China's AI Push Meets Amazon's Cloud Surge

21:57Ed Ludlow:Quick check on Amazon. Shares at all-time highs. They've joined the$3 trillion market cap club. And this is the biggest two-day gain they've posted since 2009 after earnings. Later in the hour, we're going to speak to AWS CEO Matt Garman, AWS, Amazon's key cloud computing unit. Apple is making a big bet that customers would rather pay by the month than all at once. It's the new Apple upgrade program designed to make your upgrading your device feel more like a subscription. We must mark German here with the latest power on from this weekend. It's been really interesting to see the rollout of this.

22:32Ed Ludlow:What are you trying to capture in this power on? Where do you think this is headed? Yeah, the fact of the matter is, is that you're going to see a change over time from sticker prices to subscription prices. The carriers have been trying this for years. It's been extremely successful for the carriers in the U.S. internationally. Obviously, Apple has gotten on a really good schedule with its new products, obviously new iPhones. And Apple watches every September. The iPad cadence has really become fall and spring. The Mac, depending on which Mac you get, you're thinking fall or spring as well. And so there are upgrade cycles for consumers, right?

23:10Maybe I'm going to get a new phone every three years. Maybe I'm going to get a new computer every five years. But making it a subscription is going to get people into getting a new phone more frequently. They could give those phones then back to Apple. Apple could resell them on secondary markets. They can reuse the parts for new devices, right, which creates a big cost savings and improved margins for them there too, as well as that secondary phone business. And then the consumer is paying on a recurring schedule. So the payments to Apple never stop. and over the long term you're going to see Apple creating far more revenue and profit because of this program.

23:43In fact Wall Street has been begging Apple to do this for over half a decade and so it's a long time coming.

23:49Ed Ludlow:So this weekend I did my first Apple upgrade. I took my 2020 Mac Air with an M1 chip and I took the latest Mac Air 13 inches with an M5 chip and I did the math and it's a great deal basically. I can trade in still and still do the Klarna Apple upgrade. The thing that jumped out is I've got to wait three weeks for that Mac Air. That's still an issue. Yes. So as we wrote in Power On as well this weekend, the Mac Studio and the Mac Mini, those are no longer the only Macs with extreme supply shortages. Now it's the most popular Mac, which is, of course, the MacBook Air. And new orders of the MacBook Air are not arriving at this point until early September.

24:27So you're seeing the supply chain shortage shift from niche computers to the company's most popular computer. So that's not necessarily great. And so what they're doing now in terms of their marketing online and in stores, they're pushing people towards the base level M5 MacBook Pro, the 14 inch, which they have a lot of supply of still. And they want to sort of dwindle that down because they're launching the new M6 version in just a couple of months from now.

24:53Ed Ludlow:Mark, just very quickly, we have a story on the terminal about how Apple's Siri AI stacks up against the new ChatGPT. What do we need to know? Apple has a huge advantage by having Siri AI built into every iPhone now that can run iOS 27 and the latest large language models. It's competent, right? The promise of Siri has been there for 15 years. It's never really worked. Now it works. It's nowhere near as good or as capable as ChatGPT, but the floor has improved tremendously. Bloomberg's Mark Gurman with the latest power on. Thank you very much. Amazon has blown past three trillion dollars in market value after its cloud unit, AWS, drove big earnings performance last week.

25:35Ed Ludlow:The company says its AI business has hit a revenue run rate of twenty five billion dollars and its chip business notched the same milestone. Amazon also raised its CapEx plans for this year to two hundred and twenty billion dollars as it joins the chorus of tech companies backing American open models. AWS CEO Matt Garman joins us now on Bloomberg Television and Bloomberg Radio. Matt, it's great to have you back on the show. You know, this is the fastest growth for AWS in nearly five years. But to kind of capture a moment in time, could we start by talking about how much of that was driven by the frontier labs, the big ones, OpenAI, Anthropic, or how much of it was something broader across the enterprise, something bigger in AI?

26:19Yeah, it's actually across the board, this growth that we're seeing right now. And much of that is some of the AI labs that are building their models on top of AWS. But actually, a lot of that growth is spread across all of our startup and enterprise customers, where AI is really impacting almost every single industry. And so whether it's financial services companies or healthcare companies or retail companies or media companies, really, that growth is coming across the board. as companies of all different sizes and all different industries are looking to use AI to grow their business. And so we're seeing a lot of growth from the top frontier labs.

26:58But for AWS, we're not like some others, maybe just concentrated on just one or two large customers. But it's actually growth from a really broad set of customers, which is nice to see.

27:09Ed Ludlow:Matt, when AWS says the AI business has a revenue run rate of$25 billion, what does that mean? What does the figure encompass? Yeah, that includes both training from very large companies like Anthropic and OpenAI and other large tech companies, as well as many startups. But it also, and a big chunk of that, is really inference that that broad swath of companies are doing. And so as companies think about how they take models in something in Amazon Bedrock and run those models to get value out of their business. Some of them are automating processes. Many of them are running agentic workloads that they build on AWS to further drive efficiencies in their business or deliver new customer experiences.

27:50We consider all of that work, whether it's agent growth, whether it's inference, and some of that is training new models. All of that encompasses the AI business for us.

28:00Ed Ludlow:I think I've asked you this question at various points in time since you became AWS CEO. But is there a percentage split right now, training versus inference, that you can give me? Yeah, you do. And it actually keeps shifting, I would say. More and more, it keeps shifting more towards inference. I think we still see large training clusters being used by a number of companies. But as these models get really popular and really powerful, more and more companies are integrating that inference into their workloads. So, you know, I don't know the exact percentage today, but it keeps shifting more and more towards inference.

28:34And we expect that to continue as the economics make sense, where you really want most of that cost and spend being where value is being created for end customers.

28:45Ed Ludlow:Amazon's overall CapEx number for this year is very big,$220 billion. So it's up$20 billion. And Andy Jassy explained that's mostly AI, but it also accounts for higher memory pricing, right? capex higher because the cost environment's higher but from aws's perspective what's the trajectory for next year you expect that capex will be bigger still because i think one of the things amazon is quite clear about is that even at 220 billion dollars it might not be enough to meet current demand yeah one of the things that we're quite excited about is just the potential business uh for us is is just massive and we see this as a huge opportunity for us to really invest and help customers take advantage of the AI opportunity.

29:29And so we will keep investing. We think that there's a big opportunity for us and for customers. And as Andy kind of called out last week, we have really great insight into what that demand is going to be from customers. And so when we invest, and we will keep investing in CapEx next year as well, we have great insight into when that revenue is going to land. And so it's pretty well known for us. And as Andy mentioned, much of our capacity is already spoken through through the end of 27 and even through much of 28. And so as we're investing, we're getting five year commitments from customers. We're getting these long term commitments.

30:04And so we're out there making investments to keep being able to grow the business and try to meet customer demand. But as you say, today, demand still significantly outstrips supply. And we're trying to build and invest to keep up with with what customers are asking for.

30:20Ed Ludlow:And so we expect the CapEx number will be bigger next year than it is this year? I expect us to keep investing as we see opportunities, and some of that we'll see how the market continues to grow. But right now we're excited about our investments and we'll continue to invest. The chip business has also got a lot of momentum. You know, Tranium for some time has been a big part of the strategy, and we've discussed that. I've been able to go to Austin, spend a lot of time in Annapurna Labs to look at the server design. Let's start by asking, when you say the chip business has a revenue run rate of$25 billion, what does that mean?

30:57Ed Ludlow:That is the business of selling the chips to third parties or renting out capacity based on the chips? Yeah, renting out capacity based on those chips. So today we run all of our own chips inside of the AWS cloud, and that includes both Tranium chips as well as Graviton chips, which are general purpose processors. Graviton is incredibly popular. We've been building Graviton for many years now. In fact, almost all of our large customers use Graviton as some part of their deployment, and it's a key part of how to help customers deliver extra value by lowering their costs. Tranium is wildly popular, and as we've mentioned a couple of times now, we're largely sold out through the end of next year for Tranium capacity, and it's really, really popular.

31:41we're starting to see both large customers as well as startups really love the cost benefits of running on Tranium. And having that choice in a cloud where you can run on purpose-built processors like Tranium that give you really great AI performance, together with NVIDIA chips for when you need some of that processing for GPUs as well, gives customers the right mix that they're oftentimes looking for. And so we find that combination to be quite powerful. And our Tranium 3 chips are really, really popular with customers right now.

32:14Ed Ludlow:We're live on Bloomberg Television and Bloomberg Radio. This is Bloomberg Tech in conversation with Matt Garman, the CEO of AWS. Explain the difference in economics between capacity based on Tranium and capacity based on Blackwell, for example. Like what is the selling point of going with Amazon Silicon? Yeah, we think that, look, we think customers want choice. And so we offer great offerings for both products. Some customers really like to build on NVIDIA GPUs, and those are fantastic. And we're one of NVIDIA's absolute largest customers in the world. We've been offering NVIDIA GPUs in the cloud for over a decade now.

32:53And AWS is the most scalable and secure and stable place to run NVIDIA servers anywhere. and so we're very excited about that business. But when you add Tranium, we're able to lower the costs for many workloads. And so customers like to have that opportunity where they can take these really massively scaled AI workloads or inference workloads where we can tune them because we kind of control that whole stack. We control the Tranium chips, the data centers, and the inference stack and can really tune that whole stack. And that helps customers lower their costs and improve performance. And we're really starting to see that flywheel go where model providers of all types and customers love that they get that value and great performance.

33:37And we think that that's a real flywheel that we can keep turning and are quite excited about continuing to grow that business.

33:44Ed Ludlow:Could you make it tangible for me? What is the cost saving? It's workload by workload, so there's not like a specific cost savings. But for workloads where we see this optimization happen, customers can oftentimes save 20, 30 percent off of their inference costs when they run that on Tranium. Interesting. Would you consider selling the chips outright as opposed to renting capacity based on them? Yeah, we've mentioned that we might consider that in the future. Right now we have so much demand inside of the AWS cloud that we really love that business. And so that's the place we're focusing right now.

34:18But it's an interesting opportunity, and it's something that we would definitely consider in the future.

34:23Ed Ludlow:The other big development was AWS signing the open waits letter. You yourself communicated that. Why was it important to you, Matt, to sign that and participate in that? Yeah, I think that, again, a lot of this boils down to customers wanting choice. And the big frontier labs have awesome models today, whether it's OpenAI running on Bedrock, whether it's Anthropic running on Bedrock, customers really love using those models. But they also like being able to customize models. And so having a broad ecosystem of open weights models, I think, is incredibly important for innovation. It's important for our customers.

35:00And so you think about things like the Nemetron models from NVIDIA, or you think about Kimi 3 or some of the Chinese open weights models. Those really help customers be able to customize to their own data and really be able to innovate. And so we think that it's important to not over legislate there and give that flexibility for customers to use whichever models they find to be the best fit. And that's actually why we really focus on having all of those available inside of Bedrock so that customers can choose which ones they want to use.

35:29Ed Ludlow:Not to over legislate. I mean, I had a conversation with Jensen Wong the day the letter was posted about why then? What was the rationale? It does seem like the concern is that the U.S. government overly regulates open models. Was that sort of a motivation for you? Yeah, I think that's the concern. And I think you just want to make sure that we kind of have an even playing field. And it doesn't mean that there's none, by the way. I think there should probably be the same level of oversight of both frontier models as well as open weights models. And I think we should have a consistent framework.

35:59But kind of making sure that folks realize how important that is to what customers and our industry is out there building on. And that those open weights are a key building block of that. And we want to make sure that however legislation lands, it lands evenly across all of those.

36:15Ed Ludlow:Matt, a question from our Bloomberg Tech audience for you is AWS's attitude towards Kimi K3. The open wait was released July 27th. You know, given the platforms AWS offers, what is the plan there? Yeah, it's a great model. The team there has done a really nice job and we see really great performance there. and will continue to support in Bedrock offering the Kimi models. I think the interesting thing is also, as you see many of these open-weight companies, they're starting to think about how they make money in these models as well. And so they're starting to introduce licensing around some of these open-weights models when customers want to run them in a cloud environment.

36:57And so I anticipate that there's going to be a blending of some of these models too, where these companies won't continue to spend lots of money and then just offer their IP up to the world. They're going to be licensing models. They're going to have ways of making money on those as well. And you're starting to see that with some of the open weights models actually having some licensing around them. And so we'll keep supporting these in Bedrock and working with those companies in order to offer these in the best possible way.

37:24Ed Ludlow:That's where I'd like to end the conversation. The business case and economic opportunity for open models from AWS's perspective. So if the model makers themselves would like to make money, you know, how does AWS see that going in your favor to make money from wide use of open models? Yeah. Yeah. I mean, we basically, that is exactly what AWS, it's a great platform for companies to come and offer their IP and their capabilities to the world. And so everybody, whether they're startups, whether they're governments, whether they're large enterprises, everybody can build on top of AWS. And if they have choice and they have access to these different models, it allows companies to be able to come and monetize them and sell when they have value to customers, to be able to offer value when they think that they can go at lower prices or better performance.

38:12And so having that open platform allows everybody to have that competitive chance. And AWS is a fantastic partner for all these model providers to get access to the broad set of customers. And so it's a great ecosystem where model providers benefit and customers benefit by having all of these in the same place.

38:28Ed Ludlow:Matt Garman, CEO of AWS, Amazon Web Services, back on Bloomberg Tech. Thank you very much. Now, coming up, home battery startup BasePower has a new valuation,$13 billion. We're going to talk to CEO Zach Dell about its latest funding round and the launch of its U.S.-built home powering battery. That's next. This is Bloomberg Tech.

39:04Ed Ludlow:Rising demand for electricity in the U.S. is fueling investor interest in backing battery startups, among them Base Power, which just closed a$1 billion Series D round at a$13 billion post-money valuation. Base Power's CEO and co-founder, Zach Dell, joins us now on Bloomberg Tech. A big round, right? And, you know, inevitably part of needing the funds is to scale. to get moving on the operations side. But let's start there. Like, what is it you want to do in the first instance, Zach? Yeah, well, we really want to scale energy infrastructure to meet rising demand for power. So we build a hardware product that we install on homes and we leverage this home battery that we design and manufacture ourselves.

39:47Ed Ludlow:And we leverage those batteries to support the grid in times of high demand. So we're adding capacity to the system to meet this rising demand from AI, electrification of heavy industry of transportation we're adding capacity to the system through distributed batteries the grid is able to use those batteries when demand is high and the homeowners that are have those batteries installed on their home are able to leverage those batteries when the grid goes out zach this is a residential product right at the basic level how tied is your fate and future to the adoption of solar in this country? Not really at all.

40:26Ed Ludlow:Solar is a generation technology, much like wind or gas or coal, and batteries are really more akin to a transmission and distribution technology. So the way to think about it is that poles and wires move energy through space and batteries move energy through time. And so the battery is really a utilization tool that is helping increase the capacity factor of the system and bring down costs for everybody. So I ask you that because the energy or electricity generation isn't the problem here. What is the problem that the base power is trying to solve for? Yeah, we've got a utilization problem on the grid today.

41:04Ed Ludlow:So the grid is really built for peak demand, which means that most of the time we're not utilizing all of the infrastructure, which ends up being very expensive for ratepayers or consumers of electricity. So by deploying batteries to the edge of the grid, you're able to increase the utilization, increase the capacity factor, and thereby lower costs for consumers. At home, I have a Tesla Powerwall 3. It does rely on solar to charge it during the daytime. But let's talk about that as a comparison or a case study at the technology level. The base core, it is better how, it's different how. It's really designed to be a grid resource.

41:44Ed Ludlow:So it's almost three, maybe over three times the size. It's installed much faster. It's actually owned and operated by us, the company based power and used as a grid resource. So when you go buy a home battery or a home generator, it's owned by the homeowner. And it's really only there when the grid goes out. Our asset is really a piece of grid infrastructure. And so in partnership with some of our utility partners, those batteries are used as a grid resource by the utility in times of high demand, like I mentioned earlier. And then in the deregulated markets in Texas and Illinois, where we operate, we use those batteries as a wholesale power asset.

42:20Ed Ludlow:So we're really operating a fleet of infrastructure, whereas those companies that sell batteries or generators, they're just trying to sell high margin hardware out front. And our view is that batteries are really an infrastructure asset and they're better sold and built kind of as such. Right. And not not really as a high margin product. Zach, I also feel like this is a Texas story from the manufacturing standpoint. Right. You know, this is going to be an American built technology. What were the challenges in establishing Texas as the base, the supply chain, making this an economically viable plan?

42:56Ed Ludlow:Well, Texas is a fantastic place to build companies and also to establish manufacturing. And we see actually huge advantages in co-locating engineering and manufacturing because the team that designs the product needs to be able to be very close to the team that builds the product. And so by coupling engineering and manufacturing and having that done by one team, one company and one location, you get a bunch of efficiencies. It is much easier to iterate and you can move a lot faster. Should we talk about some of your investors in the round? What was the importance of assembling that group beyond just the checks that came in?

43:32Ed Ludlow:What are you hoping to leverage from their experiences and their expertise? We're showing Ribbit, Co2, Valor, Altimeter, SANS Capital, D1. Yeah, I mean, we're building the company to compound over many decades. And we want to establish a cap table that is aligned with that kind of long-term thinking. So these investors who joined our cap table today and who've been investing with us now for a couple of rounds, they see the opportunity to scale the business across the U.S. internationally and do that over a long period of time. And they add a lot of interesting insights, perspectives, and they're really our thought partners and our operating partners day to day.

44:10Ed Ludlow:So we're super lucky to have a whole host of new investors joining the cap table and then basically all of our major existing investors reinvesting in the company. Earlier in the program, we had Valor Atomic CEO Isaiah Taylor on, you know, different part of the energy stack. But we talked about how is America doing in this domain? Right. We talk a lot about China, how quickly China moves, I guess, at the nation level and at the federal level. Are you getting everything you need, Zach, to be able to execute in the way you want, get the regulatory support? Yeah, look, I think there's a lot of energy being applied, no pun intended, to the space today, whether that's from the regulators, the policymakers, but also entrepreneurs like our team at BASE and the folks you mentioned earlier, some of the other companies entering the space.

45:00Ed Ludlow:I mean, when we started BASE three years ago, it was kind of unique to start an energy technology company. There were not a lot of those out there. And now they're very common and you see them pop up all the time. And we love that. We think that the industry needs more great entrepreneurs and teams solving hard problems and helping us scale our capacity to consume electricity in this country. So I think we're in a really good spot. And we've just got to keep executing relentlessly and building great solutions to some of these hard problems in the energy industry. You're building across the electric stack.

45:28Ed Ludlow:And I kind of like read a lot about you and think you're pitching yourselves as like a next generation utility almost. And I think we should end the conversation with like, what is your relationship like with the existing utilities, with the rest of the grid? Because you're all kind of trying to move together in the same direction. Yeah, I wouldn't think of us really as a next generation utility. I would think of us as a modern energy technology company that is a provider of choice to the utilities to scale their infrastructure. So we work very closely with utilities, with all kinds of utilities, with municipal utilities like Austin Energy, with co-ops like CoServe and GVEC, with investor-owned utilities like El Paso Electric.

46:06Ed Ludlow:And we build them technology solutions so they can scale their infrastructure and meet the moment, meet the rising demand that's coming from AI and all these things that you discuss all the time. there's an incredible inflection happening in energy consumption in America. And it's never been more important for the utilities to kind of step up and adapt. And we are really helping them do that. And it's our honor to work with the utilities. They're incredible partners and they have a huge responsibility in this coming decade. And we're really excited to partner with them. Zach, very quickly, what's it like trying to hire right now the talent you need?

46:42Ed Ludlow:look i think that we have a incredibly mission-driven culture and company and there's a lot of people out there hopefully some of them are watching this show that feels strongly that uh that scaling our capacity consume electricity and really driving towards energy abundance abundance on the path to human prosperity is one of the most uplifting and exciting missions that you can work on and so we've had the great fortune of having tons of the best engineers in the world come to base and say, hey, this is a mission I've got to be a part of. And so we've had a really great time, frankly, building out an incredible team down in Austin of just very mission aligned individuals.

47:21Ed Ludlow:And we're excited to continue to grow that team as we continue to scale the business. Zach Dell, co-founder and CEO of Base Power. Thank you very much indeed. There's a lot of other tech headlines. It's time for talking tech. And first up, South Korean AI chip designer DeepX secured funding at roughly four times its previous valuation, buffing the firm to$2.2 billion. The news comes months after the startup, which developed semiconductor architecture tailored for AI tasks, said it secured over 30 mass production contracts from customers across eight countries. Plus, according to a PwC survey of 1 ,000 finance executives, 86 % of execs said they thought AI training was more valuable than an MBA for new hires.

48:02Ed Ludlow:91 % of those execs also said they were willing to pay accordingly, increasing compensation for AI literate employees, pointing to a growing urgency for firms to adopt AI tech. And Spider-Man Brand New Day was the biggest debut in Hollywood history, with the movie opening to$360 million in the US and Canada. It was a smashing success in China, too, hauling the country out of its post-pandemic Hollywood slump and contributing to a global box office debut of$927 million. dollars that does it for this edition of bloomberg tech these are the earnings that we're looking at this week earnings continues we've got palantir spacex first ever earnings report and call as a public company amd a big one in the ai infrastructure space and then later a focus on entertainment the economy paramount disney uber all on wednesday sorry disney and uber on wednesday uh recap everything on the podcast was a pretty fast start to the week you know where to find it on the terminal on all Bloomberg platforms and online on Apple, Spotify and iHeart.

49:09Ed Ludlow:Have a great week. This is Bloomberg Tech.