Chapter 1: What is the main topic discussed in this episode?
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Bloomberg Tech is live from coast to coast. with Caroline Hyde in New York and Ed Ludlow in San Francisco.
This is Bloomberg Tech live from Washington. Coming up, ARM announces plans to sell its own chips for the first time with Meta as the first major customer.
Plus, space stocks on the move after reports that SpaceX aims to file a prospectus for an IPO as soon as this week.
And Kleiner Perkins makes its largest raise ever. $3.5 billion we'll discuss next with partner Ilya Fushman.
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Chapter 2: What are the latest developments in SpaceX's IPO plans?
And real demand at a time of real market volatility. And big deals being done. Is that still buttoned up? Of course, it was only recently that SpaceX consumed XAI.
Indeed, it wasn't only very recently. And that's a business that has a huge cash burn attached to it, but it doesn't seem to have dented any enthusiasm for this IPO. You've really got a situation where institutions are looking at SpaceX as a monopoly and the retail component are looking at it as master Elon strikes again. Of course, they're going to want to get into this.
He's made spectacular returns for his investors over the past 20 years. We're just showing a chart, Kyle, that is the kind of anticipated IPOs, and the valuation of SpaceX is like 1.75 trillion. It's worth reminding the audience that post-merger SpaceX XAI, that private market transaction valued the company, the combined entity, at 1.25 trillion. This is big. There's a lot at stake here, right?
There's a reason that all of these space and SpaceX adjacent stocks are pushing higher.
Chapter 3: What impact does the current market volatility have on technology stocks?
This is one that the world wants to get in on, and there are a long list of creme de la creme investors that are already on the cap table. Just go over the basics of what we know of the existing backing that SpaceX has. I mean, the existing backing includes people, Blue Chip funds like the likes of Fidelity.
You have dedicated space infrastructure or telecom infrastructure like Echo Star is in there. Google is in there. Bank of America is in there. Given the amount of fundraising that's happened and how long SpaceX has been private, there's been a very long tail of people who've wanted to get into this. And that's going to raise real questions over how they're going to get out of it.
Typically, an IPO doesn't allow much in the way of individual investors to sell their shares. Given how long some of these people have been locked up, there may be more of a push to do that sooner than the typical 12-month lockup period.
It is going to be one for the record books. Bloomberg's Kyle Porter, we so appreciate your reporting on it. Look, let's go to a publicly traded name already that has some big moves today. We're watching Arm. That's after the company announced plans to sell its own chips for the first time, not just design them, not just license the technology.
Arm CEO Rene Haas sat down with Bloomberg Tech Europe's Tom McKenzie.
It is a very big day for Arm, there's no doubt about that. We've been an IP provider since we started. We started selling compute subsystems a few years ago, which was sort of the next step, but it's not a physical thing.
But as we grew into the CSS business, we had customers that kept asking for more and more and more, and here we are today with Arm's first chip product, the Arm AGI CPU, which Meta is our lead partner for, and Meta asked us to do it with them, so we did. Talk to me about Meta and the partnership then. One of your customers, OpenAI, also a customer.
What are the commitments from Meta, from OpenAI to take this chip on board? When do you start shipping? So as Mohamed said, it's available now. And we'll start shipping at the end of this year.
We're not saying anything publicly about the volumes associated with it, but they are material enough that we have to start talking about the product because it's going to start showing up on our revenue this year. The revenue starts showing up this year.
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Chapter 4: How does AI influence the future of defense technology?
It is halftime in the program. This is Bloomberg Tech. Welcome back to Bloomberg Tech. This is what financial markets look like. Technology stocks in particular pushing higher, oil coming down a little bit. The market is weighing up the prospects of a ceasefire, of a plan towards peace in the context of the war in Iran. America has put out some proposals.
What we've seen throughout the morning is lines principally via Iran's state television pushing back actually on their interest in engaging with the U.S., but At least in the technology sector, we haven't seen the NASDAQ 100 or the Philadelphia Semiconductor Index change directory. You still see Brent crude. That's the global benchmark for oil.
Hold above $100 a barrel and a lot of focus on supply chain, particularly the passage of ships through the Strait of Hormuz in the context of energy, but other things as well. That's what we've been talking about for 24 hours straight.
It is because we've been talking about how technology intertwines with defense and how it all aligns here in Washington. We were at the Hill and Valley Forum, Ed, and it held a spotlight really on defense tech in the age of AI. But NSIB data shows just how early that shift still is.
While Pentagon spending on defense tech has more than doubled from about $1.8 billion in fiscal year 2023 to $4.3 billion for fiscal year 2025, it still makes up, get this, less than 1%. total contract dollars. Here to discuss more on this is Rachel Hoff, policy director at the Ronald Reagan Institute, which issued the report. And it's stark warnings, basically.
You not only highlight how little in the grand scheme of things money is going to defense tech for all the amount that we talk about it, but you also try and outline ways in which it could be adopted faster. First and foremost, why do we get so much excitement about defense tech? Why is the VC community pouring in money when the end client isn't putting money in as much?
Well, it's a great question. And I think you got to look at, you know, not just the end client, but the threat environment, the world that you were just speaking about, in which that client is operating. And simply put, it's a dangerous world. It's getting more complex and complicated as we see tension on the rise, as we see conflicts. erupting in different corners of the world.
And that means that protecting American national security is good business and it's important business. And so we're seeing those private dollars flow, that private capital from the venture capital community. But those investors are going to need to see the public dollars line up in terms of Pentagon spending if it's going to continue and if they're going to continue to take that risk.
I mean, the reporting that Ed and team and women continue doing, Andril now looking at an overall market cap of $61 billion, raising another $4 billion. And yet we're just talking that less than that is how much has been directed towards defense tech from the Pentagon. What are your policy prescriptives to get the government even more comfortable with aligning that money?
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Chapter 5: What are the implications of SpaceX's IPO for the space industry?
Aircraft carriers moving into the region are an important part of projecting American strength. But the fact that only one weapon system, the Lucas droneā is being used in Operation Epic Fury that's been developed in the last 15 years. Only one system in this operation that's less than 15 years old really shows how we need to keep up to meet those challenges that you're speaking to.
The word procurement comes up quite a lot when you're somewhere like Hill and Valley Forum and there's a bit of an exasperation from industry about how that works. PowerPoint presentations is something that they stress over. Is this administration better than prior administrations and this Pentagon better than prior iterations of it at dealing with more nimble, smaller technology companies?
Well, politics aside, at the Reagan Institute, we've developed a report card to look at exactly this, and we've seen improvements in some grades that matter in this defense innovation ecosystem over time, and we've seen some grades moving in the other direction.
But the biggest year-on-year jump that we've ever seen, the biggest improvement in grade, is something we call customer clarity, that demand signal that the government's signaling to private sector partners. And we see that not just through...
spending and acquisition pathways, but some of the reforms that this administration has pursued, the acquisition transformation strategy, streamlining technology priorities. They've said a fewer number of technologies are important and then sent that signal to private sector partners in terms of what the administration wants to focus on.
And from what we hear from those private sector partners, that's helping them align to national security priorities.
I want to talk about talent for a And his point was talent is a real issue. And that's why in many ways they've got this novel way of training people up because there's a huge retirement block that's about to come.
You said the average age of a worker in that industry was 65. Yeah. Or something like that. And not everyone works until the president's age. It's a generational thing in the school. Sorry, Carrie.
No, but what's so great about your national security, basically an innovation-based report card, is it reads like a school report. And you're saying talent base, D plus in America. Yeah. Do we need more? Look, I sit as a British person who, luckily enough, works in America.
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Chapter 6: How is ARM planning to sell its own chips with Meta as a customer?
But as viral apps do sometimes, kind of user activity on that app seemed to die down in recent months. And remember that producing videos, especially AI videos, it's an expensive business. It can cost... a lot more to produce even a 10-second video clip than it does a paragraph of text in a chatbot.
So you have to think about the cost-benefit ratio for a company like OpenAI when it's facing stiff competition from Anthropic on enterprise, when it's facing stronger Google Gemini models. Is it the right decision to go all in on video when there's limited compute, limited resources, I think is probably the question the company was thinking.
Now, the dynamics with Disney, I think there's going to probably be more about this story. We're going to look into exactly what happened there more, but I think that we're seeing this pushback on video front from a major lab is very significant.
And it really does seem part of this broader strategy shift, honing in on where to win, that Fujisimo is really bringing over OpenAI as well. Bluemose, Shireen Ghaffari, great reporting as always. Thanks so much for bringing it to us. And look, we've got to talk a little bit more, Ed, about what all this means for Disney. Because what a first week for Josh Damara at the moment.
Like the unraveling of the Sora deal that many people thought would be the next experience we were going to get with Disney Plus and the like. And now also there's issues with Epic Games.
So Josh DeMauro became CEO last Wednesday, the 18th, at the annual shareholder meeting. He's seven days in. And Disney put money into this open AI relationship. It was supposed to yield things. They also have an investment in Epic Games, video game maker, a company that's doing big layoffs. So hard start to that tenure.
Welcome to the role of CEO, it would feel like. Well, that does it for this extraordinary edition of Bloomberg Tech right here from the heart.
Yeah, lots to recap on tech and politics. Do it on the podcast. You know where to find it. Online, Apple, Spotify, and iHeart. From Washington, D.C., this is Bloomberg. I'm Carol Masser. And I'm Tim Stenevek, inviting you to join us for the Bloomberg Businessweek Daily Podcast.
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