Meta to Spend Up to $27 Billion on Nebius AI Infrastructure

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1:01Ed Ludlow:So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off. deep in the work that moves the business. Let's create smarter business. IBM.

1:34Scarlet Fu:Bloomberg 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.

1:56Ed Ludlow:Boy, the tech news continues to come fast and furious. Let's get the latest with Ed Ludlow, B-Tech co-host. He's out there somewhere in California getting into trouble in Silicon Valley. Ed, I want to start with the meta platforms paying as much as$27 billion for cutting-edge artificial intelligence infrastructure from Nebius Group. Nebius Group stocks up 13 % today. All right, not bad. Up 52 % year-to-date. Okay, better. Up 345 % on a trailing 12-month basis. Ed, let's just start with the basics. What is Nebius Group? What's going on over there? Yeah, it's what we call a neo-cloud. It's a fancy way of saying it's a data center that just runs AI workloads, because prior to this point, lots of data centers have done all kinds of software and storage.

2:41Ed Ludlow:And, you know, Meta is pursuing this kind of everything strategy. Meta is not a cloud computing company, but it has a lot of compute demand. And so it's buying loads of chips from NVIDIA and AMD for its own data centers. It's working on its own chips in-house that go into its own data centers. And then it's basically leasing or renting capacity from a number of other players. The difference with this Nebius deal is like it's really big. You know, it's$27 billion over five years, but up front$12 billion next year for dedicated capacity. And that tells you that they've moved very quickly and it's a very serious arrangement.

3:16Scarlet Fu:And it adds to its$3 billion deal with Nebius last year as well. You talk about Meta really diversifying and not betting on just any one company, right? I mean, it's kind of spread its chips everywhere. Yeah.

3:29Ed Ludlow:The idea is that in an environment where you are supply constrained, in other words, the demand that a company has for compute power is greater than what exists in the real world, They have found that diversifying is the best way to get the compute needed for different workloads. Meta is a very big and serious buyer of NVIDIA chips. You know, it's in the top five easily. But there is benefit to designing at scale. Like the economics of designing your own chips makes sense, particularly when it's for running internal workloads, right? When I visited Meta's chip lab last week, one of the chips they've come up with, for example, trains the algorithm that does ranking and recommendations.

4:10Ed Ludlow:In other words, how ads show up in your timeline. That's very specific to them. And so it's paid off the investment so far. I'm just looking at the graph of this chart from Debius. It went public in 2011, kind of bouncing around, not doing anything. And then around February of 2022, at the price of about$20 a share, people said, oh, this is an AI play. So we go from$20 to$128. Where was that called, Ed Ludlow? Well, there's also a history part of it, which is that it was previously associated with a property of Yandex, which is a Russian cloud computing company. And so, you know, just simply due to what's the word I'm looking for?

4:52Ed Ludlow:I guess sanctions. You know, it changed itself. It's now an Amsterdam based company. So that's a part of it. But it's completely, I'm visualizing the chart for our audio audience, but it completely coincides with the birth of the NeoCloud and demand, specifically the data centers that just run AI. All right, here's another story that just recently crossed the Bloomberg terminal. Again, big numbers. OpenAI in talks for$10 billion joint venture with PE firms. What's up with that? Yeah, so we've just moved our own version of this story. and what I'm told by sources is that basically it helps a lot for open AI to have some money that's off the balance sheet to go out there and find a vehicle a mechanism to sell its software and so what these guys are doing is they've set up an entity where those private equity companies in the first instance can go to all of the different kinds of companies that they own and are trying to make better in the classic PE style and say you know what why don't you guys use open AI stuff.

5:54Ed Ludlow:It's pretty good. And so that gives OpenAI a way of going to market. And it gives these private equity firms some exposure to OpenAI and a mechanism to do business with them that also benefits all of their existing portfolio of investments.

6:09Scarlet Fu:Do we think that this is going to be the template that it starts to use more of these off-balance sheet kind of ventures?

6:16Ed Ludlow:Yeah, I think this is very interesting because like what I hear from time to time across Silicon Valley for all sorts of things is that there is benefit in having multiple entities, be that a geographic split or be it a business line split. And in part, because you at scale with enterprises, the OpenAI private X story is about selling OpenAI's platform to different enterprise companies. It's just a sort of old archaic world where it seems like going back to that model is what is in favor. But this news that broke this morning is the first real example I've seen of it. The idea has been spoken about in the corridors for a little while.

6:57Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this.

7:03Ed Ludlow:Hello, hello. I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO, Arvind Krishna. And I asked him, how can companies use AI to its fullest potential to create smarter business? My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example? If anybody has more than 10 % of what they had for customer service 10 years ago, they're already five years behind it. if anybody is not using AI to make their developers who write software 30 % more productive today with the goal of being 70 % more productive.

7:50Scarlet Fu:Yeah, wow.

7:51Ed Ludlow:So we are not asking our clients to be the first experiment on it. We say, you can leverage what we did. We are happy to bring out all our learnings, including what needs to change in the process, because the biggest change is not technology. It's getting people to accept that there's a different way to do things. To listen to the full conversation, visit ibm.com slash smarttalks.

8:39Scarlet Fu:Do that with Acrobat. You have 30 plus documents that need to be simplified into a proposal. Do that. Do that. Do that with Acrobat. Learn more at adobe.com slash do that with Acrobat. Small businesses are the pulse of every community. They bring people together, create opportunities, and drive growth. With a widespread presence in communities across the country, Chase for Business supports small business owners at a local level. That makes it possible for you to connect, learn from each other, and grow together. There's a real commitment to seeing small businesses succeed. The Chase for Business team has knowledge and expertise that span a wide range of financial areas.

9:18Scarlet Fu:They can help you make more informed decisions as you navigate the complexities of running your business. They'll help your business grow with individual guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more at chase.com slash business. Chase for business. Make more of what's yours. The Chase mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2026. JPMorgan Chase and Company.

9:55Scarlet Fu: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. One of the big movers was Dollar Tree. And the outlook here from Dollar Tree was kind of mixed because even though adjusted earnings per share is going to meet the average analyst estimate, the outlook for revenue came in a little bit light. So let's bring in Jen Bartaschus. She is our senior analyst covering retail staples and packaged foods. And Jen, we've seen these value retailers do pretty well in this current environment with a lot of higher income consumers trading down, yet this sales view did miss the average analyst estimate.

10:42Scarlet Fu:Is that because analysts and investors have gotten a little bit ahead of themselves when it comes to the outlook here? Well, it's a good question, Scarlett. You know, with regards to the overall revenue growth for Dollar Tree, you know, last year was a real transition year for them. They shed the family dollar unit. They're refocusing. They've been investing in the business. But that trade down customer doesn't come all that often into stores. And so while they bring a much higher basket and they're taking their big adopters of that higher price point of three to five dollars, they're just not coming in as frequently as kind of the core low income consumer.

11:19And so I think the conservative view on the top line is that there are a lot of things going on right now. You've got fuel prices are on the rise. You've got consumers who are stretched. And you've got a mixed behavior with regards to the types of households that are coming into Dollar Tree.

11:36Ed Ludlow:So what's Dollar Tree and other dollar stores? How are they adjusting their strategies at all? So with regards to strategy, one of the things that they really ran into trouble with, and this is why they went beyond that$1 price point back in 2022, was being able to have a compelling variety of merchandise in the stores. So the multi-purchase, the multi-price point strategy that Dollar Tree is rolling out has been really effective for them because it gives people slightly more choice of what's in the store and they can offer more compelling value. So that's been a tactic that's really paying off.

12:13It's just a question of, you know, they're still in the process of rolling that out to all of their stores. So it's not everywhere yet. And so they're getting that bump as stores are adopting these higher price points. But once they're in all the stores, the question is, how sustainable will it be? So that's one of the things that everyone is looking for.

12:32Scarlet Fu:And Jen, one thing we know about Dollar Tree is that it has done better in terms of operations, in terms of performance, because of this decision to divest its family dollar chain, which was begun last year. How far along that process is Dollar Tree? Is it, you know, halfway done, two thirds done, 100 % done? So the divestitures is done. The question is the refocusing on their own internal operations. So, you know, with regards to last year, they started to pay a little bit more attention. They're really working at improving their supply chain efficiency. They're working at improving store level productivity.

13:09They've invested in wages in the stores to help have more employees there at the right times and to provide the right amount of customer service. But it's still early days for the overall transformation of the company now that it's back to being just a single banner. And so it will probably extend through this year that we see more of those tactics start to take hold and to have a real material impact on the business overall.

13:34Ed Ludlow:What is Target? What is Walmart? What are they doing in response here? What's really interesting, Paul, is that Dollar General, as a direct competitor in the dollar store space, they talk about having over 500 items that are at the$1 price point or below. So they're actually undercutting Dollar Tree on some of that value play. If you go into a Walmart or a Target, when you first walk in, they have kind of those value alleys where they have low-priced items right at the front where you can see them. So everybody has a strategy to try to show value through some variety that's at very low price points.

14:11But then when you get to the big box guys, their competitive advantage really is in the breadth of assortment that they carry. And if they can be compelling on value across the store, that puts them in a good position.

14:24Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this.

14:29Ed Ludlow:Hello, hello. I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO, Arvind Krishna, and I asked him, how can companies use AI to its fullest potential to create smarter business? My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example? If anybody has more than 10 % of what they had for customer service 10 years ago, they're already five years behind. If anybody is not using AI to make their developers who write software 30 % more productive today, with the goal of being 70 % more productive.

15:17Yeah.

15:17Ed Ludlow:Wow. So we are not asking our clients to be the first experiment on it. We say, you can leverage what we did. We are happy to bring out all our learnings, including what needs to change in the process, because the biggest change is not technology. It's getting people to accept that there's a different way to do things. To listen to the full conversation, visit ibm.com slash smarttalks.

15:46Scarlet Fu:Everyone has been there. Your team's feedback is scattered across emails, chats, and sticky notes. It's a mess. But PDF Spaces and Adobe Acrobat gives you one collaborative workspace to streamline every file and comment. So, if you need six departments to finally agree on a proposal, do that with Acrobat. Need to turn a mountain of feedback into one plan of action? Do that with Acrobat. Want to stop searching for files and finally get everyone on the same page? Do that. Do that. Do that with Acrobat. Learn more at adobe.com slash do that with Acrobat. Small businesses are the pulse of every community.

16:27Scarlet Fu:They bring people together, create opportunities, and drive growth. With a widespread presence in communities across the country, Chase for Business supports small business owners at a local level. That makes it possible for you to connect, learn from each other, and grow together. There's a real commitment to seeing small businesses succeed. The Chase for Business team has knowledge and expertise that span a wide range of financial areas. They can help you make more informed decisions as you navigate the complexities of running your business. They'll help your business grow with individual guidance and convenient digital tools all in one place.

17:00Scarlet Fu:With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more at chase.com slash business. Chase for business. Make more of what's yours. The Chase mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2026. JPMorgan Chase and Company. 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.

17:40Ed Ludlow:We have a great guest here. Michelle Korsmel joins us, CEO of the National Restaurant Association. Michelle, thanks so much for joining us here. You know, one of the industries that was thought to be impacted or could be impacted severely by some of the change in immigration policy from this administration was the restaurant business. Has that, in fact, happened? Well, it's interesting, Paul. Well, when you look at last year, we had some growth, but not really strong growth. It was 4.6 percent nominal growth and less than one percent full time growth. And we know that that has a lot to do with the fact that consumers were a little bit more weary.

18:21The immigration policies and the immigration disruption definitely made a difference in restaurant business, particularly people coming to sit down in family dining. You know, it's interesting when you think about immigration because one out of every five people that work in restaurants was born outside the U.S. Many of those are citizens. Many of those obviously are fully documented and able to work. But in terms of an immigrant population, the restaurant industry very much represents that.

18:52Ed Ludlow:So what are your operators telling you about maybe just their their access to the ability to attract and retain labor? Has that been a challenge for them? Yeah, it's always tough to find and retain the best labor. We're thinking about the value of working in restaurants as people are considering, do they go and work in health care? Do they go and work in education? And people need to know that you can find a great career in restaurants. In fact, there's a lot of opportunity that exists. Eight out of every 10 restaurant managers started in entry level. And so we know I'm sorry, nine out of 10 started in entry level and eight out of 10 owners started in entry level.

19:30So we know that there's a lot of upward mobility. So finding people to come in and then building that upward mobility is always a priority for restaurant operators.

19:38Ed Ludlow:Michelle, talk to us about tariffs. We're going into year two of this uncertain tariff regime or situation. How is that impacting the restaurant industry? Has the industry figured out a way to kind of just deal with it? Yeah, it's interesting you talk about figuring out a way. It has a little bit normalized that we have some disrupted prices. Food and beverage tariffs have been pretty stable for at least the last six months. And so that's provided some more continuity in terms of pricing. But food price is tough, right? Food prices have been steadily increasing since before the pandemic. And that's something we're watching.

20:15So it's often more now about availability. We know we don't have enough cattle herd that exists today to meet the beef demand in the United States. So that has an impact on pricing. So we're seeing those types of activities impact food prices almost more than tariff activity today.