Meta to Spend Billions on AMD Gear, AI Scare Trade Continues

14:54Caroline Hyde:On the Bloomberg Terminal, there are, let's say, a dozen reports of single-name stocks that are moving because of the association with Anthropic, who held an event this morning. You study the software sector, right, very closely. Is there any evidence those names are moving because people genuinely believe there's a fundamental change to how they do business? Or is it just simply name association at this point?

15:17Ed Ludlow:I think it has to do with the idea that if Anthropic sees the need to partner with these companies, Anthropic sees that they provide something that Anthropic doesn't. And they understand these are incumbent vendors with installed customer bases and loyalty and processes and things like that. It doesn't mean there isn't future disintermediation risk. We all know that. But I think it's a signal to investors that these companies are viable and important to the ecosystem. And investors have not been assuming that over the prior few weeks.

15:53Caroline Hyde:Hilary, there was a research report, a bearish research report from a little-known outfit called Citrini that basically outlined various risks to different sectors from AI. One of the co-authors joined Bloomberg Television. I just want to play you some of that conversation.

16:07Ed Ludlow:I thought there was going to be a small reaction. It was definitely larger than we expected. But I think it's not that surprising when you take a step back and consider kind of where the markets are in the U.S. You know, the AI trade has been going on for three and a half years. It's been more or less a straight line up. And essentially, like everyone is max long today. And so there really aren't many incremental buyers left. And so it, on the one hand, you know, spooks people when you do consider what is negative about this. But I think specifically the market right now is trying to digest this idea that AI has gotten a lot more powerful in the last six months.

16:41Caroline Hyde:You know, in that he's kind of saying, well, this is kind of the function of the market of the last three years, but still poses the central question, which is, is AI rendering existing software obsolete or is it making it better? Just your reaction to that research report and the co-author's thoughts there. Sure.

16:58Ed Ludlow:I think it's both. I think AI represents a risk and it also represents an opportunity for many of the incumbent vendors. We could take SaaS separately, but we've been talking internally about what I call the great catch down to SaaS. Every other sector, every other part of software selling down to SaaS on disintermediation risks. But there are reasons why a lot of sub sectors should be relatively more defensible. And we could talk about those if you like. OK, well, let's talk about what's defensible, because there's this drip feed of AI doomerism, shall we say, in these various reports and blog posts coming from the CEO of Anthropic himself to over at Citrini.

17:37Ed Ludlow:We've also had Harvard coming out with their piece that we're seeing it being incredibly effective when it comes to financial analysis and portfolio decision making. The Harvard-led study is talking about how trading, mutual fund trading decisions, 71%, it predicted right. The model was trained over a five-year window, but they're also talking about, look, maybe the outperformance bit is what it misses. So from your perspective, where's the outperformance going to come from some of the companies that can withstand this, that can show that they're really effective while using the AI tools? Sure, sure.

18:11Ed Ludlow:I think of security as an example of that. Anthropic introduced a vulnerability management tool, not even management, just a scanner for vulnerabilities in code that's produced on the platform. And that's a build time phenomenon. Most security vendors are run time, but they bring a lot to bear that we could talk about from a technological perspective that it's going to be hard for an LLM or an agent to have. They have the physical infrastructure. They cover all the enforcement points. It's partly a physical phenomenon, not just a digital phenomenon per se. But on top of that, when you think about it, I don't know how entities, and especially regulated entities, can have the fox guarding the hen house when it comes to security.

18:56Ed Ludlow:And kind of the same existed in cloud as well, because AI creates so many vulnerabilities, so many new vulnerabilities that we've never had, that it's a major issue when you're looking to what's becoming the greatest attack surface to be the solution to the problem. Similarly, the data platform vendors are really the platforms for the next generation of AI applications. We're seeing them build on top of the snowflakes, the MongoDBs, even potentially the Oracles. To some degree, Datadog, that's slightly different. But what customers are looking for is higher levels of automation to make their lives easier when there's a tsunami of data coming at them.

19:38Ed Ludlow:These infrastructures oftentimes are quite different. The data models are different from LLMs. The infrastructure on which they run are far more efficient than what LLMs do and seem to be able to do. And so I believe the greatest source of automation is going to come from these incumbent vendors. I should have mentioned Databricks, of course, in which ClearBridge has a private investment. And so solving headaches for customers in the face of a ton of complexity is going to be of paramount importance.

20:08Caroline Hyde:Hilary Frisch, Clearbridge Investments. Thank you very much. Now, coming up on the programme, Paramount is said to have raised its offer for Warner Brothers, more on the drama to buy one of Hollywood's most story brands. That's next. This is Bloomberg Tech.

20:37Caroline Hyde:Every weekday, keeping an eye on what's happening across Europe and around the world.

20:42Ed Ludlow:We do it early so the news is fresh, not recycled, and so you know what actually matters as the day gets going.

20:48Caroline Hyde:From Brussels, I'm following the politics, policy and the people shaping the European Union right now.

20:54Ed Ludlow:And from London, I'm looking at what all that means for markets, money and the wider economy.

20:59Caroline Hyde:We've got reporters across Europe and around the globe feeding in as stories break. So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris.

21:20Ed Ludlow:On Apple, Spotify, YouTube or wherever you get your podcasts.

21:28Ed Ludlow:Time now for Talking Tech. And first up, Anthropic has accused DeepSeek, Minimax and Moonshot of distilling its clawed models to bolster their own AI capabilities, adding to concerns in the U.S. about Chinese firms improperly gaining an edge. Representatives for the three firms didn't respond to requests for comment. Sticking with Anthropic, look, sources say the company will let some current and former employees sell their shares at a valuation of about$350 billion, the level reached during a recent fundraise. Anthropic has lined up$5 to$6 billion from outside investors, though the amount and details have not yet been finalized.

22:02Ed Ludlow:And Canada, well, it summoned OpenAI executives after it was revealed the company debated but ultimately didn't refer a ChatGPT user to the police. That person became the sole suspect in one of Canada's worst ever mass shootings. OpenAI banned the user months before the attack but said it found no credible or imminent threat. Ed.

22:22Caroline Hyde:Okay, let's take a look at shares of Warner Brothers, Discovery, Paramount and Netflix and get the latest. Paramount has raised its offer for Warner Brothers from its$30 a share all cash proposal. That's according to Bloomberg reporting. Now, Warner Brothers Discovery and its board is reviewing that revised proposal. Bloomberg's managing editor for media and entertainment, leading the screen time team, Dicker Shaw. We actually don't have the specifics, I don't think, yet of how improved this offer is. But it's on the desk of Warner Brothers Discovery, its leaders and its board. Take it from there.

22:53Ed Ludlow:Yeah, I mean, you see both sides taking this more seriously and being quiet. I mean, there's been a kind of a progression with these talks where back when the first bidding war was happening, you know, had Warner Brothers reviewing offers from Comcast and Netflix and Paramount. It was very quiet, right? People didn't say a lot because everyone thought they were in it. Then Warner Brothers picked Netflix and it got really loud. Paramount accusing Warner Brothers of doing things that weren't right. Netflix and Warner Brothers often firing back. and now it's gone quiet again, which to me is clearly a sign that the board is seriously reviewing the Paramount offer.

23:26Ed Ludlow:If Paramount has increased it by a dollar to a share, which we assume they have, it seems hard to believe that they would outright reject it as they have the recent ones, which means that they would have to go to Netflix and sort of say, what do you got for me? Well, exactly. And we'll get a drip feed of what it is exactly that they've got. But if it is markedly better, do we expect Netflix to respond in kind? You know, it's a tough question to answer. Netflix has communicated to some of its shareholders. I've heard from people at Netflix that they feel they have the balance sheet to go up, right?

24:00Ed Ludlow:We're talking about a growing business with a really significant market cap, even if the stock's taken a little bit of a beating during these negotiations. So relative to Paramount and even relative to the Ellison family, Netflix should have the money to go there. It's a question of whether they want to. You know, their stock is down. I've lost track at this point. And it's more than 30 % since these negotiations started. And they may decide that there's a number that is too high for them. We just don't know what that threshold is. It continues to evolve. And we know that you'll always have the story, but you're mostly sure.

24:31Ed Ludlow:Thank you so much. And coming up, more on Meta and AMD's multi-billion dollar deal as the race to power AI intensifies. And AMD up 7 % coming off of those previous highs.

24:44Caroline Hyde:Yeah. And then Meta flat as a pancake. Much more to come. It is halftime. This is Bloomberg Tech.

24:57Caroline Hyde:Welcome back to Bloomberg Tech. We're continuing to track the impact of AI on legacy software, essentially. Lots of names actually moving to the upside. The story is at Anthropic and basically taking its clawed AI agent and linking it in a platform for everything from HR, investment, banking, documents. and that is pushing a lot of names higher. IBM is up 4%, but remember yesterday, Monday, it fell by the most since 2000 when it said that Clawdor could be used basically to improve, archive, change, update, COBOL coding bases, a program that was invented in 1959. Otherwise, our top story is a deal between AMD and Meta.

25:39Caroline Hyde:Six gigawatts of capacity over the balance of the decade, largely focused in the first instance on AMD's latest accelerator and the server that it's based on, MI450. But this is basically$60 billion of potential revenue for AMD over that time period. The stock up more than 7%. Meta has traded flat, but I guess that it's hard to gauge if this makes any difference to Meta at all given its existing spending commitments. Karen?

26:04Ed Ludlow:Well, someone's been writing on just that, Ed. Blue Meg Intelligence senior analyst Mandeep Singh says that Meta's six gigawatt AMD deal actually lowers chip spending as a share of CapEx and secures supply tailored to AI inference. He also writes that the stock-linked structure could give Meta added leverage against NVIDIA. Mandeep Singh joins us now. Why does it need leverage against NVIDIA? It struck a deal last week with them. Is this more like, we've got other options? Yeah, and look, I mean, the fact that they are planning to use NVIDIA's CPUs, to me, that was a sign that, you know, if you had to get the GPU capacity from NVIDIA, you pretty much had to use everything they had to offer.

26:41Ed Ludlow:With this deal, I think AMD sort of comes across as the more desperate partner in terms of, you know, giving Meta their stock warrants and making sure that, you know, they are at Meta, which is going to spend$135 billion out of that. Half of that will be on chips approximately. So think of it this way. They currently are about a$10 to$12 billion run rate. this could potentially double every year in terms of just by adding one customer at the scale that they plan to buy the chips from AMD.

27:16Caroline Hyde:You know, the way that AMD puts a single, double digit, sorry, billions of dollars per gigawatt, but the gigawatts need to get built, right? There are operational milestones. Every time I go and see AMD or we speak to Lisa Su, She puts a lot of emphasis on inference, you know, MI450 in particular and what those systems can do in the inference phase. Do you, in this deal, see a point of differentiation for AMD if they do go after the inference piece?

27:45Ed Ludlow:I do, and simply because all these companies are trying to emulate what Google has been doing with TPUs. And remember, TPUs are used for both training and inferencing, not just for Gemini, but also for Anthropics. So the fact that they have signed this deal and are willing to go from being a merchant silicon provider to a custom silicon provider for Meta, and Meta's workloads are more skewed towards video and the family of apps they have, similar to Alphabet, to me this is a sign that's what Meta feels they can accomplish with the AMD chips. Yes, they will continue to use NVIDIA for training, but for inferencing, Meta's workloads are different from any other provider when it comes to the chatbots or anything else that they're doing.

28:35Caroline Hyde:AMD was at pains to point out they'll kind of co-engineer the roadmap to future server design starting MI450 and then go beyond that. Mandeep Singh of Bloomberg Intelligence with the React. Thank you so much. Now, coming up on the program, Rainer Pope from Matt X joins us to discuss his chip startup's latest fundraise as it aims to take on NVIDIA. That's coming up next. This is Bloomberg Tech.

29:05Ed Ludlow:This is Tom Keen inviting you to join us for the Bloomberg Surveillance Podcast. It's about making you smarter every business day.

29:14Caroline Hyde:I'm Paul Sweeney. We bring you complete coverage of the U.S. market open. We cover stocks, bonds, commodities, even crypto, all the information you need to excel.

29:22Ed Ludlow:And I'm Alexis Christophorus. Bloomberg Surveillance also brings you the analysis behind the headlines.

29:28Caroline Hyde:We do that through conversations with the smartest names in economics, finance, investment, and international relations.

29:34Ed Ludlow:We do all this live each and every weekday that bring you the best analysis in our daily podcast. Search for Bloomberg Surveillance on Apple, Spotify, YouTube, or anywhere else you listen.

29:47Caroline Hyde:On the East Coast, listen at lunch. And on the West Coast, listen as soon as you wake up.

29:51Ed Ludlow:That's the Bloomberg Surveillance Podcast with Tom Keen, Paul Sweeney, and me, Alexis Christophorus. Subscribe today wherever you get your podcasts. Bloomberg Surveillance, essential listening each and every business day.

30:11Caroline Hyde:AI startup Matt X has raised more than$500 million to build hardware to compete with NVIDIA. The chip company was founded by two alumni of Google's semiconductor business, and its aim is to make a product specifically designed to run large language models. Co-founder and CEO Rainer Pope joins us now. I think we should get into the specifics, but my goodness,$500 million is quite a large Series B. What do you need that level of capital for, and what does it reflect? Yeah, so I mean, I would say, very happy to be here and thank you. One of the, really what it reflects is, on the one hand, very strong confidence from some of our lead investors in the product.

30:52Caroline Hyde:This is from Jane Street and Situational Awareness have led our round. Very strong, on Jane Street's side, they're absolute technical experts. They understand the kind of product we're doing. And then Situational Awareness, that's Leopold Aschenbrenner's fund. he wrote the book on AGI and he really understands where this whole space is going what we are looking to do with this product and with this money firstly I would say the demand for LLM compute is just insatiable all of the frontier labs are looking at where this space is going and they're all concerned I'm going to run out of silicon I won't be able to serve all the demand I've got so our goal overall has been to make the highest throughput per square millimetre of silicon that any product has.

31:39Caroline Hyde:This is about computational density. That's right. And so you guys are basically saying throughput in terms of flops per millimetre squared, this is something you can own. What was the breakthrough? What is it that you're so good at to achieve this? Yeah, so there's really a combination of two things. If you look at the products in the market previously, there's been the HBM-based family, which is NVIDIA, Google, Amazon, and then there's been the SRAM-based family. And you are SRAM? We are both, actually, uniquely. So it's kind of taking two good ideas and putting them together. It is possible to do both very high throughput, as you get from HBM, but also very low latency, as you get from SRAM, and do that in the same product.

32:19Caroline Hyde:What it gives you is actually a product that is better than any other product in the market at throughput. This is exactly the flops per square millimeter that you described, while also matching some of the best, like the Cerebrus and the Grok, at latency.

32:32Ed Ludlow:Let's talk about how quickly people can start deploying this. Right now, because what your aim is to complete the final design this year, you hope to start manufacturing shipping even in 2027. Who do you need to partner with on that? How do you expect to be manufacturing here in the US or abroad?

32:48Caroline Hyde:Yeah, so I mean, there's a few big parts of the supply chain. And this is common for us as well as many other semiconductor firms in this space. Really, you need logic wafers, memory wafers, which is HBM, and then you need rack buildouts. And so those are the big parts of our supply chain. TSMC is well recognized as the best provider of logic wafers. And then the memory wafers, there's the big three, which are SK Hynix, Samsung, and Micron. And then there's a whole range of providers across the rack and manufacturing side. One of the big things that if you want to manufacture in very large volumes, we hear about these multi-gigawatt deals that are coming out.

33:30Caroline Hyde:These require billions of dollars of manufacturing. and then actually setting up hundreds of millions of dollars put into setting up supply chains in advance of delivering that. And so that's a big part of what we're excited to be able to do now.

33:44Ed Ludlow:You left Google in 2022, and the goal was creating a better chip from scratch, Reiner. But have you been impressed by the leaps that TPU has taken? It seems to have impressed the market. What is it that you felt wasn't at Google for you that you now can build better?

34:01Caroline Hyde:Yeah, so I think what is really required is if you want to absolutely nail the LLM workload, you have to be willing to break compatibility with previous chips. One of the strong guarantees you see all of the existing players providing is you can take a program that was written on my previous generation chip or my generation of chips five years ago and it will run on my next generation chip. A lot of what that means is there are constraints on my chip has to support all of the previous number formats I supported. It has to support all of the different programming model, the way I communicate between cores on the chip.

34:32Caroline Hyde:all of those have to be the same as each other. We felt that it would be necessary, if you really want to just absolutely nail this workload without regards for backwards compatibility or other workloads or anything like that, you need to, something of a blank slate design is required. For us, this means very large matrices, very low precision support, and then in fact an ability to split your very large systolic array into small pieces. You name-checked Grok, I think, with some admiration a second ago. I mean, like when NVIDIA acquired Grok, Jensen Wang's view was that they were struggling to find their place in the world, in the market.

35:07Caroline Hyde:And for what it's worth, Sarah Brass, who named Jensen as well, filed confidentially for IPO yesterday. Why might you succeed where Grok had to go to NVIDIA and I guess they're working on something, you know, and the public markets, you know, are needed for capital going forward? Yeah, so I would say this is, like, historically, the market has been won by the HBM-based players. That's the Google, Amazon, NVIDIA, and not by Grok and Cerebrus. SRAM-only chips are very good for latency, but when you want to run very long-contact models, you run out of memory capacity. SRAM is too small. It's fast, but too small.

35:46Caroline Hyde:Really, the hybrid of doing weights in SRAM, so you get the low latency, as well as having the HBM for very long-contact support, but we believe that's what enables the low latency without all of the compromises that you would get otherwise.

35:59Ed Ludlow:Ryan and Pope, thank you so much for joining us today, Matt X, CEO. Look, we're going to stick with funding news. Basis, a startup making AI tools for accounting, has raised$100 million at an over$1 million valuation. This, of course, has investors grew pretty wary of disruption from agentic AI. Here with us is Matt Harp, Basis CEO. I go to the point. How is Basis different from Anthropik's co-work plugin for an accounting business?

36:25Caroline Hyde:Yeah, well, first of all, great to be here. Thanks for having me, Caroline. Look, we have an excellent relationship with OpenAI and with Anthropik. And I think co-work, ChatGBT, the whole range of tools that they have are absolutely fantastic. I think, though, you can only sort of serve so many masters. And when it comes to domain-specific work, specifically in our situation, accounting, there's a need to build with that domain specificity in mind. I think it comes down to a couple of things. First of all, you want domain-specific capabilities. So, for instance, we announced today the first example of a long-running agent completing an entire business tax return workbook.

36:59Caroline Hyde:That's something that you can't really do in any other AI tool that exists out there. You need domain-specific accuracy. So, we are able to guarantee to the firms that we work with that the AI will meet the requisite level of accuracy for it to be used in a real manner. And we can sort of guarantee that performance. You need domain-specific user experience so that it's fluid and it works well for people who are experts in their field as they go about doing their work. You can't just have a chatbot or the variety of other sort of basic user experiences that you need. You need to build enterprise sort of great features, collaboration, audit trails, auditability, et cetera, things of this nature.

37:35Caroline Hyde:And finally, you need domain-specific deployment approaches. approaches. The capacity of a lot of these AI tools to be extremely useful in workflows probably far exceeds the adoption today. And there's going to be a great challenge over the next decade of figuring out how to get AI into all the places it needs to get into. And so we think for all those reasons, being demand-specific is very important. I think that's pretty evident to this day.

37:55Ed Ludlow:And so is that$100 million to ensure the adoption curve is where you need it to be? Where does that money get deployed first and foremost?

38:02Caroline Hyde:Yeah, it's a combination of things. I think for us, first and foremost, we're always focused on building the most capable and the most accurate AI for accounting. So we are growing our engineering and ML teams dramatically. We're a fully New York-based company, and we essentially want to be the home for applied AI work in New York City. So that's always number one priority. But the other aspect of it is we are now starting to serve accounting firms across all their practices, CAS and core accounting being the initial segment, but now also tax, audit, broader advisory. And over time, figuring out how we can get AI into all these various places is extremely important.

38:35Caroline Hyde:Demand has exceeded our capacity to serve it. And so we felt it was important to bring additional capital to make that possible. So Matt, I'm going through my taxes right now and through the portal of my accountant, who I won't name, they do a good job. I upload all of the documents, W-2, 1099, 1098, whatever. But there is an element of observability because I still have to go in and double check all of the automated part of it. I know that's not the same, but the case study you gave of a business tax filing start to finish, The observability piece must be critical if you're handling that for businesses of scale.

39:11Caroline Hyde:Yeah, absolutely. Good question. We think that the ability for an accountant to understand what's happening at a granular level as the AI is helping them get work done is extremely important. That goes back to a little bit about what Caroline was referring to in terms of what makes us different than generic tools. having domain-specific user experiences and domain-specific auditability functionality is extremely important. And then we also think that accounting firms have a very important role to play. At the end of the day, what people like yourself and what businesses around America probably want is a human that they have a relationship with, that they trust to do this incredibly important work.

39:46Caroline Hyde:And so having the AI collaborate with humans to make that possible in an even better fashion maybe will improve the experience that you have on your taxes in future years as firms figure out how to bring these two things together is extremely important. So here in the central question is, is it an aid to an existing job or does it displace an existing role in accounting going forward? We just have 30 seconds. Sure. Not a 30-second question, but I'll give you my best answer on it. Sure. I think if you look at what's happened with software engineering over the course of last year, and you can look at this internal basis, pretty much today, no engineer at the company should be writing any meaningful amount of code.

40:21Caroline Hyde:And yet our engineering team, our machine learning team is as busy as it's ever been. we're hiring as aggressively as we possibly can be in those areas. And that's because there's so much additional engineering work that we want to be able to do that when you free up time to focus on more things, you can do more ambitious things, you can build things you never thought you'd be able to do. And the same thing is true for accounting. There's tons of accounting work in the world that doesn't get done today. The Pentagon just failed its eighth consecutive audit. Companies are misstating financials because they don't have enough accounting resources.

40:47Caroline Hyde:Beyond that, if you go to any hospital system in America, They can't tell you how much it costs them to provide a simple procedure like a knee surgery. These are all things that accounting can make possible. It is sort of the fundamental way that we understand economic activity that goes on in and around our organizations. And so we think there's a huge opportunity to do more accounting work. Most accounting firms see that opportunity as well and need the capacity to be able to do that. And so from our perspective, this is going to allow firms and the accountants at those firms to take on even more work and get things more done, get more things done in the same way that software engineering has been able to take off over the course of the last 12 months.

41:23Caroline Hyde:Matthew Hart, CEO and co-founder of Basis. That was a pretty good summary, actually. A little more than 30 seconds, but we'll give you it. Thank you very much. Now, coming up, we've got to look forward to what to expect from President Trump's State of the Union address, which is later tonight. We have the preview. This is Bloomberg Tech.

41:52Caroline Hyde:All eyes are on President Trump's State of the Union speech tonight. This is only days after the Supreme Court decided to strike down his tariff policies. Bloomberg TV's Washington correspondent, Tyler Kendall, joins us. What do we need to expect?

42:07Ed Ludlow:Yeah, hey, Ed. Well, President Trump is expected to tout his economic policies that are already enacted, but also push ahead some policy proposals that he would like to see enacted related to affordability as the White House really placed defense on the issue, according to recent polling. In fact, the Wall Street Journal is now reporting that President Trump is set to announce a negotiated commitment from big tech companies to pay more when it comes to electricity costs related to AI data centers and a bid to remove some of that burden from U.S. consumers. I was here at the White House just last month speaking to the U.S.

42:39Ed Ludlow:Energy Secretary Christopher Wright as the administration urged the nation's largest power grid to hold an emergency power auction specifically for these big tech companies. So perhaps we'll get some firmer details on that tonight. Because as you well know, this has been a White House trying to thread the needle between bolstering artificial intelligence, but also trying to quell some of those concerns from Americans when it comes to jobs and, of course, the cost of living related to electricity. Because that is going to be the number one issue as we head into the midterms. There's a new poll out this week from Ipsos finds that 57 percent of U.S.

43:12Ed Ludlow:adults disapprove of the president's handling of the economy. Front and centered, as you mentioned, is going to be that tariff policy. And sitting there in front of the president tonight is going to be those Supreme Court justices that struck down those IEPA tariffs last week. Thanks, Tyler Kendall, with the rundown. Thank you very much. And look, the State of the Union is also the target for bets on prediction markets, like Calci, like poly markets. Look, a market that was once a fringe obsession of economists and election wonks, now traders are wagering on just about everything. Critics call it unregulated gambling.

43:43Ed Ludlow:And it's today's big take, deep dive. And please say Bloomberg contributor Chris Beam is here to talk us through it. It is a wonderful deep dive. And just as we think about the State of the Union, how has the idea of regulating this changed in the years?

43:56Caroline Hyde:So currently, the status quo is that prediction markets are regulated by the CFTC. And the reason is that they technically offer what are called event contracts, and event contracts are derivatives. And so the CFTC argues that falls under their purview. Now, there's a lot of people who disagree with the CFTC. State gambling regulators, a lot of casinos and other members of the gambling industry argue, yes, that prediction markets should actually count as gambling and therefore be regulated by the states. How good are prediction markets at predicting the future? So it depends what kind of market you're talking about.

44:43Caroline Hyde:A lot of scholars have looked at political markets and prediction markets to predict elections and have overall found that prediction markets are more accurate than polling and certainly more accurate than you or me or any individual trying to prognosticate about elections. What's interesting, though, is that those markets become less accurate the smaller they are. So, you know, a presidential election market could be quite accurate. But then once you get down to more state and local races, when there's less liquidity, that's going to be less accurate.

45:19Ed Ludlow:I mean, some of the bets that we see are extraordinary. I mean, I don't know how much liquidity there is on whether Jesus Christ is going to return in the next couple of years, but that's literally something you can go and place a wager or at least a prediction on using these markets. How have the companies themselves, Calci and Polymarket, navigated what has been thrust into really now success, but also backlash at the same time and worries about insider trading in this?

45:44Caroline Hyde:Yeah, the companies have taken different approaches. Calci has really tried to position itself as the adult in the room. They emphasize the internal rules that they have around insider trading, around market manipulation. They have whole teams and software algorithms designed to detect trading patterns that might set off red flags, which they then report to regulators. Polymarket is in a slightly different position because so much of their trading happens overseas and is not regulated by the CFTC. And they also just haven't talked about it as much. So I'd say CalSHI, particularly because it was the earlier entrant in the U.S., has emphasized cooperating with regulators, trying to be above board about the markets that they provide.

46:38Caroline Hyde:it's the latest Bloomberg big take and it's a must read Bloomberg contributors Chris Beam thank you very much that does it for this edition of Bloomberg Tech it's not as if there's a shortage of things to come this week State of the Union and then Nvidia on Wednesday oh and earnings after

46:51Ed Ludlow:the bell today as well look just don't forget to check out our podcast you can find it on the terminal as well as online on Apple or Spotify on iHeart the tech news keeps coming as of the disruption this is Bloomberg Tech

47:09Ed Ludlow:This is Caroline Hyde.

47:10Caroline Hyde:And I'm Ed Ludlow, inviting you to join us for Bloomberg Tech, a daily podcast focusing exclusively on technology, innovation and the future of business.

47:19Ed Ludlow:Every weekday, we bring you the top headlines from the world's biggest tech companies.

47:23Caroline Hyde:From finance to defence, AI to entertainment and from startups to the magnificent seven.

47:29Ed Ludlow:We highlight the latest stories of the people and companies pushing the tech sector to new frontiers and the politics that shape global tech markets.

47:37Caroline Hyde:We do this all every weekday, then bring you the most important conversations and analysis in our podcast.

47:42Ed Ludlow:Search for Bloomberg Tech on YouTube, Apple, Spotify, or anywhere else you listen.

47:47Caroline Hyde:Join us every afternoon on your commute home and stay ahead of the tech news cycle.

47:52Ed Ludlow:That's the Bloomberg Tech Podcast. I'm Caroline Hyde in New York.

47:55Caroline Hyde:And I'm Ed Ludlow in San Francisco. Subscribe today, wherever you get your podcasts.