Elon Musk Sues Apple, US Takes Intel Stake

25:42So Apple's building a new version of Siri for next spring and it's obviously much needed for reasons that I don't have to spend an hour listing now. But they basically have two paths. They can go completely in-house with the new version of Siri and by in-house, I mean self-developed large language models to power it, or they could use a third party to help out in terms of building the new Siri. So they've been talking to a bunch of possible partners to see if they're willing to power aspects of that new Siri. So they've been talking very much to Claude from Anthropic, and I believe eventually they'll reach some sort of agreement.

26:17But more recently, they started negotiations with Google about Google building a model based on its Gemini technology for Apple as well. So we'll see where they ultimately land in a few months. And before that, we've got more hardware to come. And Mark Gurman, you've been writing about that throughout the weekend on Power On. I urge everyone to go and take a read and then listen. We thank you so much for joining us.

26:41Welcome back to Bloomberg Tech. Let's check in on a couple of stocks because more broadly, the benchmarks are flat. But I'm looking at PDD up more than 1.2%, let's now call it. This is the owner of Temu, of course, actually reported slightly better than anticipated numbers. Revenue pushed up 7%. Look, it is the slowest pace of expansion in years for the Chinese e-commerce giant. However, it did manage to beat some pretty low expectations of analysts. Net income, that was on the downside. But really, this is coming from galvanizing consumers. They're trying to offset this economic fallout from U.S.

27:12tariffs. And a little bit of a relief today. Intel up 1.5%. This is the U.S. government. Does take that 10 % stake. Does have President Trump saying they got it for zero. But he does want to show support. and this is all about having a domestic champion here in the United States when it comes to chip manufacturing. But that's all about the story of AI, isn't it? And let's talk about AI startup perplexity, set to allow publishers the opportunity to actually share in revenue their articles generate. The move comes as the company faces pretty mounting criticism and legal action from media outlets over its use of their content.

27:42Blumberg's Shereen Ghaffari, I'm pleased to say, is still here in New York, and I'm thrilled about it. What are we seeing in terms of perplexity trying to fend off issues? This is all about comment. This is all about the actual new product that they're offering and trying to share revenue there. That's right. So Perplexity, as well as other AI companies, but they've really been one of the quickest, is making a big push into an AI browser. So having all the AI tools actually embedded into your web search and being able to sort of understand what you're seeing on the web and everything you're doing on your computer.

28:12At the same time, they want to be able to have high-quality information for people when they are searching through different tabs. So they're integrating this new kind of premium tier of subscription that will allow you to actually get some more high-quality news sources into your AI browser assistant and give 5 % of that revenue share to publishers who partner with them. Okay, so they're able to charge more and therefore allow some money to go to them. But that must be a fraction thus far of the actual use of publishers and what they're working on. And many have been fighting back at perplexity for that.

28:48That's right. And by the way, I misspoke. It's actually 80 % of revenue share, which is high. And what I meant was it's$5 a month for the subscription. And yes, it comes at a time. I mean, this company has had some fights with media companies in the past and continues to, right? They have had accusations of plagiarism that they've denied. They have also more recently just sort of been facing copyright infringement lawsuits. It's not, they're not the only ones, right? Almost every major AI company is facing these kinds of legal battles. but Perplexity in particular has sort of faced some criticism over that.

29:24And I think now they're trying to show that they can work with publishers. They have done some similar sharing of their revenue in the past, but that's been on ads. And this is one of the first to be on subscriptions. And it's different, isn't it, from the just mega deals that we see OpenAI or maybe even Google, of which, of course, Perplexity is throwing their hat in the ring for a Chrome browser. They've just been giving lump sums in some way to some of these publishing companies. That's right. Right, so Perplexity says they don't want to do these big one-off deals. They actually think that it's more sustainable to do these long-term partnerships, or more structural sort of percentage partnerships of the actual subscription revenue or the ad revenue.

30:00Shireen Ghaffari, we thank you for being in the house in New York. Now, elsewhere in AI, Palantir down once again as investors' question returns on AI investments and valuations. Concerns which have been hitting Palantir for at least two weeks now. Let's bring in Jeffrey's analyst, Brent Thill. He's one of the most bearish analysts with a$60 price target and an underperformed rating. and you just thought the valuation got totally out of whack. Has the fall rectified anything for you thus far? No, I mean, it's still 70 times revenue we've ever seen a software company trade of this multiple. So as we've said, you can touch multiples like this, but you can never sustain or live.

30:36It's like living on the top of one ever. So you can get there, but you can't stay there. So again, the fundamentals of this company are blowing anyone's expectation, including ours away, for them to put up a rule of 90, which is top line and bottom line margin combined equally 90, is unheard of. So they are effectively on a different planet as it relates to their fundamentals. But the valuation is there as well. So I think we've tried to separate the two in saying the company is performing extremely well. We don't see anything like it in our coverage universe. However, we have seen this before where you saw Snowflake, Datadog, others that traded at those similar multiples.

31:23They never sustained. And it was a tough fall. So, the minute the revenue growth decelerates and we've had eight quarters of accelerated revenue growth, once you see that decel, the multiple is a concern. Do you have a view on when that deceleration will actually have? Because you've said in your notes that you've got limited visibility, lumpiness in quarterly bookings? I mean, are this actually going to start showing up and convincing the retail investor that has helped drive it up and to the right? Yeah, I mean, it's a good point. So the majority, a huge part of the investor base is retail. It's about 40%.

31:56And so our clients are institutions. And I don't speak to a lot of clients in Palantir because our institutions have basically valuation thresholds that they can't break through. And And they've all seen this movie before in the last 20 years in our group. So from a retail perspective, it can keep working. When does it break? We don't see a breakdown in the fundamentals. I think the question becomes, you know, the comps are going to start getting harder. And can they sustain that level of growth? And Dr. Karp, the CEO, has said this, that they expect headcount to actually shrink and they can grow revenue 10x on a shrinking employee workforce at Palantir, which is, to me, kind of mind-blowing.

32:42Because if you think about it, you need a lot of Palantir people and services people to get the software working. How does this happen? Does AI make the software work? There's a couple of things that just I think everyone's trying to make sense of. That's one comment that how do you grow 10x with that tiny of a workforce? And Brent, you've outlined the issues of employees, but there are upside risks that you also detail. They actually do do faster and expected monetization, particularly of the AIP, or they do get sustained commercial momentum. How long can the market remain irrational and others remain solvent?

33:18Well, the market can remain irrational for a while. Again, remember, you're dealing with a retail install base. You're not dealing with an institutional base. So as a pig in the stock. So I just say that this could continue to go on. And this is the area that we've been wrong, which is the magnitude and the duration of how long it would sustain. I mean, if you take the next closest multiple in software, and this is close to 70 times, it's cloud flare at 20, 25 times. And then it falls off a cliff from there in terms of the multiples across our coverage. So you're just really dealing with something that is super unique.

33:54Their business is super unique. The execution has been incredible. So there's been no real reason fundamentally to sell the stock other than, hey, the multiple is where it's at. So I think it's a hard one because, again, you have to give them credit. The product is working. The customers love it. And you look at the quality of the execution has been next. No one's been even close to them. Well, they still remain the best performing stock in the S &P 500 despite the recent fall. But we'll see how much the momentum carries on. Brent, it's always so great to check in with you. Jeffrey's analyst, thanks for your time.

34:33Look, another defense tech company to watch. This one actually part of, it's not part of the public markets yet, in fact. is private and it's called Saronic. He wants to speed up shipbuilding in the United States with the goal of securing U.S. naval dominance, according to the CEO. We spoke with that CEO, Dino Mavrucas, about the shift that he's seeing in government interest. I was in the SEAL teams for 11 years. My last five years were spent on SEAL Team 6. That was from 2004 to 2015. I say that to say this. This is the fastest that I've seen the military and the government move to adopt anything in my life.

35:10Now, that is extremely encouraging from a business and an operational perspective, but it should also be concerning when we think about why is that happening, right? The potential threat with China and the South Pacific. We need to move and we need to move now. And that's why we're operating so quickly here at Saronic. We're investing private capital to build the technology that our warfighters need and get those solutions in their hands as fast as possible. What else do you need, Dino? You talked about how you're building the infrastructure and the talent, but what is it that keeps you up at night that stops and holds you back?

35:45When we think about what we need, I break it down to talent, customer, capital. If you bring those three things together, there's magic that is happening here at Saronic. What I mean by that is we have a world, like truly world-class team. Our co-founders come from phenomenal companies with phenomenal backgrounds. We have over 800 employees now across the country and actually across the world. We've opened locations in Australia and the UK as well. Capital, we have some of the world's largest and best investors, 8VC, Andreessen Horowitz, and the list goes on. And you've got commercial customers as well.

36:25Just to round things out, How big a sector could that be in terms of demand? I mean, we look at the commercial sector as absolutely critical. I mean,$100 billion plus commercial maritime market. And here's the thing that I point out to people when you're focusing on defense. It's you need a strong commercial industry to have a strong defense industry. We build all of our products for dual use, defense and commercial. What that lets us do is diversify our revenue base, invest more dollars into R &D to build better solutions for the government, build robust and reliable supply chains that can scale, take advantage of economies of scale.

37:10You have to build for commercial use cases as well. The days of building one-off bespoke solutions for the government are just over. We need to be building ships by the hundreds and boats by the thousands. And that's what we're doing at Cerronic. And you've been able to make your supply chain work to fit that at the moment, because with tariffs coming in and changing the rules around metals and supplies, how has that been for you to navigate? We spend a lot, a lot of time on supply chain. We have two dozen people that focus on nothing but supply chain. But here's the beauty of what we've been able to do at Cerronic.

37:46We're completely vertically integrated from start to finish. When I say we're building our own boats and ship, we're building our own boats and ships, right? We're contracting the aluminum and the fiberglass. We're bringing in every single component that is integrated onto our platforms. We're doing final assembly. And we have the capital and the team to bring things in-house when we find bottlenecks in that supply chain. That's very rare and very unique and a very, very strong differentiator when you talk about what it takes to actually get to scale. Saronic CEO Dino Mavrucas with us earlier, well, later last week.

38:23Now the SpaceX delayed the test flight of its Starship rocket on Sunday, just half an hour before its scheduled liftoff due to a liquid oxygen leak. Now it marks another blow to SpaceX's launch record after two earlier flights this year ended up in explosions. Now the company is aiming for another launch later tonight. Coming up, the world of esports. It looks to gain a wider fan base, announcing a new tournament. More on that next. Meanwhile, we're watching some outperformers in the world of gaming. EA, Roblox, both trading higher, significantly outperforming, for example, on Roblox up more than 7 % after last week's sell-off.

38:59This is Bluebeck Tech.

39:08Hey, everyone. It's Cal Penn, the host of Earsay, the audible and iHeart audiobook club. This week, I'm sitting down with author Matt Dineman and narrator Jeff Hayes to talk about dungeon crawler Carl. Matt had one line in a notebook from middle school, Alien Game Show. It took him until 2019 to finally write it, but what came out was an out-of-this-world audiobook phenomenon. We talked about that origin, a talking cat with a charisma stat that breaks the game, and what it takes to voice an entire world. Fiction is bulls**t. So you gotta trick me into caring about what you're talking about. And that's always what I have thought of as my job.

39:54So as a narrator, I always want to keep you engaged by making you feel as if I care as a narrator. And when I do dialogue, I don't want to tell you what the characters are saying. I want you to hear firsthand. Listen to Earsay, the Audible and iHeart audiobook club on the iHeartRadio app or wherever you get your podcasts.

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41:27The Esports World Cup Foundation, well, it's announced a new biannual tournament called the Esports Nations Cup, Bringing together the world's best players in an attempt to elevate esports to a new cultural and patriotic movement. The tournament is set to debut in 2026 in Riyadh. Joining us now, esports World Cup CEO, Ralf Reichert. There we are. Ralf, give me a sense of why representing countries matters here. So when we look at what happened this year, this year was the second iteration of the esports World Cup. was the first time that all the games industry comes together and competes across 24 different games.

42:05And this is a unique moment because esports has been very segregated into different disciplines. And now there's one place where this all happens together. And we've proven that it can happen on this scale and be successful with 700 million viewers across the world, 3 million people visiting Riyadh for it, which is, you know, as much as Vegas has visitors in four weeks. So that was the proof point. Now we want to bring it to the next level because esports has been built out of clubs, which are super important and the origin of it. But for my mom to care, to take it for the next step and really make it mainstream, we believe that Nations is a very logical step.

42:43And by building this platform and the model of the esports World Cup, we at the foundation now have the means and the trust of the publishers, the community and the fans and the players, most importantly, to do this. and that's why we announced it on Saturday and we're incredibly excited about it. Why in the Middle East, why has Riyadh been so quick to adopt this? So I think there's a few reasons. I mean, number one, there is, out of the population of Saudi Arabia, 63 % are below 35. And 70 % of the population in Saudi Arabia identifies as gamers. So it's a huge home for gaming. And then the crown prince himself is 38 years old, right?

43:25So he's endemically has grown up with gaming and a lot of people in the government, actually. So I think it's the first government that's out there where, you know, it's consisting of people who really understand gaming from the inside out rather than looking out of it. And number three, Saudi Arabia has publicly said this multiple times. It's diversifying their economy and tourism is a big one, but gaming as well of this diversification. and the largest e-sports event in the world is a no-brainer to achieve that. I mean, they had Ronaldo, of course, giving away prizes at the recent festival and he lives over there playing as well.

44:04I'm interested, Ralph, just about how much money has managed to be built through this. What sort of sponsorship are you seeing? Because the numbers, the viewership, the eyeballs are extraordinary. Yes. So, I mean, as you said, right, Ronaldo is our global ambassador. So I was on stage with him the other day presenting the trophy to Team Falcons, who have won. Very quickly, second, Team Liquid, an American-European crossover. And last but not least, Team Vitality, which is a European club. But we have more than 22 sponsors with many international names like Sony, Amazon, Pepsi, Hilton, MasterCard.

44:37So the lineup is incredible. It's well over a nine-figure sponsorship income. But to be honest, the industry is still early. So without host city fees and country hosting fees like we have gotten through Saudi Arabia, At this scale, this wouldn't be possible. And we've seen this a little bit in the last few years that the monetization is not where it's in traditional sports. And I think one of the things we always miss is traditional sports is heavily subsidized by governments as well, by public money. Being it in the college system or an amateur system or in one of the biggest sports events come to countries, right, where it's a big marketing and financial support.

45:16and I think what we're seeing with the Esports World Cup and now with the Esports Nations Cup is for the first time that governments really at scale invest into it, believe in it and use it as a cultural tool like they do with traditional sports. It's been great seeing some of the numbers, seeing some of the celebrations, talking about the next tournament. Ralf Reichert of Esports World Cup, great speaking with you. Thank you.

45:43The Federal Trade Commission is urging tech companies to resist what they see as pressure from foreign governments to weaken data privacy and free speech protections for U.S. consumers. Now, FTC Chairman Andrew Ferguson spoke to us about the agency's concerns, what he wants to hear from U.S. tech companies. In the United Kingdom and Europe and elsewhere, American tech companies that do business, you know, in the United States and elsewhere are coming under pressure, sometimes through direct legislation, to potentially censor speech in Europe, maybe even in the United States. Of course, the Brazilian Supreme Court justice is of the view that American tech companies need to censor speech everywhere because it's the nature of the Internet.

46:25And it was really important to me as an American law enforcer to make it clear to American companies, you don't get to take a free shot at American consumers just because of something that governments in other parts of the world are asking you to do. We've got laws here in the United States that protect the relationship between American consumers and American tech firms. And so no one should think that you just sort of get to do to Americans whatever you want in order to comply with the demands of foreign governments. And that American laws, particularly the Federal Trade Commission Act that I enforce, don't allow American tech companies to hurt American consumers just because a foreign government is demanding it.

47:02And I just wanted to make sure that everyone, consumers and the tech firms, understood this is how I see the law. And I want you to come to explain to me how you are planning to protect American consumers, notwithstanding the demands of these foreign governments. And if they aren't, then I'm going to enforce the law against them. Thus far, we have seen action taken in particular by Apple, pushing back at requirements by the United Kingdom for a so-called backdoor into data that they hold, encrypted data. I'm interested as to how you felt that unfolded in the UK and whether Apple played by the the playbook you wanted to see yeah i mean look and i think a lot of credit here needs to go to the to the vice president who um you know sort of personally managed trying to protect americans from these demands of a foreign government but yeah i mean look i want american tech firms to understand you have legal obligations in your home country in the country that made it possible for you to become what you have become to protect american consumers and not basically to give Americans the short shrift because it would be easier to comply with the demands of a foreign government.

48:06And so I'm glad that because of pressure from the United States and particularly from the vice president, that we were able to achieve this outcome and protect consumers from Apple. But this isn't going away. Europe has passed these laws that promote censorship. Britain has these laws. We're seeing this sort of thing happening in Brazil. And it's very important that American tech companies understand you cannot just sort of take it out on Americans in order to comply with these other foreign governments. You have to protect Americans first. FTC Chair Andrew Ferguson, go to online and see the full interview.

48:39But that does it from this edition of Bloomberg Tech. Let's check in on Intel shares, a historic time for a company when 10 % of its equity is now held by the US government. They don't want governance role. But President Trump earlier today taking to Truth Social and now at a press conference discussing the upside for America. Don't forget to check out our podcast. You can find it on the terminal as well as online on Apple, Spotify, and iHeart. From New York, this is Bloomberg Tech.

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