Nvidia Puts Another $2B Into CoreWeave, Offers New Chips

0:11Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco. This is Bloomberg Tech. Coming up, NVIDIA invests an additional$2 billion in CoreWeave, expanding their partnership to accelerate the build-out of AI factories. Plus, IonQ continues its acquisition spree as the quantum company buys chipmaker Skywater technology in a cash-a-stock deal worth$1.8 billion. And gearing up for big tech earnings, Meta, Microsoft, Tesla and Apple all set to report earnings throughout the week. We have the preview. And the markets are up ahead of those all-important earnings tests.

0:53We want to see whether there's vindication, whether revenue and the profit lives up to some mighty valuations, particularly in the AI space. But we're up for a full straight day on the Nasdaq 100, longest winning streak since back in December when we had a five-day run heading into the Christmas period. So there is optimism, but not if you look at the US dollar, not if you're seeing the search for safety in gold. But we stick to our knitting here in tech. And what have you got, Ed? We've got a deal and it's for NVIDIA to invest an additional$2 billion into CoreWeave. They're going to buy CoreWeave's common stock at$87.20 a share.

1:27There is a technology sharing part of this, but the bigger picture is to accelerate the build out of capacity. Bloomberg last night speaking on the phone with the CEOs of both companies. Bloomberg's Ian King, who conducted that conversation, joins us now on set. I'm going to get to the circular financing bit first. We asked him, is this circular financing, him being Jensen Wang, the CEO of NVIDIA, his answer was pretty simple, that he's saying this is a very small proportion of what CoreWeave's going to need to raise on an ongoing basis to build out capacity. And it's in line with what they invest in lots of other companies.

2:03Take it from there. Yeah, I mean, he said, look, whether it's CoreWeave, whether it's XAI, whether it's any of the others that he's, OpenAI, obviously, that he's agreed to give a lot of money to, he's like, this is just a small portion. This is me just helping them out a little bit and showing faith in what they're trying to do. They're going to have to go and raise this money themselves. The market will basically sort this out. This isn't circular financing, was his argument. And it felt like the Corweave CEO, Michael Entrator, came back and said, look, it's a drop in the ocean compared to the amount of infrastructure spend that we're having to do.

2:35But where do they strategically align? Why dig even deeper into their pockets to give money to Corweave at this time? Yeah, I mean, Jensen said that this is really a technology partnership, that CoreWeave is a very early adopter of NVIDIA systems, tends to do them in the way that NVIDIA thinks they should be done. And this kind of serves as like a reference platform, so they like that. And also, he just thinks there's a lot of demand out there, so the faster we can go, the better things get. There's also CPU. Put the GPUs to one side. What Jensen Huang really wanted to emphasize, as far as I can tell from reading the transcripts of your conversation, is that Vera CPU is now going to be a standalone infrastructure product.

3:19CallWeave's relevant here. Just explain what he told you on the phone. Yeah, I mean, as you know, Jensen never says anything without having carefully thought it through. So he really wanted to deliver a message that this is a standalone product as well as being part of the infrastructure. You remember previous versions have been sort of integrated into NVIDIA's computers. Right, one of six chips. Right. Now, hey, you can use it on your own. if you want, and that makes it a direct rival to some big products out there. And real quick, Caro, AMD under pressure, Intel also under pressure. Ian, is that a surprise?

3:49It shouldn't be, no. Right. Ian King, we thank you so much for breaking down a really important story for us. And look, there's another one in the world of AI semiconductors. Microsoft is rolling out the second generation of its own AI chip. So C shares are up about a percentage point, not moving much on the news that is just dropping. and Bloomberg's Matt Day is a person who covers Microsoft for us, breaks that news. How important is it that yet another company is building their own AI chips? Well, for Microsoft, it's really important. They got a bit later jump than their biggest rivals, Amazon and Google, in building their own.

4:21Silicon, they see this as an important way to reduce costs, to find another source of availability. So this is going to be a really big test for their chips unit and for their cloud business. We write in our Bloomberg story that it could eventually provide an alternative, right, to NVIDIA's hardware. But the reality is, like all the other hyperscalers, Microsoft still depends on NVIDIA. Just explain its scale of its compute and what it does rely on NVIDIA for. So NVIDIA is the workhorse that powers the vast, vast majority of the AI workloads in Microsoft's data centers. If you're using OpenAI as a chat GPT consumer, chances are you're pinging an NVIDIA chip running in some Microsoft data center somewhere.

5:01Now, like everybody in the industry, Microsoft would love to have some other options. hence this effort with Maya to try to build a better mousetrap, one more suited for their data centers and one that ideally could reduce some of their costs in the long term. Tell us how it's rolling out, where it's rolling out first, and ultimately when customers are going to be using it. So it's not clear when customers are going to get their hands on this. The first units are live today, Microsoft tells us, in data centers near Des Moines, Iowa. More are coming to the Phoenix area, but we don't have a date yet for what a wider rollout looks like or, you know, sort of crucially, what availability looks like.

5:34Is this going to be a global rollout? Is this more of a kind of R &D step and future chips are going to are going to sort of carry the mail for them? So it's kind of yet to be seen how broad they take this one. Bloomberg's Matt Day out of Seattle with the latest on Microsoft's latest AI chip efforts. Let's talk through the market reaction to all of this with Kim Forrest, CIO and founder of Boca Capital Partners. And go back to the NVIDIA core weave deal. You know, it's a driver in markets this morning. the explanation from NVIDIA CEO Jensen Wang is that it is not circular financing because it is a small portion of CoreWeave's overall capital requirements.

6:09Are you concerned about that? And what do you make of his response? Sure. Well, of course, it's circular financing. You know, CoreWeave, as well as everybody else, even Microsoft, is a big customer of NVIDIA's. So if NVIDIA is investing in its customers, by definition, it's circular financing. It is a good point that, you know, two billion is probably a rounding error for NVIDIA at this point. But it's also true that CoreWeave has to prove itself to the market and raise its own money. Kim, we're saying circular financing, the term, as a bad word, a bad phrase. Is it? Right. Yeah, kind of. You know, Jensen points out that CoreWeave is going to be one of their reference accounts.

7:00What you ideally want in a reference account is somebody that has worked with you, is kind of pure, and has no inside kind of relationship with what they're recommending other than they use the product, they love the product. And, you know, this kind of sullies the relationship that CoreWeave has so much investment from the company that they're giving a reference for. Meanwhile, many would say it's just because we cannot build compute fast enough. And in many ways, NVIDIA, more than anyone, sees the opportunity. And it's just piling money behind this to be able to get the end demand that it needs for the products that it's currently building.

7:41Kim, are we likely to see through these sorts of technological partnerships as well as financial partnerships actually get the compute out at this high speed that we need? Sure. Well, you know, we're going to see them until we don't. I'm not trying to rain on anybody's parade. But at this point, it's all kind of, you know, up in the air. Right now, there is a huge demand for compute. But like everything else in the world, somebody is going to overbuild and And it's going to be jarring and disappointing. I'm not saying that that's any time in the future. I'm just pointing out the obvious. That, you know, yes, this is a very symbiotic world with customers and providers and competitors all kind of working in the same pool.

8:27It's messy and it's like real life because it is. But, you know, just be warned that this is not, you know, trees don't grow, you know, well, trees grow into the sky. but not forever. We'll put it that way. Well, they're not going into the sky today for Intel and AMD because both of them under pressure that maybe here's Jensen coming for their piece of the pie, the CPU part of the pie, that everyone was very excited for them. Indeed, Intel of late in the run up in their stock. Does Vera brand the CPU on its own prove that it's a key competitive to them too? Well, I think at first it's going to work in its own environment and it may become a competitor, sure.

9:08I mean, I think the takeaway from all these announcements over the last, I don't know, 48 hours is that everybody's innovating. And that is excellent. I love competition. I'm a capitalist. Innovate. Try to outcompete. Do it. Live that way. But the fact of the matter is the CPUs that are the workhorses in just plain old cloud computing aren't necessarily going to be interesting or aren't necessarily going to look to NVIDIA. NVIDIA loves the highest priced product. That's what it does. And I'm sorry, the workhorse people need reliability. They need it to look the same across their platform. They need a lot of stuff that a new CPU chip isn't necessarily going to be interesting to them.

10:00Now, in the world of AI data centers, sure. But in the old-fashioned ones that are going to have to persevere for decades, I don't know that that's really a competitor, NVIDIA. That's an interesting observation because the GPUs in the AI context are ARM-based. And so if you're running those GPUs of x86, you're going to have to do some special software work to make them match. Let's put that to one side. It is a massive week in the world of technology from earnings alone. We also have a Fed meeting on Wednesday. Of those names that are reporting this week, what are you most concerned about and what do we need to be looking for in the earnings context?

10:38Well, you know, how are things looking in the future? I don't really even care about how things looked for last quarter, I have to tell you. I'm looking for the next six months. And I think especially on more consumer leaning things like Apple, that might be, you know, the focal point for all investors is what new products are driving consumers to the company and are they meeting demand? That whole thing about how in demand are consumer items. Microsoft has a little special issue. I think there's a lot of concern that AI, maybe Claude, is going to replace a lot of software packages that make businesses run.

11:25I don't know how true that is, but I think we're going to get a glimpse into how popular or whether or not businesses are paying up for enterprise licenses, and that's always a concern. Kim Forrest, CIO, founder of Boca Capital Partners. Thanks for joining us across the spectrum of earnings and semis today. Coming up, we're going to the world of quantum. IonQ CEO Niccolò Di Masi is going to be joining us. How his company has just bought yet another quite the acquisition spree. We talk about why it wants to get into semiconductors. This is Bloomberg Tech.

12:12IronQ, well, it's agreed to buy U.S.-based chip foundry Skywater technology for around$1.8 billion. Shares on the downside for IronQ now, they have been up earlier. We're seeing Skywater up more than 5.8 percent. It's a cash and stock deal, and it's the largest in quite the string of recent acquisitions by the quantum computing firm INQ. Let's talk to its CEO now, Niccolò DiMassi. What does having a U.S.-based chip foundry add to the speed of your own technology? It actually does three exciting things for INQ. The first is that it accelerates our entire roadmap. So we talked this morning on a public webinar sort of earnings call style about the fact that it's going to bring in the cycles of R &D design and packaging iteration we do to build our quantum computing chips and hence our full fault tolerant machines quite considerably.

13:02We're moving things in by about a year on our 2 million cubic chip. And we're moving full fault tolerant chips forward into 2028, where we'll have them ready for scale up by the end of the year. What's exciting also is this is a big bet for us on what's called the merchant supplier play in the quantum industry. So INQ already sells our atomic clocks to a number of quantum computing companies in the US. This is going to expand our ability to supply the quantum industry. Our photonic interconnect quantum networking business is also built to cater for multiple quantum computing paths and modalities.

13:44And last but not least, of course, it's a big spread bet on the U.S. semiconductor manufacturing tailwind that I think is already being experienced for critical industries. as we rethink through supply chains, security, and the importance of keeping everything domestic to ensure security. Does that help build and leverage the relationships you already have with the U.S. government, for example? Is that an area that you think is going to drive growth? Oh, for sure. The U.S. government is a very important partner, and the Department of War, of course, is very important. And Skywater obviously does a lot of work, not only for the quantum industry as a whole, where I would argue they are far and away the leading, if not only, quantum foundry.

14:32But Skywater also does work more broadly in classified programs, as does INQ. And so there's plenty of synergies on that vector alone. We look forward to doing more for our nation's government, classified and not. We look forward to doing more for our nation's Fortune 500 companies. And this is a relationship we're really excited about because it increases the velocity and the frequency with which we can spin wafers across all of our product generations, which means the further out we're talking, the more room there is to move things forward. And you're seeing us continue to spend money to move things to the left on our roadmap and win this geopolitical space race of our era.

15:18Nicola, continuing to spend money, there's a lot of emphasis that this is Skywater with US-only operations. Do you look at Europe and other jurisdictions and give yourself backing to go out and do another deal if you need to have a similar footprint and presence in a different market or geography? Well, Skywater has a tremendous amount of upside capacity that we can tap into here, not just on the design engineering side, but on actual manufacturing. So we did this deal because we believe that manufacturability is paramount. Our ambition, as I think you both know, is to be both the NVIDIA and the Cisco, if you will, of the quantum computing and quantum networking and security space.

16:01And so our full quantum platform, networking, sensing, security and computing all has foundry requirements, all has semiconductor manufacturing requirements. What this deal does is it improves certainty, brings forward the roadmap. and, of course, make sure that we have industry-leading costs. So I think this is going to be enough capacity for global production. Skywater focuses on high-security classified program work and U.S. government work, and that's usually a standard that's accepted very internationally for the Five Eyes, NATO, and our allies. Nicolo, in the global quantum race, how do you stack the U.S.

16:41as a leader in field against the prospects of Europe and what you see being worked on in Asia? Well, I fancy INQ's chances, you know, most and first of all. I think that beyond INQ, there's a very vibrant ecosystem in the US. And of course, there is in Europe. The geopolitical race is, I think, very much between the US and our allies and what's going on in China, to be honest. And this is, of course, of paramount strategic importance, not just on the computing side, but also on the quantum security side. These are all solutions that INQ provides. We're the only quantum platform company in history.

17:22And as you both know, we already have a strong foothold in Oxford, England, Geneva, Switzerland, and Seoul, Korea, with our offices that continue to expand to ensure that we're able to not just deliver those solutions, but deliver them in the right global and local way across government and commercial needs in every one of our allies. Well, that was the other big deal that you did, Oxford Ionics, quantum chip technology that you purchased. And I'm interested in how the relationships, though, going back to Skywater are going to continue, because they also serve other quantum competitors of yours.

17:54Will they continue to do so? Absolutely. We are steadfastly dedicated to ensure that the quantum industry prevails. We respect everyone's pathways to market. At the same time, as I mentioned a couple of minutes ago, INQ already is a merchant supplier on our own. We supply atomic clocks and photonic interconnects to the industry and networking equipment. And so Skywater will be taking our existing merchant supplying business and accentuating, deepening and broadening that with, of course, their chips business. So rest assured, we see this very much as a bet on U.S. quantum, our allies' quantum, the quantum industry's supply chain needs, fulfilling those securely and at scale.

18:37And at the same time, in a walled off manner, INQ's own roadmap, of course, will also be accelerated and a supply chain domestically assured. Nicolai, very quickly, you said that this brings things forward by a year. There are people that just aren't familiar with quantum computing. How real is this going to be in the real world and when? Well, we've been saying since we completed the acquisition of Oxford Ionics that full fault tolerant gate model quantum computing is going to happen by the end of this administration. This transaction obviously accentuates that, underwrites that and assures that.

19:18And so I think you're going to see, you know, in the next three years, everything that we have promised on our roadmap come good and hopefully then some. The reason why this is so exciting for us is that with Skywater, we can make quantum computing a mass market reality. And we can do that at a price point that's accessible, not just for governments, but also Fortune 500 companies. And that's very much our goal to build the winning quantum ecosystem across all solutions and product family offerings that INQ have. Security sensing, networking and computing. INQ CEO Nicola DiMasi, it's great to have you back on the show.

19:56Thank you very much. The pressure is building on Grok, XAI and Elon Musk's AI chatbot. The European Union says it's probing X over concerns that it didn't prevent its chatbot from generating deep fake images that, quote, may amount to child sexual abuse material. Bloomberg's London based tech editor, Olivia Solon, joins us. Olivia, what's the need to know here from the EU probe side of this? Well, it's another day, another investigation into X from the EU. This time, yeah, it was about whether or not they did, X did a sufficient risk assessment to prevent harmful outputs from Grok before deploying it across the EU.

20:37This is a legal requirement under the Digital Services Act, which is a kind of set of rules around illegal and harmful content. And so, yeah, there's quite a long list of investigations of X at the moment within the EU, but this certainly adds to it. I mean, you mentioned France has also been looking into it, Ofcom in the UK, where you sit, India. But, Olivia, X's response is they've taken the necessary steps in some way. Of course, it's a unit of XAI. And this, again, builds tensions between the US and the EU in some government manner. Right. I mean, this has been a bit of a flashpoint in the sort of debate over free speech and control over big tech between DC and Europe.

21:24Clearly, I've been kind of checking to see if there's been a response so far from either Elon Musk or J.D. Vance or Trump on this particular announcement. So far, I haven't seen anything, but I'm sure it'll be something that will come up in the coming days. Yeah, the Trump administration has been very critical of this, of the EU in trying to police content on these platforms. And sees it as a free speech violation. We just showed X's statement, but it was a previous statement on how they go about removing illegal content, including child sexual abuse material. Very quick, 15 seconds of it. Does the EU probe have teeth?

22:03It does. I mean, they can find as much as 6 percent of global annual revenue if it's found to be in violation of the DSA. And already they are on the heels of a separate 120 million euro EU penalty coming X's way. previously. Bloomberg's Olivia Solon breaking all down. We thank you so much. Coming up, defence stops. They're on the higher side. In fact, they've soared as governments ramp up spending on heightened geopolitical tensions. More on that next. This is Bloomberg Tech.

22:50Welcome back to Bloomberg Tech. We're halfway through the show and it's a big week in the world of technology when it comes to earnings. Tesla, which reports on Wednesday, is currently the laggard down 2%, but it's a bit of a calendar to track. Now, Apple's the most interesting, up almost 3%. Actually, it's on track for its biggest jump since October. People have been passing the third-party data. There are lots of analysts out there that have said buy the recent dip because it might be better in China than we first thought when it comes to Apple. Of course, you move past that moment in time, Carrie, that is earnings, particularly the quarter gone, and people want to know what's happening with Siri, what's happening with the AI version of Siri.

23:28Mark Gurman's done a lot of reporting on that, of course, but until the company says something material, that's still what the hopes and expectations of the street rest in. What are you looking at? It's an alphabet story too, isn't it? But I'm going to pivot away from the earnings story just for a moment Ed because we've got to talk about geopolitical tensions. We have seen the effect it's had on defense stocks. They've soared as you'll see. In fact the sector gained nearly 44 % you've seen in the last one year basis. Military contractors are cashing in as governments to ramp up the spending on fighter jets, yes on missiles but also tech areas, drones and some investors really say that the rally is just getting started.

24:05Here with more is Bloomberg Equities reporter, Avelisse Bonilla-Ramos. And Avelisse, is this sustainable? What are we expecting in terms of revenue growth, profitable growth, fundamental growth on these earnings? Sure, Caroline. Thanks so much for having me. And yes, political developments are definitely a major driver of this sentiment. You know, the rally is driven by expectations that the sustained increases and global defense spending, this geopolitical instability, shifting alliances, ongoing conflicts are going to sort of like, you know, boost more this rally and continue this rally. And then these earnings this week are going to be really a test to what can actually happen.

24:49And, you know, the Aerospace and Defense Stocks Index is rising or rose about 42 % last year, you know, pacing a little bit of the broader market. Analysts are concerned about certain things you know these stocks are um in the political crosshairs just to put it that way um definitely the well the other concern is yeah sorry let's let's do a bit more on the political crosshairs when caroline and i were in las vegas for ces uh the president on true social was very clear ahead of an executive order that he wasn't happy about uh defense company compensation the compensation of the CEOs at the head of these primes because they weren't delivering.

25:31That seems incongruous with the massive run up in those stocks. Sure. I mean, the investor confidence right now, and that's very interesting, but the investor confidence right now in Momentum is sort of like these companies are growing a little bit faster than what the sort of like classic thought about or behind this defense talks usually is or was because a lot of these companies are moving into the technology play. There's a lot, you know, modern warfare is increasing. There's relying on more reliance on drones, on AI, on advanced sensors, software, missile defense systems. So once all these companies are sort of like tapping into that, investors continue to be a little bit more positive on this side.

26:19And that is exactly why we have you on, because of the tech focus that these businesses are having. We'll watch out for their earnings. Bloomberg's Aveliz, Bonilla, Ramos, thank you so much for joining us. Meanwhile, let's turn to wintry weather. It is blanketed. Most of the United States is leaving lingering effects, too. Power grids, they're expected to endure increased stress from really brutal cold in the wake of the damaging winter storms. Get this, more than 800 ,000 homes and businesses nationwide are currently without power. And this is concerns already have been growing around the U.S.'s power grid's resilience in the face of rising AI power demands.

26:49The first power and natural gas reporter Noreen Malik has been very busy this weekend reporting all of this out. What's the effect on prices? Yeah, prices got really high yesterday. You know, weekend is usually a lull for prices. And we saw prices around like a thousand dollars this morning. The Texas grid in like West Texas, where they're usually lower, was like two thousand dollars. And in Dominion, in northern Virginia, where there is that concentration of data centers, we got to like$1 ,000 as well. Spot prices are a little lower because real-time demand seems to be affected by school closures and businesses, just everyone working from home.