AI Industry’s Circular Financing Deals, Apple Smart Glasses

25:10And aside from it being kind of cute and definitely different, meaningfully different from normal smartphones, which have kind of hit a very incremental update cadence, I think it's harder for even regular people to be impressed by new smartphones. This definitely is different looking than most smartphones on the market. And just from a practical perspective, it is especially well suited to media consumption, including both looking at all the photos you have on your phone and watching videos. The aspect ratio is just better suited for both of those things.

25:42Ed Ludlow:And Dana, real quick, remind us how much the Z Fold costs. It ain't cheap. Just short of$2 ,000. I think it's about$1 ,900 here in the U.S. So definitely not cheap, even by modern smartphone standards, which have undergone some price hikes across different brands. Limbo Stainer-Wallman, editor on the consumer technology team with everything Apple and everything Samsung. Thank you very much. Now coming up, NVIDIA doubles down on AI. New investments, bigger partnerships, the growing debate over who's really financing the AI boom. It is interesting that NVIDIA is now down almost 5 % for all the headlines on what were headline positive pieces of news.

26:23Ed Ludlow:This is what markets look like. We opened higher. We're now a lot lower, particularly in chips. We can unpack all that all. It is halftime. We'll be right back. This is Bloomberg Tech.

26:42We used to build computers for people to use, and we're going to still continue to build incredible computers. These are now processing AIs for humans to collaborate with. But in the future, we also have AI agents and robots, and they're going to be using computers. So instead of just a billion people using computers, we're going to have 100 billion agents and billions of robots all using computers. The computer industry that's built on top of the chip industry surely is not big enough.

27:13Ed Ludlow:Welcome back to Bloomberg Tech. Some of my conversation with NVIDIA CEO Jensen Wang. Let's get back to today's big number,$750 billion. That's the potential value, potential value of a fresh round of AI infrastructure deals NVIDIA is working on. Markets have reacted in a really unusual way to a number of headlines this morning. The concerns about circular financing, the idea that NVIDIA is bankrolling the same companies that are buying their technology. There's some nuance in that$750 billion number. We need to understand it. But having opened higher, NASDAQ 100, but particularly chip stocks, are now markedly lower.

27:49Ed Ludlow:Joining us for more is Bloomberg's Ian King, who is with me in San Francisco Friday night, trying to understand what was a big AI event hosted by the Korean government. Let's just focus on the SK bit. Half a trillion dollars. I had the opportunity to ask Jensen to sort of just explain what it encompasses. You also did some reporting on what it encompasses. What does it encompass? Yeah, that's a good question. And the problem is we still don't know. I mean, a while ago, big numbers were a good thing. It was great. They were celebrated. now, you need to bring the details. So this could be spending by SK on the data centers, that would be SK Telecom.

28:24This could be spending by NVIDIA on SK Hynix's memory chips. This could be investment by NVIDIA on helping SK Hynix develop future memory chips. We just don't know. Because we don't know, there's the risk.

28:40Ed Ludlow:I think Jensen's response to me is basically all of the above, right? And there's no timeline for the deployment of that$500 billion. But SK Hynix has 60 % market share in high bandwidth memory. NVIDIA has a greater market share of compute. So that's kind of how it was explained to me. There's the open AI piece of this. And one thing I think the audience really appreciate is there's all the reporting about what NVIDIA is or isn't committed to. But what argument does NVIDIA make historically about whether it is or isn't circular financing. Yeah, I mean, it's pretty much what Jensen said to you, which is, look, this thing is going to the moon.

29:15It's growing and it's growing and it's growing. I'm making these investments to speed up that growth and to facilitate that growth, make sure it doesn't stall. And guess what? If I'm buying parts of these fantastic companies, then that's going to provide a great return on that investment. That's his argument. But obviously underpinning that is that we're going to the moon and not everybody believes that.

29:33Ed Ludlow:Right. So it's whether or not you believe in the future state of the market that Jensen's outline. Just to finish, it was very interesting to be there on Friday. Jensen Wong is still a leader in industry, but it's kind of more than that. You had the president of South Korea, all of the major AI CEOs, and then Jensen kind of leading the way in the middle. What else did we learn from that event? Yeah, I mean, you have arguably the two leaders of the AI software development efforts. You have Dario and you have Sam Hultman, and we're talking about who's doing what, who's doing chips. Chete One is like, oh, well, you know, these guys are making chips now.

30:12And that was a revelation. And, you know, Dario was there on stage with him, supposedly having told him this. Jensen, who he would be competing with, was there on stage. So there was a lot of dynamics and that just showed how fluid the situation is.

30:24Ed Ludlow:On a very serious note, NVIDIA's decline has now accelerated to 5%. Again, markets opened higher. NVIDIA is now down. There's no explicit headline, but the chat in the market is about circular financing. Bloomberg's Ian King. Thank you very much indeed. Let's get more on NVIDIA. Mandeep Singh of Bloomberg Intelligence joins us now. And really interesting to see what you and the team had to write. I talked a little bit earlier, Mandeep, with a portfolio manager who really agreed with your thesis, which is, on the other hand, NVIDIA doing this gives a lot of confidence to the market, right? It's constructive overall for the AI build out.

31:01Ed Ludlow:Is that what we're writing here? It is. And look, I think because the numbers are getting so big and who has the most free cash flow to invest in the backstop of leases, it's NVIDIA. NVIDIA. And NVIDIA wants to boost up, you know, not just OpenAI or any specific company, but that entire NeoCloud complex because they want that compute to be deployed beyond the cloud providers who are in turn developing their own chips. But at the end of the day, the more fragmented this model ecosystem is and the more companies that use NVIDIA, I think that's what they are focused on for the next few years. Right now, NVIDIA is down 5%.

31:46Ed Ludlow:It's biggest drop since the first week of June. But I'm just trying to understand the sort of reaction in markets to what was like lots of different headlines. We're also showing your research, and there's a line in that, easing concern that capacity demand is fading. You still see very long-term demand outpacing this industry's ability to supply. Yeah, I think the core of the thesis is that, you know, AI is going to be a lot more compute and power intensive than it used to be, memory intensive. And when it comes to the type of computing that is required for large language models that have got trillions of parameters and do so much computation to get to the next word, there is no shortcut.

32:27I mean, if these open-weight models were tomorrow coming up with a much smaller model that can have the same type of reasoning as the frontier models, then we would have a very different conversation. But for now, even with the open-weight models, the number of parameters seems to be going up. Give me K3's 2.8 trillion parameters. So that's where I think the compute needs will remain. And that's kind of the core thesis that Jensen has as well.

32:57Ed Ludlow:I got some details on that model in just a minute. Mandy, real quick, the research on NVIDIA also ties in what we learned last week from Alphabet. And this week, we have a big earnings week on deck. Where are you thinking right now about CapEx as a guide? I mean, these numbers, the hyperscale CapEx would exceed$1 trillion for those five companies. And everyone will raise their CapEx. I see no reason for anyone, you know, not raising CapEx. And if they're not raising capex, then that's where, you know, the memory price increases have to be accounted for. And there is some sort of an offset I'll be looking for.

33:34Ed Ludlow:Bloomberg's Mandeep Singh, leading technology research at BI. Thank you so much. Now, we've just been discussing Beijing-based Moonshot AI has officially released its latest model, Kimi K3, as Chinese firms closed the gap with U.S. rivals. Moonshot posted on X saying the model has architecture of 2.5 times the intelligence per unit of compute. The initial announcement of Kimmy's K3 and benchmark performance triggered a sell-off in AI-related stocks this month. We covered it on this show. The company was accused by the White House last week of improperly using AI models and banned NVIDIA chips as part of development and training of their products.

34:11Ed Ludlow:Coming up, we've got way more on private markets, specifically why one firm is looking into supply chains for its next investment. Joining us is Overmatch Ventures general partner, Morgan Hitzig. This is Bloomberg Tech.

34:40on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less.

35:23That's public.com slash market. Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., Member FINRA, and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. Ask yourself, what are your best people spending their time on right now? Expense reports, receipt chasing, month-end close that takes weeks. You become what you spend on and that's not what you're building toward. Brex is the intelligent finance platform that eliminates that work before it starts. AI agents that handle the manual stuff automatically so your team can spend their time on what actually compounds.

36:04It's time to get Brex AF. Learn more at brex.com slash AF.

36:36administration. This product is not intended to diagnose, treat, cure, or prevent any disease.

36:42Ed Ludlow:Europe is divorcing Palantir. Despite being a critical component of the continent security apparatus, Palantir's Trump-aligned infamy has heightened urgency for Europe to repatriate key services that have long been outsourced to American companies, giving way to European newcomers. Bloomberg's Mark Bergen joins us with one of the most read stories in tech on Bloomberg Today. This has all the hallmarks of something that's right at the heart of the Bloomberg Tech audience's interest right now. But in simple terms, Europe wants to find a European Palantir to do the business that Palantir is currently doing.

37:16Ed Ludlow:What are you reporting? Yeah, that's right. I think there's a couple of things happening. One, as you mentioned, Palantir is becoming the stand-in for Silicon Valley tech and a particular type of Silicon Valley company. It's very close to the Trump administration, working with the Pentagon, working in Israel. It has some political baggage and the outspoken CEO, Alex Carp, of co-founder Peter Thiel. The second component is that the impetus for our story was that the French intelligence agency has swapped out the Palantir contract for a local provider called Chaps Vision, working with the intelligence services for the past decade.

37:51This is kind of national critical work. And you're seeing an increasing amount of officials in Europe saying, this is something that we just can't afford to outsource.

37:59Ed Ludlow:Well, this is being played out in the public domain. French Prime Minister Sébastien de Canu posted this on Instagram, the divorce line that we opened our conversation with. That's a case study. But are the European nations kind of following in his example? I think that was far more political theater than what you're going to see elsewhere. But we have seen, we've seen the Dutch defense minister come out and say, we're looking to phase out Palantir. We have some reporting on our story that Poland is is looking for alternatives as well. The company we profiled is Chaps Vision, a pretty, I would say, relatively obscure tech company.

38:36It kind of operates more like a private equity roll-up firm. It's bought almost 30 different companies. They told us they want to be European champion, that they're talking to every single country in Europe right now. Again, they're very small relative to Palantir, but clearly they have a lot of political will on their side.

38:54Ed Ludlow:Mark, with our colleagues in research, you've essentially calculated what it's going to take for Europe to get to a pace where it's not reliant on U.S. tech. What's the headline dollar figure and what does it account for? In the trillions, it's massive. And I think there's a distinction, however, between the kind of building out a cloud infrastructure, building out chips, building out even large language models, and then some of the tooling and the services layer that a company like Palantir provides. And, you know, Palantir obviously will argue that they have 20 years plus of experience and that their tools are far more advanced than these countries and companies that are switching off are going to realize that they're suffering.

39:34But I think the counterpoint to that is that it's much cheaper to build an alternative to Palantir than it would be to build an alternative to OpenAI and Anthropic.

39:43Ed Ludlow:Bloomberg's Mark Bergen from London. Thank you very much indeed. We have more on defense tech. California startup Antares Nuclear raised$470 million to advance its plan to build tiny reactors aimed at supplying power for U.S. military bases. The Torrance-based startup is part of a U.S. Energy Department program aimed at acceleration of nuclear power. Venture capital firms Paradigm and Caffeinated Capital are co-leading the funding round. The investment is expected to help the company deploy its first systems to U.S. military installations by 2028. And the Financial Times reported that SpaceX's European rival, the exploration company, is in talks to raise at least$300 million, bumping the company's valuation to more than$2 billion.

40:25Ed Ludlow:The funding round, which isn't yet finalized, is aimed at financing the exploration company's efforts to develop the first European reusable space capsule, which will be used to transport cargo to the International Space Station and its planned successes, according to the FT report. Let's stick with private markets and deep tech. One venture firm believes investing in single points of failure, or SPOFs, as a core part of its investment thesis. Joining us is Overmatch Ventures general partner, Morgan Hitzig. SPOFs, SPOF, single points of failure. You and I have had really robust conversations about how to be specific, how to focus on what is now a broad category, right?

41:08Ed Ludlow:Defense tech, national interest tech. Explain your thesis here. Thanks, Ed. It's great to be back with you. One of the things we focused on is single points of failure. And we wrote this piece last week. We called it the most valuable map in the world. And this really came on the heels of the president's executive order focused on supply chain. And that executive order had sort of three key pieces of it. The one we honed in on was mapping supply chains down to the raw materials, particularly for defense contractors. So how does that manifest for us here at Overmatch? We're really focused on companies that have some edge that is oriented on these single points of failure.

41:46And those single points can be technical in nature. So think the heat shielding on a hypersonic missile. They can be physical in nature. It could be a plant or a mine. We've got a couple of companies that are orienting in that domain. Or it could be regulatory or labor or several other key facets we're focused on.

42:05Ed Ludlow:So I want to get deeper into what we are literally talking about. Drones are a good case study. So you can go out and invest in a drone company, but the fetters or barriers to the drone industry are their supply chain. So it sounds like what you're trying to identify is that problem and then the people that are solving specifically for the supply chain problem. Correct. And I think the drone example is a great case in point. You know, the Department of War has been very focused in the Office of Strategic Capital. Their first major tranche of financing was oriented on critical minerals. They're now focused on the unmanned systems supply chain.

42:42And so that's everything from printed circuit boards. We actually have a company that's focused on that space called Principal Mineral. They're also focused on actuators. All of these places where we have drone companies that are effectively, I mean, they're systems integrators at their core. but they are also doing this hardware-software combination. But one of the things we realize is they're all reliant on the same core suppliers and how do we create better secondary suppliers to create more robust supply chains.

43:14Ed Ludlow:You're right. Today, SPOFs are simultaneously a strategic crisis for America as well as one of the most mispriced investment opportunities. mispriced to the downside? What do you mean by that? So they're mispriced because they're not factoring in just how critical they are from a geopolitical perspective. So SpaceX is a good example. If you think about the upside of SpaceX, I think one of the things that's not yet priced in is just how reliant some of the communications companies are, just how reliant the military increasingly is on Starshield. So there's a lot of upside there if you factor in geopolitical risk.

43:54Same thing for some of these assets that are sort of sleepy industrial assets. Think actuators, think uranium mining, think all of these things that used to not be venture backable, but with the combination of some of the financing that's coming from the government side. So Office of Strategic Capital is one example, but you also have Ex-Im Bank. You also have DFC under Ben Black's leadership. you've got a whole bunch of organizations that are making it, pricing some of these assets in a way where they're actually venture backable now. Although there's always still going to be that conversation of what can be an early stage venture business and what should stay in the private equity domain.

44:38Ed Ludlow:Okay, so that last point I find fascinating. The cap tables look different. When I read big rounds, maybe at the growth stage, but the names are different, right? So American Dynamism for Andreessen, Founders Fund is very focused on this area. But increasingly, you've got the legacy mutual funds, private growth equity, also kind of catching on that this is important. What's Overmatch's experience of playing in that field? So we have great relationships with these organizations. I think one of the things that has built a bridge to the Blackstones of the world, to the Cerberuses of the world, to the J.P.

45:14Morgans of the world, is the fact that the government is putting their money where their mouth is. There's a real demand signal there. And so, you know, we work a lot with J.P. Morgan. That's one example I'm sure you've talked about on the show. Yeah, we covered it. they've been really focused not just on on and off balance sheet investments, but also they've got a$10 billion fund focused specifically in this domain. So we see it as a great way to bring follow-on capital alongside some of our early stage companies. We just had that in one of our more recent funding rounds with a company called Armada, really getting some of that growth capital in earlier to focus on some of the CapEx spend.

45:56That's just really tough when it's early stage venture capital dollars.

46:00Ed Ludlow:Overmatch Ventures general partner, Morgan Hitzig. Thank you very much indeed. Now coming up, investor anxiety of AI spending has picked up ahead of big tech earnings. That's the calendar for this week. But let's take another look at NVIDIA. Down 5%, you know, having opened up higher with the rest of the market and like very quickly, the conversation has gone from announcements on investments in AI infrastructure to circular financing. There's more to come. This is Bloomberg Tech.

46:40Ed Ludlow:Big tech earnings coming thick and fast this week. Bloomberg's Ryan Vestelica here to talk us through how markets are gearing up. I would say there's a lot of pressure, particularly in semiconductors right now. Look, that's a lot names, Microsoft, Amazon, and Meta, it's going to come down to capital expenditure, right? Like the vibe has changed on what Wall Street needs to see to get a pass on the scorecard. Yeah. Someone told me last week that it used to be the more CapEx you were doing, the better. Now it's completely the opposite. Now the less you're doing, the better. We saw last week, even Alphabet, which by most accounts is the best position company of the big four hyperscalers to compete in AI.

47:23It has Gemini, it has Chips, it has Waymo, it has Search, it has YouTube, it has all these different businesses that it can use its AI in. And even it was unable to justify the amount of CapEx it's doing, at least based on the stock price reaction. It had the worst day in more than a year, in part because it is spending so much that it turned cash flow negative for the first time in its history as a public company. Now we have, like you said, Microsoft, Meta, Amazon, they're all reporting this week. The spending plans are going to be, I would say, by far the most important thing people are watching for, as well as their ability to kind of articulate why they feel like they need to continue spending this much.

48:06and they need to show that it is translating to improved growth, improved prospects, improved efficiencies. There's a big hurdle here for them.

48:15Ed Ludlow:Reading your weekend piece with Jaron about how earnings collide with the sort of market revolt of higher AI spending, Apple is the outlier, right? Different to the hyperscalers. What do we look for there? Well, Apple, I'd say the thing I am most paying attention to is how it's talking about memory prices. Obviously, memory chips have been in huge demand this year because of the AI infrastructure build out. Now, Apple recently raised prices for some products, but not the iPhone. So it's going to be very interesting to see what they say about the landscape with respect to memory. Is it having an impact on demand?

48:50Is it having an impact on margins? Are they thinking about expanding their pricing to other categories like the iPhone? Of course, we have the foldable iPhone that's expected later on this year. we don't really know what the pricing is going to look like there. Maybe this is a way for them to kind of sweep some of the memory prices under the rug with just a higher price target for this new form of the phone. We don't know. But that's going to be something I am paying a lot of attention to. And I imagine memory is going to be the real issue for people.

49:18Ed Ludlow:Just very, very quick. The market's kind of weird today. It seems circular financing concern. Is there anything else you see? One thing I would just flag that you see in NVIDIA down quite a bit today. And it looks like, at least at the moment, Apple is once again the largest company in the world. So it really shows you right now the bifurcation in the market. Apple not really participating in the AI spending trade. The stock has really been rewarding and others have been falling back. Bloomberg's Ryan for Celica across everything. Thank you so much. That does it for this edition of Bloomberg Tech.

49:48Ed Ludlow:And as Ryan said, this is what markets look like. Big sell-off in chip stocks, NVIDIA down 5%. some conversation around circular financing, which you can recap on the podcast. Find it online on Apple, Spotify, iHeart, and also on the Bloomberg Terminal. Have a good week. This is Bloomberg Tech. When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline.

50:23At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation. Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. If your best finance people are doing expense reports, chasing receipts, or spending time on month-end close, It's time to get Brex AF, a gentic finance that eliminates that work before it starts.

50:59Learn more at brex.com slash AF. Aging is real, and so are the benefits of adding vital proteins, collagen, peptides to your daily routine. Because around the age of 30, your body needs backup to keep your collagen up to help support healthy hair, skin, nails, bones, and joints. Available in the classic collagen peptides, collagen and protein shakes, and new Vital Proteins Collagen Sparkling Waters. so you can stay vital, stay you. Visit vitalproteins.com to learn more and where to buy. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.