Dell Boosts Forecast Through 2030 Off AI Boom

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1:09Bloomberg Audio Studios. Podcasts. Radio. News.

1:19Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco.

1:30This is Bloomberg Tech. Coming up, Dell rises after almost doubling its growth estimates for sales and profit through to fiscal 2030, boosted by demand for AI products. As we speak with a key AI player, the CEO of CoreWeave joins us on the company's latest purchase and a weigh in on the wave of compute deals. And Tesla might unveil a new cheaper version of its Model Y. As soon as today, we'll discuss what to expect. Meanwhile, let's check in on these markets, Ed, which maybe take a bit of a breather. Maybe there's a possibility of some profit taking as we have just ramped higher and higher. Day after day, notching new records in the S &P 500.

2:08We are flat on the Nasdaq 100. Remember, we've still got a government shutdown on our hands, but we do still see some buying of some key names. What are you looking at? Yeah, our top story is Dell. And much like the broader market, it's lost a bit of steam. We were up almost 6 % earlier in the session, now up 2%. Through the fiscal 2030, they have almost doubled their outlook. They're seeing top line growth, 7%, 9%. Bottom line growth, adjusted EPS, 15%. But the story is really clear. Traction in the AI server business. They have a backlog. Margins will improve. It's worth digging into. It is, and we do that with Bloomberg's Brody Ford.

2:44Just how seismic is this to give us the guidance all the way out to 2030? You all said it great. It's AI servers, right? Somebody needs to buy NVIDIA chips, package them into servers, and sell them to somebody else. And Dell has emerged as a very successful company doing that. The opportunity appears larger than Wall Street had anticipated. Sales are going to be pretty healthy growth rate in the coming years. Though, of course, as with a lot of AI infrastructure, the question is margins. Those are going to remain pretty tight, those operating margins in the single digits, which often gives investors anxiety, but the growth rates are good enough that today it doesn't matter.

3:24The numbers are really interesting. So in the quarter gone, Dell did book$5.6 billion worth of business. They shipped more than$8 billion worth of servers, and they have this almost$12 billion backlog. And how they're explaining it is that server margins right now are depressed because it costs money to move quickly. I think that's the conclusion I'm getting anyway. Yeah, that's right. I mean, it costs a lot of money to move quickly. These are massive deals. The supply chain is tight. And so if you want to be a buyer that gets priority, you're probably going to pay a little more. The AI infra market, whether you're talking about compute, servers, really anybody but NVIDIA, it's very competitive right now.

4:06And so if you want to move with scale, you have to accept some lower margins. Dell has been willing to do this, and it's winning some big deals from companies like CoreWeave. Core Weave, big deal. We talk about G42. We think about the global impact here. But Brody, at the moment, we're in this market where anything where you bolt on AI helps your stock do relatively well. Just talk to us about what IBM has been announcing and the folding in of Anthropic. IBM is another one of these companies seen as a bit of a legacy company, forgotten a bit by the average investor on Wall Street. But today they announced that they're going to be using Anthropics models for their coding assistant.

4:43this matters because Anthropics model really is the favorite for coding. And so I think this is being taken as a bit of a cosign for IBM's tool that, hey, large enterprises, you're not just going to pop into Cursor. You're probably going to do it through a more regulated environment and maybe IBM will be that vendor. A slight tangent, but yesterday, Brad Lightcap, who's OpenAI's COO, told me that Codex, which is their somewhat similar product. The use of that is up 10x since August. And I noticed on social media there's a lot of debate about which one's better. I'll leave that to the Bloomberg Tech audience to decide.

5:23IBM does software. I think a lot of people don't appreciate that. This story is indicative of that. Just explain what they offer. Exactly. IBM offers a variety of software, whether it's in financial processing transaction, whether it's in coding assistant. It's a lot of somewhat custom development helping large enterprises get all of their data in order. Let's say run AI models on it. Let's say use it, your existing data and your coding environment. They have a pretty wide swath. And as you said, folks don't realize a lot that it's their largest business segment at this point. This is not the kind of outsourcing IBM of years past.

6:05Bluebird's Brody Ford on some of what's happening in tech today. Thank you very much. When Caroline and I woke up this morning and sat at our desks, markets were pushing higher. There was a lot of enthusiasm about AI and we've lost a lot of steam. I'm not saying it's the fault of this program going to air, but those major indices are now marginally in the red. There are concerns that we are losing steam and the words AI and bubble keep coming up a lot. Let's get a discussion with Janet Mui, RBC Brewing Dolphin, head of market analysis. All of these deals announced this week were driving us at the index level when it comes to technology.

6:42We're now losing steam. What is the principal direction of travel here, Janet, when it comes to the tech sector? Hi. Thanks for having me, Ed. I do think that the markets have been rallied very strongly. It's almost like a straight line, particularly for the cheap companies. So I think taking a breather is absolutely normal. And I think some investors would be taking profits. So I'm not too worried about that. I do think that the direction of travel would continue to be upward because what we have seen is that there are a lot of mega AI deals. And they involve a lot of infrastructure, a lot of CapEx spending, and it stays within the AI ecosystem.

7:26And I think it just gives you visibility over that longevity of that AI spending. Janet, the driver in Monday's market was the deal between AMD and OpenAI. We spoke to AMD CEO Lisa Su. Listen to this. I have full confidence in OpenAI, Sam, Greg, Sarah. I mean, this is a massive opportunity for us right now, right here. It's about who has the most compute and how fast can we get it online. And we're committing to doing this together. The question was whether OpenAI was good for the money that it needed to fund all of these projects. And the market seems nervous about that. How nervous about it are you?

8:09So, so far, I think the financing has been coming from really investors and companies with very deep pockets. I mean, we're talking about the hyperscalers, including NVIDIA's investment into OpenAI. That's$100 billion there. So I guess from the liquidity perspective, that's pretty ample. And so far, we're not seeing a lot of credit or debt financed activity going on into this AI spending. So I think on that front, I'm comfortable. And I think the key thing is that there's just so much demand for compute out there. So many companies can benefit from that. and the building of the infrastructure in AI, it involves not just a single company, but really countries and many companies working together in the ecosystem.

8:55So I believe that this really gives you visibility of the longevity of this AI trend going forward. But the reporting keeps on coming back to us. Why, if there's unlimited demand for compute, does AMD need to give so-called incentives, it feels like, to open AI, to share in on its own winnings of future revenue? Why does NVIDIA have to put$100 billion to work in terms of equity investment in open AI if they should be just winning out for the sheer demand and scale of compute? And why does Oracle become one of the best performing stocks when clearly some of the profit margins don't always accrue to an Oracle?

9:32How do we decide which company really should win here, Janet? Yes, so I think the big players in this AI ecosystem, in this buildup of infrastructure will likely be clear beneficiaries. I think that's more on the hardware, the equipment building side of AI. I mean, there will be definitely some big winners in the software side of things, but we don't know what's the next killer app, so that's a bit more difficult. And that's why I think the key favorite for investors remain that AI infrastructure buildup, whether you talk about data center, cloud, compute, and et cetera. And I believe that, you know, I think some concern is right.

10:13A lot of this, you know, this close loop of capital liquidity investment is based on confidence. It's really the confidence that there is going to be insensurable demand for compute. And it's really hard to gauge how much of that. But if we do believe in this, the leaders in the AI, I mean, Jensen Huang talks a lot about how the demand for compute is just going to be so many, you know, tenfold up from here. So I think, you know, I would like to listen and believe in the experts in terms of their vision on how much there is on the compute demand. And so far, it seems very, very solid. Yeah, promises and vision.

10:54But Janet, what data do you turn to for hard fundamentals? Because at the moment, the MIT report showed that some of these ultimate focuses on productivity aren't actually paying off. Where is it that you're going to get your confidence that can be grounded in fact, not vision? I mean so far if you look at the corporate earnings growth right you look at the hyperscaler they're still delivering double-digit earnings growth and and in fact you can attribute a lot of that to AI the improved efficiency in say advertising and cloud computing demand and things like that it's actually a lot of a big proportion of the earnings delivery is already based on AI and I think there's still a lot of potential.

11:38And I think in terms of the actual data, I think you just need to look at the earnings revision. I mean, typically you can see today from Dell, just one example, that earnings estimates and revenues are keeping revised outward. So there's really clear visibility you're going to as far as 2030. So I think these are really hard data that you can look at. Janet Mui, thank you for that read from RBC Brew and Dolphin. It's always so great to check in with you. Meanwhile, coming up, we're going to speak with Michael Entretter, CallWeave's CEO. He's going to be talking about the latest AI deal that he's doing, a bit of M &A.

12:13And where is he finding confidence for the never-ending wave of AI deals? This is Bloomberg Tech.

12:30AI hyperscaler. CoreWeave has announced it's set to buy UK-based monolith AI, expanding beyond cloud infrastructure to offer broader AI solutions, in this case to industrial and manufacturing companies. Joining us now, Michael Intrator, CoreWeave CEO. There's been a wave of M &A coming from you, Michael. I want to understand why you're broadening out in this way. Yeah, thank you very much for having me. It's exciting to be back. And, yes, we've been quite active on the M &A front as we continue to build and broaden our offerings. Many of them are organic, things that we're building internally.

13:05And as you can see with the Modeleth AI deal, as you can see with the OpenPipe deal, as you can see with the Weights and Biases deal that we did earlier this year, There is a tremendous focus that we have on broadening out how we're going to be able to support our clients from the software side. Obviously, there's also the core scientific transaction that is in process. And once again, it is part of our vision of being able to offer a turnkey solution from the bricks all the way up through the infrastructure and through the software to be able to serve our customers in the best way possible. And is that because also it's more profitable?

13:50Michael, we're looking at reports at the moment about Oracle and ultimately how razor thin its profit margins are when you're thinking about renting out compute because of the cost of ultimately the GPUs coming from NVIDIA. How hard is it to make your bread and butter work from a real profit margin perspective? Yeah, look, you know, the profit margins we're able to garner with the infrastructure that we sell are significant. We're excited about it. We've really been able to drive our business in accordance with our objectives. We're scaling at an incredibly fast pace. And so with that, you get short term distortions.

14:27But in terms of the business strategy and execution, I couldn't be happier. When you think about where the space is today and where the space is going to be over the next several years, the broadening out of our offering of software solutions really allows for an incredibly effective way of bringing on new clients that are going to pay for not only the infrastructure, but also the services that they get when they need to be able to integrate artificial intelligence into their broader mission. And so we're excited about that. We think it's the right way to go. We've been aggressively pursuing it.

15:05We brought on some great teams and, you know, you'll be seeing products coming out of those teams imminently. Michael, the top story today is Dell roughly doubling its growth projections for both sales and profit through fiscal 2030, largely because of AI server demand. And you are one of the key customers for Dell in that respect. from the customer's perspective, what does that kind of bigger picture forecast from Dell signal to you? Look, you know, there's a lot of noise in the space again, and this happens periodically. And, you know, but when you take a step back, you're seeing incredibly strong demand from Dell, you're seeing incredibly strong demand across the hyperscalers as they're able to embed AI into their products.

15:55You know, the profits that those are driving are the underpinnings. You're asking about what people look to. That's what they look to, right? Like they look to people that are able to generate revenue from their existing client base using AI. And that is incredibly strong. We've seen it repeatedly. You're seeing it again with Dell. It's really exciting. And once again, you zoom out just a bit here and it's really an incredible space going through an incredible transition. That transition is causing a systemic imbalance in the infrastructure side, which is what drove us towards the deal that we are looking at with Core Scientific.

16:36Core Scientific is an infrastructure provider for us. They are one of many. And, you know, over the since our last earnings call, we've increased our contracted pipeline of power from 2.2 gigawatts to now up to 2.8 gigawatts, which is a new number that we're putting out there, of which none of that comes from, of course, scientific. We have broadened our strategic relationships with other private providers of the infrastructure. A great example of that is Galaxy Digital, where we're able to go ahead and get large blocks of contiguous power to continue to buy infrastructure that will be made available to our clients as they continue to build.

17:21And ultimately, that brings us back to this particular acquisition that we're looking at. You know, it's an acquisition that we put out there several months ago. Core Scientific provides core weave with over 500 megawatts worth of infrastructure, which we currently have contracted. Therefore, you know, we have a great relationship with them. Regardless of the outcome of this acquisition, we will continue to have a great relationship with them as they deliver power to us within our data centers that we share with them. It is a small and shrinking part of our portfolio. And ultimately, that led us to the position where really under no circumstances will we readdress the bid that we put out.

18:06That's the number. We think it fairly represents the value for them. We think it will be great for the two companies to move forward together. The systemic imbalance within the infrastructure is causing, you know, it really is stressing the supply chains and causing all kinds of delays. Yeah. I'm sorry to cut you off. We're going to run short of time. And I've got to ask you this. 24 hours ago, we had AMD's CEO, Lisa Su, and OpenAI President Greg Brockman on the program. There are lots of unanswered questions about the six gigawatts of capacity they've agreed. Will CoreWeave participate and support in that arrangement?

18:44Just very briefly. Yeah. So we support OpenAI enormously across the space and we have great relationships with AMD. We use their infrastructure within our portfolio. How they choose to divvy that out, we don't know yet. You know, we're more focused on the 14, you know, the minimum deal that we did two weeks ago, which was a minimum of 14.2 billion dollars, which will continue to expand with Meta. That will come online in 2026. We're really excited about that. And, you know, the AMD deal with OpenAI is just another example of the recognition across the space of how much of this infrastructure is required and how much demand all of these providers of artificial intelligence are encountering.

19:30Michael Entredo of CoreWeave, thank you very much for being back on Bloomberg Tech. Now, coming up, Tesla is set to unveil a more affordable version of its Model Y. We have more on that next. This is Bloomberg Tech.

19:49Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London, with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday, keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled, and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break.

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20:55It's time now for Talking Tech and first up, Bank of New York Mellon is exploring tokenized deposits, enabling clients to make payments using blockchain technology that could speed up settlement time, reduce costs. Other banks, including JP Morgan and HSBC, have made similar moves. Plus, Applovin, while it's facing a probe over its data collection practices, according to sources, the Securities and Exchange Commission is investigating whether Applovin violated service agreements on pushing targeted ads. Applovin declined to comment on the matter. And Elon Musk named a former Morgan Stanley executive as the chief financial officer of XAI.

21:28It's all according to a report in the Financial Times. Anthony Armstrong worked on Musk's purchase of Twitter. He will oversee the finances of Musk's AI startup and the social media platform, now called X, of course, Ed. Tesla is set to unveil a new cheaper version of its Model Y as soon as today. That's according to sources. Bloomberg's Craig Trudell, our global auto czar, joins us from London. You and I worked on this together. This is what I'm hearing from sources inside Tesla, that it is just a more affordable Model Y. Fewer features. They engineered cost out of the battery pack. and the motor, but also it's kind of been hiding in plain sight because Musk and others discussed this on the most recent earnings call.

22:10Yeah, one of the more colorful moments on that call was, you know, some of the other executives at the company kind of dancing around these questions about what this more affordable Tesla would be, and Musk just coming right out and saying, let's let the cat out of the bag. It's just a Model Y. So, you know, I think the expectation here, of course, is that this, by taking some of the content out of the vehicle, maybe, you know, making it a little bit less attractive from a range perspective, but more attractive from a price perspective, you know, the hope here is that some incremental consumers who maybe were going to be priced out of this vehicle now can maybe afford it with this$7 ,500 tax credit going away.

22:53And I think that's going to be, you know, one of the key questions for the next earnings call from Tesla as just how steep of a cliff are we looking at here now that that incentive has been sort of pulled out from under the industry. I can see that that reacts to the unwinding of the tax credit. But there's been this ongoing call for them to offer a less costly version of the EV, largely because of China competition. Is it enough? I think that's a really fair question. And Ed's reported on this going back quite a while that Elon Musk is not particularly interested in expanding the lineup with an altogether new vehicle when in his mind, this is a company that's on the cusp of making vehicles capable of driving themselves.

23:37And so, you know, why sort of, you know, bother with introducing a more affordable vehicle and competing with the likes of a Corolla or a Civic when, you know, what you have in the lineup is on the cusp of doing something that, you know, no other manufacturer is going to be capable of doing. The question, of course, is can he make good on that sort of promise or vision? You know, Craig and Caroline, Tesla did not respond to our request for comment. And, you know, there's a lot of speculation out there that it could be a roadster. And we're not expecting some big event. You know, Craig, you've been editing this stuff with me.

24:13The fact and reality is we just don't know. But Caro, you know, we're waiting to see what happens. We do. We'll wait for it to drop, even if it's stealth mode. But you're never in stealth with your reporting. And Craig, we thank you for always the editor on it. We appreciate your time. Meanwhile, coming up, look, OpenAI's golden touch. How companies are benefiting. I'm just going to mention of the AI darling. That's next. This is Bloomberg Tech.

24:48Welcome back to Bloomberg Tech. Yesterday afternoon, I'm sat in a warehouse in Fort Mason San Francisco. Sam Altman of OpenAI is on stage. Loads of OpenAI execs are on stage. They name check all of these companies and some of the stocks go ballistic. One of them is Figma. And Figma basically spikes up 16 % at one point in yesterday's session, closes up 7%. It's up again for a second day, all because of a name check on stage by OpenAI. Actually, one quick stat, Karo, Figma's up for the first time for four straight days since it listed in July. So it's on a bit of a run anyway. But yeah, let's dig into what's happening with the golden touch.