AMD's Chip Deal With OpenAI Triggers Explosive Rally

23:42So I think it positions them well, gives them credibility, scale and additional kind of co-development R &D to improve their roadmap. So to me, it definitely is a big positive. And I don't think it's a zero sum game. I mean, I think it just further signifies the demand for AI compute. Even it's good for the country to build this much capacity because I do think the end payoffs are immense. I mean, Tony, we're at a new record high for the Nasdaq 100. At one point, AMD was at a record high. The valuations get over higher. When I'm looking at your holdings, top holding Apple, Alphabet, NVIDIA, Meta, do you feel confident that these are going to continue to gain in value with this AI story?

24:25I think there's a good long-term story behind all our holdings. and I think a lot of them are beneficiaries of AI. They're strong companies that are great platforms. And as a result, I think that we are entering this inflection and AI driving a ton of productivity. You think about output being productivity and labor. I think productivity is going up and labor is going to be relatively uncapped, I think, as a limiting factor. So to me, I think it's exciting. It's never been a better time to be a tech investor, I think. There's just so much change and dynamism. So I'm excited for the multi-year here.

25:05Tony, if you'll humor me, please. My column today was about all of the debt deals that are underpinning the AI infrastructure build out that we're seeing. You know, everyone seems to have a different comfort level with that as well. How sanguine are you about the role of debt in what we're seeing? Yeah, I think that the key signal here is what is this AI capacity, this AI infrastructure capacity worth, and what's the useful life? I think a few years ago we were debating is the useful life of a GPU data center three or four years, and I think that was just too short. You look at a lot of the GPUs from seven, eight years ago, they're still being fully utilized.

25:47because the AI workloads continue to evolve. And then when you fully depreciate these assets, like they're at a price point that can make sense for other LLMs to be running on them. And so I think that, you know, the useful life of these GPUs are definitely more than four or five years. And, you know, there's just more and more use cases. You think about robotics, like, you know, diagnostics, simulation. There's just a ton more than we thought there were three years ago. And I think that's what will keep the utilization high of these data centers. As long as that, you know, continues, I think it makes a lot of sense.

26:23Tony, I'm going to pivot another part of your portfolio. Verizon change at the top, Hans Versberg handing over the reins to Dan Schulman. How do you feel about it? Can you comment on that question? With Verizon, we are seeing executive changes at the top on certain companies. How do you feel, for example, of Verizon seeing Hans Versberg changing over the reins today? Yeah, actually, we don't own Verizon, so I probably, that's a little bit outside of my wheelhouse to comment.

26:53Tony Wong of T. Rowe Price, we're trying to get you on all the news of the day, but we really appreciate the insight into the AMD OpenAI deal. Thank you very much. Carrie. Time now for Talking Tech. First up, Apple, Ed, is facing an investigation in France over the storing of voice recordings made by its Siri assistant. Probe is related to claims that subcontractors and had access to sensitive recordings. The iPhone maker says it uses Siri interactions to improve services and only stores them in users opt in. Apple declined to comment on the investigation. Plus, Foxconn reported sales growth of 11 percent in the third quarter and projected further sales growth this quarter.

27:28The gains by NVIDIA partner, officially named Honhai, signals that demand for AI chips and servers remain strong. And Tesla shares jumped after the company posted cryptic videos teasing a possible product unveil. Tesla's last addition to its product lineup was a Cybertruck two years ago. Executives have said an affordable Model Y is on the works.

27:54Welcome back to Bloomberg Tech. We check in on these markets. New record highs. October, apparently, is how it's been coined, certainly for looking at the crypto world. Bitcoin, 125 ,230, up 2%. We had a risk-on rally throughout the weekend. That risk-on rally continues into Monday with the Nasdaq 100 up 0.7%, and you know why. There is a key player at the moment that is helping us push up and to the right. It is AMD up 26%, at one point hitting a record high, up the most in nine years. Extraordinary new deal soaring after, of course, it's doing this deal with OpenAI for AI infrastructure that could generate tens of billions of dollars in new revenue.

28:30Ed, we had a great conversation with Lisa Su and Greg Bultman a moment ago. Another great conversation coming up. Yeah, really looking forward to this one. Joining us now is the White House AI and crypto czar, David Sachs. He is also the co-founder and partner of Craft Ventures, of course, as well. David, there is something that I've wanted to talk to you about for a long time, and we will get to it, the debate around should the United States or should the United States not export some form of AI chip to China, and we will get to it. But I'm sure you can appreciate, you know, the AMD and OpenAI agreement is very interesting.

29:03And so as a place to start, could I just ask your sort of interpretation of what it signals when you have a U.S. chipmaker like AMD after NVIDIA and one of the frontier model shops like OpenAI working so closely together on infrastructure? Well, and I think the main thing here is is there's an AI boom going on. And the market is highly competitive. We have a number of leading model companies. We have a number of leading chip companies. And they're all competing with each other. And they're all booming. And what we see here is that this AI boom just keeps going and going and keeps driving businesses to new highs.

29:40And this is all a result of President Trump's pro-innovation, pro-export, pro-AI policy. We saw this help drive US GDP to a 3.8 % growth rate in the second quarter. So I think this boom just seems like it's going to keep going and going. And we just heard, I think it's Jensen Wang was the latest on a podcast, shouting you out, shouting out those that are in the team at the White House at the moment, guiding when it comes to technology, David. But I'm interested as to whether you as an investor have great comfort in these relationships, being built financial relationships between chip designers and the chip users?

30:16Well, I think it's up to them. You know, I don't really take sides in these deals. We want all of our American AI companies to be successful, and they're all competing with each other and cooperating with each other. I guess it's called coopetition. And that's a great thing to see. We just want, you know, putting my AI hat on, we just want these markets to be competitive, and we want American companies to be successful. And that's what's happening right now. I'm looking, therefore, at the future rollout, the buildout. Anything that gives you pause in terms of actually the infrastructure needs here at the moment, David?

30:49well anytime you're working in the world of atoms it's going to be more complicated than when you're working in the world of bits and so it's very important for us to scale up the amount of power that's available to ai companies and you're seeing that thanks to president trump's policies that are pro-energy the president uh you know backed the idea of drill baby drill going back many years i think he was very farsighted in this regard he understood that energy is a basis for everything It's certainly the basis for this AI boom. And we're in the process of allowing a lot more power generation in the U.S.

31:22President Trump is allowing so-called behind-the-meter power generation. In other words, these AI companies can stand up their own power generation. We need to squeeze more out of the grid. And we're enabling new oil and gas and nuclear, so all of the above. So I think that energy is the main thing, and President Trump is supporting that. David, final question on AMD. and OpenAI. Did the parties consult the White House about moving forward with this arrangement and their plan to work together? No, no. I mean, not with me and I wouldn't expect them to. We just don't get involved in the deal making between private companies.

31:59Again, we're here to create a policy environment that is supportive for all of our AI companies. I appreciate that. Okay, so David, I asked you to come on the program because we spoke at the end of last week for a story that was done out of D.C. on the idea of, well, what is a China hawk? But also within that broad description, should the United States or should the United States not export deprecated AI chips to China? You've been very generous with your time. But I just invite you again for our Bloomberg Tech audience, explain how you view yourself in this debate and what you think is strategically most important for this country?

32:41Well, first of all, I would say that I consider myself to be a China hawk. I want the U.S. to win this AI race. We understand that China is our main competition globally in this AI race, and we want to do everything we can to win. And President Trump, in his AI speech on July 23rd, laid out some of the tent poles of that strategy. We need to be pro-innovation, we need to be pro-infrastructure and pro-energy, and we need to be pro-export so that the American technology stack dominates the world. So this is all in the service of the United States winning this AI race. We understand that it's going to have major economic and national security ramifications, and we're in it to win it.

33:21There is a lot of focus on the direct to China part, but the other way that some look at it is there is a marketplace outside of America and outside of China, the Middle East being an example. What's your position on that and whether the United States wants to kind of leave the world open to China to sell its own technology? Well, there was a view in the previous administration that we shouldn't sell chips to many countries, including the resource-rich Gulf states. And I think that was a major mistake, because every time you tell a country that they can't buy the American tech stack, what's their reaction going to be?

33:58They're going to turn to China and adopt the Chinese tech stack. I have a very simple metric for measuring whether we're winning the AI race which is global market share If we look around the world and say five years and we see that the American technology stack as has say 80 % market share That means that we won but if we look around the world in five years and we see that the Chinese technology stack And I'm talking about Huawei chips and deep seek models for example has an 80 % market share then obviously we lost by the way that's what happened in 5G. We don't want a repeat of that. So again, the strategy here should be for the U.S.

34:33to dominate the world and have the greatest market share. And I think this is pretty obvious to everyone in Silicon Valley because we understand that the way to win technology races is to have the biggest ecosystem. If you're a technology platform, you want to have the most developers using your API. If you're an app store, you want to have the most apps in your app store. In a similar way, we want as many users on the American technology stack as possible. And I find it hard to understand why the previous administration would exclude these rich countries from participating on our tech stack. It certainly didn't help us in the race with China.

35:10If anything, President Trump's policy boxes out China from the Middle East, whereas the previous administration's policy forced these countries into China's arms. You've reworked, therefore, the diffusion ideals set by the previous administration. But when you're allowing only less powerful chips, I mean, I think the president even called them obsolete versions of NVIDIA's chips into China. Does that mean that ship of innovation in China has already sailed because they need to have the most sophisticated? They're going to have to build it themselves. Well, I think when you're talking about what we export to China, that's obviously going to be a very complicated question.

35:48and there's arguments on both sides. I think there's a pretty strong argument for not selling China our latest and greatest chips because that would be too beneficial for them. However, if you don't sell them anything, then like you're saying, that will accelerate their desire to be independent of the American stack. And so I do think there is a compelling argument for selling them a, let's call it deprecated American chip or it's a less great American chip. And by the way, this is why the Biden administration approved the H20 in unlimited quantities for export to China. Now, when President Trump came in, he said that those H20 sales have to be licensed and they're subject to a 15 percent surcharge.

36:32And nonetheless, all the people who approved the Biden policy started attacking President Trump. I think this is a classic case of no one had a problem with it until President Trump agreed to do it. David, Jensen Wong went on Brad Gerstner's podcast and there was a reaction to what he said you would point out you are an official of the government Jensen is a private citizen and CEO but at the root of what he was saying was also the idea of talent many talented computer scientists and engineers come from China I think that was the point he was making but the personnel part of this story where do you stand on that?

37:09Well, it's true that something like half the world's AI researchers are from China. And so I do think that we have to somehow be open to working with this talent or allowing this talent to use the American chip stack to some degree. So it's a complicated question always of what you allow China to do. But I think Jensen was making a point there about, again, the talent pipeline, and we have to be open to it to some degree. Again, I consider myself to be a China Hawk, but I wasn't triggered by what Jensen said because I watched the entire two-hour podcast Not just the 30-second clip and I understood what he was trying to say in context and it is a nuanced question And look, let me just say to all these people who are criticizing Jensen What have you done to help us win the AI race?

37:52I can't think of a more strategic asset in the AI race than NVIDIA and Jensen himself who for 30 years have been working on these GPUs and Jensen is a source of huge American advantage in this AI race. So let's show him a little bit of grace here. Context is everything. We appreciate you talking about the complicated as well. White House AI and crypto czar David Sachs, great to have you with us. Now coming up, Meta's chief marketing officer, Alex Schultz, discusses how AI is changing the advertising landscape. He joins us next as the Bloomberg Tech.

38:29A new book is out. Click here. The art and science of digital marketing and advertising. It's by Alex Schultz. And he says that AI is going to be a game changing for advertisers, if used correctly. Schultz, the chief marketing officer, of course, a meta knows a thing or two about direct advertising and directing it. You also understand entirely the analytics and the raw data behind all of this. Alex, welcome to the show. I'm so interested in how you have seen the unfolding over the last decade or two Incremental growth is something that you talk about so much having direct impact with direct targeted ads in many ways But then you've got to think of how a company is got long-term vision a North Star as you put it How are companies small and large managing to balance this right now?

39:10Yeah, thank you for having me This is awesome to be here I mean look incremental growth is about being incremental to what would have happened without you doing your actions You need to be incremental to what would have happened. You need to see what the lift is of your work. That fits totally with thinking long term and what is your North Star? What is the goal you want to achieve? That is absolutely a question of like, I have a goal. How do I incrementally lift that goal? Your North Star was writing this book in many ways, as well as the day-to-day in which you're understanding the analytics underneath, what's happening in terms of marketing for meta and the growth story.

39:43Why did you put this out here into the world? I mean, my north star for the book is to be useful. Like, I want small businesses and large businesses to be able to actually be better at using the tools. Like, you go back, Ogilvy on Advertising, 1985, Bible, absolutely incredible book. But there are new channels that have evolved since then. Digital marketing is 75 % of the global advertising industry. There's no book for that. I kept being asked for a book for that. So I wanted to produce a useful book to help people be good at that. Alex, in the back part of the book on AI and its impact on marketing, You talk about an audience of one, the idea that the AI can make the ad so targeted to the individual.

40:21What are the risks with that? You're clearly needing a lot of data about that person to make that audience of one relevant ad. Yeah, I mean, from my perspective, there are clear now we've reached the point where there are clear laws out there. There are clear platform policies out there about purpose use limitation of data. And so it's very clear what you can use the data for. And people like personalized ads. so people have control over what data you can get. Young people really understand how to manage their algorithm. And they love the personalized ads that they get where there's something relevant that's actually useful for them.

40:52So I think the balance is actually in a way better place than it was, say, 10 years ago in terms of people's understanding of these things. So I think the risks are much, much lower. And I think the biggest risk is not taking advantage of it. You look where Europe is. You look at how they regret the current regulations. You look at the Draghi report. They are regretting the lack of growth they have versus the growth the U.S. has. And I think one big part of that is they've hurt advertising. The big picture with Meta has been that all of the work in AI has paid off for like the bread and butter core business.

41:22Can you give us any sort of insight into how much more valuable an AI powered ad is? What the conversion on it is relative to traditional advertising? How it drives growth on the top line? Yeah, I mean, you can step back completely. Our business has been completely transformed by AI. When TikTok came along like five years ago, everything that you were looking at on Facebook and Instagram was connected content. You joined, you liked, you friended, you followed. Today, the majority of Instagram and Facebook are unconnected content. And you can see in our earnings results what the impact of AI allowing you to rank content based on semantic understanding of content and semantic understanding of the individual does for engagement.

42:04and then you see it too on the ads in terms of the revenue that's coming through and the results we're providing for advertisers. So it's very high double-digit percentage uplifts if you adopt things like Advantage Plus shopping campaigns, make sure you feed the data through with Cappy and do the basics right, which I describe in this book, both with meta but also using anyone else's tools. What about human creativity at this moment? Yeah, one of my struggles is creativity is always about pixels. And look, I love my creative team. They're incredible. We closed Fifth Avenue. We had Lewis Hamilton do donuts on Fifth Avenue.

42:37It was amazing. Things were great, and it really, really worked. But there's a ton of creativity with data. There's a ton of creativity with targeting. There's a ton of creativity with conversion rate optimization and flow optimization. And what I get at in this book is creativity in the factors where it isn't David Ogilvie saying, stick a car to a billboard with superglue to sell superglue. It's creativity in how you use data to give people amazing personalized experiences and high conversion rate flows. Alex Schultz, Chief Marketing Officer for Meta. Thank you very much. And tune in to Bloomberg Screen Time on Thursday for a deep dive on the creator economy with the head of Meta's Instagram, Adam Masseri.

43:15That's one we're really looking forward to. Okay, coming up, we're going to get back to the deal between AMD and OpenAI and what that means for concerns around circular financing, the build out of AI infrastructure, and everything else. This is Bloomberg Tech.

43:32I'm Barry Ritholtz, inviting you to join me for the Masters in Business podcast. Every week, we bring you fascinating conversations with the people who shape markets, investing, and business. CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market, whether you own stocks, bonds, real estate modelies, crypto, you really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Schiller. Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio. Sometimes it's authors, Michael Lewis, author of The Big Short and Moneyball.

44:17Regardless of the conversation, these are the folks that move markets each week. That's the Masters in Business podcast with me, Barry Ritholtz. Listen on Apple, Spotify, or wherever you get your podcasts.

44:39We're going to get back to OpenAI and AMD. The deal pushing broader markets higher, certainly pushing AMD higher. Joining us, Ipek Oshkadeskaya is with us, Swiss Quote Senior Market Analyst. Ipek, these ongoing deals between chip designers and ultimately those that are purchasing the GPUs, what do you make of it? Well, actually, it's very amazing news, especially for those who are questioning the circular nature of the business and the deals that are being announced right now. But in fina, when we look at the AMD and OpenAI deal today, OpenAI is out striking deals with data centers and chip makers from inside the US and outside the US in order to stay ahead of the game and make sure that they are not constrained by capacity constraints.

45:22So that basically means that this company today is more worried about not having enough supply for the huge demand than the contrary. And that's outright positive for the AI bulls and the sentiment here. And for AMD, there is nothing else to say. This is a jackpot. Their moment looks like it has come. Yeah, certainly biggest move in nine years, EPEC. What's interesting is NVIDIA did sink, pull back a little bit after it had risen higher on the hopes that Honhai and the server demand was clearly there. But then we question market share. I mean, is there anything that gives you any anxiety about NVIDIA's dominance?

45:52No, absolutely not. And that's due to the context, as you always say. Context is everything. The sequence in which we are receiving the information has been very insightful in what's coming. Actually, NVIDIA announced last week that they would be investing up to 100 billion US dollars in OpenAI. That is announcing today that they will be taking a 10 % stake in AMD. So there is a circularity there that suggests that NVIDIA chips are not going to replace in the context of this OpenAI deal, but rather complement it. Now, beyond this deal, this could give some leverage to AMD, but it looks like the companies are considering today that the AI pie is big enough to feed everyone grandly.

46:33Ipek, for public market investors, is OpenAI, the private company, becoming some kind of macro level factor that they have to model in? Well, absolutely. I mean, they are so huge now. They are the biggest startup in the world. They are worth 500 billion U.S. dollars. And they do have these huge deals with publicly traded companies. And those are the market moving deals of market moving stocks. We are talking about Nvidia's. We are talking about AMD's. So definitely OpenAI is pretty much the center of this AI revolution. It has been the starting point and it's gaining importance every single day.

47:16And with each deal that they announced, they are actually securing their position at the center of this game. Should we be asking more questions about how OpenAI is going to pay for all of this then? Well, yes. I mean, Sam Altman recently said that they will be looking at some funding possibilities that he didn't give details about. But one of the questions here is that AI is actually a very capital intensive play. So this company needs funding. Now, NVIDIA coming to the rescue could open the way for other companies also looking to help OpenAI and take a stake in this company that has not yet gone public.

47:57So I think that OpenAI, if anything, is not going to be having any funding problems at this stage of the game because they are dominating the AI business right now. And even though it's a private company, it does have all the funding that it needs, I think, from private and public investors are just eager to take part of this company, actually. The growth story is so clear in terms of revenue. But when you compare$13 billion in revenue per year and then you're thinking the trillions of dollars it has to spend, what gives you comfort that that revenue will match the amount that ultimately needs to be financed on it?

48:36Well, it's definitely the reach that they have. We have seen over the past three years, other companies like Meta or Chinese companies aside, but many companies right now, Perplexity, Meta, we have X, for example, with Grok and other models that are trying to compete OpenAI. And so far, they have not been successful in meeting the level of enthusiasm that OpenAI had so far. So OpenAI is actually surfing. It has been the first to come in. And it still has this popularity and its leverage of being the first comer. So I think that they do have a very good leverage in expanding their business and making more revenue in the future.

49:18They just need to play the game right. They just need to find the right partners. And that's exactly what they are doing right now. Ipek Oskar Deskaya, or Swiss quote, great to have you back on the program. Appreciate it a lot. And what a program it was. That does it for this edition of Bloomberg Tech, Caro. Tune in later today. We have more news due to come from OpenAI. We're going to speak with the COO, Brad Lightcap, on the sidelines of OpenAI's Developer Day. Gosh, a lot going on. Can't stop, won't stop, Ed. You do it for us. We so appreciate it. Meanwhile, check out our podcast, why don't you?

49:50There are so many conversations you've got to dial back in. Get into Lisa Su, get into Greg Brotman, get into David Sachs, and of course, Alex Schultz of Metra as well. All online. This is Bloomberg Tech.

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