Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is live from the heart of Silicon Valley with ed La though in Van Francisco.
This is Bloomberg Tech coming up.
Open Ai unveils its first custom AI chip called Kalapino, developed in partnership with Broadcom, plus s k Highnex's plane to raise twenty nine billion dollars in a landmark US listing, racing to increased capacity to meet memory chip demand, and Cerebrus reports quarterly earnings for the first time since going public. CEO Andrew Feldman joins us later this hour. Let's get to our top story custom Silicon open ai is tackling one of AI's biggest challenges, the supply and costs of computing.
The company unveiled Kalapino Intelligence process. So that's the wafer, a custom AI chip developed with broad coomp which the companies say carries a fifty percent lower cost versus a typical AIGPU. The focus faster, cheaper AI inference shares a broad Open pretty higher round two percent. We're off session highs, but still up a percentage point or so. In a market where tech at the index level kind of flat. This is outperformance. Blinbo Tech editor Seth Figgerman is here
with the details. This is the big picture, right, open ai is compute constrained, heavily reliant on Nvidia.
They want to diversify. What do we need to know?
Yeah, that's very I think, you know, Opening I wants to own more of the infrastructure stack, have more flexibility here, and then I think importantly, use the expertise that it's developed into what makes air models run better and more efficiently and apply that to the hardware and the same way that I think we're seeing Google do with its TPUs, and the hope would be that over time they can build a chip that's more cost efficient and also better performing and eventually cuts down its own costs.
Bloomberg News spoke to both Hocktan the CEO of Broadcom, and open ai is hardware chief. I guess you know, from raw Comm's perspective, there was quite a lot of fighting talk. Right, they see a lot of demand for a six or custom silicon. But what was interesting to me is hock Tans saying to us they see a world where every frontier lab goes to have a custom chip.
Why yeah, I mean.
It gets back to what we said about Openny a minie ago, I think giving them the versatility to kind of control their infrastructure stack and build customer hardware that meets their needs. And now I think Hocktan's com and he's saying there's not that many of these frontier model developers. So I think agree between the lines we're kind of talking about. Is anthropic, I'm going to move in this
direction and that's certainly possibility. And to your other point, I think Hocktan sounds quite bullish generally on the prospects for this chip and chips like it going forward. He sees no limit to the demand for this kind of infrastructure and is predicting that the demand and roll out for this chip next year will exceed his prior estimates for one point three gigawads to supply on.
The open AI side, it's the latest example of them being prepared to spend. Did we get any sense from our conversation with the company about how this custom chip will rank in their overall plan for compute, whether it's leasing, data center, buying and video chips, et cetera.
Yeah, you know, they remain pretty tight. Lop DOWNE what the financing for this will look like. We have previously reported that Opening I planned to spend tens of billions of dollars on these chips, with Broadcom part of its
hundreds of billions of dollars in infrastructure commitments. Seeing Broadcom has previously said that they were standing up a chip financing vehicle that could help Opening I's efforts, but it's unclear that's the primary financing mechanism for what Opening I will do here.
Bloomberg's AI editor Seth Figemann, thank you very much. Indeed, s k Heinez plans to raise twenty nine point four billion dollars in its US market debut, a deal large enough to rank among the top five share sales of all time. The listing comes at a time when markets are hungry for memory chips and semicindut to companies are rushing for capital to expand capacity meet that demand. The BOS Peter Elstrom, who leads our coverage of Asia tech, joins us that's part of it, right, Expand memory fab
capacity raise a lot of money. There's also this idea of like valuation and prestige of an ADR situation where you get exposure to American investors.
Yeah, that's right.
Sk Heinez is a company we don't talk about that often on the show. Obviously a leading memory chip company, but they often play second fiddle to Samsung, even in South Korea. But what we've seen from them over the past three years is really they've come from quite far behind to essentially the same market cap size as Samsung at this point. And that's largely because they've been so successful in these memory chips for AI applications that HBM
chips that we've talked about before. They especially HBM chips are DRAM chips stacked on top of each other, and their technology for doing that stacking has been very good.
They got Nvidia's blessing.
They've been able to jump ahead of Samsung in that market quite effectively.
Samsung has struggled a little bit.
So now what we're seeing with this twenty nine billion dollar fundraising is really them announcing to the US, hey, that they're ready to raise this kind of capital. They want more exposure in the US and yeah, they'd like more of that pe multiple that you see with the US tech companies too. They've traded at a discount to that. If they get some of that ADR exposure, that may give them a little more opportunity to increase that valuation, and.
Just on the mechanics, Peter, so it will be ADRs I believe, on the Nasdaq. So we have a timeline for this. And how much of a surprise was it that sk plowed ahead with this.
Well, it's certainly they've talked about wanting to raise money in the US for a while, so I think in terms of direction, this has been expected. I think in terms of magnitude, it's a bit of a surprise though it's a lot of money. As you mentioned, it could be one of the top five offerings of its kind. Ever, they plan to start trading these ADRs on July tenth. They've talked about that. They still have a couple of steps to go before they formally do that, but that's
the plan. At this point, they'd be able to raise that money and then, as you say, they really want to spend this money and trying to solve this choke point that they've had in the AI industry where memory chips are in short supply. Prices have been soaring, which is driving profits for a bunch of companies, including Micron, as we'll see after the bell today. But they want to be able to build additional capacity in South Korea.
They're also expanding in the United States, where they have some facilities too.
Bloomberg Tech Executive Editor details from Thank you very Much. The AI hardware story and memory in particular are set to dominate market conversation today. We've got the perfect person to speak about it. Selin Wu is a portfolio manager on Lazard Asset Management's Global Robotics and Automation team. She manages the firms tech in Ai Focus ETF, called TECHI or TEKY and actively managed ETF where sk Heinex and its career and shares are the top holding.
Welcome to the program, Thanks for having me.
The situation with the memory makers is fascinating.
Demand is exceeding supply.
Historically, that's an enviable position to be in, and the shares of those companies probably reflect that. How do you see investor appetite to be exposed to the memory trade?
Yeah, I mean the shares have been fantastic, But even after that, I think memory stocks still love for a very compelling investment case. And here's why. I don't think it's necessarily just driven by temporary supply bottlenecks. Instead, I think there's something structured going on in the cycle. For example, memory's strate peagic value is rising and changing to a primary driver for performance. Think about how cloudsher providers, one
of their largest clients. They're still adding more memory despite the price of inflation because this is still the most cost efficient way to maximize their system level performance. And when of the when token demand, excuse me, the token demand is rising on the back of the inference as well as agent the AI. I think the bottlenecks in terms of the capacity and bendwidth are becoming even more challenging, and this is a place where memory can come in and help navigate those challenges.
Does it matter that investors will have the opportunity to have US listed shares ADRs of sk How does that kind of change the mechanics of the market for you as well?
Yeah, I mean a clearly the more exposure to more diverse type of shareholder base is clearly a very positive indication for any company in the world, especially when your fundamentals, when your fundamentals are improving. So yeah, super exciting us and looking forward to the development.
A couple of months ago, sitting down with Jensen Wong and I said to him, do we even need the textbooks anymore? That would tell us historically memory is cyclical, it is boom and bust. All of the evidence suggests that in the context of HBM going into data center, it just doesn't behave the same way.
What is your thesis on that?
I mean, I agree with that. I mean, like I said, there's something structural going on. Yes, there is certain type of cyclicality going on indoor market. But at the end of at the end of the day, what you need to remembered is structure side of booth, demand and supply, and think about the supply side.
Despite the fact that all the three.
Major companies are scrambling to add new supply, there are three factors that you have to remember. Number one, manufacturing intensity. Manufacturing complexity is rising. Number two, capital intensity to open a new fab is getting more expensive, and number three the difficulty of technology and migration all together pointing out that overall supply demand balance will stay in favor of the memory stocks. I mean, I think that's really great.
I'd love to talk about your actively managed ETF for a moment. T e k y Techy Techy I launched last April, write sixty million in assets currently. What I find so interesting about the composition of it is something we've talked about quite recently on the show. There are the capital expenditure deployers and there are the capital expenditure recipients in the same basket when you look at the top holdings. Is that a conscious, active decision on composition.
I think it's the composition from our bottom up stock selection and portfolio construction. But like you said, that's exactly where majority of the capital is invested in currently. On one hand, there are big spenders, big kip expenders that are trying to build new competitive positioning in this AI homage pace. But on the other hand, we find a lot of exciting opportunities on the companies that we see these capitals AI hardware supply chain, for example. I think
that's why there's more to come. In fact, we just recently came from Asia where we sat down with a number of different companies into supply chain. Everyone is telling us how they are seeing an extended visibility from customers, how there are more conversations about ltas. Everything collectively is highlighting that demand continues to substantially exceed the supply and the AI demand outlook remains pretty robust as well.
For in the ETF context, it's a very competitive market. How closely are you thinking about flows? And again, I think people give you a lot of credit Sealine for identifying sk as being just critical to the broader infrastructure build out right now, But you know what happens next to your mind? How do you see the world changing in the next I guess six months to twelve months.
I mean even more than that. I mean that's why we focus on AI tech stack, and at the top of the step we have application layer and this is, for example, where we are going to expect really large opportunities from physical AI. We think physical AI is going to be multi trillion dollars long term opportunity. Essentially, AI is in because it's a primary driver for productivity gains, and historically productivity growths tend to translate to massive economic expansions.
I think the same thing is going to happen for AI. All the innovation we're seeing today is eventually going to open up very significant new end markets in physical AI, such as fully autonomous transformation transportations as well as a humanoid robot. That's why we're really excited about physical AI and in the meantime, that being said, it will still take a couple of years for this to turn into actual corporate earnings. So here's what we focus on instead.
Companies with vertically interiorted the manufacturing excellence that can speak to the market with scale advantage for example, or open source platform that can expedite the excelevation adoption and everything. And lastly, global technology companies that can massively benefit from the mass adoption of the application in it sulf something to watch is something we're still pretty excited about.
Seline Wu from Lazard Asseid Management, first time on Bloomberg Tech. Really grateful to have you here, Thank you very much. Indeed, now coming up, Meta and Microsoft are leading the spending spree on future data center leases, adding tens of billions of dollars just last quarter alone. We'll get into the details next. This is Bloomberg Tech. Okay, today's big number,
eight hundred and fifty billion dollars. That's how much the world's largest cloud computing companies have committed in future data center leases. Leading the charge in the AI spending spree, Meta and Microsoft both committing tens of billions more just last quarter. Bloombo's Brodie Ford has an astonishing story and a hell of a.
Chart to show us.
What I find interesting about this is that these are future leases, essentially leases planned or announced separate from what is already in operation, what they are already contractually committed to.
It's a really good point, right, So we're talking about eight hundred and fifty billion on data centers, which in many cases aren't even built yet. It's they are working through their current projects they have, and these are the ones that they've committed to leasing once they're operational. And so a lot of people wonder about what's the long
term spending trajectory on data centers? How long does this last? Well, there's eight hundred and fifty billion dollars of leases that are going to be starting in the coming years.
So when I was reading the story, I was trying to understand the future costs. It's an amazing chart, by the way, we're just showing on the screen right now, like the level of capital and it's the commitment grows. But where did their current financial healths and balance sheet stand relative to those future commitments.
Is there a concern about that?
I think there's a lot of concern that seem to always ebb and flow around the ROI of all this spending, right. I mean, it feels like every quarter or two the general sentiment flips about whether the market's worried or not, but every hyperscaler seems to agree that they must spend an incredible amount to catch up an AI to have enough data center capacity. I think about Microsoft, who through a lot of twenty twenty five said we're nervous, we're actually going to put on ice a lot of these leases,
and they've come to regret it pretty deeply. And I think a lot of the biggest tech companies, as we can see in this chart, are hoping to avoid that kind of scenario.
Microsoft added forty one billion dollars in commitments to a total of almost one hundred and ninety seven billion dollars. Compare and can trust really quick Oracle.
Oracle's very interesting because they signed a ton of leases, largely for open AI, and they've been flat for the last two quarters, which says to us that they're digesting a lot of capacity, contrasted with somebody like Meta, who is just signing as much much as they seem to be able.
To Bloombanks, Brady Ford, thank you very much. Just get out to New York where bloom Bek Jihara and and is standing by Hi.
Yahara, Hi ed It's time now for talking tech. First up Softbanks. Masayoshi Sun says he has no plans to retire anytime soon as he looks to capitalize on the AI boom. Speaking at an annual shareholder meeting, the sixty eight year old visionary fired back at skeptics, saying, quote, the AI revolution has only just begun. Calling it a bubble is an insult plus and the latest showdown between Chinese big tech and national security. Ali Baba has sued
the US Defense Department demanding removal from its blacklists. The e commerce giant called a designation arbitrary and unjustified, following a US crackdown earlier this month that accused several of China's top companies of aiding Beijing's military, and TikTok parent by Dance is in early talks to secure a record twenty billion dollars global loan. Well the exact use of the proceeds remains unclear. The massive borrowing push comes as the company wis boosting data center and AI capital.
Spending ed Thank you very much, you Hira.
Now coming up on the program defense startup, Hadrian discusses new funding at a seven point five billion dollar valuation that would be four times its past or latest value.
We're going to discuss that next. This is Bloomberg Tech.
Can AI replace human effort in the realm of scientific discovery?
In the latest episode of The Circuit.
Bloomberg's Emily Chang spoke to Jennifer Dowdner, the inventor of the groundbreaking crispher gene editing technology, about the future of biology.
Listened to this.
Biology is complex. We're not going to be able to simulate our way to an understanding of the human. We're not going to be able to avoid the need for certain types of testing. I do think there are opportunities to increase the efficiency in which we make discoveries about the way our bodies work and the way they interact with drugs that will be effective, and I think AI
will be helpful there. But it's going to come down to training models on the right kind of data, and a big need for better and more data for training models if we want to achieve that.
An Open AI executive recently suggested that if a discovery happens on chat GPT, let's say a drug discovery that open AI should get a cut of sales.
What do you think of that?
Good luck expand how are chatbots going to change drug discovery? I'm not sure the answer to that yet.
I don't know.
Lots of people are, of course, very very hopeful, so I'm very helpeful about it. But I think that innovation is still really in the domain of human beings right now. I'm not seeing chatbots in our own experience innovating. They can be helpful with summer rising data, that can be helpful in writing reports and things of that nature, but I'm not seeing chatbots coming up with a brand new idea for something that nobody else ever thought of.
So you're saying AI can't innovate.
I don't know if it can't innovate, I just don't think it is right now.
What about after the AGI moment?
Well, I never say never, so maybe that'll happen, but I'm not holding my breath.
That was Bloomberg's Emily Chang speaking with Jennifer Dowdner, Nobel Laureate and founder of Innovative Genomics Institute. What's the four episode on Bloomberg Television tonight at six pm Eastern or on Bloomberg Originals at eight pm Eastern time. Defense manufacturing start up Hadrian has been in talks to more than quadruple its valuation in a new funding round, according to sources, Bloomberg's venture reporter of BEC and Torrents and I teamed up on this one.
So let's go through the basics.
Right, these are talks, they're at a certain stage, but they only raise money right at the beginning of this year at a certain valuation. What's the jump and what do we need to know?
That's correct ed?
So Hadrian raise money at a one point six billion dollar valuation just in January. They've now had conversations to raise up to a billion dollars in this latest round. That would more than quadruple their valuation, as you said, to seven point five billion dollars. The investor demand on this one is pretty significant. We reported that several existing
investors are in talks for this one. We should note that when we reach out to comment, Hadrian said that the information provider was incorrect decline to provide further context.
That said, we sitten by our reporting.
This is an area that's extremely hot with investors right now, defense tech broadly. Hadrian makes facilities to speed up domestic manufacturing and that's been hugely of interest to a lot of folks and Silicon Valley.
Thank you for that.
I would also add that s fokes first and Hadrium said the reporting was incorrect but declined to add further context.
I would have done that for you. Thank you very much. There is some reporting that we did about where they.
Approached debt or a lack of approach to debt.
Just explain that bites so building large automated factories often means that companies need to take on debt to take you know, on the risks of building these large facilities. Hadrian currently has four factories, the latest which operate, which opened in March off the back of a two point four billion dollar contract with the US Navy. So this amount, this up to one billion dollars is just equity that they would raise. It doesn't include any debt that they may be discussing.
Rebecca, you did a great job explaining, you know what Hadrian does. It's basically an amazing factory or contract manufacturer. Generally, what is bench capital attitude right now to defense technology and this whole kind of reindustrializing America push.
There's tons of excitement here.
Ed investors in Hadrin include Andres and Horowitz through its American Dynamism Fund, Pedersfield's founder's fund, Lux Capital. This effort to sort of reshore manufacturing and create the cycle where consumers and companies can just rely on production and consumption within the US is a huge interesting.
These people Bloombergs, Rebecca Torrents teaming up with me on that one on Hadrian potentially hitting seven point five billion dollar valuation, Thank you very much. Now, coming up later in the show, we're going to sit down with David George and Drees and horror Itz general partner on a sixteen c's big bet on SpaceX conversation that we're really
looking forward to right now. This is what technology looks like in financial markets, particularly inequity markets, and we are all waiting for what is a big one that is Micron reporting earnings after the closing bell right now, Na's like one hundred modestly hired, a flat underperformance in chip stocks and bitcoin just shy of sixty one thousand US dollars per token. Welcome back to Bloomberg Tech. It's a
big moment in time for Memory. The biggest headline is probably the sk Heinex will try and raise twenty nine billion dollars in a US listing.
But the AI trade is.
Going to get its next queue from Micron's earnings after the bell. There's a lot of literature on the Bloomberg about that. The stocks down about one zero point three percent right now. It's highly analogous from what we saw in some of the earlier days of Nvidia twenty twenty three to twenty twenty five, massive growth year on year, both on the top and bottom line. But the market really wants a bullish signal, not that the bottleneck that is Memory is unwinding a little on the AI infrastructure
build out, but that the demand has staying power. So that is what we're watching for throughout the course of the day. Another top story, Elon Musk is reshaping his empire's balance sheet. SpaceX just pulled off a record twenty five billion dollar investment grade bond sale, taking on more debt while lowering overall borrowing costs across must sprawling businesses. For more Bloombergs, Private credit reporter Paula Sellison joins us, how did it go?
It went very well that the peak of demand. There were eighty nine billion dollars in orders for what was ultimately a twenty five billion dollar bond deal that allowed the company to tighten or get lower borrowing costs over the course of the marketing process, and investors are very eager to lend.
There is a bit of a history lesson in this. Find it fascinating.
So, yeah, must takes Twitter private, x joins Xai, Xai merges with SpaceX, and then SpaceX does the biggest IPO in history. And if you look at how they kind of shuffled the deck with the proceeds of the bond sale and what they planned to do in paying down existing loans, it kind of takes us back to square one?
Is that right?
Well, this was really all one long, convoluted way of allowing Xai to become part of an investment grade company
and then be able to borrow at those borrowing costs. So, you know, we had the Twitter LBO which ended up adding about thirteen billion dollars of debt, and then the Xai leverage loan and hiled bond sales which added five billion dollars of debt, So when SpaceX acquired XAI, there was seventeen point five billion dollars of debt with interest rates in the nine and a half percent to twelve
and a half percent range. All of that essentially just got refinanced initially through a twenty billion dollar bridge loan that was then taken out with the investment grade bond sale on Tuesday, and now interest rates around five and a half to six.
And a half percent.
We broke the story in just the days before the IPO that SpaceX had got IG rating from the free main agencies. That was really important, right The story right now in the AI space is borrowing and the IG rating has proved to be pretty handy to SpaceX.
Absolutely, so there is so much need for capital. Investment companies just can't do it with cash flow. They have to borrow, and they're borrowing across all the different debt markets. But the best place to borrow for most of them is the investment grade bond market because it's very large,
very deep pockets, and it's a cheaper borrowing cost. So being able to get those investment grade ratings just opens up access to capital that makes it so much easier to borrow all this money to finance the AI build out the most.
Paula Cellison, thank you very much.
Indeed, in the equity space SpaceX actually hire again today one hundred and fifty eight dollars per share SpaceX David, George Andresen horror it's general partner, is on set with us right now. He led the firm's investment investment in SpaceX, a state which is now valued at more than ten billion dollars and it's proved to be Andresen's largest return in history. And you're somebody that I've wanted to speak
to about the company for a long time. There's a lot here, but I think just as an opening reflect on the IPO, David, and I guess not just in a moment in time for Andresen, but what you think it's signified for what is a very big and now quite diverse company.
Yeah, well, look, thanks for having me on. A great to be here with you. The IPO is just a milestone in the history of the company. I think it's a great event for the company to be able to access a new investor's access capital that they couldn't otherwise access.
Before.
And one of the things that I'm most excited about as relates to the IPO is the fact that retail was able to partake in such a big fashion. So if you look at the allocation that went to retail as a proportion of the overall IPO, it's around thirty percent. And so if you just take that portion that went to retail, it's almost the largest IPO by itself in the history of IPOs.
So I think it's fantastic that. Why is that part of that? David, Sorry to interrupt you.
Retail has proven to be an excellent group of buyers and holders of stock. So obviously it's a large proportion of the ownership of Tesla, but they also are large owners of the meg seven at large, and so I think it's excellent for SpaceX to be able to access that. I think you know, in large part, retail is long term thinking, which aligns with the way Elon thinks and how he's built SpaceX, and so I love that they're a big part of it.
Probably the question I get for you most commonly is about the lock up.
What will happen?
You know, to the venture firms would say, well, we will redistribute to our LPs the stock and we expect lots of them to hold. But that would seem to make the retail holders important. And what was like a very complex lockup, It wasn't straightforward.
Yeah, look, I think this is a great step forward generally and how lockups are run, and I expect for IPOs going forward, this is probably going to be the way it's run. So cerebristed something similar where you have the lockups come off gradually over time, and I think this is good, this is healthy.
It allows you know.
The public market investors to be able to buy stock over time as opposed to you know at cliff events. For us, we're very long term thinkers. You know, we're happy shareholders of SpaceX. You know, we think very much about the long term.
You know.
Obviously, what makes us so excited about the business is all of the things that can go right for SpaceX, all the optionality that you have. And so the way that we look at it is you start with the launch business, and in order to be successful as a space business, you have to rely be able to get things to space. And so SpaceX has the infrastructure in an incredible way to be able to build applications on top. Obviously,
Starlink is the first one. We expect that with Starship and V three, they've achieved some de risking in terms of what they can bring up to space. Eventually they'll have rapid reusability with multiple launches per day on Starship. It's a feat of physics magnificence that they can take something that's the size of larger than a football field, send it up to space, grab it with chopsticks, and
then reuse it again. They'll rapidly be able to do that, and that's going to enable all the applications that they want to build on top.
It also now has a name starmind Yes as of last night, and you know Elon Musk engaging with others on X. There are many out there that believe that the timeline that was presented in the perspectus of Orbital Date Center SPACEXIT as early as twenty twenty eight, actually we could see some pool forward on that. Again linked to the tracking of Starship. Where do you sit in what's realistic.
Near to Yeah, Look, I think the biggest hurdle to cross is just rapid reusability of Starship, and I think you know, there's a consistent theme with Elon's companies, and certainly in SpaceX, which is physics has been de risked, and so now.
It becomes an execution question.
And so as you think about timelines, we feel like it is inevitable that they can achieve these milestones, just a question of how quickly and at what cost. And so if you have starship that can rapidly, you know, reliably get things up and back to space, we think that's the major unlock for bringing compute to space.
I know earlier you.
Were talking about the eight hundred and fifty billion dollars of CAPEX for AI data centers on terrestrial grounds. Right now it's getting harder and harder to get data centers live on the ground here. I think it's a matter of time before we have it in space. I actually think I like to reframe it a little bit. I don't talk about it as orbital data centers. I talk about them as sort of airplane sized.
Gpu ras in space.
So think of it as you know, something like seventy two GPUs up in space with big wings that are solar arrays that are kind of the size of a seven thirty seven. And then you can have many, many of those in space. They've demonstrated that they can do this. They have ten thousand LEO satellites, So we feel like it's a matter of time and execution before they can do that. The physics has been de risked, you know, to the point about how it's getting harder and harder.
To do this.
You know, on the ground, I think at a minimum, orbital data centers will be incremental capacity that you can have in space on top of what we have on Earth. And I think there's a case that in the fullness of time, the economics actually get better than on the ground.
David the firm Andreessen Horowitz has been involved with must companies in different ways for about six years, in different ways x XAI, the different financial transactions that took place.
For you, how much was this this.
IPO a referendum essentially on Musk himself or how central to the fate of this company do you see long being?
Yeah, Look, Elon is the centerpiece of all of those investment thesis that we had right in backing his companies. You know, he's he's been remarkably strategic and how he's put the companies together, and you know, he has done very well by shareholders.
He's taking care of shareholders.
He takes a lot of pride in that, and we appreciate that As his partner. I think as it relates to,
you know, the go forward, he's been very smart. He and Brett Johnson and the team ASPACEX have been very very smart about capital allocation, right, you know, when they have done acquisitions, they have been remarkably strategic in terms of putting things together first, you know, and putting X with Xai, which is very logical, and then obviously the fit of XAI and SpaceX together, you know, is undeniable.
So we expect that will continue to be very smart about capital allocation, take care of shoreholders, and we appreciate that.
Where do you stand, David then, on the transaction that everyone continues to talk about, which is a future where Tesla merges with SpaceX, Is it rational to your mind?
I go back to the things that he's done in the past, and the things that he's done in the past, is he has decided to do acquisitions of his companies or mergers of his companies when there is very strong strategic alignment and it makes business sense.
So I wouldn't expect it to be any different going forward.
There's this broader idea, if you extract it out from from Elon Musk, that even at the growth stage, late private companies staying private for longer, late stage growth, that the investment thesis is still around the founder, the person at the top. I don't know, how whether you share that view of others that even if you are talking in the tens hundreds of billions of dollars of value, that value is assignable to an individual or a group of individuals.
Yeah.
Look, I think you can see reflections of this actually in the public markets. So I think you can see this in Elon companies. Certainly. I think you could see this, you know, with Apple under Steve Jobs. I think you could see it with Meta under Mark Zuckerberg. But certainly in the private markets. You know, this is a centerpiece of our investment thesis when we're backing companies at any
stage and any size. I recently wrote a piece that basically said late stage venture, which is our asset class, is not about capital markets.
It's about founders.
Late stage venture is about late stage founders and enabling them to think long term, make big decisions, and make big bets, and oftentimes they choose to do that in the private markets.
And so you know, our asset class.
That we play in, it's about five trillion dollars in size. It's grown ten x over the last ten years. It's larger than the Russell two thousand. It's almost twenty percent as large as the Nasdaq. So this has become a real asset class. And I think there's reasons that we should explore. Why is it that cost a title?
What would you call that late stage venture?
Late stage privates with the value crews, where the value yeah, and where the value crews, yeah. And the centerpiece of the investment thesis is around the founder and the big decisions that the founder has to make.
It's a lot of key man risk to model for.
Yes, that's right, But I think the more important thing to model for is what can go right? Okay, you know we always ask ourselves, you know, it's hard to imagine what could go right. And we even see this with mature companies. If you look back at the time when you know the iPhone came out, If you look at the two thousand and nine consensus analyst estimates for what Apple was going to do, and that in two
thousand and nine. For the next four years, and then fast forward four years, they actually beat those numbers by three x. And that's probably the most covered company in the world. So we like to think with a great founder, with a technology trend on its.
Back, what can go right?
And you know, if you look at this last cycle that we've just gone through pre AI, you know, this cycle of mobile phones, social e commerce, SaaS, cloud all put together, the big story is that that big trend added about twenty five to thirty.
Trillion of new market cap.
And I happen to think that on this AI wave, on the back of this AI wave, the.
Trend's going to be even bigger.
You head a growth team that manages twenty two billion dollars across five funds. But if you think about it holistically, you're basically in the top fifteen private companies by valuation, which would have included SpaceX before it went public. How are you now deploying capital new capital into new companies, you know, with those existing investments in mind.
Yeah, Look, our whole thesis is we want to be involved in the best companies at the earliest stage possible and then continue to back them every step of the way as they need capital, and often that has been through late stage rounds in the.
Private market because you have a newer fund, right which you can deploy capital out there.
We do.
Yeah, we we have our LSV five Late Stage Venture Fund five as we call it, it's our fifth fund. It's about a seven billion dollar fund that we're deploying out of currently, and we see a ton of really interesting opportunities. So you know, if you go back to the market that we're seeing and just look at our portfolio at a sixteen Z and our latest fund, our portfolio dollar weighted is growing over one hundred percent year
over year. If you compare that to the size similar sized companies in the public markets, those companies are growing about twenty percent year over year. So we put a huge premium on very fast growth, great founders, market leadership, and sort of building.
On the back of the big trends.
Also noting the cap tables look a bit different like with the mutual funds private growth equity. David George Havenjreson Horowitz, head of Growth and general partner.
Really grateful to have you on Bloomberg Tech. Thank you very much.
Coming up, Cerebris reported its first ever quarterly earnings since going public. CEO Andrew Feldman's joining us. The stock is down seventeen percent. There's a lot to unpack there. This is Bloomberg Tech. Crebress reported quarterly earnings for the first time since going public last month. It's sales outlook beat Wall Street estimates, but still disappointed investors hoping to see the company carve out a bigger slice of the aident
center market. Right now, shares down seventeen point five percent, its biggest drop in its quite short history as a public company. What's behind that? CEO Andrew Feldman's with us and welcome back to Bloomberg Tech.
Andrew.
You know, there was a time where we would talk about the merits of top to tail server ownership, how owning all of the content of Now we're going to talk about margin contraction, and we're going to talk about the stock being down seventeen percent. That to me is kind of the mismatch that the outlook on the sales
side beat Wall Street estimates. I think a lot of people are trying to understand the sequential margin decline and for me that this is about ramping output for two big customers Is that true.
Yeah.
I think what we did is we put forward a plan in the start of twenty six, we shared it with investors as we went public, and we're ahead of plan.
You know. We delivered record.
Revenues of one hundred and ninety one million of ninety two percent year over year, and for our cloud business, you know, it was up one hundred and sixty seven percent year over year. We beat margin consensus substantially, and then we guided for full year the growth.
Margins would be ten percent better than plant.
We also shared the in Q two and Q three we would go back to some of our customers and we would rent back year that we'd sold them to try and keep up with demand, and then that would have a margin impact on the order ten.
Or fifteen points.
We did that to keep our customers close to be sure we could keep up with their extraordinary demand for or for our product for fast inference, and so that that was the story.
On every metric we put out, we're ahead of plan.
Have the proceeds from.
The IPO actually allowed you to move more quickly in ramping up capacity?
Yeah, I think capacity is the largest constraint right now for everyone.
Data centers are and.
We've significantly increased our our ability and our pipeline for data centers, which is now very large. You know, we announced a data center partnership with Bell Canada for one hundred and twenty megawatts that will be delivered in twenty twenty seven. We are pursuing data centers across the US, in Canada, in Europe, in the Middle East.
There are.
The resources that we have now at our disposal give us tremendous advantage in the pursuit of this The limiting factor data centers.
What you're talking about, like matter of factly, is buildings not necessarily the compute, right It's not what you guys are offering. How difficult right now is it is to get moving in America or other markets, to get planning approval, get the concrete, get the labor, get the thing built.
Now that that's the irony of this market, that the AI market is moving at blistering speed and we are being constrained by data centers which move with the speed of real estate. And so that is a problem that is being confronted by by everybody in the category, by the hyperscalers, by the neo clouds, by the new generation clouds. Everybody is confronting this similar problem.
Andrew Cerebris does not rely on traditional chip HBM. Would you just explain that the basics of the technology, But how insulated are you from the memory bottleneck that others are experiencing.
Yeah, that's a really good point.
Because of our innovative architecture, because of our wafer scale approach, we don't use HBM. HBM is a type of DRAM and it's made by three companies, one of whom is reporting shortly right. That's Microns, Heenex and Samsung. There's a global shortage, it's extremely expensive, lead times are long, and we don't use it, so we have a tremendous advantage there. The other constraints in the supply chain for many are cooths, which is a process inside of TSMC.
Again we don't use it.
And the third is a capacity at the three nanometer node. That's space in TSMC's factory that makes three and nanimeter chips.
Again we don't use it. We're at the five nanometer node.
Our architecture has allowed us to deliver the fastest inference in the world by an order of magnitude while avoiding the main supply supply chain constraints faced by others in the field.
Can you say, hand on heart, not just winning business, but if you actually been able to go to a customer and say we can get this compute online faster than others for those reasons you just outlined and then actually.
Gone and done it.
Oh for sure.
I mean any cases I.
Signed, we signed. For example, we signed our contract with open Ai on December twenty fourth and had them in for production on February first. That's unheard of.
So that's quick as I went really quickly Andrew this morning. Open Ai is out with Kalapino Intelligence processor. But everyone is compute constrained, right, How do you interpret the Frontier Labs going to custom and a six alongside their other compute options.
Ed.
One of the things we've been saying all along is that this market is enormous and is going to be met with a heterogeneous collection of architectures for hardware. This market will not be consolidated around GPUs. There will be a six, There will be a six from Hyperscalers, there will be a six from from Labs, and then there'll be companies like Cerebrase with pioneering architectures who all of us will will will take big bites of this enormous market.
I think one of the things that's difficult to get your head around is just how big the compute market is right now. That one of the things AI does is it makes tractable for compute much of the world around us, and that really wasn't the case prior to AI.
Andrew I it's if the world is simple, and it's money that greases the wheels to get your industry going. Can we see you come back to capital markets in some form just so you can move quicker.
We have more than nine billion on the balance sheet, I think, so we're really pleased with our position there. But of course we are always scanning both the capital markets, both equity and debt for ways to accelerate our growth.
Finally, how are you judging success yourself? What is the milestone that you'd pitch to the market to keep closest attention to.
Well, I think I think if my mother's proud of me, I think that's the biggest.
Thing you can you can ask for.
I think for markets, I think when you lay out a plan that is aggressive and you crush it, Uh, that's how you feel good about both your ability to execute in your ability to predict your own execution.
And so you know, we announced yesterday that.
That we would beat our our full year we give full year guidance that was ten gross margin points above concernsus. You ought to be proud of that, and we got to continue to execute and continue to set extraordinarily high barrows and then continue to.
Beat them.
Cerebra Ceo, Andrew Feldman, thank you very much. Indeed, really Andrew alluded to it. Micron is the big one after the closing bell. Top line growth almost three hundred percent year on year, net income growth twelve hundred percent.
Year on year. The bar is very very high the market.
It's very analogous to Nvidia what we saw twenty twenty two to twenty twenty five, massive growth, but investors always wanting more. The stocks down eight ten percent going into that print. Another stock we're watching today US fast food chain Wendy's surging as much as forty two percent.
But wait, what does that have to do with tech?
Well, it appears Wendy's has become the latest memes stock target shot up the rankings on stock Twitz climb to the top of the platform's trending list. Seems to have been sparked by a now deleted post on Reddit's Wall Street Bets forum that urged members to save Wendy's before it's too late. That does it for this edition of Bloomberg Tech. Recap everything on the podcast. You know where to find it online, Apple, Spotify and iHeart and all the Bloomberg platforms.
This is Bloomberg Tech.