Chapter 1: What is the main topic discussed in this episode?
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Bloomberg Audio Studios. Podcasts. Radio. News. Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Lovelow in San Francisco.
This is Bloomberg Tech coming up. Nvidia invests an additional $2 billion in CoreWeave, expanding their partnership to accelerate the build-out of AI factories. Plus, IonQ continues its acquisition spree as the quantum company buys chipmaker Skywater Technology in a cash-to-stock deal worth $1.8 billion.
And gearing up for big tech earnings, Meta, Microsoft, Tesla and Apple all set to report earnings throughout the week. We have the preview. And the markets are up ahead of those all-important earnings tests. We want to see whether there's vindication, whether revenue and the profit lives up to some mighty valuations, particularly in the AI space.
But we're up for a full straight day on the Nasdaq 100, longest winning streak since back in December when we had a five-day run heading in to the Christmas period. So there is optimism, but not if you look at the US dollar, not if you're seeing the search for safety in gold. But we stick to our knitting here in tech. And what have you got, Ed?
We've got a deal and it's for Nvidia to invest an additional $2 billion into CoreWeave. They're going to buy CoreWeave's common stock at $87.20 a share. There is a technology sharing part of this, but the bigger picture is to accelerate the build out of capacity. Bloomberg last night speaking on the phone with the CEOs of both companies, Bloomberg's Ian King,
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Chapter 2: What is Nvidia's recent investment in CoreWeave about?
How important is it that yet another company is building their own AI chips?
Well, for Microsoft, it's really important. They got a bit later jump than their biggest rivals, Amazon and Google, in building their own silicon. They see this as an important way to reduce costs, to find another source of availability. So this is going to be a really big test for their chips unit and for their cloud business.
We write in our Bloomberg story that it could eventually provide an alternative to Nvidia's hardware. But the reality is, like all the other hyperscalers, Microsoft still depends on Nvidia. Just explain its scale of its compute and what it does rely on Nvidia for.
Chapter 3: How is IonQ expanding its operations with the acquisition of SkyWater Technology?
So NVIDIA is the workhorse that powers the vast, vast majority of the AI workloads in Microsoft's data centers. If you're using OpenAI as a ChatGPT consumer, chances are you're pinging an NVIDIA chip running in some Microsoft data center somewhere.
Now, like everybody in the industry, Microsoft would love to have some other options, hence this effort with Maya to try to build a better mousetrap, one more suited for their data centers and one that ideally could reduce some of their costs in the long term.
Tell us how it's rolling out, where it's rolling out first, and ultimately when customers are going to be using it.
So it's not clear when customers are going to get their hands on this. The first units are live today, Microsoft tells us, in data centers near Des Moines, Iowa. More are coming to the Phoenix area. But we don't have a date yet for what a wider rollout looks like or sort of crucially what availability looks like.
Chapter 4: What are the implications of big tech earnings reports this week?
Is this going to be a global rollout? Is this more of a kind of R&D step? And future chips are going to sort of carry the mail for them. So it's kind of yet to be seen how broad they take this one.
I'm with Matt Day out of Seattle with the latest on Microsoft's latest AI chip efforts. Let's talk through the market reaction to all of this with Kim Forrest, CIO and founder of Boca Capital Partners. And go back to the Nvidia Corweave deal. You know, it's a driver in markets this morning.
The explanation from Nvidia CEO Jensen Wang is that it is not circular financing because it is a small portion of Corweave's overall capital requirements. Are you concerned about that? And what do you make of his response?
Sure. Well, of course, it's circular financing. CoreWeave, as well as everybody else, even Microsoft, is a big customer of NVIDIA's. So if NVIDIA is investing in its customers, by definition, it's circular financing. It is a good point that $2 billion is probably a rounding error for NVIDIA at this point. But it's also true that CoreWeave has to prove itself to the market and raise its own money.
Kim, we're saying circular financing, the term, as a bad word, a bad phrase, is it?
Yeah, kind of. Jensen points out that CoreWeave is going to be one of their reference accounts. What you ideally want in a reference account is somebody that has worked with you, is kind of pure, and has no inside kind of relationship with what they're recommending other than they use the product, they love the product.
And this kind of sullies the relationship that CoreWeave has so much investment from the company that they're giving a reference for.
Meanwhile, many would say it's just because we cannot build compute fast enough. And in many ways, NVIDIA, more than anyone, sees the opportunity. And it's just piling money behind this to be able to get the end demand that it needs for the products that it's currently building, Kim.
Are we likely to see through these sorts of technological partnerships as well as financial partnerships actually us get the compute out at the time of speed that we need?
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Chapter 5: How is Nvidia's investment perceived in terms of financing?
But, you know, just be warned that this is not, trees don't grow, you know, well, trees grow into the sky, but not forever. We'll put it that way.
Well, they're not going into the sky today for Intel and AMD because both are under pressure that maybe here's Jensen coming for their piece of the pie, the CPU part of the pie that everyone was very excited for them. Indeed, Intel of late in the run up in their stock. Does Vera brand the CPU on its own prove that it's a key competitive to them too?
Well, I think at first it's going to work in its own environment and it may become a competitor, sure. I mean, I think the takeaway from all these announcements over the last, I don't know, 48 hours is that everybody's innovating and that is excellent. I love competition. I'm a capitalist, innovate, try to out-compete, do it, live that way.
But the fact of the matter is the CPUs that are the workhorses in just plain old cloud computing aren't necessarily going to be interesting or aren't necessarily going to look to NVIDIA. NVIDIA loves the highest price product. That's what it does. And I'm sorry, the workhorse people need reliability. They need it to look the same across their platform.
They need a lot of stuff that a new CPU chip isn't necessarily going to be interesting to them. Now, in the world of AI data centers, sure. But in the old fashioned ones that are going to have to persevere for decades, I don't know that that's really a competitor, NVIDIA.
That's an interesting observation because the GPUs in the AI context are ARM-based. And so if you're running those GPUs with x86, you're going to have to do some special software work to make them match. Let's put that to one side. It is a massive week in the world of technology from earnings alone. We also have a Fed meeting on Wednesday.
Of those names that are reporting this week, what are you most concerned about and what do we need to be looking for in the earnings context?
Well, you know, how are things looking in the future? I don't really even care about how things looked for last quarter, I have to tell you. I'm looking for the next six months. And I think especially on more consumer-leaning things like Apple, that might be, you know, the focal point for all investors is what new products are driving, you know,
consumers to the company and are they meeting demand? That whole thing about how in demand are consumer items. Microsoft has a little special issue. I think there's a lot of concern that AI, maybe Claude, is going to replace a lot of software packages that make businesses run. I don't know how true that is, but I think we're going to get a glimpse into how popular or
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Chapter 6: Is the current AI investment landscape sustainable or a bubble?
The pressure's building on Grok, ex-AI and Elon Musk's AI chatbot. The European Union says it's probing X over concerns that it didn't prevent its chatbot from generating deepfake images that, quote, may amount to child sexual abuse material. Bloomberg's London-based tech editor, Olivia Solon, joins us. Olivia, what's the need to know here from the EU probe side of this?
Well, it's another day, another investigation into X from the EU. This time, yeah, it was about whether or not they did, X did a sufficient risk assessment to prevent harmful outputs from grok before deploying it across the EU. This is a legal requirement under the Digital Services Act, which is a kind of
set of rules around um illegal and harmful content um and so yeah it's a there's quite a long list of investigations of x at the moment within the eu but um this certainly adds to it i mean you mentioned france has also been looking into it ofcom in the uk where you sit india but olivia x's response is they've taken the necessary steps in some way of course it's a unit of xai and this again builds tensions between the us and the eu in some government manner
Right. I mean, this has been a bit of a flashpoint in the sort of debate over free speech and control over big tech between D.C. and Europe. Clearly, I've been kind of checking to see if there's been a response so far from either Elon Musk or J.D. Vance or Trump on this particular announcement. So far, I haven't seen anything, but I'm sure it'll be something that will come up in the coming days.
Yeah, the Trump administration has been very critical of this of the EU in trying to police content on these platforms.
We just showed X's statement, but it was a previous statement on how they go about removing illegal content, including child sexual abuse material. Very quick, 15 seconds of it. Does the EU probe have teeth?
It does. I mean, they can fine as much as 6% of global annual revenue if it's found to be in violation of the DSA.
And already they are on the heels of a separate 120 million euro EU penalty coming X's way. Previously, Bloomberg's Olivia Solon breaking all down. We thank you so much. Coming up, defence stocks. They're on the higher side. In fact, they soared as governments ramp up spending on heightened geopolitical tensions. More on that next.
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Chapter 7: What new developments are emerging in AI chip technology?
This is Bloomberg Tech. Welcome back to Bloomberg Tech. We're halfway through the show, and it's a big week in the world of technology when it comes to earnings. Tesla, which reports on Wednesday, is currently the laggard down 2%, but it's a bit of a calendar to track. Now, Apple's the most interesting, up almost 3%. Actually, it's on track for its biggest jump since October.
People have been passing the third-party data. There are lots of analysts out there that have said, buy the recent dip because it might be better in China than we first thought when it comes to Apple. Of course, You move past that moment in time, Caro, that is earnings, particularly the quarter gone, and people want to know what's happening with Siri, what's happening with the AI version of Siri.
Mark Gurman's done a lot of reporting on that, of course, but until the company says something material, that's still what the hopes and expectations of the street rest in. What are you looking at?
Chapter 8: How does Microsoft's second generation AI chip impact the market?
It's an alphabet story too, isn't it? But I'm going to pivot away from the earnings story just for a moment, Ed, because we've got to talk about geopolitical tensions. We have seen the effect it's had on defence stocks. They soared. In fact, the sector gained nearly 44% you've seen in the last one year basis.
Military contractors are cashing in as governments ramp up the spending on fighter jets, yes, on missiles, but also tech areas, drones. And some investors really say that the rally is just getting started. Here with more is Bloomberg Equities reporter. Avelis Bonilla-Ramos. And Avelis, is this sustainable?
What are we expecting in terms of revenue growth, profitable growth, fundamental growth on these earnings?
Sure, Caroline. Thanks so much for having me. And yes, political developments are definitely a major driver of this sentiment. You know, the rally is driven by expectations that the sustained increases and global defense spending, this geopolitical instability, shifting alliances, ongoing conflicts are going to sort of like
know boost more this rally and continue this rally and then these earnings this week are going to be really a test to what can actually happen um and you know the aerospace and defense stocks index um is rising or rose about 42 percent last year uh you know pacing a little bit of the broader market analysts are concerned about certain things you know these stocks are um
in the political crosshairs, just to put it that way. Definitely. And then the other concern is, yeah, sorry.
Let's do a bit more on the political crosshairs. When Caroline and I were in Las Vegas for CES, the president on True Social was very clear ahead of an executive order that he wasn't happy about defense company compensation, the compensation of the CEOs, the head of these primes, because they weren't delivering. That seems incongruous with the massive run-up in those stocks.
Sure. I mean, the investor confidence right now, and that's very interesting, but the investor confidence right now in Momentum is sort of like these companies are growing a little bit faster than what they... the sort of like classic thought about or behind this defense stocks usually is or was. Because a lot of these companies are moving into the technology play.
There's a lot, you know, modern warfare is increasing. There's more reliance on drones, on AI, on advanced sensors, software, missile defense systems. So once all these companies are sort of like tapping into that, investors continue to be a little bit more positive on this side.
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