Nvidia's AI Push, Paramount's Merger Pause & China's AI Race

21:29Ed Ludlow:I'm sorry to interrupt you. The president of the United States is speaking at the White House. that was president trump speaking in a bilap with the president of lebanon stocks technology stocks in particular at session highs a lot of discussion on the situation of the war in iran trump saying that there is no interest in meeting with iran and holding talks for peace or a ceasefire if they are not going to take it seriously or until they're ready he said that iran wants to meet, but that this time the U.S. has no interest and that they will continue deploying military might to pare back Iran. A lot of questions focused on also what's happening with the Strait of Hormuz.

22:20Ed Ludlow:And let's get a recap. Bloomberg's Washington correspondent, Tyler Kendall, out in D.C. for us. wide ranging, lots of questions, but Iran are focused. What do we need to know? Well, Ed, you really hit one of the main headlines there. President Trump saying that Iran is desperate to meet in his words, but that the U.S. doesn't have any interest until Iran is willing to meet in what he called a meaningful way. This is Bloomberg News confirmed earlier today that Iranian officials are in Pakistan for talks with mediators. Now, he was also asked about a headline that we have been tracking very closely here, which is that threat from the Iranian-backed Houthi rebels to institute immediately a maritime blockade against Saudi Arabia.

23:03President Trump saying that if it happens, we will take care of it. Also, for context, we had confirmed earlier today that this potential threat is extending to any vessels going to and from Saudi ports, threatening potentially the 4.5 million barrels per day that Saudi Arabia exports via the Red Sea. President Trump also went on to confirm that Israel is currently in the process of withdrawing troops from southern Lebanon in a test of the truce between Israel and Lebanon in Israel's fight against the Iranian-backed proxy group Hezbollah. This move comes as you're seeing President Trump is meeting with the Lebanon president, Ed, marking the first time that we have seen a meeting between the two leaders of this country in nearly 20 years.

23:48Ed Ludlow:That's Tyler Kendall in Washington, D.C., summarizing the president's comments. Thank you very much. This is what markets look like. Again, technology stocks pushing to session highs as the president was speaking. The Nasdaq 100, a gain of almost 2 % on track for its biggest jump in about three weeks. The SOX similarly just coming off its session high of 5%, but on track for its biggest jump in about a month. But, you know, it's been a lot of swings and moves. NVIDIA is up 1.6%. At the top of the show, we brought you some news based on a Bloomberg News interview with NVIDIA personnel that they are very much on track with Vera Rubin.

24:23Ed Ludlow:Their latest generation system, full production is underway. They've already actually shipped some Vera Rubin-based platforms to some of the biggest AI companies where workloads are expected to run imminently. We'll keep tracking it. The AI trade is evolving. Investors are looking beyond the biggest winners and asking where the next wave of profits will come from. Joanne Feeney, who advises capital management, says the recent fallback on AI-related stocks is an opportunity that investors should focus on the companies with durable competitive advantages. Joanne, it's great to have you back on the program.

24:56Ed Ludlow:You know, the situation's moving fast and changing quickly, right? Chip stocks closed in a bear market Friday night on the idea that better, more efficient AI, less demand for hardware. By the time I came into work Monday morning, we were back to where we were prior to that. There's lots of demand for hardware. Try and explain it to me. Yeah, Ed, you know, you and I have been talking about this for a long time. And right now, I think investors are starting maybe to parse through where the strength in competitive advantages actually lie. You know, first, obviously, it's the suppliers to the data center build out to the enabling of these AI models like NVIDIA, like Broadcom, both of which we've owned for a long time for clients.

25:38But now I think people are trying to think about, okay, what about those model companies? Because although most of them are not public, we're starting to see more and more of them. We saw a couple of announcements in the last week of new, very high-powered models out of China. We're seeing the price of the implementation of AI in terms of the token costs falling. And it just seems like there's a concern that the model makers are going to struggle to be able to continue to differentiate what they're offering. And that suggests profit margins there are going to be challenged and that you'd better look elsewhere.

26:12And that's why we like the chip suppliers still and the data centers, because they have other things that they're offering besides just running these models. The security, the stability, the reliability, the data handling, all of that gives them, we think, a more durable moat. And that would sustain our profit margins.

26:32Ed Ludlow:what one interpretation post Kimi K3 release was it's a 2.8 trillion parameter model that's priced three dollars per million tokens on the input side 15 dollars per million on the output side and that would basically be an indication that the Chinese AI companies feel good about where they're pricing it they see demand and when we enter the inference phase there'll be even more demand for nvidia-based or gpu-based platforms is that an argument that that tracks for you Yeah, so I think this competition story among the models is going to take some time to play out. I think you'll see that gap shrinking over time as more and more models come out with better and better capabilities.

27:14But, you know, the demand will rise, yes, because of lowering costs on the inference side. And that only then spurs more demand for more data centers, for more NVIDIA chips, more Broadcom design chips, et cetera. So, you know, you just have to think about where the profit margins are going to be maintained and where they're going to start to shrink over time.

27:33Ed Ludlow:Is it healthy to sort of go from a situation where you enter a bear market to and there have been big swings in the socks? And I'll remind the audience of your many years covering the semiconductor industry. But, you know, it's amazing how quickly things return to normal, so to speak. You know, I think one of the areas to really be a little bit worried about is the memory space. and I think they're so-called priced cheaply, like Micron at whatever it is, six times future earnings. Bring it up. There's a reason for that. And the reason is that those profits, those sales numbers have in large part been driven higher by massive price increases, hundreds of percent.

28:14That's not going to be sustainable for forever. And at some point, we're going to get more supply. And even with some of the innovations we're seeing in high bandwidth memory, We're going to see those prices come down as more supply comes on. Why? Because you have three players at the leading edge. You have some at the trailing edge. They're all building more capacity. And this is how the memory world works. Some people are saying, oh, this is different. We're no longer in a cyclical industry. I just disagree. The game theory behind when these guys add capacity and how much they add has always pointed to them collectively adding too much capacity.

28:50It's in their interest to build more capacity than their current market share justifies because they want to gain market share. And so we're going to see those prices come down at some point. And we always see the prices of the stocks come down well ahead of that. So I think that's a particularly dangerous area. I don't know for how long this current positive momentum is going to last. But I also don't think it's a problem, Ed, that we saw a little bit of a pullback. Investors probably had become overly concentrated. We are pretty active in making sure our investors, our clients are not overweight, any one name.

29:23And so you see some diversification, which is simply smart. And it does lead to these kinds of periods of pullbacks of volatility.

29:30Ed Ludlow:Every day you want to be able to answer the question, why? Why is something happening? We're showing Micron's up almost 11%, which is only its biggest gain in about three weeks. But you're right, trades at 6.5 times forward 12-month earnings. Why? What is going on in the here and now? Well, it's hard to know. I mean, look, stock prices are noisy, right? I spent a lot of time studying asset pricing back when I was an economist. And we learned looking at the data back then that you don't look at any one day. You don't even look at a week. You don't look at a month. You've got to look at the long term.

30:06And what we've been focused on is how are earnings driving the fundamental valuation of a company? What kind of cash flow can they generate over time? And so these periods where you have these big run-ups and run-back downs are just noise. And so we really focus on long-term investing for our clients and looking at the fundamentals. Ultimately, that is what supports a company's valuation. And so for Micron, there is a period ahead of them where they're going to continue to have really strong pricing, where they're going to continue to have strong profit growth. It's just that you don't know when we're going to get the news that, oh, this is how much new capacity is coming online from all three of these guys.

30:47And so, therefore, this is how much prices are going to fall. It's not that their earnings stop growing. It's that their earnings growth actually at some point probably turns negative because if you get a collapse in prices, then, you know, you have a period of negative growth. And that's happened in Micron's history in the past. And so that's why it is trading where it is. And it also is why I think it's a little bit of a risky place to go.

31:08Ed Ludlow:Joanne Feeney of Advisors Capital, back on Bloomberg Tech. Thank you very much. Some news. Anthropic has reached a landmark$1.5 billion settlement in a copyright lawsuit over the use of millions of pirated books to train its AI models. The deal, which received final court approval yesterday, is the largest copyright class action settlement in U.S. history and could set the stage for similar cases against OpenAI, Meta and Google. and we will track what happens in that space. Now, coming up, we're going to take a look at where venture capital is finding the biggest opportunities as Moonshot's Kimmy rattles the AI industry.

31:47Ed Ludlow:Joining us next, Samir Dallacchio of Bessma Venture Partners back on Bloomberg Tech. Stay with us. This is Bloomberg Tech.

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33:30Ed Ludlow:China's Moonshot AI is preparing to begin discussions in August on a final round of fundraising before listing in Hong Kong at a valuation of as much as$50 billion. Sources say the Chinese AI lab should close a financing round that began this summer at a valuation of around$31.5 billion and then intends to open discussions with potential backers about a very quick follow-on capital raise. Of course, it's been in the news cycle constantly for four days. The AI conversation has shifted yet again after the release of Moonshot's Kimmy K3. Treasury Secretary Scott Besson says the U.S. will scrutinize Chinese AI models for evidence of intellectual property theft.

34:10Ed Ludlow:Against that backdrop, where is venture capital seeing things? Where are the biggest opportunities? Are we worried? Joining us now is Samir Dallaki, a partner on the Growth Investment Practice team at Bessama Venture Partners. There's so much in your portfolio that's interesting and highly relevant to this. But could I just start by asking what your net takeaway from everything Kimmy K3's been? All-consuming, Kimmy K3, in the news. And I think it's a great thing. I really do. I think we have a moment in time where I'm a free trade, competition is good for us kind of a guy. I believe that the right tool for the job is the right answer for our enterprises, for customers.

34:53and they will use Frontier Lab models like Anthropic for the stuff that they need to use that for and they will use open source models from China and other places in the world over time. We need our open source US and Western-based open source models, open weight models to get better and bigger and that's great and that will happen if we have free competition with the Chinese models. But that's my general take.

35:17Ed Ludlow:I'm very positive on the development. Let me ask you one sort of final specific thing on Kimi K3. Bessemer is an investor in Anthropic. One of the questions posed was, okay, if a startup of Moonshot's size and scale and resources can put out a 2.8 trillion parameter model, price it such that it did, what's the moat of an Anthropic or an open AI? Why do we value them such as we do? Your industry colleague, Son Monamedi, from Greylock was on the show on Friday, and he basically said, well, Anthropic's got a real business with multiple streams of revenue. It's completely different. But where would you put your response to that question?

35:57Well, because we're big investors in Anthropic and they're in the quiet period, I can't comment specifically on them. But I will say about the frontier models generally, what I would say about their modes, they're still at the frontier. They're still extending the lead. We're in a stage of recursive learning improvements to the models. The models are being released faster and faster as we get ever better capabilities. I believe the frontier will continue to stay at the frontier. And you'll have others that will catch up. Now, there's also a lot of talk on X right now around whether there should be, Secretary Besson mentioned, should we be going after IP theft and distillation?

36:38And how do we feel about that? I'm a free markets guy, but I don't believe in IP theft and distillation. So I do hope that we will figure out ways to better protect the IP of the closed models on the frontier. But that would be my take on that.

36:53Ed Ludlow:Samir, it's been way too long since you've been on Bloomberg Tech. So take us inside the portfolio company's perspective on that. You know, you have concern about IP theft on behalf. How would that impact if there were to be regulation or there were to be an action protecting those companies that you're backing and investing in? Yeah, I think at the frontier, you know, it's important that they put up defenses. I think it's important that there are protections for IP. I think that we'll see those model providers are going to continue to explode in growth. I keep trying to explain to my colleagues in the market just to get a sense of the size of this market, Ed, is astonishing.

37:37This is like having the opportunity to invest in Rockefeller's Standard Oil in 1870. The market for intelligence is the largest market. I used to say in technology, it's the largest market in human history. And so the frontier model, the penetration in enterprises is so tiny relative to what it will be that the frontier models will continue to excel. But the open source ecosystem is going to continue to flourish. it should, companies like Fireworks, we'll talk about, are going to benefit from that.

38:10Ed Ludlow:The big news of late, so Fireworks took ARR from 100 million to 1 billion, but they did it in less than a year and a half. And you're, with Reset, somebody with experience in software, you're basically saying we've not seen that growth trajectory before. It's extraordinary. And I used to be the CEO of a SaaS company. I took it public in 2017. To build our SaaS company to IPO scale took us eight years. These guys are adding 100 million of ARR per month. That took us years and years and years. Do you know what's interesting about that? Sorry to interrupt you. Those guys at startups like Fireworks, they're good at software, right?

38:47Ed Ludlow:They're good at AI. Are they good at go-to-market? Do you know what I mean? So they're able to do that 100 million of ARR per month. Have they been able to keep up with themselves on the sales channels and having good operational leaders in that business? Yeah. Well, I'll tell you, it's one of the biggest reasons we invested behind Fireworks, and we're so excited to back them. The CEO, Lynn, is an incredible strategist, a deep technologist, came from Meta, was leading the team from Meta that built PyTorch, which is sort of the leading open source framework for machine learning. But she's recently brought in George Hu as president.

39:24And George and I got to work together at Twilio after they acquired my last company, SendGrid. and I will tell you without hesitation, George is one of the absolute best go-to-market leaders, software executives in the industry. He was the COO at Salesforce, then the COO at Twilio and so the companies that are scaling at this pace and have the wisdom to bring in some folks that have seen scale and growth and can put in process and operational rigor, we think are going to be real winners in this market and that's why we think Fireworks

39:55Ed Ludlow:will be the winner in their market. to lots of people, AI is still quite abstract. It can mean lots of different things. So, you know, at Bessma, you guys basically say you invest across the stack, the model layer, the infrastructure layer, the vertical application layer, you know, but those are all quite different things. Like Lease AI is a high-flying portfolio company of yours. But they all have slightly different factors behind them. They do, and you have to look at each of the markets, and every business is different. But what's extraordinary is just the demand and the pull from the market for all of them.

40:29You're just seeing exponential growth, growth curves like we have never seen. That's what they have in common. That's what they have in common. I've been in software now for 31 years. I've never seen a lease AI selling AI to property management companies. They've posted publicly. They crossed 200 million of ARR and are still doubling. The companies in software history that reached what I would call triple-digit growth at triple-digit scale, those triple-triples, that's extraordinary. Any company that did that in the prior era went on to become household names. And we believe we're investing in those kinds of companies.

41:08Lisa is doing it in property management. Lagora and Evenup are doing it in the legal field. Bridge is doing it in healthcare. It's just an extraordinary group of businesses.

41:20Ed Ludlow:Samir Dallakia, partner at Bessemer Venture Partners, back on Bloomberg Tech. Thank you very much indeed. Coming up very quickly, Tesla is trailing in its AI spending compared to its big tech peers. And that's worrying investors. They want to see the EV maker put its money where its mouth is. We'll get the preview next. This is Bloomberg Tech.

41:45Ed Ludlow:As big tech rushes to pour trillions into AI investments, Tesla is lagging behind. Despite setting lofty goals, the company just spent just$2.5 billion of the$25 billion in 2026 capex. And investors are growing a little bit concerned. Joining us, Bloomberg's Jordan Fitzgerald. This is the mindset going into Tesla's earnings this week. They want to see Tesla spend money. They do. This is a bit of a show me the money situation here. In prior years, Tesla spent about a little under$10 billion annually in CapEx, which is in line with more traditional automakers like Ford and GM. But as Tesla rebrands as not a car company, but an AI company, the market really wants to see it spend like one.

42:30Ed Ludlow:2026 capital expenditures, we should point out, at$25 billion are way beyond anything Tesla's even attempted before. What's the metric that we judge then? We just want to know that spending in this quarter is tracking ahead of that, in line with that. Yeah, we just want to see progress here. If Tesla's not spending, then investors have reason to doubt that they're making progress on their robo-taxis and robots and other AI-linked projects. And given that Tesla's valuation is priced as if it's a growth stock, an AI stock, that it really needs to start delivering on those AI benchmarks. There's also added pressure here since SpaceX went public.

43:08Like now investors, if they're not happy with Tesla, they have another way into Elon Musk. And so Tesla really, really needs to start delivering on those promises or at least indicating that it's on the way there.

43:21Ed Ludlow:Jordan, really quick, TSR, when are Tesla earnings? What else are we looking for? Tesla earnings tomorrow after the bell. I'm sure you and I will both be head down on that. Other than that, commentary from Elon Musk is always the most important thing in any Tesla print. But the past few quarters, we've seen the print come out and the shares initially rise post-market. And then Musk starts talking on the call and we see a little bit of a dip. Things really, really move off of his tone, off of the words he uses. There's a lot that's not in the direct report that we can get a hint on from Musk. And I'm sure many are hoping for any sort of color he can give on the potential for a merger.

43:59Ed Ludlow:I am braced. I am going to participate. And hopefully my voice will last that long. Blumos Jordan Vichderald, thank you very much indeed. Indeed, that does it for this edition of Bloomberg Tech. Again, kind of tech stocks at session highs or just off them after the President of the United States was speaking. But generally, the rebound in chip stocks continues to gather momentum. Some really top conversations across public and private markets today. Recap them on the podcast. You know where to find it. It's on the Bloomberg Terminal as well as online on Apple, Spotify and iHeart. This is Bloomberg Tech.

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45:33in Lacqua on Bloomberg Television or wherever you get your podcasts.