Meta Expands AI Compute Deal, Nvidia GTC Kicks Off

24:15which, as the CEO Peter Stern teased today, would mean that the machines are a little more durable than what you might be used to. Right. The foot traffic of the gym versus my tread at home, which is getting reasonable use, probably not as much as it should. Where does this fit in in the big story of Peloton? We always talk about them in the context of many consecutive turnaround plans. Yes. So the company is coming off of a really lackluster launch last fall. It introduced new bikes, new treadmills, a new rowing machine, really betting big on AI across its lineup. And so far, the sales have been pretty lackluster.

24:51And so the company is just try trying again. In addition to possibly rolling out new products in the next year, year and a half, which is quite a ways away, it is diversifying beyond home fitness into, as we said, locations like the gym, sort of amping up on its existing commercial business. and potentially it hopes winning over more long-term customers by introducing people to the equipment in other settings beyond just getting them to invest in this really expensive gear for their living rooms. Yeah, I mean, once again, this is a company that did incredibly well during COVID and suddenly we thought that what is a pretty luxurious item should be owned by one and all.

25:33How is he just trying to re-kilter the business? Yes, absolutely. As you said, the company was really high flying during the pandemic when lockdowns really forced people to stay at home and do almost everything at home, including work out. And so lockdowns, of course, eventually eased and gyms reopened. And so Peloton is trying to find people where they are, including hotels, gyms, that sort of thing. Bluebird Zayna Wallman with the Peloton latest. Thank you very much. Coming up, we're going to discuss IPO expectations with Matt Withiler, head of late stage growth at Wellington Management. As we often say, we're halfway through the program and it is halftime.

26:12Stay with us. This is Bloomberg Tech.

26:22Welcome back to Bloomberg Tech. When it comes to markets, the war in Iran is still a big factor. And this is kind of what the picture looks like. It's pretty simple. We do see technology stocks in particular pushing higher without performance in semiconductors. Although there's a story on the Bloomberg Terminal this morning about some of the potential disruption to the chip industry from the war in Iran and its supply chain. Things like helium and sulfur may be impacted. That's worth a read. But the market pretty sanguine. And Brent, the global benchmark for oil,$102 per barrel, kind of off slightly.

26:55We got reduced capacity numbers from a number of the key golf players this morning. We are expecting, of course, to hear from the President of the United States in the next 30 minutes or so in the context of a news conference, Cara. An important one to watch. In the interim, let's turn our attention from those public names, but also those that are soon to be public as well. Matt Whitheiler is with us. He's the head of late-stage growth at Wellington Management. Nearly$11 billion in assets under management on its private investing platform. And Matt, if we didn't have the tensions in Iran, are we still likely to be quiet on the IPO front until we have the juggernaut come into the market?

27:31How much are you anticipating SpaceX? Yeah, I think things would be slow until the big ones go out. And we talk about SpaceX a lot, obviously. You all have spent a lot of time on that subject. But I think you can add into that mix OpenAI and Anthropic, potentially a Databricks. I think that's really what the market catalyst will be for the IPOs going forward. That's so funny because we had Ali Godsey on the show last week and he pushes back. He doesn't want the money. He doesn't particularly want to be publicly performing at this moment. He likes being a private company. He's got a wash with money coming from the private side.

28:05Why do some of these giants need to be going into the public market? Why the catalyst? I mean, I think if you just think about the capital intensity of some of these businesses, maybe set Databricks aside for a second, but you think about SpaceX, OpenAI and Anthropic, the capital consumption that these businesses are going through really necessitates tapping into a bigger pool of capital that you can't really get access to on the private side so i do think it's not if it's when for those companies for sure matt i have a series of mechanical questions for you if that's okay that i whether rightly or wrongly i've been thinking about a lot of late so if you take all these names that we've mentioned spacex anthropic open ai databricks they have a lot of investors in common across their cap tables.

28:48Does that make things complicated when it comes to who will or won't IPO first and in which order? I'm not really sure that it impacts the order or timing of the IPOs. And I think the reason why you have some name overlap in the investor set for those names is simply due to the fact that those three companies have raised a tremendous amount of money. So it's less a reflection of some market dynamic and more a reflection of the fact that when you're raising$10,$20,$50 billion in financing, on the private side, there's only a limited pool of investors you can go to. And then similarly, there are a group of the four big U.S.

29:28banks all competing for different parts of the brief across names that, if you go through the news cycle, are all preparing to go public in a similar window. Is that complicated? And again, I don't think that's super complicated. I think that the banks assisting these companies and helping them to list will figure out ways to solidify their position in those books in order to capitalize on the opportunity. Because we're really talking about the potential for some of the biggest listings ever to be coming to market this year. And that's where Wellington is so interesting. And, you know, you've been on the Midas list however many years running.

30:04You understand private markets. You also understand as a crossover investor and into the public markets. How much are you growing some anxiety that these companies are finding that their shares are being marketed in places they didn't realize? Look, we've done a lot of deep dives on these SPVs that claim to own a lot of Andrile or a load of SpaceX, and people aren't actually owning what they thought. How are you telling your friends around a dinner party right now? Yeah, no, I think it's a great question. Obviously, sitting inside of Wellington, we have the benefit of seeing the full picture of what's going on in the public market versus what happens in the private market.

30:37And there definitely are instances where these SPVs may come into the private companies, and even the companies themselves aren't sure who's actually buying pieces of their shares. And I think what an interesting trend has been recently is we have seen the more in-demand companies really clamping down on the number of SPVs and the ability for SPVs to come into their financings. Because they know in the private markets, they get to choose who goes on their cap table. They get to decide who they're going to let invest. When they go public, anybody can buy their shares. And so the companies on the private side are really starting to clamp down on who am I comfortable with coming into my cap table via an SPV.

31:17And this is about FOMO. This is about a retail investor or an accredited investor more broadly who hasn't had access to the whopping markups that they've seen in the private market like Wellington has and doesn't want to just be left having to buy it in the public market after it's IPO'd. Is there enough juice left on the table for these companies once they go public for the share still to perform? I definitely think so. I mean, if you think about the public market in general, perhaps the return expectations in the private market and public market are different, but the risk profile is also totally different.

31:48And so I believe that, you know, if you think about some of the names coming out and the growth rate of those names, the scale of those names and the potential market opportunities for those names, I think there's still a lot of return potential ahead, which opens the door for even the Wellington public teams to invest in some of these names, ultimately when they go public, and generate exciting returns for the clients, hopefully. Matt, what's Wellington going to do in the late stage space for the balance of this year? Like, with the context of all that environment that's going on, what's the strategy?

32:20You know, I think there's opportunity to be had in some of the larger names that are attracting larger dollars. and think about some of the bigger financings coming to play. But I don't think for us, at least, the right strategy is put all of our chips in that basket. For us on the late-stage private side, we augment the opportunities of some of these larger financings with comparatively smaller yet still late-stage businesses. Because as great as AI is, as great as some of those names we just talked about are, you don't have to be an AI business to go public. You can be a great consumer business, healthcare business, fintech business and go public.

32:54and you don't need to be a trillion dollars of market cap. There are plenty of exciting mid-cap names, even small cap names in the public market that I know our public teams would be excited to add to when those names ultimately do enter the public market. Matthew Widthaler, head of late stage growth at Wellington Management. Great to have you back on the program. Thank you very much. Elon Musk's XAI is looking to hire bankers, equity, credit and crypto experts according to job postings on its website. The recruits will help train the company's chatbot, Grok, on financial strategy as it joins rivals pushing software for investing professionals.

33:32Cara. Fascinating. And look, let's just stick, Ed, with XAI because Senator Elizabeth Warren has been busy sending a letter to Defense Secretary Pete Hegseth demanding information about the Pentagon's reported decision to give XAI access to classified networks. Now Warren calls Grog a, quote, controversial AI model and says it has provided disturbing outputs for users, according to the letter. And coming up, companies are on high alert from potential Iranian cyber attacks. We speak with Ali Mellon, that's Forrester analyst focusing on cyber threats. That's next. This is Bloomberg Tech. Hello, hello.

34:09I'm Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO, Arvind Krishna, and I asked him, how can companies use AI to its fullest potential to create smarter business? My one advice to them, pick areas you can scale. Don't pick the shiny little toys on the side. For example? If anybody has more than 10 % of what they had for customer service 10 years ago, they're already five years behind. If anybody is not using AI to make their developers who write software 30 % more productive today, with the goal of being 70 % more productive. Yeah. Wow.

34:57So we are not asking our clients to be the first experiment on it. We say, you can leverage what we did. We are happy to bring out all our learnings, including what needs to change in the process, because the biggest change is not technology. It's getting people to accept that there's a different way to do things. To listen to the full conversation, visit ibm.com slash smarttalks.

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36:18that need to be simplified into a proposal. Do that. Do that. Do that with Acrobat. Learn more at adobe.com slash do that with Acrobat. As the war in Iran enters its third week, companies are on high alert for potential cyber threats. Look, medical tech maker Striker says its operations remain disrupted after a cyber attack hit order processing, manufacturing, even shipping. Now, a pro-Iranian group known as Handala has claimed responsibility, But Stryker and cybersecurity firms have not confirmed the hacker's identity. For more on the cyber threats facing global enterprises, please say we're joined by Ali Mellon, Forrester analyst covering security operations and AI.

36:58And she's got this great new book out, Code War, How Nations Hack, Spy, and Shape the Digital Battlefield. And here is Iran trying to do just that, Ali. But from your perspective, when do we get a definitive answer that it was indeed who claims to have done the attack? We really need technical indicators. That's what we're looking for here. And unfortunately, that could take weeks to months depending on how the recovery process goes. It's ultimately the decision of the cybersecurity team that is working with Stryker to come out with that information. And that process typically does take weeks or even months.

37:31How much should industries, institutions, individuals be worrying about the Iranian threat right now? They should actively be preparing their systems, and they should be doing that whether they are large enterprises or even smaller companies. One of the things that we've seen over the past several years is that many of these attackers will target smaller companies that have access to larger companies as part of their customer base and use that as their vehicle to get into some of these larger companies. So it's something that everyone needs to be thinking about right now. Ali, this is a war and there's human life involved.

38:05I don't mean to trivialize it in any sense or fashion. But in this environment, how much of a positive is it for the cybersecurity sector? You know, if you try to look in aggregate about whether spending on cyber goes up or down, one would imagine that as a result of the conflict, it would go up. Absolutely. One of the things that we've seen and one of the things that I saw as I was researching and writing my book, Code War, is that at the end of the day, during military and wartime scenarios, that's when cyber attacks are at their highest and especially most effective. And so most organizations are going to be investing more in cybersecurity and should.

38:46And we had previously seen that there was a bit of a lull before this where they were limiting some of their investment in cybersecurity. I absolutely expect that to change and more investment to take place in the cybersecurity sector. We've looked very closely at how AI, particularly through a swarm of autonomous agents in the cybersecurity context, is changing the field. Did you see evidence in researching for your book that the threat actors also are very focused on using AI and AI's capabilities in their attacks, not just on the defense side? This has been such an evolving situation, as with most things related to AI.

39:22But yes, we are seeing that attackers, especially nation state attackers, are using AI in very effective ways in their cyber operations, especially offensively. So they're trying to automate as many aspects of the attack as possible, which is going to make it much more difficult to understand exactly who is targeting you, why they're targeting you, and to prevent these types of attacks in the future. They are largely not creating net new zero days and kind of net new attacks. But what they are doing is increasing the speed of delivery of some of the attacks that they had been perpetrating before and reducing the human load that they need and the human resources that they need to execute on those attacks.

40:02The book Code War really breaks down how China, Russia, U.S. lead in the field of cyber power. But when you're looking at a country like Iran, how much are they a threat at this particular moment? I think many would have initially at the onset of this conflict were surprised that they didn't do more on that particular event. Much of what Iran is doing right now is prepositioning and identifying the targets that they need to be sitting in, be prepared to execute an attack when they want to. One of the things that I found in Code War is that much of the attacks that take place are coordinated with other military operations, whether that's missile strikes or other activity.

40:40So, of course, they're doing espionage operations on a regular basis to get access to companies or to government organizations that could give them more information. But when it comes to wiper attacks, like we've seen with Striker, ultimately they want to time those with more strikes, with more effective military operations to get the maximum impact possible. And the focus of an Iran, is it just to get in anywhere where there is a vulnerability? Was there a reason that Stryker in particular is a medically focused business that had relationships with Israel was what many had anticipated was the reason?

41:13But is there any rhyme or reason as to when they get in and why? Absolutely. Especially with a threat actor that is this dedicated to the supposed cause, they are pushing to get into the organizations that make the most sense, both from a publicity standpoint and an impact standpoint. So the fact that Stryker had contracts, large contracts with the U.S. military, the fact that they had a presence in Israel through an acquisition in 2019, and of course that they're a U.S. publicly traded large company, all factored into why they were the perfect target in this situation. Ali Mellon of Forrester, thank you very much.

41:48Coming up on the program, the Oscars happened at a time of turmoil for the film industry with the advent of AI. We have more on that next. This is Bloomberg Tech.

42:06layoffs consolidation streaming losses and the rise of the creator economy are reshaping hollywood's future raising questions about whether the industry is simply in decline or on the brink of extinction bloomberg originals investigates hollywood is very much a factory town and the widget that we make is entertainment Across the board, everyone is creative, from the directors to the writers to craft service. Everyone has a talent. Some people come out here sort of on accident and find a place inside of the circus, and I think that some people are kind of called. Pilot season, up fronts, awards campaigns, Hollywood moves in cycles.

42:50But now, the cycles have slowed a lot. It's a reset, and no one knows where the new baseline is. If you spoke to the average worker in Hollywood, you'd hear existential dread. You've seen a pretty dramatic reduction in output, a lot of layoffs, fewer jobs. So it's just been a dark period. Los Angeles has visibly turned into what I would call a ghost town. Employment in California's motion picture industries peaked in 2016, but was decimated by the pandemic. And despite a surge in streaming, the actors and writers' strikes meant a massive loss of jobs that show no sign of coming back. Big tech disruption, mega mergers, and the looming threat of AI has left Hollywood in shambles.

43:40I never thought this crap would happen in my lifetime. We're just in this inflection point right now where everything's converging. Not great economics, bad business models, audiences that are fragmented. They've forgotten what a star looks like. Bit of a much smudge. You can find the full episode on Bloomberg.com or on The Terminal. And this is all the turmoil that they talk about for the film industry. It's a context in which the Oscars just took place on Sunday. Now, one battle after another took home Best Picture Prize at the Academy Awards, delivering a long-awaited win for the veteran filmmaker Paul Thomas Anderson.

44:14Meanwhile, Netflix's K-pop Demon Hunters, the most watched film ever on the streaming service, won Best Animated Film. Bloomberg's entertainment team leader, Chris Palmeri, joins us for more. There were first-time awards that we'd never seen being given. Just talk us through the big winner. It does seem to be one battle after another. Well, I think, yeah. Well, for sure, the big winner is Warner Brothers. They went into this with two favorites, and they came out with the most trophies, for sure, of any studio. I think in general, too, the big winner is Hollywood. I mean, as you said up there, I mean, there's so much angst in Hollywood right now with mergers and AI and job losses.

44:53And this was a show that really celebrated the best of filmmaking. It didn't go too much in a political direction, I think, even though I can't imagine one battle after another on President Trump's viewing list. But it could have been much worse for Hollywood. And I think it actually it made them look pretty good. AI came up in the form of Conan O 'Brien's opening monologue, along with some other jokes about those in attendance. But the AI thing was present, at least on the stream I was watching. Yeah, you know, as you mentioned, it came up, you know, Conan joked that he was going to be the last human host of the awards.

45:34but again the winners here Paul Thomas Anderson for One Battle, Ryan Coogler for Sinners, these guys are real auteurs, they are people who tell unique stories and they were big studio movies as well, so this was really a celebration of classic Hollywood, not a look forward with dread Blumos, entertainment editor Chris Palmieri in LA, thank you very much. Let's turn from Hollywood's big show to AI's big show. Shares of NVIDIA are actually pushing higher in anticipation of GTC, GPU Technology Conference. Bloomberg's executive editor, senior executive editor, Tom Giles is with us here in San Francisco.

46:19There's a lot of like, wow, this is the Super Bowl of AI, etc. But I think some smart writing on the Bloomberg term this morning is that actually this is a stock that's been going sideways for quite a long time. For six months, it's gone nowhere. And everybody is looking to Jensen Wang this week to say some things to reassure the market. Three things stand out for me. One, that long term projection for sales of advanced chips. He's talked about 500 billion through 2026. Are there going to be any updates to that number? Is it going to change the timetable? Is it going to up the number? People are looking for that.

46:54Second of all, concerns about the war. What is the war going to do to global demand, global growth, and specifically the supply chain? The closed straits of Hormuz mean that supply of helium is constricted and chip makers need that for production. for production. And then thirdly, the question is, what happens to, what about products? What about the product pipeline? Will he do anything with that Grok purchase that he made very quietly when no one was looking? And will he get into CPUs? Yeah. I mean, this guy is going to speak for hours, hour and a half at least, and then over communicate as we're all used to.

47:46What are we anticipating in terms of the kinds of questioning around the CPU, for example? Are we going to get any more details of how much he wants to own that side? That's right. And eat other chip makers lunch the way he has in so many other areas of this industry. So they're going to be peppering him with questions about products. They're going to be questioning him about China. And is the Chinese government going to say yes to the importation of those few chips that the U.S. government has allowed into China? And remember, right now, his forecasts are removing China from the picture completely.

48:25So war, China, product pipeline and long term growth. The market needs reassurance and they're going to be looking to Jensen throughout this week to give it to them. In your career, Tom, leading this newsroom, what's the most analogous? Someone like Jensen Wong who goes on stage and is like a rock star at a concert. You know, who's he akin to in how we cover him? Well, remember, I mean, for a long time, Apple products, right? An Apple product unveiling was like this high holiday for Silicon Valley. One more thing, remember? And the ways that that captured and moved stocks around the world. I think NVIDIA is in many ways similar to that.

49:09And, you know, there's a reason why they call it Gen Sanity. Oh, take us back to the times where he's having to sign people's T-shirts. Bloomberg's Tom Giles. So appreciate you. Thanks for joining. Now that does it for this edition of Bloomberg Tech. It's a busy week. Yeah, and jokes aside, you know, GTC is a macro level event. It will move markets. And there was a great preview to it. So check it out on the podcast. You know where to find out on the terminal and online on Apple, Spotify and iHeart from New York City and San Francisco. This is Bloomberg Tech.

49:43I'm Francine Lacroix, an award winning journalist, and I've got a new podcast, Leaders with Francine Lacroix from Bloomberg Podcasts. I've interviewed everyone from heads of state to fashion icons about the news of the moment. But I've always been curious, who are these people as leaders? I don't think there's one right way to be a leader. Make decisions. A poor decision is always better than no decision. Listen to new episodes every other Monday. Follow Leaders with Francine Lacroix wherever you get your podcasts.