Anthropic Builds Its War Chest Ahead of IPO

24:49Well, as we've talked about on the show a few times in the past, the U.S. has imposed quite strict restrictions on Chinese companies' ability to buy the most advanced chips from NVIDIA. And so they have been kneecapped in terms of their ability to use those chips for training the advanced AI models. Nevertheless, you see companies like DeepSeek and Moonshot in particular make very significant advances, use their engineering expertise to be able to produce models that are perhaps not quite as good as the frontier models from Anthropic and OpenAI, but very, very close at much lower costs. So this sign that DeepSeq is turning to Huawei for these chips shows that they are getting more access to domestic chips.

25:33They are making progress in terms of producing those domestic chips. They still want to buy NVIDIA chips. Those are still the best ones on the market. But to the extent that they can use Huawei to handle some of the inference and some of the training, that's going to be a big advance and a big positive impact for the Chinese companies. All right. Quick 30 seconds left. But private sector, that's still using the NVIDIA chips, correct? They prefer that? In the private sector? Like Alibaba, Tencent? Yeah, the Chinese companies would like to be able to buy NVIDIA chips if they can. They'd like to be able to get the most advanced ones on the market.

26:12They can't buy Blackwells right now. The U.S. has allowed them to buy these H200 chips, as we've talked about before on this show. But Beijing has a very vested interest in trying to get them to use domestic chips like the ones from Huawei. All right, Peter, thank you so much. That's Bloomberg's Peter Elstrom.

26:36Welcome back to Bloomberg Tech. I'm Lisa Mateo in for Ed Ludlow. I want to get to some stocks on the move that are in the tech sector. I want to start with Tesla off the bat. Their shares are down about 6%. I mean, they had that highly anticipated CyberCab launch. It didn't really impress investors much with that. Then we go to NVIDIA. Their share is up about 1.5%, still riding that high. The news of acquiring Hugging Face for$13 billion. Their co-founders, now billionaires on top of that. And Adobe shares on the lower side. They're down about 6 % after a leadership changeup, which leads us to our next story.

27:10That is Adobe. It is named Anil Shakravarty as its next CEO, succeeding Shantanu Narayan. Now, the surprise pick, it comes as Adobe. It faces growing pressure from AI upstarts. We have Bloomberg's Brody Ford. He broke the story and he joins us now. So Brody, he is entering this challenging competition, right, from a lot of AI startups. Was this election a surprise for him to begin with? Right. So Adobe has been having the CEO bake off in the background for the last six months. It's been an unusually public process because the company announced the CEO was stepping down, which usually you don't do that until you have a replacement.

27:48But in this case, there was two divisional leaders who are seen as the internal, you know, candidates. There was one that was very much the obvious candidate, right? He led the creative business like Photoshop and all that. And this other guy, Anil, he ran more of their marketing and data software that you don't necessarily think of when you think of Adobe. And so a lot of people assumed, oh, David, he's got this in the bag. Turns out he didn't. Turns out he left the company yesterday when the other, you know, the other candidate ended up being chosen. So it's clearly a bit of a shocker for certainly the Wall Street types.

28:26So what does he bring to the table? So Anil, what I've generally heard about him is that he's very smart and he understands the product very well. And clearly Adobe hadn't been doing super well, right? I mean, their stock was down 50, 55 percent. And so the argument for a nil is that you both get somebody who can shift up the strategy a little bit because he hadn't been directly running creative, but also he knows the company. And so you don't have that whole disruption risk when you bring an outsider. Well, we have Adobe, right? Their software has been kind of the standard, right, for being creative.

29:00But then enter AI and Wall Street seems to be concerned about it. So should they be? And how is this new CEO, how is he going to take on this new challenge? The whole risk for Adobe is that you don't need their products anymore, right? I mean, there were many years where my friends and I would Photoshop stupid pictures of each other, but now you can just make that with AI, right? I mean, that's like a silly use case, but I think some version of that is happening around the economy. And Adobe is worried that they're just not the shiniest maker of creative tools anymore. All right. And any other leadership changes before you go that we should know of for Adobe?

29:36After David leaves, I mean, a lot of folks expect that there might be a bigger house clearing, right? I mean, there's a bit of a changing of the guard here. And so I wouldn't be shocked to see some more divisional leaders depart in the coming year or so. All right. Brody Ford, always appreciate your time. Always a pleasure. Always makes me laugh, too. All right. So as we enter September, a month that has historically delivered the calendar's largest single drops, our next guest believes that seasonal weakness is not a reason to step away from stocks, arguing that we should look through the fall's volatility rather than react to it.

30:10Ameriprise Financial Chief Market Strategist Anthony Saglin-Bennie, he joins us now. So let's start there. Let's talk about September. It's usually this slow time. You're saying maybe not so much. Yeah, I mean, over the last 20 years, the S &P 500 has fallen on average by about a half percent in the month of September. It's actually the worst month for the market in any given month over the course of the year. But what drives a lot of that return or that lower return in September are a few key outlier years, right? 2022, 2011, 2008. Big events or macro shocks or recessions, they generally really weigh on that September figure.

30:57When the economy is growing like we're doing right now, when earnings are strong like they are right now, the typical September sees either flat or returns that are positive. And actually, the fourth quarter is the best quarter for the S &P 500. So on average, you see the S &P 500 over the last 20 years grow by 3.7 % in the fourth quarter. So if you can look through some of this near-term volatility, which we're likely to see a little bit more of, when you get to the back part of the year, actually returns for the S &P 500 are some of the strongest of the year. Excellent. And I want to talk tech earnings because it was a big week for it.

31:38I mean, you can jump to some of the names. We've got Dell, NVIDIA, HPE, Snowflake, Broadcom, you name it. You can add to the list if you want to as well. But were you happy with the results? Some were mixed. Yeah, overall, very strong quarter of tech earnings. So S &P 500 earnings for the information technology sector grew by about 75 % in Q2. They're expected to grow by over 60 % in Q3. They are expected to be the leader across the 11 S &P 500 sectors in the fourth quarter and for all of 2027. As you mentioned, as we've gotten tech earnings over the last several weeks, they've really validated that, A, the AI theme is secular and growing.

32:22The concerns around the CapEx spending for the hyperscalers and is it really creating revenue? We got an answer to that for most of the hyperscalers. They had very strong cloud compute. Mag 7 earnings in Q2 grew by 118 % year over year. Obviously, NVIDIA's earnings a little while back really, I think, knocked the cover off the ball and showed that all of that spending from the hyperscalers is showing up in revenue. And semiconductors, the announcement of buying Hugging Face kind of shows that they're taking their revenue and they're taking their gains and they're expanding their reach across the ecosystem.

33:05So I think overall, the fundamentals across technology and profits are very strong, and we see them continuing to be strong through the rest of this year. Yeah, so what kind of questions are your clients asking about the AI trade in general? What are they concerned about? What are they excited about? Yeah, a lot of it has to do with CapEx spending. I mean, obviously, with the hyperscaler spending, you know,$800,$900 billion this year on data centers and AI infrastructure on pace to spend possibly a trillion dollars next year. The real question is, is all of this spending going to show up in revenue?

33:44And I think that's going to be an ongoing question that investors are going to want to see each quarter that these companies are reporting. And so far, the revenue is showing up. I think the bigger question is, are we going to get the kind of revenue at the scale that justifies this CapEx spending? And I just think the verdict's still out. But obviously, we need compute, we need inference, the data centers need to expand so we can get the type of productivity and growth out of the large language models. You were talking about Anthropic earlier and its planned IPO. For them to continue to grow and for AI to continue to be strong and actually get outside of technology and into other business to produce efficiencies and productivity, we need to see more spend on the data center side to get the inference and compute to make these models more powerful.

34:40Anthony, you mentioned something earlier about Hugging Face, NVIDIA, that acquisition. Are you worried about the concentration of power in AI? Yeah, I mean, there's obviously a lot of AI circular financing right now. I think that's another big question that investors have is all the complexity around the financing deals. I think for NVIDIA specifically, right, they want to expand their reach outside of just providing chips, right? And they don't want to probably put all their chips on two open models or two large language models like OpenAI and Thropic. So the open model architecture kind of helps protect them and build the infrastructure and large language models larger than just what two companies can do.

35:24I think in terms of the circular financing, I think investors are just going to have to pay very close attention to how these deals are arranged. I'm here in the Detroit area. Auto financing is something that's very common where OEMs provide financings to dealers and customers so they can buy their products. I think companies like NVIDIA are trying to do that, right? create the financing, create the structures so it's easier to build those data centers and that AI infrastructure. The question is, I think investors are going to have to continue to monitor these to make sure that the agreements actually show up in revenue, show up in the data center so you can build this AI architecture in a way that maybe 12 months, 18 months, 24 months from now makes it more powerful.

36:17All right, Anthony, we're going to have to leave it there. Thank you so much. That was Ameriprise Financial Chief Market Strategist, Anthony Saglam Benny. All right, coming up, OpenAI, they take another step toward AGI with its most advanced model yet. We hear from CEO Sam Altman on the growing risks that come with increasingly powerful AI. This is Bloomberg Tech.

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39:09As AI becomes more powerful, who decides how it can and can't be used? Well, OpenAI CEO Sam Altman, he says there needs to be clear red lines, but also more freedom for users. He also admits the industry has fallen short in explaining how AI can empower people. Bloomberg's Ed Ludlow sat down with Sam Altman yesterday. We think there are some things that very clearly models should not be able to do. There are some clear red lines, and we talk a lot about being able to detect those, but people also have strong opinions about things within the broad bounds of what is possible about how they use AI and how they want to be able to use AI.

39:48And this is going to be a difficult question for society because there is not going to be agreement on what is and isn't acceptable use of AI. I think it's very important in the same way that, you know, people do things with electricity that I may not always like, but I think everybody has a right to electricity, that we say, you know, there are going to be some rules for society. You can't go like electrocute somebody else on the street. But this is an important platform that belongs to all of us and that we need to be able to use. So there will be an ongoing conversation, negotiation in society.

40:23There will, of course, be some things that we agree on that people just should not do with AI. But there's a lot of edges that we're now going to have to feel our way through and giving people autonomy and freedom to use AI is important to our mission. Sam, at the G20 this week, Treasury Secretary Scott Beston said that the AI industry had done a terrible job of explaining how AI benefits ordinary Americans. What's your view of that and whether you would, on reflection, consider OpenAI to be in that bucket? I think the industry has done a terrible job of this on the whole. I think we have done a bad job ourselves, maybe better than some others, worse than some others.

41:06It is difficult, of course, to explain that this is... The world should, in my opinion, should want us to worry a lot about this technology. The world should want us to think about all the ways that could go wrong, to talk about what we see coming, but not to sort of like stir up doom or concentrate power for ourselves just because in the history of technology, the way you solve the hard problems is to look at them, talk clearly about them, have scientists debate them, work really hard to prevent and mitigate them. And that has been our intention. But clearly, sometimes it ends up scaring people.

41:41Now, there's another thing that I think has gone really bad besides talking about the ways this could go wrong, which is I don't think we've done a great job as an industry of really talking about how to empower people with this technology. Right. You know, you hear some people talk about, well, we're going to give you a cure for cancer and that's so great. So we're going to, you know, take these risks and you're going to have to have less power and autonomy. We want people to have more power and autonomy. You know, I don't think a cure for cancer is enough. I mean, wonderful thing to have, obviously, but we should set our sights higher.

42:12we want these tools to enable a boom in creativity and entrepreneurship in people figuring out new ways to be useful to each other and wonderful products and services to enable each other with and I think that has been lost in the messaging and I also think there's some companies that have a different opinion there but but it's very very important to us that this technology is something where people get more power and more autonomy not less and I think people rightly get afraid when they feel like AI leaders might not quite want that for them. All right, that was OpenAI CEO Sam Altman here along with Ed Ludlow.

42:50So the push to give more people more power with AI, it comes as OpenAI, it rolls out its most advanced model yet. GPT-6 Astra, it's being positioned as a major step toward AGI, but its powerful cybersecurity capabilities are also forcing OpenAI to put new guardrails in place. Bloomberg, Seth Figerman, he joins us now with this. So, Seth, let's start there with the guardrails. We just heard what Sam Altman was saying about security. So what are some of these new guardrails that they're putting in? Yeah, opening eyes kind of following a playbook that Anthropic has also done earlier this year, which is finding a way to introduce a new, more powerful model to the wider public while trying to take steps to safeguard or restrict the most advanced cybersecurity capabilities that have been raising concerns in recent months.

43:34So that's what they're promising here, that they're basically going to release this model in the coming days or weeks to the general public. but prevent people from maybe taking advantage or misusing these capabilities. I think stepping back to Altman's remarks, they're trying to strike this very difficult balance between pushing out more advanced models that kind of continue to keep them at the frontier of AI development and keep them competitive with Anthropik and Chinese firms while also dealing with the very real concerns that are emerging from this development. So who gets it first? It's going out to a limited group of partners that work with Open United's Daybreak cybersecurity program.

44:08That program, I believe, has far more partners than Anthropics does. But these are kind of business organizations as opposed to just laymen. And you mentioned Anthropic before. So how does this put this in competition with Anthropic, this new model? Yeah, so I think OpenAI is taking pains right now to say that this is as good or better than the most competitive offerings from Anthropic. And in fact, OpenAI's top executives, Greg Brockman, their president, went so far as to declare this kind of the beginning of the AGI era. You know, AGI is sort of this very squishy term, but also a milestone that a lot of the industry has been focused on where AI can match or exceed the capabilities of humans in many economically viable tasks.

44:48So even to begin to kind of whisper or say out loud that this might be that moment for open AI is something that we should really take stock of. But I think it's also optically a moment for them to try to say, you know, we've been on the back foot a lot this year. Altman has admitted that at times. We're trying to show again that we are at the top in AI development. Where do you see AGI headed? You know, again, it's very controversial in some corners to even say, is AGI a thing that can happen? Has it happened already? Some people think it'll never happen to be a thing that happened years ago.

45:17But I think stepping back from that, I think it speaks to the feeling right now that over the past year, we've seen rapid advances in certain corners of AI. AI has gotten meaningfully better at coding, at cybersecurity, at some financial services tasks. It's still weak in other areas. It's kind of lumpy. But it's gotten good enough that I think Altman and others would argue that if you took these models and showed it to someone five or 10 years ago, they'd say, yeah, that's AGI. But there's certainly a lot of experts who say, no, it's not there yet. All right. Seth, appreciate your time. Thank you for joining us here.

45:48Of course, at Bloomberg's Seth Figerman. So, NVIDIA's, their$13 billion deal for Hugging Face, it is now minting three new billionaires. The AI platform, its French co-founders, Clem DeLange, Julian Schumann, and Thomas Wolfe, they are each now worth about$1.8 billion. That's nice, according to the Bloomberg Billionaires Index. Now, the deal is expected to close in the first half of next year, with NVIDIA pledging to keep hugging face on an open platform.

46:23Well, Apple is kicking off John Ternus' era with what could be the biggest run of his new devices in its history. Next week's product launch is expected to introduce foldables, new iPhones, and an updated Apple Watch. Bloomberg Sam Kelly joins us with more. Sam, thank you for joining us. This is going to be his first event since taking over the new helm. What's the vibe going to be at this event under this new leadership? What can we expect? Yes, good morning. Big moment for Apple. Obviously, it's going to be an iPhone event, but a very big moment for John Ternus as well. Obviously, he's been very involved with the products that we will see next week.

46:57And obviously, these products are very much under the leadership of Tim Cook. But at the same time, we are going to see what his leadership style is, what his communication style is like. Will he be involved in the actual presentation of some of the hardware or will he just sort of introduce the keynote in the beginning? So it'll be interesting to see sort of how we're ushering into this new era and how involved he will be in the presentation. All right, so let's get to some of these products. The foldable phone, that's entering Samsung territory. Can they go against the competition here? Yeah, I mean, I think the big question is why has Apple waited so long when Apple has been dominating this for quite a while?

47:36So the pressure will be really on to see not just that it's built this foldable device that everyone's waiting for, but how does it perform? Is there a crease? What's battery life like? What is the software like to support it? How will usability be like? So all eyes will be on the foldable device. We're hearing it's about five and a half inches. It will open much like a book into almost the size of an iPad mini. Pretty similar to some of the other devices we've seen on the market, of course, with the Apple Touch. We're also expecting a new iPhone 18 Pro lineup, two models there. The entry level 18 we're expecting later next year, actually.

48:14But it's not just going to be about iPhones. We're expecting perhaps some additions to the smart home world with a home hub that would act almost like a home security system or FaceTiming in the kitchen to communicate with others. But AI is really going to have a big play across all these different devices, whether it's the watch or new Apple TV. We're expecting that as well. And all these different things of how AI will play into the next era of Apple. A lot going on. 30 seconds left. What is Apple going to have to do to prove that they can compete with the open AI, with others on AI? Yeah, that's a great question.

48:54We already saw a little bit of what to expect at WWDC back in June. So now it's really about the execution. What will it be like to have Siri on these new devices? How will AI play into that fact? Is it fast? Can Siri be more than just a question and answer system? Can it really learn what's on your device, your ecosystem, your calendar? Can it really get to know you? That's what we're going to be watching. All right. That's Bloomberg Samantha Kelly. Thank you. We're looking forward to that event next week. Well, that does it for this edition of Bloomberg Tech. Don't forget to check out our podcast.

49:28You can find it anywhere. It's on the terminal. It's online at Apple, Spotify, at iHeart as well. Thank you for joining us. I'm Lisa Mateo. This is Bloomberg. work.

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