Nebius CRO on 2026 Strategy, Meta’s Rogue AI Security Breach, Ross Gerber on SaaS & AI

23:45Whereas Figma tends to be used for a little more of complex design tasks. So that would be your UX design, your web design, whereas Canva is used really heavily by marketers, people who want to post on social media. And I think that makes them a little bit more resilient to this AI platform shift. Because if we see a lot of people kind of switching their workflows over to things like ChatGPT and Claude, it's less likely, in my opinion, that those users are going to switch off of something like Canva. Right. Okay.

24:15Anita Ramaswamy:I don't know if it's even launched. I saw that the Figma shares were falling yesterday, and they continue to fall today, on Google's new AI design tool, which, I mean, it's yet another data point to show that these bigger companies are, I mean, they're going to try to throw everything they can at it. I wanted to also ask you about the IPO market, though, because this is sort of a separate story here you mentioned in your story we've got spacex and openai and probably anthropic coming down the pipeline what are the bankers telling you about how canva would fare up against issuances like that so to your earlier point of course it is a highly competitive space and the google offering you know kind of came out of left field but at the same time i think a lot of big tech companies have seen what canva has done seen the fact that they've been able to be profitable for eight years and sort of looked at that story and are seeing opportunity there.

25:11I think there's a big difference between, you know, Canva versus Figma, and that comes down to valuation. If you look at Canva, where they last raised money at a$42 billion valuation, that multiple is close to like 10 times. Figma actually went public at a much higher multiple of revenue. And so, you know, that difference is kind of important and notable. And when I talked to bankers, a lot of them were, you know, the sentiment was about the valuation. And at the end of the day, Akash, it comes down to the price that Figma or Canva decides to go out into the market. And so, you know, it is a tough time and there are plenty of other offerings that are going to go to market.

25:49But I think at the end of the day, investors will assess Canva on a standalone basis. What it's really going to come down to is, is that IPO priced and is it pricing in the future risk and the potential for AI to eat away at its business long term.

26:03Anita Ramaswamy:And so what do we know about timing insofar as what Canva is thinking? Are they still looking to go public this year, next year? What do we know? So the news that I reported in my column is that Canva is planning on an IPO next year at some point. Next year. Okay. Well, it feels like it's been next year for the last three years straight. So I'll believe it when I see it, is what I will say. All right. Well, Anita, I want to thank you for coming on. That is Anita Ramaswamy, our financial analysis columnist here at The Information. Our next segment is with our sponsor, Nebius. It has been a big couple of weeks for the NeoCloud company.

26:41Anita Ramaswamy:Nebius announced two mega deals, a$2 billion investment from NVIDIA and a$27 billion infrastructure deal with Meta. To top it off, Nebius is raising$4 billion in debt. That last announcement pushed the stock lower, but shares are on track to end the week in the green. I talked about all of that and more with the company's chief revenue officer, Mark Boroditsky. Here is that conversation. Mark, welcome to the show. It's great to have you here. Gosh, it's a pleasure. Thank you so much for having me. So you guys have been real busy lately. I mean, if we just recap some of the headlines from the past week or so.

27:20Anita Ramaswamy:I mean, you had the NVIDIA investment. You announced the contract with Meta this week. We also, well, certainly GTC has been there in the background. You also had the $4 billion debt raise that was announced this week. I want to start with the most immediate news, which is the debt raise. It's the latest headline. Why should investors not be afraid of this? We've seen this debt story play out a couple of times before with neoclouds. Well, this is a little bit different than some of the other debt stories that have been presented. First of all, this is a convertible offering. So inevitably, this becomes a part of our overall equity stack.

27:58And this is also reinforcement of the commitment that we've already made about being able to support the 15 to 20 billion dollars in CapEx that we need in order to be able to support the growth plans that we have. So this is, I think, a very positive story from that standpoint. We're delivering a healthy form of financing to support, ultimately, the AI cloud growth plans that we have.

28:27Anita Ramaswamy:Now, the meta contract is really interesting because here this is a story of a big company saying, we're building out our own facilities, but we really need help right now in the short term. And so my question for you is, what gives you reason to believe that a big customer like Meta would stick around with Nebius after they're done constructing their own facilities? Actually, we anticipate that's likely to be the case in the entire category. I mean, inevitably, if there was sufficient capacity available to them with their own construction, they'd be pursuing that. So our business model is not really dependent on these kinds of opportunities.

29:10We recognize and respect that this may be a moment in the market. And it's really a privilege to have this kind of a customer, a very unique one, because it's, at the end of the day, a very scale, sophisticated, highly capable customer that, in many respects, is endorsing our platform. You know, this is the second purchase that Meta has made. And they are very satisfied with us as a supplier. And you can see it by the commitment they're making here. And I think we will, in the fullness of time, probably as you forecast, see this relationship. Maybe it repeats. Maybe it doesn't repeat. But ultimately, we're actually angling for the broader market, which we see as the thousands of customers that are out there that need to fulfill their AI requirements.

30:01requirements. And we are pursuing that in earnest.

30:05Anita Ramaswamy:But is it not true that it would be a bit cheaper in the long term for customers like this to build out their own facilities? Cheaper in the long term, yes. But at the end of the day, they today don't have the ability to supply their immediate needs. I can't speak to their specific circumstances as to how they arrived at that, but the need is here and the opportunity is here. And the value that they're going to derive from this probably far exceeds the marginal cost exposure that they have by not building it themselves. Right. So you're at GTC this week and we've seen the fast pace of announcements that have been coming out of the conference.

30:53Anita Ramaswamy:Certainly on Monday, we had Jensen in Huang's keynote, we saw more details about the Grok chip, about Vera Rubin, and about the Feynman chips as well that are coming even further down the line. My question for you, Mark, is how you think about balancing this fast pace of development of new chips with the likelihood that, you know, you probably prefer long contracts, and it's better to have a contract with a customer that is years long, but that customer might come to you and say, hey, look, there might be a new chip coming out six months from now. I don't want to sign with you for two years. I think the important dimension that's not immediately visible is the fact that there's a lot of different workloads.

31:41There's customers that are still building on Hs. As a matter of fact, we've got customers right now that are literally telling us, we'll take all the Hs you can give us. As a matter of fact, I was talking yesterday to a pretty traditional industrial customer, very large scale supplier of capabilities to the oil and gas industry. And they told us that they're currently really heavily invested in H's. So you can recognize that still earlier generation chips have a strong viability in the workloads that were actually well suited to them. Now, of course, you're correct that this sort of ongoing delivery of next generation chips represents an opportunity for us to help customers to deal with more sophisticated workloads, more sophisticated performance requirements.

32:31And we are very committed to making sure that we can deliver the most recent capabilities and help our customers to incorporate them in their plans. As a matter of fact, a lot of the conversations we're having are customers that are telling us, you know, today we're on the Blackwells and we are going to shift to Grace Blackwells. And how are you going to help us to make our journey to the Viras? And we're having interesting conversations about how we plan together so that we can partner with them to meet their ongoing expanding requirements, not just in terms of just the number of chips, but the kinds of chips and the kinds of workloads that we can support.

33:12Anita Ramaswamy:We've reported here at The Information on some of the challenges that there are with any transition to a new chip. And we've reported with the Blackwell chips, there was sort of an onboarding process there. What challenges do you anticipate helping customers migrate to the Rubin family? And how do you address those? We address those by having the best GPU and AI engineers on our staff. What we're really well respected for, and I hear this all the time when I ask customers about their renewals and why they're staying with us and why they're expanding. They tell us all the time, beyond the technology that we provide and the experience we have, that the engineers that we couple with our platform are the best they've seen in the industry.

34:01Actually, I had a customer yesterday, a well-known financial services customer, tell me that the POC they just completed was pleasurable. They said that they've never, their team said that it was a pleasurable experience. And I think that's the marquee difference that we have in comparison to other players out there, is that we're bringing the expertise necessary to work with this very sophisticated technology. You could think of this as a forward engineering capability to help them to understand how they can actually migrate to the new architecture, what they need to be thinking in terms of their workloads, their applications, their services, and how we can help them to make the migration.

34:44Anita Ramaswamy:How do you think about which customers get which chips? Because we know that all of these chips are in high demand and the Verirubin chips will, you know, when they're rolled out, I mean, there's only going to be so many of them to go around. It's hard to implement, as you said. We've got in this decision-making seat where, in some cases, demand is so high, you have to choose? How do you go about making that decision? Very good question. And it's actually an astute observation. It's not an easy one, candidly. I've never been in a position where we have to say no to customers. So this is a new experience for me overall.

35:23And I do believe that this is not a sprint. It's a marathon. And we're looking not just for the transaction that's in front of us. We're looking for the long-term partnership. We want to know that we can help customers not just with what they need today, but be able to be a reliable, strong, respected partner that they can turn to as their needs expand and their growth depends on having that kind of access. So we're looking for customers that follow a set of principles, or actually we are looking for them by applying a set of principles where we are first and foremost, servicing our existing customers.

36:04And then second, we are looking to help enterprises start their AI journeys. Third, we're looking at software vendors that are looking to transform their businesses to become AI-led. And then we're working with the AI natives that we already have the right to win and that have been the hallmark of our success to date.

36:25Anita Ramaswamy:Right. Mark, any plans to offer customers access to chips that are not made by NVIDIA? I'm thinking about Google and Amazon that have made some big strides, AMD as well. We're always looking at the alternatives and remaining technically astute as to what's going on in the market. I'd love to say that we are a market maker, but the reality is that we're a market catcher. We are relying on the demand that's out there. We're relying on what customers are asking for. We're not in a position to transform that demand. So today we are paying very close attention to what people are asking for. And today that priority is completely NVIDIA driven.

37:04So they're not asking for AMD or for TPUs. When we hear about TPUs, as an example, 99 % of the time it's a former Google team. And unfortunately, Google alumni does not make a market. Once we start to see it more positive. One day it could. You never know. One day it could. Yeah, yeah. It would be a massive diaspora from Google if it happened. But if we do see the pattern, yes, we'll definitely have to consider it. We're very demand-driven today.

37:36Anita Ramaswamy:So last question for you, Mark. How much do depreciation schedules for these chips come up in your conversation? Less and less. The reality is that it's the pace of the innovation that's taking place that's driving the term that people are typically looking for. So I've got highly innovative companies that are looking for shorter terms. And then I've got companies that have more reliable and consistent workloads that don't want to have interruption in their supply that are looking for longer terms. They're all recognizing that supply is actually driving price, not the underlying accounting. Okay.

38:10Anita Ramaswamy:And what do you mean by that? I mean, expand on that a little bit. Just explain what you mean by that. Well, the reality is there's insufficient capacity in the market to meet the demands that people have. out. So price is actually being driven by the amount of capacity, not whether or not it's a four-year, five-year, six-year, seven-year depreciation schedule. Got it. Great. Well, Mark, I want to thank you for coming on. That is Mark Boroditsky, the Chief Revenue Officer at Nebius here on TITV. The AI super cycle has had big implications on the debt markets, not the least of which has been hyperscalers issuing loads of new debt that investors have been eager to eat up.

38:51Anita Ramaswamy:On the other side of the spectrum is debt for enterprise software companies that investors have not been as excited about. This week, we saw the latest data point to that effect. A number of big banks halted a debt deal for Qualtrics, totaling$5.3 billion, according to Bloomberg. I want to bring on Ross Gerber, president and CEO of Gerber Kawasaki Wealth and Investment Management, to help us break it all down. Ross, welcome to the show. it's great to have you here yeah thanks for having me okay let's talk debt so okay when we hear that a bank halted a debt deal for people who aren't as well versed in that what does that mean means they couldn't raise the money i mean it's pretty simple so you know investment bankers get paid a commission to sell deals so on a five billion dollar deal you're talking like a hundred million dollars you know it's it's it's big commissions here so they do everything possible to sell this debt to their clients because they get paid to do that.

39:45And so when they halt a deal, that's pretty rare and it's not a good sign, obviously, for that issuer.

39:52Anita Ramaswamy:Okay. And so they halted and they basically said, we're not, I mean, we sold maybe two of the five, let's say, we can't sell the rest. We're just taking a hit on it. Right. Exactly. And see, a lot of these deals oftentimes are predicated on private equity cash out where they'll invest in a company and then throw the debt on it and then take a dividend for themselves to pay themselves back and then sort of saddle the company with this debt you know we're actually customers of call tricks and it's a very good company and and we have contracts with them we can't just like stop paying them so you know it's not like they're in any like financial issue it's about what does this look like five years from now when the debts do you know and do we want to hold that much debt so it could be an issue of over leverage as well where they're just being a little bit too greedy on how much money they're trying to borrow okay so So now what does this, I want to broaden this out.

40:45Anita Ramaswamy:I mean, Qualtrics is one company. What are you seeing in the debt markets broadly for these enterprise software companies? I mean, I'm thinking of some of these companies that went private five years ago. These PE firms had to lever up to buy them. What's all that debt trading at these days? Well, that's where it gets pretty ugly because the class of 21, we call it, whether it be the SPACs or the debts or the IPOs of that time are probably the worst performing investments that we've seen. And a lot of that was due to the excessive speculation of that period of time, and also incredibly low rates.

41:22So let's say you did a deal back in 21 where you borrowed a billion dollars at, let's say, 5 % or 6%. But now that deal looks like a 10 % or 12%. So you're at 50 cents on the dollar if just off interest rate changes. You see what I'm saying? And then you You have higher risk now as people perceive those businesses as weaker in the future. And then they might trade even lower, 25 cents on the dollar. So you see substantial discounts in markets like in the BDC market and then in the private credit market where there's lack of liquidity. Where there's liquidity, we see much better deals, much better rates.

41:59So if you're an investment grade type issuer or if you have a very solid financial backing, you're still able to borrow money. The capital markets are certainly open for business. But as risk gets scarier for bond investors, they're just walking away from this illiquid, high-risk stuff.

42:19Anita Ramaswamy:So you have this kind of double whammy. You have both the enterprise values coming down. You have the interest rates coming up. So my question is then, how does this play out then for the enterprise software companies whose debt is being traded? I mean, some of these deals will have to be refinanced. what what do you think this turns into are these companies have to restructure or what happens well right that's what happens if you can't borrow now in most cases you know the companies are you know multi-billion dollar companies that aren't just going to go bk so it takes a lot to go bankrupt you know you can ask donald trump he's done it a few times and so you know these companies you know will probably survive but what it happens is is it it's just like a liquidity crunch much internally in those companies so what happens is they go okay we got to pay off this debt one way or another and that's where you see the layoffs the cutbacks they have to increase cash flow to cover interest and principal payments and then they end up refinancing at a much worse you know deal than they had before which then hits earnings you know because if I'm paying twice as much or three times as much in interest that comes right off the balance sheet you know so So it's, you know, be careful what you wish for.

43:32When you have 0 % interest rates, people just borrow, borrow, borrow. We saw it in the real estate market. That's coming due right now. You know, for 20 years, people borrowed at 3 % and 4 % mortgages. That's coming due now at 6%, 6.5%. And real estate deals are going down at 10%, 11%, 12 % yields now. So imagine if you're a high-risk borrower, you're looking at maybe 14%, 15%, and then a war breaks out. So this is a really tough time to get liquidity. And I would say there's a lot of money out there. So we're not in a recessionary environment. There's cash out there, but there is risk aversion from investors.

44:10Investors want safety right now. And that makes it real tough if you're over levered.

44:15Anita Ramaswamy:What are you buying right now in the debt market? In the debt market, I'm mostly actually buying a lot of foreign debt. I'm getting money outside the United States and trying to get currency diversity. I like foreign debt. And, you know, in general, that diversification for my firm makes a lot of sense. I buy a lot of short term high yield of high quality issuers where I can get, you know, five or six percent on a short term high yield right now. And they're high quality companies that aren't going out of business. So these are tech companies or these are all different industrials. You know, it can be a lot.

44:50It's not tech companies, you know. So there's not a ton of debt of the tech companies that I really want to own compared to, you know, solid industrial companies where I can get a nice yield and have liquidity. So the main thing that I look for as an investor and how it works at my firm is where we look for liquidity. We don't want to get stuck, you know, like these BDCs drop, you know, 50 percent in the last six months. And BDC stands for? Business Development Corporations. These are loans to, you know, higher risk businesses. But they're at the same spectrum of private credit. And so when you're in the high risk area, we've seen a substantial decline in value.

45:30You can get a ton of yield if you're willing to take risk. But that's not what clients want right now. They want safety and liquidity. So buying short-term bonds of, you know, you can buy Apple bonds or, you know, Disney bonds or Netflix bonds, you know, things that you know that's going to pay off that might mature in the next couple of years and still get a very nice yield. So investors want that and they want liquidity. And that's where you have a lot of liquidity. And then on the risk spectrum, there's no liquidity, you know.

45:57Anita Ramaswamy:Right. So let me ask you this. Watching to see how the SaaSpocalypse plays out, we've got these big mega AI IPOs coming up, coming down the pipeline. Investors will get to see a closer look, hopefully, at the financials of these companies. And then they'll decide if all the hype is worth it. Do you think that those AI IPOs could actually be good news for the SaaSpocalypse in the way that people actually come back to enterprise software companies and say, hey, I mean, they actually have cash flow. Why were we knocking them so hard? Well, I don't know if investors look at it that way. I mean, like a good company earns a profit and they return those profits to their shareholders efficiently and manage their finances efficiently.

46:42And so if I'm a SaaS company like Salesforce with a really solid business in cash flow, I just have to manage my business right and the stock will come back. You know, AI is not going to replace Salesforce tomorrow. There's a ton of limitations. You know, just today I was like, I wish I could just say into my computer, pull up all my older clients above 65 years of age that have an allocation of equities over 65 % out of my entire book. Can you just pull that up for me? And it can't do that right now. And so there's just a lot of time before AI is effective. I'm with you, but that's not the narrative right now.

47:19It doesn't matter what the narrative is. I use it every day. I can tell you its limitations right now because I trade billions of dollars. So I can tell you right now, AI is a long way away from taking anybody's job. That's for sure. Okay. It's actually fairly inaccurate in its analysis, especially on financial data and such. So I'm still using my Bloomberg, trust me. So, you know, what I think it is, is that companies like have a very small window not to be disrupted. They have a small window here, maybe the next 12 months to build agents that make Salesforce 20 times better because I'm not quitting my Salesforce.

47:55I've invested a million dollars into Salesforce. You know what I mean? It's like it runs our business. It doesn't just go away because AI comes around and says, oh, you know, we'll manage like literally millions of pieces of data for you without a mistake. You know, so I think that if these companies run themselves correctly, the stocks will come back up and there's value there. But I also think companies like OpenAI and all these private companies are vastly overvalued. And the ongoing public is going to be challenging for these companies at the valuations that they pump themselves up to without any, you know, buyers or sellers.

48:29You know what I mean? So the public markets aren't so nice. You know, you've got to come out here and fight the battle.

48:34Anita Ramaswamy:This could benefit the sales forces of the world. Well, it's not per se benefit them because it does take capital away from those stocks into new stocks, remember. So it's like the less choices I have, the better it is for Salesforce. So if I got four more great tech stocks to buy, Salesforce might come down the list further. You know what I'm saying? So it's not necessarily a benefit. But I think investors have to think long term. The AI ecosystem is amazing. It's just an amazing opportunity. It's a once-in-a-lifetime opportunity. People who don't see it, I understand because it's oftentimes hard for us to see past a few years.

49:13But I've been a tech investor for over 30 years in the public markets and ever since I've been a child. And I can tell you this for sure. When we look out five years from now, the world will be vastly different. It will be incredibly profitable companies that adopt AI technologies and the infrastructure behind it. like your sponsor, Nebius, like the numbers out of Micron, or NVIDIA, or Microsoft. You know, this is just the beginning. Yeah. And that's what I'm trying to say. Salesforce is going to get 20 times better in the next five years.

49:46Anita Ramaswamy:To talk about the memory chip crunch then, I mean, we saw the news this week about Micron. Micron shares are up big time this year. I mean, I don't think there's any disputing that people need their product, but the supply chain crunch is something that can't be ignored. How do you think about when that might return? you know, these short-term fluctuations? What do you think? So my basic feeling right now is that the next two years will be pretty competitive for every piece of equipment, machinery, data center, maybe three years until there's some supply and demand balance between the demand for infrastructure and the supply of the materials for this, whether it be chips or equipment or land or just getting approvals from cities.

50:29You know, I think people are underestimating the desire for people to have all these data centers in the United States, for example. And so, you know, there's a lot of things that have to be built. You know, I did this with AOL back in the 90s, you know, the internet takes off and everybody's like, whatever, but we had to like lay cables. And we laid all these cables for like a long time. And a lot of those companies went bankrupt, you know, but the internet thrived and built the Amazons and the Googles of the future. So there will be new Amazons and Googles built over the next five to 10 years.

51:00And that's what we're looking for as a firm at GK and in my fund. But I think investors just need to be patient, look for opportunities like Micron. I mean, the numbers are insane. So, you know, like, it's not down today. It's not down today. Like, I'm just doing my numbers on this thing. And I'm like, and I was thinking like maybe 30, $30,$35 a share this year. Now I'm going like 40 or plus. And I go, why doesn't it deserve a 20 PE? You know, you had 800 bucks, you know? So, you know, I just think like there's just this denial in the market of how profitable this is for certain companies like NVIDIA or Micron.

51:42And these companies are printing money right now and it won't last forever. But I think the next five years are pretty good, you know? So when do you get out of the stock?

51:53Anita Ramaswamy:I mean, you know, a company like this it's not going to last forever and it's hard to i mean when do you when do you sell at what point that you sell it just reads more of like an equilibrium where you're not growing a thousand percent year over year you know like okay these are i mean come on you know i i'm trying to grow my company 20 to 30 percent a year it's you know it's challenging and we're you know i don't know what we're worth you know what i mean but like when you think about a hundred billion company trying to grow at 20 or 30 percent a year and they're doing 50 and 60 percent a year in revenue growth i mean this is insane and people just don't like this is incredible amounts of money being made and spent and and so you know i think it'll reach an equilibrium the next three years or so and then these companies will make a considerable amount of money but it will be much less growth and then you have to look at the pe ratios but these companies are not trade Nvidia is at 18 for PE.

52:49They're not even close to what the PE ratio should be in these companies. So when you say what would the equilibrium PE for these companies be five years from now, maybe it's 20 to 25. And they don't even have those PEs now. So it's going higher. So I'm investing hardcore. People pitch me all the time on all this stuff. I say all my money is going into this stuff. I'm sorry. I don't want to buy this. I don't want to buy this. I'm putting it all into AI. I'm sorry. Great.

53:17Anita Ramaswamy:Well, Ross, I want to thank you for coming on. That is Ross Gerber from Kerber Kawasaki here at The Information. That does it for today's show. A reminder, we are on this stream Monday through Friday at 10 a.m. Pacific, 1 p.m. Eastern. I want to thank you all for tuning in. We really do appreciate your viewership. Make sure to subscribe to the information on YouTube and follow us wherever you get your podcasts. I am already excited to get to our next show tomorrow. Have a great rest of your Thursday. Bye-bye for now. Thank you.