Blo, Lenovo Soars on AI Growth

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1:53Bloomberg Audio Studios. Podcasts. Radio. News.

2:02Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco.

2:13Ed Ludlow:This is Bloomberg Tech. Coming up, Starships were meant to fly, but scrub. SpaceX delays a critical test seconds before launch. Plus, we'll discuss the space company's planned mega IPO with a SpaceX alumni and an early investor. And Lenovo soars post earnings on strong AI growth. We sit down for an exclusive interview with the world leading PC maker's CFO, Winston Chen. But first, SpaceX's 12th Starship test flight for now, Scrub. All right. It is sounding like we are not going to be able to clear this issue in time today. So we are going to be standing down from a launch.

2:58Ed Ludlow:SpaceX delaying a critical test of its massive Starship rocket after a pin tied to the launch tower mechanism failed to retract during the final countdown. The setback comes just the day after the company formally filed for an IPO. Bloomberg's Lauren Grosh back with us. Another attempt penciled for this Friday evening. But can you believe it? The tension, the drama, the anticipation. Lauren in one city, Ed Ludlow in another. And it's a piece of metal that stops us going of a hold T minus 40 seconds. Do we know what happened? Right. So from what Elon said, it sounded like it was a hydraulic pin that controlled the arm on the launch tower.

3:40You know, they mentioned a quick disconnect. You know, all these things need to move rapidly out of the way once the launch takes place so that the rocket can actually clear the tower. So it might seem small, pretty important. That's just what makes rocket launches so exciting, right? One tiny little piece of technology could go wrong and the whole thing gets stopped. So it sounded like there were also a number of other issues they were working to. Something with the flame trench also had stopped the countdown at one point, too. This is all a new pad, right? So this is a new rocket, a new launch pad.

4:18And I think with this launch, they definitely want it to go well this time, just given all of the stakes surrounding their IPO and their filing that they had this week. So I wouldn't be surprised if they're being a little extra cautious this time than they have been with previous test missions.

4:32Ed Ludlow:So new pad, pad two at Starbase, Texas, Boca Chica, Texas. This is a test flight, 12th test flight, but a brand new architecture for Starship, right? Basically, the hardware top to tail, the Starship spacecraft at the top, that's the black pointy bit, if you're looking at the screen right now, and the super heavy booster on the bottom. Why is that important, Lauren? Well, the anticipation has been super high for this launch because it's the debut of the third iteration of Starship, what's known as version 3 or V3. And this vehicle is supposed to be the one that kind of achieves all of the dreams that Starship has laid out, right?

5:11It's supposed to get to that really massive payload capacity of 100 metric tons. It's also supposed to be optimized for total reuse, which is kind of the ultimate holy grail that they want to achieve with Starship, being able to bring back both Starship and the super heavy booster intact so that they can rapidly refly them again. So this is kind of the version that's supposed to do all of that. And so I think, you know, everyone is, you know, waiting on pins and needles to see if it will actually work as intended.

5:43Ed Ludlow:Right. The prior iterations of Starship 35 metric tons payload to low Earth orbit. They want to get 100 metric tons more. Bloomberg's Lauren Grush, please don't go far. Thank you very much. Let's get more on SpaceX and why a new re-engineered new architecture Starship matters. With Laura Crabtree, CEO of Epsilon 3, Laura spent more than a decade at SpaceX, supported milestone missions, the first Dragon launch, the company's first crewed mission to the International Space Station. I think you left prior to Starship really kicking off, but you understand why this matters. So let's start with the V3.

6:23Ed Ludlow:Why does it matter? It matters because people have been waiting, as Lauren just alluded to. Everyone's been waiting for this next iteration, for it to be operational, to be able to book a launch on Starship. And I think it will enable the next iteration of what we want to see as the space industry continues to grow and access to space continues to be easier, more affordable, etc. And we can take larger payloads. We can take more people to the moon. We can take lunar rovers more quickly. And I think everyone's been waiting for that for a long time now. Laura, you'll understand. So SpaceX's S1 went public and a main focus of it was that larger future payload you're talking about being orbital data center.

7:16Ed Ludlow:But the core mission, the kind of founding mission of SpaceX is to make humankind a multi-planetary species. We haven't on the show talked as much about that human payload. Sorry if that's probably not the kindest way of putting it, but the human payload element of it. How would that work in Starship? The idea is that if you're going to go the distance of Mars, but even in the near term, the moon, it is Starship that is the best technology platform to get us there. Is that the idea? That is the idea. And Elon has talked many times at Company All Hands and I'm sure also out in the public about the future goal of making humans multi-planetary species.

8:01So the ultimate goal of something like Starship is to make life interplanetary, to enable that future we want to see. As he said, we don't want to be like the dinosaurs and we don't want to go extinct on this planet. And so there are a lot of pieces that SpaceX needs to achieve to get there because the mission for SpaceX to be multi-planetary, but you have to have the building blocks of data centers. You have to have Starlink. You have to have all of the things that we've built up to this point. And this is just the next piece of the puzzle.

8:38Ed Ludlow:You were the senior mission operations engineer. You basically trained the crew and you oversaw and ran the Dragon spacecraft mission. So for the Bloomberg Tech audience, SpaceX getting humans to the International Space Station or into space so far has been Falcon 9 with a dragon capsule on top. I'm now showing Starship V3 pictures right now, Laura. The bit that I think people are finding it hard to understand is within the design of the Starship spacecraft, different to putting a capsule on Falcon 9, how would that work? Like, literally, where do the astronauts go? So there have been lots of design iterations, and I'm not entirely sure where the design iteration is right now.

9:24But from the last I saw, the starship would then take all the humans to the moon and the complete payload would be human. So it would be geared towards humans. So there would be toilets. There would be the pods for people to live in while they're being transported to the moon. So that is more the idea, I believe. And so that's something that we still have yet to see until Starship is operational and many flights have taken place. I don't think we will know exactly the designs. And I believe SpaceX is probably waiting to unveil that in future versions.

10:08Ed Ludlow:Can you try and take us inside SpaceX a little bit? You know, part of covering the almost launch of the 12th test flight yesterday is seeing the sort of gathering of SpaceX staff and engineers, everyone that worked on the reengineering, the new architecture. When Elon Musk or the other leaders go to the team and say, let's rip up the script, the blueprint and start again. What's that process like to get to get it onto the pad? Yeah, you know, it's a challenge. In the industry, there's something called a challenge coin. So you get a challenge coin if you're going to work really hard on something.

10:49But it feels like there's a challenge coin on the line all the time. So you're given a somewhat insurmountable problem, and you have to go and solve it. And I think the difference that most people are now noting is that within SpaceX and many startups that you see in the industry today, you're given more responsibility to make decisions than you would have in a traditional large aerospace company. And so you're given a problem. You go and solve the problem to the best of your ability. And then you come together, test the problem, iterate. That's why you're seeing so quick iteration from Starship, because the engineers are being pushed to continue to think outside of the box.

11:35You can't design something like Starship with the things that have been done in the past.

11:42Ed Ludlow:present day laura you're the ceo of epsilon 3 a software platform that if you are trying to pull off a high stakes operational testing manufacturing procedure which i think starship kind of is right now that's what you need so i think you're in a good place to just tell us to end we have 30 seconds just how difficult is what spacex is trying to do uh right now with this starship program Yeah, I think Lauren alluded to this earlier, but there are millions of decisions that need to be made and millions of technical things that need to go right. So having one small thing like a pin and maybe a couple of out of family temperatures is actually miraculous.

12:23You can expect scrubs, you can expect some failure, but when you get to the end, you should have tested enough small things. And that's really what we at Epsilon 3 want is to have the infrastructure built to test enough small things that when you get to the mission, you get to the final launch, that you have done enough that you have the most confidence that your mission will go well. And I think that's what SpaceX is doing.

12:51Ed Ludlow:Laura Crabtree, CEO of Epson 3, formerly Senior Mission Operations Engineer, alumni of SpaceX. Thank you so much for being on Bloomberg Tech. Now, coming up, Winston Cheng of Lenovo joins us following the company's just blowout results. Strong growth in AI for the world's leading PC maker. This is what markets look like on the week. I'd forgive you if you forgot that in the middle of this week we had earnings from the world's most valuable company. Nvidia is down actually almost 4 % on the week, right? The Nasdaq 100 is buoyant, a little bifurcation because Nvidia was accountable for so much of the gain and rally in equity markets in recent weeks.

13:30Ed Ludlow:But over five days, that's the picture. Nvidia kind of trailing behind. This is Bloomberg Tech.

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16:14Ed Ludlow:Shares of Lenovo absolutely soaring in Hong Kong trading overnight. A gain of 20 % was the biggest single-day jump since 2008. This after the company reported strong growth in AI-related earnings, offsetting challenges from, you know what the challenges are, rising component prices. Winston Cheng, CFO of Lenovo, joins us from New York City. And Winston, it's great to have you on the program. Thank you, Ed. Thank you very much for the time. You know, everyone knows Lenovo, leading PC maker in the world. But I think to start, I wondered if we could just go a bit deeper into what AI-related revenues actually look like for Lenovo, define them, and then we can extrapolate out what the story is here.

16:54Ed Ludlow:Yeah, we're certainly very well known for our PC, given our dominance in the space for many, many years. But we are actually more than a PC maker. We have the most complete portfolio in terms of devices from PCs to tablets to smartphone. It's the most complete portfolio at scale on a global basis, on a non-IOS basis. And that serves as the foundation for AI devices going forward in terms of our product portfolio set. We have our hybrid strategy enables us to have from the pocket to the cloud. And you're seeing that gain in terms of our infrastructure business in the latest quarter. in terms of that compute capability that is now being used for infrastructure from AI training to AI influencing.

17:37Ed Ludlow:The US-listed shares or ADRs also massive performance today. You know, I appreciate, Winston, you're the CFO. Maybe you don't keep a constant eye on the share price, but the biggest jump since 2008, it has to tell you something. Do you attribute that to the appreciation maybe that you're getting for the infrastructure business? What do you think the market is maybe seeing now that it hasn't before? Yeah, so certainly we're not defined by one quarter. We're in for the long haul. And the AI spend and opportunity is also for decades to come. But we're defining this as the AI decade for Lenovo. And I think we're in the first year of that journey.

18:15And you can see the result of that focus. In terms of our capabilities, we've actually been investing in this for over 10 years. Our ability to be able to produce at scale on a global basis for both on the device side and also on the infrastructure side is unique to Lenovo. We can serve hyperscalers and also enterprises on that basis as well. And our portfolio set with the IBM heritage that when we made the acquisition in 2015 gives us a solid foundation to be able to serve the AI compute capabilities today, given the high-performance compute genetics that we have with our industry liquid cooling technology as well.

18:54Ed Ludlow:On Monday, Winston, I was with Jensen Wang in Las Vegas, of course, Vera Rubin coming later this year. That matters to you. And we were speaking with one of your peers, Michael Dell. And I was trying to understand from them the story for the PC in a world where we are shifting to inference, but also agentic AI. Can you give me any evidence or data that the more commonplace use of AI agents actually drives enterprise, knowledge worker, acquisition of PCs, new PCs at scale? Yeah, we certainly see our AI PC demand being very strong and it's been increasing in terms of our portfolio. Our AI revenues today is about 38 % of our total revenues in the last quarter.

19:39And the PC is also, AI PC is also a very big component of that. today as AI training develops and more AI capabilities are being enhanced, more people will use and need to consume and interact with the agents through their devices. And I think the upgrade for better and more higher performance devices will be a necessary part of that journey. You see that with the likes of the OpenAI and others having partnerships with either from a staffing perspective or strategic perspective with device makers. And we're also seeing that in terms of dialogues that we're having with AI companies and their desire to work with us from a go-to-market perspective as well.

20:22Ed Ludlow:Winston, what is the truth of what's happening with memory? How severe is that as a bottleneck? Well, certainly this incredible spin and development of AI in terms of the AI infrastructure is really driving the component shortages, Not only memory, but you're also hearing it in terms of CPU and, of course, GPU demand as well. I think that would be multi-year opportunity in terms of that demand. But at the same time, the industry needs to catch up in terms of that supply chain to satisfy that demand. But I think for now, that's causing the supply and demand imbalance is causing the memory prices to go up.

21:01But on the AI infrastructure side, we're able to pass through that demand because that's where the strong demand is in terms of the pricing for pass through. But on the device side, I think the lower end, you're starting to see in terms of the first quarter IDC numbers that the those that cannot get supply, I think, have seen the market shares decline.

21:21Ed Ludlow:So, Winston, what you just outlined, and bear with me on this one, how much are you negotiating with yourself? You have different business lines. They both need common components, high bandwidth memory. You know that on the infrastructure side, the server side, that's where the demand is. So do you have to have a word with yourself and say, well, what about my PC business? Do you have to make a choice of where you prioritize? That's a great question in terms of, but I think what the suppliers appreciate with us is that we have that global portfolio. We have the most complete portfolio from PC to tablet to smartphone, and I think that gives them the forecast necessary as our long-term partners.

22:04We also have that demand forecast from the server side as well of our business. So from that perspective, we are strategic partners for suppliers as well in terms of that accuracy of that forecast. We need to supply in terms of satisfying our long-term Lenovo friends in terms of the ThinkPad, which is so well-loved in the market. And I think we need to make sure that there is enough supply going to that demand. as well.

22:26Ed Ludlow:Lenovo CFO, Winston Cheng, it's great to have you on Bloomberg Tech. Thank you very much. Now, coming up on the show, smart ring maker Aura files confidentially for a U.S. public listing. We're going to have the details of that next. This is Bloomberg Tech.

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