Anthropic in Talks to Buy Startup Decart for $6 Billion

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1:02Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's check in with Ed Ludlow. He is host of Bloomberg Tech. He's based out there in San Francisco. Ed, we got Anthropic. Now, when we talk about Anthropic, a lot of folks are saying, I'm going to wait and see this IPO perspectives because this could be very interesting. But they're not waiting. They're out there doing some business.

1:40Anthropics, they're going to be buying an AI startup here. Talk to us about that.

1:44Ed Ludlow:Yeah, this is a startup called DCart, an Israeli startup that does two things. They work on world models, world models, literally AI models that try to understand the world, more rooted in real world physics. They're trained on things like video data. It's beyond text. But the second thing that they do is have a software platform that makes chips better at running AI, optimizing basically. And it seems like based on our reporting, that's the bit Anthropik's interested in. So it's a$6 billion deal we're reporting, citing sources. We don't know the structure of the deal. But in the context of what you just said, it would be Anthropic's biggest acquisition to date.

2:26Ed Ludlow:And with an IPO right around the corner, you know, it's interesting timing. But it kind of speaks to the operational or technical challenges that Anthropic still has. Is this out of the ordinary, though, for Anthropic, though? Because they really make these big acquisitions. This is a big one. I mean, but they've been really spending heavily, you know, computing power. They want to develop new products. Yeah, I don't know. Six billion dollars doesn't seem very big to me when you think about the balance sheet. I mean, the way that I look at it is Anthropics raised even this year, you know, north of 100 billion dollars.

3:00Ed Ludlow:And most of that sits on its balance sheet, you know, and in, you know, even the money it raised prior to this year probably still sits on its balance sheet. And we are seeing valuations of very specific niches that some of these startups occupy be at that level, be high. There is a lot of activity. And the frontier labs, the hyperscalers have used M &A to acquire those specialisms. In this case, DCARTS is that software to optimize the stack and make the chip run better. Ed, do we know anything more about a potential IPO of Anthropic, the timing thereof? I mean, we're just we're mentioning SpaceX is now back above its IPO price.

3:45Presumably that that bodes well for the tech IPO space. But anything on timing?

3:49Ed Ludlow:Yeah, I mean, the Bloomberg reporting is still that it's this fall. I mean, with respect, as a British person who's lived in the States for almost a decade, I still have no idea what the fall actually means. It seems an unspecified and infinite period of time. But that's what we've reported. I think, you know, late September or early October is what we had previously reported. And so it's kind of full steam ahead. And you make a really interesting point, which is, you know, I think I reported this at the time, right? Once the SpaceX prospectus hit, OpenAI and Anthropic had a good chance to read it and decide what to do.

4:24Ed Ludlow:And, you know, whatever their psychology was behind closed doors, ultimately they both filed confidentially with the SEC. and SpaceX, you know, was a led the way in that respect. And I'm going to stick with SpaceX since you mentioned it. There was talk that actually Descartes could be acquired by SpaceX, but Elon Musk said it's not true, fake news, not happening. So why would that company be of appeal to SpaceX? Well, perfect summary. There were reports that SpaceX had wanted to offer similarly$6 billion. dollars. I think the report was that it was an all-stock proposal. And Elon Musk said that it was fake news, as you said.

5:03Ed Ludlow:Same logic as Anthropic, with the greatest respect to DCart. And again, this is all Bloomberg's reporting, right? Anthropic has not confirmed this acquisition nor DCart. But their work in world models is interesting. It's not unique. There are others working in world models. The property that folks are interested in is that software that just makes the chips better from an economics perspective and operationally running AI models. And in a world where the economics of leasing out compute capacity, running your own models on your own compute capacity is so important, and there is a supply constraint, there is not enough compute to meet the demand for running AI models, that would make that software particularly interesting.

5:50Ed Ludlow:And it kind of goes back to your question on the valuation, right, and the$6 billion scale of the deal. Ed, cost of using AI, the token cost, users were here seeing stories that CFOs and managers are saying, whoa, whoa, whoa, whoa, what are you using AI for? What am I paying for? What do we know about just the user cost experience? Yeah, so there are two different parts to that. The cost of running a model is measured on a dollar per million input tokens and a dollar per million output tokens basis. And so when we get releases from, say, like Kimi K3 from China, one of the reasons that was such a big news story is that it was a high performance model, highly capable, but it was priced quite reasonably against how the absolute top U.S.

6:41Ed Ludlow:models were priced. A token spend is a budgeting issue that basically technology companies around the country, some of them have got wrong. So if you're the CFO, you have to assign a budget, right? How much money are you going to allow your engineers to spend to run AI models? And because some of these companies have consumption basis arrangements with the Frontier Labs, a customer of Anthropoc OpenAI is consumption based, they just burn through them. And then you have to go to the CFO and go, oh, actually, you know, I said I'd spend 10. I spent 100. And then you're in trouble. Stay with us. More from Bloomberg Intelligence coming up after this.

7:21Looking for more investing options? Meet SIBO, the exchange that pioneered options trading. With exclusive trading products like VIX and SPX options, SIBO can help you trade in any market environment. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers. Bloomberg Green returns to New York during Climate Week, September 22nd and 23rd, bringing together industry leaders, policymakers, and climate innovators to explore solutions for a more resilient, future-ready world. Powered by Bloomberg's trusted journalism and data-driven insights, discover how climate is reshaping business, technology, policy, and the economy.

7:58Presenting sponsor, Hitachi Energy, official airline, Alaska and Hawaiian Airlines. Learn more at BloombergLive.com slash GreenNY Radio. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's break down the numbers from Cisco, what it means for the tech space. Wu Jin-ho, Senior Technology Analyst for Bloomberg Intelligence. He's based down there on our Princeton campus. Wu, talk to us about Cisco. What did we learn with their earnings results?

8:35Yeah. Hey, Paul. So Cisco results, I mean, they're quite frankly, to put it in a nutshell, sales are white hot, right? AI close to doubling in fiscal 2027 based on their guidance. And then their core networking business, which is the basic stuff that connects all of our computers, that's going to grow at a fair double-digit pace as well. So from a demand standpoint, it's great. Cisco is the only name that's red on my screen today on the terminal. And I think people are a little bit spooked on the gross margin side for the rest of the year. So were investors' hopes just too high, or maybe was Cisco just too conservative?

9:17I mean, what's your take? So from a revenue standpoint, I don't think it was too high, Lisa. Quite frankly, I'm pretty pleased with the results because we all knew that AI was going to be strong, and then the core networking continues to outperform. But that's the issue right there, right? you have a higher hardware mix and hardware in the face of a memory inflation is going to put a drag on gross margins. You know, the head fake here was at the fourth quarter gross margins was at 66 percent. First quarter guidance was at 66 percent. And all of a sudden it looks like it's going to be closer to 64 to 65 percent in quarters to quarters four.

9:57But at the end of the day, I think it's going to be a temporary impact. And gross margins should start to improve if we look past 27. So what are the pressures on the gross margin here? Where's that coming from? The cost side? Yeah. So, you know, just to pinpoint where the gross margin pressures are, you know, they did implement some pricing increases in 2026. And that kind of diminishes going into the second half of the year. At the same time, I don't know if those future cost increases are going to keep pace with the memory increases. That's one. And number two, at the end of the day, they're selling a boatload of hardware.

10:42And we all know that hardware margins aren't as good as software margins. Now, I will tell you, Paul, there is some software attached related to their hardware products. but those are more on a recurring basis and not on a perpetual basis. So it will take several quarters for the software margins to catch up. So is this restructuring to kind of move toward AI? Is it the right move because it's putting them in a lot of competition? You have Broadcom, you have Hewlett Packard Enterprise. Is it the right move for the company? Well, quite frankly, Lisa, I view Cisco as one of the Goldilocks of AI.

11:19It's like you don't have too much AI and you don't have too little AI. It's just right. It's just right. So you're actually getting a fair amount of growth from AI, right? At the end of the day, like I said, the AI business is doubling. The optical business is probably going to continue to grow through 2028 and into 2030, quite frankly. And even though it might be a modest drag on gross margin over the long term, you're getting it up on better scale, right? From a competition standpoint, and you make a good point, they do have the Silicon One product that goes head-to-head to someone like Broadcom.

11:54But quite frankly, some of the hyperscalers are looking for an alternative to someone like an NVIDIA or Broadcom. And Cisco is one of the few companies that can offer that. They have the chip capacity to give it to the cloud providers. So they might be in the sweet spot of picking up a little bit of share, not too much, but a little bit of share from the bigger Silicon players. So, you know, most of the big tech companies have reported, but we're still waiting for NVIDIA and a couple others. What's the narrative, or has the narrative changed on AI, the spend, the return? Where are we on that narrative right now, Uj, when you talk to investors?

12:28Look, I mean, if we look at Supermicro results yesterday, and also some of the other smaller pick-and-shovel guys, like Lumentum and Coherum the other day, I mean, the spending on the cloud is really, really starting to ramp up, right? We're still in, like, I would say the third inning, and 2027 is going to be the ramp-up phase as well as into 2028 as these AI infrastructure build-outs continue to keep pace. Now, where it hasn't really started to pick up and Cisco has started to see it is on the corporate IT side, and that's going to be a positive read-through for someone like Adele or HPE, which reports later in the month and early in September.

13:10Hey, Woojin, got to ask, too, at the same point, like we've been hearing a lot about the AI space and what's been going on there as well. But when we start hearing about new clients, are they getting anyone anywhere, let's say, new, or what's on the horizon for the company? Yeah, so look, the sovereign space as well as the neocloud space is still relatively new for someone like Cisco, right? But again, I do think that they fulfill the sweet spot where, given their enterprise expertise, they could play a very good middleman for the neocloud guys who need a little bit more, as well as the sovereigns, who need a lot more hand-holding than someone like, let's just say, a Foxconn can provide.

13:53Stay with us. More from Bloomberg Intelligence coming up after this. The Big Take podcast from Bloomberg News keeps you on top of the biggest stories of the day. My fellow Americans, this is Liberation Day. Stories that move markets. Chair Powell opened the door to this first interest rate cut. Impact politics. Change businesses. This is a really stunning development for the AI world and how you think about your bottom line. Listen to The Big Take from Bloomberg News every weekday afternoon on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. You're listening to the Bloomberg Intelligence Podcast.

14:36Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's stay in the world of technology. We can do that. And I want to talk to Anurag Rana. He's a senior tech analyst for Bloomberg Intelligence. questions um apple is going to bring in a foldable phone two thousand dollars i don't know i'm not a foldable phone i don't know andrew anurag thanks so much for joining us here talk to us about apple and a two thousand dollar foldable iphone yeah so first of all you have to thank mark german for all the reporting that he has done on this topic so first of all samsung has a foldable phone that came out seven years ago so the big question is why did they take apple so many years to come out.

15:22And what Mark tells us is that Apple was not happy with the crease in the middle of the phone when you fold the thing. And so Samsung has a new display, which is helping out Apple to solve that problem. So now here is the thing. We are coming to a point where the unit shipments are not growing for Apple largely because, or it may not grow next year because they're most likely going to raise rates when they announced their next line of phones coming up the first or the second week of September. So the big question is, well, what can you do to go out and increase average selling price? So the Pro Max sells at about$1 ,200.

15:58And that's, I think, where most of the users for this device will go. The real Apple crazy, the enthusiasts, which only buy the brand new phones out there and they buy the Pro Max, that's about$1 ,200. So if you are able to just shift that buyer from a Pro Max to affordable, that's a 67 % increase in average selling price for that. So I think that's what's going to happen next year. Because remember, because of memory pricing, everything is getting more expensive. And that's where what we anticipate is going to happen with Apple as well. But Enra, are people going to buy it? I mean, I see it. I'm looking at your notes here.

16:35It says Apple's first foldable phone generate 20 to 28 billion of fiscal 2027 revenue in your scenario based on 10 to 14 million units at the average selling price of about$2 ,000. I mean, is that right? You think people are going to buy into this? That's actually, to be honest, if you look at it, half of Apple's phone, half of Apple's total revenue comes from the iPhone. So it's still a very small portion of that total number. I know, you know, 24 billion is a big number by itself. But, you know, Apple on any given year sells about 250 million phones out there. So out of that, you know, selling about 10 to 12 million phones in year one is not that big of a deal because, I mean, as I said, there are enough people that buy the Pro Max or the Pro every year.

17:22You know, you can see combined, that's about 30, 40 percent of any new year phones is just Pro and the Pro Max. So it's a very sizable market. And, you know, Apple buyer on the higher end is fairly affluent. So talk to us about, just give us an update while we've got you here, Anurag, on China, both from an end-selling market as well as the supply chain aspect. Where are we with China these days? Yeah, so one thing that's happened with Apple over the last three quarters is they've gained a lot of share in China. And that's because they did not increase the price of their phone over there while the competitors have.

18:00So if you look at their iPhone results, I mean, it's just been staggering 20 plus percent for the last couple of quarters at least. And we have never seen that. I mean, it always used to be high single digit growth. And we attribute a lot of that to share gain. So when we see them coming out with the next iPhone iteration, I'm really keen to see if they're going to raise the rates throughout the entire chain of fronts, everything from the lower end or the higher end, or are they only going to target the higher end of the market? I think if they leave the lower end alone, I think they're going to go out and gain more market share in China.

18:35What you're mentioning is, while going back three years, they lost some share in China because of Xiaomi coming up with their models. But I think these guys have done a very good job of capturing phone market. Now, another thing Mark Gurman has said, it's possible the next series of phones may have a red iPhone. And that, if it comes out, you know, that's another thing that's going to entice the Chinese market. Because, frankly speaking, the U.S. market is saturated. China and India are the two really big markets for them to go after, and China being the more affluent between the two countries.

19:07Anurag, something you point out in this article, it's a new leasing plan. Can you explain this? Because you're saying it's going to give shorter replacement cycle for the foldable. Yeah. If you remember, just about three or four weeks ago, Apple launched something called the Apple Upgrade Plan. It's like leasing your equipment directly from them on a two-year or three-year basis. So typically, you keep your phone for four or five years. But if you get on this leasing plan and let's say you pay$55 for a normal phone, not obviously the foldable, and you just have to return it back to them after two years or three years, depending on what you use, they increase this for watches.

19:46They did it for Macs. They did it for iPads. And what we think that happens is for people who are just thinking about a payment plan and not so much buying$1 ,200 upfront payment. This is going to go very well for them and tap into an end of the market that they are not used to. Second, they're going to raise the rates of refreshes of the device. So what that does, that also helps in the revenue growth because, again, as I said, we are coming to a point, at least in the U.S., that you have a saturated capacity of getting new users to jump on the bandwagon. Stay with us. More from Bloomberg Intelligence coming up after this.

20:53Bloomberg News every weekday afternoon on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Business development companies, you may have heard of them by the acronym BDCs. They're a type of closed-end fund that provides retail investors exposure to a diversified portfolio of private companies in their earliest stage. One such company went public today on the New York Stock Exchange.

21:32That would be Robinhood Ventures Fund 2, ticker R-V-I-I. Sarah Pinto, head of Robinhood Ventures, joins us live from the NYSE. Sarah, thanks so much for joining us here. Talk to us about the IPO. Why take Robinhood Ventures Fund to public? Thanks so much for having me. It's so exciting to be here today. So there's so much happening in the technology market with early stage companies, particularly now with the advent of AI creating amazing innovation and wealth creation. And historically, that wealth creation has been incredibly hard to access for most investors, right? You have to be accredited.

22:14You have to know the right people. You have to have really high investment minimums. And then there's no liquidity once you invest in private venture funds. And so really with Robinhood Ventures Fund 2, we are bringing innovation to this market to bring early stage venture to everyone. Well, can you give us an idea of how many private companies this include? Like what different sectors? Can you break it down for us? Yes, of course. So we chose to focus on what we think is an end of one unique ecosystem for early stage companies, which is Y Combinator. the storied accelerator incubator based in San Francisco.

22:49They produce about 500 to 800 companies a year, and we plan to invest in about 150 companies a year. So over three years, this fund could have up to 400 or 500 companies, which for an early stage strategy makes a lot of sense because you want to have that diversification in order to be able to invest in some of the companies that were really early when you invested in them, but go on to be worth tens, hundreds of billions of dollars. So 8 million shares, I guess it was a total underwriting here. What are the use of proceeds here? So use of proceeds is really capital for the team to invest in the next generation of innovative companies from artificial intelligence to deep tech companies that are building in the financial sector, in healthcare, in space, in defense.

23:45And we will write checks in every single Y Combinator batch, probably about 100 or to 120 a year. And every check is in the hundreds of thousands. And so that capital will be used to make those investments that will be added to the fund. Any investment minimums? What about fees for people who are interested? Yes, for sure. So we decided to use a tried and true model, which is for fees, which is the venture capital model. So 2 % management fee, 20 % performance fee to align incentives between the managers and the investors. And it'll be the fund size will be somewhere between 220 and 250 million dollars, depending on the green shoe exercise.

24:35So in the venture capital community today, Sarah, do you have to be an AI play to raise money today? That is a very good question. And the answer is not necessarily. What you have to be is really an innovator who has a compelling story. And so what we look for is we look for these founders who are outliers, who have an amazing vision and who will beat the odds. Because, right, the odds for these early stage companies is probably that they won't be able to displace the incumbents. But what's amazing with being a tech investor is time and again, you see companies that start out really small and go on to become the next defining company of their generation.

25:22Well, I'm looking through your list here and you have some pretty well-known YC alum. I'm looking at OpenAI, Stripe, like Airbnb, companies like this. Yes, Y Combinator is an extraordinary ecosystem. They've gone on to create over a trillion dollars of value, over 100 unicorns and decacorns. To your point, companies like DoorDash and Airbnb and Stripe have come out of Y Combinator. Sam Altman was deeply involved before and while he was founding OpenAI. Our first one, Robinhood Ventures One, has invested in companies that came out of Y Combinator or whose founders went through Y Combinator, like Boom Supersonic and Stripe and Ram.