Muse Powers Meta to Cusp of $2 Trillion in Best Month Since 2013

0:00Scarlet Fu:Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans.

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0:59Scarlet 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. Microsoft abandons personal AI chatbot race with Copilot Reboot. I kind of thought that would be a net negative for the stock. It shows you what I know, which is not much. Stock's up 3%. Let's check in with an expert here, Anurag Rana, Senior Tech Analyst for Bloomberg Intelligence. Anurag, it's been kind of a week here for consumer-facing AI apps, if you will.

1:43Meta comes out with Muse. That stock's up 10-11 % on that news. What's going on at Microsoft? Yeah, I think it's a lot less to do with personal, but it's a more question of enterprise product becoming a little more stronger because of the features that they have. Now, it's one of the most important part of Microsoft's chatbot right now. The co-pilot feature is that at the bottom of it, they are not only using OpenAI models, but they are actually adding newer models to it. So, for example, Anthropics Cloud, and we think down the road it's going to be other models, you know, perhaps Mistral in Europe and maybe other open source models down the road.

2:20So I think what Microsoft is showing is it is an important layer in between, and the model companies are not going to take all the economics here.

2:29Scarlet Fu:Do we know what the, has Microsoft given us a lot to work with here in terms of numbers and, you know, paid subscribers? Yeah, so if you, you know, the most amazing part of Microsoft offices and I can go back you know 15 years thinking well where are you going to get more users it doesn't work that way I mean you you already have let's say 300 400 million people that are using this product but what happens is they really like to upgrade their plans it's called you know their latest plan called the E7 suite or the Microsoft it has co-pilot in it it has a lot of agentic capabilities in it and it's priced almost 75 percent more than And the last plan, which is called the E5.

3:09So we should see massive double digit growth in Microsoft Office revenue over the next couple of years, even when user growth is not there because people are embracing these paid seats of Copilot, which, if my memory goes right, is something around 30 million right now out of the big base of, as I said, about 300 plus million users. 30 seconds left, Anurag. On my AI window on my phone, I do not have a Microsoft product there. I don't have Copilot. Is that a problem for Microsoft? No, because it's not for the consumer. It's really going to make money from the enterprise side of things. And that is where the most important part is.

3:45For them, let Apple, Google, and Meta try to fight for the consumer side of things.

3:51Scarlet Fu:Yeah, they've got you through work. Oh, okay. Yeah. So as long as you accidentally press the Copilot button, which I do oftentimes, and something will trigger, I'm like, oh, okay, there's Copilot. All right. That's AI. I'm doing my AI thing. Stay with us. More from Bloomberg Intelligence coming up after this. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version.

4:30Scarlet Fu:So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. You already know how AI is changing how everyday work gets done, how much ground you can cover, and how fast a team can scale. To stay ahead, you need the tools that give you a competitive advantage, built for this new era. Welcome to Agentic Revenue. Adio is the CRM for this world. It meets you where you work, compounds every customer signal into context, then acts on it across your pipeline to let you move at unmatched speed and scale.

5:15With agents and automations for every job in revenue, Adio orchestrates your work around the clock. Built to handle the scale of your workloads, extensible with API and MCP, and with the infrastructure to keep up with your most ambitious agents. Loved by high-growth startups like Granola, Modal, and Etched, Adio runs the work behind every win. That's Adio, the agentic CRM, the intelligent system that never sleeps. Picks up leads at 2 a.m., catches renewals before they slip, hands you the answer before you ask. Try Adio free at adio.com slash iHeart. That's adio.com slash iHeart.

5:55Scarlet 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. Let's take a look at what's you know who else has had a big week is Meta. They've had a massive. Yes. Yeah. Rerating there. Yeah. Total rerating. And there was this conference that they held Meta Connect, which I hadn't heard about. But I guess folks in Silicon Valley do. It's the annual flagship conference. But it ended up being pretty momentous for the company because they launched their new Muse AI agent with this new charm thing that looks like a Tamagotchi.

6:35I didn't know what a Tamagotchi was until yesterday.

6:37Scarlet Fu:But now you know, and now you've downloaded the Muse AI app on your phone. So you and millions of others, which is why the stock has done very well and is now up for, I believe, a fifth straight week. Mandeep Singh is our global head of tech research here at Bloomberg Intelligence, and he joins us now. So, Mandy, when we look at Meta and what it's accomplished this week, it's got a bit of swagger here. And I wonder if this was all part of a grand plan with Meta settling that lawsuit with California and the other states before it announced all these initiatives that have investors really excited.

7:12I mean, it could be. we have seen that before with Alphabet, you know, after they settled that lawsuit, the monopoly lawsuit, and then Gemini 3 was launched, and they did quite well after that. So, look, I wouldn't make too much out of that in terms of timing. To me, what they have done here is carved out a niche in this space where, you know, two frontier lab companies, OpenAI and were running away with the market. And now Meta has shown that they have a play when it comes to these long-running agents around e-commerce use cases. And that is why they have done so well. Today, Microsoft has launched a revamped co-pilot where they are running their agent for, you know, a longer duration in terms of doing something similar to what Muse has done with these e-commerce agents.

8:09And it sounds like that is the playbook going forward for all these companies that missed out because OpenA and Anthropic did so well. Speaking of Anthropic, we were just Bloomberg News reporting that it signed an 11.6 billion dollar seven year contract with Akamai Technologies for computing power. Is this just another one of the headlines coming out about Anthropic? What are they doing here? I think everyone wants to lock in capacity right now, whether you are a chip maker. like NVIDIA who is prepaying all their suppliers, or if you are a frontier model company like Enthropic or OpenAI, you want to make sure you're not short of, you know, something that is needed to deploy your product at scale.

8:55And look, Microsoft has the distribution. They have the cloud. Same thing with Google and Amazon. These companies, OpenAI and Enthropic, have relied on the hyperscalers for distribution. and now obviously, you know, they're competing with them at a lot of levels. So for them to be able to use Akamai and I think Muse did the same with Fastly and Cloudflare, these are all the companies that help you distribute your software, you know, to the edge. And if these agents are running for much longer duration than, you know, the chatbot experience, then you need a lot of edge capacity, which is what I think Anthropic is trying to make sure they have plenty of if they start to deploy their products for consumer use cases.

9:43Scarlet Fu:So, Mandeep, it feels like September is going to come and go without an S1 filing from Anthropic for an IPO. I mean, we do have Monday, Tuesday, and Wednesday where something could happen. But when we got the sense from reporting that an IPO is coming in November, If markets remain volatile, and I'm thinking here of the Treasury market in particular, you know, bonds continue to sell off and rising rates starts to hurt stocks. Is that something that might motivate Anthropic to hold off on an IPO? Or is Anthropic not sensitive to that in the same way that the hyperscalers are not sensitive to rates when they sell debt?

10:21Yeah, I mean, there are a lot of factors at play. But look at how far we have come this month, you know, from the talk about these companies slowing down their model development to Muse taking off in such a big way. I mean, at this point of time, it is about, you know, making sure that you file your S1 and, you know, you kind of address all the risk factors. So to my mind, that, you know, slowdown in frontier development and that OpenAI hugging face incident was a bigger factor in the delay that we have seen with the Enthropic S1 filing. But I doubt they're going to delay it for too long, given, you know, MetaMuse has clearly seen a lot of traction.

11:04And you don't want to wait for too long, given how well Enthropic has done, you know, for the first nine months of the year. What is what you guys call the annualized run rate for Anthropoc? What's the latest data point we had? Well, it's grown seven times from the end of December to September, which is the$65 billion run rate. And, you know, some people are saying they give that ARR on a gross basis. OpenAI's comparable number is around$40 billion. So you could, when they file the S1, you will try to figure out, you know, what is gross versus net. But still, you know, seven times growth for a company at this kind of revenue run rate is staggering.

11:47And I don't think MetaMuse has changed that in any way. So it's more about riding that momentum. And this will be a perfect time for them to go public.

11:56Scarlet Fu:Hey, Mandeep, did you pay attention to the China-U.S. summit and all the tech CEOs that attended the state dinner last night? I'm wondering what you think the conversations might have been like. Like, we know that there were no Chinese CEOs really in attendance this time, partly because they don't have a market to sell to. But, you know, what what do they want to get out of a relationship with China, these big tech CEOs? I mean, clearly, you know, the American companies, especially the likes of NVIDIA and the chip makers, want to sell their gear in the Chinese market. And from an administration perspective, they don't want to slow down the U.S.

12:37companies when it comes to frontier model development in any way. The other big, I think, focus item could have been around distillation by Chinese model providers of U.S. models. And again, everyone is trying to figure out how to stop that because clearly that has been a factor in terms of the Chinese open-rate models catching up. So to me, these are the big picket items when it comes to the U.S.-China kind of frontier models and the chip makers and how they're allowed to sell capacity or not. So those, for me, would be the key items. So CapEx, are we going to state these elevated AI CapEx levels for how long, do you think?

13:26Well, right now, I think all the signs are, you know, even Meta is going to raise their CapEx next year. For the longest time this year, everyone was questioning Meta's CapEx and how, you know, they may not be able to show ROI. So what will be their justification for 2027? Well, guess what? I think they have enough momentum to raise their CapEx and all the other hyperscalers already were seeing ROI on the cloud side. And so I do expect that CapEx numbers to go up for next year.

13:58Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects.

14:39Scarlet Fu:Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. You already know how AI is changing how everyday work gets done. How much ground you can cover and how fast a team can scale. To stay ahead, you need the tools that give you a competitive advantage, built for this new era. Welcome to Agentic Revenue. Adio is the CRM for this world. It meets you where you work, compounds every customer signal into context, then acts on it across your pipeline to let you move at unmatched speed and scale. With agents and automations for every job in revenue, Adio orchestrates your work around the clock.

15:14Built to handle the scale of your workloads, extensible with API and MCP, and with the infrastructure to keep up with your most ambitious agents. Loved by high-growth startups like Granola, Modal, and Etched, Adio runs the work behind every win. That's Adio, the agentic CRM, the intelligent system that never sleeps. Picks up leads at 2 a.m., catches renewals before they slip, hands you the answer before you ask. Try Adio free at adio.com slash iHeart. That's adio.com slash iHeart.

15:49Scarlet Fu:You're listening to Bloomberg Intelligence with Scarlett Foo and Paul Sweeney on Bloomberg Radio. All right, Scarlett Foo and Paul Sweeney live here in our Bloomberg Interactive Broker Studio in New York City. We're streaming live on YouTube as well. We just were chatting with Alexis Crowe, chief economist at PwC, and I asked her, what's the number one question she's getting from her clients these days? And she said, the bond market. And that is the subject of our big take story on the Bloomberg terminal. Getting tons of readership here. The Great Bond Shakeout locks in a 5 % world quote until something breaks.

16:24One of the co-editors, co-reporters on that story is Michael McKenzie, rates reporter for Bloomberg News. Michael, I guess you're asking the big, big question or going to the big issue. Is this kind of the new normal where we've got a 10-year well north of 5 % here? What did you report in? What did you guys find out? Hi, Paul. Yes, that is what the story is. I think we've got an economy, nominal growth running in excess of 6%. The economy is running hard. You've had a huge amount of stimulus come through with the one big, beautiful bill. And it's an economy which, while it has low unemployment, it has a sticky inflation problem with the potential for inflation to keep going, potentially higher.

17:04And I think the real change, there's a lot of reasons for why bonds have been trending this way since the beginning of march we had the war begins in the middle east oil prices shoot up they still stay elevated we have concerns about the debt the fiscal outlook is not a good thing for the us it's also a global story with a lot of longer dated bonds selling off around the world so it's been a very tough year for bonds but i think what's really changed in the past week is that as we since saw the fed raise rates for the first time in three years last week other fed officials have come out and have sounded very, very hawkish.

17:40And so the bond market is now saying, OK, they want to get inflation back to 2 percent. Austin Goolsbee this week talked about a painful trade off between employment and inflation to succeed in getting that 2 percent target. So the bond market does what it does, which is essentially we price in more we price in more rate hikes. And that's exactly what's played out this week. And Michael, I guess roughly a month ago, Secretary Besson, you know, came into the marketplace and said he wants to get long-term rates down and started a bond buying program. That does not appear to be working. Have we heard anything from the secretary since?

18:18No, but I think what's interesting about that program was that one thing that the secretary did say recently after he announced the buybacks was that, oh, the U.S. doesn't have rising term premium because if you look at the U.S. treasury curve between fives and 30 years, it's flatter than other countries. And when you talk to people in the market, they then scratch their heads and say, well, why is he doing buybacks then? What's the point of doing buybacks? The real problem Besson has is that he came in as Treasury Secretary saying that he wanted to see the budget deficit fall to 3%. It's still running at 5.5%.

18:49And at those kind of numbers, on top of all the existing debt that's just been growing in the last 10 to 15 years, buybacks aren't going to do anything or to quote one of my my bond sources it's basically like bringing a water pistol gotcha so but i've had a lot of folks uh michael suggest don't freak out too much about where yields are because this is an economy as you mentioned at the top here this thing's running six percent plus on a nominal gdp basis and that kind of growth these rates are okay is is that what you're saying? Yes. Yeah, that's exactly what it is. And again, you're getting good income now.

19:30You're getting yield. Treasury yields are now above inflation. That wasn't the case back in 2022 and 2023. So the pricing now seems more normal or back to where we were pre-global financial crisis. So we've completely exited, I think, that whole period after the global financial crisis where we had ultra low yields. We had a lot of QE from central banks, not just the Fed, but globally. It suppressed interest rates around the world. And so what's interesting is that the US rates have adjusted because the US economy is growing stronger. But if you look at countries like the UK, France and Japan, their growth isn't as good, yet their yields have also been rising too.

20:10So there's a lot of concerns around fiscal. And I guess the other key point in all of this, of course, is if you have these hyperscalers who've been coming in and doing what people in the bond market called the$25 billion drive-by bond issuance. And they are somewhat agnostic about the cost of this because these are very long-term deals they're putting together. So you have competition for capital. It's coming from other G10 countries. It's also coming from big U.S. companies as well. Hey, Michael, lastly, just to the extent we get some kind of resolution into the war in Iran, presumably oil energy prices would come down to a certain degree.

20:48Maybe that would take out some inflation expectations. And maybe that might bring yields down. What are your sources telling you on that front? Well, I think if you look at inflation expectations, they've been remarkably stable. The story has really been real yields, which is the Treasury yield adjusted for inflation. That has been going up. And that's because that's a growth story. It's also a story that says the Fed is behind the curve. It's an indication that the long term rate that the Fed needs to get to or the neutral rate, which neither stimulates or slows down the economy, is higher. Now, obviously, this is a theoretical term.

21:24A lot of Fed officials talk about this. It's just, you know, it's kind of dark matter or something difficult to position about. But at the end of the day, the bond market, if you look at market proxies for where the Fed's neutral rate is, it's around just under 5 % now. And I think, yes, oil will help perhaps create, you know, a nice bit of a rally here in bonds or relief rally. But I think ultimately there are other forces weighing, pushing inflation. It is sticky. And if it's broadening out more into the service sector, then you could be in a scenario where it's actually higher towards the end of this year.

21:58And don't forget, the Fed itself and its last dot plot doesn't expect to see a 2 % inflation target until 2029.

22:05Scarlet Fu:This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

22:31You already know how AI is changing how everyday work gets done, how much ground you can cover, and how fast a team can scale. To stay ahead, you need the tools that give you a competitive advantage, built for this new era. Welcome to Agentic Revenue. Adio is the CRM for this world. It meets you where you work, compounds every customer signal into context, then axon it across your pipeline to let you move in on match speed and scale. With agents and automations for every job in revenue, Adio orchestrates your work around the clock. Built to handle the scale of your workloads, extensible with API and MCP, and with the infrastructure to keep up with your most ambitious agents.