Big Tech’s AI Debt Is Raising Investors’ Eyebrows

23:59We actually invented the quantum computing category back in 95 when we demonstrated the world's first qubit gate at the University of Maryland. And we've pioneered every milestone since then, both in the lab and commercially. So being a public company, we consider to be an actual part of our evolution. You know, we raised$3 billion between July and October. And it's honestly been part of establishing the sector or communications opportunities around the world and ultimately credibility that enables us to drive both government traction and private sector commercial traction. So we're very proud of the NYC.

24:35I have to leave it there. Nicolo Di Masi. Thank you.

24:45welcome back to Bloomberg Tech let's take a quick check on these markets because look we're higher in fact we are having the best day on the Nasdaq 100 since May of 2025 we're up 2.3 percent such is the volatility in the market right now good and video currently up 1.7 percent earlier in the moments in the show it was in the red so we really see some anxiety in the market as we head towards holiday-shortened week. Bitcoin, though, still in that anxious moment. We're off by nine-tenths of a percent, 87 ,000, but steadier than where we were trading over the course of the weekend. So let's break down what is causing some of the sell-off in these momentum trades, whether it's crypto, whether it's stocks.

25:22Bitcoin Bloomberg crypto reporter, Emily Nicole, joins us. Emily, look, we have had a wash out when it comes to ETF flows, when it comes to more broadly some of the money, the fast money that was in Bitcoin. Are we seeing some sort of steadying? We're definitely seeing a bit of recovery. I mean, it went as low as 80 ,500 odd on Friday. So going back up to about 87 ,000 today, that seems like a pretty good recovery for Bitcoin. On the ETF front, we're not really going to know the data until the end of the day. That's where we might see more of the institutional activity coming in. But definitely those who trade over the weekend, those are the retail traders predominantly.

25:58We're definitely seeing a bit more confidence coming back to the market. I mean, the key number for everyone to be focusing on is that this is the worst month on track for the worst month since the FTX crisis, since 2022. Does it feel like that in the anxiety in the market right now? It definitely feels very unstable. You know, like when everything was happening in 2022, there were clear catalysts for why everything was down. We had strings of bankruptcies, fraud scandals, you name it. This time around, there isn't really that kind of catalyst. We've seen some kind of weakness in the crypto market with the mass liquidations that were happening in early October.

26:32That means that liquidity is kind of down. So you would expect some more volatility in Bitcoin. And then we've also had, you know, that's like companies like Strategy that acquire lots of cryptocurrency and use that to propel their prices upwards. Lots of those have been launching into the market and not doing very well. And so there are various kind of things that you can point to, you know, even the instability in tech stocks in the last week that you can point to and say, maybe that's why Bitcoin's having this moment. But because there's no clear catalyst, no clear sign of why there's something so unstable, nobody can really point to why it's having such a down month.

27:05Is it also because we're at the end of the year? I always think of tax loss harvesting in many ways must be in the eye and focus for a lot of crypto investors. There's always that potential, you know, people are still kind of uncertain as to how to even do tax with Bitcoin. I think not everybody is as clear as how how crypto assets are valued, particularly around the world. It difference depending on the country you're in. So there could be some of that going on. That's not to say, though, that this is not really an ideal time to be selling your Bitcoin. It was, you know, over 100 ,000 only earlier this year.

27:36So if you were looking at selling and taking a profit, I guess 80 ,000 isn't really the value you'd want to be selling at. Emily, Nicole, great breakdown. Thank you very much indeed on all things Bitcoin. Let's stick with crypto more broadly, though, because special purpose acquisition companies, you know, the SPACs, they've made a comeback. And they're now latching on to, guess what, crypto treasury companies, such as strategies we're hearing Emily Nicole discuss. It's all about emerging tech as well as quantum computing. It seems as though the momentum trade is really there. But researchers are warning that many everyday investors betting on these types of companies are liable to lose money.

28:11Bloomberg's Bailey Lipschulz is here for all things momentum. So SPACs, they're back, but they've been sort of getting into the world of crypto treasury companies too. Why are they seemingly a match made in heaven or hell? Well, it's a match made in heaven because, to your point, momentum. So things that are trendy are where we've seen SPACs flock to. Think back to SPAC 1.0 or 2.0, depending how long you've been following the industry. EVs. We saw Nikolo go public. We saw DraftKings when sports betting was starting to pick up steam. So as we see the transition, as we saw a rush of companies, whether it was reverse mergers over the summer, creating digital asset treasuries or now SPACs, it really is kind of latching on to the latest theme.

28:49And then we've seen that parlayer turn into quantum, just given that the majority of companies that are already publicly listed were quantum de-SPACs back in 2020 and 2021. Some people, very close to administration, are losing a lot of money in that. It felt like a lot of the Trump sons were out there talking about these digital asset treasury companies. Are they hurting? Are they underwater? Well, they're hurting. Really, when you look at the whole pitch of DATS over the summer was, we can trade at a premium to the actual cryptocurrencies we're holding, and we'll continue to sell shares or convertible debt to fund that.

29:23Well, those premiums are evaporating. A number of these companies are trading below that net asset value. So the big question is, if the whole market is propped up by companies selling shares or converts to buy cryptocurrencies, Well, when we enter a bear market, what happens next? And we're seeing a lot of this kind of falling down quite a bit. Now, you've got a wonderful story where you quote Peter Atwater, founder of Financial Insights. And he says all of these SPACs getting involved in crypto asset, treasury companies in particular, looks like a turducken. A turducken? Turducken. I would call it a bird and a bird and a bird.

29:59Here is a bird and a bird and a bird. Why is he saying this is what it feels like? So turduckens historically are chicken stuffed in duck, stuffed in turkey. So if you look at the graphic, the crypto is the chicken stuffed in the duck, which is the treasury company, which then gets stuffed in the SPAC. Is that not delicious? I've never had one. Supposedly they're awesome if they're done well. But the comparison from Peter seems pretty spot on because you're taking kind of a concept, if you will, with cryptocurrencies. You're putting it into a DATS, which were all the rage. and then it's like, okay, well, why don't we marry those with SPACs?

30:32And we saw that and are continuing to see that play out. We'll see if it cooks well or not. We can take this analogy to many a place. Bailey Lipschulz, ahead of Thanksgiving, we needed that kind of story. Meanwhile, coming up, Lily Lyman from Underscore VC joins us to discuss how AI could drastically impact discoveries in science and healthcare. That's next. This is Bloomberg Tech. I'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 commodities, crypto, you really need to hear these conversations.

31:27Sometimes 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. Regardless 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.

32:01We've been talking all day, all weeks, about the concerns around the amount of debt that firms are taking on in support of the data center build-out. So there's another D that could throw a wrench in the AI boom, depreciation. Bloomberg's Dina Bass, who covers AI infrastructure, has been writing about the lifespan of AI GPUs in Bloomberg Businessweek. You join us now. Michael Burrow has been talking about it. Other players have been talking about it. Should we have anxiety about depreciation of GPUs, Dina? So it's very hard to say. We're going to talk a little bit, Carol, about accounting 101 here.

32:33So when you buy a lot of physical assets, a company has to decide what the useful lifespan of those assets is and write it down over the course of that time period. It's called depreciation. GPUs, which companies like Meta, like Google, like Microsoft, like OpenAI, are spending tens of billions of dollars on them. We really only have a couple of years of useful data for how long the current generations of those will last. And so most of the companies are writing them down over the course of five to six years. But there's a real concern because, as we all know, NVIDIA is committed to putting out new ones annually and is sort of trying to obsolete its own product.

33:14So there's a real concern about what happens to those. How long can they be used? If you're writing them down over too long a period of time, you might be artificially boosting your profits. What was interesting was in NVIDIA earnings, they said, look, our A100s, which have actually been officially discontinued, they're still up and running. They're still working and efficiently so. So they were trying to sort of put some calm amid this anxiety. You've got a great quote coming from Sarah Fryer, the CFO of OpenAI, of course, who'd been talking about how they're structuring their GPU depreciation.

33:46Sure. So Sarah Fryer said to us, look, you know, on the one hand, we don't really know. Is it four years? Is it six years? But what OpenAI has seen is that they feel good that it's at least five. And the reason is that they know that they're still using their A100s. And the basic idea for companies like OpenAI is you use the latest chips, the NVIDIA Blackwells, for things like the very high-end training of the absolute top-of-the-line frontier models. The older chips can still be very useful for things like inference, so running the actual models. And so that's the way that they think that this all works.

34:21But that all requires the data centers to be what everyone's been calling, Satya Nadella's been calling fungible. So it means you can switch what the data center does from training to inference. You can switch from one customer to the next. So when a customer rolls off and a chip is a little older, can you find a new customer, take that older chip? That's a lot of the question around, you know, quote unquote, how fungible these data centers are. Well, look, CoreWeave was fungible from being a Bitcoin miner with its GPUs to him being an AI company. And many of these neoclouds have pivoted in that way, Dean.

34:55And lastly, I've looked at KKR, for example. They're talking about potential froth in AI investment more broadly. And they're sort of trying to understand how the end user is using their data centers. But really, who is on the hook for all of it? They're trying to say, look, data center owners, operators, often it's going to be the leaser who is guaranteed long-term payment. Do we know who really has to hold the baby here and the bathroom? I keep asking people the same question. When the music stops, who doesn't have a chair? Because as you mentioned about debt, there's been large amounts of debt contracts, financing of these GPUs.

35:34And if the GPUs are useful for less time than we think, what are the people that are holding debt on them do? Do they ask for more collateral? How does this all go? And, you know, people that we spoke to did say that regulators and investors have to think about how far the, quote, contagion is going to spread if this all, you know, sort of comes home to roost at once. Dina Bass, on the optimistic side, we appreciate it. Lovely to have you in town amid this Thanksgiving holiday. We appreciate it. Meanwhile, markets, look, they're trying to weigh the risk of depreciation on one side. But there's also the hope, the hope that AI will pay off, particularly, say, in life sciences and healthcare discoveries.

36:17Already major AI players like Anthropic have stepped into this area with models aimed at boosting research and development. Now, investors see an opportunity too. Lily Lyman is managing partner over at Underscore VC. She is a Boston-based early-stage investor in startups like TetraScience, H1, Quilt Health. Here in New York, not Boston. You really think Boston, though, is going to potentially be a winning trade when you think about the confluence of what's going to win out if healthcare is supercharged by AI? Well, Caroline, thanks so much for having me here in the studio. It's great to be back.

36:49And look, as investors, we're always looking for a clear why now in a market opportunity. And we are certainly seeing signs of transformation in life sciences and AI. What's changed is that we now have the data, we have the sophistication of the models, and we have real industry pull to unlock this potential. And what it could do is unlock$4 trillion worth of value across life sciences and healthcare. What's changed is that biology is no longer just a wet lab discipline. It is now a data and information industry. Many people are calling it tech bio. And we at Underscore, as pre-seed and seed investors, and particularly based in Boston, are incredibly excited about this because it's opened up a whole new world of software investing opportunities in the world of science.

37:32Can I go to that 4 trillion number? Yes. What's that pegged upon? What is it that we're seeing that will be fueled and to garner$4 trillion of worth? Well, if you think about what the life science, the combination of life sciences, and actually, honestly, all of scientific data and healthcare, it's across the gamut of how this gets done today. I mean, today it takes$2 to$3 billion per drug and decades to develop these therapies. Think about if that can get cost, you know, if that can get changed to be a fraction of the cost in a fraction of the time. The economic and the human impact of that is absolutely enormous.

38:06So the opportunity we see is across the entire value chain in life sciences. So whether it's research and discovery, whether it's in preclinical and clinical trials and services, manufacturing, development and deployment, you put all that together and it's not hard to see how there could be a$4 trillion opportunity coming out of this. And you said you're seeing signs. What are the signs and what are the software companies that are leveraging those signs? We're seeing signs across all the different players in the market. So the major pharma companies are certainly making moves in this space. They are under enormous pressures.

38:37I mean, the cost of R &D is rising. It basically doubles every nine years. They are facing issues with their margins. They're facing a potential$260 billion revenue cliff as some of their patents expired. And so that's creating the market pull for AI solutions. They are partnering with, often many times, startup companies. So, for example, Takeda just launched their partnership with TetraScience, which is a company we're invested in. Think of TetraScience like the Snowflake, but specifically for scientific data. And what it's doing is it's partnering with all the major technology players, NVIDIA, Google, Microsoft, Databricks, Snowflake, and rallying the tech stack around this opportunity to unlock scientific data so it can actually be used by models.

39:18And so in this one, what they're able to do is working with Decada on hundreds of use cases so AI can sit on top and use this data. And it's driving 90 % faster workflows, 40 % increase in productivity. So we're seeing that type of adoption and partnership across the major pharma players and startups. How does a portfolio company compete with an anthropic who's getting into a similar space? People always love to ask that question. How do startups compete with the incumbents? And I always think that, yes, incumbents have the advantage of data and distribution, but startups have the advantage of focus and speed.

39:53And so we're seeing those opportunities across the board. I mean, there's a company we're investing in called TerraFlow, which is automating the analysis and data around flow cytometry. And again, I mentioned tetrascience. You know, these are opportunities that require very specific domain focus, very specific types of people who can do it, and the ability to build in an AI native way from the ground up. The Anthropics of the World Open AI is also launched in this space. They also are going to need to do the practical implementation, and so they're going to need partners along the way to do it.

40:22So I think it's not a zero-sum game. I think there's an opportunity for collaboration. Certainly think so. Lily Lyman, who's over in New York for a short while. We appreciate her coming into the studio, managing partner at underscore VC.

40:39Online travel and experience booking company Peak, it is doubling down on AI. It's acquiring Acme Ticketing and Connect & Go and the move positions Peak to expand its reach across museums, theme parks, tours and other attractions. The company also raised additional$17 million in funding. Here to talk it all through is Peak CEO, Rizwana Bashir. So you call yourself the Shopify of experiences. Explain what that is. Basically, we're the operating system that works with museums, tours and activities providers. And we provide all of the tooling they need to run their business. So online booking and payments, everything that you do on site as you're checking in, all the way through to marketing, business analytics, collecting reviews.

41:20We really are that end-to-end backbone for everything that a business needs to operate. And that backbone is solidified by your M &A. So talk to us a little bit what Acme brings to the equation, what Connect and Go, how are they fueling the growth? Absolutely. So, you know, what we saw over the last couple of years, we really got to know these businesses. And they've done incredible jobs in working for very specific verticals. And so, as an example, you know, Acme has built incredible infrastructure and ticketing for museums and iconic cultural attractions. Think about that as here in New York, things like the MoMA, the Whitney Museum, the Frick Collection.

41:56So that includes memberships and donation management. And so they've done a fantastic job there. That's something that we can incorporate into everything that we're doing at Peak. And Connect and Go really doubled down on theme parks and water parks. And so that means that RFID technology that you've probably used when you've taken your kids to those. Yes, I was at a water park this weekend for my sins. Exactly. So you've used that. So they've done a great job on that technology alongside a lot of things around online and on-site guest services, things like F &B. And so, you know, bringing these three companies together, we get a huge advantage by being able to have a lot of synergies, as well as being able to, you know, take all of the best features and cross-pollinate them across the platforms.

42:40And the last piece, obviously, is just that we've been real innovators on the AI side. And so we're now in a position to take all of the things that we've learned and take them across. So what sort of innovations in AI? Really, you know, last year we went and polled our businesses. and over 80 % of them said, we know we really want to use AI, but only 10 % were using AI. And so it became very clear that for us to be able to assist those merchants, we actually needed to integrate AI tooling into our platform. So examples of that have been, first on revenue growth, which is obviously incredibly important to businesses.

43:15We created AI dynamic pricing tools. So that means we're incorporating things like weather or seasonality or frankly, local demand. Think Taylor Swift is coming to town. And what we were able to do with that was layer that into the pricing for the businesses to increase revenues by about 5 % to 20%. So massive impact on revenue growth. Another area that we've really done a lot on AI has been around automating operations. As you can imagine, the businesses we work with, they have a lot of manual back-end operational tasks. Bryant Park ice skating here in New York, very popular this time of year.

43:53they have lots of people trying to reschedule. So they're spending thousands of hours on these manual tasks. So we were able to automate all of that work and in doing so save them thousands of hours of time as well as millions in costs. And I think the last thing has really just been that there's a shifting consumer demand landscape. We all know that. Over the last few years, people have been moving towards things like TikTok for the video content. And, you know, over half of consumers say that they're inspired to book experiences based on what influencers think. And yet the businesses we partnered with didn't have a way to be able to meet that demand.

44:31And so, you know, we created influencer marketing tools with a click of a button. They were able to reach hundreds of thousands of potential travelers. And so in doing that, what we're really allowing our operators to do is focus on what they're really good at, which is delivering an incredible customer experience, while taking care of what is a huge shift in the industry. But that shift comes with costly talent. You've just raised$70 million. Is that what that's for? Is it about beefing up your own tech talent to be able to bring more generative AI offerings to bear? Is it about more acquisitions?

45:04Where does that funding get put to work? Yeah, it's absolutely, it's about us consolidating all of the platforms as well as really layering in more AI. So think about the things we've already done to automate operations. We've now got hundreds of agents working behind the scenes 24-7 to do everything that the merchant needs. And so what we're really doing is doubling down on innovation. And so that means tech talent. And it means also an opportunity for us to double down on sales. One of the things that we saw with the acquisitions is that although Acme and Connect & Go have fantastic customers, they've actually done very little on the sales side.

45:42So we want to bring those tools to market. So, you know, AI plus sales allows us really to get our tools into the hands of many more businesses. And a few more experiences for all of us out there this Thanksgiving and holiday season. Razwana Bashir coming on talking about the M &A and the fundraiser peak. We appreciate it. And that does it for this edition of Bloomberg Tech. Do not forget to check out our podcast. Find it on the terminal as well as online on Apple, Spotify and iHeart. From New York, this is Bloomberg Tech.

46:13This is Caroline Hyde. And I'm Ed Ludlow, inviting you to join us for Bloomberg Tech, a daily podcast focusing exclusively on technology, innovation and the future of business. Every weekday, we bring you the top headlines from the world's biggest tech companies. From finance to defence, AI to entertainment and from startups to the magnificent seven. We highlight the latest stories of the people and companies pushing the tech sector to new frontiers and the politics that shape global tech markets. We do this all every weekday, then bring you the most important conversations and analysis in our podcast.

46:46Search for Bloomberg Tech on YouTube, Apple, Spotify, or anywhere else you listen. Join us every afternoon on your commute home and stay ahead of the tech news cycle. That's the Bloomberg Tech Podcast. I'm Caroline Hyde in New York. And I'm Ed Ludlow in San Francisco. Subscribe today, wherever you get your podcasts.