OpenAI Tops $850 Billion Valuation

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0:45Bloomberg Tech is live from coast to coast. With Caroline Hyde in New York and Ed Ludlow in San Francisco. This is Bloomberg Tech. I'm Tim Stenevec in New York. Coming up, OpenAI closes one of the biggest funding rounds in history. We're going to have the details. Plus, Anthropic accidentally releases internal source code behind its Claude Coding Assistant. And today is launch day for Artemis II. We are on the ground at Kennedy Space Center. We're going to get you the latest. First, though, a check on the markets. Tech stocks in the green, along with other U.S. stocks. This as optimism grows that the war in the Middle East may be nearing a conclusion.

1:30Look at what we see right here on the big board. The Nasdaq 100 off to a pretty strong start for the quarter. But this does come after a relatively bad quarter where it fell 6%. Out of correction territory, though, we should note. Also, the S &P 500 up 0.9 % following a decline in the most recent quarter of 4.6%. Oil still above$100 a barrel. This is Brent Crude up 101.66 is where we are, down 2%. Talk about a tough quarter for Brent Crude, up a whopping 70%. We've got a great program coming up. Investors are a little nervous when it comes to stocks, but still higher on this first day in the quarter.

2:13I do want to start in Washington, where President Trump has arrived at the Supreme Court for oral arguments in the birthright citizenship case. Bloomberg Washington correspondent Tyler Kendall joins us with the latest. Tyler, an unprecedented move for a sitting president to attend these arguments at the Supreme Court. What can you tell us? Yeah, hey Tim, so we're about an hour into the oral arguments here at the Supreme Court. Right now, the U.S. Solicitor General John Sauer is still being questioned by the justices. We have to keep in mind this case centers on President Trump's executive order that he signed on the first day in office seeking to bar U.S.-born children of undocumented immigrants from obtaining U.S.

2:54citizenship. And what the justices are looking at today is the Trump administration's interpretation of the citizenship clause under the 14th Amendment. We're not going to get too wonky into it here, but the Trump administration, as we're hearing outlined right now by the U.S. Solicitor General, is essentially arguing that in order for the amendment to apply, it requires a relationship of what he is calling full allegiance to the United States, which the Trump administration says does not extend to undocumented immigrants or temporary visitors. We are about to hear from the challengers in this case.

3:24The ACLU lawyer is about to be questioned by the Supreme Court justices who argues that the 14th Amendment has a longstanding legal precedent of granting citizenship to those born on U.S. soil. Now, Tim, we're not expecting to get a ruling today from the justices, but rather we're looking for those signals on how they may rule. We had some indications going into this that some conservative justices may be skeptical, and that appears to be echoed in what we have heard so far. That includes Chief Justice John Roberts calling one of the administration's arguments, quote, quirky. Although it does appear the administration has some sympathy.

3:59I'll give one example. Samuel Alito, conservative justice, saying that the administration is likely correct that when they were ratifying the 14th Amendment, the drafters weren't thinking about undocumented immigration. So it's going to be something to watch here. But you're exactly right. This is very unprecedented. The first time we've ever seen a sitting U.S. president president inside for oral arguments as they decide the future of one of his key policies. Bloomberg's Tyler Kendall with the latest outside the Supreme Court. Let's turn now to the Middle East, where tensions remain high as the war with Iran continues.

4:34President Trump said he'll only consider a ceasefire if the Strait of Hormuz is fully reopened. He is set to address the nation tonight as questions grow over the path forward and the broader economic impact. For more, let's bring in Bloomberg Balance of Power co-host Kayleigh Lyons. Kayleigh, the back and forth between Washington and what we're hearing and what we're learning out of Iran, there still seems to be quite a bit of daylight there. What can you tell us? Yeah, there certainly is, Tim, which is a repeated pattern. The U.S. says one thing, Iran pushes back. There's also a repeated pattern that the president says one thing or is reported to be considering one thing and then says another.

5:07As we are in a very different place, it seems, regarding the Strait of Hormuz than what the Wall Street Journal indicated yesterday, which was that the president was considering at least wrapping up military operations without the strait reopening. Now he says there will be no ceasefire if the strait is not open. But Iran is very much pushing back on that in a statement citing the Iranian Revolutionary Guard Corps in state media. They said, and this is a quote, the Strait of Hormuz will not be open based on the absurd displays of the American president going on to say that the situation in the strait is decisively and dominantly under the control of the IRGC Navy.

5:39Now, of course, the U.S. military continues to strike that Navy and other military targets. The president alluding to that in a true social post today in which he said that until the strait is open, free and clear, the U.S. will continue to blast Iran into oblivion or, as they say, back to the Stone Ages. So this is still a war that is ongoing. And the president has indicated it could continue for at least a few more weeks. He told reporters in the Oval Office last night it could be two to three weeks more. And, of course, the entire nation will hear from him at 9 p.m. Eastern time, also from the Oval, in which he is expected to address the future of this conflict.

6:10Perhaps we will hear from him as to whether or not he is considering actually deploying ground forces or another surge operation as we're seeing more assets deployed to the Middle East, including a third aircraft carrier. Would he be doing that if he did not intend to use it? And we also can expect to hear from him on the NATO alliance specifically. At least that's what he told Reuters, that he will be addressing our allies not coming to the U.S.'s aid when it comes to this war in Iran. after he earlier told the Telegraph that NATO is just a paper tiger and that he is seriously considering withdrawing the United States from it, Tim.

6:42A lot for Joe and Kayleigh to keep an eye on. Keep an eye on them. 1 p.m. for the early edition of Bloomberg Balance of Power. Bloomberg's Kayleigh Lyons joining us from Washington. Well, let's discuss the broader implications of these latest developments, especially when it comes to tech markets. I want to bring in Fiona Sincotta, senior market analyst at Citi Index, for more. Fiona, I want to talk about the de-escalation trade that we saw and potentially that we are seeing today. I should note that traders at Goldman Sachs and JP Morgan are suggesting this was mostly a squeeze. What is it in your view?

7:12Is it a squeeze or is it a de-escalation trade? Yeah, it's a good question. I mean, it's not the first time we've seen it. So I think there is reason to be cautious about whether it really is a de-escalation trade or not. I mean, obviously, we know the Nasdaq fell almost 5 percent across March. It moved into correction territory. It declined 10 out of the past 11 weeks. And it's rare that we see such negativity towards tech stocks. So, you know, there really has been a lot of sell pressure on the tech sector. But we are seeing that bounce back. The daily performance yesterday was the best in almost a year.

7:54And that de-escalation trade or squeeze that we're talking about is holding today. Now, I think there is reason to be cautious here, because, I mean, although we've heard before from Trump that we could be sort of, you know, moving towards an end to the war, the market, I don't think, is going to be convinced until we sort of see that Strait of Hormuz reopen or at least, you know, clear signs that we're heading in that direction. And the reason for that is because whilst oil prices remain high, Treasury yields are also going to be remaining high. And that just sort of, you know, takes the or hits demand for equities and particularly for tech stocks.

8:34We do tend to see that they come under pressure as yields rise. Now, yields have come back from that sort of almost 4.5 % that they were at on Friday to around 4.3 % today. But as I said, I think we really would want to see more concrete signs of that Strait of Hormuz reopening in order for this trade to really gain much more traction and retake some more key levels on the way up. I'm so glad you went there because that's exactly what I wanted to talk about. With Brent crude above$100 a barrel, WTI very close to$100 a barrel, I think a lot of people are scratching their heads saying, wait a second, why are we seeing a surge in equities, especially tech, if oil is still this high, Fiona?

9:13To what extent are oil prices tied to tech stocks? Yeah. So, I mean, you wouldn't necessarily immediately link the two together. But as I said, that drive, that elevated oil price adds inflationary pressures globally, but particularly if we're looking here in the U.S. as well. And that just really does keeping those Treasury yields elevated. Now, that also sort of supports the view that the Federal Reserve is going to be taking potentially a more hawkish approach to monetary policy. All of this ties into the fact that we're seeing less support for tech stocks. Lower yields are beneficial for stocks, but more importantly for tech stocks, because they reduce the discount rate applied to future earnings, making valuations more attractive.

10:02So when we have those higher yields, that really does make tech stocks less attractive. So as I said, I think oil prices are going to remain key. And I think interestingly, even if we do see that Strait of Hormuz reopen, it will take time for oil prices to come down. And if they do come down and when they do come down, I guess, the actual baseline rate is likely to be much higher than what it has been, that$60 a barrel, more towards the $80 a barrel because we're going to see a longer period for that sort of normalization. But also, I think there will be a risk premium that will remain tied in there.

10:39I want to throw something at you. It's private markets now, but expected to become a public equity this year. And that's OpenAI. We're going to talk to Shireen Ghaffari from our Bloomberg News team. She reported out yesterday the$852 billion valuation after a$122 billion round. what does a potential IPO of OpenAI and of Anthropic this year do to the broader tech equity market? Now, I think it would be extremely exciting. I think there would be a huge amount, unprecedented amount of interest. And I think it would actually be positive for the AI trade. I I think the AI train has come under pressure.

11:23We've seen a lot of questions about where it's going, whether the rallies that we've seen over the past year, they've obviously come into question, I would say, over the past six months. And I think those IPOs going public in those companies will actually potentially re-drive attention and interest into that trade. Fiona Sincotta from Citi Index. Fiona, always good to check in with you. Thanks for joining us on Bloomberg Tech. Well, coming up, as we just mentioned, OpenAI closing one of the biggest funding rounds in history. We're going to have the details next. This is Bloomberg Tech.

12:14OpenAI is now valued at$852 billion. The AI company closed a$122 billion funding round intended to help with its costly push for more chips, data centers, and talent. Let's get the details with Bloomberg's AI reporter, Shereen Ghaffari. Shereen, those are big numbers. I like in the piece you said, this funding is by any measure one of the largest transactions in history, dwarfing not just previous fundraising rounds by fellow privately backed startups, but also acquisitions and IPOs. Is this it for OpenAI before it goes public? We don't know yet, but it definitely could be. In a press call with OpenAI CFO, she talked about how this helps them have maximum flexibility.

12:59If they want to remain private for a little longer, they could. If they want to go public, they also could. You know, obviously we are heading into a year where we are expecting some AI IPOs, including potentially open AI. However, you know, given A, the macro uncertainty and changing conditions, and B, the need for these companies to prove a very solid path to profitability, at least in the future as the IPO, it's obviously too soon to say exactly when or if these companies will this year. Okay, these companies, that includes Anthropic. I just want to flick out another piece that you wrote, this one, along with colleague Mark Anderson about Anthropic accidentally exposing its system behind Claude Code.

13:43Human error in this case, what exactly happened? Yeah, so the company acknowledged that this was human error and not a sort of hack. However, this is source code. So this is the underlying material that goes into the Cloud Code product. We're already seeing some users try to replicate that code now and put it out there. And that is not a good outcome for the company. So it raises questions about what went wrong, how they're going to stop that again, And especially given earlier in the past week, they had another incident with a leaked, another kind of human error leaked blog post. Bloomberg's Shireen Ghaffari from our AI team.

14:21Check out her reporting and the entire team's reporting on the Bloomberg Terminal and at Bloomberg.com. Well, at the same time, shares of OpenAI have actually fallen out of favor in the secondary markets. Investors have been looking to offload as much as$600 million worth of shares, but finding no buyers. Instead, seeing demand surging for rival Anthropic. Bloomberg's Hema Parmar covers hedge funds, and she joins us now. So, Hema, what's going on here? Because it seems like there's this disconnect, at least with the latest funding round that I just talked about with Shireen. And what you're seeing, or what hedge funds are seeing in the secondary market, what can you tell us?

14:54So, the secondary market's really interesting. And what they're paying attention to right now is this valuation gap. So the gap between the$380 billion valuation for Anthropic and this$852 billion valuation for OpenAI. And if you are thinking that Anthropic is going to have a round in the future and it's going to close that gap and it could be sizably bigger, you might be looking to snap up Anthropic shares now to get in early as that gap potentially narrows. And so when you look at the two options, OpenAI may seem in less of a favor compared to the hot demand. We're seeing Anthropix shares in the secondary going for a valuation of$600 million or more.

15:38It's incredible. I mean, it just shows how quickly things can shift. And we did see last week a move away, at least from Sora for OpenAI, maybe streamlining before an IPO and also really leaning into what Anthropix bread and butter is, the idea of coding and selling to enterprise customers. What's amazing to me is really how quickly this has shifted and wonder if it can actually shift back a different way anytime soon. How quickly do things move in the secondary market? So the secondary market moves slower, obviously, than stocks would do, but you can see changes within a few days, within a few weeks.

16:12When you look at companies like OpenAI, there are some concerns about the spend, and this raise will help to absorb some of those costs. But when you look at the expenditure that some of these companies are making in AI, huge costs. And then when you look at OpenAI, leading into enterprise a little bit slower than Anthropic. But not to say, I mean, they've raised$122 billion from sizable investors. The other thing to think about with the secondary is sometimes existing investors may seek liquidity, not because they're souring on the company, but they just either want some extra money to play with or, you know, they see their position as already sizable within their Maybe you got to buy a house or a plane or something.

16:52I don't know. Bloomberg's Hema Parmar. Thanks so much. Check out Hema's story on the terminal. We got some breaking news right now. Billionaire Elon Musk's SpaceX has filed confidentially for an IPO. Let's check out more about timing with that in just a few minutes. We're going to have more details on that coming up. In the meantime, a conversation on AI's expanding role in cybersecurity. We're going to break with Armand and CEO Kevin Nandia. That's next. Bloomberg Tech.

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18:31SpaceX has filed for an IPO. Some breaking news. Let's get to our own Ed Ludlow, who's at Kennedy Space Center in Florida. Ed, this story that you wrote along with Bailey Lipschulz, SpaceX said to file confidentially for an IPO ahead of AI rivals. What can you tell us about timing? What did you learn? Yeah, I mean, the main thing and the important point of us confirming via sources that the paperwork is in is it probably does put SpaceX on track for a June IPO. There has been lots of reporting about will they or won't they, you know, as a starter gun moment for the broader IPO window. But of course, the mechanics of what they're trying to do, raising$50 billion plus maybe$75 billion at the high end at a valuation of$1.75 trillion, it's going to take a very large coalition of bankers and banks to run that book in what will be the biggest IPO in history on a dollar raise or valuation perspective.

19:27So we've known this was coming, but it is a big psychological moment for the markets that it's in. And it sets SpaceX up to execute on the groundwork that they've been putting into place for a little while now. It's a great piece. We're going to have more from Ed Ludlow from Kennedy Space Center a little later in the program. Breaking news coming from Ed and Bailey. Check out their story on the Bloomberg Terminal for more. Well, as we mentioned, Anthropic has accidentally exposed the source code behind its AI coding assistant, Claude. In an emailed statement, Anthropic said no customer data or credentials were involved and that the issue was caused by human error and not a security breach.

20:06The incident comes as the company is pushing back against a U.S. government designation, labeling it a potential supply chain risk. Joining us now to discuss the role of AI in cybersecurity is Kevin Mandia, CEO of Armadin. It's an AI platform that simulates real-world attacks to identify and fix vulnerabilities. And Kevin, that's exactly where I want to start, the vulnerabilities of this. With that anthropic story that I talked about with Shireen and just mentioned, this vulnerability seems to be as a result of user error, not necessarily an attack. How do you look at that in the context of overall vulnerabilities when it comes to the threat landscape today?

20:44Well, no question. Whenever you lose source code, there's a reputational hit. But when I looked at this case, they didn't lose customer data. They didn't lose customer credentials. They didn't lose customer model weights. And that's where the magic happens when you use agents because agents have total recall on your data and how you purpose those agents. So this is one of those things that happens to companies whenever you have a human in the loop. You have a process that's potentially frail or degrades over time. So they're going to have to manage through the reputational hit on this. But at the same time frame, I'm a cybersecurity expert, and I look at this.

21:21Whenever you lose source code, there will be folks that scour that looking at ways to how does this software work and how do we take advantage of it? Maybe in this case with prompt injection. So all you're really going to get out of this, Tim, is probably a faster release cycle because now you have millions of people looking at your code that you never intended to have them look at it. So you're going to have a fast release cycle should there be any identified vulnerabilities from the extra million sets of eyes that are looking at your source code. You were the founder and CEO of Mandiant before it was sold to Google Cloud.

21:54You're former CEO of FireEye. You have been doing this for decades. Right. this era that we live in right now with soon to be everybody having an ai agent that can act on behalf of them and also seemingly perhaps bad actors having ai agents right that can act on them how does that look out there today compared with other times in this industry are we more vulnerable now than ever before yeah that's a great question tim i think we're going through an inflection point and i hate that term but it's just dead reality whenever you see a shift change in technology, the unfortunate reality is that usually malintent can be implemented faster than positive intent.

22:34That just is what happens. So you look at the internet, it allows people to commit crimes or try to make money from 9 ,000 miles away from where they perpetrate the crimes. And wherever money goes, crime follows. Wherever information goes, espionage follows. That's our systems. So you're going to see in under two years, AI agents, because they can think and learn and have total recall, they will become the offense in the cyber domain. And the cyber domain's always been contested, Tim. There's always been bad guys on the internet. But now these bad guys or the espionage actors are going to be able to use agents to work at compute speed.

23:11So the change we're going to live in the cyber domain is that you're going to see the speed of attack go way up. So vulnerability discovery will be condensed down to seconds rather than days or minutes. And you're going to see over time, defense have to be autonomous. It can't have humans in the loop. So we're going to go through that inflection point over the next two years. But agentic AI is absolutely going to speed up the risk that everybody has in the cyber domain. Kevin, forgive me. We only have 20 seconds left, but how are you now doing that and addressing that at Armadan? Well, we are addressing it.

23:46What you're going to see is Armadan is going to be all offense all the time. We're going to be the agents that train your defensive agents so you can respond at the speed of compute and respond autonomously to the threats that emerge. New and novel threats will be found by the good guys before the bad guys. Kevin Mandia, Arminen, CEO, joining us from San Francisco. Kevin, good to see you. Well, coming up, Intel moves to buy back half a chip plan in Ireland, signaling renewed confidence. Look at the stock, up more than 9.9 % We're going to have more on that deal next. This is Bloomberg.

24:30Welcome back to Bloomberg Tech. I'm Tim Stenevec in New York. Let's take a look at markets on this first trading day of the second quarter after a really bruising first quarter of the year. The S &P 500 up about 1 % right now. Now, NASDAQ 100 up 1.4%. This after a really bruising first quarter where the NASDAQ 100 fell about 6%. The S &P 500 fell about 4.6%. Brent crude still above$100 a barrel. The war in Iran still weighing on overall sentiment. You can see Brent down$2 a barrel. That's about 2%. But at these elevated levels, still a lot of questions about what the duration of this conflict actually looks like.

25:11Well, shares of Intel are surging right now. The chipmaker has agreed to pay$14.2 billion to buy back half a plan in Ireland that it previously sold to Apollo Global Management. Bloomberg's Ian King covers semiconductors, and he joins us now from San Francisco. Ian, the stock reaction to news such as this, what does that represent about how investors are thinking about Intel right now? Well, they said themselves that this is kind of a sign of confidence in where their business is going. and it would appear from the reaction that investors have taken them at their word and believe in that. The sort of background to this is that suddenly the CPU, the chip that Intel specializes in, has become kind of an area of interest again, and people are betting that this is going to be part of AI data centers to a greater extent going forward.