Intel Raises Billions, Apple Sticks With Glass iPhone

20:59In Q2, which we just reported, we did$40.4 million, which is a record for the company. We closed Northern Data in mid-June. We rebranded the company to Rum Group. So now we have two divisions. We have the video platform, which is Rumble. And on the other side, we have Quake AI, which is the AI compute as a service business. And that showed up in the quarter. And we posted a record, a record in the history of the entire company since the inception of going public. And for the very first time, we initiated formal guidance as a company now that we see that we can predict and be better at telling the market and where we're going and telling the story.

21:44And we are forecasting between$87 million and$93 million for the third quarter of 2026.

21:52Ed Ludlow:Chris, do the investors accept, understand and believe the Quake AI story? I think that's something the market's missing right now. I think that we have to execute as a team and we have to show that we can take this business and capitalize on the opportunity that we have. We have over 250 megawatts of unmonetized power, 150 megawatts that's in Georgia. that represents a$3 billion annual revenue opportunity for the business. So at this moment, I think the market wants to see some execution, and I think we're starting to show that. We posted a record here in Q2, and we're anticipating I'm posting a record in Q3.

22:40Ed Ludlow:So that's interesting, right? Not yet monetized from a megawatt perspective. You could even just do it on a per-GPU basis. You guys have more than 20 ,000 NVIDIA GPUs across H100 and H200 generations. What does it take to monetize that capacity? Bring it online? Yeah, so our current estate that's monetized right now, we have about 22 ,000 GPUs. That's monetizing at about 6 to 7 million per megawatt. And as you've probably seen with a lot of different earnings out there and SpaceX, et cetera, there's a lot of different projections on where that can go for the estates. The 250 megawatts that we do have that's currently unmonetized, if you throw Rubens in there, if you throw Blackwells in there, depending on the customer that we put there and what chipset we put there, that can scale up pretty dramatically from$6 million to$7 million per megawatt.

23:34You heard Elon talking about 30, he was guessing between 30 to 50 billion per gigawatt. So, you know, the scale can get pretty, pretty rapid there. And that is exactly the opportunity we have in front of us. And my team is heads down 100 % on monetizing that 250 as fast as possible. It's only been a month and a half. We've got the utilization up on the current estate up to roughly 85%. And now we're heads down on trying to get that$250 ,000 monetized, get the right client there, and capitalize on that$3 billion annual revenue opportunity that sits right in front of us.

24:15Ed Ludlow:Again, this was a pivot. So in the quarter gone, the video platform still contributed more than$30 million in revenue. What's the future of that business? You see an inflection point where AI is just the vast majority and video goes away, or it's more even set? I see like there's a real opportunity that's coming in the future. And I think it's a little early at this moment, but robotics, I think the next major leg on AI, obviously AI compute, the demand, it's very scarce. The demand is super high. There's very low supply. And that's going to be a very big business going forward for us. But I also think the video side provides a real opportunity when we get into this robotic era of AI.

24:57the video data is going to be very compelling in order for training robotics. So we sit in a very interesting place with over 57 million monthly active users on the video platform and a community, a very strong community that can contribute a lot of video data and monetize their video data for that robotic era AI. And I think that creates a moat around Rum Group that, you know, the typical neoclads don't have. We have what the neoclads have, and that's the power, the land, the GPUs. But we also have something they don't have, and that's the video data.

25:34Ed Ludlow:Rum Group CEO Chris Pavlovsky, back on the show. Really appreciate your time. Thank you very much. Coming up, leveraged ETFs are growing in popularity, adding even more exposure to mega cap tech and semiconductor names, stocks that have experienced some of the sharpest swings in years. What could that mean for risk across the broader market? It's a really important big take coming up next. By the way, this is what markets look like. A lot of it focused on what's happening with the US and Iran. We see bonds drive higher. Most stocks largely higher than Nasdaq 100 is flat. Chip stocks outperforming.

26:05Ed Ludlow:It's half time. This is Bloomberg Tech.

26:16Ed Ludlow:Welcome back to Bloomberg Tech. One increasingly popular area for investors in the past few years has been leveraged exchange traded funds. Many of these are tied to AI-related stocks. The dramatic increase in the issuance and trading volume means the risks of these leveraged ETFs are no longer contained by individual investors, but could impact the underlying stocks or even the wider market. Bloomberg's cross-asset reporter, Danisa Sokova, joins us with today's big take. And it is a big take. So many people are reading this this morning. Start with the basics. Like, what is the top line that the big take is trying to get across?

26:52We've been talking about the concentration in AI names. So I'm taking you back to 2022. The concentrations of AI exposure was about 26%. Looking at this number this year, we're talking about 58%. At the same time, those ETFs have really increasing AOM, and most importantly, in their derivative-based bullish exposure. We're looking at 500 billion of bullish exposure, and as we said, about 60 % of this is AI name. Very concentrated. But we're talking a lot about how big they are. But the most important number is how much they're traded. And they're traded a lot. In the last 30 days, they were traded about 70 billion of them.

27:34So despite their relatively small part of the ETF universe, they really exert great influence. And that's what we saw in South Korea, obviously SK Hynix and Samsung. We saw really big volatility. And this is one of the few examples where we clearly saw leveraged ETFs up and exacerbate that. Of course, those stocks are not as liquid as the NVIDIAs and AMD and all those companies. Those products are concentrated. But we saw clearly how big their influence can be in a market like that.

28:06Ed Ludlow:Danita, leveraged ETFs, particularly AI-related ones, have been in the news for a lot. But for the section of the Bloomberg Tech audience that just needs the basics, what is a leveraged ETF? How does it work? So leverage ETFs uses derivative to either increase the exposure of ETFs. So I can have three times the leverage of an NVIDIA stock, for example, or it goes the other way. We can have an inverse leverage where the product can go short NVIDIA for two or three times. Over the past few years, there have been fewer 3x products. So a lot of the products we see are two times. But clearly, that's a lot of leverage.

28:44There were some suggestions about five times leverage products that didn't make it in the U.S., but some of those actually exist in Europe. And what we're seeing in markets like Asia, especially South Korea and Hong Kong, is that those are extremely popular. They're all about really not so liquid products, and retail investors are putting billions. We're talking about the SK Sinex products that became the biggest single-named leverage ETF, and it reached$17 billion earlier this year after that regulator just reigned in. and now it's more. But still, we're talking about a lot of leverage in that product.

29:18Ed Ludlow:Bloomberg's in it, Sacova. Thank you so much. Go and read the big take. So much traffic on it already today on the Bloomberg terminal and on the website. And again, this is something that's been in the news cycle a lot of late. Another big story breaking this morning, e-commerce startup FIA used software that allowed it to take credit for sales. It didn't drive. And its co-founders, Phoebe Gates and Sophia Chiani knew about and pushed for those features for more than half a year. That's all according to sources and internal communications. Bloomberg's Olivia Solon joins us with the story. I think, again, start with the basics.

29:55Ed Ludlow:How does FIA work? So FIA sells itself as a sort of digital shopping assistant, and it has an app that kind of recommends products. And then it also has a browser extension, which pops up as you're sort of shopping online on retailers' websites and shows you coupon codes for discounts. And if you click on one of those coupon codes or click on a FIA link before buying something, FIA gets a commission for that from retailers. So our reporting is that FIA has been taking credit for sales that it didn't drive. How? So as I just said, if you actively click on a link from FIA or you use one of its coupons, FIA deserves to get a commission under the rules set out by its commercial partners.

30:40But what we noticed was happening was that FIA was taking credit for sales that it wasn't involved in. There was no human interaction. And it was doing this because of the way that this sort of attribution model works is that when you click a link, you have to drop a little cookie on the shopper's browser. And that tells the retailer, hey, FIA recommended this shopper to buy this product. And so you should pay them a commission. But what FIA was doing was something called cookie stuffing, which is dropping a cookie at other times, not when anyone was clicking. So it was doing it automatically in the background using a number of different tools and including when you were trying to kind of close down FIA's pop-up tool, which, again, you're not supposed to do.

31:25You have to be taking an intentional action for it to count to get a commission.

31:30Ed Ludlow:We're just showing the response from a spokesperson at the company. We're reviewing every transaction we're fully committed to and have already begun issuing transaction reversals to brand partners as a result of many this attribution. The two founders, as we said in the intro, are kind of core to this story. What do we need to know about their role? So we have internal, I've seen internal Slack messages that indicate that they knew about these features and were kind of actively encouraging different ways to drop cookies, even when there was no kind of shopper interaction. We have messages from Phoebe Gates back in December where she's talking about one of these features that automatically drops a cookie in the background on the mobile browser.

32:12And we have messages from Sophia proposing another feature and discussing another way that cookies are dropped automatically without any human interaction.

32:24Ed Ludlow:Bloomberg Tech Editor Olivia Solon, thank you very much indeed. Coming up, drone startup Neros has raised$250 million in a funding round that's tripled its valuation. We're going to talk to Neros CEO, Saron Monroe-Anderson, and one of its lead investors, Sequoia partner, Sean Maguire. A very big conversation coming up next. This is Bloomberg Tech.

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33:23Ed Ludlow:rocket lab ceo peter beck just told bloomberg the company still intends to launch its neutron rocket this year as it pushes to take on spacex shares are lower after beck appeared to soften the timeline for neutron's first launch during the company's earnings call here's what he said their intention here is to still definitely push hard to go try and get a first flight away this year but i think the the real question that should be asking is is uh what about the 10th flight because these programs, obviously first flight is important, but flight number 10 is actually really, really important because that shows that you've got into a full sense of scale and cadence and reusability.

34:05Ed Ludlow:Sequoia's made one of its biggest defense bets on drone startup Neros. The company just closed a$250 million round, tripling its valuation to$2.5 billion as it looks to ramp up production of its attack drones. Nero's CEO, Sauron Monroe-Anderson, and Sequoia partner, Sean McGuire, join us here in San Francisco. I think, you know, they're big numbers. Congratulations on the round. They're big numbers, but he deserves them. They're big numbers. People focus on the valuation tripling, right? But I think it's a really interesting idea to be specific about Nero's, what you're working on, what the specific technical challenges you're trying to overcome in your lane.

34:43Yeah, well, thank you for having us. For us, this round is really interesting because we are going from being a single product, single capability company with the Archer strike drones into multiple products. So recently we started publicly talking about Bandit, which is the counter UAS interceptor that we are developing. And today we're also announcing Archer AI, which is the first time one of our drones is going to have autonomous capabilities on board. So this is something that we've been really thinking about intentionally as a company. How do we become multi-threaded, multi-product? And we want to have as big of an impact as possible for the warfighter.

35:22And the way to do that is delivering more capability.

35:24Ed Ludlow:Away from the specific technology, there's also the ambition to ramp up output, essentially, through the end of the year. I guess that is partly where the capital comes in. Yeah, and we've been focused on ramping production for a long time. Really, since we started the company, we knew we had to be very forward on production and supply chain. But this year, we've seen a big growth there. So today, we're at about 50 ,000 drones per year output. And by the end of the year, we'll be at 100 ,000 drones per year run rate. And we're looking forward. We think that getting the company to a million drones per year capacity is extremely important for having a strategic impact for America and our allies.

36:04So that's really what we focused our factory that we moved into a few months ago. We call Millennium One. We focused it around this goal of getting to a million drones per year vertically integrated.

36:16Ed Ludlow:Sean, come in here. You led Sequoia's investment in SpaceX. And at that time, the initial investment, but present day as well, right? You would say SpaceX is a company one of one, an asset one of one. In the drone field, there are other proxies you can make your evaluation against. So how did you do that with Neros this time around? Yeah, look, I think that's a fair question. And a couple of things. One, I think there's a gap right now. There's probably about five of these next generation defense tech companies that have actually done useful things in the field. Like it's about five. It's not more than that.

36:50Ed Ludlow:Would you say Anderil, Shield AI, et cetera? Yeah, I would say definitely Anderil. But Neros is one of the companies at the top of the list. What they've done is pretty striking. So that's kind of point one. Point two on this question, like SpaceX, when they started with the Falcon 1 initially, that wasn't yet, you know, a just massive leading rocket company. They were just getting started. And then with Falcon 9, it was still not as good as some of the state-of-the-art rockets from the past. But it was really, you know, over the last five, six years where just through feasibility, through production, through cadence.

37:30SpaceX just became, you know, it's 90 % roughly of the world's mass orbit last year. For Niros, the way I think about where these guys are, it reminds me a lot of where the cellular communications industry was in the 90s. Interesting. Where, and like, if you think about what is an FPV drone, this may sound crazy, but it's actually very, it's basically a flying cell phone. Yes. So the most important thing is comms, where you don't want, you know, you need very advanced radios that don't get jammed, et cetera. You need a bunch of sensors, cameras, infrared cameras, you know, other, you know, other sensing payloads.

38:06Um, and you need to be able to do this kind of in a way where you're doubling your performance every year or so to kind of outpace all the defensive capabilities. And, and so like the actual body of the drones are more or less commodities, like the motors, the carbon fiber chassis, all this. But the payload, you're basically flying an iPhone that is on an exponential race. It's like a Moore's Law development pace. So if you go back to the 90s, there were a lot of companies that were basically buying the same components and making cell phones. But it ended up with Apple as the dominant player and then Android as an operating system that went on other hardware.

38:48But I think it's going to be the same thing with drones. Like these guys are building a whole product ecosystem where there's an operating system that lets everything happen seamlessly across drones and to accomplish a mission. And the development is in this kind of, it's very similar form factor as a cell phone. It's going to be very hard for people to think.

39:03Ed Ludlow:So the distinction or the core competency is software, what you would say, or? I would say it's, and I'll let you go one second. It's radios, it's sensors, it's integration of the electronics in a way that is scalable and reliable and is on an exponential trajectory, the same way making a cell phone is, plus the operating system to integrate with their other products, plus being able to manufacture insane numbers of units with a very reliable supply chain. That's key. Yeah, I think Sean hit the nail on the head. And historically, we've been more hardware focused than software focused. What we really wanted to solve off the bat was the manufacturing of these drones without a Chinese supply chain.

39:46When we started the company three years ago, there was no way you could go and buy an FPV drone that did not use Chinese components, Chinese chips. And so that was really like our core focus over the last three years was building up this ecosystem of radios, flight computers, all these other things that are critical going inside of the drone and being able to actually manufacture them at scale. Now that we've established a strong baseline there, we are pushing more on the software aspect with the autonomous capability that we're adding, as well as using that same component ecosystem from Archer into Bandit, our new platform.

40:23So we really think there's this flywheel where you build up this amazing base of components and it allows you to go build other types of platforms very quickly. You said it yourself.

40:33Ed Ludlow:Three years ago, you founded this company. To date, you have what you describe as major contracts with the Army, Marine Corps, contracts with every component of SOCOM and other allied countries. Give us the backstory of how you were able to do that in that period of time. Yeah, we've had to move really fast. We saw three years ago, our primary focus when we started was just in Ukraine, working alongside the Ukrainians, building a better drone for them. And at that point, the Pentagon did not really care about what we were doing. From a procurement perspective. From a procurement perspective. They didn't really think that small drones had a massive impact for the U.S.

41:15warfighter. We had this bet that they would be and that the Pentagon would realize that. And I think we've had a really interesting front row seat to watching that realization happen over the last 18 months. and being well-positioned to start delivering on real contracts as America has said, hey, we actually need drones. We need drone dominance. And so that has been, you know, because we focus very heavily on building a useful product in Ukraine off the bat and then scaling the production, I think we've shown that we are really one of the only drone companies in America that can scale very quickly and actually deliver when these big contracts are coming down the pipe.

41:55Soren's too humble. Can I just add? Please. jump in so soren is a young man he was many people don't know this but there's professional drone racing leagues there's two of them he was the world champion in one of them and professional in the other so starting as a young kid he was just obsessed with drones that's the technology story your background story and and then kind of when the war in ukraine started he's very patriotic for the west in general like for america for ukraine for the entire west and as a young guy very early 20s, maybe even 19 at the time, basically flew to Ukraine and just started trying to help the Ukrainians learn how to fly drones and push the limits of their technologies.

42:31That led to really getting the company going. And he's just been delivering everything he said he's going to do, he's done. And so it's just led to a big gap between Niros and most of the other competitors.

42:43Ed Ludlow:Sean, can I ask you a slightly more difficult question about the future? Because you don't have a crystal ball. But this is about re-industrialization for that specific vertical, the national interest of this country or the West, those contracts we've discussed are with the public sector, essentially. So how do you model for that TAM in the future? You are an investor, first and foremost. How do you have a sense of how real and big the opportunity is? Good question. So I think about it in two ways. Way number one is my, like, kind of, I've been very lucky to see SpaceX up close and then follow Tesla.

43:20And by seeing how SpaceX operates, which to me is the most vertically integrated company in the world, and I feel pretty confident in that statement, my vision is that there should be 10 companies like SpaceX in America, and that is how we re-industrialize. And what that means is that you start by selling one thing, you buy a lot of your components from other people, and you over time vertically integrate your supply chain more and more and more. And then once you have this vertically integrated supply chain, I mean, like SpaceX is now the biggest, they make PCBs. They're the number one producer of PCBs in North America for strongly-acusant terminals.

43:56That's trained a lot of other people in how to make PCBs that we had lost the skill in the West. That's a supply chain ripple effect. Yeah, it's a whole supply chain ripple effect. And so the people that learn how to, you know, make steel alloys, et cetera, like they go and kind of do other things. And you need, so SpaceX is done in space. Tesla's doing in automotive, I think if we had 10 companies that became national champions in some vertical, roughly 10, it almost doesn't even matter what they are, that will fully re-industrialize America. And so I think Nero's, by being at the beginning of this exponential trend of drones and warfare, they're just getting pulled along and they're able to compete even with China.

44:37and granted China's vastly far ahead right now in drones, but they're close enough that they can actually compete. And my forecast is 10 years from now, people are going to be shocked by how vertically integrated this comes.

44:49Ed Ludlow:So that also raises questions of economics, right? You know, you talked about establishing the supply chain. You've raised a pretty sizable round. Is it just purely dependent on scale in order that you give the value proposition to your customers, the different arms of the defense apparatus of this nation, or is it still a technology advantage that you think will win out in the end? I think it has to be a good combination of both. We've seen that today we can deliver a drone that is highly capable that when our drone was certified for usage by the Department of War, it was about an order of magnitude cheaper than anything else.

45:25So we've already been able to massively reduce the cost of using small drones for the Department of War. We see that over time what scale is really going to get us and what investment into the space is going to get us is actually closing the gap on some of these critical technologies. So Sean mentioned radios as an example. This is one of the areas where Chinese drones are incredibly good. They iterate radios extremely quickly. And DJI, which is the world leader in drones, has built custom silicon around their radio stack. And they have by far the most performant radio stack in the world. And so we think that the investment that is going into the defense space and really what NEROS wants to do is take that volume and take that capital and put it towards these foundational technologies that will allow us to actually close or even get ahead of where China is at today in consumer drones.

46:22Ed Ludlow:We just have two minutes left in the show, which is unfortunate, but I want to get to the backstory of Bandit, the new Interceptor drone. This was catalyzed by a specific event of the war in Iran. Could you just pick it up, both of you, and why you moved so quick? Yeah, I mean, we had been watching the development of Interceptor drones in Ukraine for the last year and a half. And it's something that we knew was going to be on our roadmap. But we've tried to be very focused as a company because we do not want to get distracted and build too many things at once in lower quality. And so we really had to pick the right point to go and build Bandit, our Interceptor.

46:59But when events started happening in the Middle East, we saw that American assets were getting targeted by Iranian drones. And we just did not have a reasonable defense. This is interceptory, literally intercept other drones. Literally intercept other drones. So he goes after Shahhead style drones and takes them out of the sky. And this is the most economical way to defend against these types of drones. And so when we saw U.S. service members' lives in danger in the Middle East because of those threats, we knew we needed to act quickly.

47:31Ed Ludlow:Sure. Your 60-second assessment of how they moved quickly, their execution on that. I think this is something that a lot of software investors get wrong about hardware companies. For software companies, when you have one successful product, it doesn't give you much of an advantage for building a new product. In hardware, when you have one successful product, the probability of having another successful product is very, very high. So you get to reuse a lot of the same components. You already have the supply chain. You already have the electrical engineers, et cetera. And so these interceptor drones, there's actually probably 80 % or so overlap in the actual componentry and know-how.

48:06And so I think this will be the second, but not the last product these guys make.

48:11Ed Ludlow:Again, it's a big but early round. I'm sure you'll be back on the program in future raises. I appreciate you both taking the time. I'm Solomon Rowe, Anderson, Neuro CEO and Sean Maguire, partner at Sequoia. Thank you very much. Some other news headlines in Talking Tech. First up, the White House has rolled back a TikTok ban on government devices. A memo from yesterday states that TikTok is no longer a, quote, covered application for the purposes of the No TikTok on Government Devices Act, effectively allowing the app back onto federal devices. Plus, Anthropic and Riot platforms joined forces on a$9.1 billion deal that would have the Bitcoin mining company supplying 191 megawatts of capacity to Anthropic over 20 years, all according to sources.

48:54Ed Ludlow:The move underscores Anthropics' efforts to gather enough computing power to meet its customers' demands. And OpenAI is said to be buying back$7 billion worth of shares ahead of a potential IPO, according to sources. The chat GBT maker is said to be buying back shares from current and former employees instead of tapping external investors for that tender offer. We're still tracking more earnings. Yes, it continues. After the bell, core weave. Again, a story about moving quickly to get compute capacity online. The stock's treading water up eight tenths of a percent before the print. Largely speaking, it's events in the Middle East that are driving public equity right now.

49:37Ed Ludlow:Like there's a big movement in bonds that might be going on here. There's the kind of feel good around a day two story on NVIDIA's$500 billion deal with Wall Street to collateralize compute. The Nasdaq 100 is flat. The SOX is higher, nine tenths of one percent. And again, Intel, $20 billion share offering. It marketed$15 billion. We're reporting that there was$100 billion of demand. That is all playing into what's happening on your screen right now. My goodness, what a fast start to the week. It is only Tuesday so much across public and private markets. That does it for this edition of Bloomberg Tech.

50:12Ed Ludlow:Please recap on the podcast. You know where to find it on the Bloomberg terminal as well as online on Apple, Spotify, and on iHeart. From San Francisco, this is Bloomberg Tech.

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