Apple's Stumble, Amazon's Surge and Anthropic's Hacks | Bloomberg Tech 7/31/2026

"BLOOMBERG TECH" IS LIVE FROM THE HEART OF SILICON VALLEY WITH ED LUDLOW IN SAN FRANCISCO. ED: COMING UP, TIM COOK'S FINAL APPLE EARNINGS CALL AS CEO IS A STORY OF SUPPLY CRUTCHES, DEMAND MISREADS AND A TOUGH OUTLOOK. AI SHARES ON BIG SPENDING AND ACCELERATED CLOUD GROWTH. AFTER OPENAI'S BREACHES, IT IS NO ANTHROPIC STERN WITH THE COMPANY SAYING IT'S A ARE MODELS BREACHED THREE ORGANIZATIONS DURING CYBERSECURITY TESTS. WE HAVE THE DETAILS. THE TECHNOLOGY EARNINGS, AND A VERY BIG REACTION IN STOCKS. APPLE IS ON TRACK FOR ITS BIGGEST DROP SINCE MARCH OF 2020. AMAZON IS ON TRACK FOR ITS BIGGEST JUMP SINCE APRIL OF 2012. LET'S GET THE STORIES. LET'S START WITH APPLE. EVERYTHING WE NEED TO KNOW ABOUT TIM COOK'S FINAL QUARTER AS CEO OF APPLE. >> I THINK THE MAJOR TAKE AWAY FROM APPLE'S REPORT WAS HOW MUCH THE INCREASE IN MEMORY PRICES IS REALLY STARTING TO WEIGH ON THE COMPANY. THEY TALKED A LOT ABOUT COMPONENT SHORTAGES. PEOPLE HAVE BEEN CONCERNED THAT THE MEMORY ISSUE WILL EAT INTO THEIR MARGINS, POTENTIALLY EAT INTO DEMAND. THE STOCK HAD NOT REALLY BEEN REFLECTING A LOT OF THESE CONCERNS GOING INTO THE REPORT. IT HAD A VERY STRONG MONTH GOING INTO IT. I THINK THIS IS PART OF THE OVERALL ANTI-AI SENTIMENT. NOW IT SEEMS LIKE THAT IS FLIPPED AGAIN AND PEOPLE ARE REASSESSING THE ISSUES APPLE IS FACING, EVEN AS THEY MAY BE TAKE A NEW LOOK AT SOME OF THE AI NAMES THAT HAD BEEN SELLING OFF PRIOR TO THIS. ED: APPLE SAYING REVENUE GROWTH IN THE SEPTEMBER QUARTER 9% TO 11%. THE STREET WAS LOOKING AT 12% AND THEY ADMITTED THEY MISJUDGED DEMAND. AMAZON, THERE IS GROWTH IN AWS. THERE IS CLEARLY A HIGH DEMAND -- CELEARLY AI DEMAND. RYAN: THEY HAVE SET THE CHIP BUSINESS IS SEEING DEMAND. STRONG REPORT OUT OF AMAZON. I THINK IT HIGHLIGHTS THE DIVIDE WE'VE SEEN THIS EARNINGS SEASON BETWEEN THE COMPANIES THAT ARE ABLE TO DO A LOT OF AI RELATED SPENDING BUT MAKE THE CASE THAT THEY ARE JUSTIFYING THAT WITH IMPROVED GROWTH, WITH IMPROVED PROSPECTS. YOU PUT AMAZON AND MICROSOFT INTO ONE BUCKET. BOTH OF THOSE COMPANIES HAD POWERFUL REACTION TO THE RESULTS. I THINK PEOPLE WERE REASSESSING THEIR OUTLOOKS FOLLOWING THE STRONG RESULTS FROM THE CLOUD BUSINESS, EVEN IN THE FACE OF HIGHER SPENDING. ON THE OTHERS YOU HAD ALPHABET AND META, MAY BE DID NOT DO AS GOOD OF A JOB. YOU SAW THOSE STOCKS COME BACK. ED: AMAZON DID RAISE BY $20 BILLION IN PART BECAUSE THE COST ENVIRONMENT IS HIGHER. TO OUR NEXT GUEST, AMAZON'S SET OF NUMBERS DEFINED GAME CHANGER. THE MANAGING DIRECTOR AND SECTOR SPECIALIST FOR TECH MEDIA AND TELECOM AT MIZUHO SECURITIES IS WITH US. WHAT WAS IT ABOUT AMAZON'S NUMBERS THAT YOU LIKED? >> I DEFINITELY THINK IT WAS A GAME CHANGER BECAUSE OF THE EXHILARATION IN AWS GROWTH ON THE TOP LINE AT 37% I THINK HAS CONVINCED MORE PEOPLE THAT AI IS IMPROVING THEIR OVERALL BUSINESS. AND THEN THE DISCLOSURE THEY GAVE IN TERMS OF HOW AI IS IMPACTING THEM ON THE SILICON SIDE WITH THEIR TRAINING CHIP, THEY ARE WELL-POSITIONED. ALL IN ALL, THE BOOKINGS GROWTH, THE BACKLOG AND COMMENTARY FROM ANDY JASSY ABOUT WHAT IS TO COME I THINK SET THIS STOCK UP TO CONTINUE TO OUTPERFORM GOING FORWARD. ED: AMAZON SAID ITS CHIP BUSINESS WHERE IT RENTS COMPUTE CAPACITY, BUT BASED ON THEIR IN-HOUSE SILICON HAS A RUN RATE OF $25 MILLION. ARE YOU EXTRAPOLATING AND SAYING THAT IS ANOTHER LINE OF BUSINESS WHERE AMAZON CAN GET SMART SIDE? JORDAN: IT'S SHOWING HOW MUCH BENEFIT THAT THEY GET FROM HAVING THEIR OWN CUSTOM CHIP. NOT ONLY DOES IT ENABLE THEM TO GET SUPPLY, BECAUSE IT'S SO DIFFICULT TO GET GRAPHIC PROCESSORS FROM NVIDIA, IT ALSO ENABLES THEM TO OFFER THAT TO THEIR CUSTOMERS PROBABLY AT A LOWER COST. YOU WIN ON BOTH SIDES, SUPPLY AND COST. THEIR MARGINS ARE GOING UP VERY HEALTHILY. I THINK THAT IS ENCOURAGING TO INVESTORS, BECAUSE ALL THESE COMPANIES WILL CONTINUE TO SPEND, THEY NEED MORE COMPUTE, MORE CAPACITY, BUT THEY SEE PRESSURE ON THE MARGINS AND CASH FLOW. EVEN THOUGH AMAZON'S CASH FLOW WAS NEGATIVE FOR THE LAST 12 MONTHS, THEIR MARGINS IN THEIR AWS BUSINESS ARE INCREASINGLY GOING HIGHER. ED: SOME POINT OUT ON THE CHIP BUSINESS THEY ARE NOT SURRENDERING ANY MARGIN TO NVIDIA IF THEY GO WITH IN-HOUSE SILICON. DO YOU HAVE ANY AMAZON ECHO DEVICES IN YOUR HOUSEHOLD? JORDAN: YEAH, I HAVE ONE. ED: HOW MANY DAYS A WEEK WOULD YOU SAY YOU HAVE AN AMAZON PRIME PACKAGE ON YOUR DOORSTEP? JORDAN: EVERY OTHER DAY AT LEAST. ED: WHAT I FOUND SO, INTERESTING WITH THE OTHER DATA POINTS THE NONFINANCIAL, WHERE THEY SAY HERE IS EVIDENCE THAT PEOPLE THAT USE ALEXA PLUS, THEIR CONSUMER FACING AI, ARE MORE LIKELY TO SIGN UP FOR PRIME, ARE MORE LIKELY TO SPEND IN A GREATER BASKET SIZE ON AMAZON.COM. HAS ANYONE BROUGHT THAT UP ON YOUR DESK? JORDAN: ACTUALLY, NO. I THINK PEOPLE ARE SO FOCUSED ON THE AI, THE DATA CENTER SIDE OF THE BUSINESS BECAUSE IT DRIVES ALL THE PROFIT THAT THEY ARE NOT AS CONCERNED OR WORRIED ABOUT E-COMMERCE, WHERE THEY ARE DOING VERY WELL. I THINK THAT IS A GOOD THING. YOU WOULD LIKE TO SEE THEM GET MORE VALUE OR CREDIT FOR THEIR STRANGE -- FOR THEIR STRENGTH, THEIR BRAND. WHY DOES AMAZON TRADE AT 40'S MULTIPLE WHEN YOU LOOK AT COSTCO AND WALMART'S VALUATIONS. ED: WE ARE A HOUSEHOLD WHERE MY ECHO DEVICE COMPETES WITH MY BABY AS THE ALARM CLOCK EVERY MORNING AND WE HAVE NOT MOVED BEYOND THAT ON THE AI SIDE. YOU HEARD RYAN TALK ABOUT APPLE WAS THE AI SAFETY TRADE IN A WAY. IN APPLE THIS IS A HELL OF A REACTION IN THE STOCK. THERE IS NO SENTIMENTALITY FOR TIM COOK'S FINAL EARNINGS CALL. YOU TALK ABOUT THAT IN YOUR NOTE. WHAT ARE YOU MAKING OF ALL OF IT? JORDAN: I WOULD TELL PEOPLE THAT THE MOVE DOWN 9% IS PROBABLY MORE THAN THE ACTUAL RESULTS WOULD SUGGEST. THAT'S BECAUSE THE STOCK HAS MATERIALLY OUTPERFORMED TECH AND THE MAG 7 OVER THE LAST 30 DAYS. THERE WAS A TON OF MONEY HIDING IN APPLE AS LIKE THE ANTI-SAFETY AI TRADE. THAT IS GOING TO COME OUT AND GO BACK TO MICROSOFT AND AMAZON AND OTHERS. WHAT I WOULD MAKE OF IT IS THEY WILL PROBABLY SEE HIGHER RISK AND STRUGGLING A BIT, NOT ONLY IN IPHONE TO GET COMPONENTS AND SUPPLY, BUT THEIR SERVICES BUSINESS MISSED. THAT IS WHERE THEY GET A LOT OF PROFIT MARGIN. IT SOUNDS LIKE THAT WILL REMAIN AT A LOWER GROWTH RATE AS YOU LOOK INTO THE END OF THE YEAR. MY CONCERN, AND THIS IS WHY I WOULD NOT BE CHASING APPLE DOWN 9%, IS THERE GOING INTO THEIR IPHONE 18 LAUNCH CYCLE. I FEEL LIKE THE RISK IS THAT YOU GO INTO A NEW PRODUCT CYCLE AND YOU CANNOT GET ENOUGH COMPONENTS, WHAT DOES THAT MEAN FOR YOUR ABILITY TO BEAT AND RAISE NUMBERS? I DON'T THINK IT IS GOOD. ED: SO THIS IS A PEOPLE STORY AS WELL. TIM COOK, A CORE FACET OF HIS CAREER HAS BEEN HIS ABILITY TO MANAGE OF THE SUPPLY CHAIN, AND HE MADE THE ADMISSION THAT THEY MISCALCULATED HOW MANY PROCESSORS THEY SHOULD ORDER. IN SEPTEMBER, IN THE LAUNCH CYCLE FOR THE 18, HE HANDS THE REINS TO A PRODUCT GUY. JORDAN: I DON'T ACTUALLY THINK PEOPLE ARE ALL THAT WORRIED ABOUT THE MANAGEMENT TRANSITION. I THINK THEY WILL BE STATUS QUO. THEY WILL FOCUS ON THE SUPPLY CHAIN. THAT IS WHAT THEY DO BEST. I THINK THEY NEED TO HAVE A GOOD FLASHY LAUNCH WITH THIS FLOATABLE PRODUCT. THAT COULD GO A LONG WAY TO HELPING TERNUS, EVEN THOUGH THAT WAS PROBABLY PUT INTO PLACE WELL BEFORE HE TOOK THE REINS, BUT IT WOULD HELP ON THE MARGIN TO CONVINCE PEOPLE THAT THEY HAVE A NEW INNOVATIONS COMING. END OF DAY, IT IS ABOUT HOW MUCH OUR CONSUMERS -- HOW MUCH ARE CONSUMERS WILLING TO SPEND? THEY ARE DOING WELL WITH MACS WHERE THEY RAISED PRICES AND CANNOT SHIP ENOUGH PRODUCT TO MEET DEMAND. COME EARLY NEXT YEAR, AFTER THE LAUNCH QUARTER IN THE FALL IS BEHIND THEM AND THEY RAISED PRICES, IS DEMAND HOLDING UP AS WELL GIVEN THE HIGHER COSTS? WE WILL HAVE TO WAIT AND FIND OUT. I THINK IT IS UNDETERMINED. JORDAN: -- ED: A DECLINE OF 9% IN THE SESSION. JORDAN KLEIN AT MIZUHO. READ HIS END OF JULY NOTE. COMING UP, CONCERNS ABOUT CHINESE AI START OF MOONSHOT GROWTH FOLLOWING A BLOOMBERG REPORT IT HAS A COMPUTING POWER AGREEMENT WITH ALIBABA WHICH USES OR RELIES ON NVIDIA CHIPS. WE HAVE THE DETAILS NEXT. THIS IS "BLOOMBERG TECH." ED: CHINESE AI CHAMPION MOONSHOT HAS A COMPUTING POWER AGREEMENT WITH ALIBABA FOR THE USE OF AROUND 20,000 NVIDIA CHIPS, ACCORDING TO SOURCES. THOSE SOURCES SAY THE HARDWARE FORMS A SUBSTANTIAL CHUNK OF THE COMPUTING CAPACITY MOONSHOT USES FOR ITS KIMI MODELS, THE LATEST OF WHICH RIVAL U.S. COMPETITORS. WASHINGTON HAD RESTRICTED CHINA'S ACCESS TO SOME GENERATIONS OF NVIDIA CHIP ON NATIONAL SECURITY GROUNDS. LET'S START WITH THE BASICS OF WHAT WE ARE REPORTING. PETER: JUST TO BACK UP ONE STEP, MOONSHOT ANNOUNCED ITSELF TO THE WESTERN WORLD A COUPLE WEEKS AGO, WHERE IT CAME OUT WITH THIS KIMI K3 MODEL WHICH HAS STRONG PERFORMANCE, NEAR THE LEADING EDGE OF THE FRONTIER LABS IN THE MODELS AT OPENAI AND ANTHROPIC. HOW DO THEY DO IT? WE KNOW THERE HAS BEEN BREAKTHROUGH ENGINEERING AT A NUMBER OF THE CHINESE COMPANIES. DEEPSEEK WAS THE PHENOMENON LAST YEAR, BUT NOW THE QUESTIONS ARE AROUND MOONSHOT AND HOW THEY PULL THIS OFF. WE'VE SEEN A COUPLE BITS AND PIECES OF IT, BUT THIS HELPS US UNDERSTAND THE BROADER PICTURE. WE KNOW ALIBABA HAS AN INVESTMENT IN MOONSHOT. WHAT WE WERE REPORTING IN THIS STORY IS ALIBABA IS SUPPLYING A BUNCH OF THE COMPUTING POWER BEHIND THAT MODEL. WE KNOW THEY ARE USING 20,000 NVIDIA CHIPS, THE HOPPER GENERATION. ALIBABA SAID THEY ARE NOT THE H200 CHIPS, WHICH ARE THE LEADING EDGE. OUR SOURCES TOLD US THEY ACTUALLY ARE THOSE H200 CHIPS, BUT THE HOPPER GENERATION. MOONSHOT HAS BEEN ABLE TO USE THAT TO BUILD OUT THIS MODEL. WE HAVE THE WHITE HOUSE SAYING THEY BELIEVE THEY ARE ALSO ACCESSING GRACE BLACKWELL CHIPS, EVEN MORE ADVANCED CHIPS FROM NVIDIA. ED: WE ARE SHOWING THAT COMMUNICATION FROM ALIBABA ON WHAT THEY ARE DENYING AND WHAT THEY ARE NOT. IT IS WORTH A DISCUSSION OF WHAT WE DON'T KNOW. FOR A LONG TIME WE HAVE BEEN ASKING ABOUT HOW MANY NVIDIA CHIPS ARE GOING INTO CHINA? ARE CHINESE FIRMS USING THIS TECHNOLOGY OUTSIDE OF THE UNITED STATES AND CHINA? POSE SOME OF THOSE QUESTIONS FOR US. PETER: IT IS A COMPLICATED PICTURE, AND WE HAVE THIS SHIFTING REGIME OF EXPORT REGULATIONS THAT AFFECTED A BUNCH OF THE SPIRIT NVIDIA IS NOT ALLOWED TO SELL ITS MOST ADVANCED BLACKWELL CHIPS INTO CHINA RIGHT NOW. IN THE PAST THEY WERE ABLE TO SELL THE NUMBER OF THE HOPPER GENERATION OF CHIPS. MORE RECENTLY THE U.S. SIGNED OFF ON NVIDIA SELLING THOSE H200'S INTO CHINA THAT WOULD BE A PRETTY ADVANCED CHIP FOR MANY OF THESE COMPANIES TO USE, INCLUDING MOONSHOT AND DEEPSEEK. BUT BEIJING PUSHED BACK ON THAT IDEA THAT DOMESTIC COMPANIES SHOULD USE THOSE CHIPS. HE WOULD PREFER TO BUILD OUT ITS OWN SEMICONDUCTOR INDUSTRY, PARTICULARLY SUPPORTING COMPANIES LIKE HUAWEI IN PARTICULAR. IF YOU ARE USING H200 CHIPS, IT IS POSSIBLE FROM THE U.S. STANDPOINT WITHIN CHINA, BUT THERE WOULD BE PUSHBACK FROM BEIJING IF YOU ARE USING H200 CHIPS THAT THEY WOULD PREFER YOU NOT USE AT THIS POINT. IT IS ENTIRELY LEGAL FOR THEY CAN GO TO SOUTHEAST ASIA AND GET THESE CHIPS INCLUDING PAGE 200 -- H200'S. THIS IS A LOOP OF CHINA HAWKS HAVE WANTED TO CLOSE, BUT AT THIS TIME, THIS IS STILL A LOOPHOLE. ED: ALIBABA IS ONE OF MOONSHOT'S BIGGEST INVESTORS. PETER ELSTROM, THANK YOU VERY MUCH. ANTHROPIC SAYS ITS AI MODELS BROKE OUT OF A CLOSED TESTING ENVIRONMENT AND BREACHED THREE OUTSIDE ORGANIZATION. ANTHROPIC SAID IT MADE THE DISCOVERY AFTER REVIEWING ITS OWN CYBERSECURITY ATTACKS FOLLOWING OPEN AI'S SIMILAR ANNOUNCEMENTS. ONE OF THE MOST POPULAR STORIES, UNSURPRISINGLY, ON BLOOMBERG. >> AS YOU MENTION, ANTHROPIC MADE AN INTERNAL REVIEW AFTER THE HUGGING FACE INCIDENT WAS DISCLOSED A LITTLE OVER A WEEK AGO, AND DISCOVERED THAT IN THREE INSTANCES, THEIR MODELS, WHICH WERE CONDUCTING THEIR OWN INTERNAL TESTS, HAD BROKEN OUT AND HAD HACKED THREE EXTERNAL ORGANIZATIONS. I THINK IT RAISES A TON OF INTERESTING AND IMPORTANT QUESTIONS ABOUT THESE AI COMPANIES ABILITIES TO CONTROL, UNDERSTAND, AND MONITOR THESE MODELS, AND ESPECIALLY THE FACT IT TOOK IN AT LEAST ONE CASE THREE MONTHS FOR ANTHROPIC TO DISCOVER WHAT HAD HAPPENED, WHICH RAISES QUESTIONS ABOUT THE ABILITY TO SEE WHAT IS GOING ON. ED: IN THE ANTHROPIC CASE, WE DO NOT KNOW WHO THE THREE COMPANIES ARE. WE KNOW THE ESCAPE FROM THE SANDBOX ENVIRONMENT. GO INTO THAT QUICKLY. >> THERE IS AN IMPORTANT DISTINCTION TO BE DRAWN. IN THE RECENT OPENAI CASE, WHICH HAS DRAWN A LOT OF COMPARISONS, THE MODEL DISCOVERED NOVEL VULNERABILITIES AND HACKED ITS WAY OUT OF ITS ENVIRONMENT. IN THE ANTHROPIC CASE, THERE WAS A HUMAN MISCONFIGURATION THAT ALLOWED INTERNET ACCESS FOR THE MODEL. THEREFORE, THE MODEL THOUGHT EVERYTHING IT HAD ACCESSED WAS PART OF THE TEST. THIS IS SOMETHING ANTHROPIC IS REALLY INSISTENT ON, BECAUSE THEY ARE PINK -- ARE POSITIONING THIS AS A HUMAN SERIES OF ERRORS AS OPPOSED TO AI ERROR. ED: I INVITED ANTHROPIC ON THE SHOW. THEY SAID NO. COMING UP, SITUATIONAL AWARENESS AND INVESTMENT IN COMPANIES TIED TO THE AI BOOM. WE HAVE THE DETAILS. THIS IS BLOOMBERG TECH. ED: TROUBLED HEDGE FUNDS. SITUATIONAL AWARENESS. STAKES IN PRIVATE COMPANIES TO RAISE CASH AS IT FACED A WAVE OF MARGIN CALLS. ITS ASSETS PLUNGED TO ROUGHLY $10 BILLION. THAT IS WHEN CITADEL'S CAKE GRIFFIN SWEPT IN TO BUY THE FUND'S PUBLIC PORTFOLIO. THE FOUNDER OF SITUATIONAL AWARENESS PRESERVE THE WEBSITE FOR POSTERITY. LET'S GET THE DETAILS. EXTRAORDINARY REPORTING. TRYING TO UPLOAD -- OFFLOAD A PRIVATE STEAK TO TRY TO MANAGE THE SITUATION? >> WHAT WE ARE SEEING IS AN INCREDIBLY DRAMATIC UNFOLDING OF EVENTS IN THE LAST 24 HOURS. THE NEWS THAT WHILE SITUATIONAL AWARENESS WAS IN CONVERSATIONS WITH CITADEL, MILLENNIUM, JANE STREET TO OFFLOAD THEIR PUBLIC BOOK, THERE WERE ALSO HAVING CONVERSATIONS TO POTENTIALLY OFFLOAD THEIR PRIVATE PORTFOLIO. THIS IS A SIZABLE PORTFOLIO THAT INCLUDES A $5 BILLION POSITION IN ANTHROPIC. THE FACT THAT THEY WERE IN TALKS WITH SEQUOIA AND GREEN OAKS TO POTENTIALLY OFFER THOSE STAKES REALLY SHOWS HOW DRAMATIC THE SITUATION WAS. ULTIMATELY, THEY DID NOT GO AHEAD WITH THAT BECAUSE THEY GOT THE CITADEL DEAL. BUT IT IS NOT A GREAT SIGN WHEN A FUND IS LOOKING AT TRYING TO SELL THEIR PUBLIC AND PRIVATE BOOK TO MEET MARGIN CALLS. ED: WHAT IS THE STATE OF PLAY? IT SOUNDS LIKE THE FIRM IS STILL THERE. HAS ANYONE HEARD FROM ASH AND BRUNNER IN THE LAST 24 HOURS? HEMA: HE SENT A LETTER TO INVESTORS APOLOGIZING FOR THE DRAMATIC UNFOLDING OF EVENTS, SAYING THAT HE IS RESPONSIBLE, SAYING THAT THE FUND STILL HAS ITS YEAR TO DATE PERFORMANCE UP 80%. BUT KEEP IN MIND THE MONTHLY PERFORMANCE IS DOWN NEARLY 70%. ALSO REALLY IMPORTANT IS THINKING ABOUT WHEN INVESTORS BOUGHT HIM. THOSE WHO GOT IN EARLY IN THE FUND'S EXISTENCE ARE PROBABLY DOING OK. BUT IF YOU ARE AN INVESTOR AND GOT IN THE LAST FEW MONTHS, THE PAIN IS PRETTY BAD. ED: TESLA IS CONSIDERING SEPARATING ITS CHINA BUSINESS TO PAVE THE WAY FOR A POTENTIAL SPACEX MERGER, ACCORDING TO A REPORT IN "THE WALL STREET JOURNAL." THE JOURNAL SAID SOME TESLA EXECUTIVES HAVE BEEN TOLD TO PREPARE FOR THAT MOVE. ELON MUSK WROTE THAT THE REPORT WAS FAKE NEWS. LET'S START WITH WHAT IS IN THE WALL STREET JOURNAL REPORT. THERE ARE MULTIPLE LINES OF INFORMATION ABOUT WHAT IS BEING CONSIDERED. SUMMARIZE AS BEST YOU CAN. >> I THINK IN THE BROAD SCHEME OF THINGS, FOR MONTHS NOW, IT HAS BEEN SPACEX AND TESLA. ARE THESE COMPANIES GOING TO COMBINE? THE BIG QUESTION IS HOW TO THESE COMPANIES COME TOGETHER, CONSIDERING THE FACT THAT SPACEX IS THIS GREAT BIG U.S. DEFENSE CONTRACTOR AND TESLA HAS THIS HUGE CHINA BUSINESS THAT IS CRUCIAL TO THE COMPANY. AREN'T THOSE THINGS IN CONFLICT? I THINK WHAT WAS VERY INTERESTING ABOUT THIS REPORT LAST NIGHT WAS ELEMENTS OF THE FACT THAT THESE COMPANIES ALREADY ARE KIND OF SEPARATE. I THINK THAT IS PRETTY WELL KNOWN AND UNDERSTOOD. THE QUESTION IS WHAT EXACTLY ARE ADVISORS THINKING, OR HOW IS THIS POSSIBLY GOING TO WORK OUT, CONSIDERING THE FACT THAT THE CHINESE COMMUNIST PARTY PROBABLY IS NOT PARTICULARLY PRIMED FOR THE SHANGHAI FACTORY CRUCIAL TO TESLA CLOSING UP TO A SPACEX BUSINESS, AND SORT OF OVERLAPPING WITH SPACEX, WHICH MUSK HAS BEEN QUITE OPEN ABOUT. THEY HAVE NOT BEEN CRAZY ABOUT STARLINK. ED: MUSK POSTED MORE THAN ONCE THIS HAS NEVER EVEN COME UP IN A DISCUSSION EVER. OF FAKE NEWS. PEOPLE SHOULD ASSUME NEWS IS FAKE UNTIL PROVEN OTHERWISE. I THINK OUR COLLEAGUES IN CHINA WHO DISPUTED THE REPORT -- >> I THINK THE FACT THAT MUSK HAS BEEN VERY PUBLIC ABOUT THE FACT THAT STARLINK IS A NO GO IN CHINA -- HAS ALSO TALKED OPENLY ABOUT JUST HOW MUCH CHINA IS COMPETING WITH SPACEX. THERE ARE A LOT OF ELEMENTS OF THE JOURNAL'S REPORTING THAT RING TRUE. THE QUESTION IS OF COURSE WHAT IS GOING ON BEHIND THE SCENES FOR THESE COMPANIES TO GAME OUT WHAT COULD BE DONE. I THINK THE JOURNAL SORT OF BROUGHT SOME NEW THINGS TO LIGHT LAST NIGHT. OF COURSE, MUSK AND HIS CAMP IS PUSHING BACK ON WHAT WAS REPORTED. >> A YEAR AFTER HIS BITTER SPLIT WITH DONALD TRUMP HE PLANS TO SPEND TO BACK REPUBLICAN CANDIDATES FOR THE MIDTERMS, ACCORDING TO "THE NEW YORK TIMES." HOWEVER LAST YEAR MUSK TOLD THE ECONOMIST HE FELT TO INVOLVED IN POLITICS. ACCORDING TO REPORTS, HIS SUPER PAC IS PLANNING TO SPEND $120 MILLION ON A NEW FIELD PROGRAM IN AT LEAST EIGHT STATES. COMING UP, WE HAVE MORE ON APPLE AND AMAZON EARNINGS. THE REACTION TO THE PRINT FROM AMAZON AND APPLE IS BIG. THESE ARE BIG MOVES INTO OF THE WORLD'S BIGGEST TECHNOLOGY NAMES, AND THEY ARE IN DIFFERENT DIRECTIONS. APPLE IS ON TRACK FOR ITS BIGGEST DROP SINCE MARCH OF 2020. AMAZON IS ON TRACK FOR ITS BIGGEST GAIN SINCE 2012. THAT IS HOW SEVERE THIS IS. AT THE INDEX LEVEL, WE ARE KIND OF NETTING OUT PRETTY MUCH FLAT ON THE NASDAQ 100. PRETTY MUCH FLAT ON THE PHILADELPHIA SEMICONDUCTOR INDEX AS WELL. WE ARE HALFWAY THROUGH THE PROGRAM. THE CITY OF SAN FRANCISCO LOOKING BEAUTIFUL THIS FRIDAY. STAY WITH US. THIS IS BLOOMBERG TECH. ♪ >> WELCOME BACK. EARNINGS ARE THE BIG STORY. I THOUGHT WE WOULD TAKE A BEACH THIS FRIDAY AND LOOK AT THE NASDAQ 100. ON THE WEEKS, MODERATELY LOWER. IN SEMICONDUCTORS, ON THE STOCKS, WE'RE DOWN 4% ON THE WEEK AND THERE HAS BEEN SO MUCH NEWS. REMEMBER THAT THE WEEK STARTED WITH CONCERNS ABOUT CIRCULAR FINANCING AND NVIDIA. WE HAVE ENDED THE WEEK WITH A PRETTY UPBEAT PICTURE ON CAPITAL EXPENDITURES IN THE WORLD OF AI, LARGELY THROUGH THE AMAZON LENS BUT APPLE WAS A BIT OF A SURPRISE. THE MANAGEMENT OF THE SUPPLY CHAIN. APPLE IS ON TRACK FOR ITS BIGGEST DROP SINCE 2020. DISCLOSURE OF SOME MISMANAGEMENT OF THE SUPPLY CHAIN. WE WOULD NOT EXPECT TO SAY THAT ABOUT APPLE. THEN THERE IS AMAZON, ON TRACK FOR ITS BIGGEST JUMP SINCE 2012. INCREDIBLE CROWD GROWTH AND A LOT OF AI MOMENTUM. LET'S TALK ABOUT EARNINGS AND HOW IT IS ALL GOING. LET ME TELL YOU, ON A FRIDAY, WE HAVE TO GO THROUGH ALL OF IT. THERE IS NO ONE BETTER. IT STARTED WITH AMAZON. YOU KNOW THESE COMPANIES WELL. YOU HAVE A CLEAR STRATEGY. WAS THERE ONE SINGLE THING WITH AMAZON THAT YOU JUMPED OUT -- JUMPED OUT AT YOU? >> WE STARTED ADDING IT TO OUR VALUE PORTFOLIO ACTUALLY USED PROCEEDS FROM APPLE EARLIER THIS WEEK TO CONTINUE THAT. IT HAS BEEN TRADING LIKE A VALUE STOCK. WE KNEW THAT THE CEO UNDERSTANDS HOW TO ROLL NEW TECHNOLOGIES. HE WAS KIND OF THE FATHER OF AWS. OUR BET HAS BEEN ON HIM. IT DID NOT LOOK TOO GOOD UNTIL YESTERDAY. WHAT WE BELIEVE IS THE COMPANY IS IN A POSITION TO MONETIZE THE CAPEX. SPEND. THEY PULLED ALL THE LEVERS. ED: WHAT PEOPLE FOCUS ON BEYOND THE GROWTH AND CRAFT BUSINESS IS THE REVENUE RUN RATE FOR THE CHIP BUSINESS, RENTING CLOUD CAPACITY, AND AWS AI WHICH IS BEDROCK MODELS. DO YOU LOOK AT THOSE OR IS IT STILL JUST AWS OVERALL? >> WE LOOK AT ALL OF THE SEGMENTS. THE ONE THAT ALWAYS GETS OVERLOOKED IS THE RETAIL SIDE. MAYBE EVEN ADVERTISING. WE CERTAINLY LOOK AT ALL OF THEM. WE ARE CONCERNED AS INVESTORS WITH IS THE MANAGEMENT PIVOTING? YOU HAD A CEO WHO MISSED. WE ARE LOOKING FOR MANAGEMENT TEAMS THAT ARE REALLY DRIVING INTO THE FUTURE. THAT IS THE CASE AT AMAZON. JASSY HAS CUT COSTS AND ALL THE RIGHT PLACES. INVESTED IN ALL THE RIGHT PLACES. AND HE KEEPS A LOW PROFILE WHICH I THINK IS VERY IMPORTANT AS AN INVESTOR. WE PAY ATTENTION TO THAT. WHAT IS THE CATALYST FOR OUTPERFORMANCE? WE THINK IT IS BEING IN THE SWEET SPOT OF INVESTING AND MONETIZING. ED: WOULD IT BE FAIR TO SAY THAT IN FINANCIAL MARKETS PEOPLE HAVE DIFFERENT OPINIONS ON THE SAME METRIC? THE CASE STUDY I PUT TO YOU IS FREE CASH FLOW. META SHOWED ITS LOWEST LEVEL SINCE 2022. AMAZON HAS BEEN IN THE NEGATIVE FOR A 12 MONTH BASIS AND OF SEEMS TO MIND. I AM NOT AN INVESTOR, I'M A JOURNALIST, BUT PEOPLE ALWAYS SAY THAT FREE CASH FLOW IS A BETTER MEASURE THAN MARGIN OR ANY KIND OF PROFIT. EVERYBODY SEEMS TO BE ON THE SAME PAGE ABOUT THAT? >> YOU ARE 100% RIGHT. WE ARE IN AN ECONOMY OF A SECTOR THAT IS IN A MAJOR TRANSFORMATION. DURING THESE TIMES HISTORICALLY, I HAVE BEEN DOING THIS FOR OVER 40 YEARS, IT YOU MUST INVEST. IT IS AN ARMS RACE. WE CAN TOLERATE TIMES OF NEGATIVE FREE CASH FLOW ESPECIALLY WHEN IT COMES TO THE QUALITY OF HYPERSCALERS HAVE. THAT IS SUPER IMPORTANT. IF YOU ARE INVESTING FOR THE FUTURE, YOU HAVE TO BE WILLING TO SACRIFICE FREE CASH FLOW. TO INVEST FOR THE NEXT ROUND. THE INVESTMENT IS PLAYING -- PAYING OFF. FREE CASH FLOW WILL RETURN AND HE TALKED A BIT ABOUT THAT. ED: LET'S TALK ABOUT APPLE. IT WAS TIM COOK'S FINAL EARNINGS CALL. THE SEPTEMBER QUARTER, THE WORLD IS GETTING MORE DIFFICULT FOR THEM BUT THERE WAS THIS ADMISSION THAT THEY DID IT WRONG. ON HANDLING THE SUPPLY CHAIN. >> THAT IS SOMETHING I'VE LOVES ABOUT TIM COOK OVER THE 13 YEARS THAT WE HAVE OWNED THIS STOCK. WE GOT IN AFTER THE GOOGLE MAP DEBACLE. HE WROTE AN APOLOGY ACKNOWLEDGING THE MISTAKE. IN JANUARY OF 2019 WITH A MISSED EARNINGS HE WROTE A LETTER TO SHAREHOLDERS. I DON'T KNOW OTHER CEOS THAT DO THAT. HE IS A COMPETENT MANAGER OF THE SUPPLY CHAIN IN THE BUSINESS BUT HE MADE MISTAKES AS WE ALL DO. I MAKE THEM EVERYDAY. WHAT WE LEARNED IS THE NEXT QUARTER WHICH WAS EXPECTED TO CONTINUE TO BE A REALLY STRONG MOMENTUM QUARTER IS NOT GOING TO BE. IN THAT DISCUSSION WHAT I THOUGHT WAS INTERESTING WAS HE SAID EVEN THOUGH THE SUPPLY OF A MEMORY CHIPS MAY IMPROVE, WE DO NOT EXPECT PRICES TO GO DOWN. HE ALSO DID NOT SAY THAT HE WOULD BE IN CHINA BUYING THOSE PARTS. I THINK THE MARKET IS STILL TRYING TO DIGEST ALL OF THAT. WE HAVE SOLD A CHUNK OF OUR HOLDINGS GOING INTO EARNINGS BECAUSE IT HAD BEEN SUCH A STRONG PERFORMER RELATIVE TO EVERYTHING ELSE. WE THOUGHT SOME OF THE GOOD NEWS WAS PRICED AGAIN AND WE WANTED TO FUND NAMES LIKE AMAZON THAT HAD NOT PARTICIPATED IN THE RALLY. IT IS A NAME THAT YOU HOLD ONTO. WE CALL IT OUR TREASURY BILL OF TECHNOLOGY HOLDINGS. I DON'T THINK YOU CHASE IT. YOU LET IT SETTLE. HE WATCHED VERY CAREFULLY. THEY WILL HAVE AN AI ANNOUNCEMENT. THEY WILL ALWAYS GET A NEW CEO. I THINK YOU HAVE SOME TIME TO ACCUMULATE THE HOLDINGS. BUT CERTAINLY NOT TODAY. ED: HAPPY FRIDAY. IT HAS BEEN A LONG WEEK. THANK YOU VERY MUCH. RIVIAN'S QUARTERLY ESTIMATES BEAT. BUT THEY PAGAN DELIVERIES OF THE NEW SUV. SHARES OPEN HIGHER. I CAUGHT UP WITH THE CFO WHO SAYS THAT THE NEW MODEL WILL BE A KEY CATALYST FOR RIVIAN. >> WE ARE REALLY EXCITED ABOUT THE OPPORTUNITY TO INTRODUCE THIS TO THE WORLD. IT IS THE START OF OUR FIRST EXTERNAL CUSTOMER DELIVERIES. ALSO THE FIRST OPPORTUNITIES FOR CONSUMERS TO TEST DRIVE THE VEHICLE. WE WERE ABLE TO COMPLETE 50,000 DEMO DRIVES OVER THE SECOND QUARTER. THAT WAS A KEY DRIVER IN THE INCREASE THAT WE SAW. ACROSS EACH OF OUR RETAIL SPACES. THE REACTION FROM THE MEDIA HAS BEEN FANTASTIC. THE SAME IS TRUE AS WE LOOKED AT THE FEEDBACK WE ARE SEEING FROM CONSUMERS WHO ARE GETTING BEHIND THE WHEEL EXPERIENCING IT FOR THEMSELVES. FOR SOMEONE LIKE MYSELF WHO HAS BEEN HERE FOR 5.5 YEARS THAT, JUST A VERY GREAT MOMENT TO SEE R2 OUT IN THE WILD. RIVIAN IS A POSITION TO SCALE UP OVER THE SECOND HALF OF THE YEAR. ED: DO YOU TRACK THE CONVERSION RATE OF THOSE 57,000 DEMO'S, HOW MUCH AND OF BEING ACTUAL SALES? >> RIGHT NOW WE ARE IN THE PROCESS OF TAKING EXISTING RESERVATION HOLDERS WHO ARE INTERESTED IN R2 AND GIVING THEM THE FIRST LOOK TO EXPERIENCE THE PRODUCT. ALSO INTRODUCING MORE AND MORE CUSTOMERS AND TO THE BROADER RIVIAN ECOSYSTEM. THIS IS A BIG MOMENT FOR THE BUSINESSES WE ARE TRYING TO DRIVE AND EXPAND OUR BRAND AWARENESS AND INTRODUCE MORE HOUSEHOLDS INTO THE RIVIAN COMMUNITY. ED: CAN YOU TRY TO QUANTIFY WITH THE SALES CONTRIBUTION FROM R2 WAS IN THAT QUARTER AND WHERE YOUR TRACKING? YOU HAVE SAID THAT IN THE BACK HALF OF THIS YEAR IS WHEN WE WILL START TO SEE R2 IN A MEANINGFUL WAY BUT WHAT IS THE TRAJECTORY? >> IN THE SECOND QUARTER IT IS LIMITED IN TERMS OF THE NUMBER OF DELIVERIES THAT IT CONTRIBUTED TO OUR OVERALL DELIVERY. WE ENDED UP SHIPPING OF A 12,000 UNITS. EMBEDDED IN OUR 70,000 UNITS OF GUIDANCE FOR THE YEAR, WE WILL SEE A SIGNIFICANT STEP UP IN THE SECOND HALF FOR DELIVERIES. R2 WILL BE A KEY CATALYST FOR THE GROWTH WE ANTICIPATE SEEING. ED: THAT WAS THE CFO OF RIVIAN. PRESIDENT TRUMP NOW HOLDING A CABINET MEETING AT CAMP DAVID. LET'S LISTEN IN. PRES. T RUMP: WHAT THAT DOES FOR YOUR HEALTH CARE, YOU WILL SEE THESE POLLS FOR THE DEMOCRATS HAVE WONDERFUL NUMBERS ON THIS STUFF AND THEY ARE HORRIBLE WHAT THEY HAVE DONE. OBAMACARE IS A TOTAL DISASTER. IT IS A COSTLY WRECK. IT IS UNAFFORDABLE. IT IS A DISGRACE. THEY NEVER EVEN THOUGHT OF BEING ABLE TO DO SOMETHING LIKE THIS. THEY DID NOT EVEN TRY. I GOT THE CHART COMPANIES AND THEN I GOT THE COUNTRIES. THE DRUG COMPANIES AGREED BECAUSE THEY KNEW THE COUNTRIES WITH TWO. WHEN I CALLED GERMANY AND FRANCE AND THE UNITED KINGDOM AND ALL OF THESE COUNTRIES I SAID YOU HAVE TO DO IT. IT IS UNFAIR. WE ARE PAYING 10 TIMES MORE THAN YOU'RE PAYING FOR THE SAME DRUGS. THEY SAID WE ARE NOT GOING TO DO THAT BECAUSE WE WILL HAVE TO DOUBLE OUR PRICES TO MAKE IT HAPPY. I SAID MAYBE YOU WILL HAVE TO TRIPLE YOUR PRICE. THEY SAID WE CANNOT DO IT. I SAID THAT'S ALL RIGHT. I WILL CHARGE YOU VERY SUBSTANTIAL TARIFFS WHICH ARE FAR MORE THAN WE ARE TALKING ABOUT. THEY ALL SAID THERE WOULD BE A GREAT HONOR TO DO IT. YOUR DRUG PRICES HAVE GONE DOWN BY NUMBERS YOU CANNOT EVEN IMAGINE. MY FIRST TERM I HAVE THE PRIVILEGE OF HAVING LOWER DRUG PRICES FROM THE BEGINNING OF THE YEAR TO THE END FOR THE FIRST TIME IN 28 YEARS. I CALLED A NEWS CONFERENCE TO ANNOUNCE IT. THE YEAR HAD ENDED AND IT TURNED OUT THAT 1/8 OF A PERCENT IT WENT DOWN DURING ONE YEAR. THE FIRST TIME IN 28 YEARS. IT WAS ALWAYS UP. MORE EXPENSIVE. I CALLED A NEWS CONFERENCE I WAS SO PROUD OF MYSELF. I SAID LADIES AND GENTLEMEN, FOR THE FIRST TIME IN 28 YEARS DRUG PRICES HAVE GONE DOWN FROM JANUARY TO THE END OF DECEMBER. AND I WANT TO CONGRATULATE EVERYBODY FOR BEING A PART OF THIS WONDERFUL EXPERIMENT. NOW WE ARE TALKING ABOUT 600%. WE PAY THE LOWEST DRUG PRICES ANYWHERE IN THE WORLD. I WILL SAY IT AGAIN AND AGAIN BECAUSE THE PRESS DOES NOT WANT TO REPORT IT. THEY DON'T WANT TO TALK ABOUT IT. WHAT THAT DOES FOR HEALTH CARE IS UNBELIEVABLE BECAUSE MEDICINE IS A BIG PART OF HEALTH CARE. I WISH PEOPLE WOULD UNDERSTAND THAT. I HOPE THEY WILL VOTE FOR US IN THE MIDTERMS BECAUSE YOU WILL SEE SOME STUFF THAT WILL BE HORRIBLE BECAUSE THEY CAN BLOW IT VERY FAST. YOUR DRUG PRICES ARE GREAT. I SAW SPAIN YESTERDAY AND WATCHED THE CATASTROPHE THAT TOOK PLACE. IT LOOKS LIKE AN INVASION OF A COUNTRY BY HUNDREDS OF THOUSANDS OF PEOPLE. THE SAME THING WILL HAPPEN TO US OF THE REPUBLICANS DO NOT GET ELECTED. EXCEPT WORSE. MUCH BIGGER. MUCH EASIER TO GET INTO DESPITE THE FACT THAT WE HAVE BUILT THOUSANDS OF MILES OF WALL THAT I SAID WE WOULD DO. IF WE DID NOT HAVE THAT, FORGET IT. WE HAVE THE SAFEST BORDER IN THE WORLD. ED: THAT WAS PRESIDENT FROM SPEAKING AT A CABINET MEETING. NO HEADLINES OTHER THAN THE PRESIDENT TOUTING THE STOCK MARKET. WE WILL CONTINUE TO MONITOR AND BRING YOU HEADLINES IF AND WHEN THEY COME. WITH ANTHROPIC JOINING OPENAI IN REVEALING THAT SOME OF ITS MODELS BROKE OUT OF SEALS TESTING AND HACKED OUTSIDE ORGANIZATIONS, FEARS ABOUT THE REAL-WORLD RISKS AND CALLS FOR SAFEGUARDS ARE RISING. THE CONCERN IS NOT JUST WHAT AI KNOWS ANYMORE BUT WHAT IT CAN DO AS THE SYSTEMS BECOME MORE AGENTIC AND BEGIN TAKING ACTIONS IN THE REAL WORLD. TRUST AND SECURITY BECOME MORE IMPORTANT. SHE HAS A FOCUS ON HEALTH. SOMETHING THE PRESIDENT HAS BEEN SPEAKING ABOUT IN THE LAST FEW MINUTES. SHE JOINS US NOW. YOU KNOW SO MANY FOUNDERS WHO HAVE A STRONG VIEW ON THIS. YOU ARE INVESTING IN THIS SPACE. JUST TO START YOUR REACTION TO ANTHROPIC'S EXPOSURE LAST NIGHT. >> GREAT TO SEE YOU. THANK YOU FOR HAVING ME. A COUPLE OF WEEKS IN A ROW OF DISCLOSURES THAT ARE RINGING ALARM BELLS FOR QUITE A FEW PEOPLE BUT I THINK IT IS REALLY ILLUSTRATING A BROADER POINT WHICH IS WE ARE MOVING BEYOND THE COMMODITIZATION OF INTELLIGENCE MODELS INTO WHAT HAPPENS WHEN MODELS INTERACT WITH THE REAL WORLD. THESE DISCLOSURES SHOW BOTH WHAT CAN HAPPEN WHEN THERE IS A MISCONFIGURATION IN THE ANTHROPIC CASE AROUND A SANDBOX AND ALSO NEW STRESS TESTS THE SUPER HYPER INTELLIGENT MODELS, THE POTENTIAL RISKS. AT THE SAME TIME I THINK IT IS INCREDIBLY EXCITING HOW ADVANCED OF THESE MODELS ARE GETTING. THE FUTURE MIGHT BE MOVING INTO THE OPERATING SYSTEM AND THE TRUST INFRASTRUCTURE AROUND IT. ED: THE PRESIDENT WAS SPEAKING ABOUT DRUG PRICES, ABOUT THE ROLE AND POSITIONING OF DRUG PRICES IN HEALTH CARE. MY HOPE WAS THAT YOU WOULD COME ON THE SHOW AND YOU ARE VERY FOCUSED ON THAT VERTICAL, LITERAL VERTICAL AI APPLICATION OF HEALTH CARE. THERE IS AN OPPORTUNITY THERE, IT SEEMS, TO REALLY CHANGE THE INDUSTRY. DEENA: THERE IS, AND YOU WERE WITH US IN MARCH WHEN WE HOSTED A WHOLE CONFERENCE AROUND THE OPPORTUNITY OF THE INTERSECTION OF HEALTH CARE AND AI. THERE HAVE BEEN EXCITING DEVELOPMENTS FROM ALL OF THE LABS, WHETHER IT IS ANTHROPIC GOING ON THE RECORD SAYING HEALTH CARE IS ONE OF THEIR BIGGEST PRIORITIES, GOING DEEP INTO LIFE SCIENCES, TALKING ABOUT DRUG DEVELOPMENT AS A POTENTIAL PRIORITY FOR THEM, OR OPENAI'S LAUNCH JUST LAST WEEK AROUND HEALTH CARE. I DON’'T KNOW IF YOU HAVE PLAYED AROUND WITH IT AT ALL. IT HAS BEEN FUN. I HAVE ENJOYED USING IT. AS SOMEONE WHO HELPED LAUNCH GOOGLE HEALTH OVER A DECADE AGO, IT IS FUN TO SEE HOW FAR THESE MODELS HAVE TAKEN THE OPPORTUNITY TO REALLY TAKE HEALTH CARE INFORMATION INTO YOUR OWN HANDS. BUT I THINK MORE IMPORTANTLY, MOVING BEYOND INFORMATION GATHERING INTO ACTUAL ACTION. I THINK THAT IS WHERE THE NEXT GENERATION OF INNOVATION IN AND AROUND HEALTH CARE AND ACROSS REGULATED INDUSTRIES WILL BE. ED: IN MARCH, A CONFERENCE, IN THE ROOM, THERE WERE THE FOUNDERS OF SPECIALIZED STARTUPS. THERE WERE REPRESENTATIVES FROM ALL KINDS OF TECHNOLOGY COMPANIES. FORMER CLINICIANS. AND SOME REGULATORS. I THINK THE QUESTION POSED WAS, IF OPENAI AND ANTHROPIC ARE SO BIG AND THEIR CAPABILITY IS SO WIDE, WHY DO THEY NOT GO AFTER THIS FIELD MORE INTENSELY? DEENA: I THINK THIS IS AN EXISTENTIAL QUESTION FOR PRETTY MUCH EVERY APPLIED AI COMPANY. WITH REGARD TO HEALTH CARE, BOTH OF THOSE LABS HAVE GONE ON THE RECORD NOT ONLY LAUNCHING AROUND HEALTH CARE AND LIFE SCIENCES, BUT TALKING ABOUT HOW IMPORTANT THESE PRIORITIES ARE. I THINK WHAT HAS BECOME CLEAR IS IT WILL NOT HAPPEN IN ISOLATION. IF YOU SAW THE LAUNCH COMING OUT OF CHATGPT ON THE HEALTH CARE SIDE, THE PRODUCT ITSELF IS GROUNDED IN PARTNERSHIP. IT IS ABOUT LITERALLY CONNECTING YOUR HEALTH INFORMATION, WHETHER YOUR FUNCTION HEALTH LABS OR APPLE HEALTH, TO THE SLABS. SO AT THE END OF THE, IT IS INCREDIBLY EXCITING HOW GOOD THESE MODELS ARE GETTING. BUT IT IS LESS ABOUT EXTRACTING INFORMATION AND MORE ABOUT TAKING THAT INFORMATION AND APPLYING IT TO THE REAL WORLD CONTEXT. HEALTH CARE MAY BE THE BEST EXAMPLE OF THE REAL PHYSICAL WORLD INTERACTING WITH MODELS. WITHOUT THOSE PARTNERSHIPS, THE HEALTH CARE INFORMATION IS JUST LIVING IN ISOLATION. IT IS GOING TO BE DEPENDENT ON DEPLOYMENT AND ON PARTNERSHIP. THAT IS WHERE I THINK IT HAS NEVER BEEN MORE EXCITING FOR STARTUPS AND FOR THIRD-PARTY COMPANIES, RIGHT? RATHER THAN TRYING TO REPLICATE A MODEL AND BUILD A NEW FOUNDATIONAL LAYER, THEY ARE THE ONES WHO CAN TAKE DEPLOYMENT TO THE NEXT LEVEL. ED: CAN WE TALK A LITTLE BIT ABOUT SOME OF YOUR RECENT INVESTMENTS THROUGH BUSY PERSON? I MEAN THAT IN THE KINDEST WAY. YOU HAVE BEEN DOING SOME INTERESTING ROUNDS OF LATE. LUX CAPITAL HAS SCALE, WHICH I FIND INTERESTING. BUT INCREASINGLY, SOME OF THE MORE LEGACY WALL STREET INSTITUTIONS ARE GETTING EARLIER INTO THE GAME AND SOME OF THESE VERTICALS. DEENA: YEAH. THERE IS SO MUCH OPPORTUNITY, I THINK EVERYBODY WANTS TO HAVE A HAND IN IT, FOR SURE. AT LUX, WE ARE EXCITED ABOUT THE OPPORTUNITY ACROSS A NUMBER OF VERTICALS, HEALTH CARE BEING ONE OF THEM. BUT ACROSS QUITE A FEW OTHERS AS WELL. I THINK PHYSICAL AI AND ROBOTICS IS A MASSIVE OPPORTUNITY AND WE ARE STILL EARLY DAYS THERE. IT IS CLEAR THAT AI IS NO LONGER -- IT IS HOW WE USED TO TALK ABOUT TEC AND TECH EVENTUALLY BECAME EVERYTHING. AI IS AN OPERATING SYSTEM. THE OPPORTUNITY ACROSS THESE LEGACY INSTITUTIONS IS ABSOLUTELY MASSIVE AND WE ARE JUST GETTING STARTED. ED: I MOVED TO SAN FRANCISCO IN 2018 AND FEEL LIKE I MISSED THE BOAT A LITTLE BIT ON THE SOCIAL MEDIA WAVE AND ON HARDWARE, AND NOW AI TECHNOLOGY. WHAT DO YOU THINK HAPPENS IN THE BALANCE OF THE YEAR IN PRIVATE MARKETS? THERE ARE CERTAIN SPACES. DEFENSE TECH IS SUPER FOCUSED ON. THERE IS SUCH MOMENTUM. THE NUMBERS THIS YEAR ARE BIGGER THAN LAST YEAR. DOES THAT APPLY TO HEALTH? WHAT IS THE ZOOMED OUT VIEW OF THE INDUSTRIES YOU ARE INVESTING IN? DEENA: I THINK THERE IS A LESSON THAT EVERY TIME YOU THINK YOU KNOW, SOMETHING POPS UP AND PROVES YOU WRONG. WITH REGARD TO PRIVATE MARKETS, THE OPPORTUNITY HAS NEVER BEEN BETTER IN THE APPLICATION LAYER. THAT WOULD NOT HAVE BEEN THE CASE IF I HAD COME ON THE SHOW A COUPLE YEARS AGO. THE FOCUS AT THAT TIME WAS MORE AROUND INFRASTRUCTURE AND AROUND THE MODELS. BUT IT HAS BECOME CLEAR JUST HOW QUICKLY THESE MODELS CAN ADVANCE AND IT HAS BECOME CLEAR THEY CANNOT DO IT IN ISOLATION. SO WE ARE EXCITED ABOUT EVERYTHING FROM REAL WORLD HEALTH COMPANIES LIKE SINE AND HEALTH, -- SYNON HEALTH, TO COMPANIES LIKE SOVEREIGN AI, WHO ARE TAKING THE NEXT LAYER OF DEPLOYMENT GEOGRAPHICALLY. WE ANNOUNCED AN INVESTMENT IN 1001 AI IN THE GCC, AND THOSE ARE GREAT EXAMPLES WITH THAT TRUST LAYER, ESPECIALLY GIVEN THE NEWS IN RECENT WEEKS, IN THESE INCIDENTS. IT IS GOING TO BE MORE IMPORTANT THAN EVER. THERE ARE MORE INTERESTING COMPANIES IN THE WORKS RIGHT NOW THAT WE WILL BE EXCITED TO UNVEIL IN WEEKS TO COME. ED: THANK YOU VERY MUCH INDEED. COMING UP, INVESTOR CONCERNS OF HEAVY SPENDING FROM THE HYPERSCALERS. MICROSOFT IS EASING FEARS BY PROMISING TO STAY CASH FLOW POSITIVE. DETAILS NEXT. ED: TODAY'S BIG NUMBER -- $450 BILLION. THAT IS HOW MUCH MICROSOFT ADDED TO ITS VALUE YESTERDAY AFTER ITS MARKET CAP JUMPED 16%, INCREASING MORE THAN ANY COMPANY EVER IN A SINGLE DAY. THE STOCK IS UP 2.3%. WHY ARE INVESTORS SO HAPPY? BECAUSE MICROSOFT STRUCK A CAUTIOUS TONE ON SPENDING. UNLIKE MANY OF ITS MAG SEVEN PEERS, IT EASED FEARS BY REMAINING CASH FLOW POSITIVE. TECH IN-DEPTH -- THIS IS IMPORTANT. FREE CASH FLOW IS THE METRIC PEOPLE ARE LOOKING AT. AND THEY ARE MAKING A COMMITMENT. THEY HAVE STATED IT. >> ALL THE MONEY BEING SPENT ON DATA CENTERS IS A BET. WE SEE SOME OF THE GREAT CASH FLOW BUSINESSES, AMAZON, META, AND GOOGLE, HEADING TOWARD NEGATIVE FREE CASH FLOW. MICROSOFT HAS SAID WE ARE GOING TO PRIORITIZE STAYING CASH FLOW POSITIVE. WE WILL BE MODERATE WITH OUR SPENDING. AT LEAST FOR NOW, THE MARKET IS SUPER HAPPY. ED: I REMEMBER THE BIG MOMENT WAS ORACLE'S NEGATIVE FREE CASH FLOW. MARKETS FREAKED OUT. AMAZON HAS BEEN NEGATIVE CASH FLOW FOR A WHILE. >> YOU MAKE A GOOD POINT. WHEN ORACLE WENT FREE CASH FLOW NEGATIVE, THEY WERE THE FIRST BIG COMPANY TO DO SO, AND EVERYONE THOUGHT LARRY WAS CRAZY. EVERYONE DIGESTED. MICROSOFT IS STILL SPENDING 170 $5 BILLION. THAT IS A LOT OF MONEY. BUT THEY ARE SIGNALING THAT THERE IS AN END IN SIGHT. IT IS NOT GOING TO BE THIS CONSTANT RATCHETING UP OF SPENDING, WHICH IS WHAT MAKES THE MARKETS SUPER NERVOUS. ED: LAST YEAR, AMAZON RAGED CAPEX VERY QUICKLY. HAS MICROSOFT EXPLAIN HOW THEY CAN PULL OFF THEIR GOAL? BRODY: THEY HAVEN'T. THE FACT THAT COSTS ARE GOING UP WITH MEMORY AND THEY ARE STILL HOLDING STEADY, IT MEANS THEY ARE FINDING COST EFFICIENCY. IF THAT IS TRUE, FOLKS WILL BE HAPPY TO SEE IT. ED: BRODIE FORD, THANK YOU. THAT DOES IT FOR THIS EDITION OF BLOOMBERG TECH. YOU CAN FIND THE RECAP ON THE BLOOMBERG TERMINAL, ONLINE, ON SPOTIFY, AND ON I HEART. GOODNESS. WHAT A WEEK. A BIG EARNINGS WEEK. WE HAVE HAD A I MODELS BREAK FREE OF SANDBOXES. AND STILL THE CITY OF SAN FRANCISCO LOOKS BEAUTIFUL THIS FRIDAY. HAVE A GREAT WEEKEND. THIS IS BLOOMBERG TECH.