Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive from coast to coast with Caroline Hide in New York and EVA though in San Francisco.
This is Bloomberg Tech coming up.
Tesla plans for twenty five billion dollars in additional spending this year to support Elon Maask's AI ambitions.
And Intel shares jump out of the company pledges to support Musk's advanced chip manufacturing project terror Fat.
And we'll bring on more tech earnings and tech news. We'll hear from the CEOs of Lift, Service Now and IBM and First.
For the last day this week together in New York, Ed.
We look at what these markets are up to, and we're actually managing to cling on to some sort of green in the Nasdaq one hundred less so for the NASDAK more broadly, and that we are seeing pressure more on the investor mindset with oil climbing up again five times set high. We're above one hundred and two on rent. The geopolitical context remains. It impacts certain earnings like with Service Now for example, but we're all tracked on earnings today.
Yeah, it's been exhausting, frankly, being on Eastern time and covering Tesla's earnings in particular, right, really simple, storing massive commitment to spending a lot of money to actually get going on the two big projects, rob Taxi and Optimus, the humanoid robot. The headline capex twenty five billion dollars for this year, but actually the shares it down significantly, not just because of that, but because of the commentary they will enter negative free cash flow for the balance
of this year. That's a lot of money stuff, but there's some execution as well. Let's get to Bloomberg's Crage Trudel, who leads our coverage of auto's around the world.
That's where we probably start.
Right in the quarter, things look really good, and then Tesla told us Craig we are going to spend in a multi year investment cycle, and things got a little bit sour.
Yeah, I think, you know, part of what you know made the numbers look so good was maybe there was a moment where everyone wondered whether or not Tesla was actually going to go forward with this sort of high wire act of you know, spending the twenty billion dollars plus in capex that was outlined just a few months ago, you know, for them to actually only have you know, roughly two and a half billion dollars of CAPEX in the first quarter, that that sort of sent a signal
potentially that spending wasn't going to be quite at the pace that was flagged. Instead, a Musk hops on the call and says, oh, no, we're going ahead with that, and then some and I think that does give some people pause when you have a car business that, yes, is looking a little bit better than it was a year ago, but a year ago it was really in a brutal place.
Hold that's graphic on the screen. Just let me say something real quick.
Carry The reason at first thing looks so rosy is that CAPEX in the quarter was basically not trending toward the twenty billion for the full year.
Anyway, everyone was like, oh, they're underspending.
And then it got confusing because they were like, wrong, going to spend a lot more to take it.
Away, And I Musk really tried to articulate Craig why that spending is necessary. We're going to get to terra fab and chips in a moment, but with you, I want the underlying fundamentals of where he's spending on cybercab what about the humanoid robot focus. I mean, this is what investors care about, less about car sales, more about AI.
Yeah.
I think that's right, and I think there's been honestly a lot of patients with being able to sort of look past the idea that a lot of these projects have not earned meaningful return and you know, may not for the time being. But you know, we've gotten to a place now where this is a company that you know, is primarily a car business where a couple of years now they have actually seen decline in their sales and
decline in their position in their most important segment. And we don't have clear indications of when exactly, you know, this robo taxi project is actually going to be meaningful. We had, if anything, a bit of incremental indication that maybe next year, but that's you know, a bit far off. And then also some indications too that the to miss robot may not be you know ready, I'm the timelineers as previously flagged, so some negative indicators from that perspective.
As well, shock me create Trudell slower timeline Bloomberg's crety Dow. We thank you so much on all things, cars, fundamentals, robots more in Tesla, though.
When in La.
Mosk has planned to spend three billion dollars to build a research facility in Texas part of that ambitious chip manufacturing project dubbed Terrifat bringing Intel along for the ride. Bloombgs I King in San Francisco could really articulate why three billion?
Is this some sort of like pilot that.
They do to see whether they can actually make the chips?
Yeah? I mean this is a long established practice in the semikinductor industry where you make what's called a pilot line, and this is your way of showing, well, does my manufacturing technology work and do my designs work? And you're kind of doing it on the cheap three billion dollars, you know. I know that's a lot to me and maybe not much to you, But in the chip industry
it really isn't very much at all. It's about ten percent of what it would cost to build, you know, a leading edge, full sized fab.
Last night, the news about Elon Musk's ship ambitions came in the Q and a portion of the earnings call and I needed some help. I turned to you for that help to understand the pilot line bit that you just explained, but he.
Dropped a big piece of news.
He said that the initiative will use Intel's fourteen A process. What is Intel's fourteen A process? Why did Intel shares jump when that headline hit?
Yeah, this process that we're talking about, this is basically the recipe that they used to create semiconductors, and they're looking for outside users of that. Basically, they don't have enough of their own work, their own demand for their own designs to be able to fill the factory, so they need outside customers. So this raised the possibility that guess what, you know, Elon Inc. Is going to be
a customer of Intel in some way. We don't know whether he's just going to license that and do it himself, or whether he's going to actually help Intel fill its fabs. And I hopefully we'll find out later today when Intel.
Bloomberg Zy and King again really jumped in and helped with understanding that when the news broke in Tesla surnings call last night, there's a by the way coming the Philadelphia Semiconductor Index or SOCKS, that's the main gauge of chip stocks in the United States and actually around the world. But the US sister Shares is up for a sixteenth straight session, sixteen straight days of games, which is a record, and that's astonishing when you think about the direction of
travel in newsflow the war in Iran. We've talked about how the war in Iran has impacted the chip supply chain.
Carrow, but it's not even slowing down. We're up almost three percent in the session.
That is just a phenomenal piece of data analysis that you bring time and time again from Bloomberg. But what's more important is also just how we navigate this and what it means for the likes of Tesla and Intellers. They try to bring chips into just about everything. This is about AI and the use cases. Pierre Ferugu of New Street Research says Tesla has a strong advantage versus peers to quote win in order on robot taxing humanoid robots.
He maintains a BIKE rating on the stock for the six hundred dollars price target.
You join us.
Now, how important is terrifab to that vision you have on winning the AI race for Tesla.
It's a good question, Caroline.
The tarafab is like an enhancer for Tesla and so SpaceX it's really like a player that is I would say five to ten years out and probably closer to ten than five. And the idea is that now that we know compute is everything, you can achieve miracles with compute, the key is going to become how can you deploy compute faster than your competitors and at a lower unique costs? And what he LEARNMSK is doing today with Tesla and SpaceX, it's real project.
Sitting between the.
Two, he gets started to be in a position to manufacture in how so you know, vertico like integration is actually a major factor of course savings in an industry where everybody has very high gorss margins. And he's going to control the space at which he can actually build chips and as he's planning to throw them into space and to deploy data centers in space, and he has like a pretty large rocket to do.
Yeah, that's j.
And forgive me for interrupting you, but what you're saying doesn't match what Elon Musk is saying, right because he got asked this on the call, are you doing terror fab? The initiative to manufacture chips at scale because of unit economics, and his response was no. He consistently says, because I don't believe that TSMC and Samsung can match the supply that Elon Inc. Needs to fulfill those long term ambitions.
Yeah, I think it's okay to say that today. But the unity going to of TSMC probably ter a FAB is never going to beat them. But TSMC is now charging on average sixty five and growing person ghost margins. So if you have your own manufacturing capabilities in a house, whether you work magic against TSMC on you need economics or not, you are actually working magic on your own unit economics.
Therefore the efficiency gain. Look, all of this needs to eventually be put to work. We need to vindicate a twenty five billion dollar CAPEX expenditure.
Yet is it vindicated?
How if we're already seeing Optimus perhaps behind schedule. If we're already questioning, really how quickly regulators can allow cyber cab and the autonomous vision on the road, Does it match the spending in the here and now?
It all depends, Caroline, on the timeframe you set for yourself to put into perspective. Twenty five billion dollars of CAPEX if you include FAB, about half that money is going to be spent. I think on compus to be in the same league as the frontier players in.
AI, and you need AI for FSD, you need.
AI for Optimus, and on top of that you have the partnership with Grog of course with XAI. Then the second aspect is Teslas this year is set to generate but fifteen billion dollars of firm operating cash throw so you know, the negative fakesue of Tesla this year might be ten billion dollars if they manage to spend fast and of the twenty five billion, which might be a challenge. And they have a balance a cash balance studio of about forty five billion dollars, So we're talking thing that
at the scale of Tesla is actually very reasonable. Then, in terms of how do you get a return on that robot XI, there is a broad consensus that once it is you know, really scaled out, it's a multi trillion dollar opportunity. So I mean, if the cost to get into the race and win it is twenty five million dollars, answer, it's a good price. Yeah, And then you have Optimus a million optimists a year. How much value is there in that? Another thing is that it's
going to take many years before we get right. So it's a long it's a long duration investment.
You know.
Twenty five billion dollars is the big number, and later in the show will explain why it's the big number. Pierre, did you wake up this morning in the camp of which some of your colleagues are in that there is further evidence now that eventually SpaceX will merge with Tesla.
I won't tell you.
I think it's going to become more and more challenging not to do it. For sure, a terrafab project like the pilot line at Tesla in the first large scale manufacturing, the faber at SpaceX, the cross accounting and you know pricing between the two is going to become difficult. Yesterday learn explained how you know optimist Roberts will remain connected
to the cloud. If they remain if they need very large cloud blow it might be sphase data and third eployments, right, and so there would be a question on how much to slapez for like space on on Starship. So there are a lot of good reasons for the merger to happen. Now, you know, does that mean it's going to happen. I wouldn't bridge that gap yet.
Yeah, fair good of New Street research or is a joy having you on the show. Thank you for the analysis. Now we are also watching shares of other earnings that become thick and.
Fast over in Europe.
Look how noc here our performs that more than five percent again, and AI an infrastructure story in many ways for Nokia that manages to see European stocks on the higher side for its particular play.
But boy are we in the eye of the software storm right now.
Nouchi I'm the.
M eight percent Service now down the most in its history, and that's after we once again have to our CEOs to prove a negative and they're finding it very hard to do so. They had twenty two percent growth in subscription and still the stock dives. We're going to be hearing more from the CEO of service now later this hour. Let's around with all of that. But ed what else we got coming up?
Yeah, it's going to talk about k Hinnicks posting a sharp jump in quorly profit on booming AI memory demand.
But how long is that going to last?
This is Bloomberg Tech.
Let's look at Korean trading now, sk Heinex flat, but the South Korean semiconductive manufacturer actually reported.
A fivefold jump in quarterly profit.
But the results are instead leaving investors questioning actually the longevity of the AI boom. Bloomberg Asia stocks reporter who's here in New York with SCFPN Lee can articulate why the stock was under pressure with such a phenomenal set of profit.
Yeah, absolutely, it was an absolutely stunning quarter. But also you have to note that the shares have rise in ninety percent so far just here, and if you look at the past here the share has rose more than the rise of more than five four on. The position is pretty crowded. So even even the strong earnings can trigger sell on the news. But I think investors wants more evidence to see that earning is more structural than cyclical, and that's going to take more than a couple of months.
So if you look at the memory ship in the past, there has been bloom and bus cycle and even though people agree that this is the supercycle that's percent unprecedented, this is still subject to the could be subject to the downtren This is a trillion dollar question. When that downturn could start.
We're talking about the lucrative market for high bandwidth memory. I always think about it as the funnel. It allows the GPU to take the data quickly and process it quickly. So you got sk Heinex, You've got Samsung and then Micron in the United States. Beyond the numbers, was there evidence that sk is winning a little bit in that market of HBM.
Yeah, Actually, esk Heinezys, that's just the biggest, the supplier of the HPM. It has about sixty percent market share last year. But the rivals Samsung and Micron are catching up,
especially Samsung. But what's interesting is that because a lot of these memory names have been diversifying, reallocating their production resources to HBM, we're seeing stortages in the traditional M and NAN that's giving pricing power to dis memory makers and that's why we're seeing the strong numbers this quarter for s k heinezin.
Those of you.
Only great to have you on Blombo Tech. Thank you very much. A lot of news out there today, Cara.
Now is a lot from Asia. In fact, let's go there. It's time for talking tech. First up, soft Bank is seeking a ten billion dollar loan secured by its shares in OPENINGI. It'scording to sources, the Japanese conglomerate has been piling on debt as Fano Massiosti's son seeks the position himself really is a lynchpin in the global AI boom because of insuring SoftBank's debt.
Well, that's jumped after that news came out.
Plus ten Cent has unveiled a major upgrade to its foundational AI model, with major advances in areas from complex musing in particular to coding.
It's the first big test for the.
Company since it recruited a top researcher from Openingi. The model has been made available via a suite of ten Cent products, and TSMC plans to hold off on adopting ASML's most cutting edge machine for chip production until twenty twenty nine because it looks to save money. That's a major blow the Dutch maker of some inconductive manufacturing equipment. Now TSMC is its largest customer, according to Bloomberg supply
chain data. And by the way, look, each of these advanced lithography machines cost over four hundred million dollars a piece if you're looking at the top end.
At the top end, a lesson we learn on the show the other day. A lot of people are out shopping right now and coming up. Lift is claiming its territory in London, Europe's largest righte hailing market. David Risher, he's the CEO of Lyft. He's been shopping and buying up some interesting companies. We're going to discuss that next. This is Bloomberg Tech.
Lift is doubling down on this international expansion with a deal to acquire gets UK business. This marks Lift's third acquisition in just a year in a move to really catch up with its large arrival Uber. David Rischer, CEO of Lyft, joins us to share more in the company's growth strategy. The growth strategy is international growth day and what was it about gets UK optionality here that you liked?
So it is the big guy when it comes to London's black cabs, and London's black cabs are awesome. I suspect, Carolyn, you've taken one or two in your life and you know they're amazing, right, So it's the best way to get around London. And that's the idea is we are a customer obsess company. We wanted to make sure that we could increase our footprint in London. This roughly doubles the size of our rides in London, which is wonderful.
And I think some like seventy five to eighty percent of London cabs who have an app are going to have access to Lift customers over time. So it's a great win win.
Now, David, you know, I think the best way to get around any city is to bike, and I'm pleased that you're also doing the bike optionality the suntime they're bikes you have in London. Just what does this mean in terms of capital intensiveness? What does this mean in terms of investment you need to make in these new cities.
Yeah, so it's not a very big capital raise. I mean a nice thing about the sort of let's say traditional ride share business, the one that we're in is we don't own a lot of assets, right, the London cabbes own their own cars. So really what this does is it allows caves taxi cab drivers who are as you know, brilliant, to sort of make even more of their time. Right, They're going to have more customers thanks to the Lift app and our promotion of the get
by Lift app. So anyway, that'd be great. They also have a big business to business audience. They actually do work with a VBC, they do work with the economists, they do work with the Royal Albert Hall. So they've got a really nice stable base that we can build on. And then as mobility changes over time, becomes more autonomous and so forth, it just gives us a bigger footprint in the UK.
I want to understand, David, how this works in practice. In Western Europe, the taxi cab is part of the culture, and in London, of all places, the black cab is at the heart of what it is to be a Londoner or a visitor to that city. So how does the consumer respond to a big American tech company coming in and bringing a brand like get into its fold?
I mean, I hope, well, right, what we hope to do is bring the same customer obsession that we bring here every single day in North America, you know, all across the world. As you guys know, we acquired Free Now last year. They also have a significant presence in London, across all of Europe really and we've seen great growth with that brand and with our writers there because they're
now seeing you know, an even better experience. So look, that's our general strategy is you know, customer obsessions with drives profitable growth. And I just love to your point the fact that we're going to be with the London cab system in such a deep way because it's frankly
going to teach us something about great service. London cabies are amazing in that way, and hopefully it'll allow us to bring even better technology and sort of invest more in the whole marketing of the idea of taking a taxi when you're in London.
David, you've joined us regularly on Bloomberg Tech, and you've been generous with your time in explaining how you've come into Lyft over now almost three years. I think right
and put your print on it. The first part of the story was getting to be a cash flow positive, but you are in this kind of m and a strategy and so could you just explain how going shopping and acquiring companies in different markets is going to impact the final financial health of the business and free cash flow in particular for sure.
So yeah, it was actually my three year anniversary just last week, ed, so three years, congratulation and thank you, loving every minute of it. Look, if you think of the stages, you're right. At first we were losing money. We were losing cash. Now we're making money. We're profitable quarter after quarter after quarter. We're throwing off over a billion dollars in cash. So what that allows us to do now is to grow through acquisition, exactly to your point.
We can take that cash and put it to use. How are we growing We're growing largely internationally. Why because that improves our sort of footprint and over time improves our economics because this is a scale business. And then if you look at the next stage, of course, with self driving cars, you know, again having a large footprint and having a large scale, frankly, is going to matter even more. So this is the sort of journey we're on.
It's a step by step journey. But I love where we're going, and I love the fact that both our financial results and our customer results are improving every day as a result.
How does the profitability focus fit into the robotaxi and autonomous focus. I mean, I can tell you Black Cavies aren't going to love that in many ways.
David, Well, so I think you're talking about two things.
I think you're right anytime you've got a big shift, you have a set of people who are doing something today and maybe they're worth they won't be doing that tomorrow. That's something we're very very focused on in LYFT. I can give you a very specific example. We're now rolling out autonomous cars in Nashville with our partner, Weimo over the course of this year, and we just announced that half of the employees in our very large new depot in Waimo. That will excuse me, in Nashville are drivers.
Half the employees are drivers, right, So part of it is we have to help that transition happen when it comes to profitability. Look, self driving cars over time, frankly, should improve the economics of bride share.
It should lead to.
Because you know, they don't have a lot of the cast, they don't have the same insurance cast and so forth. But that's going to take a long long time. I think right now it's really kind of early days for that. We're just trying to figure out a way to kind of make the transition in a very very thoughtful way.
David Rischer, CEO of Lyft, back in San Francisco. I'm here in New York. We're grateful to have you all the same. They're coming up. We're going to get back to today's big story, and that is Tesla. The stock is down because of the massive commitment to spend money on the big projects, AI, robotics and Robotaxi, all of which we just discussed a little bit with Lift CEO. So my last day in New York City, but there's so much more to do. We'll be right back. It
is halftime. This is Bloomberg Tech. Welcome back to Bloomberg Tech. Our top story is Tesla's earnings. It's a story about a massive investment cycle, and it's time for the big number. The big number is twenty five billion dollars. That is Tesla's capex commitment for the full fiscal year twenty twenty six. So you're asking why is it a big number and why are the shares down? Well, the most that Tesla's ever spent in a full year is about eleven billion dollars.
That was in twenty twenty four. But now we know about the robot line, the Optimist line going up in Fremont, the bigger one going up in Texas, how they're going to expand cybercab production, they're going to need the funds, and when it comes to chips, A lot of people's reaction to this was that twenty five billion is a big number, but it's a drop in the ocean for the industry.
What's up?
Have a quick look at what's happening with Microsoft.
There are some news that they're going to be offering voluntary retirement some seven percent of the workforce on the US workforce.
As it currently stands.
It's voluntary buyouts to just a small percentage. The coustock is currently under pressure by two and a half percent. But once again, this is going to fit into an AI narrative where people can do more with AI productivity tools, and therefore, how does that affect the labor market as of now, Microsoft saying they're going to be offering voluntary retirement to seven percent United States workforce ed.
But let's go back to Tesla as well.
Within all of this, because that is the earnings we're focusing on. Investors maybe betting less on EV sales and on AI and robotics these days, but vehicles are still for the moment, the company's bread and butter.
So side back into.
Testla's quarterly performance from that angle. Jessica Coltell's hit this Edmund's head of insights, so actually better return to some sort of growth, particularly I was interested to see in Europe as well as in US and Asia.
Yeah, I mean that really is their core business. And I mean I think what we're seeing as an EV market, it's not very you know, it's not very linear in terms of growth. We're going to see starts and stops and all those type of things like we've seen here in the US, especially in regards to the federal tax credit. But this market is going to continue to grow, So it's not as if it's hit the end of a runway or even close to the end of the runway.
It's just beginning. But it's gonna look a little lumpy, like to get to full electrification, which I think most automakers are on the same page thinking that is really the end goal here.
I think the end goal as well in the stops and the starts. How much has that to do with the will.
Well, right now, it's tricky. I mean, we're not necessarily seeing a massive consumer just push to interest right now because of gas prices. And it's interesting because in twenty twenty two and Russia and via to Ukraine. We actually saw a much stronger traffic push towards EV's online then we're seeing right now. And I think a lot of
that has to do in general affordability. Because gas prices are high, especially markets where Tesla does very well, like California, It's not high enough to make people want to buy forty fifty thousand dollars vehicle. So it's a bit of a different paradigm right now than we've seen in past gas spikes in twenty twenty two and even in two thousand and.
So this is the difficulty in understanding, Jessica. This is what the CFO Vi Bettanaya has said. Whilst the recent increasing gas prices has had a positive impact on the order rate, this improvement started before the uptrending gas prices. And basically what he goes on to say is that Tesla credit themselves with having a broader.
Offering and a more affordes offering.
Try and wag through the data and see if you agree with Tesla's CFO.
Well, they have an affordable offering and as far as EV's go, right, I mean, and they have I think vehicles, particularly the model why that match a lot of consumer preferences. It's not a random sports car or you know, large sedan or anything like that that matches up. And Tesla hasn't been pretty elastic in terms of pricing. They've drop prices, they have raised prices. They do a lot to match demand, so I wouldn't necessarily say that their you know, sales
were skyrocketing before it gas prices. But I think what they do well is they're well known. They saw increases share in California sales in the first quarter. It was a smaller pie, but they got a bigger part of it because I think people also know their brand too, so I mean they're synonymous with evs, so people just looking for an EV's they think of Tesla, so they have an advantage there.
I was talking a minute ago about the big number, which was capital expenditures guide for the year. The small number for me was the FSD subscription take right, So they ended last year with one point one million FST subscribers and it's gone up a little bit to one point two eight million. It's only available in the United States and some limited parts of Europe. But if you think about how many Teslas there are on the roads around the world. That does to me seem like the small number.
I mean, it really is, and I think a part of it is the consumer acceptance and understanding of what it is, the safety of it all. I think it's something that's exciting that people like it. They're thinking, oh, this card pubs can help me drive.
That's fantastic.
I can focus on other things, but it really still is. You know, it's largely unknown to I did the majority of consumers, and Tesla does have a lot of more mainstream consumers. They sure they had some early adopters, but now they're getting mainstream books that are maybe not as TechEd forward as you know, as we all think, yeah.
Just how does Elol must tackle that?
Because look, his huge pay package is actually linked to adoption of FSD, and in many ways you sort of apologize for the small numbers and tells us about.
Yeah.
I mean, I think it's something that it's going to take time, it's going to have to grow. I mean, they have a lot of hands in different parts at this point, so I'm not sure how he's going to accomplish it all. But I think, you know, obviously education is important thing. How this is going to fit the regulation because there's any time there's any sort of crash, I mean, the news is definitely more proportionate than what
you'd see any place else. And I just think that you're going to have to work on the public acceptance of these type of technologies. I mean, people are very weary. We just heard about AI replacing jobs. It just all becomes a bit of a not a scary black box. There's something to that effect to a lot of consumers.
I guess the last headline that we can give our audience is that must said that by the end of this year in the us FSD unsupervised. In other words, eyes off the road, hands off the road. We'll see if that happens. Jessica cole Well, head of Inside at Evans, thank you very much. Another top story, and we're turning to another of Musk companies. SpaceX is playing a bigger
role in President Trump's Golden Dome project previously known. According to sources, SpaceX is among a group of companies developing the operating system underpinning the Missile Defense System. Let's get the latest with Bloomberg's Mike Shepherd, who's in DC. Let's start just with the details Bloombergs reporting because this is an important.
Story it is.
It's important because Golden Dome is one of the President's signature initiatives when it comes to protecting the US against the ballistic missile attack.
It's worth one hundred and.
Eighty five billion dollars over the course of the program so far, and SpaceX will be providing, together with other companies, a critical component in of it. Think of it as the glue that holds all these networks together. It will be essentially the operating system that helps the govern military operations once this thing gets up off the ground. And it is an expansion of the role that SpaceX had
already been playing in the project. It had been building satellites through its Starlink platform, and it had also been developing a military communications network through it star Shield technology, and that is a classified version of Starlink that offers encryption, especially for military use.
At MIKE, Where are we with the vision and then the action towards Golden Dome, and really what the other puzzle pieces are that need to be put in place, Well.
Caara, if you want to think of it as a puzzle, there's still a lot of pieces to the side looking to be placed in the right spots. There is a long way to go before this thing actually becomes in place and an effective defense against the kinds of missile threats that have been warned about for years from China, from Russia, and now even from Iran. There are questions about the extent to which US adversaries could try to
strike the homeland here. And this is the reason why the US has moved in this direction, and it has turned to one of its most reliable space contract director of SpaceX, to really help get this up off the ground.
And SpaceX is working with a couple of other signature names who have taken on increased roles working with the government that includes indoorial industries and palunteer technologies as well on developing this communications and this operating system that we've been reporting on today.
You know that that last point is so crucial. SpaceX has this legacy with the US government which is about ten to fifteen years in duration, hundreds of millions billions in contracts NASA and the Defense apparatus. But if you look at those other names and orill Impulse, we're talking much smaller contracts. Right in the context of this broader story.
That's right.
They are much smaller contracts, and yet they are part of this larger ecosystem ed And when you turn the focus back to SpaceX also we do see this company on the move. They are getting ready for an IPO later this year that could value the venture at almost two trillion dollars, and they are also making moves in other directions to shore up other parts of the product line that could help in.
This venture too.
They have reached an agreement or at least to have the rights to acquire Cursor AI for up to sixty billion dollars, and the idea would be to use its coding and debugging ability to help the XAI segment of SpaceX in its development and advancing its products. And you could see very easily integrating those artificial intelligence capabilities as well into this kind of operating system we've just been talking about.
Mergs. Mike Shepherd from Golden don't we appreciate it? Thank you? Now coming up easier to use AI tools.
Well, they've sparked an increase in abusive imagery online. That's according to the difficulties of investigators. More on that research next, this to bring back tech child pornography, and it's always been a major scooch of the but a surge of abusive material created with AI tools, it's making it hard for investigators to pass the real from the fake, and that can be the difference in knowing which cases need
urgent attention Nimos. Kurt Wagner, one of the report reporters on Today's Big Take, joins us, now is a difficult read whether you're a parent or not, Kurt, But really this is about prioritization. This is about a lack of resource for many who are trying to understand which child to go out there and help and which one is actually an AI generated piece of content.
Caroline. We spent six months working on this.
We talked to dozens of law enforcement officials who are at the frontline specifically of child's safety crimes, and what they told us is that because of AI, the number of reports and tips they have to sift through is jumping exponentially. And when you are sifting through, as you point out, and not sure whether the image or the video you're looking at depicts a real child in physical danger or something that has been totally fabricated by an
LA or some other generative AI tool. They spend a lot of time basically tracking down leads that don't lead to actually helping a child endanger. And the fear is that the more this happens, the more there is a risk that a real child who's being harmed is going to get overlooked because everyone's busy focused on the AI generated stuff.
There is a mechanism here, so when a technology company or a social media company finds that content that we're talking about.
They report it.
They are required to report it to the National Center for Missing and Exploited Children NCMEC, and from that there is other data available. What does the data tell that organization curve.
So ideally, when a big tech or media company finds this and reports it ed, they would include a lot of detail about the image or video, right, maybe an IP address, a location, you know, how it was created, or what types of tools were used, and then Nick make that organiation you mentioned, They receive all of these from all around the country and then redistribute them out to state experts state investigators.
The problem is that a lot.
Of the tips that are coming into Nickmick, especially those that are AI related, do not have any of that necessary data to actually go do anything right, there is no IP address, there is maybe no location, and so Nick Mick is being flooded with these tips and doesn't have anything to do with them. And so we've seen
Congress actually make a big deal about this. There is just an investigation by Senator Grassley of Iowa where he's trying to challenge these companies to report more useful information to Nickmick, because if they just get a video or photo but nothing else with it, there's no way that they can go and actually try to stop a crime.
Kurt, I think the numbers are important here and they're astounding. Last year the Clearinghouse received one and a half million reports or suspected see some with ties to AI tools. But the previous year it had just been sixty seven thousand reports, and in twenty twenty three it's four thousand, seven hundred, which is all too many, but one and a half million to just talk us through the sun exponential growth that you're talking about and the ways in which people are trying to tackle it, Yeah.
I mean less than five thousand two years ago, now one point five million in just two years, and growing and expected to continue to grow.
And when you think about why that is.
I mean, you just have to look around at the ease of use of these AI tools that have come up. Right, all of these companies are spending tens of billions of dollars on data centers and products, trying to move as fast as humanly possible to get these AI tools, the generative AI tools, into the hands of everyday consumers. Of course, the downside being that that also helps the bad guys.
And so while AI related reports are still a small sliver of the total number of reports that people get, you can see Caroline how it's growing exponentially and expected to continue.
So Oka, you said at the beginning of our conversation, you spent six months reporting this as part of the reporting course, had responses from a range of technology and actually in particular AI companies. We've been showing those responses on air throughout the conversation. But how would you summarize the industry's response, either directly to your reporting or to the issue that you that you are talking about.
A lot of the big companies are telling us that, hey, we have safeguards in place, right, we don't allow if someone goes to chat GPT and tries to role play with a child, which is something that now happens. They say that they have alert setup that they can detect that report it, get it taken down. I think the issue, ed is when you think about open source models. What we've heard is that some of the open source technology
gets used. People download it to their personal device and then they train it to create more child abuse material. And that is where the technology can get really dangerous because people are able to tailor it towards a specific thing that they want to create without any oversight from the companies themselves.
And so when you're.
Using a mainstream product owned and operated by the company, there tends to be more guardrails. But when people are able to kind of take the stuff, put it on the personal device, and manipulate it themselves, that's where you know, these tools can become very powerful in a bad way.
Bloomberg Kirtwagner, thank you. Now.
Coming up, Warner Brothers shareholders approved the one hundred and ten billion dollar sale to Paramount, but they don't sign off on everything. We have the details from the investor meeting. Next this is Bloomberg Tech. Texas Instruments is up almost nineteen percent, on track for its best day since two thousand at a record high, the biggest maker of analog chips, massive demand from all the industrial machinery that goes into
building a data center. That's the story. That's one of the best performers today.
I've got the reverse, the worst performer on the S and P five hundred, in fact, the worst Perforeman's ever for service.
Now after its earnings, we caught up with the CEO, Bill McDermott.
As he tries to push back on the negativity around software.
Just take a listen to what he had to say.
Even though subscription growth is still twenty two percent, you beat on revenue.
What more can you telemarket? Right now?
Bill, I think it's very important to deal with facts. We're fifteen billion dollar enterprise software company, the fastest to ever get they're growing at more than twenty percent. We had a beaten raised quarter and we reiterated our full year guidance. So that's the baseline for the conversation. And we are a growth company, and I'll take the interview anywhere you wanted to go.
Let's talk about geopolitical headwinds, Let's talk about acquisition integration expenses. Maybe there's some of the areas that investors and the analysts have said. Look, it made for a bit more of a messy quarter than perhaps would have been easier for you to tell the story on what is the underlying growth rate of AI at the moment of adoption of the service now products.
Yeah, what you have to realize is AI is the product, it's the whole platform. So the platform is fully autonomous. So when a customer buys our AI platform, it is enabling every function of their company to be a native AI company. So it's all AI now. And that's another thing. We said we would do twenty and twenty twenty six a billion of net new annual contract value on pure AI additive to the platform. Yesterday we uped it to a billion and a half and I think we'll run
through that. So if there's anything that the investors wanted, they probably wanted a bigger beat. So we're beating every quarter, maybe they wanted a bigger beat. And then the second thing is, and it is true we acquired a couple of companies.
That was Service Now CEO Bill McDermott. Sticking with software, we're looking at IBM at one point in this session having its biggest lowest level since a year ago eight Pril twenty twenty five. Software AI, same story.
It is, and also similarly for IBM, it's a macro uncertainty. That meant they didn't upgrade their revenue full year expected, so they held it.
They held it, and that seemed cautious. Look.
I spoke with having Krishna just yesterday after the amid the earnings, and he looked said.
I got better margins, better profit, better cash.
But he did see that there's a macroeconomy concern and so he wasn't going to raise his guidance. But look, he's talking about AI as well. It infiltrates all of it. It's not just a model. They see tailwinds. The market doesn't yet believe it. At the moment, there is angst ed about these software businesses being disrupted by.
Them to say in the future, we will make more money. This is the timeline, that's.
All, And for now they can't.
But for now we talk about what's happening with a deal WBD as we know it, Warner Brothers, Discovery and Paramount both down. Paramount down by five percent. But we got that approval of the deal one hundred and ten billion dollar acquisition of the company BI Paramount's guide outs, let's turn our attention to what comes next. Bloemberg's media reporter Hannah Miller. The investors okay with it? Now, we've got to see if the regulators are yes.
That's the next step is to overcome any regulatory obstacles that crop up, including anti trust reviews in both the US and Europe.
Senator Elizabeth Warren has posted on x in the last couple of minutes that the Paramount Warner Brothers deal is an antitrust nightmare? Is that how the world feels about this, Hannah?
I think that's certainly how Hollywood feels about this. That we've had a lot of celebrities, actors, writers, directors come forward and actually sign an open letter protesting the deal, arguing that this will affect jobs, it'll lower production, it'll mean higher costs. They think that this consolidation, it would have too much power in Hollywood.
I mean, it's getting personal.
If you go on TikTok, there's Jane Fonder and pretending to be CBS news anchors that are being disrupted in the future. Just what is the tactics that Hollywood now deploys. What is it that we're likely to expect in terms of the time.
I think we've already seen them really, you know, make a big fuss about it in the press. This open letter was a great move. We've seen a lot of celebrities post on social media. Politicians have also come forward and you know, expressed concern about the deal. So you know there is going to be this sort of public relations battle that'll be on the hurt.
At some point, we'll talk about the tech story.
Remember ViacomCBS Paramount plus HBO Max. That will be discussed at some point. Bloomberg's Ala Miller, Thank you very much. That does it for this edition of Bloomberg Tech.
It has been such fun. Haven't you sat next to me?
It's been great. It's been a hell of a week.
I mean, newsflow wise, markets wise, earnings wise.
But I think we've we've been across it all.
You have, you're going to jet back to the West coast.
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