Anthropic Looks to Buy Decart for $6 Billion

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22:30Ed Ludlow:Let's get over to New York, where Bloomberg's Yahaira Anand is standing by. Hi, Yahaira. Hi, Ed. It's time now for Talking Tech. First up, CXMT is now China's most valuable company after surpassing Tencent, showing that the sky-high demand for memory chip stocks showed no signs of slowing down. The switch reflects investors' continued preference for AI-linked hardware over traditional internet champions. Plus, also, China's largest ride-hailing platform, Didi, swung bank back to a profit after previously reporting back-to-back quarterly losses. The company reported a net income of$128 million, with revenue increasing 11 % thanks to China's strong ride-hailing demand.

23:15And SpaceX saw its highest intraday level jump in over a month after releasing a new AI model called GrokBot. The new software is designed to handle a wide range of professional work, including signing into various apps and websites and allowing bots to share details and context with one another. Ed?

23:35Ed Ludlow:We're so good at coding and long-running tasks. Thank you very much, Yajira. Let's stay on SpaceX. Shares had surged 35 % post-lockup expiry through yesterday's close, adding roughly$500 billion in market value and defying fears that a wave of insider selling would pressure the stock. But several more lockup expirations are ahead. Investors are bracing for more volatility. Bloomberg's Carmen Reinecke joins us with what we need to know. And, you know, it's a calendar thing. In August, there's more. In October, there's more. And next year, there's more. Yep. It's something that we're going to just keep seeing, potentially adding pressure to the stock.

24:10Although, going through the first one, it seems like investors didn't have a ton to worry about. We saw pressure heading into the lockup, especially with Wednesday's earnings report sort of coinciding right ahead of when those shares did lock up. But that ended up being the low for the stock for now. The next day, shares jumped and they rallied 35 % over the next five days. We're seeing a little bit of selling pressure today, but that's pretty expected after a 10 % jump that we saw yesterday on that GrokBot news. So a lot of strength here. I think it gave investors some confidence that there wasn't a lot of selling with that first lockup.

24:44It was the biggest one that we'll see. And it was more shares sort of coming online than even actually in the IPO. So a very good sort of first hurdle, as investors have said, for the stock, but more pressure coming up in one week, we get the next lockup expiration.

25:01Ed Ludlow:Next summer's the big one, right? That's when Elon Musk shares, subject to very specific lockup terms hit the market. Yes, you're right. So about a year after the IPO is when that happens. And then sort of all of the available shares will come online and we'll have the total float, you know, for everyone to trade. And we'll see what happens. I mean, the first year of trading post IPO is so volatile. And we know that there are often large drawdowns. I mean, SpaceX has already seen a huge drawdown, you know, over a trillion dollars in market value lost from the top a few days after the IPO through last week's bottom.

25:36So lots of volatility here is to be expected, continuing, and I think we're going to see it in the year to come.

25:42Ed Ludlow:Carmen, really quickly, there were two very large numbers Elon Musk touted on the earnings call. How are investors thinking about that? I think those are of paramount importance, right? We know that so much of what investors are looking at here is that future bid, right? It's Elon's vision. And so if you're a bull, that's what you're focused on. You're saying the valuation doesn't matter. That's what I'm investing on. If you're a bear, you're a little bit more, you know, scrutinizing that figure. So what those goalposts are very important. 100 billion RAR by year end,$1 trillion of revenue in 2030.

26:17Ed Ludlow:Bloomberg's Carmen Reinecke. Thank you very much. So coming up, IVP general partner, Kat Willem joins us. We're going to talk about investment opportunities in the AI infrastructure layer and probably a whole lot more. It's halftime here in the beautiful city of San Francisco. Stay with us. We'll be right back. This is Bloomberg Tech.

26:42Ed Ludlow:Welcome back to Bloomberg Tech. Stocks at record highs, the S &P 500 at a fresh record high. Really, there's some economic data underpinning that. Technology shares are pushing higher than NASDAQ 100, up a percentage point outperformance in chips. That's kind of been the story through this middle earnings cycle, where we've had a lot of the NeoClouds. Of course, we had the big NVIDIA announcement earlier in the week, and that has carried the chip sector with some momentum. In private markets, there's a lot going on too. Let's get today's big number,$190 billion. That's Databricks' current valuation after raising$5 billion in funding its second round of financing this year.

27:20Ed Ludlow:The fast-growing software firm, which competes with the likes of Snowflake and Alphabet, also said that it crossed$7 billion in revenue run rate. Confirmation of a story I think we've reported quite recently. We started talking today and started the show on Anthropik's efforts to buy DCart for about$6 billion, according to sources, in what would be its biggest acquisition yet. Some of the biggest AI companies are spending to build and run their models. And it raises questions about where the value is moving in AI right now. I've got an amazing person to talk to about that. Kat Willem is general partner at IVP, where she focuses on high growth companies and the AI infrastructure layer.

27:59Ed Ludlow:And it's great to have you here on Bloomberg Tech. It's great to be back. Thank you. I want to start with a general question about buying and building organically. You know, at all layers of the five layer cake stack, all of that's happening at once. Some people are building. Some people are out in the market. What is it that you see most in your in your portfolio? Yeah, good question. So we're venture capitalists, right? We're trying to invest in all these companies. You know, some of them we're going to sell to bigger companies. But the ones that we love are the ones that go all the way. Right.

28:27The ones that go series B to S &P, as we like to say at IBP. So we're investing in the likes of series B to S &P. Series B to S &P. That's the that's the internal mantra. I mean, we joke. OK, sorry, I didn't mean to interrupt you. I just like that. Yeah, so we're investing in the likes of the Databricks and Descartes, you know, hopefully those 10 years ago versus today. But, yeah, I mean, I think it's no surprise that NVIDIA is acquiring something like, excuse me, I said NVIDIA, I meant Anthropic. Anthropic and acquiring Descartes because what you have in Descartes is you have, I mean, it's a world model, but I think that the reason that they're acquiring Descartes is because of this inference optimization.

29:05Yes. And that is like one of these layers of the stack that's becoming a super hot commodity.

29:09Ed Ludlow:Software to make the chips run better in simple terms. You're an infrastructure investor. Your background is in software infra. Where do you focus right now? What is your sort of area of expertise and the lane that you're most focused on? Yeah, so very much software infrastructure and cybersecurity. Different reasons for the two. You know, I learned this lesson very viscerally as a kid. Like my first job out of college was working at Oracle, selling databases. And in a single day, I was a sales rep. I visited Chevron, Intuit, and Marmot, like the tech clothing brand. And I was astounded at the rate, like sort of the breadth of industries, but then the breadth of use cases too.

29:51And that was the moment that it was like, you know what, these infrastructure companies have vast markets and TAMs. And if you build something hard that no one else wants to build, I mean, these can be long-term compounding businesses.

30:03Ed Ludlow:What are some of the sort of, I don't know, I guess you'd say you don't have a favorite child, but in the portfolio, like which companies are your favorites right now that you see having the most potential? Okay, well, let's tie this to public markets. And if you look at the top 10 trading names, you have to get all the way to number eight or nine before you get to a sort of a conventional software SaaS company, right? And one through eight are Palantir, CrowdStrike, Palo Alto, Snowflake, Cloudflare, et cetera. There's a reason that these businesses trade so well, and it's because revenue compounds with usage.

30:39And implicit in that is it is uncorresponding to seats. I've totally forgot the question you asked.

30:49Ed Ludlow:The question is which are your favorites? My favorites are the ones that do that. So my favorites are ClickHouse. My favorites are Perplexity, a usage compounding business. My favorites are Cribble, Langchain, Base10. All of these are technical founders building technical products selling into a technical audience. And once you have them, the net dollar retention or like the accumulating usage from those accounts is well over 100, 150 percent. I'm really interested in perplexity. You know, they seem to offer a much broader range of things now than their origin. One way that you could explain to us is when you make the sponsorship or pitch to the rest of the partners on why perplexity, what is the future that you'd outline to the team?

31:33Ed Ludlow:Why you'd back them? Perplexity was easy. It was two things. So September 2023, it's about 2 million in ARR as compared to the whatever Arvin has said publicly, 500 million. So this is three years ago. It came down to two things. Number one, the CEO. I mean, Arvin is in the class of his own, a technical wizard, extremely ambitious. and number two was as simple as they ship product quickly. Yes. Right? And that is a compounding advantage in this environment. So I think the mistake with perplexity is thinking of it only as an answer engine, just as the mistake with thinking about Anthropic as just a model company.

32:12That shortchanges both of those companies dramatically, right? Perplexity was the first to be an answer engine. It was also the first to launch a browser comment. It was the first to launch deep research. It was the first to launch a computer agent with computer. And so that is a usage compounding story, right? Because you put all those things together and as revenue scales with usage.

32:35Ed Ludlow:We could sort of stop for any period of time and say there's a lot happening in AI. Are we in an AI bubble, et cetera, et cetera? I would ask you, what is the trend within AI that you have identified? What do you think is happening within all of the companies that you're backing that is less talked about at the moment? That they have unsatiable interest in demand. But that's not changed, right? Demand is still running far ahead of the industry's ability to supply. Right, exactly. I think someone said this morning that they could sell their whole 2027 book today, given the chance. Now, you wouldn't want to do that.

33:11But I think the thing that people are missing is we can simultaneously be in a golden age of technology, which I think unequivocally, I mean, I'm a diehard optimist, but I think unequivocally we are. And we could have a capital markets adjustment. I won't say correction because that's probably a technical term. But that wouldn't negate the fact that, it wouldn't say that the trend is fake. It would just say that we have a timing mismatch. We probably have timing mismatches all the time. I just think we're in the, I mean, there are going to be different phases of this sort of AI proliferation. and we're still in sort of the individual productivity phase.

33:47So if you're a corporate CEO, you might be underwhelmed, right? Because you're like, where is it showing up in the numbers? But if you look back, I mean, think of, I think it was 1987, the MIT Nobel economist Richard Solo. He said the computer age is showing up everywhere except in the productivity stats. But that was in 1987, right? And like, look today. I mean, he's also famous for the Solo paradox, which is really obvious today, but that general purpose technology will show up in long-term growth numbers, which unequivocally it has. And so I think right now we're probably in this expectation mismatch where you have it showing up in productivity, but it's a little bit more individual.

34:32And we need it to flow through to workflows and then to just absolutely transforming companies.

34:37Ed Ludlow:I'd love to end the conversation by learning a little bit about IVP, what the partnerships guiding principles are, what you're trying to do differently? Yeah, I mean, honestly, the thing we're trying to do differently is that we have done the same thing for 46 years. And now it's going to change. If we can invest in 10 companies of consequence a year that have the potential to be generational companies, only 10, right? We don't want decision fatigue. We invest in 10 companies a year. You know, that's our mission. Is it harder to resist the urge to invest? Absolutely, absolutely. But venture is a picking business.

35:07Yes. Venture is not a index coverage business. and hence we stick to our we do one thing one thing well and that's invest in 10 companies

35:16Ed Ludlow:a year it's okay based on reporting therefore if some funds have 50 percent write down you just say 50 percent of these didn't work out i'm asking for an insight to the reality of how that works in the end oh yeah i mean in venture you have to adjust quickly that you can't flog yourself for the losers because the losers are in service of the winners, right? Across my portfolio, probably one or two companies will make up the vast nugget of returns versus the long tail. I guess my question was, that's still true in the AI age? Oh, that is more true today than it was yesterday. And it's five times more true than it was five years ago.

36:04Yeah. Yeah. I mean, look at this morning, right? Lovable, raising at 13 billion and Cognition raising at$40 billion. I mean, I think there are these just like crowned winners and those are going to be the ones that return all the returns in venture capital.

36:19Ed Ludlow:And I think what you said earlier is look at the companies that can ship product. CACWILM, my VP, it's been great to have you here. Thank you, Ed. Vanessa, thank you very much indeed. Now coming up, a Cerebra Shares slide after the company projected slower growth than some investors had anticipated. Some bulls out there wanted more. We'll speak to CEO Andrew Feldman, who joins us next. This has been Bag Tech.

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38:54Ed Ludlow:Okay, for just the second time since its IPO, Cerebris reported quarterly earnings yesterday after the closing bell, offering some investors growth that was slower than anticipated. Shares down 13.4%. I think that's on track for the biggest drop since the last week of June. Cerebra CEO Andrew Feldman joins us now. The first thing that I learned was there is a business renting out compute capacity that's still there. Could you give me a backstory on that, Andrew? Oh, of course. There's a huge business of renting out compute capacity. I think it's what the neoclouds do. It's what the hyperscalers do.

39:36It's a very profitable business.

39:41Ed Ludlow:And is it outpacing the growth from the business of selling the hardware direct to others? Well, we have two parts of our business. We have a first-party cloud. That means we design, manufacture, and deploy equipment in our own data centers, and we rent it out to our customers. That part of the business was up 281 % year over year. Huge growth. Huge growth. On that part of the business, we control the data centers. There was another part of our business where we sell our AI hardware to customers who want to do the exact same thing, who want to deploy the equipment and either use it for themselves or break it up into little pieces and sell the compute to various customers.

40:36Those customers, we call that our hardware business. We're selling hardware for their premise. And in Q2, some of our customers didn't have data centers available, so we were able to deliver less to them. And so right now, data centers are a challenge for everybody. We had some. We were able to deploy them for our own use and for the use of our cloud customers, our first-party cloud customers. And so that business is absolutely ripping.

41:07Ed Ludlow:We're live on Bloomberg Television and Radio with Srebrenica CEO Andrew Feldman. And the reason I asked for the backstory on that is that that cloud business was born out of needing to build data center capacity to test the technology worked. It seems to be working. It was. We wanted to be able to provide demonstrations to customers without having to move hardware to their facilities. We didn't have a hyperscale customer at that time. And so there was a need to find a way to deliver compute services to people who didn't have a data center, didn't have a way to otherwise enjoy our blisteringly fast AI hardware.

41:52And so we set it up at first for ourselves and then for demonstrations. And there was so much demand on it over time that it's become a big business for us. And last quarter, Q2, it was an extraordinary business for us. And we expect it to continue to grow at tremendous rate. Now, even though now we have hyperscale customers like AWS, now that we have frontier labs like OpenAI, that business continues to grow at exceptional rates.

42:23Ed Ludlow:Okay, the hardware business, there is some confusion out there. You report on a core basis, which showed that the hardware division was up, right? On a GAAP or non-core basis, it would be otherwise. Just explain the story for the hardware business. The story is one of our large hardware customers had some warrants, and those warrants are subtracted from revenue. The value of those warrants are subtracted from revenue in GAAP accounting. And so it made the numbers look a little smaller than they were actually.

43:03Ed Ludlow:Demand is great. It's there. There is a backlog. We know about it. We've got 25.4 billion in backlog. So here is the data that people are really searching for with Cerebris, which is how can you get the capacity in place faster, both on your own data centers or to get the hardware into the hands of customers for theirs? And that's a fair question. What we said on our call yesterday is that we had signed up or had already live 600 megawatts of capacity and that we had a pipeline of gigawatts of additional capacity. And what we said was that we expect our revenue to more than triple next year. And so I think we have been executing at a tremendous rate, adding 600 megawatts in several months, six or seven months is no small feat.

44:03And we will add vastly more in the months to come. And so I think we are ahead of plan. We beat guidance and we beat consensus on the things we, on our core business. on core revenue, core gross margins, and beat by a lot on core operating margins. And then we guided a big raise for 2027 and 28. So we feel really good about the business and are proud of last quarter's results.

44:44Ed Ludlow:Andrew, what are the biggest factors on the supply chain side or on the operations side that are impacting your ability to deploy that capacity? So there are several things you need to do on the supply chain. First, we just talked about data centers. You need a place to put your equipment so you can build the cloud so that you can deliver it to your customers. Walking back upstream, you need manufacturing capacity. And we've expanded our capacity by partnering with FlexTronics and Sandmina and Rocket EMS. We will this year increase manufacturing capacity by more than 10x. Walking further back upstream, you have to work with your fab partner.

45:33Our partner is TSMC, and they have assured us supply that will support our growth. And so we've systematically worked each of these components in a field we call capacity to have more chips, more manufacturing capacity, more data centers to put these chips to build the cloud offering.

45:57Ed Ludlow:The stock's down 14 % right now as you and I are talking. Since the IPO, it's performed. I think the stock was up 42 % from yesterday's close. Is lockup expiry a factor here? You know, we talked earlier in the program about SpaceX's lockup and the mechanics of that. Would you say that you see an impact of that in your case? We do. There are lockups that are expiring and there are people who invest against those. Those aren't the investors that we're focused on. We're focused on long-term investors. We're focused on delivering returns through investing in our people, in our technology that will play out over years.

46:43And when you guide to more than a triple next year and say that 28 is going to be giant and 29 as well, we're trying to speak to people who want to be with us on this ride and who want to be in the AI business and want alternatives to, say, NVIDIA. and that's who we're talking to.

47:15Ed Ludlow:Andrew, I appreciate it's only been a few weeks since this was announced and you were on the show, but how's it going with AMD? Are engineering teams already working together? Have you moved quickly on that? I enjoyed that conversation when you had me on your show a few weeks ago. I appreciate that. And it is, you know, Lisa Su and Mark Paper Master, they acquired my last company and I had an opportunity to work with them for several years and I enjoyed it a great deal. We have a good relationship there and we have disaggregated solutions running in our labs. We have close engineering relationships.

47:51These are talented engineers on both sides working extremely hard and we will have deployments in

47:58Ed Ludlow:the fourth quarter. And very quickly, there was customer demand after the announcement. There is enormous customer demand. Disaggregated solution provides the best of both worlds. It allows GPUs to go faster. GPUs are good at throughput and not so good at speed. They allow GPUs to go faster and Cerebris, which is really good at speed, and we can improve in throughput. And so the disaggregated solution gives a faster, high-throughput solution. And that gives you both the economics, which is throughput, and the customer experience, which is speed. Cerebris CEO Andrew Feldman, back on Bloomberg Tech.

48:38Ed Ludlow:Thank you very much indeed. meta says it has shut down more than 750 000 instagram and facebook accounts in australia believed to belong to users under 16 to comply with the country's landmark social media ban the ban's being watched closely to see if it curbs social media use among young people the report last month by the australia's online safety regulator said it led to only a marginal reduction after taking effect in December. That brings us to another big number,$1.4 trillion. That's the potential financial penalty Meta says it could face in a landmark social media addiction trial kicking off in California next week.

49:19Ed Ludlow:A coalition of 29 state attorneys general alleged Meta engaged in deceptive business practices affecting millions of young users, and that led to a mental health crisis. Let's get the details with Bloomberg's legal reporter, Madeleine Mecklenburg. You know, it's a big number, the potential penalty. But this is us teeing up for something to come this week. What do we need to know? That's right. It's a massive number, especially when you consider what Meta's market value is, which is$1.5 trillion. So if this figure actually came to pass, it would be staggering and record-setting in the realm of civil litigation.

50:00I think it would be the highest penalty ever levied. But you're right, the trial started this week with jury selection, but next week we're actually going to get into the substantive arguments when we're going to hear opening arguments from both sides about this case, and then we're going to kick off in about a month, for about a month of testimony. We're expecting to hear from Meta's CEO, Mark Zuckerberg, and other executives at the company, as well as folks from the state attorneys general's offices who are going to talk about what we can expect or what they're saying is the impact that these policies at Meta have had on individuals in their state.

50:36Ed Ludlow:Madeline, what is literally the legal issue that will be debated here? This is an interesting case because it's different than one that we've talked about before. Loyal viewers will remember the case that we heard about in Los Angeles earlier this year. This is about a bigger question than just harm to an individual user. This is about harm to a broader population. As you said, they're alleging a mental health crisis. And they've said that these algorithms and these tools that are being employed by the companies are contributing to widespread issues. It's compared often to the litigation against big tobacco because it's about whether or not this company is considered a public nuisance and is causing harm to individuals in a broad population.

51:26Ed Ludlow:Very quickly, Madeline, just this morning, we've heard from Meta. What are they saying going into the trial? Meta's kind of maintained the same line across all of these cases. As I said, this is one of several cases, but of course, a very significant one. And they've said that they have safety features that they believe help make this experience for young users safe and that their work has been sufficient. Bloomberg's Madeleine Merkelberg, thank you very much. Some breaking news. OpenAI is naming a new chief revenue officer for the second time in less than a year. This comes as an effort to bolster sales growth ahead of a highly anticipated Wall Street debut.

52:04Ed Ludlow:The AI startups hired Dali Rajic, president and chief operating officer of the Alphabet-owned cybersecurity firm, Wiz, as its new revenue chief, succeeding Denise Dresser, who leaves OpenAI to pursue other opportunities following a transition period. That does it for this edition of Bloomberg Tech. Recap the show on the podcast. You know where to find it on the terminal as well as online on Apple, Spotify, and iHeart. This is Bloomberg. Healthcare doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing.

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