Tech Earnings and Apple’s Fresh iPads | Bloomberg Technology

From the hardware innovation.Money and power collide in Silicon Valley and beyond.This is Bloomberg Technology with Caroline Hyde and Ed Ludlow. I'm Caroline Hyde of Bloomberg's worldheadquarters in New York, and Ludlow is off.This is Bloomberg Technology coming up. We gauge the health of technologyearnings with 80% of s&p 500 companies out with results.And as Buffett cuts his stake, we'll push ahead to Apple's product event asthe company prepares to launch new iPads.Plus, we speak to Andrew Weil, founder.

Of Lucky, as the company announces abrand new range of AI powered products. But first, let's check in on thesemarkets. And look, we have a post Fed feeling of,well, optimism in the markets. It feels we don't have an awful lot ofeconomic data on the table. We do have some significant bondissuance, ten year yields holding steady with 4.5%.The NASDAQ managing to push up to 6/10 of a percent, notably using the S&P 500,breaking some of those technical levels of where we've seen an average in tradeover the last 50 days. So this seems to be some bold moves inrisk on attitude.

Not though, in bitcoin, though.Crypto off by 9/10 of a percent. We're seeing 63,155 is currently wherewe trade. Moving on though, and when it comes tocrypto related news, we'll be digging into what's happened with Robinhood.Of course, Wells Notice received a sec looking at particularly its crypto salesthat it currently does up 7/10 of a percent, despite of course announcingthat the SEC may well be looking into its business.Apple down 7/10 of a percent. This is all post of course, the oracleof Omaha over Warren Buffett saying, look, I'm pulling back on the stake inApple even though he did shower its.

Praise over the business, really lovingthe iPhone product. But nevertheless, we look ahead to newproducts, new iPads. Wish I had with that in Mark Gurman in amoment, but Nvidia up 2.6%. I want to shine light more broadly onsome of the chip makers because we are seeing a lot of movement higher.The stocks, for example, trading higher. NVIDIA still yet to report.That comes May 26, May 22nd. We also get on this week.There is still so much to be said for earnings.The earnings season well underway. Results are at 8% and the S&P 500already in technology communication.

Services companies beating corporateestimates. I think 90% of tech and communicationservices companies actually topped earnings estimates, according to datacompiled by Bloomberg. When get all the statistics.Bloomberg's Jess Minton is with us, I'm pleased to say.And just more broadly, it feels as though when companies have beat, havethey really outperformed? I mean, Apple was a massive sigh ofrelief when we saw the stock rally, but how has that been bearing up?So you can actually see this function in B?I go through Gina martin Adam's team.

Over in that function, and you can seebasically on the equities there. So when you're looking at how stocks inaggregate from the S&P 500 have been performing in excess of the broaderindex, the actually it's basically kind of pales in comparison to how they havebeen in prior quarters. But nonetheless, because of Apple onFriday, when you see this now, the S&P 500 since earnings season basically gotinto full swing with Jp morgan back on April 12th.Now it's up close to about 1%. In that span, it had been about lowerthan 1% prior to Apple's earnings results.So now you're starting to see that pick.

Up a bit just on the back of obviouslythese big tech bellwethers. But to your point, Caroline, we stillhave Nvidia coming up on May 22nd. I know.And there was so much optimism baked in. What about those that have missed?I mean, they've been punished hard, have they?And have there been any themes as to why they've missed?Well, that's a great point too, because a lot of that also has to do with moreforward looking guidance. And that's why because as we know, whenyou do think about first quarter earnings results, that is more backwardlooking.

So when it comes to the guidance, that'swhere it has been disappointing. And then, of course, because this is atechnology program, obviously a lot of traders and investors want to know whenthose cost cutting efforts that have really helped propel any sort of bigtech company or especially anything that is tied to that, especially when youthink back to metal at the end of 2020 June when it started its first big jobcuts in Toronto there and then another one last spring, how much longer canthis continue? So if you look at the buy function, theywere on a 12 month aggregate basis. So side analysts are still marking uptheir projections for technology.

Companies and growth companies, too.But a lot of those laggards like health care and utilities, those are actuallystarting to pick up to now, maybe with the effect of AI.Many wanted to see that impact other industry groups.Just lastly, give us a sense of whether companies are really been rewardingshareholders because that felt like why a lot of the reason Apple popped it wasbecause we got a massive buyback. We're starting to see companies givedividends. I mean, you triggered my memory of thefact that mattered didn't this time, but they did in the previous earningsseason.

That's always usually music to tradersears there. But also the big thing about buybacks isalso when you look at what's happening with CapEx and reinvesting into thosebusinesses. So just beyond that, so that's somethingthat investors want to see more of. As far as what are companies doing toreinvest beyond just those buyback programs.But we have seen a number of companies, and especially to your point, Caroline,looking at Apple with that historic buyback announcement, of course, itstill has to execute those, but we still have when you're thinking about whatpotential catalysts could come for.

Apple, obviously, we know in early Junewe'll have the Worldwide Developers conference, but I know Mark Gurman fromBloomberg is coming up soon. So he's going to talk about the bigevent tomorrow. We're potentially we could see some morenew iPads that are coming out. Caroline.Mark Lewis. A moment on the con just mentionbrilliant to have your roundup of what's been happening in terms of earningsseason. We actually want to get a realinvestor's take here as well. Uncle profits with us Executive vicepresident portfolio manager of an Alger.

$25 billion in assets under managementand Uncle Apple actually one of your biggest holdings.You have been cutting that a little bit across some of your funds.Warren Buffet doing the same thing. How have you interpreted, for example, acompany such as Apple's results and ultimately the growth trajectory of abusiness like that? Look, Apple is a consumer utility, andone of the things about Apple has been that they have been slower in adoptingthis cycle. Now, the hope is that at some point theywill catch up and they will be a fast follower, which we strongly believe thatthey will.

But in the in the near term, there areother companies that are more immediately investing in and procuringA5 type revenues that is propelling growth.Okay. Let's talk through some of those names.I mean, we've had from Alphabet, from Amazon, from Mehta, all of them, theCapEx spend they're making, are they building the reward in return for thatinvestment from your perspective? Absolutely.It's the number one thing that we have been looking at through this earningsseason has been CapEx and how these companies are spending their CapEx.We wholeheartedly expected them to have.

A big CAC back CapEx number through 2024and they're even talking about 2025. And this to us is the leading indicatorof what's to come. And I because they wouldn't be buildingthis CapEx unless they saw the demand trends.I would remind you that during earnings season, both Microsoft and Amazon talkedabout how they were limited on capacity of GPUs.So this again, I mean, people keep asking like, where is the where's theapplication? Someone is using those GPUs.They're all used up already. The hundreds of millions that havealways been already been spent.

And of course, benefits from the desirefor GPUs. It's got to be in video, right?I mean, is that the number one play for you?Have you been looking at well, AMD or indeed looking at the design elementwith ARM? Yes, I think a lot of boats are going torise over the next decade and a lot of boats are rising now.So it will it be a winner take all market?It's not going to be a winner take all market.There will be many different winners. Nvidia is going to be the winner takemost, however, and we are we are really.

Excited about what Nvidia is doing interms of not only software development but how they're changing the network inorder to make data more, more efficient. So they're reaching out beyond justchips into the enterprise networking and and software as well.So that sets up a really great moat for them and makes us very bullish onNVIDIA. I mean, it's one of your number oneholdings across some of your largest funds.I know that you've also been starting new funds and ETF in particular tryingto execute on this theme. Can you talk us through some of thenames and perhaps why not automatically.

Consider the air play that you've beenadding to? Yeah, So you know, there's two companiesin the industrial space, Vertov and Quanta Services, both of which are, youknow, they used to be relatively slow growth companies but are now levered tothe AI play. Vertov makes cooling systems for datacenters and quanta. I actually I joke that these are ditchdiggers or they're pole climbers because they effectively distribute or make thetransmission for electricity. Both.Both of these things are going to be have to have radically changingcompetitive dynamics in that.

For example, for for Quanta, we don'thave enough electricity, so we expect to see utility CapEx start to riseincrementally over the next 5 to 7 years, all of which will service thepeople that implement the the transmission lines.For Vertov, you have a very changing, changing dynamic on the cooling aspectof of the data center and Vertov ends up being the net winner.And that's really interesting because we're hearing again and again that thisis a worry, for example, of, you know, Sam Altman been going around the MiddleEast in particular worrying that the key anxiety, the bottlenecks here are energyand indeed access to GPU.

That's why there's been so muchreporting of the fact that he's trying to build up other chip makers.Have you been thinking about ultimately that actually being the key bottleneck?Do you agree that energy is going to be the real issue here?Limiting factor? I think that technology is prettyamazing in that as you look forward, I mean, as we stand today, is is energygoing to be a bottleneck? It is.However, as you move forward to three and four years, the energy efficiencyefforts that are occurring, not only at the chip level but at the data centerlevel are quite significant.

And we think that, you know, thetechnology on cooling and electricity will.Keep up and not hamper the growth of the industry.So, for example, the if you look at the performance per watt of the B 100, whichis in videos newest chip, it's actually significantly more efficient than theolder generations. And so as you move through time, I dobelieve that the on a performance per watt basis, you end up getting moreefficiency that is, than is currently baked in by the market.Where is the market getting too exuberant.Do you believe any view that the hype.

Has made market capitalizationsunsustainable in certain names? I don't think the market is exuberantright now. And and, you know, everyone always askslike, are we in a bubble? Are we in an air bubble?And I would say it's much too early. This is very much like, you know, it'srevolutionary in terms of of what is about to happen.So, you know, I just look at the valuations across across the Mag seventhis morning. You look at Metta.Metta currently trades at a 10% discount to the market on our 2025 earningsactually might be a 15% discount now.

That it's pulled back so much.That to me, for a company that is going to change the way that we interact asconsumers with AI and how businesses interact with consumers is not anegregious multiple. You know, you can go down the list withAmazon. Amazon doesn't trade at that egregious amultiple to the market, especially as they're showing leverage.You know you look at Microsoft. Microsoft again, if you look at 2026numbers, it trades at a 5% free cash flow yield.So to me, these aren't really set up as bubble esque type valuations and we'renot terribly exuberant, especially after.

This pullback.Well said, Uncle Crawford, really great to get your perspective as someone whois holding all of these names, investing in and indeed adding to we thank you,Uncle Crawford of Alger. A great way to kick off this week.Meanwhile, coming up, Apple preparing to unveil a new lineup of iPads.We're just talking about the product launch called Let Loose.That's tomorrow. They'll be previewing the event next.Meanwhile, let's just look at GameStop, which is moving for no apparent reason.Again, you know, it's the OG meme stock were down some 13% last week.Of course, it was rallying hard.

I mean, ended Friday session up about29%. This seems to be real Well, desire to begetting in and out on this key meme name.Once again, we'll keep an eye for you. This is betting that technology. Berkshire Hathaway held its annualmeeting of the weekend, of course, and Apple quickly became one of the biggesttopics as the meeting unfolded. Warren Buffett here praised the companycalling the iPhone one of the greatest products of all time.That was after revealing he kind of stake out a report today, $135.4 billionholding an apple at the end of the first.

Quarter, down 174.3 billion at the yearend. Now, meanwhile, whole news when it comesto Apple and Foxconn, which of course assembles the majority of iPhones,posted its strongest monthly sales growth since the start of 2023.And just look at what the impact it had on the shares, potentially, of course,raising those expectations for iPhones for air server sales.I spoke it all down and push ahead. Tomorrow's event, of course, allregarding the iPad. Bloomberg's Mark Gurman here with us.And Hon Hai, Foxconn, how we want to talk about it.Always a great tell.

We've been worried about its previousearnings, but now it looks that on from a month on month basis, on year on yearmonthly posting, we're getting record sales for the company.Now, if you look at the prior quarter on highs revenue, their expectations, theirforecasts weren't so hot. Right.And then you saw Apple reveal its iPhone sales for the previous quarter last weekand you saw the iPhone come in about $5 billion down on a year over year basis.Right. But looking ahead to the June quarter,the current window that we're in, Apple said it expects revenue to grow lowsingle digits.

Right.So growing for the first time in a couple quarters here.And Foxconn's expectations for this quarter as well seems to align withthat, given that they still assemble the vast majority of iPhones via Foxconn.Now, it's not only iPhones driving that high revenue, it's also development andmanufacturing of air servers for various companies.However, I don't believe that the servers that Foxconn is building areconnected to Apple's announcement coming June.For all intents and purposes, the guy from Apple will be on device, at leastfrom the get go, and probably using.

Third party infrastructure, notsomething they're creating on their own. But one day, I do expect Apple to moveto its own air server environments. Oh, interesting.Okay. And therefore, talk to us about the longterm commitment to Apple and indeed perhaps a slight pullback coming fromwhat is its third biggest shareholder, Berkshire Hathaway, saying that we arepulling in, trimming back, but they still seem to believe in Apple as a keytech winner. Yeah, I think Buffett does seem tobelieve Apple is a key tech winner. I mean, Buffett and his typical processfor which stocks he buys, Apple is right.

Up his sleeve, right?You're not going to see Apple grow ten fold or to some significant degree atthis point. But you know that it's more likely thannot that you're going to get solid returns off this company.You're not going to lose your money. It's certainly better than putting yourmoney in a bond market or in a mutual fund in most cases.So it is a very safe pick. Apple, I think, for for many quarters tocome, despite the fact that it's not going to be a high flyer or anythinglike that. I mean, $110 billion share buyback, manyfeeling that that's the a value stock.

Now rather than a growth stock, Mark.But I'm interested in a way from like the arbitrary way in which we describewhether you buy into this stock, we are all caring about the products and theunveilings and we're going to get some. Yeah, that's right.Tomorrow, Tuesday, 7 a.m. Pacific Time, 10 a.m.Eastern time. Is there let loose iPad public launch.There's going to be a few things coming. One is a revamped version of the iPadPro. This will be the most significant updateto the company's tablet since the current model was launched in 2018.You're also going to see a new iPad air.

Why is that important?Well, in addition to a spec bump, you're getting a bigger iPad air, somethingcloser to the size of a MacBook Air for the screen, a 12.9 inch display.This'll be the first time that Apple's offering a 12.9 inch iPad at thatmid-tier price point. Right.And at that mid-tier product line. So that's a big deal.As Apple looks to make its iPads more like Macs and expand the product linethere. And then you're going to see themrebuild the ecosystem around its iPads with two key new accessories.There's going to be a new magic.

Keyboard, a higher end version thatmakes the iPad Pro look more like a laptop and use something that's a bitmore durable and convenient. The second thing is a pro version of theApple pencil. So a new higher end SKU of it's Applepencil silence. That's a really popular accessory thatartists and creatives and others like to use for drawing.The new version will have some new gestures so you can squeeze on it tohave certain commands. Apple's home page was updated thismorning where you can use an Apple pencil or a virtual pencil to erase thelogo on Apple's home page, which might.

Imply that the pencil is finally gettingan eraser on the back. Look like a classic number two pencil.And the other thing I've written that we'll have is haptic feedback.So when you use the pencil, it'll vibrate back on your finger so you knowwhat you're doing based on tactile feedback.So that's going to be a pretty nifty update as well.And I think overall for iPad fans, especially those who have been waitingmany, many, many months or even years for a revamped version, that iPad Protomorrow is going to be quite an exciting product launch for them.Love playing Mark Gurman Bingo.

Of all the things that you've just toldus and playing it out tomorrow when they will come to life, we thank you.Bloomberg's Mark Gurman on all things Apple and iPad.Meanwhile, coming up, new bidders come to the forefront to try and save theFrench tech company Asus. We'll have all the details.That's Bloomberg Technology. Time now for talking tech.First up, Chinese self-driving firm Momenta, but it's filed confidentiallyfor an IPO in the United States, according to sources, And it may happenas early as this year. Now, the company was founded in 2016 bya team of engineers from Microsoft.

Research Asia, and its backers includeGeneral Motors and Temasek. Plus, the Biden administration isopening applications for $285 million in federal funding, set up an institutefocused on digital twin technology. The chip industry may see thistechnology can leverage A.I. to help reduce development andmanufacturing costs. And Jack Dorsey, well, he's left theboard a social networking service, Blue Sky, which he, of course, helped fundand popularized a year ago in the wake of kind of some regret over the sale ofTwitter to Elon Musk. Now, the Twitter co-founder took to nowex to tout his new philanthropic grants.

To open Internet protocols, which hedescribed as, quote, freedom technology. In fact, he said the X is such a freedomtechnology. Now, let's turn our attention to theFrench tech company Atos. Now, it says it has received some fullproposals to restore the group to financial health, including one italready rejected from Bain Capital. Now the firm is seeking to reach a dealby the end of the month to inject fresh funds after clients have actually begunto hold off business. The latest bidders to throw their hatinto the ring are tech billionaire Daniel Kuczynski and David Lyons.One point.

Let's break it all down.And Ben BARTOLONE is with us. And Benoit, just remind us, this is acompany that's thought of incredibly integrity in the tech space in France.And ultimately the government wants to make sure that it survives.Yeah, it's it's been a darling of the French tech scene and a major blue chipindex company in France. It used to have a market capitalizationof 15 billion. It's now down to 200 million.So it's got lots of problem. And it's in the indeed, a key company.It has 100,000 employees and 10 billion of revenues last year, many keycustomers around the world, the I.T.

For the Olympic Games, for example,upcoming in Paris this summer, but also key defense activities for just theFrench defense industry. It also has supercomputers that help thenuclear industry. So the French government, seeing thetrouble of the company, finally decided to make a bid on that part of thecompany to more strategic activities. Talk us through the rivals here.Some of the key players we mentioned mentioned a couple of billionairesthrowing their hats in the ring. Exactly.So one of the bids is actually from the bondholders of the company.They want to be center stage here.

They want to be key in deciding who'sgoing to be the winner. So they are open to partner with anencore shareholder. And this could be either the Czechbillionaire, Daniel Kozinski. He's been known to buy sort of unlovedassets, assets that need restructuring. He started in energy.He's been to retail in France, already made a bid to buy retailer because heknew it was attached to the credit fund and is teaming up with that tester againto make a bid for for Atlas. And then there is David Lyon.He's a French entrepreneur. He has a much smaller I.T.company called One Point and is teaming.

With Butler Industries, another investorin France, to to buy the company and in a plan that he's calling one others.So it's sort of down to a race between these two.We'll see how the race continues. Ben Butler, we thank you so much for theupdate on the French company. Meanwhile, coming up, FCC warningRobinhood markets that it faces an enforcement action over its cryptobusiness. Details next.Meanwhile, talking of a tussle over sales, paramount keeping an eye afterthe $26 billion offer came for the company from Apollo.And Sony is pulling back.

Welcome back to Bloomberg Technology.I'm Caroline Hyde in New York. Let's get a quick check on these marketsbecause a little bit of optimism out there on the day we're managing to see ahigher change. The Nasdaq 100 up 6/10 of a percentafter we see, well, perhaps a quiet inning in overall economic data, but aramp up in discussion coming from the Federal Reserve after we got a littlebit more of a tamer comments coming out of the market, trying to even beat backin some of those rate cuts for the rest of the year.We see the MSCI All country world index on the high side to really we've seenmoney move into the European assets and.

Indeed Asian on the day Bitcoin, thoughnot finding the love for the risk on feeling we're down to 63,392 currentlyup just down by just 5/10 percent though so small change.Let's move on and have a look at what else is moving in the world of cryptoand individual companies because well, more broadly, we have seen the chipsector doing particularly well on the day.Just seeing in video Rampart, we're seeing Micron getting an upgrade fromanalysts. That's on the higher side, leading thecharge on the stocks. We're seeing generally a feeling ofgetting back into these chip names ahead.

Of ARM this week.Remember the chip design company coming out with its earnings.Apple on the downside, though, I'm afraid, Warren Buffett cutting his stakeeven though he pulled on a lot of love for the company.All eyes on the iPad unveil tomorrow and Robinhood up a quarter of a percent nowcoming off of some of its highs were trading exactly 18 on the nose.That's after the SEC is one that Robinhood is.Crypto business faces potentially a lawsuit, a so-called wells notice fromstaff of the SEC. Let's break it down.When Bloomberg Sonali Basak any detail.

What it is the SEC doesn't like aboutrobinhood's play in crypto. Let's just talk about crypto in generalbecause what this was was a securities filing that Robinhood made that hadabout a two paragraph detailing that said they received a wells notice, whichwe know is essentially an intent for the SEC to sue against the use of itscryptocurrency business. So we don't know exactly all the detailsbehind it, but we do have Robinhood Statement in Return, which says thatthey firmly believe at Robinhood. Their officials believe that the assetslisted on our platform are not securities.We know that the SEC has been looking at.

Exchanges and brokerages for the listingof what they deem as unregistered securities.But we also know that this has been a massive fight between many players inthe industry, as well as their fight against the S.E.C.itself in this pursuit. I mean, yes, you can trade crypto onRobinhood, but most people think of it more of a stock play.I mean, it's interesting that GameStop is back front and center with the memestock frenzy today, but how important is crypto to Robinhood?So look at the overall assets here. The assets under custody over atRobinhood.

At the end of last year, less than 15%were crypto. But even though it's a small amount ofthe overall crypto play, the overall also the overall market play.To your point, they're known for equities and options trading for themost part. That same quarter, the last quarter oflast year, you saw equities and options volumes kind of drop off.Here they were negative, whereas crypto trading volumes had risen prettymeaningfully. So even if it's a smaller base, thebusiness has been rising very dramatically and they report onWednesday after market and you would.

Probably see them really benefiting fromthat crypto boom in the first quarter of this year.It is volatile revenue, it's a smaller part of their business, but it's beenhelping them attract new customers. With that said, investors have alsoshaken off these worries about the SEC at other platforms as well.And again, these fights have been long because companies have tended to sueback. Let's see how Robinhood handles thissituation and look forward to that earnings as well.Sonali Basak Thanks so much for bringing us the latest.Meanwhile, let's go to the latest in.

L.A.The Milken Institute Global Conference has just kicked off this weekend inBeverly Hills, where finance chiefs, tech heavyweights, even Elon Musk,they're gathering to discuss everything from, you guessed it, AI to, of course,geopolitics. Now, our own Wall Street Week host,David Westin just sat down with Arvind Krishna, IBM chairman and CEO, todiscuss the regulatory landscape for Tech.Tech. Listen.I think every regulator is worried about three topics, not just safety andregulation.

They're worried about innovation.They're worried about competition and they're worried about safety andregulation. So when you take those three together,the airlines have opened really come together to help you foment innovation.So I think that that actually helps the regulators to think about what is goingon here. Well, and, of course, there will be someguardrails that are always put. But in my experience, open technologieshave always been safer and more secure than closed technologies.Is one of the risks that maybe you're obviating with your emphasis on openarchitecture, that some of the I'll call.

The big guys get an advantage and reallyhave an entrenched position? Well, I use the concept of a walledgarden. When you have a walled garden out ofthose areas, the technology has been more innovative or less innovative.Outside of walled garden has always been less innovative.And so I think that it's actually helps you create more competition.Does it avoid regulatory locking of a certain one or two players?Likely. But isn't that good for all of us?Are you pro regulation? I am pro regulation as long as it islight touch and allows innovation to.

Happen.I absolutely would be pro regulation if regulation tries to reduce innovation.I think that's the problem. What about the distinction betweenregulating the technology as opposed to regulating the uses?We had Sam Parmesan or somebody you know well on who said he thinks regulate theuses, don't regulate the technology because that will impair innovationalways. How can you regulate the technology whenyou don't even know where the technology can go?Two years ago, we had heard of a large language model.If we come out with our technical.

Instruct lab.Six months ago, nobody had heard of that.There will be another one. And another one and another one.So I think trying to regulate the technology implies that the regulatorand the and the policy folks believe no more innovation can happen.I think that's a bad bet to make. Of course, the CEO of IBM, AlvinKushner, with our own David Westin. Meanwhile, coming up, look, we're goingto be joined by Andrew founder. I'm a lucky winner.Exclusive interview on the company's brand new suite of AI powered productscoming up next.

This is Bloomberg Technology. Andrew is announcing a brand new rangeof AI powered defence products. Now the Pulsar family of AI enabledelectromagnetic warfare, or E.W. systems.They base expand on the existing E.W. systems by not only countering knownthreats with pre-programmed techniques, but by leveraging, you guessed it,artificial intelligence to detect both known and new threats.I've got to break down what this really means.And your founder, Palmer Luckey, joins us now.And a key question is, how is this used?.

How is this different?Well, first of all, note that pulsar is already being used by U.S.military customers across multiple continents, multiple cars on fixedsites, on mounted vehicles and on aircraft.So pulsar, while we're announcing it for the first time today ahead of software,it's actually been in existence for years.This is something we haven't been able to talk about but been working on for along time. It's an AI powered electronic warfaretool that can understand what's going on in the RF domain and then take measuresto accomplish your aims within the RF.

Domain.So jamming, hacking, spoofing, controlling, identifying things,countering those things, making sure that your own electronic systemsmaintain their functionality. And it's able to do that extremely fastbecause it's powered by lattice, our A.I.system that powers all Android products. It's able to do what would havepreviously taken a team of electronic warfare specialists in a building fullof equipment, weeks or months to accomplish in just seconds.So to that point and power, of course, preface all of this with from apolitical perspective, but from a.

Personal perspective right now, it isemotional time when we're discussing war, women discussing warfare.So we're sensitive to that. But where at the moment is this beingused in a different kind of what you were just talking about, how it'salready been basically been used since 2020?This is the first time you can discuss it.How has artificial intelligence changed the pace with which you can iterate?But also things are changing within warfare.Well, I started in URL because I was concerned that the United States and ourallies around the world were losing our.

Technological edge to some of our nearpeers. And even now in many areas, Piers.And I think how things have been playing out in Ukraine and around the world havereally proven proven that out. A.I.is changing the game in a lot of ways because it allows you to deploy largenumbers of systems that are much more intelligent, much more useful way thanwe've ever been able to do before with even remotely piloted systems, and hasbeen focused on A.I. since the beginning of our company aboutseven years ago. You'll notice that our name and allindustries is, you know, the acronym is.

Air.Then that's for a reason. We were we believe that artificialintelligence is going to be changing the nature of warfare long before a lot ofpeople were paying any attention to it. I remember when we were starting ourcompany, it was hard to raise money for AI companies.People weren't taking it seriously. They saw it as kind of a science fictiongem, but not something that was real. And unfortunately, the reality of theworld today has forced people to start paying more attention to what I can doon the battlefield. People are paying attention.A government they have to all the.

Defense sector in particular.And I mean, I speak to the fact that the Air Force in the United States has got,with the program, understood the impact that you're making and ultimately whatbrought you one you're now doing a program is sort of seen as a new type, anew force of of defense tech startup. You actually call it a non-traditionaldefense company. Can you talk us through theCollaborative Combat Aircraft program? Basically, this is about aircraft thatfly alongside those that are manned. Sure.I mean, this is an area where the U.S. Air Force and Secretary Kendall deservea lot of credit for their vision.

They want to deploy AI powered aircraftat scale alongside manned aircraft on a timeline that is relevant to theconflicts that we are trying to deter and that have the ranges andcapabilities that we need to be meaningful to the adversaries that wemight have to fight. I'll just name the name.It's China. Kia.The Collaborative Combat Aircraft Program is the program to to to developand then build over 1000 cars that are going to fly alongside manned aircraft.Loyal wingman, the loyal wingman. They've been called and or I'll justbeat out Lockheed Martin, Northrop.

Grumman and Boeing for a slot on the KIAprogram. We're going to be using that slot tobuild production representative aircraft, not prototypes, but productionrepresentative aircraft that are going to be ready to go to scale atmanufacturing. If we can hit all of our if we can hitall of our milestones and prove that we are as good at building airplanes as weare building. You went there and you mentioned China.I'm interested as to therefore where you will manufacture and ultimatelysee deploying of of these particular autonomous fighter jets.Well, they're going to be deployed right.

Here or built right here in the UnitedStates where they're going to be deployed.That's up to our customer. I don't have a ton of insight into whereexactly they might do that, though. I've got some ideas.I'm interested where you see that for at the moment, the US taking leadershipback or do you still worry since splashy the founding of Agile, whether you dothink that US has really reasserted itself, become again the leader.I think that we have a long way to go in certain areas.But the really powerful thing is that we've recognized the areas where we haveproblems.

I think people have been pulled out oftheir slumber. They realize that there's areas we canmove much faster. We can do things in months, not years,that just were not possible to do within the bureaucracy before, within theprevious construct of how we are supposed to get things done.I mean, the Air Force taking a bet on and all on CCAR is just one of manyexamples of people realizing that business as usual is not something thatwe have time for, not in the modern timeline, not in the modern threatenvironment. But what about the competition from theBoeings, from the Lockheed's?.

Are they not getting with the program,starting up their own internal start ups or indeed making acquisitions?You know, I don't feel like those guys are really the competition.I feel a bit of a kinship with them. Look, I'm not running my business thesame way that they're running their business.But at the end of the day, we're all trying to protect the same country.We're all trying to protect the same values, more or less here and around theworld. I'm actually much more worried about thecompetition from Iran and much more worried about the competition fromRussia and China.

We've had systems in Ukraine since thesecond week of the war and the innovation that I've seen coming out ofRussia, China and Iran as kind of a coalition of very technologicallyadvanced adversaries. It worries me a lot more than thecompetition that I have here in the U.S. There's things that I'm going to buildthat I do better than Boeing, for example.And there's things that Boeing is going to build that where they're better thanme. And I recognize that.And I think we're doing a pretty good job of finding how we can continueworking together with all of these.

Different companies and all thesecompanies that I just mentioned as building on the this program.We're working with all of them in some capacity on other programs.It's actually a little less cutthroat than people would think because of thatvery strong shared sense of mission that you see in the United States nationalsecurity apparatus. And you are aligning incentives withallies as well. And we note, of course, an autonomoussub that you've been working with about Australia and actually sort ofco-developing and keeping on pace, unheard of kind of in the defensecontract space and actually being on.

Time and in budget.But where else might you manufacture, might you co-develop?It was interesting that one of our own reporters highlighting that the VP ofTaiwan was speaking at a US event, would there ever be manufacturing in Taiwan?Well, you're right on the Go shark program.That's an autonomous robotic submarine the size of a school bus that we've beendeveloping with the Royal Australian Navy.And we actually just delivered the first submarine a year ahead of schedule andon budget, which as you mentioned, is rare.It's it's practically unheard of.

There are other areas where we'relooking to expand. I can't talk about the specifics of it,but I can tell you that I have in Taiwan frequently.I was just there a few months ago. I'm going back in just a few weeks.Taiwan is obviously one of the key technological partners of the UnitedStates, especially in the region. It's critical for United States militarysecurity that that Taiwan remains free and independent and democratic.But it's also very important for our economy.I would say there might not be another country in the world that is reallyunderpinning so much of our way of life.

When it comes to semiconductors and allof the things that they power throughout our consumer and industrial and defenseeconomy. You talk about how things have changed,certainly from the Ministry of Defense perspective, but what's also changing isthe politicization ultimately of companies that are working withinwarfare. And we certainly see that from protestshere among students. How have you been feeling and is beingembraced still by the private sector from a money perspective?Are you raising money? Is it easy to do so?Are you looking to go public?.

Well, luckily, I think that there is avery big gulf in sophistication around international affairs between the typesof people who are funding and are all and the types of people who are skippingclass to camp out on campus, on campuses.I think that there's a lot of people who recognize that the United States shouldhave the best technology. The only way to credibly deter warfareis to have a backstop of credible threat of violence.There is no way that you can deter every adversary with the threat of a sternlyworded letter or this idea that sanctions are going to cripple theireconomy, especially in areas where we.

Don't even have the leverage to makethat true. I think that on the funding side, wedon't have any problems. We've got a lot of money in the bank.We have a very healthy revenue pipeline. We're on the path to being a publiclytraded company and a lot of people are really excited about that becauseAdderall, in addition to building tools that keep our men and women on the frontlines safe, which is something people want to be invested in, is also just agood, credible business with a really good roadmap that's doing well on ourexisting products. And it's a healthy pipeline of futureproducts.

We just announced Pulsar.We just showed off some other new products like Menace X.We're going to be announcing products through the rest of the year.We've got about a dozen products that we've publicly announced and we've gotanother dozen that are not even publicly talked about yet, and they're of asimilar caliber. And I think that our investors recognizethat perspective and existing. I look forward to you coming back andtalking about it when they can talk about it publicly.But quickly, IPO 20, 24 or 2025. Well, I can almost promise you it won'tbe 2024.

If it was, we'd already have to be waydown that path. You know, wants to be a publicly tradedcompany for a variety of different reasons.It's something that we've wanted to do since the very beginning.You know, this is my second company. You might know I started a companycalled Oculus VR when I was 19. I sold that to Facebook for a fewbillion dollars. I was there for a few years before I wasfired, and I've decided that I want to go on a different path this time.And luckily that aligns with what our customers want us to do, what ourinvestors want us to do.

And I think what the American peoplewant to do, where they want to be able to buy into these companies, not havethem operate as private entities beyond reach and beyond control.I'm a lucky guy to sit down with you. Thank you.And you're founder. This is Bloomberg Technology. Oh, the pleasure of eating cheese.So simple. And if I.Symphony of Phrases Moments. What a song.Simplicity. Simplicity.Delight.

It was created with software from Suna,one of the new crop of AI startups focused on basically building tools toautomate the music making process. But while the music era is creeping uponus, not everyone is a fan. Break it All Down with Bloomberg'sRachel Metz, who actually is the joy behind that song that you just heard.And Rachel, when am I going be able to stream it on Spotify?And ultimately, that is the issue here, right?That a lot of I made songs kind of taking away the business of real artistswho. I think it's a little bit it's a littlebit early to say that definitively, but.

That is a concern.Absolutely. Both of artists that see this technologydeveloping of record labels, you know, there are a lot of differentstakeholders in the music industry. And as I becomes better and better atmaking music, they have a lot of concerns about this.Other increasingly express it for sure. What's interesting is perhaps you shinea light on, you know, but also you do, which is actually backed by AndreessenHorowitz. But also some players in the game Ithink are common, is one of the founders is one of the money behind it as well asUnited Masters that.

Steve Stoute So they do have backing ofsome players within music. But it looks as though these companiesare trying to ensure that you're not able to say, Please make me a song in.Well, the essence of Billie Eilish, they are trying to be clever about the way inwhich we basically copy or don't. Yeah.I mean, they want to position themselves as something that anybody can use.And I am anybody and I can use them to make music.And it is true that it's a very it's a very quick process.Or you can make it as long as complicated as you want, you can bringyour own music to it.

So it's for anybody, someone who's aprofessional musician who wants to augment the music making process, or forsomeone who just wants to type in a quick prompt and get a song about thesimple pleasures of eating cheese or any topic, really.But yes, there are some people in the music industry, such as Carmen.Also Will.i.am was another person who put some money into youdo.So it'll be interesting to see where musicians sort of, you know, come, comein in the coming months and years if they're interested in participating withthese companies and using them, or if they say, Hey, wait a minute, I don'twant you training on my music, or maybe.

A little bit of both.I assume, as we've seen with Image Generation, as we've seen with video.Very briefly, Rachel Lawsuit's likely to happen here.I would. Yes, I would expect so.I spoke to somebody in the music industry and they said that was one ofthe things they're expecting to see happen.They're expecting to see some deals between the companies and that arebuilding this music, making software and record labels and maybe otherstakeholders in the coming months, but also perhaps some lawsuits.And as we know, the music industry has.

Been quite litigious and is alreadyinvolved in some lawsuits regarding other types of generative A&R companiesand UMG. Just striking that deal would take time.Looking at how to protect artist versus A.I..It is going to be something we unpack with your help.Rachel We thank you so much, Rachel. That does it for this edition ofBloomberg Technology. Don't forget to check out our podcast.It's Bring Back.

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