Bloomberg Audio Studios, podcasts, radio news from the heart of where innovation, money and power collide in Silicon Valley and beyond. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Live from San Francisco. This is Bloomberg Technology Coming up. President Trump says Chinese leader Shijingping is very tough to make a deal with tech response to his late night social media post.
Plus Global Foundaries, the biggest US based provider of made to order chips announces a plan to spend sixteen billion to bolster domestic production.
And Bloomberg makes public for the first time dashcam footage and details from the late twenty twenty three when a Tesla using FSD was in.
A fatal crash.
But first we check in on these markets and alternatively higher Look, we've once again got.
Bad news being good news.
Slower services than expected in terms of economic data, slow in jobs growth than expected means will the Federal Reserve give some push to the economic perspective? Now's that one hundred trades up, some three tens of percent ed Go on a hood.
What's moving this market?
Yeah, we've got some big stories in the show today. Let's start with one that's coming up very soon. Global Foundaries up two percent. An accelerating and expanded investment in the United States for cutting edge production capacity. Tesla is down under pressure a big Bloomberg report making public for the first time some dashcam footage of a crash in twenty twenty three when a Tesla using FSD struck and
killed someone. We will get the details later. And then HPE Hewlett Packard Enterprise up six tens percent, strong revenue growth. Tariffs are an impact. And then here's the activist investor question. We speak to the sea later in the.
Hour, important conversation.
But let's get back to what has been really the focus of the market this morning. Was President Trump doubling down on tensions with China. Like in a post on truth Social overnight, the President called Chinese leader Shiji Ping very.
Tough and extremely hard to make a deal with.
For more in Moost, Katie land Lines is standing by Kaylee. What is the impact on corporate America and indeed tech America at that.
Well, it's going to depend, frankly on how the President and president she decided to move from here. As Trump says that China is proving and she's specifically very tough
to deal with. It seems he's also proving tough to get on the phone, as the White House has four days now said that a phone conversation between Trump and She will happen in the near future as they try to sort out what both sides have accused each other of as being violations of the trade agreement that was just struck in Geneva that of course, brought tariffs down from the incredibly high levels in exchange for some other non tariff barriers being removed, at least in the US's mind,
China was set to start granting licenses once again for exports of critical minerals and rare earths to US companies that have been choked off from them. Knowing that China has a choke hold on rare earth supply, they control about seventy percent of that market, and those rare earths are needed for a lot of national security purposes in the US. Obviously advanced technology around things like fighter jets,
for example, or nuclear control rods. These are things that the US and many US companies actually need access to in order to do their production work. In the US is saying that China is keeping them from getting those materials not moving as quickly as the US desires. China, on the other hand, is accusing the US of also violating the agreement, as we have seen a further ratcheting up of export controls in different areas, including around jet
parts but also chip design software for example. We continue to see an expansion of the areas in which the US is not allowing export into the Chinese markets, and all of this raises the risk that if an agreement cannot be made or kept to, that tariffs between these two largest economies could go higher again, which obvious have massive implications for companies that are reliant on Chinese imports in order to make their goods.
Bloomberg Balance of Power hosts Katie lyons, thank you very much. Just days after leaving his position in government, Elon Musk has been criticizing President Trump's signature legislation, his Big, Beautiful Tax and Spending Bill, calling it a budget busting abomination. The Tech Titans public condemnation pits him against the President at a critical time, as Trump is personally lobbying holdouts on that bill.
Cara, Now, let's look at how the US government is affecting American chip sector, which of course is something that President Trump has been vocal about. Ed global founderies, it's the biggest US based provider of May to order chips, today announcing plans to invest sixteen billion dollars to expand its chip manufacturing and advance packaging capabilities across facilities in New York and in Vermont A. Please to welcome CEO
Tim Breen to the show. Tim, how much is this a reaction to the geopolitical landscape and to Trump's desire to bring manufacturing into the US.
Yeah, well, thank you for having me. So it's really a long term trend where we see the needs for the technologies that we make here in the US just growing significantly as semiconductors play a broader role in kind of every aspect of our life, from the cars we drive, the phones in our pockets, even satellites in space, and the data centers we're building around the world. And that role is growing, and obviously that needs to be met
by increased investment. And the US has an imbalance between what is designed here and what is created here from innovators like the ones mentioned in our announcement today, and what is manufactured, and you know, GF is doing its part to grow that capacity, and that's a long term investment for us and part of a long term trend.
And there had been long term signals that you were making this investment. I think it was a late last year you talked about the thirteen billion dollars over the next ten years.
So how much of this is net new?
Is that three billion dollars in terms of R and D the real new bit hit tim.
Yeah, So we're building on our existing plans, and those plans are already underway. So this is a great chance for us to go faster, go bigger, and also bring more innovation. And I think especially the the changes we're seeing with the role of AI, both in the cloud, in the edge, and all of the connectivity in between, just means we need to be ready for the demand that's coming our way. And so yes, it's more building on those investments we've already started.
I've studied your capital expenditures and basically you average about one point four billion dollars every year. So I go back to Caroline's question the sixteen billion dollars, what's new in it? What is the composition of that funding and where does the funding come from.
Yeah, so we have a clear plan to fund this over the coming years, and I think you know, obviously, our CAPEX investments are based on customer demand, and so we'll be able to accelerate those as that demand materializes. And we're seeing that renewed interest in US based manufacturing from you know, many of these companies we've talked about, and so we'll be able to modulate our CAPEX investments to match the demand.
And obviously that's what we try to do as a company.
Qualcom is is a pretty high digits customer for you, right and when the news broke within minutes there's an email in my inbox and a quote from Christy them on it's interesting because you are listing many partners and customers as beneficiaries of this initiative. Which customers are you going to prioritize and why?
You know, we have a number of great companies that have supported this announcement and then you know, in many cases they've been our partners for you know, decades in some cases, and so quotcom is a great example of a company that's always prioritized global sourcing, having optionality and definitely producing here in the US and it's a true anchor for US in our US factories, especially in New York, and so I think we're going to be continuing to
work with all of these customers to meet their requirements, and those requirements are changing, right. They're bringing new technologies to market, they're penetrating new markets on their own. Quo become a great example of penetrating new industries like automotive, which is again a strength for US, and so very happy to support more of that right here in the US.
It's more expensive to do things here in the US. How much are costs slightly to go up? How much more can you charge by bringing your manufacturing here?
Well, manufacturing scale matter, and that's why for US, building on existing factories that have already been up and running with good yields, with high quality makes it more efficient. And so when you've learned how to do it now, for in the New York case, over a decade and even longer in Vermont, you know how to do it at a better cost structure, and obviously investing more gives
you that scale advantage. But the other advantage for customers is that they have flexibility, They have optionality in where they manufacture and so they can do one design and have it made all over the world for their requirements they have for different markets, including here in the US. So actually we think this for them actually represents a cost saving over the long haul.
Tim. There's also reports out of Germany this morning that you are investing there. What's the latest with that.
Yeah, So today's announcement is very much focused on our US plans and it's clearly the area we see the biggest mismatch between supply and demand, and so we'll be a large part of our investment plan going forward. We have a great facility in Germany and dress then we'll continue to upgrade that and expand it over time.
Nothing like the.
Scale we see in the US in terms of new investments in the short haul, but again a great opportunity to get meet board our European customers need out of that facility.
Tim, Do you need more from the government in terms of funding. You got money from the Chipsack late last year, and of course that's been in many ways talked down by the current administration. Do you need more funding from the government or is this the way to do things? With capital partnerships and indeed with capital expenditure from yourself.
Yeah, I think all of these investments always need to be done in partnership. We're really grateful for the support of this administration. They've been impeccable partners. They understand our business and where we're going. We get great support from them in various different forms, and not just for building the supply, but also encouraging the demand to come back on shore.
And I think that's a super helpful partnership for us. Obviously, we can't do this without our customers.
That's the reason we exist, and so them being a part of the story and bringing back that demand to the US is also an essential part of underrunning these investments.
And so look, it's all about partnership.
Tim.
What's Apple's role in this and how are you going to be working with them differently as part of this expansion.
Yeah.
I think Apple's been very clear that for them, there's a huge amount of semiconductor content that goes in all of the incredible devices they bring to market. And you know, if you took your iPhone out of your pocket and opened it up, you'd find an incredible array of different.
Technologies in there.
Many of them are technologies that you have produces and some here in the US and some will bring back to the US as we go forward, And so yeah, they're obviously very keen to see more domestic manufacturing.
And the fact we have such a long standing partnership means.
We know each other well, we know what we do well together, and they're keen for us to do more, as they've indicated.
Global foundary Seeo Timbering. Great to have you on Bloomberg Technology. Thank you very much. Now coming up, federal regulators are investigating whether it's Tesla's full self driving system is dangerous after a fatal crash involving the technology in late twenty twenty three. This is Bloomberg Technology a z Elon Must's house driver robo taxis in Austin. Federal regulators are investigating whether the system it calls full self driving is dangerous
even with a human behind the wheel. That's after a fatal crash in November twenty twenty three involving a driver using the system. Bloomberg is publishing images and partial footage of that crash for the first time, which had warned the audience the content you're about to see, which Bloomberg News obtained via a public records request may be disturbing to some viewers. A Tesla Model Y with full self driving engaged round the curve at highway speed. The sun
was low, the visibility was poor. The car didn't stop. Moments later, the Tesla using FSD hit seventy two year old Jonah Story, who is standing helping direct traffic at the scene of an earlier crash outside of Phoenix. She was pronounced dead at the scene. Bloombergs Crey Trudell, who broke the story with Donahle, joins us now for today's
Bloomberg Big Take. And I think the most important question, the question that we are getting most is why is it important that we release the details of a crash that happened in November of twenty twenty three.
Great, Yeah, there's a lot of pushback on that, you know, for the obvious reasons of yeah, it's now June twenty twenty four, right, and yet what makes the twenty five very significant excuse me, twenty twenty five. What makes us crash very significant for Tesla is the fact that this is something that led to a federal investigation. This investigation is ongoing, and this speaks to the sort of complexities of the way that the US has approached regulating this technology.
Right.
I think when you listen to you on Must talk about his driverless ambitions, he talks about, you know, regulatory approval and sort of gives this impression that there are these hurdles that that Tesla needs to clear as long as you're making your cars with things like steering wheels and you know, other components that sort of quote unquote normal car has. You can put a car on the road today and and say we think this is ready to be driverless. NITSA doesn't have to say, you know,
safe or unsafe, thumbs up or thumbs down. And you know what they what they are doing is picking up on crashes that are reported like this one, picking out patterns in them. In this case, this crash along with some others. Uh, you know, there were consistencies in terms of conditions that the system seems to have trouble dealing with.
And NISA is saying, look, we need to investigate this and whether or not your system is safe in these conditions, and that is a risk for investor and obviously you know, worthy of reporting, you know, putting aside the fact that you know This is a tragic situation, and you know, forty thousand people you know, die on us roads every year. Much as that's a worthy ambition to try and change that.
If you're Tesla, you know, it's rare that we look at those desks as closely as we have the opportunity to.
Here.
It's emotional for seventy one year old Jonas Story's family, it is for Carl Stock as well, who is the Tesla driver. Craig push us forward though on the technology front here though, because there are key differences between for example, Lida with Waimo and what Tesla has been using and is in any way an interpretation is the technology and how it reacts to low sun and certain of those themes that you're seeing among these crashes.
Yeah, that's a really key aspect of this story because you know, Elon Musk has has sort of taken this view that all Tesla needs is cameras, that it doesn't need more expensive radar and even more expensive light our sensors, and he's kind of out on a limb in this regard. Weimo has a very different approach. They, of course, you know, offer a system that does not have to be supervised, whereas full self driving to this point needs to be
to be supervised by a human. And WEIMO because it's offering that level of capability and taking that approach of we want to put cars on the road without anybody behind the wheel. They have a much more robust, much more expensive sensor set. And I think, you know, part of the sort of question here is, you know, is is there sort of a safety shortcoming if you're relying on on these cameras, especially in conditions like this one.
You can see from the video footage that it's quite hard, you know, to see what's ahead from from the cameras on the front of this model y and you really don't see the the pedestrian who was tragically killed until the very last moment.
Pray Trudell, phenomenal reporting. We thank you for bringing it to us.
Epic Games twenty twenty five edition of its Unreal Fest conference just kicked off yesterday in Orlando. The game developers showed off the tech behind the witcher for This Was Everywhere, and also showed off some of its AI created tools. Bloomberg caught up with CEO Tim Sweeney for an upcoming episode of the Circuit with Emily Chang. He weighed in on a competition in the AI space and also Apple strategy.
Well AI is interesting because the Google's Android operating system is open to third party AI assistants, and we're seeing some really roverse competition. There is perplexity, and others provide solutions. Apple so far has been closed. Not only are they like stifling other companies from producing AIS after their works as in Reed and to iOS as here he does, but they're failing to deliver their own AI and that's
very unfortunate. I think iOS is an area where the entire ecosystem, an entire platform should be opened up to third party competition. Apple should get out of the way and that awesome developers make Arson software and then let the best win.
Now, let's talk about the wellness industry.
It's forecast to hit nine trillion dollars by twenty twenty eight according to a study from Global Wellness Institute. But today, a leading software provider for businesses in that sector have announced a major rebrand to bring three companies Mind, Body Booker class Pass under a new parent brand called playlist Player. CEO Fritz Lamon joins us us Now and Fritz why
do this? What is it that you're going to be able to do in terms of efficiency here when you're bringing these three names in a closer alignment.
Well, you teed me up beautifully there.
You know, we have built three highly successful different brands. Class Pass which gives people a way to book fitness spas and salons and even food and beverage take out increasingly Booker, which is vertical SaaS that's powering businesses that run spa salons or appointments. And then mind Body, whose bread and butter is giving you know, kind of the operating system to the wellness industry or mostly studio fitness owners,
but also PT and others serving up wellness. And so it didn't make sense for us to have a brand that was just one of our three successful businesses. And really we wanted to sort of say, hey, look, we are now building a common platform of AI tools, an app partner, ecosystem, consumer distribution that can let us go
serve experiences businesses. So yes, wellness businesses and the fitness and beauty and spons long world as we already do, but our aspiration, we believe we've earned the right to go even bigger and to build software for anybody delivering great experiences in their town, and to give consumers apps that help them discover and book this stuff and really give them a playlist for their life if you will.
So, how much bigger does it get?
You're already forty thousand salons of SPA seventy three thousand and gyms and workout places and across thirty countries.
How much does this enlarge your total addressable market?
I mean again, you team me up beautifully there. The wellness economy is massive right in the US. It's over two trillion dollars, and so I think we'd be fine. You know, our investors would would have a great outcome hopefully if we continue to execute within the wellness vertical.
But the fact that we built these our scale has allowed us to build this industry leading AI stuff, this consumer aggregation, so we can help these businesses get more reach and distribution and not have to pay social media companies, you know, crazy ad rates to get users. The fact that we have big, big partnerships ecosystems so you can take advantage of premium tools that are built into our software.
You know, we want to go much bigger.
And you know there's twenty million small businesses in the US, and you know, only only a sliver of those are wellness, so we think it substantially increases our addressable market.
Fritz, what's the total active user base of the combined and see how many people now will be on that platform.
I can't speak to the specifics on even though you know, sharing metrics and financials my favorite topic.
The powers that.
Be have have have prevented me from sharing any any any specific details. But you know, we're we're reaching tens of millions of consumers in the US, We're operating in thirty one countries across multiple verticals, and we want to get an order of magnitude bigger in terms of our impact and our reach.
IPO get the name out there.
You know, we can't really comment on our plans.
We have investors who are super long term focused and right now we're in a position where we don't need to raise capital and so you know, we'll keep an eye on the markets and see how they evolve and see where the world takes us. Right now, we're just focused on how can we touch as many businesses and help them achieve their potential as we can?
How many how can we help as many.
Consumers get out of their screens and truly kind of build the anti tech tech company where instead of manipulating you and and damaging your mental health, we're trying to get you off your screens and into your city having rewarding experiences.
So that's our focus for now.
Fritz Lemon, CEO of Playlists, thank you very much for joining us.
Welcome back to Bluemerg Technology. I'm Caroline Hyde in San Francisco today with.
You Ed, and I am Ed Ludlow. It's great to be back together. Markets are moving on geopolitical headlines and other things. Take it away.
Yeah, and actually we're sort of trading tentatively higher on the NASNAT boar broadly. But I want to get into a couple of names right here, right now, because Apple actually managing to shake off what is yet another down crade, this one coming from Laura Martin over at Needham putting it to a hold. We now got twenty holds on Apple and we're actually racking up a few cell ratings.
Up four teen percent.
The issue here for needom is once again the lack of AI spontaneity and grasp of generative AI within the overall offering and indeed therefore slowing of a sales.
Cycle potential with the next round of phones.
So we're up four tenths of percent there cloud strike actually coming off of our lows, we're still down four percent. At one point we were down by some seven percent
pre market. This is as numbers actually met exceeded expectations for their fiscal first quarter, but not good enough when it comes to perhaps where we're seeing ARR this compared to this time last year, the net new ARR hasn't recovered from, of course, what was a massive wipeout blackout that CrowdStrike caused in July of twenty twenty four.
Head, okay, let's go to another on the top stories. Salesforce's agreement by Informatica for eight billion dollars came a year after initial talks collapsed, but then the acquisition target lost a third of its market value. The result, according to Salesforce executives and people close to the negotiations, is evidence of the software giants more disciplined approach to deal making and it's patients. Bloombergs Leanna Baker leads the deal's team.
This is just like a classic Bloomberg Tech story. This is what happened behind the scenes. Two things, Salesforce learning the value of patients, and then you know, the two people at the helm with those companies probably paid a big role.
If you look at where Salesforce stock has been since the Informatica deal was announced, it's not doing too well. It's actually down more than what Informatica is worth. So Mark Benioff here is sort of defending the deal to Wall Street, and Salesforce is using words like discipline and patients to show that they're a different acquirer than they were just a few years ago when they bought Slack, when you know later they came under in the crosshairs
of activists in vesters. So they're trying to show that they're a different sort of m and a acquirer now still a serial one, but maybe not paying as much as they would have even a year ago when they first started talks with Informatica, and the need.
For Informatica became ever more necessary in a way, as Jenner to Ai just became the focal point for Salesforce of Mark Benioff. But how did they therefore keep the conversation alive? How did they show this discipline over the twelve months.
So we reported in the story that the CEOs stayed in touch. As you know, when two companies come together, it's kind of like a marriage, it takes a while to get comfortable. And we also know that there was interest in Informatica, not just from Salesforce. We reported that Cloud Software Group, a big privately held private equity back company, was also interested in. Mark Benioff did say we were lucky to get this company because it does seem like
it was a competitive auction. Goldman Sachs was working with Informatica, JPMorgan was working with Salesforce, and it just took a long time to come together, but it did accelerate ahead.
Of our scoop.
They had a handshake agreement before we reported it a few weeks ago.
Yeah, Milbyding, I've forgot that handshake with them. We thank you, Leanna Baker. It's been great reporting throughout. Let's discuss it further with someone who has a lot of focus on that particular deal and others. Brand Ruda is co managing partner, and Coco Pemira, which is an investor in Informatica, And what's so interesting, Ryan is perhaps you say that a dollar back today is worth more than a dollar back perhaps.
A year ago.
How has liquidity changed, how's this deal making changed?
Yeah, I mean the probably Thanks Carolyn ed good to see you guys.
The environment for private equity has been really tough in terms of getting liquidity back to investors. You've had extending investment horizons for a lot of businesses. That's usually actually good news in the case of like an informatica, which we've been invested in for a decade at this point, kind of leading to this transaction, but it's been very hard to get liquidity. And actually this kind of liquidity to our investors is particularly valuable because it's coming from
a strategic it's an all cast transaction. It's not private equity to private equity, which from an LP's perspective is fine, but also it tends to be left pocket right pocket. They might actually be an investor in that private equity fund that's buying from the private equity fund.
That they're an investor in as well.
So this is particularly precious DPI, as we say, distribution to paid ins like real liquidity relative to the value of what's in the fund. So We're very proud, very happy with this transaction at this particular point in time especially, and so.
How repeatable is that, how many strategic buyers are out there with the guts the determination to keep following these sorts of processes.
We think strategic activity.
Certainly, the interest that we're seeing is very high in the kinds of businesses that we back, and i'd say for our investment philosophy, it's really strong.
You know.
Informatica is one of these great stories.
Of really product led growth that we try to back for long periods of time. And that's what actually strategic buyers want. They're not trying to buy in EBITDA optimized gutted private equity portfolio. What they want is really well invested product sets. And so if you have businesses that are doing that, like we do with our technology portfolio,
it generates a lot of strategic interest. So we expect that it's certainly very active today in terms of dialogue, and we expect that's going to continue.
I was really looking forward to this conversation because of the private equity lens rather than what is more common on the show, which is venture back deals. But what they have in common, right, is the exit environment and
what types of exits are on the horizon. D S D sales full Symformatica as a sort of starting gun and signal of more activity to come in different formats, particularly thinking about this administration and the regulatory environment that would allow something like that to happen.
Yeah, I mean we think what a lot of the strategic, big strategic buyers that we see are looking at is actually generally pretty appreciated currencies in their own stock price, a lot of liquidity, and then the need and the excitement to really get their story together for the emerging and kind of really accelerating AI landscape, and informatic is exactly that. So you want to find businesses that are going to help, you know, codify kind of what you're going to be able to do in that AI world,
and Informatica is like right in the middle. So for those like you, if you have assets that kind of bolts of that story. And there's like so many companies that are out there in the private ecosystem today, you know, it's a bit of a smorgas board.
Is twenty five dollars a share, good like it's great for us.
Yeah, I mean this has been a it's more than six billion dollars to our investors.
Wow, it's a.
Very very significant, large, multiple billion dollar gain.
I asked that because of the reporting right that you know, one year on from their initial talks, a big fact was the downward pressure on the stock that allowed them to proceed. And I don't know how you view it. You might say, well, what might have been at thirty dollars or thirty five I don't know.
Yeah, I mean there's a lot of volatility in the world today. You see you kind of everywhere. What we'd focus on is like the point what matters to us is the point to point over ten years, not over twelve months, and over that period of time.
I mean.
The really cool thing about Informatica.
And there's a lot in there, is that the products that salesforce is buying with this company are overwhelmingly products that we created with the management team host the going private in twenty fifteen, So the cloud business was really
zero at the time we invested in them. We saw a team that we really fu could build a next generation cloud data management platform that's guiding the company's guiding into more than a billion of ARAR this year from a starting point of zero, not a lot of private equity back to software businesses can say that they've done that. So from that kind of point to point level, like we're thrilled, our investors are very happy with the transaction, and look, it's a very good home.
I think Salesforce will get a lot out of Informertica.
I know the way you said, there's a lot of volatility in the globe right now because you're a global footprint kind of pee in fact, for ED and I we think about your European chops because that's the place that we come from.
I'm interested as to how therefore the landscape differs. We talk about us exceptionalism. Is that where the deal is going to happen. Is it global in nature?
Well, we think, I mean a side effect or kind of a very direct consequence of what's going on in the world today and particularly in this country, is that the commitment that we see in Western Europe about investing in Europe is very high. It's about the highest that I've seen it in my investing career.
And so.
That's going to have like really interesting benefits to the economies there, to the innovation pace, and frankly it's overdue. I mean, look at all the hyperscalers based in the US. We are looking more at bringing the best of Silicon Valley into Europe. As we've always and there's never been a better time in our view to have a very deep European origination network to be able to invest behind where a lot of that innovation is going to come.
We were just showing actually some newsletter coming out of our European colleagues, Mark Bergen, who's writing about how this glimmer of hope is on the returns that are yet to be born in Europe for the VC community, for the P community.
What needs to get done here in terms of actually starting to see IPOs.
For darlings like Revolute or actual exits. Is it going to be actually your kind of companies that help foster.
The M and A side of things.
Yeah, we'd be very like we're here in Europe and we think the capital base that we've got to be able to invest in the businesses that are really growing and really building the next generation of innovators and disruptors
in Europe, that's a very fine thing to be. There will be plenty of capital now from US and folks who look like us in the private markets and the piper up markets really do need to come around again in Europe and kind of open the way that they are opening in the US pretty successfully now as well. But there will be we think, with what we have like plenty of private capital will be able to pick up those companies at the same time.
Brian Ruder, Permira, co managing partner CO ce a great feel together here in San Francisco, Thank you very much.
So.
Coming up, the CEO of HPE Antonia and Nary Joins US discussed the company's earnings and what it expects to see a reduced impact from tariffs US. Next, this is Bloomberg Technology.
Yet more announcements of investment in the US by big data center players. This one Amazon coming out saying they're going to be investing ten million dollars in North Carolina. At the moment, it's expanding its AI infrastructure, creating we understand about five hundred new high school jobs. What's interesting though, ed here is the commitment to reskilling the training, the education programs, the fact that they want to be really
bringing about more engineers in particular. That is what a lot of people have been worried about this move to generator. AI moved to manufacturing, whereas the skill base his Amazon committing ten billion dollars a lot of AI hardware and infrastructure, but with that some support for skills as well.
Ed.
Yes, we're thinking about where their data centers are on the East coast and southeast coast particular of this country.
Okay.
HPE says tariffs will have a smaller than expected impact on sales this year. AI revenue also beat and assessmates, but the company continues to face headwinds, and that includes an activist investor. HPE CEO Anthony Andery joins us. Now, I find what you said about tariffs and how that's reflected in the numbers so interesting because the hyperscalers, for example, told us that one reason capital expenditures were raised in that period is the reflection of the higher cost of
doing business because of tariffs. For you, it's like almost the opposite story.
Yeah, good morning, Ed, thanks for having me. Look, we'll raise our guide thence for a number of factors. Number one, because of all the work we have done throughout a very diversified supply chain, we find ways to mitigate the tariffs obviously the USMCA plays a role in that. But at the same time, we know we are performing better in many of our businesses and we have had a number of targeted actions to continue to mitigate any impact from the tariff.
And that's us today as we know it.
But the reality is that the original impact we communicated at the earnest call in Q one now is significant lesser, and therefore, together with the cost actions, together with the better performance of the business and the lesser impact on tariff, we raise the bottom range of our guide by eight cents.
And Sony, is it possible for you to quantify for us the sort of sales channel impact that you provide from video? So we talk endlessly about all of the projects domestic and overseas, and videos involved in the great buildout. It's you know so well, and I spend hours tearing servers apart. Nothing happens without HPE and others assembling the designs. I just want a number on it, that's the thing.
Yeah, Well, hard.
To put a numbered because you know, many of these buildouts are happening as we speak, and it takes a little bit of time to go from an agreement with a customer working with US and Nvidia to building a deploying it and then eventually put it in production. But I can tell you, look, we are have a deep, long standing relationship with Nvidia. We are covering all segments of the market where it's these big large buildouts in the service provider space, whether it's.
Sovereign or enterprise.
And one of the things I'm really proud is that the work we put together with Nvidia LA last year when we announced the Nvidia competing by HP and a private cloud, AI is growing very rapidly. In fact, one third of the new orders we booked in Q and Q two were from enterprise. But at the same time, we are completing one of the largest deployments on the GB two hundred as we speak, and that's a very large deployment.
And then we said.
That our backlog grew quarter over quarter now is three point two billion dollars on a commulative basis.
For the last two.
Years, we booked over nine billion dollars and we have a multiples of the backlog in our pipeline.
That one billion attributed to AI in particular is good, but it's not as much as Dell, for example. I hate to put it so on the nose in that way, Antonio, But how much is perhaps Elliott on your board or others around you sort of saying, look, capitalize on AI even more.
Yeah, now there has nothing to do. Look, the previous quore that we book ourselves a very large order, which is the one we are deploying today, and that was not the all didn't do that. So this is a lumping business and you will see us also talking about some of the large orders as we may get in the current quarter of subsequent quarter. So you know this
goes back and forth. But ultimately you have to play with discipline and our goal is to grow in the eye and the rest of the business with a capital structure that works because the reality is that there is revenue growth, then there is profit accretion, and then is working capital. And the working capital is something you have to watch very very closely because the timing from winning a deal to the time of revenue recognition in these large deals can be long and therefore you impact cash
flow from operation. So we're trying to balance all of that while we delivering our commitments from the revenue growth and on the EPs.
Growth, well, you delivered in terms of six percent revenue growth on the quarter. We appreciate it, Antonio andry Hpeco for joining us.
The enterprise gets a lot of attention when it comes to AI option, but consumer technology is poised to be upended by AI as well. At least that's according to today's VC Spotlight guests. Ambudetski, a partner at Nea and Nan joins us now on set San Francisco. I mean, like, you know, chat GPT is the easiest example, the lowest hanging fruit. You know, the user base is all of us going on our iOS based app saying oh sorry or thank your police. Could I ask this question? Crashing
the GPUs? But I think that's kind of what you're looking for in your thesis, right, the next version of that.
Well, thank you so much for having me on. And you're exactly right. We're at the beginning of an incredible new consumer AI renaissance if you think about it, We're now in the third subwave of the AI super cycle. Twenty twenty three gave us large language models, twenty twenty four gave us multimodel the ability to generate voice video images, and twenty twenty five is now the year of agentic capabilities and applications. Incredibly exciting time to build the new
generation of consumer category creating companies. If we look back companies like Uber, Spotify, Netflix, we cannot imagine living without these consumer products today, and we're at the beginning of a new wave of consumer applications today.
I don't know about carry, but I feel like the stories we're covering this domain a largely early stage companies. They are moving so fast.
Yes, we are early, but what's really exciting right now is how quickly consumers are adopting AI tools AI applications. The stats are absolutely remarkable. We're seeing faster consumer adoption than any of their prior tech waves. If you look at it today, eighty percent of consumers already use zero click search AI search for over forty percent of their searches.
And gen Z, which is always the tip of the sphere for new consumer products, ninety three percent of gen Z knowledge workers are using two or more AI tools every single day. So consumers are experimenting, They're hungry for new tools, and they want more.
Who isn't adopting fast enough?
I mean, is there Sometimes there's a handring element that maybe.
This agenda divide as well. Is that something a seatbone out and someone will take to research.
Yeah, we're starting to see more research reports and consumer adoption. One of the interesting disparities is that if you look at mainstream US consumers, only twenty seven percent of US consumers are using AI tools regularly versus let's say seventy nine percent among AI experts, really the people who are
building and working in Silicon Valley today. So there's an interesting trust and awareness gap that still exists, and that creates the perfect opportunity for consumer product companies to come along MA CAI useful, MAKEI really relevant in people's everyday lives. You know, they may not even know it's AI behind the scenes. They're just going to be incredible new consumer products, and they have to be trusted brands. Trust is a really important element in building consume AA products.
I mean, Apple is a trusted brand and it seems to be being really slow and it's getting and it's getting stooled in China. My regulate it is how much do you need the juggnal of Apple and indeed Google and Android to push through generative A on I day and then you get more eleven labs twelve labs companies that you'll you're backing to build into.
That well, I think those companies are incredible distribution partners and their investment in the AI ecosystem, the infrastructure, the GPUs, the model capabilities is really important. But ultimately startups are always the best position to take risks, to innovate, create magical new products that people love, and I think it's incumbent on these large players to find the right partners in the startup ecosystem really quick.
I wanted to get your reaction to Johnny I've io and open AI because the bigger picture question is is there a world beyond the smartphone interaction or PC interaction in form factors When you look for a company they're developing for I don't even know what.
Well, so far we have not needed a new device for hundreds of millions of consumers right to try these new AI tools. But the interesting thing is, I think the desire for an AI native and many companies have it. Not just OPENINGI is also a signal that we want a more open ecosystem, one where developers can freely build AI native applications that connect to our devices. So will there be new AI native devices whether it's eyewear or
you know something on your lapel that that didn't work. Yeah, well we'll see them very very soon.
And it's great to have you here, great to have her in the studio and Petski partner at Nea. All things consume AI. Well, that does it for this edition of Bloombag Technology, though ed. But we've got some big conversations have today.
Yeah, tune in tonight as the Tech Summit kicks off in San Francisco, first with a conversation with Alphabet CEO cinderpitch Ie, and we'll be on the road tomorrow for a special edition of Bloomberg Technology Live from the Summit. Don't forget the podcast from San Francisco. This is Bloomberg Technology.