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This is Bloomberg Tech coming up. Big Tech lags as investors remain skittish about the AI trade. We dig into anxieties and losses coming from the magnificent seven plus earnings that still roll in. We speak with Octo CEO Todd McKinnon after the software company boosted its full year profit Foradcast and TikTok. We'll invest more than thirty seven billion dollars to build a data center in Brazil, this first project in Latin America. But first we check in on
these markets that are volatile on this day. Look, we're putting back on some of the gains made yesterday on the Nastaq one hundred. We're off only by a tenth of a percent in video flip flopping between gains and losses. But all eyes on some of the key magnificent seven names that like magnificent. On the day, Bitcoin so managing to power up nine ten percent. We're at ninety two thousand, so bit of dip bin and going on a sentiment
though still remains pretty sour on the asset class. Move on and have a little look at what's really under fired today. Reports out there that Microsoft potentially having to tay you to its salespeople of co pilot of AI productivity tools. Maybe you need to pull back on your sales targets. There is counter reporting coming from the NBC that this isn't currently true, but we're going to dig into those details for you. Currently off by one point
eight percent. All of this speaks to the anxiety that AI isn't going to give us the productivity gains many and Hope Bailey Nipshew's sent piece to say is here with us at the moment, really talking about more broadly what we're seeing in this market at the moment. And Bailey, are we seeing those sorts of anxieties.
Well, we are seeing some of the uncertainties that we're seeing that play out in real time. The big debate really around a lot of the CI trade, and we saw this play out throughout November, is how much of.
This spend is going to be realized?
Are the dollars going to make sense at the end of the day, And if you're seeing companies dial back there spending. What does that ultimately mean for the bottom lines When you see a report like we've been seeing, whether they're conflicting or not with Microsoft, it's a lot for investors to chew on.
And what's been being chewed on is in people who have diversified since the bottom in October, since we really saw the perhaps end of the significant setting. Tech still lagged and we've seen underperformed health, tach, care and other key sectors.
Yeah, if you look so last time, we had an all time higher looking back to October twenty eighth best performers healthcare, communications, energy. As you mentioned, worst performing group is tech. One thing to keep in mind when you look at that SMP five hundred info Tech.
The big names Nvidia, Apple.
Microsoft are in there, missing Tesla, Alphabet and other names. So a little bit of a grain of salt to take it with that, But we are certainly seeing investors diversifying, flocking to healthcare, Eli, Lilly, Cardinal Health, Biogen all out performing. When I talk to portfolio managers, part of the debate is we've come so far, so fast in a.
Lot of these names.
Yes, and as much as we like to think that things only go up eventually, the question is can you performing is their alpha generation, and that's why we see some.
Of that repositioning.
Repositioning still significant gains on the year if you're thinking of an Nvidia, but the momentum traits we've seen on the back of this, the fact that quantum stocks have done so well, some of the crypto spheres, and they still under a lot of pressure right now.
They're under pressure. There's just a lot of volatility.
You look at the moves that we saw, whether it was a nuclear power or as you mentioned in quantum, pretty much NonStop up into the right, whether that was retail, whether that was momentum or just hedge funds trying to juice their books. We've seen them pull back pretty markedly. Obviously, Bitcoin has been quite volatile trying to recoup some of
those losses. But if you're really kind of macro investor or running a book broadly from the equity side, we're in December, if you're up quite a bit, maybe take some gains off the table and maybe diversify into something like a healthcare which could be positioned to benefit or at least continue growing.
If there are concerns around AI.
And concerns as a macrob of picture. We just saw the ADP figures today, I mean jobs market looking a little bit weaker as well being lipstials. It's always a joy to have him on talking to us through the markets. We've got more market context for you now and more broadly with Sylvia Deablonski Defiance ETF CEO CIO you've been writing it's not all all over, but the pace of spending is becoming more selective if upcoming macro data corporates,
we could be nearing a tradable bottom. As a longer term investor, I continue to see these pullbacks as opportunities. She joins us. Now so cooperating here, is market sentiment not or is market sentiment going to shift to the positive again?
Good warning?
Well, you know, barring external factors, which we've seen a lot of right throughout the last year, whether it's been geo politics, whether it's been tariffs or for things like this, you know, if we're on pace here for kind of the trend that we have here, and we do have this growth of AI, you know, I know there's news around spending being cut back and things like this, but we're still in the infancy of AI and there has already been so much spending that is now going to
kind of pile into the economy, pile into do these different companies, different sectors and things like this. So I think it plays out and benefits these these companies over time. So I think, you know that coupled with a FED that is likely to cut particularly if we have a new FED chair in, you know, in with the president and kind of you know, knowing where the predictions will go on. That that's what the market's really looking for. Right we have a little bit of a weaker labor number,
Consumer spending is holding up. You know, corporate earnings were arguably great. You had over eighty percent of names beating on the top and bottom line. You know, double digit growth continues, positive GDP outlook. I think that we could be in for a good market here, a.
Good market led by the same names. It's interesting that Innvidia CEO Jensen Wang is in Capital Hill today. We understand he's just been seen entering US House speak at Mike Johnson's office. How much will political tailwinds or headwinds help will hindle some of these companies be worried about access to China, well broadly, Cannon Vinie continue to lead this market higher.
So I think in a way, and Video still has the monopoly on AI and chips right, and so I think that you know, a lot of the other semiconductor companies are starting to do you know better and take some of the business away, but for now, and Video remains the clear leader. In terms of Washington and politics. Of course, all of these things impact these companies. You know, they are the trillion dollar clubs. They lead the market
and policy effects them first. But the other side of that argument is when the market falls back, you know where do people invest. A lot of times they look for defensive names, but you have these high again trillion dollar companies, high quality, strong balance sheets that over time tend to perform. Investors actually do look to those companies
for investments. And if you look at today, you know, four hundred out of the five hundred names actually participated in the bounce off of you know, the last pullback, and so you see a little breath expansion there. I do, though, think that the AI tech is going to continue leading markets for years to come.
You've actually got a lodge cap etf that is, excluding magnificent seven, how is that performed of late and how many people are wanting to put money into it?
So interestingly enough, we've actually seen an increase in flows into that ETF. And you know, it may sound like a contradiction what I just said, it absolutely isn't. I think that the average investor has exposure to MAG seven everywhere, right, whether it's in ETFs or they hold the single name stocks.
And so when you're when the market pulls back and you're looking to diversify it and broaden your exposure, we take out those names because we're saying, hey, you already have them, hang on to them, but participate in the in the in the breath and the broadening of the rallies in the years to come. And so you know, very much like an equal which strategy x MAC excludes
the max haven't. But but what's you know we think very favorable about that is you're still letting the winners win, right, so you still have market.
Caps rallying in that fund.
And can you know do well over time.
You really have created a lot of ETFs that have been galvanized by this whole broadening out of the Trade AI and Power Infrastructure ETF. For example, But I'm also interested in the quantum side of things because there's an interesting story. Key Nobel Laureate, winner of the Physics Prize, has just been talking about how China looks like it's really pulling ahead just a nanosecond behind the US in
terms of quantum compute scale and indeed innovation. How much have people be wanting to get into the quantum side of the equation?
Well, I think, you know, what you just mentioned will be a big reason, and we'll put a lot of focus on the quantum names again for investors, because of what happens when we think that, you know, other governments are beating us in AI or technology or things like this. The US government tends to invest right, and American corporations tend to invest and catch up and try to win
the race, right. So I think that just you know, on a basic level, you've seen some good news around quantum, whether it's been HSBC, the advanced bond pricing models that have come out of it. You know, you've seen some good results around and kneeling from d Wave. You know, some of the top quantum companies have done quite well
for investors. But I think you know, as this continues and it becomes more commercial, you will see flows coming into the space, and we think it's a longer term hole for investors.
What hasn't been a longer term held just in recent days has been micro strategy. You have a lot of ETFs giving either you long exposure to micro micro strategy now called strategy or indeed leverage positioning for it, but also to go short as well. So you're kind of offering both sides of the pile here. What do you make of the fact that maybe Michael Sailor isn't a complete hoddler for the longer term, that maybe at some point they might have to sell bitcoin.
Yeah, I mean I think that that's you know, that's a business decision for their firm in terms of how best to to you know, generate ROI and and be profitable over time. But you know what you just mentioned, it is true. We have long funds, we have short funds, and for us, we're just trying to democratize hedge fund like products for investors that you know, are tactical and knowledgeable about these markets and look for short term exposure opportunities.
So those products are simply there. We don't necessarily have an opinion on you know, their view of that. We want to give them the right tool to do that. But I think you know, if Bitcoin rallies, you'll see strategy do well. If it doesn't, you'll see it go the other way, and perhaps the flows we'll also match in terms of long and short leverage funds.
Slovia jabonskiin talking about what has been quite the volatile trade for certain retail of late Defiance ETF CEO CIO, it's always great to catch up with you. Coming up, we're going to hear from AWS CEO mcgarmond at his take on the AI power demand, the race with Nvidia so much more of course trainium three. This will be a big tech.
The desire and the hunger out there for more power and more compute is almost insatiable. And so the more we can take an existing power footprint, an existing set of capabilities and bring more and more compute into that for customers to build cool applications and cool environments and to get value from that, that's we're focused on.
Then.
So we're going to be pushing that envelope as fast as we as we possibly can to get those new and new capabilities out to customers.
The pitch for Trainium in both the training and infants use case is that it's a great deal, you know, cost effective performance. At the same time, you went on stage and said AWS is quote by far the best place to run in video GPUs. How are both if possible?
Well, I mean that both both are possible because that is a great environment to run accelerators and compute in. And so we've been working for fifteen plus years with the in Nvidia team and Jensen and team to deliver outstanding capabilities for our customers. And for when you're running a large cluster of Nvidia GPUs, people will tell you AWS is the best place you get the best performance, the most stable cluster, the best capabilities out there and
broad scale. And so why folks like OPENINGI and others are running in AWS and we have that choice. And so for others that want to be able to take advantage of Trainium. And there's some uses cases that are best for TRAININGUM, there's other use cases where in video
GPUs are going to be your best option. We want to have all of those available and so we think that if we can continue to push the envelope on what TRAINUM can deliver for customers and make sure that we are supporting the latest and greatest from everything that the awesome team in Nvidia is delivering. That's going to be the best outcome for our customers.
The plan for AWS is to basically double capacity by end of twenty twenty seven to round eight gigawatts, so you have a sense of how you apportion that capacity in how Silicon and serve a design to Trainium versus and video GP is.
We're just going to keep pushing as fast as we can and we'll see where customer demands drives us as we go. And as you said, we're massively adding capacity. In the last year alone, we've added three point eight gigawatts of capacity, and we'll continue to add more and more as over the next couple of years, and we'll let customer demands drive us a little bit on what they're looking for and what they want, and that's what we always listen to and that's what we'll continue.
To listen to.
The focus with Trainium in the time i've been able to interact with you and talk about again not just the accelerator, but at the server design level, there's a lot of benefits the customer. When does that benefit start accrueing to AWS in terms of profitability, Like, if it's such a good financial proposition, you must be able soon to say we're making a lot of money on this.
Yeah.
Well, you're already seeing some of the benefits of crew You see things like bedrock growing really really rapidly, and you see training empowering that under the covers. And we announced today that more than half of all tokens and inference done in bedrock are done on TRAININGUM two servers under the covers, And so you're already seeing that benefit come. You see the models that we're building and Nova and Nova too start to get better and better over time
and be accelerated by Trainum. And so we really think that there's a whole bunch of dimensions on which both our customers, our partners, and our own products are going to get accelerated all from TRAINUM.
Every time you come onto the program, I always offer the audience opportunity to pose a question to you. There's a lot of interests in AWS, right, many of your customers span global technology. Actually most of the questions were about anthropic That wasn't much said on stage. I think people are trying to understand what is the benefit and advantage AWS office tanthropic while they are ramping trainum through Project Raineer, but also ramping their TPU allocations as well.
Well, Look, our partners are an anthropic. Our partnership with them is incredibly strong and it's never been stronger, and we do a ton of collaboration with them, and as I mentioned through Project rain here, it's a huge collaboration there to go build their current generation models and all their models run today and launch on day one on top of Trainium and on top of AWS.
AWS CEO Matt Garman along with their own ed Ludlow. Let's discuss this growing AI chip race and the big tech names. Who's when, who's losing? Joan Feeney is the perfect person to ask partner and portfolio manager over it advises capital management. So did Amazon manage to solidify its prowess when it comes to vertical integration, cloud and ship.
Offering, Well, they seem to be doing a really excellent job of that. And what's interesting about what Match has said is they're going to let customer demand drive you know, how they build out these different capabilities for AI applications, which tells us that they are going to be different models purposed to different types of workloads. So everybody's thinking, oh, and Vidia is the market dominant player right now. They have massive market share, and they're treating it like it's
one sort of big thing that's homogeneous. And I think what people are going to realize over time is that they're going to be different types of models for different workloads, and different chips will be useful for developing such different models and for running those models, for doing the inference.
So I think there's a lot of room for different chip players here, and we should expect more of the in house chips like what Amazon does in collaboration with Marvel, or what Google does in collaboration with Broadcom, to continue to rise in prominence, as we've been seeing in the recent news coverage.
I mean, yeah, let's talk about Marvel out with earnings out with also a key purchase of Celestial AI. That's all about lasers, and we can talk in lasers a little bit more. But are we seeing a six really starting to put a concern towards in video? Should they be threatened by this custom built model?
Well, no company likes any kind of competition right, So I'm sure in video would just be happier if they didn't exist.
But clearly, look, ASEX are very powerful.
That stands for applications specific integrated circuit right, So these I believe these kind of xbus er TPUs are going to be designed and going to be put to use for the type of applications in AI for which they're best designed. So it's clearly the case that in Vidia is going to lose share over time in the big world of AI compute. But nobody should be surprised by set by that, and the pie is still growing so
massively they can't meet demand. They're not unlikely to be able to meet demand for some years to come, and so there's a lot of room for a sick approaches to play roles in various types of models.
So we should expect that.
Before we talk more lasers, I want to go back to where we sort of started, the fact that you're getting specific chips for specific applications but also specific models. And I think there's some threat in the market today around Microsoft's are the part of the flywheel, because everyone thinks Microsoft got very strong cloud offering, and clearly we've seen as you not be able to fill demand with
its supply. We're now we're just basically about the applications, about companies being willing to pay more for these AI agents and actually the use of AI. What are you hearing in the market. How much does that impact your sector of chips?
There is a lot of sporadic i should say, information about how much AI agents and AI is being used in different settings. So, right, there was a story today about how Microsoft has reduced its sales targets for getting AI agents you know, to be adopted by their customers, and so that as people concerned, you know, Salesforce similarly is trying to roll out right their AI agent capabilities and some people are wondering whether that's going to happen.
But there are so many other applications in addition to those kind of smart helper AI agents, and I think the earlier in the week announcement with Nvidia in synopsis is a good example of that. Right, the industrial uses, whether it's these digital twins basically being able to model out a whole factory or a whole building, or you know, any other physical presence in simulation. You need this kind
of computational power. You need AI and so that kind of collaboration I think really points to lots of other applications for AI, and then you go to biotech and pharma and.
Computation.
We've just been held back for so many years by its limitations from the CPU side, and now that we have these GPU based accelerators and innovations in fabric like what Celestial is bringing to Marvel and what Broadcom already does, is speeding up all of these computations, making farmer applications possible across all industries.
And some would say limitations have been in the fabrication in the United States energy just making sure that we've got more solid and trustworthy supply chains. I think about just the news also earlier this week one hundred and fifty million dollar steak in a chip startup by Pat Gelsinger. Of course we all know him from Intel, but the US is making that investment in x light a startup. Johanne, you have some real insight as to how this technology
is being put forward. It's all about lithography taking on ASML.
Yeah.
So x light is developing a new laser technology and that is a fundamental ingredient to doing lithography right. ASML being the leader in extreme ultravilethography, which depends on these very high end lasers. So x Light's taking a different
approach to laser development. And what's interesting is and also reminds me of my past, is that this one hundred and fifty million dollar investment by the federal government by the Chips and Science Act, the work is going to be done at a place called Albing Nanotech, which is where I got my start in the semiconductor industry, you know,
twenty plus years ago. And it's a location for collaborative R and D for development of new manufacturing techniques, development of new materials, development of new recipes for designing and
building chips. And it's all the major players in the industry are there, and it's pre competitive, and so for x Light and Pat Gelsinger to be doing it there with the support of the federal government sort of enhances this model of get some public support for a technology that can be spread and help the industry broadly speaking, and does go towards this effort to enable more chip equipment design and manufacturing to eventually occur.
In the United States. It's going to take a long time.
These programs, as I was involved with back in the early two thousands. They take many years, but it's a great way for the US to subsidize a general technology which could ultimately help US position and equipment manufacturing and.
The state of New York. I'm sure music to its is to Joanne Feeni of Advices Capital Management. Thanks so much time now for talking tech. First up, Uber launching autonomous trips with ad Ride in Dallas, marking the latest US city where the right hailing giant is offering such a service. Uber's global head of Autonomous and Mobility and Delivery sat down with our colleagues at Wall Street Week.
It's an exciting time to be in the autonomous space because we're really graduating from a technical problem that first started as a science project to something that now is increasingly being solved and can be commercialized and be offered to more and more people who are using Uber.
All around the world.
And Dell CEO Michael Dell says he sees the AI build out as not stopping anytime soon, with more demand than supply at the moment. He weighed in after, of course, announcing that six week two five billion dollar gift to fund accounts for twenty five million American children ten an under.
Long term, we think.
Investing these accounts in the s and.
P five hundred is a very.
Good way to compound over time for these children. When I look at what's going on today in the ignormous buildout in AI, what I see is a lot more demand.
We'llcome back to bo BEG tech. Let's check in on these markets because there's a volatile training date. We're on a macro data to digest services look stronger, But BOYD does that private payrolls and I'm from ADB look pretty woeful worse Since the beginning of twenty twenty three, we're off by tenth of a percent. The idea of FED cuts not managing to outweigh some of the anxiety around the AI trade today. Key names in the red like Microsoft as we worry about productivity gains and some of
its provisions. But move on to some of the earnings that we've got. CrowdStrike just about six tenths of percent. They actually raise fiscal twenty twenty six guidance. They're citing resiliency and demand for their AI enabled cybersecurity products. But this is a stop that's up about fifty percent this year, maybe the expectations to run ahead of it and we just take a little bit of money off the table.
Marvel up more than four percent, even as it's splashing the cash on a new acquisition that we're going to dive into in the world of lasers. But I'm talking about also marvel earnings did beat expectations, and we're more broadly seeing the adoption of its technology and a custom chips being built across the AI infrastructure sphere. Let's get
to Dina Bass, who covers all things AI infrastructure. Marvel, I mean, only an eighty billion dollar company, not nearly as large as Nvidia, but it is starting to show how it's building out in AI.
Sure, we've been talking about in Vidia a lot, and last week we were talking a lot about the Google TPU. The TPU is one of these kind of custom chips. It's not one that Marvell does, it's one that Google works with. Marvell's a main competitor, Broadcom. On Broadcoms had a lot of significant wins lately, and.
So investors have been anxiously waiting a slash worry to see whether Marvel could post similar, similar interesting contracts, and yesterday Marvell's ce you know, Matt Murphy, gave a very bullish forecast for the fourth quarter in that business indicated a new customer wins.
That included what he called, quote an emerging hyperscaler. We don't know who that is, but that kind of got people excited. And maybe Marvella is also benefiting from this interest in companies making their own shift designs for AI, not just using the in video ones, even though in most cases those companies also use a significant amount of Nvidia.
I mean, it needed a bit of optimism, right The stock is down twelve percent year today, even with today's gains. There's also optimism that maybe they're making bolt on acquisitions Celestial AI. Why are they going into photonics.
It's basically a new technology which you know, it uses light to move data more rapidly. Now, this is a technology that's been in the works for a little while and seems to always be kind of on the cosp of really you know, taking off. So we'll have to see there are other startups in this area as well, like light Matter. We'll have to see if there is significant uptake of this type of technology. But the idea is that you can use light to move data more
quickly through chips and networking. And that's you know, one of the major bottlenecks and AI chips at this point is you know, stringing them together, the networking that connect some the memory and how you move everything rapidly through those different bets.
Dina Bass across this AI infrastructure build out, Thank you very much. Indeed, let's now those stick with earnings more broadly, we're going to the software sector. We're going to Octa shares. You see, been quite a volatile ride today. We're now up three point three percent. The company reported earnings and boosted their forecasts. We saw twenty percent growth when you're looking more badly at earnings, just seeing twelve percent growth
in revenue. Oct CEO Tom McKinnon joins us now and it looks to go on for the market to digest what they were seeing here Todd. Now they seem to be optimistic. What did you feel you delivered in terms of software and not getting eaten up by big AI offerings.
Well, the business is doing great.
We had a solid I think what the market is digesting is this massive opportunity ahead of us to secure AI and what everyone's realizing is that to secure AI, you have to secure identity. All these companies are trying to roll out AI agents and to make these agents useful, they have to be connected to all of a company's data. It's not connected to a company's data, and the agent can't work on that data. It's no better than a
consumer chat GPT or Gemini. And we can help companies connect their agents to data in a secure and manageable way so they can get a great agentic experience for their customers and employees and keep it all secure.
Reflect then on actually the adoption of this agenta KI, because we've got questions in the market abound about whether Microsoft's having to really be able to scale in the way that it thought it could in the adoption of agendaki. What are you seeing? Are people jumping on it?
Well, the inbound interest we have for these new products Octa for AI agents is something like I've never seen in my history at Octa, and so everyone is very interesting, but they're all stuck. They're stuck because they're realizing they have to connect it to their company's data and that's challenging.
They have two choices.
They can put it all in a data warehouse right in the middle and give the agent's access to everything, which is problematic because they don't know what the agents are going to do with it. Or they can just have a very vanilla, water down experience where it looks just like the consumer chat GPTD you would use at home.
So we offer a better choice.
We can connect it to that data in a secure way that lets them govern and manage it.
And that's why the interest is so high.
So this is having a big unlock and that's what I think everyone is starting to realize.
There are a few identity management cut offerings out there. How do you compete against the Palo Alto networks, against Microsoft itself and wants to offer it and offer you the agentic KI as well.
Yeah, the way I.
Like to explain it is these companies have to choose the right platforms and systems to build out this AI future. And imagine, like an analogy I use is imagine if you had to choose one streaming service, you had to pick one, you had to pick either Prime Video or Netflix, and then that's only when you could watch. That's what some of these big platforms are saying. They're saying all use everything from us. It's like, just you can only use Netflix, and you better hope all your shows are
on Netflix. What we're saying is you can choose whatever AI technology you want. Get some You can get a model from Google, you can get infrastructure from Amazon, you can get application data from Salesforce, and we'll make it all work together. You can choose any show you want to watch, so to speak. So we don't lock people in. We give them a choice across all of the different platforms. And that's very important in this innovation because these things are changing.
Every week.
Google comes out of a brand new model. Open Ad is going to have a new model, and customers want choice and we give that to them.
Ton it's interesting that you're saying you're seeing interest like you've never seen before. And since you're time in Octa, why then is the market still thinking then, actually, your revenue growth is kind of going to flatline, be sub ten percent growth. Can you see something different?
Well?
I think we see two things.
We see a very solid business that is profitable and growing at a nice clip, and then we see this massive upside. I think the market is trying to understand how quick it materializes, you know, how.
Big it can be.
When we're very excited, we think it could be bigger than our core business. The opportunity to secure AI could be bigger than anything we've ever done. But it's just a matter of making that real and doing the hard work with the customers to bring it to fruition.
When we're hearing about how companies are actually adopting more borning, what are you seeing most Are you seeing consultants coming in? Are you seeing companies trying to build within in and of themselves organically? Are you seeing the likes of the sellers of these generative air offerings, the open AIS or indeed the Microsoft's going in and almost consulting for them. How are we better to streamline? As you say, we're stuck? How do we unstick?
I think, I mean, I think it's all of the above.
We're seeing starting a lot of interest in the gentic solutions that.
The SaaS providers have rolled out.
Again, those are powerful, but they're they're limited in the sense they're constrained to one application or one service. We're seeing a lot of companies start to build their own where they're using tools and capabilities to connect the multiple databases and warehouses across different SaaS applications. We're what we're
seeing organic internal development. We're seeing consultants, everyone's trying to help them do this, and I think some of these key unlocks like security and identity and context and the right access permissions are going to help move this thing along in a way that's very, very powerful, powerful for everyone because this technology is real and it's quite profound, and it can make employees more productive. It can help
companies grow into new industries and new markets. It's going to be a big boon for established companies for new companies.
It's very exciting.
Tom McKinnon, oup to CEO, it's been great having you on the back of your earnings today. Thank you very much. Now, let's talk about open AI right now. Because it's nonprofit. Foundation will award over forty million dollars in grants this year to US nonprofits now. The organizations support AI literacy, community innovation, economic opportunity. It's the foundation's first major action since open AI is restructuring. Coming up, how news you creators are turning to AI slot into content for kids.
More on that. Next, this is Boomberg Tech, Warner Brothers Discovery. Of course, it's still receiving new rounds of bids, including we talked about yesterday. Nearly all cash off are coming from Netflix.
Now.
Comcast is reportedly looking to expand its entertainment empire, with hopes emerging its NBC Universal division with Warner Brothers in a cash and stock deal. It's according to sources. Let's get home to Blombergs Michelle Davis, who's been covering this M and A story across media. So what's new here from the side of Comcast.
So what's new is the big surprise is it sounds like Comcast has offered Warner Brothers.
Is David Zaslav, the CEO.
A management position and the potentially new combined company that's gonna be really big because it'll it'll be appealing to David Zaslav if he, you know, as CEO of Warner Brothers doesn't want to relinquish that sort of control right now.
The other information we.
Have is that Comcast has offered cash and stock for a combination, and they're proposing to combine their NBC Universal division with Warner Brothers' streaming and studio division.
And that's something analysts.
Actually like because they see it as a way to potentially unlock some value for Comcast. You'll see Comcast stock was trading up on this news, as was Warner Brothers. I think our Comcast is still up today, and it seems like, you know, this deal situation is really heating up. It sounds like while the different offers that are on the table are not easily comparable, they are all compelling in their own reasons.
I mean, it's interesting that Comcast is doing something originally similar to Warner Brothers Discovery, which is spinning off the cable pop so that would still be distributed. This is all still for them about the movie, the library, the streaming, and that's still something that's interesting to Netflix, even though we see it shares like hitting significant lows on the back and forth with this.
Yeah, so Comcast and Netflix both have made offers just for the streaming and studios portion of Warner Brothers, which is seen as kind of the crown jewel. Warner Brothers or Paramount is still the only one making a play for the whole company. But you know, if you are the board right now, you have to think about whether a combination with Netflix or Comcast, while potentially lower in value than a full cash offer from paramount for the
whole company. You have to consider whether that would provide future value that would exceed whatever cash you would get today from you know, selling, the entire company is.
Going to keep on folding. You'll be across at bloombergs Michelle Davis, thank you very much. Indeed, let's talk about content in a different way now, because AI generated videos getting easier to make, and some YouTube creators are leaning into low effort, low quality videos that churn out. What critics school AI slot is aimed at a growing viewer base.
It's children. Bloomberg social media reporter and it Sorvine joins us now, and you were kind of taken aback by the amount of AI created kind of addictive, short form videos that are getting out there on to YouTube kids.
Well before I was even taken aback by the AI content, I was taken aback by the fact that there are so many babies on YouTube tube and YouTube Kids in.
The first places that stop.
So we know that kids are loving YouTube. They have been for a very long time, so much so that YouTube created YouTube Kids a decade ago to help create a safer space for this audience. However, YouTube will be the first to say that YouTube kids is not created for babies under the age of two. It is recommended
really for kids ages two to twelve. But new Pew data has shown that babies and infants are actually flocking to YouTube in droves, and that is of course a fact not lost on content creators who see in this audience an incredibly valuable opportunity to make content.
Their brain is still developing. That's the argument as to why perhaps it should be limited to an extent. But look, your heart goes out to families who almost need another parent in the house when they're trying to juggle different jobs. I can understand how it ends up entering your lifestyle, But then what is entering the kids' heads at the moment. How much of it is being created by AI video generation.
It's hard to quantify exactly how much of this is high quality content and how much of it is purely AI generated, But and speaking two experts for the story, it is clear that a lot of what you see on YouTube kids is promoting itself as being educational. Titles that say that they're educational, things like learning to talk or how to say You're ABC's, and you certainly get
some good quality stuff. You've got the really popular children's channels like Coco Melan, you've got creators like Miss Rachel, but mixed in with results from those sort of vetted, reputable places, you've got much more obscure videos that are from sources that you can't really figure out where quite where they're from.
And there lies part of the issue for YouTube that YouTube Kids is meant to be safe. It's so safe and fat that over in Australia, even they're banning YouTube and other social media for kids under sixteen, they're not banning YouTube Kids. Is that an interesting fat for you? And how much YouTube Kids are going to have to start limiting exposure to the so called slop and when you want to type in miss Rachel you get miss Rachel.
Well, I think it is really interesting that in Australia YouTube Kids is one of the few social media platforms that is that is basically being spared in this band for under sixteen. YouTube Kids may have a lot of content that is safe, but I think it begs the question of how much should kids be watching it in the first place, and how short is too short. Some of the experts we spoke to are concerned that some of the shorter content can affect children's attention spans, and
how long is too long. Some of the content that I was finding on YouTube Kids was four hours long, and that is obviously far, far longer than is recommended by experts. So I think the question is how YouTube Kids balances that one of these are questions that they address and sort of what they communicate to parents to help parents feel more comfortable that the content that is up there is actually vetted and not just simply chosen by AI as something that could be appropriate for kids.
You and I parents young children. How many parents are worried about this?
So you spoke to parents are very conflicted about this. They're extremely worried. But at the same time, parents I spoke to for the story said that they need YouTube. One parent I spoke to described it as a third parent sometimes when she just needs a break. Another father told me how this is a really big internal struggle because sometimes he just needs the kids to lock into YouTube so he can deliver on other parts of being
a dad. At the same time, I think that there were parents, their parents that I heard from, who described wanting to get rid of YouTube Kids altogether because they said that more than any other platform that their kids are using or appy. They when they're told to turn off YouTube kids, they actually can't turn it off.
And they end up in a bad mood. Quite often, I find off if they've ever consumed anything on the screen. We appreciate this deep dive is a great read. Alex Levine on her latest on YouTube kids, TikTok. When I invest more than thirty seven billion dollars to build a data center in Brazil, so the first project in Latin America. The data center will be developed near the industrial port of the same and will fully rely on clean energy from wind energy parks, whom Marg's Peter Millard joins us
and you cover energy out of Rio. Why is Brazil so well placed for this day to send to build out.
Brazil?
It's Latin America's largest economy, and it's also a renewable energy powerhouse. Most of the energy comes from hydroelectric plants. There's also been a rapid advance in wind energy and most recently with solar energy, and so data centers they want to have, they're basically looking for clean energy when they build out these data centers. I know there are some that are relying on natural gas, but ideally they
want renewable energy, and Brazil has it. It also has a completely interconnected electricity grid, unlike the US, where you have kind of certain where it's kind of split up geographically.
And so that helps.
You can have a renewable energy project far away from where the data center actually is, and then they can have a purchase agreement where they are and the electricity goes into the grid and then the data center would consume it.
So the data center developer involved is omnia. You've got Casidol's mentors, who's helping with the energy supply. Peter, How big is this because in the US we've almost become a bit numb to thirty seven billion dollars here, another trillion there. But this must be pretty seismic in terms of scale.
Yes, that's right.
When they talk about the first phase, they're talking about three hundred megawatts. But at Pierson, the officials I've spoken to have said that it could reach up the three gigawatts, which is I mean, they would take about a decade to get there, but that's half of what you currently have in Virginia. So in terms of scale, it could be.
Huge, And of course we'll be thinking a lot about the relationship that Brazil has with China, and therefore Bite Dance TikTok's parent from the Moost Peter Millard. It's a great story. Thanks for bringing it to us. Meanwhile, let's talk about Salesforce shares at a historic cheap valuation, as this concerns well that its growth prospects could be eroded. II the company releases its third quarter earnings later today,
what can we expect. Arag Rana joins us from Blombag Intelligence, and there is this anxiety that even though they can talk about agent Force until they're blue in the face, it's not actually giving much bearing on revenue.
Yeah, there are two elements of it, and you know, one of the most important part is the size of the company. It's a it's a very large software company, very big revenue base. So even if you see adoption of whether it's data cloud on the AI side or agent Force, it doesn't move the needle if the macro is bad. And that's really the big narrative for whether it's Salesforce or Workday or a lot of other software companies. Is enterprise tech spending on the non AI side of
it is not that strong. You're not at people are not adding headcount at the same rate they were a few years ago, and that is what's weighing in the subscription growth rate of all these companies. And I think that's the big narrative. And you know, from my experience, unless the estimate starts to move up, you know, the star kind of you know, it remains you know, I would say range bound.
On that case.
What's really interesting is the narrative in the market is being dictated by a report out of the information about Microsoft sort of finding it tough to charge people for its co pilots, for its agenda AI offerings and salespeople sort of having pulled back on targets. Now we haven't managed to match that thus far and around, But is that really what is focusing the minds of those in the market, Whether there's productivity gains from salesforce from copilot.
So again, there are two aspects of it, and I think one thing is very clear that there is no shortage of revenue on the AI infrastructure site, So let's keep that, you know. The other one one area, the second piece is all these co pilot products that companies are launching in the case of Microsoft, when it comes to something like a GitHub copilot, highly productive and massive
updake just because of what it provides. In the case of the office copilot, it has value to it for the end customers, but at the same time, it's very expensive to run at this point because the cost of you know, token generation and inference is not that it is not that low. That's going to come down and it will lead to more and more people embracing that.
But that goes back to the first thing we talked about is a slowdown in enterprise tech spending, and I think that bays on everything, not just a handful of sectors.
Many of those can perhaps show the benefits of Informatica purchase today at least yeah, I.
Mean, I think that you will see some revenue uplift because of that, and that's good. But the question is going to be what kind of cross selling can they do using their distribution arm that could get Informatica's organic sales growth a big lift, because I think that is one of the benefits of accumulating some of these assets under one umbrella.
And rak Rana it's a busy day, a busy week. Senior analysts Bloomberg Intelligence. Thank you so much for bringing us your research that does it for this edition of Bloombag Tech. Do not forget to check out our podcasts. Find it on the terminal as well as online on Apple, Spotify, and iHeart and stick with earnings as they break after the bell. This is Bloomberg Tech.