AI Funding Frenzy Continues with Cursor, Thinking Machines

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1:11Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Lovellow in San Francisco. This is Bloomberg Tech coming up. Tech stocks whipsaw as skepticism grows about the Fed being able to cut interest rates in December. Plus, Thinking Machines, the AI startup founded by former OpenAI exec Mira Morati, is in talks to raise funding at$50 billion valuation. And we sit down with the CEO of Cursor after it raised$2.3 billion in a funding, valuing the company$29.3 billion, Caro. Massive private sector funding valuations. But let's get to the public sector because we are being whipsawed on the day.

1:54Look, we are flat. If you're looking at a five-day stretch, the Nasdaq is currently flat as a pancake, as we might say over in the UK. But at the moment, we are still seeing this questioning, questioning of valuations, questioning of sustainability of CapEx spend from the big AI players, questioning of what the Federal Reserve does next. So we dig into key assets that have seen volatility this week. But I'm looking at crypto has been in the eye of the storm. We're off by 7%, let's call it, on Bitcoin more broadly. We're seeing a lot of pullback in terms of the ETF buying. We've seen another more than$800 million washed out in terms of outflows from those ETF products, Ed.

2:29The mood music of the market has changed this Friday in the context of technology. Best laid plans. I was going to tell you that Tesla and NVIDIA were two of the biggest decliners, actually both now in positive territory. But over the course of the week, probably NVIDIA more than any other has had volatility, starting the week with a really big jump, then declining on news flow. actually in aggregate over the course of the week, it's basically flat. But then there's the Super Bowl next week with its earnings. Are we really talking about the Fed or are we really talking about an AI bubble and valuations?

3:01Probably both at this point, Cara. Yeah. And let's get to both of those key elements we want to dissect. Bloomberg TV markets correspondent Nora Melinda is here to really break down what felt like the start of the day of a risk-off rally. The risk-off is still there in crypto, but we're really getting whipsawed in the stock market. We're seeing a lot a whipsawing in the market and a lot of conversation here about a potential AI bubble. But when you think about valuations from the S &P 500 more broadly, we haven't even seen a 5 % decline in the S &P 500 since April. So we do have folks over at Truist Securities really talking about the fact that maybe this is time for a correction because this is a longer period than we've seen opposed to normal here as we haven't seen a correction here for the broader market.

3:43Nora, I'm going to let you and the audience in on a secret. I was going to take a vacation next week. Okay. Check my calendar. Super Bowl Wednesday, NVIDIA earnings. We've got to talk about it. And one of the reasons it's great to have you on the program, let's talk about it through the lens of the options market and what that's telling us about how they've looked at their calendars and how they're preparing for that print. Well, a lot of activity happening here in the options market. And as you mentioned, NVIDIA, of course, being a Super Bowl event for the market next Wednesday post-market. But we are seeing call options here on the VIX, which strikes around 60 here and set to expire right before the NVIDIA earnings come out.

4:22So, it really is showing you a bit of a glimpse into the options market and what that means as we think about volatility more broadly and what that means for the broader market. Someone's taking a bit of a holiday, at least until November the 25th. That's Michael Barry. We understand, of course, he's been winding down his SEC, at least, for Scion Asset Management. But he really sparked off this whole narrative about how we assess assets and ultimately the deterioration of them when it comes to GPUs and chips. Right. And he is talking about the fact that potentially a lot of these tech companies are using it to pad artificially their earnings here.

4:55So when we think about tech companies and the fact that we do see them flying high, we're seeing valuations super intense here. We're seeing them very high. It just really begs the question more broadly as to whether or not these tech companies are running further beyond what fundamentals will actually allow. Bloomberg's Nora Melinda with the tech market look. Thank you so much. Let's keep the discussion going and break down the signals in the economy, how they trickle into business. Natalie Gallagher is principal economist and director at BORD, an AI-powered enterprise planning platform providing macro analysis and strategic guidance to global companies on business investment and economic policy.

5:31It's been a difficult week. We planned this morning show with the narrative in the market right now that this is about the Fed and what they will or won't do in December. But actually, over the course of the week, it wasn't about that at all. It was about valuations and an AI bubble or not an AI bubble. What's the real driving force right now that's top of mind for the people you speak to? Yeah, you know, the debate has absolutely intensified when we talk about are we in an AI bubble? And there's really, there's two sides to the story. On one side, it doesn't appear to be as cut and dry as maybe a repeat of the dot-com bubble.

6:06And that's because we have spending on real capital, contracted services. We also see profitability, right? We see revenue growth when we look at enterprise planning, when we look at productivity tools, advertising, and third and foremost, we also see that the hyperscalers have some pretty resilient balance sheets to fall back on. Now, there's absolutely risk, right, as we approach the potential for an AI bubble, but it's not as cut and dry. Let's try and link it to the Fed. Why does it matter if the Fed does or does not cut interest rates again in December? It matters extensively, especially for a sector like tech, because it's so rate sensitive.

6:48When we look at discounted cash flows, we look at M &A activity. The Federal Reserve was already flying partially blind back in October. Very likely data is going to continue to be delayed or offset as we get into December. And so that elevates the risk of a Federal Reserve misstep that's going to have an outsized impact on tech. What's having an outsized impact on the economy is AI investment. In many ways, it's underlying why we've seen GDP growth. But I've been speaking to CEOs of late and underneath the hood, they're saying this economy is weak. And actually, we're seeing companies, Verizon this week, Amazon earlier, they are laying off tens of thousands of people in many ways to try and right side their cost base.

7:30Natalie, what are you actually hearing from the companies that lead right now? What I'm actually hearing is that there's really two sides to the economy right now, right? It's regularly called a K-shaped economy. So you're absolutely right. We have AI valuations that are really driving business investment and overall economic growth. R &D spending, for example, it was up 15 % in Q2. That is the highest it's been since the dot-com era. Now, when we talk about what's also sort of channeling economic growth, those AI valuations, they're allowing higher income consumers to continue to drive growth in the economy.

8:04And that's why it's so important as we get into 2026, we really have to talk about what does the tech sector look like and what does AI look like in the next 12 months. Now, Natalie, I'm going to ask more of a complex one now. And I want your take just more broadly on women thinking about the AI bubble. Michael Well, Barry, many in the media have been talking about this depreciation of certain assets. In particular, we're trying to work out just how long an NVIDIA GPU lasts you. Is it three years, four years, five years? And the company is sort of doing accounting, wouldn't say tricks, but accounting changes to try and understand how long these assets really last.

8:38From your perspective, what is the asset that we should be analyzing? What is the underlying accounting we should be keeping an eye on? You know, I would say even broader picture, what we really need to track is the investment that's been taking place, right? There's been a significant investment wave really across assets, and this is just part of the broader story. What we're really going to need to see from an economic perspective is this translate into meaningful productivity growth. If we don't see that, then we risk a capital misallocation story. Just a couple of minutes time, we're going to go talk about applied materials, the chip equipment maker.

9:12But that story illustrates that right now there is still an issue with tariffs and with China and with trade policy. Yes. How is that impacting the global economy right now? Right now, you know, we saw an immediate de-escalation when we had the U.S.-China trade talks back in October. And so that removed an immediate headwind. But it also introduced a structural issue. Right. We have an annual renegotiation period, for example. Now, what that does, and in broader sense, what tariffs do, is they create a situation where companies don't have quite the forward guidance that they would like. Because we're talking about investment cycles that are seven to ten years.

9:51Realistically, we're getting about one year visibility into overall prices. We're about to get a bit of visibility next week with our so-called Super Bowl when it comes to NVIDIA's fundamentals. But when you're giving analysis, when you're thinking about strategic advice, do you think the commitment to continue spending by big AI players is there and is there globally at the moment, Natalie? I absolutely think it continues to be, have a lot of weight behind it. Now, what I also see when I look at the numbers is that there's been sort of a clear shift in investment strategy towards evidence-based investment rather than just spending on faith alone.

10:29You know, we absolutely saw this with how investors responded to share prices following the earnings release back in October. It's been great having you. Come back soon, Natalie Gallagher. She's principal economist at board. We appreciate it. Look, Ed just teased us, Applied Materials. Let's go there. I'm just going to flip on from Tesla and NVIDIA and show you what's happening in Applied Materials stock right now because we're off now only by three tenths of a percent. This company was sinking as much as six percent at the opening of trade. We were worried about the current quarter sales that are suffering largely because of a decline in Chinese business in particular.

11:00That is a significant, about 30%, let's call it 29 % of total fourth quarter sales were from mainland China, and they declined some 8 % year on year. What are we thinking about this fiscal year? Look, we've just been talking about Taraset, and we know the outlook isn't great, but it's interesting how much this stock wants to rebound, how much the market wants to rebound right now. Yeah. Coming up, former OPI executive Mira Marati's startup, Thinking Machines Lab, could soon rank among the world's most valuable private companies. We'll give you the latest in the funding talks next. This is Bloomberg Tech.

11:36This is Caroline Hyde. And I'm Ed Ludlow, inviting you to join us for Bloomberg Tech, a daily podcast focusing exclusively on technology, innovation and the future of business. Every weekday, we bring you the top headlines from the world's biggest tech companies. From finance to defense, AI to entertainment, and from startups to the magnificent seven. We highlight the latest stories of the people and companies pushing the tech sector to new frontiers and the politics that shape global tech markets. We do this all every weekday, then bring you the most important conversations and analysis in our podcast.

12:10Search for Bloomberg Tech on YouTube, Apple, Spotify or anywhere else you listen. Join us every afternoon on your commute home and stay ahead of the tech news cycle. That's the Bloomberg Tech Podcast. I'm Caroline Hyde in New York. And I'm Ed Ludlow in San Francisco. Subscribe today, wherever you get your podcasts.

12:34Thinking Machines Lab, the AI startup founded by former OpenAI executive Mira Murati, it could become one of the most valuable private companies less than a year after it launched. According to sources, the startup is in talks to raise funding at a$50 billion valuation, quadrupling its value from July. Let's get more from Bloomberg's Rachel Metz, who worked on this story while their very own Ed Ludlow and Shereen Kafari. Look, is there fundamental growth? This is vindicating this sort of 50 billion, or is it on the backing that she was there in such a leadership position over at OpenAI? I mean, it's a very young company and they have released a product.

13:12So it is possible that they're seeing a lot of traction that they haven't spoken about publicly yet for their product. It's called Tinker, and it helps people and companies fine-tune AI systems. But it's not clear how much growth they could actually have, right, if they've been around for less than a year. So it's pretty tremendous that they'd be in talks for this kind of money and valuation. When we broke the story, people on social media kind of blew up, and they were saying, oh, that would be$25 billion per blog post because the company's only ever done two blog posts. But we did get the sense that this is Mira Moratti, right?

13:47that she is out there talking to investors about this. It's her. She's the face of it. Explain to our audience who she is, why she's important, and I guess the intellectual capital that she gives that place. Sure. So Maradi has been in the tech industry for a long time. She has been at OpenAI or had been at OpenAI for a number of years and was an executive there. So she was at the company before things sort of like exploded with the brief ousting and rehiring of Sam Altman. In fact, she was very, very briefly named CEO during that whole debacle. So she has a lot of experience dealing with crisis and also with a company that's grown very, very quickly in AI.

14:34And she has attracted a tremendous roster of talent at this company. thinking issues. Yeah, dig into that talent, Rachel, because she actually drew over with her an awful lot of ex-OpenAI, well, actual co-founders came with her. Absolutely, yes, quite a number of early employees. She has one of the co-founding employees over there, John Schulman, with her, and also there are people advising the company that used to work at OpenAI. So, it's a very deep bench of experience from that company, but also from other companies as well. But OpenAI in particular, there was quite an exodus of talent from that company to her company.

15:15And again, the reason this is extraordinary, it was only February that they kind of came into existence publicly. July raised at a$12 billion valuation. Now, November talks for$50 billion valuation, maybe more. Bloomberg's Rachel Metsch, thank you very much. Turning to media, Paramount, Netflix and Comcast are eyeing potential bids for Warner Brothers Discovery. Meanwhile, the company has amended CEO David Zaslav's contract to secure his pay in the event of a sale. For more, let's bring in Bloomberg's Felix Gillette, who joins us now. There's a deadline to this, the bid part, and so there's some mechanics to why Warner Brothers Discovery took this step.

15:54Yeah, I mean, now we know the deadline for the first bids is a week from yesterday, November 20th. So that's coming up fast. And I think this is another signal that, you know, big transaction potentially could be coming down the pipeline sooner rather than later. You know, they changed the Avsov's compensation package to account for all these different possibilities, you know, whether it's a sale of the whole company, whether it's a partial sale, or potentially if there is no sale and the company goes through with its original planned spinoff of the cable networks from the studio and streaming business next year.

16:31It's interesting. Now that's a reverse spinoff. Initially, it was going to be Warner Brothers. It was spun off the actual bit of movies and the magic and the streaming and cables were going to be left with Discovery Global. And now it's the other way around. But whatever the case, David Soslav's saying, look, I'm committed until 2030 unless he has to leave because the company is bought. From your perspective, you're hearing more that the insiders would like it as a whole sold, or would they like it sold for parts and to different players? Depends on who the bidder is. I mean, Paramount Skydance clearly wants the whole thing.

17:06They're happy to take the cable networks that would fit in with their portfolio and give them additional scale. But if you're talking about Netflix, they have no interest in the cable networks. They just want, you know, the studio's business, the library, the HBO Max side of things. Comcast, you could see maybe going either way. But really, they want the studio, the library in terms of scale, getting their streaming business, Peacock. I think they're worried that if they don't do a big transaction like this, you know, it's going to be very difficult to keep up with Netflix and Amazon in the years ahead.

17:40Felix, you've already answered this, but let's leave our audience with the what we know. So explain just very quickly again the deadline and where we think these bids stand. Yeah, the deadline for the first bids is a week from yesterday, Thursday, November 20th. We think these three companies are going to submit bids. And, you know, the Warner Brothers Discovery is saying that they're hoping to get this decided one way or the other by the end of the year. So we at least now have a very concrete timeline for how they're going to deal with these bids. they've been out there meeting with the bidders, presenting their financials, going through the library and plans.

18:16So this is happening quick now. Seemingly, a$58 billion offer from Paramount Skydance is not enough. Bloomberg's Felix Gillette, we appreciate you breaking it down.

18:33Chinese e-commerce platforms, they saw strong sales during the country's month-long shoppings event, Singles Day. Now, an AI integration emerged as a major growth driver of that. Let's speak with Jacob Cook. He's co-founder and CEO of WPIC. It's Marketing and Technologies, which helps global brands expand their reach in Asia. And boy, have we seen the reach of Singles Day into weeks, into months. But are the numbers actually good when you take into, well, the idea that it is longer than on previous times? Yeah, we did a leg-for-leg comparison. And we think it's about 14.8 % up over last year, which is actually much better than expected.

19:10We think this is the strongest one since 2021. And they ran a week earlier and a couple of days later. But even taking that into account, we're pretty optimistic at the Chinese consumer right now. OK, where is the Chinese consumer right now? Well, middle class growth was pretty good. You know, Alibaba is now reporting numbers, especially with their 88 VIP program that's also really strong. and that's focused on a more upscale consumer. They're reporting 30 % up in that particular category. So that's pretty good. Middle class consumers are what people have been worried about over the last couple of years.

19:45There's been pressure in employment. So that really didn't play to any consequences here for this 11-11. It was great. We're seeing close to 15 % growth year over year, which is already the largest shopping festival. So these numbers are pretty optimistic. Jacob, are we in a position where we can look at all of the Chinese technology companies that participate in this and say this specific company won? They are ahead. Alibaba is the one I'm thinking about most because in early October, the shares hit, I think, their highest level since 2021. But there's no sort of tangible evidence that any one company, at least from what I can see on the Bloomberg Terminal, did any better or AI made any more impact than any other in this period.

20:32Yeah, it's interesting. I think for sure the destination platforms, as opposed to the social commerce platforms, did better here. So that's JD, that's Alibaba. They're definitely, we think, much stronger growth than the Doyen or Red Node platforms. right so AR really did I mean the the business advisor that Alibaba released is quite effective you know it made things a lot more efficient despite that growth of 14.8 percent that we think they came in at you know ad spend growth was much lower than that which means that acquisition costs have come down and Alibaba is really making it more efficient to find your customers and I think what's going to happen as a result of that is we're going to see a lot more ad shift maybe away from the Doyin and TikToks next year into Alibaba platform, I think we're just going to further drive that growth.

21:18Jacob, what did you learn about the health of the Chinese economy? You know, this came in better than expected for us, too, as well. You know, so we see really solid growth. And we've seen this, what we looked at, we saw labor pressure also picking up in terms of salaries and the amount of household income recently. So this wasn't totally unexpected. But I think if there was any apprehension about the stability of that middle class consumer or upper class consumer, I think that should be over. I think we're heading into a really good 2026 in terms of the story about the Chinese consumption. I mean, the government's been there to prop it up.

21:55There's been subsidies. So in many ways, people would say that they should be able to buy at this moment. What is it that they buy in terms of domestic brands versus, well, the companies that you advised who are trying to access Asia at this moment? Yeah, I think it's all over the place. I mean, when we look at, again, when I was talking about the 88 VIP and we look at that middle and upper class consumer, we would see a lot more of the imported products consumed by that demographic. So that's what's driving a lot of that growth right now. But, you know, I think that a lot of the local brands, especially, you know, mainly TikTok and Doyen focused, a little bit more price conscious.

22:29But I think what happened again, you know, Alibaba's business advisor, you know, we expected, you know, in terms of the price recommendations to drive pricing down. We thought that was what it was going to do. But we were actually pleasantly surprised. In some cases, it had actually recommended that that prices come up, which has been good for margins. So I think all of those factors, you know, put into place, I think foreign brands are going to be a little bit more focused on that market for next year, seeing a little bit more margin growth and top line revenue growth. Stephen Engel, our reporter over in Asia, did a beautiful wrap up of like the ways in which they are targeting using e-commerce, social media and the influence of influencers.

23:08But how are you seeing AI and some of the ways in which technology are helping some of the brands that you represent? Well, I think just from from being on the ground, this year was very efficient. I mean, you know, it did run for a month. Sales were spread out different categories, which made it really great to operate. I mean, if we go back to 10 years ago, it was kind of bring your toothbrush and pillow to work because you were there 24 hours around the clock. This year, the preparations, the AI, just the assistance in general and efficiencies really kind of made it great for operators. And it kind of reduced the stress level on people's operations.