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Open Ai raises one hundred and ten billion dollars with key Amazon backing and a deal that values and startup at seven hundred and thirty billion plasanthropics dispute with Appendagon and intensifies over safeguards around the use of its AI technology and block plans to cut close to half of its entire workforce in a move the company describes as a bet on AI. But first we check in on these markets that have a lot more to digest than just AI.
On the day, we're off by four tens percent, and.
As that investors trying to navigate what has been a pretty brutal month. Yes there's anxiety over AI capex. Yes there's worried about where on inflatory pressures are going. The PPI data today showing that maybe the FED can't cut as much as the market had wanted. But there's also
geopolitical risk. I ran us front and center. Let's look at what we're doing over the course of the month, because remember we are winding up February, and it means we've had the worst month for the NASDAQ one hundred and for the SMP five hundred since March of last year. We're off by more than three point eight percent. Move on and have individual companies in your line of sight today, because the key story is a private and a public market one. I'm looking at what happening to Amazon. We're
up four tens a percent. It is going to be slump supplying fifty billion dollars to open ai in terms of its latest funding rounds.
Does that come in compute?
Does that come in terms of really focused access to open AI's own agents.
We're looking at Video off by one point eight percent? What does that mean for their GPUs?
But they're throwing in thirty billion dollars as well, So two is softbak. Let's get more details. Seth Biegerman is with us and piece to say. And what's so interesting is this deepening intertwined between open ai and Amazon.
What do you make of it?
Yeah, I mean it's really telling. I think it's another example for us that it takes all parties now to meet the needs of AI and cloud computing. Amazon obviously has been a long time supporter of OPENINGI rival Anthropic, but increasingly opening Ianthropic and Amazon have brokeer cloud computing
deals as part of this form. In addition to the money that Amazon is committing, Opening I will be using Amazon's training and chips, which is certainly a vogue of confidence, and Amazon's technology, and they'll be working together on a models that might be useful for Amazon specifically. So again, Google, Amazon, Microsoft, the video, they're all kind of backing everyone right now to lift up the wider AI market.
It's interesting therefore that maybe in video is down a little bit on the day throwing money into open ai, but maybe people worry if there's more dependence on Trainium and Amazon chips, maybe less dependence on GPUs. What's so interesting as well is open Ai says the funding round isn't over.
They're also tapping venture capitalists coming forward.
Yeah, it's our understanding that there's still billions more to go here, though I think the majority of it is now done and committed, and so that next trench of it might come from venture firms and from sovereign funds, with our expectation that this will all be wrapped up this quarter.
What's been also notable is how maybe some of the pr moon music that have been so all consumed with open ai and its prowess had slightly shifted to the alternatives and propably been leading a lot of the charge in terms of unveils.
To the enterprise. How much is open Ai now able.
To refocus to talk up its coding tools, to be able to talk up its penetration into the enterprise.
Well, certainly, first off, this is a vote of confidence in OPENINGI. I mean keep in mind that during the months they've been working on this deal, I think there's been heightened concerns on Wall Street about capex spending. With Opening I really at the center of a lot of that unprofitable startup committing to spend more than a trillion dollars on infrastructure, and yet they still are on the
cusp of raising the largest funding round in history. Now, to your point, Hoping has, like Anthropic, been investing heavily in AI coding tools, AI agents and working to help enterprises figure out how to make the most of its existing AI technology. So I think we should just expect them to double down on that in the run up to what will likely be in IPO pretty.
Much, Seth Giegman, we so appreciate the roundup. Thank you.
Let's get the markets tape chaping Morgan Asset Management Global market strategy is Stephanie Adiagas here with us.
Stephanie.
This is once again shining a light on the extraordinary capital expenditure that is necessary for these frontier labs.
It absolutely is, and I think it comes on the heels of this agentic boom that markets are really beginning to take issue with. And the reality is the reason why these agents are so phenomenal is because they think longer. The amount of inference required in these agents is magnitudes larger than the kind of single query just prompting an LLLM of the past. So, you know, the economics around AI continue to mount. We heard that from Nvidia this week.
I think for the markets, I mean there's just this lingering anxiety of Okay, yes, we need a lot of infrastructure, but who's going to make money on all of this, and where are the competitive modes actually going to stick in this rollout? And then of course, what does this mean for some of the companies that may be privy to.
Disruption well, before we get there. I want to go to Nvidia because it was sort of extraordinary. That's dound today and yesterday on the back of such strong fundamental numbers that it posted. How do you interpret that market shake off of it.
I mean, part of it is we've all become, you know, Tiger parents, and we're used to exceptional results. It's not enough. We're now more concerned about, okay, moving forward. We got to see some kind of moderation in these growth rates, given just how remarkable that they've been for so long.
I think markets are thinking about that.
I think on the other side, there's also this desire to diversify perhaps exposure to some of these AI names, and that's really where we're seeing caution really emerging in markets.
I have to say, I'll produce a made the Tiger Parents.
An a changer yesterday. I'm having a love it. We all expect more and more and more.
But what's interesting is whether or not we're starting to expect more of software now. I spoke to the Intuit CEO yesterday after their numbers came out, and Sasan has been talking about the disappointment he's had in the sell off of his stock, the worries that they've had about really their growth rates not supporting some of the decimation
in the market capitalization of this business. And they feel that people are adopting into it, and they are striking these partnerships with Anthropic and Open Air, and they're like the software concerns, And there we have him saying, it's very hard to disprove a negative. How are you thinking about the market worrying about software and its ability to weather this AI disruption?
Yeah, I think it's rational to price in a greater degree of uncertainty around the sustainability of earnings growth. But I think markets maybe getting a little ahead of themselves. And there is almost some misunderstanding I think around how transformed or how disruptive these tools are.
Isn't the market meant to get ahead of itself?
Though that's true.
That's true, and it makes sense to self first and ask questions later.
But now it's time for nuanced discussion.
Around what these tools are going to do. Because these plugins themselves don't distruct businesses. It's about what you use those plugins to do. Who is leaning into AI to provide AI empowered services, to bolster competitive motes, to do more. And the other thing you know crossing headlines today is around labor disruption, and I'll say, you know, companies that are thinking about how they use AI to substitute their workers,
they're missing the forest of the trees here. The real transformative impact from AI is what you can do to do more, to do faster, to build better, to do things that you wouldn't have done before, and ultimately outrun your competition in doing so.
We are going to be discussing BLOCK at length in a moment, but I'm assuming that's exactly where you're pointing the fact that Jack Dorsey has admitted he over hired and in some ways has been rectifying and rebalancing BLOCK from a personnel perspective, But he is saying I am late, and we are going all in an AI and other companies are going to follow all that, other companies to follow who are bloated, who do need to RECTI five and are going to use AI as a good excuse.
I think the reality is AI is going to create a lot of transformation in work, and that transformation could at times look like layoffs in some areas. But I think over the medium term, we're going to see all sorts of job creation too.
Maybe they want because we'll keep talking about promot engineering.
Well that's sort of thing.
It is a thing of the past.
Well, one of the things is, look, these agents can create a whole bunch of work. They can automate processes, but the amount of work that they can reliably automate relative to what a human worker does in a services oriented economy is still a fraction I should add. And all of these you, our listeners should know. Hallucination rates for the current frontier models still range between twenty.
Six percent and eighty percent.
Whatever frontier model you're using, Claude Gemini, chatchbt. They're still getting things wrong. There is still a real layer here and oversight. And the thing is, the need for human oversight only compounds when now we're talking about a lot more product, a lot more output because AI is helping us achieve that.
It's interesting because of late, I think there's been pushed back on the hallucinations that are happening at the very cutting edge models.
And yes, that might be a thing of the past.
So I'd love to dig into that deity that you're still seeing maybe up to eighty percent. More broadly, how you thinking about the macro impact and whether or not we will see a FED that's able to tackle this in any way or not.
Yeah, it's a challenge, and that's an artificial analysis for the FED. It's a challenge right now. You see there's a little bit warmer inflation. Right now, we kind of know what's contributing to that.
It's tariffs. Maybe we can see through that.
And I was just in DC earlier this week hearing from a bunch of these FED governors, and.
There is a range of opinions here.
But I think the reality is the FED is very data dependent, and right now, in the hard data, you still see very very early impacts of AI labor disruption over the medium to long term. There are I think some big questions I think we have to rely on I guess what his history has told us, and then ultimately the fact that yes, we're all amazed at the exponential growth of the technology of the frontier, but the diffusion the real economy isn't exponential.
It's linear.
It's going to be jagged. That's going to give us time. It's going to give policy makers time to adjust. Stephanie, thank you for helping push us forward. Sevani Aniaga of JP Morgan Acid Management. Now coming up, Anthropic rejects the pentigons the latest offer in a dispute over AI safeguards. All the details coming next is a bretting back tech.
I offered more talks if so long as they're in good faith. We're always open to talks. And we set a deadline, and we meant the deadline, and up until that deadline, I'm open to more talks. And I told them so.
Emil Michael nan, under Secretary of Defense for Research and Engineering. After Anthropic rejected the Pentagon's latest off in a dispute over safeguards around the use of its AI technology by the US military. Now and Thropic CEO said, quote, we cannot in good conscience accede to these their request. And now well, the deadline for any further talks is fast approaching. Lumos Tech in Industrial Policy reporter Maggie Island joins us for more.
It's fast approaching.
It's five pm New York time, Washington time.
Maggie. What can be done until then? Exactly?
So? Look, the rhetoric here has been rather intense.
You see.
Emil Michael the Pentagon under secretary accusing Dario.
Amidae of having a God complex. Last night, you see.
Dario continuing to say that we need these two safety guardrails, and those guardrails are no autonomous strikes without a human in the loop and no surveillance of US citizens, and without that he doesn't seem willing to budge. So definitely, these two sides are staring each other down, and we're going to find out at five pm.
Who's will to blink.
We're also seeing coalitions of workers who are employees at Amazon, at Google and Microsoft and open Ai also asking their companies to join Anthropic in refusing to comply with the Defense Department demands. Maggie, what is the argument coming not only from amor Michael saying he's got a gold complex and actually calling him a liar, but what are the legal protections already in place?
Right?
So the Pentagon has said, look, according to the Constitution, according to US law, the US is not allowed to have domestic surveillance over its own citizens now. And Thropic's take on that is actually that AI might propose some new legal ground where there are situations where just due to the sheer power of artificial intelligence to aggregate public data. It could lead to new surveillance use cases under which the law isn't clear. So there's definitely some semantics going
on here. At the same time, these are real sort of life and death questions about how the US wants the AI tools to be used for warfare.
Mag Eastland, You're reporting throughout has been stella. Thank you very much for joining us on it. Let's continue the conversation. Sarah creps is with US, director of the Tech Policy Institute at rot Cornell University, and you're at the intersection of how national security, geopolitics, and tech policy intertwine. This is anthropic having to lead the charge here in many ways and the only one have got this sort of relationship with the Pentagon thus far. Would you make of Dario's pushback?
Yeah, and I think we should take a step back and acknowledge why they're at the tip the no pun intended the tip of the spear here with the Pentagon, which is that a year or so ago, you know, they seem to go in the direction of focusing on enterprise and what that more than a year ago because their first contract with pell Andeer was in twenty twenty four, and so that's the market they're going for, and so
they engaged. They were part of, you know, one two hundred million dollar contracts with Pellenteer and the Pentagon in part of that enterprise kind of business that they're focusing on, and so as part of that, that enters them into a you know, this arrangement that I think has then led to where we are now, which is this standoff in terms of how they balance their kind of ethical constitution with the need to be doing enterprise work that will bring in the revenue.
There is a lot at stake because what is It's not only just a two hundred million dollar contract of work that Anthropic has, but there's almost a threat coming from the Pentagon that if you don't abide by our rules, we're going to say that you're a supply chain issue and lots of other military related companies are not going to be able to use your models in the future. How much of a problem would that be for Anthropic? How much you surprise by the Pentagon's focus there?
Well, I think they are definitely two sides of this story. So we're is what I think makes this generative AI so different from bombs and bullets and nuclear weapons is that nuclear weapons and missile silo only has one purpose
and it was built by defense contractors. The cutting edge AI is coming out of the civilian world, and it's a classic dual use technology problem, which is it's starting in a civilian space and now it's getting appropriate and used by the Pentagon, and so it really it's a civilian technology that now has this critical national security, you know, value.
And so that's where this tension is. That both sides are correct, but the Pentagon does have a lot of leverage because it's it's the federal government.
It's the federal government, and we've been hearing from the federal government. I just want to hear a little bit more from under Sexuary Michael. That's what he told Blomberg earlier today. Just take a listen.
We've been negotiating in good faith on the Department of Warside for about three months and we're working pretty diligently, and we sent over a proposal that we thought made a lot of concessions to the language that Anthropic wanted, and then without any notice, they published an article where we thought we were getting close, saying that they were breaking off talks well before the deadline, which is generally not good partner oriented practice, if you.
Will and look Panthropic in return, has said that while the Pentagonservator's proposal fell short, the company continues to negotiate with defense officials and remains committed to working with the military.
Sarah, So, when you think more broadly.
And this is an echo of what happened with Google years ago, how do you think tech policy can be written by the Pentagon, by the government to fit current purposes.
It is surprising that we're seeing this repeat of twenty eighteen, where Google and the CEO seem to have been blindsided by the employees reluctance to work with a Pentagon, And here we are eight years later, and it seems like a repeat of this that could have been avoided. But I think if we put ourselves in the position of how quickly AI has been moving in the last couple of years, you can see how this just becomes kind of a somehow new territory, even though it feels like
we've been here before. And so I think, what was happening last you know, the last year or two, AI was moving so quickly. The Pentagon is moving quickly, trying to do things differently, and you can see then why you know? And I worked in the acquisition business in the Air Force, and there was always this question, why
can't we move faster? This is why you can't move faster is because things with the federal government and national security and classified work and removing leaders from Venezuela are just not the same as coming up with a grocery list for yourself at home with chatch Ebt or in this case, Claude Daria.
Armide has been very clear that he thinks more about the implications of grocery list, and he's written about the adolescence of technology, written large at the beginning of this year, thinking about the geopolitical implications, the implications for ethics for our world of work going forward. Sarah, just tell us a little bit about where you think there might be any room for agreement.
Can the Pentagon go as.
Far as to agree, as with Dariamide's desire to not have surveillance of US citizens or not use models for autonomous lethal strikes without human in the loop. Is that ever something that they could be specific enough about.
I think it's a great question, and I think that's the reluctance of anthropic which is that the US has been saying, we are we one is to use AI, use cloud for any lawful use, and it's not lawful to use autonomous weapons, and it's not lawful to do mass surveillance. So what's the problem here. I think the worry, probably from the perspective of Anthropic is that slippery slope. What does it mean to be fully autonomous? What does it mean to do mass surveillance? And so I think
that's that great. What they think is gray area that they want to be very careful about. And I think the view has been that they would rather be trying to influence safe use of AI from the inside rather than take a sanctimonious perspective and be on the outside and not be able to influence the implementation and deployment of AI. And so I think that's what they're trying to do. And so for the Anthropics leverage, I think is that their model is really good and that the
Pentagon wants to use it. So my expectation would be that they probably will find some middle ground here. Before five pm.
Today, Sarah Craps of the Tech Policy Institute at Cornell University, we thank you very much. Indeed, now we just want to bring you some breaking news from a Trump post on truth social So President Trump posting about an FTC letter to Apple. Now Trump is posting FTC letter to Apple on Apple News's political actions. The FTC wrote to Apple on Februy the twelfth, regarding Apple News, we're off
by one point six percent. Will bring you any further details regarding that post, It is just simply a post of what the FTC has written to the CEO, Tim Cook and the fact that it's nation's consumer protection agency responsible for protecting the American consumer and they're looking to look Apple News as one of Apple's many products and services coming up, the Hollywood drama to buy Warner Brothers reaches it too climax, but as Netflix bows out, story isn't over.
We're on that next to suplomleg Tech.
Netflix has dropped its bid for Warner Brothers Discovery, clearing the way for Paramount Skynounce to clinch its deal for the home of Bugs, Parney and Superman Now. In a statement, Netflix's co CEOs said the price to match Paramount had gotten too high and investors rewarding that move. Just check out the shares and let's get the details. Bruemugs Luka sure who leads our entertainment coverage? Did it come as a surprise?
The speed with which Netflix pulled out came as a surprise. You know, there'd been a growing suspicion over the last week that this was tilting right. Warner Brothers had selected the Netflix bid in December. Over the last couple of months, Paramount had waged this campaign to change it. For most of that time, it still seemed like Netflix was the
clear front runner. But over the last week, you know, Paramount made a bid that Warner Brothers thought was better, and people started to get the feeling that, you know, that Netflix was having second thoughts. But I think the speed with which it all came together on Thursday was a real.
Surprise, and it came straight after the meeting at the White House with Ted surroundos. Can we interpret anything from a political perspective, look.
I think the political pressure that Paramount brought to Bayar definitely had an influence. It made a lot of Warner Brothers shareholders believe that the Netflix deal was going to take a long time and be more complicated, and maybe be more interested in the Paramount deal. But I wouldn't read too much into the meeting yesterday. I don't think it's like Ted Sarando's walk into the White House, came away saying, oh, we can't do it, and then pulled out.
I think Netflix had been sort of ga building to this point for a little while.
And now all eyes on the Ellisons and what's next. Luca Shaw, thank you so much for jumping on that news. Meanwhile, coming up, Jack Dorsey and as is huge jub plots over at Block as a fintech makes a big bet on AI, but is AI really the only catalyst for these job cuts at Block We're on that Next. This is bluembg Tech. Welcome back to Bloomberg Tech, checking in on these markets, checking in on individual names. To the downside after earnings. This time it's core weave off by
nineteen percent. We haven't seen this sort of fall in six months for the Neo cloud. And this is as their couple expenditure continues to balloon to thirty to thirty five billion dollars for the year that was more than the.
Market had anticipated.
They're also posting a bigger loss than had been thought, even though revenue did climb. Look again and trade to the CEO saying, this is our business model. We build because we've already got the orders from the likes of Microsoft, from the likes of other key cloud demand and GPU demanders. But for now the market still wants more proof point and we're lower. As move on to some individual names also on the move on the back of that big private market deal.
I'm looking what's happening to this points of nim video.
We're off by three points, We're down by two percent for the giant, Yes, second day running that we're on the downside after its earnings. But crucially it's putting thirty billion dollars of its own money into open Ai. Now does that come in the form of GPUs we get to understand. But really this is as we understand that we are gu see Amazon lent on more by open ais. They put fifty billion dollars into this one hundred and
ten billion dollar funding round for open Ai. Does that mean that we're dependent less on a video more on Amazon's own chips and cloud. Certainly Microsoft to the downside as people start to interpret that that relationship between open air and Microsoft is continuing to untangle.
We get all more about Capex.
And the likes with bluemeg Equity's reporter around Verstelica, who you've been singling out how cheap and video has become. But after its earnings, we are still trying to find the proof point then it still is going to dominate market share like it always has.
Maybe this deal with.
Open Ai on Amazon showing that perhaps we can't depend on that so much.
Hey, good morning, thanks for having me. Yeah, I say that's become a growing concern. So even though in Vidia continues to grow pretty rapidly, it's multiple is getting pretty cheap. We are seeing a number of competitors, including its own customers, showing pretty good success with their own internal chip offerings. Obviously we have Alphabet with its TPU chips. You mentioned Amazon this morning and the deal that they have with
open Ai. This just shows that even though in Vidia looks like the results in their just overall trends are pretty positive, there you still have a lot of concern about how sustainable is this, what is competition going to look like, and what does all that mean for how we should be interpreting the stocks prospects, especially as we look out over the longer term.
I mean extraordinary because in video posted the seventy percent growth in revenue said that it's going to be accelerated into fiscal quarter that.
Were currently in RYAN at the moment.
But this ongoing AI capex uncertainty is also running at the same time, you've got the software uncertainty as well. Are we what is it that the market needs to hear to galvanize some support.
That is a great question, because it really does seem like no matter what part of the market you're looking at when it comes to AI, seems like there's just sort of growing concerns everywhere. I mean, you mentioned Corewave not too long ago, another company that's spending very aggressively, and while they're also showing pretty good growth, people are skeptical. How much is this spending going to pay off? When an't we going to start to see more pronounced returns
from it? What does the impact all this is having on earnings and cash flow and so forth. Major concerns out there, and then software is a little bit of a separate issue. But at the same time you have this sort of growing adoption of AI, you have sort of improved efficiency of these models and more capabilities. What does this mean for sort of traditional vendors, and we did get some mixed results out of the software group this week, companies like Salesforce, into It, Autodesk, all these
companies coming out painting sort of a mixed picture. I think I'll just flag a duo Lingo, So maybe a little bit of a separate thing here, but the language learning software company that desk stock is plummeting today because they give a weaker than expected outlook, and that looks like one where people are just sort of looking and saying, like, what is the demand for this kind of service going to be in a world where we have AI providing
auto translation sort of services out there. So that is just sort of I think indicative of just the growing concern and fear out there.
Joe Lingo off by fifteen percent and the moment ran Vasilika, thanks for bringing us that one. As we think about how powerful these models have become. Just take a look at the two day chart of block shares. We've got that huge spike coming after the company which owns Square and cash app to a shareholders it plans to cut almost.
Half of its workforce. Why AI.
Let's talk about it with Bluebot Fintech report Emily Mason, and there is a lot of hand ringing as to whether this is AI washing or actual AI productivity Emily, but first of all gives us the fact, what did Jack Dawsey announce.
I mean, he is.
Really saying that this is driven by AI. They've made a lot of investments in their internal tools like Goose, which are meant to help employees across the board operate more efficiently. So they were really trying to communicate that this is coming from a position of strength and that you know, it's a bet on AI making them more efficient.
I think they're getting a lot of skepticism that you know, they hired really aggressively over Covid and similar to a lot of their peers, and you know, maybe they needed to reduce some.
Blow when they say a position of strength. I think the CFO was talking about how they've seen more than twenty percent growth in their gross profit for the core to they just talked about his Jack Dorsey discussing how they, yeah.
They did over hire in COVID.
He admitted that, but they also feel that they've been pretty well run. That's something that I've been hearing echoed by Annus as well, that compared to other payment companies. Actually, they're pretty profitable on a per employee basis, on a one year basis, it's been more volatile for the stock, so Emii painter as as to what the reaction is going to be like and how you actually let go of that many people, four thousand all in one shop.
I mean, that's part of what made it so surprising, right, is like it's not totally clear what pushed them to make such a dramatic change. If they are performing so well, they're really trying to increase their product velocity to keep up with competitors. I think people feel like they've done a good job of that, catching up with Toast as far as future parity for serving restaurants, which has been a focus area for them on the square side. So I think that's kind of where they are, and they're
hoping to just continue on that trajectory. They've made a lot of restructuring changes to kind of operate more efficiently. They've gotten a rid of a lot of middle management people, and I think part of a question I have is like is this the culmination of that? Like are they now happy with their organizational structure and are they going to be able to just execute without restructuring anymore.
And that was the argument.
Don't have wave off the wave, just do it once and do it efficiently, shall we say? But still, this is a human story, Emily Mason, thanks for bringing it to us from Bloc, and therefore let's get you the wider human picture here as it intertwined with AI. JP Gownder's with us, his vice president and principal analyst, a Future of Work team and the research for Forester.
You've been writing a lot.
About the potential for AI washing, for companies to blame AI and technology for job cuts.
But what do you interpret Block as.
I think it's a story in part potentially of AI washing. AI washing is incredibly pervasive right now. After all, if you lay people off and you say, well, we've just become so much more productive because of AI, it makes you sound innovative, it makes you sound in control. But the truth of the matter is that Block does, as
you've pointed out, have some other problems. They're down seventy five percent from their record high, all time high of stock, but they also did over hire during COVID and that can't be overlooked. I will say this in the tech sector when you have a software developer centric kind of organization, there is more potential using AI to fill in for productivity because coding is moving in the direction of becoming very much generated by AI.
What caught my attention when I first read the post yesterday from Jack Dorsey was he was saying, I'm late, I'm not early.
Others are going to copy me.
Now do you think there's going to be a copycat effect here, particularly from software from tech companies that are at the cutting edge of using the latest, greatest front end models.
Probably. I mean there have been quite a few tech layoffs, including of developers from some of the biggest firms in the world. We've seen Amazon layoff thirty thousand employees over the last few months, and it will be happening everywhere. But again, all of these companies were in a war for talent during COVID, and they were kind of hiring
everyone they could get their hands on who had talent. Now, these newer tools that allow software developers to generate code at a much faster pace, well, it does change the economics.
A bit, but there's still a war for talent, just a different kind of war for talent.
And so I'm.
Interested as to who there for these companies are fighting to hire and who gets let's go in this scenario.
Right, Well, look, I think what we saw that was different during COVID is even relatively junior developers were being snapped up people straight out of college. And right now we know that junior talent is suffering in the job market. Very qualified people find it hard to get on that
first rung of the career ladder. Who they're fighting over are really the leading edge AI experts and people with a lot of hardcore AI experience who are really adept at using these tools in a variety of ways and who have proven that they could drive some business value. Because we know that ROI remains relatively elusive with AI rit large at.
The end of the day, skategoating or not, job cuts are still occurring, JP push us forward as to what the future of work in your mind's I actually does look like. The reason this block announcement had such an impact is because it comes on the back of a week where we had the Sutrini research to kick it off, when we all had this angst about what a dystopian two years time looks like. With ten percent unemployment is that what you're thinking is a reality.
So at Forrester we have a forecast. We believe that by twenty thirty that AI and automation will take about ten million jobs out of the US economy, which is about one hundred and sixty million jobs, so that's about six point one percent. That is nothing to sneeze at. There's real human pain involved there, but it's not the apocalypse that some people are talking about. We believe that
usually AI is augmenting rather than effectively replacing people. And if you look beneath the covers and mi T did to study, ninety five percent of companies have yet to see any tangible return on an investment in a financial sense from all the AI investments they've been making over the last few years. So we have a sober look. It will have an impact. Ten million jobs is not nothing, but it is hardly the apocalypse.
Will it create jobs JP?
Yeah, there are definitely some new categories, at least of skills that are necessary. I mean, did you ever hear of a prompt engineer three years ago?
I know? But are they still needed?
I thought that was I thought that was last year's issue.
It certainly was, and now we're moving to who's good at agentic AI, but those agents still base their actions on a lot of prompting. So prompting hasn't quite gone away to the degree that people would lead you to believe. But we are indeed moving toward a more agentic world.
JP Gander, it's great to connect with you today, a forester, thank you for the thought leadership.
Coming up. Thirteen percent.
That's the amount of the global smartphone market could shrink this year. More on that IDC number next Disciplue mag Tech. A new report from my DC says the global memory crunch will lead to a historic contraction in the smartphone market. Nobila popol Scene, a research director at IDC, joins us to discuss.
This next thing. You call it a crisis like no other.
What's driving it purely the fact that we all need memory for data centers.
Absolutely, I mean it is like no other be because we've been through the pandemic, We've been through a really volatile year just now, like with a terrorists, and we still didn't see a drop like this, right, so this is completely different situation. And essentially there is just not enough memory for the players that needed. And given that, how many different products we need memory in right, So
that's what's essentially creating the crunch. But more importantly, it's not just about the drop now and then the market will recover. It's about what makes us really different and much more dire for the industry. It's how this is going to create a permanent change, a structural reset of the entire industry, both in terms of ten So just this year, we're looking at about one hundred and sixty
million units wiped off the market. But even when it starts to recover, which as of our assumptions, the situation was stabilized somewhat mid twenty seven and we're starting to go in positive growth territory, but you're still looking at, you know, close to one hundred and sixty million off the TEMP. So throughout our forecast we're not expecting the TAM to get back to prior you know, twenty twenty five levels right within that Again.
Can I join pan on that TAM Why will it be so long term diminished?
So essentially the U and the reason for the drop is how the change in the competitive landscape is going to is gonna you know, the impact that it's going to take. So where the you know, where is that one hundred and sixty million coming from. It's the prices of the memory, right, And why we keep saying, I mean that have the prices of the memory that are shot up up to have been three hundred percent from what they were last year, and they're continuing to go higher.
Memory that used to contribute to about twenty percent of a smartphone bomb cost is now anywhere, you know, tripling that. So imagine a smartphone that is at below one hundred dollars. If the memory costs used to be fifteen twenty dollars and that's tripled, it's essentially making below hundred and fifty
dollars smartphones uneconomical to make anymore. So those OEMs, and there are a lot of you know, Android OEMs operating in that space with majority of their portfolio, some with ninety percent of the portfolio below that, those are the ones that are at extreme risk. You know, not to
say that anyone is immune. Even the larger players like Apple and Samsung are going to face higher memory prices, but at least they are able to secure the supply, and when they get the supply, or at least majority of it, they can afford those higher prices, right, because
their devices have larger margins. It's really those lower end Android players that are already operating on you know, racer thin margins that's simply not going to be able to make those phones, those below one hundred and fifty dollars phones.
So it feels a bit like it's the emerging markets that are going to be hit the most in terms of en demand in terms of low cost phones.
Can we not innovate our way out of this?
You know I would, and I think I said that earlier to someone that we are. You know, this is going to be a time of like survival of the fittest, where the of course, the larger players are going to be able to secure their supply and leverage their you know, their margins to be able to absorb some of the costs.
But we're you know, we always see, right at times of crisis is when the biggest innovations come out, right, So you know, we're curious to see and we're already hearing of some of the lower OEMs either resorting to use devices to get the RAM from that or you know, and memory from older phones. But you know, we still don't think it'll be enough to overt the drop that
we're seeing. The other strategy and mitigation strategy that they're thinking about or going to leverage is that they're going to try to move up in price segments, right, so
target above two hundred dollars phones. But again the challenge there is that demand there is going to be very sensitive because one, there's going to be so much increased competition from more established players in those price segments that it's going to be really harder part for the low end below one hundred dollars brands to be able to get demand or consumers to buy their devices above two hundreds.
So even though they're being ambitious, I think it's going to be a big challenge to operate at the same volume at higher price segments. So, you know, that brings
me to my other point. We're not only looking at a full competitive landscape change where many players exit and you know, share change between the larger players that are remaining, but also a complete product mixshift of the industry that it's going to last for a long time because even when the crisis stabilizes and memory prices go down slightly,
they're not going to go back to prior levels. So it's almost never, you know, permanently uneconomical to make those subundred hundred and fifty dollars devices.
So we can beat a lot of changes. Are we going to be keeping our phones for longer? Nibella that was already a trend, and yes, exactly.
So the consumers that are not going to be able to afford those higher price segments or higher prices which are across the board, not just on law and we're you know, some are going to end up resorting to you know, keeping their devices longer, or resorting to the use market. So there's just so many dynamics at play, and we're eager to see how OEMs and consumers adapt. But it's going to be a very challenging couple of years.
Pope, it was fascinating research Senior research director at I d C. Thank you coming up a new way to start your weekend. Bloomberg TV is launching Bloomberg this weekend. Co host David Gurr is going to be joining us for a preview.
This is Bloomberg Tech.
NASA shaking up its Ultimism mission to the Moon. The Space agency decided to cancel a multi billion dollar Boeing upgrade to the centerpiece launch system.
Rocket and is slotting in a test.
Fighter fight closer to Earth as the program remains beset by delays and coast over ons. Now, even with this latest turn of events, NASA insists the twenty twenty eight deadline for a lunar touchdown remains unchanged. Meanwhile, there is something changing of Bloomberg TV, unveiling a brand new show to start.
Your weekend, Bloomberg this Weekend.
Joining us is the program's co host, David Gourret, one of three and a whole team behind it. David, I have a feeling you might be talking for some tech stuff this weekend.
Indeed we will, so there'll be plenty of tech stuff, certainly watching what's been happening with the Pentagon and Anthropic, and also the private credit story continues to be royaling as well. So I think it highlights why we're doing this program. That is, it doesn't seem like everything is contained in a Monday through Friday week anymore. It seems like it starts to build even more at the tail
end of Friday going into the weekend. So between that, what's happening in tech, private credit, and then of course what's happening in geopolitics.
I think it has the makings for very busy launch weekend for US.
I blame Crypto, Yes, they started throughout the week and vibes, but what we like to do on a weekend is maybe digest in a different way as kind of a sit back approach rather than a lean in. Is that kind of the style of the program.
That is definitely the plan, and of course if something major happens, we will change course and accommodate that and cover the live news very capably with all of our colleagues around the world.
But having done this.
Once before hosted a weekend show, I know that the importance of it center is largely on being able to exhale at the end of the week, think about what's happened on Saturday, maybe have some longer conversations about themes that have developed over the course of the week, and then on Sunday position everyone.
For the week ahead, set the table for that.
So it'll be three hours a significant amount of time, but we're on TV radio and streaming as well, so folks can kind of listen to the show as they move about their day.
They don't have to be stationary in front of the television or the radio to do it.
I mean, I really feel like the themes that have engulfed this week in many ways are the themes that continue from our tech audience perspective day in day out. What does AI mean for the future of work? What does it mean in terms of a dystopian future in twenty to thirty that is articulated a substack by Satrini research We've never heard of before. Sorry Satrinia, But is that something you're thinking about? Is that what the audience asking.
For as well?
I think so.
And there's some plus to see that this were at the beginning of the evolution of a lot of these things. And I think that people are very hungry for all
kinds of analysis. Yes, the most alarmist and thought provoking, but I think there are many opportunities when it comes to AI, when it comes to productivity, it comes to the economy broadly, kind of sit back and really hear interesting conversation about what people are thinking about, where it's headed, where it might be headed, where it could be headed, and we'll be having those conversations.
Yes, who can we live?
Let me fly that We'll have the minority leader of the House representatives of King Jeffreys on the show tomorrow, and the Democrats have just had a big meeting outside of Washington, d C.
Obviously on the heels of the state of the Union.
We'll be having a conversation with him about that, the Democratic agenda. Certainly we'll get into tech, talk about Iran as well as we continue to watch what's happening there and the House prepares to vote on a war Powers resolution next week. Light stuff, light stuff, There'll be light fair as well.
I don't mean to David Gore. There'll be some laughs. I know that.
With your team, we thank you to be sure tune into the premiere of Bloomberg this weekend. That's tomorrow's studying at seven A at Easton that does have this edition of Bloomberg Tech. But keep an eye on some of these stocks. Then now's like one hundred having its worst week since March was month in fact of March of last year. It's down on the week, it's down on the day. In video off by two point two percent. Amazon without open Ai, fifty billion dollar funding of one hundred and ten.
This is Bloomberg Tech