the retail consumer, not the retail electricity provider, whether you're in California or Texas
or where I am in Kansas City. And so you're seeing a lot of those innovative solutions start to happen and that but the goal is to not have this AI build out and to win the AI race, We're going to need a lot of electricity, but not have that be paid for by the retail consumer and as a result, have inflation rise because of that. The goal is to have the Hyperscalers pay for that, and there's multiple innovative solutions that are resulting in.
That Open ai raising more than one hundred billion dollars, are going to go back to it with this kind of bigger goal of a trillion dollars of commitments. Right, you know if you try and top them all up, how much of a risk is it that the center of what's happening there is just this sort of single entity. I'm not necessarily talking about circular financing. I'm talking about the build out. The main tenant of that being one
single company. And of course you know Amthropic and an xai and Google will factor into that, but increasingly it's open AI and everything.
Yeah, I think we're going to world at autonomous everything, right, and so and and and we'll see where that where that ends up. Look, I have a lot of confidence and you know, you you give the tech tools to to the tech experts and what can they do? And we've already seen it's been incredible in terms of the opportunities in AI. And we're if you think about it,
we're just getting started. I mean as far as what what opportunities there are for agenic AI and and and other ways, Right, whether it's healthcare or or education or just every area in our lives is going to be impacted over the next several decades. And and so the technology is there, we just need to get the energy there, and we need to get the electricity consistent.
So how great is the risk that the supply of energy will not catch up with where demand is currently and where it will be.
Well, Look, I've been investing in the energy sector for thirty years, and you know, you give these energy sectors, this sector a challenge, and it always steps up to the to the plate. And and I do think that the sector will and and so so there are plans in plays to continue to expand the US electricity grid. And if you do that you mentioned earlier your discussion yesterday, you can you can make the grid more reliable and so so we I don't think there's gonna be a big risk of that.
Actually, let me ask you just really quickly, Elon Musk has this target of one hundred gig or what's of solar capacity in this country?
Is that achievable?
Rob Well, I think you're gonna need all of the above approach to meet that. So you're gonna need solar, You're gonna need win. You're gonna need hydro, we're gonna need nuclear. Obviously, we're gonna need more natural gas. And so we've got to the US has got an advantage and it's gonna win this global AI race because it
can provide low cost electricity. It's going to do that by this all of the above approach that includes solar, wind, nuclear, natural gas, and and and frankly, probably a little bit of call as well.
Rob bunld Sours's Capital. Great to have you back on the show, Thank you very much. Now coming up, door Dash serves up a first quarter growth forecast. We break down the food delivery giants latest earnings.
Next, this is Bloomberg Tech.
New York Governor Kathi HOCl has pulled a proposal that would have allowed for commercial robo taxi services outside New York City. This comes as a blow to Alphabet's Weimo, which is looking to aggressively expand its driverless fleet this year. A Waymos spokesperson said the company will work with the state legislature to advance the issue and bring its service
to New York. That story was broken by our Consumer Apps and Gig Economy reporter Natalie Lung, who joins us now to break down some of the other earnings on her beat, and you've been busy. I'm looking at shares with door Dash up around six percent or five percent right now. They had been as high as seven percent, on track for their best day since April last year. Company issuing a first quarter order growth forecast that tops estimates.
The food delivery platform beat estimates on gross order volume. In the fourth quarter, earnings and revenues missed expectations. I guess the way look at actually, if you take the lid off the food type ofware in the delivery bag, what's the story with door Dash here?
So the demand for on demand delivery is very strong, as evidenced by Dordash's strong growth order forecast for the first quarter, and then follows sort of the strong demand out of that uber head earlier this month. But the bigger story here for DoorDash is their investments into some of the new products, including the UK business they acquired, as well as like a back end system upgrade that they're talking about to reconcile all of these new businesses they've been building and acquired.
So the back end system upgrade is really interesting. Whenever executives from the company come on the show. They always talk about how good they are at software, in particular, what is it that they're rebuilding here.
Yeah, so last year they went on this you know, multi billion acquisition spree, including UK's Delivery, and earlier a few years ago they acquired the Eastern Eastern European delivery business Volte. And so now they have these three different apps DoorDash, Volte and Delivery, and they all worked on different systems, and so the CEO, Tony su wants all these systems to work on the same platform so that engineers can work on the same projects and analytics teams
can look at the same common data sets. And so he says this is a painful but necessary exercise to conduct this year, and they are having to invest a lot into it that could weigh on profits.
You've also been looking at booking holdings stock down, you know, relatively significantly. I don't know if some analysts are saying, like global travel seems strong, that's supporting them. Others are debating and questioning their growth forecast to interpret that.
What do you see?
So it's actually a similar story there in bookings. They are it's going to be a big year for reinvestments for them. Last year they talked about this transformation program where they had to cut a few jobs and reorganize some of their businesses, and now they're investing those savings back into the company for AI. And they talked about how customer service has been improved with AI, and so there's always, you know, concerns or skepticism on how that would play out for them.
Bloomberg's Natalie Lung terrific reporting all morning long. Thank you very much. I just want to look at shares of Figma. The company gave an annual revenue outlook that topped estimates and it kind of eased Wall Streets anxiety over AI threats to its own business.
It's up around seven percent, but.
Also, like I think, showed a lot of what it's doing in the field of AI. Bloomberg's brody Ford is on the other side of town from me, where it's
raining heavily. I've learned a lot this morning through your reporting about what, on the face of its heres a pretty boring term net dollar retention rate, but actually, like if you kind of dig into it, it basically shows Figma had a lot of existing customers it launched new products, those existing customers were willing to pay for those new products on top of what they already have.
That's exactly right, Yeah, and that's true that investors wanted to see. I mean, Figma is one of these names that's gotten caught up in the SaaS apocalypse, you know, the fear that as it gets easier to build software, these application leaders aren't going to have the pricing power they once did. But Figma showed us they did because on average, if I gave them a dollar last year,
I'm giving them a dollar thirty five this year. And so that clearly shows that the amount of products customers are buying is expanding.
We kind of zeroed in on by the way we're showing the shares kind of over a longer time period since the IPO in July of last year, down twenty two percent. Basically, Pigma Make they basically said, like, here's an AI tool that we have.
It is growing. What do we need to know?
Right?
Pigma Make is essentially the you type in a prompt and it kind of gives you a pretty good app right. I mean, it's in the vibe coding realm, and that matters because there's a lot of these startups like Bolt or Replet that problems to be able to vibe coaps pretty well. And so it was really up to fig O to show that, no, we are the incumbent here and we're going to out innovate our peers. And you know, at least last night they took a step towards convincing the market of.
That doing those brody Ford terrific reporting. Thank you, Thank you very much. A lot more coming up. Bike Dant seems to compete with the world's leading US based AI companies literally on their own turf. We have more on that next. This is Bloomberg Tech. It's time for Talking tech and first Start. The UK has proposed rules requiring tech companies to remove abusive images within forty eight hours all face fines of up to ten percent of global
revenue or even a UK service van. The move comes amid investigations in Ireland, Spain and other countries over nonconsensual undressed images created by Ex's AI Chatbotrock Plus Morgan Stanley's cutting fees in half for clients trading private company shares on its newly acquired equity Zen platform, charges for buyers and sellers will be lowered to two point five percent from five percent on most transactions, undercutting competitors as it
looks to take advantage of an expanding market. And finally, Amazon has officially overtaken Walmart as the world's largest company by revenue. The online retail giant posted seven hundred and seventeen billion dollars in sales for twenty twenty five, edging past Walmart's seven hundred and thirteen. A big driver of that growth Amazon's cloud computing business AWS, and we.
Stripped that out. It's not quite apples to apples.
Another story, Chinese tech giant bike Dance is hiring in the US for nearly one hundred open roles within its Ai division. The push comes after it announced the deal to sell parts of its US TikTok business to non Chinese owners to address US national security concerns. Bloomberg's social media report Alex Lavine has the story, let's stop cis like, what are these roles?
Where are these roles?
The roles are mainly in California and Washington. We have them across Los Angeles, San Jose, and Seattle, which are all cities that TikTok also has offices in and I think what's so fascinating about these AI roles is really just how much they run the gamut. You've got roles that are focused on producing international data to feed to.
Buy dances llms.
You've got roles doing research to make AI more human like. And you've also got these really interesting roles building science science models that are really looking for talent in biology, chemistry, and physics. And these are more roles focused on helping buy dance pursue drug discovery and development.
So the reason this is a notable story, right, you just said that these roles will be in proximity to or in US TikTok's offices, right, But the broader thing is, you know, Chinese parent hiring for roles in the field of AI in the UNI States national security competition take us there.
To clarify, these not necessarily in the same as the TikTok offices, but they are in the same cities where TikTok has a large footprint. And as you just mentioned, these are also cities where some of the leading American AI companies also have a lot of a lot of talent and their own footprint. I think what's so interesting is that to this point in the US, we've really
thought about byte Dance as a social media company. It is also a dominant AI company, and it really seems that that has been a bit lost on the US until now. And I think the turning point has really been over the last week since by Dance unveiled some new AI models for video generation for example, an image generation that has really caught on and raised concern especially from Hollywood.
In a very big way.
All right, Bloomberg z AlCH Slovine, it's a must read report on the Bloomberg about byte Dance building out AI teams in the US.
Coming up, we're going.
To discuss what Mark Zuckerberg had to say about teen social media use when the metase A CEO testified in a landmark trial. We have those details coming up next. This is Bloomberg Tech.
Welcome back to Bloomberg Tech.
We're just going to take a quick look at where financial markets are right now. We had a lot of
economic data to pass through the morning. Our market's team on the Bloomberg terminal and on dot com are really emphasizing the geopolitical risk that's out there, also ongoing concerns about inflation then as that one hundred very tech heavy, modestly lower down three tenths of a percent, chip stocks taking a breather, down eight tenths of a percent, and then Bitcoin now further blows sixty seven US thousand dollars to can remember it's a shorter week in the United States.
It was a holiday on Monday, but bitcoin trades twenty four to seven, and we came back from that holiday weekend with Bitcoin under pressure. One headline, by the way, Goldman Sat CEO David Solomon saying he owns a very modest amount of bitcoin, but remember he's long been a cryptoskeptic and that's not doing much to support the asset either way. We'll keep you posted. Another top story today, Meta CEO Mark Zuckerberg took to the stand in the
Landmark social media addiction trial. Bloomberg's Riley Griffin was in the courtroom for that testimony. And look, we were building up to this on the program throughout the week. Take us through the lines of questioning, and I guess the top line of what mister Zuckerberg had to say in response to those questions.
Yeah, ed, great question.
It was an intense day here in Los Angeles, and yesterday we saw Mark Zuckerberg testify to a number of things. Questions about company documents that showed that Meta had been focused on increasing time spent among young users. Questions about the under thirteen demographic on the platform. Despite policies that suggest they're not allowed to be, there still millions of Americans under that age on the platform. Questions about decisions
he personally made regarding beauty filters. All of this came to a head with him on the stand at times rather uncomfortable, very subdued. He did score a couple of wins here and there, but overall the picture was painted of a company that made deliberate.
Could be user of health the youngest users.
Right.
You know, Instagram does have age limits and other tools that already exist, and mister Zuckerberg basically splained it was very difficult to enforce them. Did he go a step for over and explain why it's difficult to enforce them. I think he also talked a little bit about other tools that they are being let's say proactive on.
Yeah.
So one of the cases that mister Zuckerberg made was to say that for the youngest users, particularly those without driver's license, it's really hard to verify age. He took a line that has come up a lot these days, particularly in lobbying afforts, which is to say that phonemakers like Apple should do a little bit more to help.
With that age verification process.
In fact, an email was brought forth by Meta's defense to show that he had made efforts to reach out to Tim Cook in the past to look for efforts that where they could collaborate on improving team safety.
So he said, it's an open secret.
They all know that many users are lying about their age. The plaintiff's attorneys suggested that that Meta had not done enough to enforce that, and there were some documents that showed that Nick Klegg, for example, a former policy chief, had said these policies were basically unenforceable and showed that they weren't doing all that they could. So we saw
it go back and forth. But Mark Zuckerberg's take here was that it's a really difficult challenge even as they create proactive tools to remove under thirteen users and NICs.
Roddy Griffin, who is on the ground and will continue to cover the trial, thank you very much. Let's discuss the broader legal invocations of the case with Mary Anne Franks. She's a professor at George Washington University Law School in Intellectual Property, technology and Civil rights. And a moment ago, the team was showing the data around what else is happening in parallel with this specific trial? Right there are three thousand such suits running in parallel. You also have
states attorneys general forty plus looking at this issue. But in the here and now, with this specific legal proceeding, could you just help us understand what is it question here?
Please?
The primary question that they're trying to address here is are the harms that are being experienced by these plaintiffs? And those are some really extensive and really serious ones, including in some cases suicide, but depression, body anxiety, body dysmorphia. Are these things attributable to the design of certain platforms in particular things like Instagram and Facebook? And so really the question is who is causing this harm? What is responsible?
Is it the content that these kids are seeking out or is it the way that these platforms have designed their tools and services to entice really vulnerable users to stay on the platform for longer and longer periods of time.
It was mister Zuckerberg, who was giving testimony, and you know, the I suppose top line of that testimony was that it is difficult for Meta, in particular through the Instagram app, to enforce what are existing rules. You know, how do you feel that that argument will carry from him?
It's not really clear how well that's going to serve I think the defense, because really what Zuckerberg seemed to be reiterating was, well, we have all of these really dangerous tools that we know can cause harm, and you know, it's just really hard for us to keep them out of the hands of certain individuals.
But that's just sort of accepting.
The premise that these kinds of products and services should exist at all, and that it's just an intractable problem about who's going to access them, when the question really should be, you know, why are you creating these types of features? What's the actual use of something like a beauty filter that you know is going to be really
attractive to nine and ten year old girls. So I think that he's very much trying to say, well, if you assume a world where all of these things have to exist, then it's really hard for us to control access. That's true enough, but why do these things actually have to exist.
We're showing a February eleventh statement from metas specifically tied to this trial, and the back half of it says, the evidence will show she a plaintiff, faced many significant difficult challenges well before she ever used social media. I'm just putting that that is Meta's statement. Prior to that in November, you know, they had said they strongly disagree with these allegations and confident the evidence will show our
longstanding commitment to supporting young people. I'm going to ask the same question again in a slightly different way that you have the CEO of the company defending what our existing policies and practices, but explaining how difficult it.
Is to enforce them.
Would you just help us understand, you know, what pressure will be put on him as the CEO of that company, or what changes or what outcome the court could affect how that company does business.
Yes, so a lot of things could happen at this point.
Because this isn't just about whether liability is found in these particular cases. This is also the first moment that we're really seeing the general public get a look at what did Mark Zuckerberg know and when did he know it? And so even if an individual cases, it's an uphill
battle to show absolute causation for these injuries. Now we've got information in the hands of the public, in the hands of regulators, in the hands of policymakers, and you've already seen that this kind of attention is causing these companies change some of their practices. So they've been giving the kind of pr propaganda about how well we're doing our best.
But it's really challenging.
But every time there's serious consequences that might loom over these platforms, they do start making some changes, although usually they're a little too little, too late.
We put in writing that this trial will run through the end of March, and again it's in parallel with a number of other legal proceedings that involve other parties. How much does one trial influence all the others that may happen after very quickly.
Quite a bit these This is a Bellweather trial, and the entire reason why it's been chosen is because it's supposed to give both parties a sense of how this is going to play out. And so if it looks as though things are going badly for the defense, that could really have an effect on settlements and possibly agreements going forward to have safer products and platforms.
Mary Anne Franks from George Washington University Law School, thank you very much. What about the business impact? MINDA Smiley c the analyst that eMarketer has been looking into teen social media use and enjoy us now and again, going back to mister Zuckerberg's testimony, his argument was that this category or demographic is a small part of the Instagram business.
Does your research support that?
Yeah, I mean I think the reality is a little bit murkier than that, right, I mean, I do think he maybe has some points when he says they're not a demographic is majorly monetized, and that they maybe don't bring in a ton of ad revenue, but that does not mean they're not significant.
I mean, when you look at our a Marketer data, we.
See that in the US at least about eleven percent of Instagram users are under the age of eighteen, and so again not a huge majority, but that's a significant percentage. And also, I think, you know, the numbers tell one story, but the reality is these platforms gain a lot by you know, essentially hooking these users young because the younger that they get on these platforms, the more likely they are to continue using them in the future.
So again you can look at the numbers.
You can look at maybe how much they how much revenue they're generating from teens per year, but really it's about setting these behaviors early and benefiting in the long term.
Mister Zuckerberg stated that teams equate to one percent of revenue, which I thought was an interesting data point. This question about the future of Instagram in particular, but you know, the other meta family of apps is well, what would they change? You know, And part of the discussion in the testimony was the tension on the rules they have in place and the privacy of the individuals that are signing up for them. Does that tension have any pairing on how they do business going forward?
Yeah, I mean I think it's still really early to say, but I mean, for sure, I think depending on how these lawsuits play out, if they end up having to fundamentally change how their platforms work, whether it's whether it's the algorithms or AutoPlay and infinite scroll, whatever it might be, that will in turn have an impact on how teenagers
use these platforms. And something we've noticed is that, you know, it was interesting to see him really kind of downplay to what extent meta is really prioritized time spent as a metric when our numbers show and just you know, paying attention to the company in general, and we know that time spent is definitely a crucial metric for formata
and all social networks. And we have seen time spent among teenagers specifically rise year over year on Instagram, and so we do see that, you know, anything that would kind of hi away that time spent if they would have to make changes to the platform, what would have an impact.
But your research shows that teams are spending significantly more time on TikTok than on Instagram. I think I'm correct in saying right. I just want to point out that with this trial, TikTok and also Snap and not parties to the case because they had settlements prior to it. But if we look bigger picture at the industry, how will these other players be looking at this trial, do you think?
Yeah?
I mean I think they're all probably looking at it through through a similar lens. I know YouTube is trying to really make the case that it operates very differently than than a meta than a TikTok than a snapchat, and so I think, you know, that could potentially see see.
YouTube play out a little bit differently.
But I think in general, yes, especially a company like TikTok, which is kind of you know, it's really equated with teenage use. Right, A large part of why it became so popular in the US in the first place was because of young people, because of teenagers.
So and like as you said, yes, our figures do.
Show that teenagers spend a ton of time on TikTok, definitely more than Instagram. Although we are see that seeing that time spent you know, come down a little bit year every year, which kind of suggests that TikTok isn't maybe the shiny new object it was, you know, five six years ago.
The difficult question, I mean, there's is what happens next, right, and your your research others point to law makers, you know, putting out a new set of rules. Is their momentum behind that pathway?
So yes, and no, I think there is momentum at the state and the federal level. We are seeing lawmakers and regulators try try to address a lot of these concerns. Independent of this lawsuit, These lawsuits. That being said, they're running up, running up against a lot of challenges.
For one is big tech lobbying.
I mean, these companies are lobbying against a lot of these bills and laws.
There's challenges happening in court, and.
Then even you know, generally this tends to be a bipartisan issue. I mean, we see lawmakers on both sides of the aisle want to kind of reign in the power of these platforms and reign in what they perceive to be harms.
But the way they want to go about.
It often differs, and so that's another challenge. Enforcement is a challenge. We're seeing that play out in Australia with the ban under sixteens. You know, they're having a lot of success in some ways, but they are having some enforcement challenges and actually getting people under sixteen to completely say off these platforms, and so it's a messy area to regulate.
Mind Smiley emocs to senior analysts. Thank you.
Now, coming up, we're going to hear from Microsoft president Brad Smith on the company's relationship with open AI.
That's next. This is Bloomberg Tech.
Microsoft president Brad Smith says the company is on track to spend fifty billion dollars by twenty thirty to expand AI infrastructure to the global South. He sat down with Bloomberg's has Linda Ahmin on the sidelines of India's AI Impact Summit. He also weighed in on the state of Microsoft's partnership with open ai Take a listen.
I think it remains a critically important partnership for Microsoft. We bet on each other, but it's not as exclusive as it was, say a few years ago. OpenAI uses our compute, they train models in our data centers, but they work with other companies as well. We critically rely on open AI's frontier models. They are among the best, and many days they are the best in the world. But we have a relationship with him thropic. We use open source models, We're developing our own models, so on
both sides we work with more partners. But I think the partnership between the two of us remains an imperative. It's a huge priority for us at Microsoft.
The question is why is it a hedge, is it a strategic pivot? How would you describe that move looking at alternative partners.
Well, look, if you want to think about the partnership between open AI and Microsoft. All you have to do is ask one question, would any of this generative AI sector even exist if the two of us had not come together. Open Ai created something that no one else even understood was possible when they launched chat GPT, and open Ai could never have created that without Microsoft's compute and really frontier data centers on which to train that.
We built something special. We'll each do special things on our own. Will each do special things with other companies? Will each do I think, very special things with each other.
Just one funnel question, because we're running out of time, apparently, copilot is it losing traction?
I don't think so. It's gaining ground. It's getting better every week, it's getting better every month. I say this as a user, not just a M three sixty five copilot, but our consumer copilot, our researcher agent, our other agents. We're seeing usage grow. We will continue to add features and functionality. I personally think it is an important part not just a Microsoft's past and present. It is a key part of our future. It is a key part
of I think making everyone more creative, more productive. I certainly find that in my own work each and every day that.
Was Microsoft fvicechair and President Brad Smith, along with Bloomberg's has end Amen. In other news out of the Summitcrosoft co founder Bill Gates backed out of a keynote address just hours before he was due to speak, replaced instead by the president of the Gates Foundations Africa and India offices. The Foundation explained the decision as an effort to ensure
the focus remains on the conference, without elaborating. The withdrawal follows criticism of gates relationship with convicted sex offender Jeffrey Epstein and speculation about whether that link could overshadow the Foundation's broader mission. Coming up, there is more drama around the sale of Warner Brothers Discovery. We'll discover that next. This is Bloomberg Tech. Hollywood is no stranger to a plot twist. Take the latest development in the saga to
purchase Warner Brothers Discovery. According to sources, the Justice Department has summoned some of the country's largest theater chains to discuss the potential impact active a sale to either Netflix or Paramount Skuydance. This coming on the heels of Warner Brothers reopening deal talks with Paramount. Now all this drama should be seen as one twist too many for Netflix, according to Bloomberg Intelligence, Let's bring in the aufer of that research b I.
Seen around this. KEITHA. Angerath and.
Investors have voiced this, right there is this idea that now might be the time for Netflix to walk away from some corners of the market. I think last weekend Korra came out in favor of that. But you at BI have some pretty clear reasons why you think Netflix should walk away.
Just outline them for us.
Yeah, absolutely.
I mean this has been a major distraction ed now for you know, over a couple of months right now, and we've seen that even you know, as a reflection in the stock price. But they're really you know, it just kind of really muddies a really clean narrative for the company. And I think from our perspective, yes, we do see that. You know, Netflix obviously has a lot of financial firepower. They are an absolute cash flow machine.
They're probably going to generate about eleven billion in free cash flow this year, there's.
No doubt about that.
But there is going to be the question of leverage. So if they do take up their offer, it's currently about twenty seven dollars and seventy five cents their risk, pushing close to almost four times leverage. As they go up to maybe thirty dollars thirty two dollars, we don't know what that final number is going to be. And then you know you're going to deal with how do you reduce debt, So it just becomes a big problem there. And then of course you just have the general concerns
with integration risk, execution risk. And remember with this, you know, Netflix is really acquiring a business that they always wanted to stay away from. They're acquiring a traditional Yes, they do get the library, the fantastic IP, the HBO library, which is one of a kind when it comes to scripted you know, dramas, But then you also really are increasing your dependence on Hollywood. And the whole reason that Netflix has done so well ed is because they have
been a global powerhouse. They have not just depended on Hollywood for content. They have gone to so many different local markets. International has been such a big deal for them. But you know, as we kind of see the union contracts kind of coming up, you know, we think that increasing the dependence on Hollywood is actually more of a negative than a positive for Netflix and.
Just very quickly getha the stocks down more than thirty percent since this started. Is that a signal or is it real pressure on management?
So a couple of different things. I think a lot of it hinges on what the outcome of this whole Warner Brothers Discovery deal is going to be. But then Netflix also has some problems. They have shown that they haven't really been able to grow engagement and a lot of people have argued that maybe that is why that
they're pursuing Warner Brothers Discovery in the first place. So, you know, they have a couple of things to do in terms of increasing their operating margin in terms of boosting engagement, and if they do that, then I think management has a pretty good story why they don't need Warner Brothers Discovery.
Keither rang enough from Bloomberg Intelligence. Thank you very much, and we will be speaking with Netflix coc Ted Surundos is in about thirty minutes time, so stick around. That does it for this edition of Bloomberg Tech Recap. What was an incredible news show on the podcast you know where to find it. This is Bloomberg Tech