Tech Trade Under Pressure; Musk Sells His Vision of the Future

23:40Ed Ludlow:I'm conscious in the moment. One session a market does not make, but actually we're seeing declines extend quite significantly on the NASDAQ 100 now. The Philadelphia Semiconductor Index, or SOX, is down significantly, although part of that is like we were due a correction having been up more than 80 % year to date. You go to air in 35 minutes' time. I don't want to front run it, but just give me an overview of today's show. I got to ask first, Ed, have you ever enjoyed a correction? Have you ever enjoyed a bear market? Is it a whole new thing? You know, that's why I always say one session of market does not make.

24:17Ed Ludlow:Stocks go up and stocks go down. And as you taught me over a number of years, zoom out on the chart. Don't look at the red flashing on the screen. I would zoom out over the chart and look at American prosperity, which is booming right now in the Caroline Hyde and Ed Loveville world. We're going to talk to Lizanne Saunders. She is on fire. about the betting, the speculation in the market. Gabriela Santos, Ed, has one single sentence involved. You have to save more. That'll be two of the big focal points we'll look at. Bloomberg's Tom Keen. Thank you very much. And please don't miss the premiere of Bloomberg Money today, 12 p.m., New York time.

25:04Ed Ludlow:Okay, welcome back to Bloomberg Tech. We have to talk about financial markets. The Nasdaq 100 down two and a half percent. The Sox down six percent. There's a lot of nervousness in the market. The AI trade is getting hammered on all sides. I would still observe that chip stocks are still up on the week, but the S &P 500 is actually down on the week. That means that after nine straight weeks of gains, we fall short of a historic 10th. Economic data is playing a role here. Jobs data for May came in hot. We're looking at wage data, and that's why you see that move in the US 10-year yield. There's also some digestion of Broadcom's earnings, which were Wednesday night, but that outlook for the current period for chip sales, AI chip sales, that did put some nervousness into the market.

25:49Ed Ludlow:And a SpaceX IPO around the corner, there's a lot on the Bloomberg terminal about how that feeds into volatility. Speaking of, today's big number, 100 gigawatts. That's the annual AI compute capacity. SpaceX says it ultimately wants to deploy in orbit a lofty goal made no easier by the challenges of building and maintaining networks of thousands, even millions of these specialized spacecraft in a harsh, harsh orbital environment. What does a space-based data center look like? Bloomberg did a mock-up of how these craft would work. So this is the body inside radiation-tolerant AI chips right in here.

26:29Ed Ludlow:Around them, networking layer, power, thermal management, flight control systems. Then for communications, the satellites could rely on laser links around here rather than your traditional radio frequencies. That's kind of the squiggly line beaming back down to Earth, handling that enormous flow of data to power these systems. Absolutely massive solar array panels as well as batteries to store that energy when the sun's not there, right, when it's blocked. This up here is the radiator. On Earth, data centers use air or they use water for cooling. In space, radiators disperse the heat into deep space, and they're going to need to handle far more heat than today's current designs.

27:12Ed Ludlow:Out of this world? Yes. Our next guest has already started down this complicated road. Philip Johnson is the CEO and co-founder of StarCloud, which launched the first NVIDIA H100 chip aboard its satellite this past November. put myself on the spot here you tell me what was my explanation of the basics of orbital data center like did we get it right excellent excellent explanation so for you this is real right an h100 inside the form factor of a satellite explain how you got to that point the engineering challenge the deployment? Yeah, for sure. So we, as you rightly mentioned, we launched the first NVIDIA H100 in November last year.

28:02Actually, we launched a satellite which has five GPUs, three from NVIDIA, three from ARM, but the H100 was the most important and interesting one. And the way we got there is we started the company about two and a half years ago, and we had a very quick development cycle for that first spacecraft. And I think on the screen here actually you can see one of our early renders of a very large four kilometer by four kilometer solar panel with a five gigawatt cluster in the middle and that would be for something like training we're more going to be doing things like uh right now we're very focused on these small inference nodes so we'll be launching we just filed with the fcc for a constellation of 88 000 of them um which enables us to deploy about 20 gigawatts of compute and philip we you know

28:45Ed Ludlow:We're zooming out. This is a case study of a five gigawatt data center. Can you just reiterate what you said about the scale of the solar arrays? What were the numbers on that? Yeah, so this solar array on the screen is about four kilometers by four kilometers with about a one kilometer by four kilometer radiator down the back there. I would say that that renders from a couple of years ago when most AI workloads were for training. And it seemed a more, you know, it seemed we wanted to show that if you wanted to do any kind of workload, you could and so we showed the hardest thing you know actually now it looks like 99 of all ai workloads will very soon be inference and so we don't need to dock together a large structure like that and that's the reason we're now doing this distributed constellation of much smaller satellites so you know philip um i want to be honest honest with the bloomberg tech audience i invited you onto the program because this is spacex's pitch right a vast network of of orbital data centers and I guess that we, in SpaceX's case, we're still waiting for the designs and Elon Musk has said that, you know, in the coming weeks he will show his hand on that.

29:52Ed Ludlow:You're a company that is already doing this, yes, at right now a limited and small scale. I just wondered if you'd account for that, you know, the idea that SpaceX plans to do this and, you know, how StarCloud will fit in with that. Yeah, for sure. I mean, I think we really are talking about potentially the largest market opportunity ever. We're talking about trillions of dollars per year of CapEx will be deployed in space. And so everybody's going to have to have a solution for space compute. Some of that will be using SpaceX, but certainly lots of other people are going to want more independent clouds.

30:28And so that's the customer base we're going after. initially also we'll be serving workloads to you know uh other spacecraft providing edge and cloud

30:38Ed Ludlow:services for other spacecraft what about um the deployment of your satellites are you a customer of spacex on the rideshare program or how does that work yes we are a very happy customer of spacex on both the rideshare program and uh potentially for dedicated falcon 9 launches so yeah don't want to speak too soon but uh that we should have some interesting uh things to say about that soon you come back on the show when you're ready let's end here um what's the ripple effect of this spacex ipo going to be for you right is there going to be a trickle down yeah we're already seeing it um i mean there's just enormous interest in the space industry that that wasn't there before um so we raised actually the fastest uh unicorn round coming out of yc ever So in 17 months, we went from basically zero to$1.1 billion valuation with$170 million raise.

31:31I think a lot of that is fueled by people now understanding space, realizing there's a huge market opportunity there. And that's in large part because of the SpaceX IPO.

31:42Ed Ludlow:StarCloud CEO and co-founder Philip Johnson, really grateful for your explanation of the technology, but also to hear about what you guys are working on. Come back. Thank you. The challenge of satellites reaching orbit has mainly been solved through reusable launch vehicles, i.e. SpaceX. But one critical bottleneck remains, scaled satellite manufacturing. That's partly what SpaceX needs cash for, not just SpaceX. Startup APEX has just raised more than$200 million as it works to increase production of its satellite platforms for commercial firms and government work, including an involvement in President Trump's Golden Dome Missile Defense Shield.

32:17Ed Ludlow:APEX CEO, Ian Cinnamon, joins us more. Ian, congratulations on the round and thank you for being here. It's interesting what we're doing. We're trying to encompass all of this future economy. The bottleneck of satellite manufacturing, how severe is that bottleneck? Try and quantify it for me. Satellites have been around for 70 years, right? Satellites themselves are not new. But to your point, SpaceX has really solved the key part of the space ecosystem. which is how do we deliver the satellites from Earth to space? And to give you a sense of how severe the new bottleneck is, which is actually the spacecraft production, the facility that I'm standing in right now, we call it Apex Factory One, is capable of producing over 200 satellites per year.

33:04That is more satellites than the U.S. government launched last year. And the demand is growing sky high. So for us, we are seeing an enormous shift in the market away from saying, let's launch one large, bespoke, exquisite satellite and shifting to how do we launch constellations, fleets of satellites that are actually able to work together.

33:26Ed Ludlow:And that has led Apex to becoming really that go-to spacecraft platform company in the industry. So Ian, the regular audience of NovoTech has kind of heard this story before. There's a company in Bulgaria called Endurosat, which basically pitches itself as like the TSMC of Bulgaria, but similar. contract manufacturer for satellites of third parties. Is that an accurate way to also describe what Apex is doing right now in the United States? So Endurosight is a great company, but fundamentally a different business model from us. So what we do is you could, if you want to make an analogy here, right, I would actually say we were the Ford of satellites.

34:05So we go ahead and we say we're going to have a set number of products, a small satellite, a medium one, a large one. Think a sedan, an SUV, a pickup truck. We design that upfront. So we're not contract manufacturing someone else's design. It's ours. And we go and produce them in the factory I'm standing in right now ahead of any customer demand. So when somebody says, I need 100 satellites or someone like StarCloud wants to go launch a constellation, we're able to rapidly supply them in a matter of weeks or months instead of years with a standard off-the-shelf design.

34:38Ed Ludlow:Let's talk about the money. $200 million raise. What is the priority for you to get scaling here? What is the thing you're acting on most quickly? Space is expensive, right? Space is full of hardware. It's full of expensive launches, buying Falcon 9s, buying other launch vehicles and so on. But Apex is in a very fortunate position where we're actually able to operate as a real long-term sustainable business. We have now raised three back-to-back$200 million rounds over the last 14 months. And we've raised all of them from a position of strength where we don't actually need the capital, but it's simply a way for us to speed up and actually go faster.

35:16So for us, that means increased hiring, increased production, and more deliveries to our customers for programs like we announced earlier this week with our partnership with Northrop Grumman on space-based interceptors.

35:28Ed Ludlow:Ian, next week, SpaceX will conduct the biggest IPO in history. how is that going to impact you in the immediate and also in the future? It's incredibly synergistic, right? SpaceX has really opened up the space ecosystem and really paved the way for different customers, whether it be U.S. government, allied nations, commercial customers, to ship their architectures from large, expensive, bespoke satellites to fleets of proliferated systems. We supply those proliferated systems. So for us, SpaceX has been a massive tailwind in our favor that's actually helping the industry move forward at a faster pace.

36:07We are a great customer of SpaceX. We have a wonderful relationship with them. And we are very excited for their IPO next week.

36:14Ed Ludlow:Ian Cinnamon, Apex CEO, the company raising its latest$200 million around. Thank you very much indeed. Coming up on the program, we're going to hear from Thinking Machines Lab CEO, the former OpenAI CTO, Mira Mirati, on what her new startup is trying to achieve. That conversation from the Bloomberg Tech event coming up next. I have to check back on markets. Look, this is where we're at. There's a lot of red on that screen this Friday. Tech is underperforming, and that's probably putting it mildly or lightly. NASDAQ 100 is down now almost 3%. The Philadelphia Semiconductor Index is down 6.5%. Its biggest drop since October.

36:52Ed Ludlow:There is a lot of chatter out there that while we were kind of due a correction in chips, The index up more than 80 % year to date anyway. The S &P 500 is snapping as it stands and nine straight weeks of gains run and yields are higher on the eco data. We're going to keep checking that. It's important. This is Bloomberg Tech. Support for the show comes from Public. Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth.

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38:58Ed Ludlow:Humans should stay in the loop for AI, says Thinking Machines Lab CEO and founder Mira Moradi. She spoke at the Bloomberg Tech event last night with Bloomberg's Emily Chang. Listen to this. The most advanced AI systems are the most incredible tools for thought that humanity can ever have. and so how can this change the way that we think and where we're still thinking and uh but it's changing the nature of thought what we're thinking about um and and this part i don't think is actually this part is familiar to us you know um since the beginning of time like technologies have deep technologies have changed what we think about, like language, writing, numerals.

39:47I think this is the opportunity ahead of us, this possibility to expand what we think about and have new tangible things that we think about. And this requires very intentional research work and product work in this direction. When I interviewed you, it was early 2023 ChatGPT had just changed everything You were CTO of OpenAI A few folks I talked to said you basically ran the place Just saying When you left and founded Thinking Machines Were you running towards something or away from something? I most definitely was running towards something Once I figured out what the thing was

40:42I had an incredible experience at OpenAI I was so incredibly lucky to work with some of the most dedicated and most talented people in the world and that's incredibly special and I'm very grateful for that experience and eventually I had my own view of a very strong view of how I think this technology ought to be developed. And it's very rare to start something from scratch once you have developed such a strong perspective on it. And that's a rare privilege to have. And I think having a company like Thinking Machines gives us an opportunity to focus on where we have the highest conviction and build and orient the entire company around that conviction.

41:42Ed Ludlow:That was Thinking Machines Lab CEO, Mira Moradi, along with Emily Chang. Software has dominated venture capital for years, but as AI moves beyond the digital world and into manufacturing, robotics, industrial systems, investors are betting that that next trillion dollar opportunity is wrapping software into the physical world. There's also the small matter of SpaceX's IPO and the ripple effects for builders in and outside of Earth's atmosphere. Joining us now is Nina Shardin, partner at Index Ventures, an early backer of companies, including Anthropic, but physical intelligence service Titan. And I'm so glad you're here with the thesis.

42:19Ed Ludlow:I would just point out there's a lot going on in public markets right now. But actually, you know, private markets are quite active in physical AI. I was tracking the data pitch book 2019 to last year. It's going up. What are you seeing? Yeah, well, thanks for having me, Ed. It's great to be here. And of course, Index and other folks in the Valley have been spending a lot of time investing in the fundamentals of AI, which have been really based on LLM. So at Index, we've done everything from foundation model of Anthropic to inference layer of fireworks and then a bunch of application companies.

42:56But if you take a step back, actually, most of the disruption in software has really been around the knowledge worker. And that's where a lot of the investment has gone. But there's a big white space, which is what does AI do in the physical world? And that's where we've been spending a lot of time.

43:09Ed Ludlow:Yeah. You know, for a really long time in many cycles, software is eating the world. And now people say, well, hardware is eating the world. You're basically saying both, you know, they are joint. Yeah. Well, I think if you look at it, there's all of these functions, electrical engineers, mechanical engineers, aerospace engineers. And for decades, they have been using the same software stack. And a lot of these incumbents were built in the 1980s. And there's this huge race, not just the race to get to space, but the race to put better things in the physical world. And unlike some of the things in the digital world, if you get one character wrong in these code, something could actually blow up, like a nuclear reactor or a rocket.

43:52And so we're really interested in companies that are trying to solve this deeply technical, very domain-specific problem?

43:57Ed Ludlow:Most multimodal, trying to ground the model in real-world physics, you know, in the case of robotics. You know, in my study of software, the VCs that come on the shows would say, we have conviction about this because there's a public market proxy, an example we can point to on how we value this company or the market opportunity for it. in humanoid robotics and other physical AI domains, much harder to do. Is SpaceX going to be a good proxy for that? Well, I think that's why all eyes are on the SpaceX IPO. And I think that it's really opened the eyes to folks of just how compelling this market is and how lucrative it could be.

44:39And that's drawing a lot of dollars into the private sector in companies that are doing similar things.

44:45Ed Ludlow:Yesterday, I was on stage with Trey Stevens from Founders Fund. And he made a very simple outline of a thesis on why SpaceX is going to work. Just we'll play the soundbite. We have a SpaceX investment in almost every fund, both across our venture funds and our growth funds. So there's a ton of exposure for LPs that were with us since the very beginning and even the ones that joined us very recently. I think, you know, the core lesson that everyone has learned from this experience is never bet against Elon. It's just a bad idea. pretty simple don't best bet against elon musk it's a bad idea i don't know like how deeply you read the s1 and you were and the world that is um envisioned for the future or out of this world and and how much that gave you conviction in your own thesis yeah well i think the way that we have played it is that elon is a huge talent attractor and so actually two of the most recent investments I've made are both in former SpaceX founders.

45:43So one is Scott Morden from Revel. He spent 10 years at SpaceX. That's right. Doing launch control. And his role there really exposed him to how big of a need there is for better software for hardware, which is why he's now built Revel. And then Sergei Nestorenko, who's the founder of Quilter, spent six years at SpaceX where he was really frustrated that he had to wait for a human to manually lay out a printed circuit board. Of course, printed circuit boards are really important to everything that's happening in chips. So we started Quilter to use AI to autonomously lay out PCBs.

46:13Ed Ludlow:We just have 30 seconds. You know, I think that we make the point that whatever happens with the IPO, it will cause some volatility in public markets one way or another. But from the venture capital industry standpoint, I won't ask you to speak specifically on Anthropik. How much do you guys need some big IPOs to get the world moving? Well, I think VC is always rooting for the IPO window to be open. It creates more options for our founders for capital and liquidity. And it's really exciting to see the ones that are lined up today. And so I think folks will be watching them very closely. Lino Sharjian of Index Venture Partners here in SF.

46:47Ed Ludlow:Really appreciate the thesis on software into physical AI and hardware. That does it for this edition of Bloomberg Tech. A crazy week. This is what markets look like. Look, tech is down. Part of it is eco data. Part of it was coming. I recap the show on the podcast. You know where to find it. I really talk conversations from the last 24 hours. I heart Spotify and on Apple. This is Bloomberg tech. As industries evolve faster than ever, companies need an environment that accelerates strategic growth and Michigan delivers on that promise. From emerging startups to global enterprises, Michigan offers what executives value most, a resilient, innovative ecosystem, diverse communities that attract top talent and a quality of life that supports work-life balance.

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