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Bloomberg Tech is alive from coast to coast with Caroline Hide in New York and ever though in San Francisco.

This is Bloomberg Tech coming up.

Cisco shares gain after boosting it's twenty twenty six forecast, showing progress in its efforts to capture more AI spending.

We're going to discuss with the CEO plus shares of Disney.

They're falling today as the company invests in its content slate and stream bundling.

Our conversation with the Disney CFO Hugh.

Johnson, and ten Cent strikes a deal with Apple under which the iPhone maker takes a fifteen percent cut for purchases in we chat, minigames and apps.

First free checking on these markets and maybe a little bit of chot as we try to discern when we get the government data and what that will show the Federal Reserve, canondean do or do not when it comes to cutting in the future.

The market a little bit uncertain at the moment.

It seems as though that lifting of a government shutdown have been priced in.

We're currently off by one point four percent.

We're dragged down by the key names in Magnificent seven.

But ed, you're looking at the company that's adding the most in points upside.

Yeah, one of the big movers to the upside is Cisco shares currently up around four percent.

They'd open much higher than that.

The key bit is they're trading at their highest level since the year two thousand, after the company raised its outlook and showed progress on capturing more of.

The global AI spend.

Let's get the details with Cisco's CEO, Chuck Robins.

Chuck, in the year two thousand, Cisco is one of the original four horsemen of technology.

Based on the numbers you gave and what you said on the call, do you feel like customers, the new ones and investors now understand Cisco's place in this new AI era.

Well, first of all, thanks for having me, and you know, I'm super proud of what teams have accomplished.

We had a record quarter and set ourselves up for what's likely going to be the best year we've ever had.

So it was just a great performance.

And as I've been asked a lot over the last twenty four hours to reflect back on two thousand and it's kind of an interesting comparison, but I think that, Look, the hyperscalers are some of the most advanced customers in the world.

They do the deepest analysis of the technology before they make decisions, and I think that their decisions to continue spending more with us speaks volumes about the innovation and the technology that our teams are building right now.

So I'm really proud of them, and I think it'll just extend into the enterprise over time.

Chuck, who are some of those new customers that you've been able to sign in the air context.

Well, we're just talking about the major hyperscalers, primarily in the United States, but we've also announced these sovereign deals in the Middle East with G forty two and the Emirates as well as Humane in Saudi There's a lot of work going on in the neo cloud space.

We're seeing sovereign players start popping up now in parts of Europe as well as Southeast Asia and India.

So it's a broad swath of customers.

But the one point three billion that we talked about is strictly the top hyperscalers that we're doing business with.

So you're talking about five companies and.

They're good for the money, as you can tell from the cash flow that they.

Have chuck not two hundred million dollars.

That you are expanding into sovereign, you are expanding into enterprise and neoclouds.

How do you bake in some of the risks that the market just cannot get enough of talking about this circular economy.

Well, so we did talk about the fact that we have over two billion dollars now in our pipeline through the end of the fiscal years over the next three quarters in neo cloud, sovereign cloud, and enterprise, and we see that continue to accelerate.

We took two hundred million dollars in orders in Q one, and it's just it's a natural way the technology technologies have been evolving over the last decade.

More they start in the hyperscalers, they move through the telco space in this case the neo clouds and the sovereign players, and then into the enterprise.

And it's happening exactly that way.

And our bread and butter over the years has been in the enterprise.

And we have lots of technolo knowlogy, We have a partner ecosystem, we have full stack solutions, we have security, we have all the things that they're looking forward to actually build out AI workloads and deal with AI with confidence.

Let's just go to that security a little bit of a fly in the ointment.

Let's say, I know you've talked clearly about perhaps how the booking of revenue can be misinterpreted, but how are you going to sell that more holistically?

How do you think the security part of the offering can really start firing on all cylinders.

Well, I started by saying clearly we're not pleased with where we are yet, but I will say over the last two to three years, we've made a lot of progress.

It's a major decision for customers to make big platform decisions.

In security, We've had a lot of great wins.

I'm proud of what the teams have built.

And we saw our next generation our walls, we saw mid teens growth and orders there.

We saw double digit arr growth and Splunk.

We saw our new and refreshed products on the security side continue to show growth.

And the issue we had in the quarter was really it's an accounting issue around how cloud delivered Splunk versus on prem delivered Splunk.

The cloud stuff is radable and realize revenues realized over the life of the term, and the on prem stuff gets recognized immediately, and we just had a major shift in how our customers consume it, which is great for us in the long term that they're buying more cloud based solutions, but it creates a little bit of a challenge on revenue during the quarter.

The good news is the networking business is doing incredibly well and can cover that for us.

Chuck, it is fair to say at a minimum that the Cisco of today isn't the same as the Cisco of two thousand.

What you've done is kind of been open about the product lineup and you've used M and A to change the footprint of the company.

What's your latest thinking on that, the products that you offer and what you need to do, either organically or inorganically to offer what the world of AI wants.

I think the big things that we did we obviously introduced a lot more software into our portfolio in areas that are strategic, like security, and this Plunk acquisition has been a great one.

I think the other thing that's worth calling out is is this investment that we started in twenty sixteen to be clear on our silicon strategy that is absolutely the reason that we're having success today in the hyperscaler space.

If we did not have our silicon and develop and design our own silicon, we wouldn't be participating at all.

It's just black and white.

And so as we as we look at both internal innovation as well as or inorganic opportunities.

We're very focused on security, We're very focused on AI.

We've made some tech and talent deals.

Anything that can help us accelerate our solutions in those areas we're open to look at.

Chuck, I do not apologize for this next question.

Are we or are we not in an AI bubble?

Oh, it's just it's so funny.

Look, the customers that are buying the predominant amount of this technology have incredible balance sheets, have incredible cash flow, have incredible profitability.

I think Caroline said it.

They actually pay their bills and and so, and they view it as an existential issue for them.

That's that's a really key element.

They don't view this as something that's nice to have.

They don't view it as something that is okay if we if we're successful, great, if we're not great.

They view it as existential, which you see with the level of spending that they're putting into it.

So it's it's a lot and it's moving fast.

And but the difference between now in two thousand is that these are massive companies with strong financial performance and they believe in this one hundred percent.

So I don't think it's going to change.

We haven't gotten into physical AI.

We have, we're just getting into synthetic training.

Yeah, we haven't gotten into robotics.

We haven't gotten into the enterprise in a big way yet, and so there's a there's a huge opportunity ahead for all of us.

I believe.

Well, Chuck Blouemberg Intelligence Analysis says, your projections are conservative.

Briefly are the conservative?

Well, I think you said that last quarter, so you've proved to be correct ninety days ago.

But look, I think based on what we know today we're ninety days into the year, were taking what we have in our backlog, what we see in the forecast.

But again we got we have three more quarters to play out.

Lots of things can change, the world's very dynamic, but we're very confident in the numbers that we put up yesterday.

Cisco CEO Chuck Robins always a joy to catch up with the thanks for spending time.

Meanwhile, as I'm going to look at some other shares on the move, JD dot Com, Tencent, I want to shine light on these ad rs.

They're under water a little bit like the rest of the market.

But JD dot Com actually relieve many an investor with a few fifteen percent increase in revenue, managing to show that maybe the investment in the food area is really building more broadly into the overall merchandise sales.

We're looking at Tencent social media app more cautious in AI spending, but it's making it work in terms of selling its overall products and the gaming strength really coming to bear.

We're seeing again a fifteen percent increase in revenue there as well.

But fifteen percent is an interesting number end because it's a theme in the next story.

Ten cents US shares trading tropic because at one point we're hiring the session.

Ten Cent has struck a deal with Apple that we'll see the iPhone maker handle payments and take a fifteen percent cut of purchases in we chat, minigames and apps doing both.

Global tech editor Petere Elstrom joins us for more that there's one of several stories actually about ten Cent today, but.

Let's start with the Apple one.

What do we need to know?

Yeah, so ten Cent in Apple have been in this standoff for a number of different years.

Tencent offers a bunch of different services, including games, but they also offer we Chat, which is really the original super app.

It's a messaging app, but you can do many other things within it too.

Now, Tencent has wanted to offer different services and games through this super app, and they've allowed developers to circumvent the Apple Store to avoid some of the fees that you would typically pay by using the Apple Store.

Apple hasn't liked that.

They want everybody to go through their Apple Store, where they take a thirty percent cut of most things that are going on.

So we understand from our sources, the sub bloomberg Scoop that they've reached an agreement now where customers within the ten Cent we Chat ecosystem are going to pay a fee of fifteen percent to Apple, so about half of their usual fee.

But they'll begin to reach some sort of truce between Tencent and Apple as they collaborate on games and other kinds of services.

So to push us forward, is this good for Apple?

Because they can start to well reap more rewards from these companies that are super apps.

Or is this a concern.

Because everyone else is going to be looking at a fifteen percent number.

Yeah, it's a very good question.

Certainly, Apple faces this kind of pressure in many different markets.

It's not just China.

In China it's a little bit different though, because they don't have the kind of market power that they do in places like the United States or Europe for that matter, or they can just take their thirty percent cut.

Regulators are looking at those fees.

They'd like to bring them down, but in China they haven't been able to make that much progress because there are these alternatives like ten cents, ecosystem and other kinds of areas too.

So this is at least an altre for them into a China market that they really haven't been able to tap that effectively in the past.

Peter Elstrom, all across the world of te tencent we so appreciated.

Meanwhile, coming up, we're all across Disney falling today after what.

Some investors are calling we're underwhelming forecast.

More on that next.

Meanwhile, check out shares of Verizon.

We have breaking news coming from the Wall Street Journal talking about how there could be some fifteen thousand job cuts to come.

Remember, we've had a relatively new CEO in place, Bloomberg reporting earlier that layoffs could be announced as soon as next week, according to people familiar, as we have a major step in the transformation led by the new CEO, Dan Shulman in New York.

Is a really bad tag.

Shares of Disney really falling today after posting fourth quarter earnings that missed estimates and projecting forecasts that underwhelmed Wall Street were down almost ten percent.

We spoke with Hugh Johnston Disney.

CFO earlier today to walk through those results.

I thought it was a good quarter overall, and frankly versus Wall Street, we beat expectations by six cents.

So, as you noted, the experiences business did very very well, six percent revenue growth thirteen percent of wide growth was terrific.

Sports did very strongly while we were launching the new DTC product, which is off to a great start.

And then in terms of experience the entertainment business, it was largely just the overlap of the film slate that drove the numbers.

I know, the linear business looked a little bit soft, but that's primarily due to the fact that we had India in the numbers last year where we made eighty four million bucks and wasn't in the numbers this year.

Take that out Apple Staples basis.

Overall, I thought the quarter was good and it actually allows us to end the year with a lot of momentum as we think about where we are right now.

We grew EPs nineteen percent for the year and nineteen percent Keeger for the last three years, and that's why we both guided to double digit EPs growth in twenty six and on top of that, doubled the share of purchase and increased the dividend by fifty percent.

You good morning.

On that momentum.

The focus for a lot is streaming, right and you have the confidence to say streaming is going to continue to be profitable through twenty twenty six.

What are the factors behind that?

What allows you to have the confidence to have such visibility into how that streaming business is going well?

Of course, streaming all we begins with the quality of the content that we have and the quality of the slate that we have going forward.

So if you think about the film slate we have right now, number one.

We obviously have Zootopia two, followed by Avatar, followed Bright, the Double Wars product two, followed by Toy Story five, Milana, and then we've got an Avengers movie as well.

So if I look at all of that playing its way into the streaming service, certainly feel good about those ten pole events.

In addition to that, our TV side continues to perform very strongly.

The ratings are great, the number of hit shows are great.

And then on top of that, we're investing in the product in a significant way, creating a unified app, and in addition to that, improving our recommendation engines and improving the navigation withinside within the DTC app.

Put all of that together and what we really see is just a huge opportunity for growth Spire to grow that business double digits along with the double digit margins we expect to achieve this coming year.

And as a result, I think we're going to continue to see that business do really well and be a real growth driver for Disney.

But the profitability who streaming operating income for the first quarter of twenty twenty six, you got to be three hundred and twenty five million dollars.

That's a lot less than the street was anticipating.

Why is that?

I think it's primarily due to the fact that we're investing in product in the business, and we're investing in in bundling.

So we all know that bundling ultimately is a very profitable thing to invest in.

It increases retention, reduces churn, increases engagement.

And that's not a theory.

We have proof on that, Hugh, Is.

This the last earnings report and quarter before Disney's board names a successor to Bob Eiga's CEO.

That's a great question.

So what the board has previously indicated, and I will say the board has been about as transparent as any CEO succession I have ever seen in my long career.

What the board is indicated is that will take place sometime during the first calendar quarter of twenty six.

We report in next February.

Whether that'll be before or after, I'll be up to the board.

But we should have it done by the end of March.

Part of our conversation with Disney's CFO, Hugh Johnson, let's stay on Disney, stink a little deeper into the numbers.

Ether Rangon Athams with us BlueBag Intelligence senior media analyst.

You've been writing the overall view for fiscal twenty twenty six is strong within guidance, maybe conservative, given multiple levers, including the launch of two new cruises, multiple blockbuster theatrical releases, and greater operating leverage at streaming driven by price increases.

But getha, the market's not giving any sort of optimism here.

Why are they beating up so hard on Disney?

Yeah, I think after Caroline, you'll come off of fiscal twenty twenty five delivering nineteen percent EPs growth.

You know, you obviously have some very solid momentum in the business.

Yes, granted, fiscal you know, first quarter of twenty twenty six looks a little light.

They're dealing with a lot of different cost issues, whether it's on the studio side, in terms of launch costs for you know, cruises, So there's a little bit of all of that that they have to contend with.

But I think, you know, the street was really expecting.

I think something much more specific and much more concrete, something better than just double digit EPs growth for twenty twenty six, especially when they have the benefit of a lot of different catalysts that come in fiscal twenty twenty six.

I mean the stock's down ten percent, right, that puts it on track for its biggest drop since November of twenty twenty two.

You heard the final question asked and answered to Hew of what happens next with succession?

Is that the overhang on the stock here.

I think a little bit ed.

I mean, you know, we know that, you know, the Disney succession issue has really been you know, bungled so many times right now, it's this has been an ongoing question for them for almost a decas I would say, you know, it seems like things are moving in the right direction.

It's kind of turning into I think a two horse race between Dana Walden, who heads the creative division at Disney, as well as Josh Tomorrow, who heads the parks.

And this has kind of been the eternal question for Disney.

Do you have somebody who is at the head of creative who can talk to talent, who can talk to all of those Hollywood executives, or do you need somebody who you know, heads the parks, who you know which is basically sixty percent of the company's profit.

I really don't know how it's going to shake out.

Maybe they have a co CEO structure like Netflix, like Spotify is doing, but again we have to wait and watch till the end of March.

Keeth Rang and Eathan of Bloomberg Intelligence.

Great to have you back on Bloomberg Tech.

Thank you so much.

Breaking news from Bloomberg.

Tesla is developing support for Apple's car Play system in its vehicles.

That's, according to sources.

Working to add one of the most highly requested features by Tesla customers, and in car Play would mark a pretty stunning reversal for Tesla and its CEO, Elon Musk, who have long ignored please to implement the popular feature.

We're going have much more detail later this hour with Bloomberg's Mark German.

Cara, you've got another one of our top stories.

Yeah.

Everyone reading about the sec findings revealed that Michael Burry's Scion Asset Management has terminated its registration status, raising the possibility that Barry could be shuttering his hedge fund or closing it to outside investors at least now.

The move comes just one month after Burry warned about marketing exuberants, particularly in AI.

For more, Bloomberg's Tom Metcalf joins us he'd cover financials banking and what really do you think this is signaling that he just couldn't bet against this so called AI bubble.

Yeah, look, I think.

Your speculations is probably on the nose in terms of the you know, this fund might well be closed in it and you know that's what you know.

You read his message and he's always been saying he just cannot read this market.

It's extremely exuberant, and you know, it was hard to interpret these he was offering of like pictures of his character from the big short, for example, you do get a sense of the frustration.

And obviously he put.

Out some shorts on Palenteer and n Video quite recently.

They would disclose in the thirteen f's.

So it's very interesting that, you know, relatively small fund but very closely followed, and you know the fact that he's potentially taken a step does suggest perhaps even a Michael Burry is starting to lose faith in trying to time this bubble.

I know that's what's so interesting really about the timing of it.

He hinted that there's better things to come November the twenty fifth, So I'm sure we've not seen the end of this ride.

But what clarification did we get in terms of the bets he's made against the likes of Palenteer that has just defied fundamentals for so long.

Yeah, and that was one of the things he points out in his post, which which basically one one image in the post said, I've sort of de registered the firm without clarifying any further what that precisely means.

But the other kind of lays out the precise nature of that bet he had against Palenteer.

So in the post he says he spent about nine point two million dollars effectively betting on Palenteer shares would sell, would fall.

Sorry, And as part of that he's got I think until twenty twenty seven the option to sell those Palenteer shares that I think it was fifty dollars, so, you know, for a fund which is about you know, one hundred and fifty million AUM at least it was in March.

That's a pretty sort of striking bet.

But yeah, of course, as you.

Look at Palenteer shares, it's sort of he's on the wrong side of it at the moment.

Tom.

I think it's so greatly remind us that it is a relatively small fund.

And the reason it has outside interest is because many have read the Michael Lewis book, many have watched the movie.

But why do we listen to what Michael Barry does?

Well?

I think you know, the way he presents his theories and stuff is always entertaining for one, but most principally you know, it's that incredible win he had back in the financial crisis, right, He really was out front and center on that huge effort to to you know, quintuple his investors' money.

So I think whatever he says people who sit up and listen.

And you know, he has built this social media following.

I think also with the honesty, right, Like, he's made bets and when they've gone wrong, he's been happy to kind of hold his hands up.

So it's always been interesting to follow him the most.

Tom Metcalf following him for us, we so appreciate it.

Welcome back to Blomberg Tech.

Let's take a quick check on these markets, shall we, Because in fact, we're on sell off mode on the NASAQ more broadly, off by one and.

A half percent.

We've got anxiety around actually the government reopening that's already priced in.

But what does that mean in terms of data?

What does that mean in terms of the Federal Reserve its ability to cut into this market.

We're up by one and a half percent.

Some of the biggest tech names are on the downside.

Let's go to where the earnings.

Have led us, because one of the key names in the red is indeed Disney.

We're off by almost ten percent.

We're having a significantly poor day.

Worst in several years for Disney.

This is as they actually pointed to still double digit earing for share growth into the fiscal twenty two six, but revenue was flat for their fourth quarter and actually owners for share dropped.

A little bit.

Maybe people wanting to see more of a narrative around the growth is they inject more investment into streaming, as they invest into their slate, as they invest into marketing and the like.

We're looking at Cisco up by four and a half percent.

Boy, Chuck Robbins on a tear as we see this company now trade at the highest since the previous bubble two thousand.

Of course, Cisco currently up four point six percent as they managed to beat and raise in terms of their earnings and they managed to just really show the AI path that they're currently navigating and sell into, in particular to hyperscalis this is where we want to go to the questioning around AI.

Is it a boom?

Is it a bubble?

Well, it's certainly fueling records in VC funding public markets, as you've seen growth there and indeed in infrastructure, But the questions are abound.

Is in an AI bubble?

How far can it run?

And what if it pops?

Pellet Butteri's with US partner at Axcel and one of the authors of the firm's latest AI report published which just there is still more room in AI spending, he joins us.

Now, so bluntly, is the rebubble?

Well, I mean, this is the question.

I think it's interesting to put that in context.

So if you look at the NASDAQ in the past fifteen years, like with every platform shift, which is every five years, so you ad mobile, cloud and AI, the nasdack is doubled.

So basically where we are right now, where the NASAK is is basically in line with historical trends.

So yes, with every platform shift, you know you're seeing frosty evaluation and we're clearly seeing that with AI, and not all companies are going to be winners.

But we're seeing tremendous opportunities here for value creation and we think that the winners are going to take a large share of that value creation.

So it's all about picking the right companies.

Well, if we look at the public markets, the winners have been clear, and you call them as the super six that have really been generating real cash.

That was something that Chuck Robins just said to us.

Look, my biggest demand has been coming from the hyperscalers and they're pretty good for the money.

But then in the private markets, all winning bats have sort of been on a certain few names Open AI for example, Philip, Where else are you seeing the money being allocated to, particularly in Europe?

Yeah, I think it's it's worth looking at where the venture funding is going in terms of you know, cloud and THEI.

I mean the total for Europe and Israel and the US about one hundred and eighty four billion dollars for this year.

Sixty percent of that is going into the models, so that's open AI on Tropic X, but the rest forty percent is going into a new generation of AI native native application that are growing very very fast and that are very exciting.

So you have the Cursor, the Perplexity, the DECA going in the US, you have the Sairah, the lover Ball and eight ten and Synthesia in Europe.

And what's very interesting here is that if you look at the model side, yes, the majority of the vast majority of the funding is going into US company, but if you look at the AI native application side, actually the Europe fares very well against the US because it's thirty billion in Europe versus forty five in the US, so that's about two third.

And Europe had shown that it can really generate its shares of winner in this category.

And you've been backing some of those winners in particular.

I think of Lovable for example, that everyone has been very excited about the way in which vibe coding has taken over absolutely everything.

But how do you know that you're not paying too much when getting into those rounds?

Well, I mean, I think this is a question we ask ourselves every time we, you know, we invest.

I think what we're trying to understand is like how far can this business run?

I think if you look at Lovable, yeah, I mean it's vibe coding.

What does vibe coote means that means that any human on earth can start to quote, I mean, we feel that is a pretty pretty large market.

Uh, and these you know this.

It can be vibe coders who are creators, and there can be vibe coders who are in the enterprise and who are trying to very fastly, you know, very quickly developed mockups of new products.

So we actually think there's a lot of room to run in the case of Locoble.

And as I said, I mean, I think evaluation are where they are today, but I think if you look at the value creation for the winners, I think the opportunity we're seeing and that are unlocked with AI, I think are much bigger than what we have seen in the past because the productivity improvement potential that EI is giving goes well beyond what any of the previous platform shifts have generated.

Some of these companies are scaling so fast, and I feel like we've had the CEO since you're on, plenty of times to talk about how he is just driving forward in enterprises at such scale and the ability to produce AI real video that feels incredibly realistic, Philip.

But I'm interested as to you in your past and in the companies that you've helped navigate have gone public.

You've seen it with Docusti, and we've seen it with u iPath.

How will we see these companies eventually tap the public markets because they're getting enormous without needing.

To well, I mean, I think at some point, you know, getting public is in the natural path for for companies.

And I think the bar to go public now is much higher than it was, you know, five years ago.

So to go public, you want companies to be you know, probably in the five hundred to seven hundred million in in annual recurring revenues.

Uh.

So there's still room for this company to grow into you know, into these numbers.

Uh.

And you know, getting public is just like a financing milestone.

So the fact that they remain private is not something that is preventing them to grow because they have access to the capital they need on the private market side as well.

What's been interesting is a lot of these AI native applications, whether they've been snapped up for aqua higher purposes or they've been snapped up for the underlying technology for they have been snapped up and by some of these super six as you mentioned, is that M and A trend going to continue, and how are you ensuring that all the founders protect the rest of the employee base they've been growing?

Well, I mean I think they're they're you know, a lot of the mn A that we have seen so far have been more on the model development side, with the Big six trying to kind of snap really big talents.

I think on the application side, I think the founder that we're seeing extremely ambitious.

They have global ambition and and they won't they won't see how you know, how much, you know, how fast and how big they're their business can be.

So we haven't seen this as as any source of concern right now.

And as I said, given that they have access to the capital that they need to you know, to run the business, and that they also have the opportunity to potentially sell some stock along the way through through seculary sale, there is everything that's needed to keep them motivated to build a big global businesses.

Do they have to come to American capital markets?

So indeed, American venture capital two scale, if they are European, if there Israeli.

Based, well, I mean I think there's there are two different things.

There is the market that you address and there's where the capital is coming from.

I think what we've seen of Europe and Israel is great, great talent, great team, great engineering.

Resources.

And so what companies are doing is they are basically building their product and engineering team in Europe and Israel.

And if they're selling software, I mean the biggest market for every dollar span of software fifty cents is spent in the US.

So then they have to develop their go to market in the US.

So I think from a market standpoint, yes, if you want to be a global leader in software and AI, you have to be a leader in.

The US market.

Now, in terms of you know where the capital is coming from, I think there are big pools of capital on both sides of the ocean, and European companies that have been raising rounds of similar size than the US, so they have access to the same pockets of capital, whether it's from Europe or it's from the US.

With global scape, which is the enormous amount of research that you've managed to bring to US, and you analyze trends and innovation and you go global and you think about funding levels, where aren't we talking about enough?

Well, I mean, I think what's going to be interesting to see is you know, how far can the models go?

I think so far we have seen a pretty pretty steep curve of innovation on the model side, and I think the big question is when are we you know, is that improvement curve going to continue to accelerate or at some point are we going to tap out with the current architecture and uh and then you know, I think if we tap out, then there's been there's going to be a plateau until we get to the next level of architecture.

But I think if I look at where we are right now, we're just scratching the surface in terms of deploying the technology that we have today.

So I have you know, probably any if you look at the enterprise, uh, we we haven't reached the S curve in terms of the agenttic adoption for for different reasons.

We think that's going to happen in the next in the next couple of years.

So I think we have plenty of room to grow and plenty of plenty of opportunities for for a company to improve their productivity using a knowledge.

Is Philibertary of ACCEL.

We are so appreciative of you coming on talking about the wealth of research that Accel has just done.

I appreciate it.

Now let's go into another area of AI, because AI has been fueling chip makers, in particular the memory side of the equation.

But then we've just.

Had results out of Japan's Kyoxia holdings, and it's putting pressure on sand Disk because you say, off by thirteen percent, Western Digital of by almost four percent.

Particular City is out there writing that these Japanese results were somewhat negative.

The market may react negatively to the way that near term earnings are undershooting consensus that there is a strength of demand for solid state drives for AI inference.

So for now people trimming back on some big AI winners of late.

But coming up we talk more about key mag seven names Tessa in particular.

Working to add Apple car Plays support to it vehicles.

While that next this is briom leg Tech.

We've got to get back to that news that Tesla is developing support for Apple's car.

Play system in vehicles according to sources.

Take a look at the shares Actually.

Apple managed to turn from negative into positive on the news.

Tesla still much in the red, off by six percent, but Bloomberg's Mark German joining us now help break the story, and I think the context is so interesting here because this feels a real about face.

Why would now be the right time for the two companies to work together.

Yeah, this is absolutely a huge reversal for Tesla.

There's two things going on here.

One, as we've discussed on this show many times, Tesla sales have not been as hot as they have been in years prior.

There are a lot of new ed players.

There's a lot of pressure on the company, particularly in China, to up its saled game.

We saw some executives leading earlier this year because sales.

Have not been so hot.

What is the most in demand feature in e these right now when making purchase decisions.

Well, it's Apple car Play.

People like to walk.

Into their car and have their iPhone interface projected onto their infotainment system.

I use it in my car.

People are not buying Tesla's because of it.

In some cases, people are buying other cars because of the well integrated support.

Tesla wants to hit every lever it could to improve sales.

You do that with car Play, right, and I would expect them to go down the list of all the requests that people have for wanting to buy a new car and hit those one by one to help sales.

It's time for Tesla to do that as good as their infotainment system is.

The second thing, of course, is Elon Musk's one trillion dollar pay package, which includes some metrics, particularly around selling a certain number of vehicles and integrating car play could potentially help with that.

And so I think this is a good thing for Tesla.

They have engineers developing support for this, testing support for this, and we anticipate a rollout unless it is canceled, of course, which Evon Musk is known to do with some features late in development in the coming months.

Mark, you worked with ed on this story, and I'm interested is to well, what is in it for Apple?

More broadly, Elon in many ways had refused to do deals because he didn't want the sharing of data, particularly when Apple was basically building a competitor.

At one point Apple backed away from that.

Now, how do they win by getting car play within it Tesla?

You know, from Apple's perspective, this is something that they don't really have to participate in.

There's no agreements behind the scenes.

Apple provides this functionality.

It provides developer tools for car makers to integrate this into their cars, so there's no money exchanged here.

It's really car play, a iPhone ecosystem feature.

If consumers rely on their iPhone for use of their car, for Apple, that keeps people buying iPhones, upgrading iPhones, keeping them locked into the ecosystem.

So that's the business play for them.

And Tesla right has a you know, over a third of the used market.

They are a gigantic player in terms of car sales globally as well in aligning Tesla with the iPhone brand, and that's great for Apple, whether they're making money directly on in or not.

Do you think Elon's going to continue to criticize Apple on his ex platform and the.

Like, Oh, I'm sure of it.

But you know, his relationship with Apple has taken a turn since Apple stopped developing its own competitor.

He relies on them very heavily now for distribution of grock and X, so it's pretty critical for him to be on Apple's good.

Side, romain on Apple's good side.

We'll continue to see how the rollout continues and if indeed it does happen as you said, sometimes Eno Musk can be prone to u turns.

Mark German we so appreciate it.

Now it's time for talking tech.

First up, JP Morgan is Lenny's managers use AI to help write performance reviews.

Now the max's new guidelines allow supervisors to use an internal chatbot to drop their evaluations, but caution that the technology is quote not a substitute.

The human judgment.

Us Google spacing a new EU probe.

The European Commission alleges the.

Tech gilt and unfairly demotes certain news results, violating the Digital Markets Act.

The investigation could add another eleven billion dollars to Googles, growing it tally of fines in Europe and delivery startup go pack as race to one of fifty million dollars an evaluation of eight and a half billion.

But that's down for fifteen billion dollars in its twenty twenty one funding round so all, according to sources.

Now, the company says the new funding will help accelerate its investment in AI.

I don't believe we're in an AI bubble, and the reason for that is we're going through a natural transition from an old computing model based on general purpose computing to accelerated computing.

We also know that AI has now become good enough because of reasoning capability, research capabilities, its ability to think it's now generating tokens and now generating intelligence that's worth paying for.

That, of course, was in video CEO Jensen Wang speaking with our own Ed Ludlow at GtC, just brushing off those concerns about an AI bubble.

But the scale of spending for data centers and of course by AI startups continues to raise eyebrows, so we wanted to dig into it with Brianna Doherty, she's analyst with Bloomberg Intelligence.

You've been putting out some great rethinking of whether open ai has scale, has the financial wherewithal, and whether there's risk within this.

It's been some of the most red analysis I've seen.

What is your takeaway as to the circular financing and whether this is a concern.

I think that there's clearly a lot happening right and the integration that we're having between the private markets as well as the public markets is clearly something to be watching, and it's a space that we follow very very closely.

We think that actually what we've been seeing with open aized relationships is the fact that they're broadening them, They're creating structures that are allowing them to potentially IPO long term.

That's obviously something that's been talked about, I think over the last couple of weeks especially and what we're thinking when we look at these companies.

So we've got a few hecticorns that we watch very closely, and actually hecticorns, I'm pretty sure it's a term.

Over one hundred billion dollars, that's what we call them.

We've got three of them in the data set that we track, over twelve actually decacorns that we also track really really closely in our data sets Open AI, Anthropic XAI.

Naturally right now, at their current implied valuations, they would rank in the top thirty if they were public and in our Bloomberg Benchmark AI Index, which has over one hundred and twenty equities in it.

So the scale these companies is huge.

The partnerships there forming are critical, and we do think we're not in the bubble camp.

We do think that there's a lot of opportunity down the road.

As it relates to this.

When someone then sits set a dinner table with you at a cocktail party and they're saying, I cannot see it.

I just Why on earth is AMD giving it stock to open AI to seal these sorts of deals.

What is your general narrative as to why we can avoid some sort of bubble?

Is it just the sheer revenue that could scale for open AI?

But you do have to have a belief, Yeah, I.

Think you do have to have a certain bit of belief.

Right.

I think what we've seen is even over the last year, we've seen opening eyes implied valuation more than double, right, I mean, naturally a lot has happened in that AI ecosystem.

And actually, something that we've been really focused on, and Jensen actually said something the other day about this as well, is we're not just talking about where we are right now with AI.

We're talking about an AI to quantum continuum, right, We're talking about this continued acceleration and where we're going to see and continue to prove it.

Right.

So, even if it's that you're thinking, Okay, well, what if some cost come down, or what if the power needs come down, Well, the demand elasticity is just so strong that for every little bit of efficiency you gain, you're going to gain some extra demand that's going to drive a next new evolution.

So we're really looking at this as continuum and investing through that type of disruption.

I mean, it's not easy, it's not without tension.

So while there's tons of opportunity, we are flagging.

We've talked about this previously, about this potential tension that can come with that.

In twenty twenty six.

We're seeing over the last few weeks we get a lot of pullbacks, right, We see a lot of optimism.

What we're seeing is investor's fear of missing note right, really wanting the innovation, but also every now and then pivot into a risk off.

And that tension is something that we think is going to persist through twenty twenty six.

So ride the volatility, expect the volatility when you're thinking about the fundamental analyiso only briefly look Michael Berry basically having to shut up shop on his hedge fund.

It would see the reporting is leading us there on his negative bets on some of these companies.

You think it's impossible.

Briefly, nothing's impossible, yeah, right, and yes it does make for good dinner side conversations.

What we're like and the way we approach this is we look very much the theme holistically, right, It's one of the reasons why we say picking single individual winners and losers is really tough when you're talking about investing through disruption.

We really look at benchmark industries.

That's one of the reasons why, you know, the way we create our work is very much looking at that benchmark approach, understanding that as these systems evolve, you're going to find new connections, new correlations, and that's really a way to continue investing through disruption without that nability, vulnerability.

And amazing analysis.

Go read it and Doherty a Bloomberg intelligence that does it for this edition of Bloomberg Tech.

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