SAP Blocks OpenClaw, Anthropic Talks With UK Chip Startup, Investors to Sell Billions for SpaceX IPO

0:13Stephanie Palazzolo:Welcome, everyone, to The Information's TI TV. My name is Akash Pasricha. It is Monday, May 4th. We are kicking off the show today with new reporting, the information published, about software firm SAP's efforts to block customers from using external AI agents, to access data on their apps. We'll then bring on one of our AI reporters to discuss a scoop that they broke over the weekend. Anthropic is in talks to buy AI inference chips from a UK startup. We'll then discuss how fund managers are planning to raise cash to grab shares of Elon Musk's SpaceX when the company makes its eagerly anticipated debut.

0:51Stephanie Palazzolo:And we will wrap the show in conversation with a managing partner at Gradient discussing how the venture capital world is thinking about all these big IPOs expected this year. It's going to be a fun show, so let's get right on into it. The corporate data wars are raging on as enterprise software companies grapple with agents pulling data en masse from their systems. My colleagues Kevin McLaughlin and Laura Bratton wrote about the dramatic lengths that SAP is going to protect its own house. I want to bring on Kevin to share more about what he's learned. Kevin, welcome back to the show. It's great to have you here.

1:26Stephanie Palazzolo:Thanks for having me. So what is going on at SAP, Kevin? So last month, SAP published a document, which was a policy document for accessing its application programming interfaces. It looked like it might have been an accident, actually, because they didn't really have much messaging behind it. But basically, the document says if you are a customer of SAP and you want to connect your SAP data with outside agents, you will have to do it through what sounds like an SAP approval process. It could be like a specific product or it could be some sort of authorization. But the language in the document basically amounts to an escalation in what we've been calling the AI data wars or the corporate data wars.

2:15Stephanie Palazzolo:So this is a dramatic, I mean, this is a like we haven't seen before in the corporate data wars. And we've heard about tolls, right? But this is, you actually have to seek our permission. Yeah. So what we've seen so far, it's been almost exactly a year since we broke the story about Salesforce's Slack unit changing its API terms in a way that made it harder for companies like Glean to do enterprise search on their Salesforce data. And since then, we've seen other measures taken by vendors like throttling or what's known as API rate limits, which are also used for security purposes. But yeah, no one has gone as far as what SAP appears to be ready to do.

2:55And there's a couple of nuances here. One is that SAP says it's not going to charge customers for accessing their data through third parties. So it sounds like it's going to be a situation where SAP goes to other software providers that its customers also work with and says, we're going to need to renegotiate our existing agreements or form new agreements for this new world of AI.

3:21Stephanie Palazzolo:Okay, that's interesting. So let's get a little tactical here. I mean, which companies are you hearing that they are having these discussions with? Do we know of any specific customer conversations? It's all very murky at this point. And like I said, it feels like they might have accidentally posted this policy document. In conversations with SAP, they mentioned that they already have agreements with companies like Microsoft and Google and Amazon Web Services that allow customers to use their data freely. And it sounds like my guess would be that we're going to see more of these types of agreements with other kind of software providers, many of whom, I mean, most of whom SAP already works with.

4:04So my guess or my gut feeling is that the agreements are going to have to take into account agents, which wasn't part of the existing agreements before. SAP also said, because we had asked them, like, what does this mean for Anthropic and OpenAI? And those companies, Anthropic and OpenAI, didn't respond in time for publication. But SAP mentioned that they are – it sounded like they're working with at least Anthropic on something. So SAP has this annual customer conference next week. I expect that we're going to be hearing a lot more about the new policy and very likely some sort of new agreements as part of this new policy.

4:46Stephanie Palazzolo:Have you spoken to SAP customers about what their reaction is to this? I spoke with licensing experts that work with SAP customers. I think the changes are so new. And like I said, we're not broadly communicated by SAP that I don't know that customers have really thought through the implications. But the licensing experts I spoke with certainly have. And one of them told us that it really looks to them like SAP is trying to change the rules mid-game. Now, there's a couple pieces here. One has to do with agents accessing SAP data. But SAP for a long time has been very concerned about customers mass exporting their data out into other platforms, ServiceNow, Salesforce, etc., in order to do analysis there.

5:35And it's important to note that SAP has always sort of operated in its own, what people call a walled garden in the enterprise software world, meaning that the rules have always been sort of different for them. The rules that SAP has laid out have always been somewhat different. And so that's also part of this, I think. It's just SAP is finally, for the first time, formalizing what their policies are going to be for things like AI agents.

6:04Stephanie Palazzolo:So, Kevin, I want to sort of step back here a little bit. You said it's been a year since you initially broke that story about companies like Atlassian, you know, all these companies trying to really hedge their, not so much hedge their bets, but really protect their own house in a world where startups like Glean are coming into the picture. You know, I recall us having talked over the early parts of that story about how enterprise software companies were saying, hey, look, we're just, there's nothing to see here, really. And I wonder how you have seen that conversation change over the last few months.

6:46Stephanie Palazzolo:It feels like this move from SAP is like the most stern move that we've seen. And so I guess despite the companies having said, don't worry about it. I mean, they're really going to dramatic lengths here. Yeah, I think let's talk about what specifically companies are going to charge for because that part is really sort of – it's pretty complicated actually. But judging from what SAP told us last week, or actually what SAP's CEO, Christian Klein, said on their earnings call last month, it's not like the data that they're going to charge for. It's called things like knowledge graphs and ontologies.

7:30And it's really sort of hard to explain what that is. But basically, this is what vendors are now referring to as context. And so the hub, the CEOs of HubSpot and Workday have talked also on earnings about basically floating the idea of charging when agents access context. Now, context is important because if an agent sees customer data, it doesn't know what to do with it at all. But it needs to know from these graphs and the ontologies, like basically it can say this specific customer made this specific order and it was shipped from this specific warehouse. the very granular kind of understanding that enables agents to do their work.

8:09And so that's the stuff that vendors are going to start charging for. And I think that's what SAP was alluding to on earnings. It sounds like they're going to charge or not charge, but they're going to form new agreements with their partners, their software partners. And through those agreements, this issue of agentic access is going to be addressed.

8:32Stephanie Palazzolo:Great. Well, Kevin, I want to thank you for coming on. That is Kevin McLaughlin, our enterprise software reporter here at The Information. Anthropic is looking for ways to diversify its compute. And my colleague Stephanie Palazzolo and Anissa Gardizi broke news over the weekend about one startup that Anthropic is looking to for support. I want to bring on Stephanie to tell us what she knows. Stephanie, welcome back to the show. It's great to have you here. Thanks. Great to be here. All right. Talk to me about how Anthropic is looking to diversify its compute. Totally. So what Anissa and I reported over the weekend is that Anthropic has been recently in talks with a London-based startup called Fraftal, which makes inference-focused chips to potentially become a customer of that startup's chips once they become available at some point next year.

9:21So even though this won't really help Anthropic with its near-term compute crunch, which we've been writing a lot about, it could really help the company further diversify its sources of compute in the future. This has also been a really big selling point in Fractal's ongoing funding round that it's raising, where specifically it's looking to raise more than$100 million in new funding at a$1 billion plus price.

9:47Stephanie Palazzolo:Well, that's a pretty good contract to hang in front of potential investors saying Anthropic is very much looking to use us. So tell me about Fractal's technology. Why would such a big company like Anthropic be looking to Fractal? Sure. So I think the first big caveat here is that Fractal's chips are actually not available yet. So basically, the company's CEO has said that they want to start making those chips at some point in the second half of this year. And then they want to make those chips available in data centers next year. So a lot of this is kind of a hypothetical in some ways. But what Fractal wants to do is basically build these chips that are specialized for inference, which is the kind of process of actually running models versus training them.

10:35So essentially, these chips would theoretically be able to, you know, run today's large language models faster and for cheaper than NVIDIA chips do right now. And a large part of this is because of a special type of memory that fractals chips use, which is also similar to the type of memory used in other chip startups chips like Grok and Cerebris. And so this type of memory works better than the memory that's typically used in NVIDIA chips because it basically helps to move the data faster between different chips, which can be a really big bottleneck in terms of today's GPUs that are used to power AI models.

11:16Stephanie Palazzolo:I want to ask you sort of a question here around why Anthropic would be looking to startups as opposed to the big cloud providers that have their, I mean, we obviously have NVIDIA. When I say cloud provider, we're talking about Google and their TPUs. Why would Anthropic be looking to a startup, do you think? Yeah, so Anthropic really has been the poster child already for diversifying its sources of compute. So it already uses, in addition to NVIDIA chips, the TPUs from Google as well as Amazon's Tranium chips. So it's already done a lot of work in diversification. So I think at this point, it's really trying to kind of hedge for the future and say, you know, we are going to have to really look at all these kind of up and coming startups that, you know, they might be the ones to create the next breakout chip in the next year or two.

12:10And they want to start building those early relationships with those with those startups early.

12:14Stephanie Palazzolo:I know we've we've had reports of OpenAI looking to build its own chips. do you think Anthropic would look to build its own chip at one point? So I think that's definitely something that they're thinking about. There have been some reports that Anthropic is actually looking to build its own chip, similar to what OpenAI is trying to do and many other model developers out there, like Google, Amazon, Meta, they all have their own chips. And so I think this is definitely something that Anthropic is thinking about. It's obviously a very big undertaking to go and build your own chip. So I think they're just really trying to consider all different strategies here, whether that's making their own chip, partnering with younger startups, working with the larger cloud providers, just really everything it can do to get any source of compute possible.

13:03Stephanie Palazzolo:And last question for you, you mentioned that Fractal is looking to fundraise. Just tell us a little bit about this company's place in the chip ecosystem. Do we know anything about the founders or the story of the company at all broadly? Totally. So Fractal, again, it's this London-based startup. It has been pretty under the radar, but it was founded in 2022. And so I think one interesting thing about this is, you know, as I mentioned earlier, from what we're hearing, Fractal is really using this potential deal to, you know, get a lot of investor interest during the funding round. I do think that one interesting thing here, though, is that a lot of this is pretty up in the air, right?

13:44So even if Anthropic does move forward signing this customer contract, they actually wouldn't get the chips for, you know, at least another year, if not further. and, you know, Anthropic is probably also talking to all sorts of chip startups. So I think like, while this does make Fractal a very interesting, you know, player in this broader ecosystem, I think we have to definitely take this with a bit of skepticism as well, just to see what's actually going to end up happening in a year or two, whenever this, you know, if this deal even happens, what is going to actually happen then.

14:18Stephanie Palazzolo:Great. Well, Stephanie, I want to thank you for coming on. That is Stephanie Palazzolo, our AI reporter here at The Information. SpaceX's IPO has public market investors thinking about not just if they will buy, but how they will afford to purchase the company's shares, given how big SpaceX's valuation has grown. My colleagues Corey Weinberg and Valida Poe covered the story over the weekend. I want to bring on our senior finance editor, Ken Brown, to talk us through those dynamics a bit more. Ken, welcome back to the show. It's great to have you here. Hi, Josh. cash. So Ken, tell me, how are public market investors thinking about how they're going to make room for the SpaceX IPO?

14:58Well, that's just it. You have to make room, right? Because most of these guys have, you know, they have some cash, but they're heavily invested in stocks. And so they're going to have to sell something. And so it's a tricky thing because SpaceX is big and it will require a lot of money to go into it. And so, yeah, it's a dance. So a lot of them are talking about how do I make money? How do I raise money for this? Well, the Mag7, the other big tech stocks are what I have to start to look at.

15:24Stephanie Palazzolo:So this might be a bit of a stupid question and I'm not an expert portfolio manager. So forgive me for those listening on the show who are, but why can't fund manager, why can't you just buy a little bit? You know, why do you have to make room for a honking chunk of a company that is, you know, a little speculative, you know, a 10, 20-year trajectory. You know, why do they have to sort of make big bets here on this big company? Well, so this is all a story about relative return. And this is what a lot of these fund managers live and die by. So I compete against an index, the S &P 500 say. If I lag the index, I'm behind.

16:07mind if I exceed the index I've beaten the market I'm a hero and I take in money if the only way to take in money is to perform well so that's the goal and so all these guys whether you're an active manager uh or you know just trying to an active manager or peg to an index or you're just trying to you know perform well SpaceX is going to be a big as you say big honking company and if they really perform well and you don't buy or you buy very little, then you're going to lag behind. I mean, this is what's happened. Any fund manager out there who did not own the MAG-7 for the past few years has lagged behind and investors are probably pulling money out of their fund.

16:48So this is a big deal for these guys and strategizing around it and how to do it the best possible way is really important for them.

16:56Stephanie Palazzolo:And so just walk us through the calculus here. So now if SpaceX gets added to some of these major indices, as we've seen, there have been a lot of conversations about, then from the fund manager's perspective, it's that, well, I didn't own enough SpaceX basically, because then the index would conceivably rise. Right. So if it gets added to the indexes and these indexes all seem like they're gearing up to add, then yeah, you really have to. It's not so much like, do I want to buy this or not? It's, do I want to bet against the index or I want to bet in favor of the index? And so you either underweight or overweight SpaceX.

17:36And so it's a real challenge. The real challenge for a lot of these guys, and this is true for most actively managed mutual funds, they're losing money. Investors are pulling money out. This has been true for some time. And they put money in index funds. And so again, if people at taking money out, it's even harder to raise money to buy stuff because you're already selling stocks every day to meet redemptions or every week or whatever. So it's a very challenging moment for these guys.

18:07Stephanie Palazzolo:Ken, there was some great reporting in the story from Corey and Valida about the dramatic lengths that SpaceX is going to in order to woo investors. The top of the story was this flight of 200 investors from Newark to Texas. And look, is this a SpaceX-esque roadshow or is this common in the land of IPO wooing? You know, nothing about this IPO is common, right? So everything is bigger. Everything is, Elon Musk is the bigger personality. Space and these rockets are a bigger thing. AI, I mean, it is, you know, a bonkers kind of event. And so, yeah, everything is a little over the top. And the in-market impact is going to be over the top too.

18:54And so that's what we're watching.

18:57Stephanie Palazzolo:Now, Ken, we touched on this a little bit at the financing AI, the revolution conference that the information hosted a week ago today in New York. The idea that this IPO, I mean, it could go well, it could also go quite poorly. And there are a million ways that could happen. And my question for you is if that happens, if the IPO kind of turns out to be a bit of a dud, what do you think the ripple effects of that would be on the AI ecosystem, on bigger tech companies? I mean, the stock market is one thing, but I mean, talk about the implications. Yeah, I mean, so SpaceX is different than almost any of these other AI companies because it's a space company and they have a space-based internet company and they have what was, you know, they have X, what was Twitter, and then they have XAI.

19:51And XAI is burning through a ton of cash. And so the problem is what will the market see? Will they see the space business and that's what they like or they don't like or whatever? So it's going to be hard to discern whether if the IPO does poorly, if it was a bet on it, it went poorly because of the AI component. It might. You won't really know until, you know, the next IPOs. I mean, look, the Mag7 are basically almost all tied to AI or heavily tied to AI, but they also make a ton of money. They are so profitable. And so, yeah, AI goes badly. It's going to hurt them, but they are, you know, they will survive.

20:33You know, the AI specific companies, you know, who knows, right? I mean, they could really suffer. They could disappear. So that's the tricky thing here. Right.

20:45Stephanie Palazzolo:In other words, the SpaceX IPO, although it will be the first one, it may not be the referendum on AI companies. It may not be. Yeah, yeah, yeah. It's just mishmash of stuff, right? Right, right. Well, it makes it all the more interesting to watch. Ken, I want to thank you for coming on. And by the way, I'm an SF. You're in the New York studio. We're trading places. Exactly. I look forward to chatting with you more about it. That is Ken Brown, our senior finance editor here at The Information. As SpaceX marches towards its IPO, as does OpenAI and Anthropic, one question that we are waiting to answer is how all of this will affect venture capital.

21:30Stephanie Palazzolo:Here to discuss that is Darian Jirazi, a managing partner at Gradient. Darian, welcome to the show. It's great to have you here. Thanks for having me. So we talked about SpaceX in the previous segment and how that could affect the AI ecosystem at large. SpaceX is a bit of a mishmash of companies. It's space. It's AI. We, of course, have OpenAI and Anthropic marching towards their IPOs. How are you watching this as a venture capitalist and how it could affect your world of early stage investing? Well, I think we're pretty positive and optimistic about where things are going, mainly because there's been sort of this lack of liquidity in the venture capital market.

22:10And with these IPOs coming up, it's going to be really nice to return capital to investors and LPs such that we can sort of feed the cycle of the next wave of innovation that's coming up. I do think that a lot of these IPOs feel priced to perfection, so to speak. But there are some other IPOs in the AI ecosystem, like Cerebris that just announced their pricing today, or that they're going to list probably this week. And that one seems to be well priced. You know, the point of an IPO is to raise capital, market your company, and then also to make sure your investors are going to make money, especially the new investors in the IPO.

22:46So I worry about that for the ones that are very highly priced. But for some of these others, I think there's a lot of upside potential.

22:54Stephanie Palazzolo:Okay, hold on. So price to perfection versus well-priced. What's the difference there? What do you mean by all that? Price to perfection, I think, you know, if you have a$1.75 trillion market cap for SpaceX when the business is doing somewhere between$20 and$25 billion in revenue, I think that's a pretty rich multiple even in private. Okay, so perfection is rich. I just want to make sure that I understand the language here. Exactly, yes. Price perfection means rich, potentially overvalued, probably not a lot of upside for the IPO participants. Got it. Okay. But well-priced for open-air Anthropic, you think it's a good multiple?

23:33I mean, for Anthropic, I think there's a lot of upside. We saw the business go from$30 billion in top line to$44 billion within a month. I think that at a trillion-dollar market cap, that's actually not too bad given where multiples are today. But if we look at other businesses like Cerebris that announced this week that they're going to list, that one seems to have a lot of upside potential in it, and there's one that's quite exciting.