Nvidia Becomes First $5 Trillion Firm, Lifted by AI Boom

23:36Time now for Talking Tech. And first up, Amazon is planning to invest another$5 billion in data centers in South Korea. That's on top of the more than$4 billion that it committed with partner SK Group back in June. Now, the new funding will support the build-out of AI infrastructure to 2031. Plus, GoToGroup, while it's raised its full-year forecast, citing new initiatives and cost cuts, Indonesia's largest internet company posted its fifth straight positive quarterly result and has been steadily narrowing losses since its 2022 IPO. Still, investors remain cautious. The stock has fallen about 20 % over the last 12 months.

24:09And Apple, while it's preparing major refreshes to its MacBook Air, iPad Mini and iPad Air lineup, with plans to give the devices higher-end OLED displays. Now, that's according to sources. The iPad Mini will likely be the first to gain the upgrade, arriving as soon as next year.

24:32Welcome back to Bloomberg Tech. There is a lot to get through in the earnings context. Let's throw up the board and let's go through it one by one. Fiserv is a name that we have not used as much on this program, that the stock is down 42%, at one point down 47 % in the session, absolutely slashing its EPS guidance. Left one analyst at Jefferies saying that the level of this miss in the quarter gone and the cut to its outlook is difficult to comprehend. That's a payments processing name. Very interesting. Going also to telecommunications, Verizon, another one that we're watching, up almost three percentage points.

25:05The US largest mobile service provider, of course, I actually had a loss in wireless phone subscribers in 3Q, but new CEO has this aggressive growth plan that we're looking at. Then there's Etsy. So this is kind of interesting. There's the earnings story, Caro, and then there's the change of the top. And you spoke with the company about that CEO change. Tell me more. Yeah, and it's actually a trusted veteran of Etsy that's coming to the fore, who's been at the business since 2011 and ran Depop, a company that they bought a few years ago. And we're talking really here about Kruti Patel Goyal being brought up from chief growth officer to be CEO as of January the 1st.

25:44Josh Silverman, I chatted to him yesterday. And really, here's a man who's been at the helm for eight years. He steered this company through the lockdown crisis, through supply chain crises. And now he's positioning this business for artificial intelligence. Remember, they did the deal with OpenAI already. And he thinks Etsy is uniquely positioned to win in AI. But he really thinks that more clearly, Kruti Patel Goyal is the person to steer it with her really having done every single job, he says, over at Etsy apart from head of engineering. And he really thinks the amount of artificial intelligence and personalization she brought to Depop is going to be the winning formula.

26:18It feels as though there's some nervousness out there from the investor community right now, whether it's about the CEO or whether about, of course, maybe about the forward-looking guidance from some of its earnings. But let's talk about earnings more broadly right now, because after the bell, we've got Alphabet, Microsoft, and Meta all set to report results. Let's take a look at what investors can expect and start with Meta. Bloomberg Tech reporter Riley Griffin joins us now. For Meta, we know the capital expenditure has been there. We know the focus has been on hiring and talent. What really Zuck has to prove out is that it's really winning formula for advertising sales.

26:50No doubt. And we will be watching that capital expenditure number quite closely. So Meta has guided that it expects to spend as much as$72 billion this year on CapEx. A lot of that going to AI, infrastructure, data centers, talent. Any revisions to that number will certainly interest Wall Street. We'll also be looking, as you said, at the core advertising business. So analysts want to see about$50 billion this quarter coming in, and they're forecasting about$57 billion for the next. Whether there is any weakness in those numbers will give pause to investors who are concerned that they're not going to see that return on investment from AI.

27:29So if we see beats there, it will be a good day for Meta. Just really quick, Riley, we're also now thinking about Meta's debt pile and its borrowing to fund these projects. What do you know? Well, in a lot of ways, Meta has been able to keep debt off its balance sheet. Think about the really notable deal with Blue Owl to finance construction at what's going to be Meta's biggest data center in Richland Parish, Louisiana. So they are taking really creative approaches to ensure that that debt isn't showing up on today's quarterly report. Bloomberg's Riley Griffin, thank you very much. Let's stay with earnings, this time Alphabet.

28:08Bloomberg Big Tech reporter Davey Alba here with the latest. And actually, with Alphabet really consistent spending, Davey? but also cloud. And like GCP in recent weeks has been really interesting. What do we need to look for? Yeah, absolutely, Ed. I think CapEx and cloud are the key units to watch out for. Last quarter, we saw that Alphabet changed its guidance to$85 billion for spending on AI infrastructure for 2025, which was a$10 billion increase over its last guidance. So, you know, Google is really showing its commitment to AI here. And then cloud has been booming. You know, we've reported recently on the huge high-profile deal with Anthropic for cloud to provide its specialized AI chips to the AI startup, Anthropic.

29:01And this was a deal valued in the tens of billions of dollars. So that is a unit that we will be certainly watching very closely. We also know that cloud has existing commitments from AI startups that it knows will boost revenue for its unit up to 58 billion by 2027. Yeah, I think Wall Street analysts anticipating what about a 30 percent growth for the cloud computing part of the business. But in terms of scale, Davy, just remind us. I mean, what is it about 85 percent of revenue still comes from advertising? That's still going to be where the real driver of revenue is going forward. Is there any worry about, well, competitive threat, particularly when it comes to search?

29:45Yeah, absolutely. Search is still the core financial engine of Alphabet. That has long been the case. And it's, you know, being it's being pressured to prove that it can still be a driver of growth, even as AI rivals circle, particularly OpenAI with its AI powered search tools and new web browser that it's launching. This unit is certainly under under pressure right now. Yeah, all eyes on Atlas. Bloomberg's Davy Alba. Thank you as we head towards the closing bell and that set of numbers. And rounding out the big earnings is, of course, going to be Microsoft, the tech giant, hot off the heels of that relationship reset we've seen with OpenAI.

30:27Let's bring in Michael Turin, Managing Director and Senior Technology Analyst over at Wells Fargo Securities. Interesting, Microsoft trading down a bit today, but yesterday really got a lift past$4 trillion market capitalization because we thought that clarity is there in terms of relationship with OpenAI. What clarity do you want from the numbers tonight? The tech investing market is going to be focused on Microsoft's CapEx. We're a billion above street at$31 billion and expecting more than$125 billion. This fiscal year from Microsoft, Microsoft investors are clearly focused on two things. It's Azure growth.

31:02Can the reacceleration continue? We've seen really strong net new Azure revenue trends over the past couple of quarters from the company, as well as what you're alluding to, the open AI relationship. We caught it a sigh of relief yesterday just that that announcement is out and we're seeing, you saw the stock react well yesterday. Just some signs that the companies are working more closely together still after, I think, a lot of back and forth around what's happening between the two companies right now. Michael, based on your model for Microsoft, has this unknown about the relationship with OpenAI really been an overhang on the stock?

31:38I think it's the first time in a long time we've started to field questions on cloud market share. Azure has been the dominant market share gainer since ChatGPT took the world by storm. We've seen Azure just continue to outpace growth of the other hyperscalers. We're talking about a business that's approaching$100 billion of annual revenue, growing near 40%. These are unprecedented rates, but with some of the deals that we've seen announced away from Microsoft starting to show up, there have been questions around just the size and scale of the aspirations of OpenAI and how much of that accrues to Microsoft versus the broader cloud hyperscaler ecosystem.

32:21So this is it. No, this is the conversation. Let's do this. So GCP has a 1 million TPU deal with Anthropic. Microsoft has started having a relationship with Anthropic. AWS and Bedrock is kind of thinking, well, what else can we offer? Grok is now available on Azure, I think. Basically, the landscape's changed. Does the hierarchy change now? AWS, Azure, GCP. We think Microsoft still has the lead in terms of market perception. That relationship with OpenAI has been very advantageous. So we think Microsoft share gains have been primary a function of two reasons. Number one, just the later stage movers to cloud are disproportionately more skewed towards Microsoft and more traditional businesses.

33:08Whereas Amazon won the early adopters, Microsoft seen the next wave come to cloud. And then the relationship with OpenAI has really improved the perception of innovation within Azure and created an environment where startups are building using Azure really for the first time. And I think everyone wants access to OpenAI's technology, which is embedded into Copilot. You can directly tap the OpenAI API through Azure. That's an exclusive agreement. Those things are holding firm. So we're still very confident in Microsoft's position. But the world has changed. What we underestimated was just how big the size of just a training market would be within the AI cloud market.

33:45So we're just seeing growth that we haven't seen in technology in quite a long time. And to be fair, maybe Microsoft did too. The issue for them is supply, not demand. They're having to turn to other companies that you analyze, CoreWeave. They're looking at Nebius and N-Scale to really be able to fulfill some of its overall cloud needs. How are you thinking about capital expenditure rising for Microsoft in the next full year, 26? I mean, we think it continues to go higher. We're modeling above consensus right now. We're a billion above consensus for this quarter. We updated that just based on some of what you're saying.

34:15We hear the capacity constraints in the market. We hear data center capacity still coming online. We think the most important thing beyond what Azure presents for the quarter is where they guide. The December quarter should have a little bit less capacity constraints. So I think investors will be listening carefully to see how they characterize Azure growth for December as well. But you're right, this is a good problem to have for Microsoft in many ways. We have a business that we're saying is$100 billion in scale and can't even keep up with demand right now. Just unprecedented levels of interest.

34:48What about, though, the productivity tools? How much of a lock-in does it have because of the software? We can't get away from it. I think it's been the toughest moat to crack in software, right? We've seen many companies try, and the honest truth is we've just all been conditioned to work in Microsoft and very effectively. Copilot is a way to extend. I think the productivity use case that is pretty interesting from the numbers perspective. investors are focused in on Microsoft 365 commercial cloud, which does embed the co-pilot metrics as well. That business is forecast to grow 13 to 14 percent this quarter.

35:26Any upside would likely be attributed to co-pilot and could create, I think, the next big unlock for Microsoft to the productivity business could start to show growth improvement alongside Azure. Michael Turin, software analyst of equity research at Wells Fargo. Thank you so much.

35:49AI startup Character AI will ban kids from having conversations with chatbots on its platform. This follows growing pressure from lawmakers and a wrath of lawsuits, alleging the company's so-called characters are responsible for harms to children. Bloomberg's AI reporter Rachel Metz has the story. You know, Character for some time has been a very interesting startup and platform to follow. And I think we've even talked about some of the risks around the concept of an AI avatar. But this is a very specific line of reporting. I think best just to summarize it for us. Yeah, I mean, Character AI, when it got its start a few years ago, The idea was that anybody could create or use any kind of chatbot.

36:39I mean, they wanted people to make anything, really. So you'd see, like, video game character-style chatbots like Mario. You'd see impersonations of celebrities like Elon Musk, so on and so forth. All different kinds of things. It was kind of, I mean, it's part of a Wild West of the scene of AI chatbots that we're really in right now. But what you also saw is immediately this was very appealing to teenagers in particular, like a huge portion of their users have always skewed younger. And over time, we've seen a number of lawsuits being filed in general against companies that are offering AI chatbots, alleging certain types of harms to users.

37:16But in particular, a bunch of them have been filed by parents against character AI due to harms that they allege have happened to their teenagers, up to and including suicide. And then the regulators have become involved. FTC opens a regulatory investigation into all makers of these sorts of AI chatbots as to how much children should be continuing conversations with them. We've got others, the state of California, trying to regulate it, Rachel. So are they front running this in some way? And how do they execute the limitation on age here? Yeah, I mean, I think this is a really interesting strategy.

37:52Just yesterday, we saw a bill introduced in the Senate that seeks to outlaw the use of AI chatbots by people who are under 18. And in that same timeframe, we're seeing Character AI saying, hey, actually, that's basically what we're doing here. I mean, they're going to let their kid users who are roughly between the ages of 13 and 17 use different features, but they will not be able to have these endless back and forth chats with their so-called characters. That's what they call their chatbots. And I think, yeah, it is in many ways an effort to get ahead of some of the issues. But the company also told me, look, we think we don't know.

38:34There's still a lot we don't know about how these chatbots can impact kids. And so we think that this is the best thing to do right now. Rachel Metz, it's a great story. We urge people to go and read it. Thank you very much indeed. Let's stay in the world of AI startups because one of the biggest backers in the industry is also one of its biggest winners. NVIDIA has been growing the number of startup investments it makes each and every year. Bloomberg's AI editor, Seth Finkerman, is here to talk us through it because it's not a venture capital company, but its strategic part, the VC arm of it, is just becoming a juggernaut in this space.

39:09Yeah, it's definitely become the$5 trillion benefactor of most of the AI industry right now. What we reported here is that just through October of this year, NVIDIA has backed 59 different AI startups, which already outpaces all of what it did last year. I think it's more than triple or quadruple what it did a couple of years ago. and there's no sign of it slowing down. And I think there's a clear desire here to kind of support the wider ecosystem and industry in ways that probably come back and benefit NVIDIA. One of the things we mentioned in the story is circular financing or the circular nature of what's happening in the AI ecosystem.

39:46What would NVIDIA say about that? You know, what they've said to us and to other outlets certainly is that there is no obligation here that the companies that it provides money to have to then turn around and buy NVIDIA chips. And that may be true. What's also true is that obviously NVIDIA is the market leader for AI chips. So if it helps prop up dozens or hundreds of AI startups with capital, some of that money is going to come back to NVIDIA. And ultimately, that feels part of a larger strategy. As we all know, NVIDIA is very dependent on a handful of large tech firms who buy up the majority of its chips.

40:18If it can build future market leaders or even smaller firms with more capital, that's going to benefit and help diversify its revenue stream. There's a great anecdote in a story coming from Aravind Srinivas, who's over at Perplexity, just saying how Jensen gets it done in terms of giving him access to GPUs that he needs. Exactly. I think it's not just about financial resources. It's about technical know-how. It's about the network. And fundamentally, it's about being able to brand yourself as an NVIDIA-backed company that carries a lot of bona fides right now. Bloomberg's AI editor, Seth Figman, thank you very much.

40:51Now, coming up, we will stay with NVIDIA as President Trump says he'll be discussing Blackwell chips with Chinese President Xi Jinping. That conversation's next. This is Bloomberg Tech.

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42:16We are going back to our top story. President Trump is set to meet with Chinese President Xi Jinping tomorrow with discussions expected to include NVIDIA's new Blackwell chips. Bloomberg Senior Tech Editor Mike Shepard joins us now. NVIDIA has just added a third of a trillion in the last two trading days. Yes, there was a raft of its own announcements. But when I say new Blackwell chips, that's sort of the operative word here, new. Are they going to be allowed to sell some sort of dumbed-down version of a Blackwell architecture into China, Mike? Well, that is the proposal that President Donald Trump has expressed willingness to entertain over the summer.

42:50He said that a deprecated version of the cutting-edge Blackwell chip would be something he would be open to allowing sales of in China. But it's unclear whether the Chinese would welcome it and also what the reaction might be here in Washington among Republicans and Democrats who remain skeptical about the wisdom of selling such advanced technology to a geopolitical rival, Carol. What's so extraordinary is that what we heard articulated by Jensen, and here we have President Trump talking about Blackwell being in the discussion point. Jensen went out and said, I've got half a trillion dollars worth of orders for Rubin and the newer architecture and Blackwell put together with zero coming from China.

43:34So what do you think the likelihood is here that China even acquiesces, even wants to be buying any of this? Well, it's a great question because so far China has rejected the even dumber down chips, the H20s, that President Donald Trump had relented on allowing sales of in China earlier this year. You remember in April, the Trump administration blocked the sales of the H20, which had been designed for the China market, but then relented in August. But at that point, authorities in Beijing said no thank you and encouraged local firms instead to buy domestically. And this is part of the Chinese government's effort to build up its own supply chain domestically, to try to turn to local producers and build up their own industry.

44:22So the question is, will they even want the, I guess, dumbed down version of the black wealth? Should President Donald Trump persuade Xi Jinping to accept it? Now, one of the theories has been that maybe China is holding out for a more advanced version of the AI chips that NVIDIA makes in hopes of deploying them across their industry. There's no question that they outperform on a chip-for-chip basis what is in the Chinese market. But one thing that China has been able to do is produce its AI chips, including the Huawei Ascend, at scale and deploy them at scale. And that makes up perhaps for some of the deficiencies in individual chip performance that we've seen.

45:02So it'll be interesting to see how this all plays out and whether other bargaining chips may get tossed into the conversation as well, Caro. Pardon the pun. Will we see Jensen and President Trump meet? Well, the two men indicated yesterday that they might see each other somewhere on the sidelines of the APEC summit in South Korea. Jensen left. We're not sure exactly what time he left Washington, but by now he would be at least close to Seoul. The president's meeting with Xi Jinping is scheduled for 10 p.m. our time tonight. So we'll be watching to see if Jensen and Donald Trump cross paths. The two men regularly meet and speak by phone, Jensen said yesterday.

45:47So surely they will be in touch. And if Blackwell is approved, we might see an even bigger reveal. deal. And we wish them all well with their jet lag. Bloomberg's Mike Jefford. We thank you so much. You've been all across what's happening in Washington and GTC. But that does it for this edition of Bloomberg Tech. Tell you what we're also all across after the closing bell. Join us to help break down the earnings out of these key companies. Meta, Alphabet, Microsoft, all focus on capital expenditure, all focus on how much demand they have for NVIDIA products, of course. Don't forget to check out our podcast as well.

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