AI Chip Selloff Spreads Across Global Markets

25:18It doesn't matter as much for the stock. The big question is, will Elon Musk talk up some of these ambitions? and then the massive unlock tied to that event and then the potential further unlock if the shares continue to trade about 30 % above, that opens up more capacity, more liquidity. Those are the events structurally that do matter from a NECM perspective. Estimated earnings August 17th, but you know, just kind of finger in the air. Jordan, what do we watch for next on the sell side? Just more initiation coverage? I mean, if you're me, I'm watching for any mention of the two together. We got RBC boosting the price target on Tesla today.

25:53based on the potential for a merger between the two companies. That's all anyone wants to talk about, all anyone wants to hear about. And they really do see it as 25 % to 30 % accretive to the stock. Just this potential for the merger. Right. Regular viewers of Bloomberg Tech know we've discussed the idea of a Tesla and SpaceX merger. No new reporting on it, though. Bloomberg's Bailey Lipscholz and Jordan Fitzgerald, thank you both very much. Coming up in the program, we've got even more from a SpaceX investor and why he sees this stock as more than just a muscled moonshot. Shares not having the best day ever.

26:27They are down now 5.5 % near to where the debut trade was. Half-time in the program. By the way, spoiler, I'm in New York City this week. There's a lot going on. This is Bloomberg Tech.

26:50Welcome back. to Bloomberg Tech. Let's go over to Ankara, Turkey, where NATO leaders are currently meeting and just signed defense deals worth at least$50 billion, according to a NATO official. The deal includes investments in space and surveillance. Bloomberg Surveillance co-host Amri Horderen is live from Ankara and joins us for more AMH.

27:12Well, following on from last year's NATO summit, this year is really as Mark Rutta, the NATO Secretary General, put it as a reindustrialization of the defense sector between transatlantic partners. So basically, that is why you're going to see a lot of deals announced on the sidelines. These countries have to get to the 5 % of GDP targets. Three and a half percent of that has to go to hardware, ammunitions, and the one and a half percent of that port, bridges, roads, anything that really is able to help support the industrial base. And when you look at these deals, you can really take away two points.

27:47On one level, the United States isn't going anywhere with its industrial base. They're still relying on things like the Triton surveillance system. And you see European countries wanting to get their hands on that. But in other parts, you actually see a push towards trying to use local European defense contractors like Saab instead of Boeing. So you see basically a two-prong approach when it comes European countries that are trying to meet the demands of NATO, especially at a time when the U.S. right now is under a six-month review of its defense posture within the European Union. Bloomberg's Anne-Marie Horden live at NATO.

28:26Thank you very much indeed. Recap, this is where markets stand. So the Nasdaq 100 and the Philadelphia Semiconductor Index, this looks bad. This looks ugly. But in both cases, we're on track for our biggest drop since June 23rd. It's become, in the case of the socks and semiconductors, very normal to see a move of 5%, 8 % in that range to both the upside and downside. It's called volatility. But there is a bigger question about investor attitude to the AI trade, particularly of chips. Bloomberg writing, the magnificent seven is losing its luster too. Investors have crowned a new set of stocks as the favored investment, funneling money into companies building out the AI boom, The turning tides show the AI is here to stay, but those investing in it are penalized.

29:14Bloomberg's Ryan Fuselica has the reporting. Again, I just want to acknowledge it's kind of noisy out there today, right? Particularly post-Samsung. But you've taken a look at the Mag 7, and then you're looking at how the market's treating the Mag 7 relative to everything else. What's the reporting? Yeah, good morning. Thanks for having me. So the Mag7 had become something of an afterthought within the market following years where they were really the primary leaders. Like you said, the nature of the AI trade has really been evolving. And we're no longer focusing on your Microsofts or Alphabets or Amazons or Metas.

29:51Now the real focus is on where the current bottleneck is within AI infrastructure. And at the moment, that is in the memory and storage space. So companies like Micron, like Sandisk, like Western Digital, these stocks have seen absolutely enormous gains this year. While Microsoft is down, I think, more than 20 percent, we've seen a lot of struggling among the companies that were for a long time really sort of at the top of the leaderboard. Is there within the Mag7 some differentiation? So Alphabet has done pretty well this year. All of the Mac 7 stocks are underperforming the NASDAQ 100, but in the group, Alphabet's hold on pretty well.

30:31I think there continues to be a lot of optimism surrounding its position with AI, not only with Gemini, its AI model, but also its chips business, with YouTube, with Waymo, all these sort of things working in concert with each other. There's a lot more skepticism about Microsoft in contrast. Like I said, that stock is down more than 20%. I think it just had its worst monthly performance since December 2000. So the dot-com era, there's a lot of skepticism there. All these companies are spending very aggressively on AI. And so far, it really seems like a mixed bag as far as what kind of return are they getting from this?

31:05What's the timeline for that return? And in the meantime, what is this really doing to their cash flow, their cash balances? Some companies are raising equity or tapping the debt markets. There's just a lot more skittishness around those kinds of things, even if there continues to be a lot of long-term optimism that eventually all this AI infrastructure in CapEx will pay off. Ryan, very quickly, we reflect in the show today on the short-term pressure for chip stocks. But in your piece, you make the point that Zoom out year to date, chip stocks have had a great run. Yeah, chips are coming off their best ever quarterly gain.

31:40They remain extremely strong for this year. they've been incredibly volatile, especially if you look at them relative to software stocks. Basically, if one of them is rising, the other one is falling and vice versa. But overall, chips remain very strong this year, but with a lot of elevated volatility. Pretty much Ryan for Celica. Thank you very much. Benefiting from this shift towards AI in parts from SpaceX and the broker calls coming out today. We just went through them with Jordan, right? As well as the idea of the NASDAQ 100 inclusion are kind of setting a price floor. For a stock that could be headed for the stars, according to our next guest, Joel Shulman is the founder, managing director and CIO of ER shares.

32:21The firm's XOVR ETF had approximately$246 million in SpaceX exposure ahead of the IPO. Now, things have changed since. Yeah, we're up to about$370 million. Actually, SpaceX gave us about$130 million of profit, coinciding with your numbers. $84 million of that was in June alone, which gave us a 5.3 % return. Contributed about 75 % of our performance for that month, when the market was generally down, down as much as 2.7 % for the S &P. Can we get to the backstory here? Yeah. So you were able to include SpaceX in an ETF product when it was still a private company. How? Right. So we were the first ones to do this.

33:03We rebranded, relaunched, repositioned XOVR in August 2024. So we're the first ones to do this. We bought our first position, SpaceX, in December 2024. We bought in something called an SPV, a special purpose vehicle. Oh, the Bloomberg Tech audience knows about SPVs. We're going to get to it. Keep going. So we got into a position. We repositioned it later on into something called a zero-zero, no management fee, no carry. We increased our stakes several times. We actually increased it twice during the second quarter, 2026, which gave us about a 14 % position going into the IPO. And one of the things we did is we had a shareholder protection plan, which prevented a big run-up of flows in the week preceding the IPO.

33:46You've probably talked about it before in your show. Many ETFs have had massive inflows preceding big events. We kept that money out, probably turned away more than a billion dollars in our estimates, maybe several billion dollars, to make sure we had a good wait for our shareholders going into the event. The reason, you know, for talking about SpaceX today in part is NASDAQ 100 inclusion. That was accelerated. And we went through earlier in the show about the mechanics of that, right? If you're a fund manager in the world that tracks the queues or that index, you need to take some action to make sure SpaceX and its weighting on the index is represented in your fund.

34:21How did that impact you, if at all? Well, so we're seeing it today. The market, you know, the SpaceX is a little down today. A little down five-ish percent. Yeah. But we think, you know, long term, we think it's a bullish sign. We've got to remember the NASDAQ has about$800 billion behind it, passive money. That represents, at a 1 % weight, about$8 billion. We've got to remember the SpaceX has been trading about$19 billion per day. It's not all coming in today in terms of the$8 billion, but it's the start. And then we've got to remember that$400 billion is accused, along$4 billion of that will be coming in.

34:59And so this is all coupled with the Russells, the MSCI's, and so forth. That's right. About$25 billion of passive money coming in. That's going to help boost the stock for a period of time. So I'm grateful to have you here in the studio with me today. There was a time, maybe just for a hot second, where you were kind of out there alone. Oh, yeah. I'm trying to work out how to describe this, but you were the only ETF for a period of time that had SpaceX. That's true. Right. Then everyone did. I've been trying to look at what's happened since. So SpaceX went public in June. Overall, I think the fund has seen outflows.

35:31A little bit. We've lost about$200 million. Some of the other funds that had SpaceX, one in particular that got in in late March, I think they're down 30 % in terms of returns alone, and they lost more than half their funds. Another ETF lost three quarters. We've lost about$200 million. We're not taking it for granted. I mean, we're not a space-only ETF. We have the Entrepreneur 30 Total Return Index, which is a 21-year track record. And that has one of the strongest, if not the strongest performance. I'm looking at the holding. So SpaceX is up there, right? It's the top holding, 17%, 18%. And then NVIDIA.

36:08Then NVIDIA. And then we have other stocks like Astero Labs, which was very strong for us. It's up 400%. And NAP, Lovett, and other things as well. I appreciate the transparency on the flows and also the origin story. You know, we've covered a lot of some of the concern about SPVs. Right. What are you really buying into? and in the end, what did you really get? Now with SpaceX, the data shows it. Let's get to your thesis. You are bullish on SpaceX. Which part of SpaceX? Well, I mean, as you know, there's a three-engine empire, right? You've got the launch where they dominate 90 % and even the competitors are using them now.

36:42So they've got 10 ,000 satellites in space. They dominate this market. They've got a clear moat in that area. Their costs have gone down from$54 ,000 down to about$2 ,000 per kilogram. We look at NASA, which over the last 30, 40 years has gone up from$54 ,000 up to$58 ,000. So they're the cost leader. Elon Musk is very much like a modern-day Rockefeller where he's very focused on cost. Then you've got Starlink. And you've got Starlink, which, you know, his leapfrog telecom, cash cow, clearly the crown jewel within the trifecta of the three-engine empire. They've got a five. A lot of people may not realize they've got a five-price interior model where they charge the lowest price for domestic.

37:21defense, and then they have maritime, and then they have aviation, which is the strongest piece. It's five times, 313 times more for aviation, using the same satellite that they use for domestic. So when you have a five pricing tier model, that's really unique and we think going to be extraordinary. Then, of course, we've got the wild card, which is where you have the optionality on the data centers in the sky. We talked a lot about the NeoCloud business. They played a pretty good short-term game with that. If they pull this off, this justifies evaluation in them some. If they pull this off where they can actually get data centers in the sky and they can get energy 24-7 powering solar at 5 to 10 times.

38:08Joel, just really quick, because we're going to hit a break pretty soon. Just reflect, where does this SpaceX IPO rank in your career in the markets? Well, for my career, it's number one. My career, it repositioned our fund, our thesis, and it put a spotlight on our VC lens where we get companies the same way the VC select companies, publicly trade companies. We got into NVIDIA back in 2005. We've held it 21 years. We see SpaceX as a long-term hold. Not unlike that. Joel Shorman from EOS. It's great to have you here in New York City next to me. Thank you very much. Coming up, I'm going to talk to Vanessa Larco.

38:41She joins us to talk about her new venture firm, uncovering early value in AI. seed, pre-seed, and what's happening with valuations in private markets right now. That's next. This is Bloomberg Tech.

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41:13the biggest debates in venture capital right now are about pricing valuations competition and where value in ai will ultimately ultimately accrue even at the very earliest stages joining us now is vanessa larko co-founder of premise a venture firm investing in ai startups at the pre-seed and seed stage and before launching premise she spent nearly a decade as a general partner at NEA. Vanessa, welcome back to Bloomberg Tech. Let's start with the big idea, right? You know, I've written a lot this year so far of what's the point of calling a seed round a seed round. The numbers are getting bigger.

41:49The entities are getting smaller. You know, there are founders who are just a trio of people commanding a very large debut check where you guys are making a big conviction call on those people. Just reflect on the state of that market right now. Yes, it's very competitive. And yes, there are these eye-popping seed rounds that everyone writes about, right? The billion-dollar seed rounds. But the truth is that those are not the majority of the rounds that are getting done. There's still a lot of value that can be created at the earliest stages. we basically see it in three buckets you know at the earliest stages you have founders who maybe dropped out of school maybe they are two three four years out of school but they have a great idea they have a very enthusiastic initial user base we think there's a lot of opportunity there you can get those um at your typical pre-seed seed prices there's like the middle bucket which are founders maybe they went through a combinator maybe they've already raised a small round and you see incredible traction at the earliest stages, right?

42:52Those are more expensive than they've historically been, but they're still within the buy box of seed. And then you have, yes, those repeat founders, the teams that's been out of deep mind that do get those eye-popping valuations. But the truth is a lot of that is de-risked because there's also eye-popping acquisitions of those teams. And so the risk reward actually does net out in those cases, even though they make red headlines. The risk reward or the potential exit like would factor, I imagine, into the term sheet. But for like bucket number one, how do you do the math on the term sheet? Like how are you modeling for future revenues or like does there need to be a future revenue at that point?

43:31Like even a business model? There has to be a semblance of a business model. What we're looking for at the earliest stages are the founders though. It is very much a bet on the founders and what markets they want to build in. The product that they pitch us very rarely ends up being the thing that takes off and raises the next round of capital. What we're underwriting is what is the probability that this team can figure out a great product for their initial customer base in a market that we think is expanding rapidly? And if there's a high probability of that, they get a higher price point. and if there's you know kind of you have to really squint to see if the market can expand or if there's room for a new product then the valuation reflects that as well but it's it's the founder we're underwriting the founders you're a founder of premise um what why make that decision you know after a long period of time to leave a big firm and and go it alone what what does that allow you to do that you couldn't do otherwise at any age well the good news is i'm not alone i have a co-founder who also left.

44:36She left Lightspeed and so we joined together. But it's the same story that our founders tell us. It's, I was working in a big organization. I saw a lot of opportunities. I wanted to move fast and be nimble. I wanted to try things out. And for whatever reasons, there wasn't enough space or time or priorities to go down that path. So at some point you get enough conviction in your ideas and what you want to build that you kind of have to launch. Like there's no other path for you. Vanessa Larco, co-founder of Premise, formerly of NEA, back on Bloomberg Tech, walking us what's happening at the earliest stages of venture funding.

45:16Thank you very much. Let's get through some of the other big tech headlines out there with Bloomberg's Yajira Anand. Hi, Yajira. Hi, Ed. It's time now for Talking Tech. First up, Chinese AI firms like Tencent, Alibaba, and Huawei are opting out of NVIDIA in favor of local AI suppliers. Bloomberg Intelligence survey reveals executives in the country say they'll allocate 46 percent of their budget for AI accelerators to domestic products over the next 12 months. That's up from 30 percent today. Plus, NVIDIA is facing another challenge out of China. Reuters is reporting DeepSeek has plans to develop its own chip to power AI systems.

45:55They'll be designed for the inference stage, where AI models, of course, learn to generate responses to users' questions. And Sentient, a semiconductor and AI software company backed by giants like Intel and Microsoft, is planning to go public. The California-based startup has raised$311 million from investors to date, tapping investors' growing enthusiasm for chip technology. Ed? Okay, thank you, Yuhaira. Now, coming up, the biggest names in tech and media are gathering for their annual summer getaway in the exclusive Sun Valley Resort in Idaho. Stay tuned for the details next. This is Bloomberg Tech.

46:45It's the time of the year where billionaires let loose. Sun Valley Resort in Idaho is hosting its annual summer camp exclusively for those in the Three Comma Club. Jeff Bezos, Sam Altman, Dario Amadei are among the tech leaders expected to attend the invite-only retreat. Bloomberg's Michelle Davis joins us from San Valley on the ground. For the Bloomberg Tech audience that might not be familiar, this is the Allen & Co TMT conference. Super private, super exclusive, and it's all historically been about deals. Set the scene for us.

47:21So, as you said, Ed, this is a conference that has historically been about deals. It's a conference that really got its roots more than 40 years ago with the media and cable industry. And in recent years, of course, tech and AI especially have become an increasing focus. I think what's really interesting about this year, though, is we're on the heels of Paramount Warner Brothers, you know, closing in on their$110 billion deal. That's going to close soon. And once it does, it's really resetting the chessboard here in media. and we're finally at the point where it feels like the floodgates are going to open and we're going to see a lot more M &A in the media industry that we hadn't seen as much in past years.

48:01So it feels like that's going to be a bigger focus here than it had been in recent years. Just last week, Comcast announced that it is going to separate NBCUniversal from its cable unit. That's seen from analysts as a bit of a for-sale sign on both of those units. Fox, as you remember, has announced that it's buying Roku, the streaming platform, for$22 billion. and Netflix still pretty much, we're sure, wants to buy a streaming asset. So, I mean, a studio. So we'll see what folks will be doing here. The mountains of Idaho is a great place to walk your dog, to have a hike, to ride a bike. I've seen the tech CEOs and billionaires do it so many times.

48:39Every year, the key names behind a deal are there. I remember Elon Musk and Twitter, Microsoft and Activision. With the Warner Brothers Paramount deal, are the key names there? We're expecting the key names to be here. A lot of the invite list looks exactly like it's looked for the past 20 years. It's Tim Cook. It's Jeff Bezos. It's Mark Zuckerberg. But there are going to be some new names as well. The incoming CEO from Apple, John Ternus, is expected to be here. Josh DiMaro, who has come in years past, will be here for the first time in his capacity as CEO of Disney. and of course there's always the special guests who you know who will be professors and and politicians who give uh speeches uh during the the official programming that kicks off tomorrow we will speak to bloomberg's michelle davis throughout the week thank you very much that does it for this edition of bloomberg tech one hour from now tune into a live and interactive q a live stream bring all of your burning microsoft and xbox questions to me and bloomberg's video game industry reporter jason schreier we're going to be talking all things video games 1 p.m eastern on bloomberg.com it's been a massive show there is so much happening in markets right now a lot of it driven by the chip sector and memory in particularly recap on the podcast a lot of good and interesting conversations the pod is on apple spotify and iheart thank you very much for joining us from new york city this is bloomberg tech

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