Microsoft, Musk Race to Reinvent the AI Chip

>> "BLOOMBERG TECH" IS LIVE FROM THE HEART OF SAN FRANCISCO, WITH ED LUDLOW. ED: THIS IS "BLOOMBERG TECH." COMING UP, MICROSOFT WANTS TO RELY LESS ON OUTSIDE CHIPS TO POWER ITS AI AMBITIONS AND ROLLOUT MAIA CHIPS. PLUS, MICROSOFT IS NOT THE ONLY COMPANY HE WANTED TO DEVELOP NEW TIPS ELON MUSK TESTING MANY NEW DESIGNS A YEAR. APPLE READY TO UNVEIL ITS NEW SMART HOME STRATEGY, SEEKING TO PLUG A MAJOR HOLE IN ITS ECOSYSTEM GET HAPPY MONDAY. WELCOME TO THE WEEK. I'M GOING TO START IN THE CHIPS SPACE. THERE'S A REPORT OUT OF CHINA ABOUT THE DOMESTIC MEMORY NAMES, TSMC COMING WITH A NEW GENERATION OF CHIPS, PUTTING PRESSURE ON A MEMORY STOCKS AND THE UNITED STATES. MACRON, CASE IN POINT, NOT MUCH TO WRITE HOME ABOUT. THE PHILADELPHIA SEMICONDUCTOR INDEX IS TRACKS ME DOWN FOR A FOURTH STRAIGHT SESSION. THERE HAVE BEEN SOME PRESSURE WHILE TECH OVERALL HAS BEEN THE A RECORD HIGHS. WE WILL GET TO THAT IN A LITTLE BIT HIT OUR TOP STORY TODAY, MICROSOFT IS ROLLING OUT ITS LATEST HOMEGROWN AI CHIPS. THE MAIA 300 AT GIGAWATT SCALE TO RELY LESS ON CHATGPT. THE BASICS OF THE MAP AND THEIR PLAN TO DEPLOY IT AT SCALE. >> THIS GENERATION IS A SYSTEM ON A CHIP, DESIGNED FOR AI TAX, FOR AI INFERENCE, NOT ABOUT TRAINING NEW MODELS, BUT ABOUT EXISTING ONE SUFFICIENTLY. AMAZON THINKS THEY CAN PLUG ENOUGH TO MAKE A MEANINGFUL DIFFERENCE ON COST AND PERFORMANCE. ULTIMATELY, THIS WILL BE BACKING MOST OF THEIR AI WORKLOADS INTERNALLY. ED: WHAT MICROSOFT SAID THE LEADING GPU SYSTEMS, AND PRETTY SURE THEY ARE TESTING NVIDIA'S BENCHMARK AS THE KIND OF COMPARATOR. WHAT IS THE BACK STORY ON MICROSOFT'S CHIP PROGRAM? ALL OF THE HYPERSCALERS HAVE CUT THE PROGRAMS. DIFFERENT PLAYERS BUT DIFFERENT INFERENCES ON COMPUTE AWAY FROM NVIDIA. SOME OF THEM PUT A FOCUS MORE ON THE ECONOMICS, THE TOKEN MIXED -- TOEKENOMICS OF THROUGH PUT. MATT: THIS IS WHERE MICROSOFT HAS LANDED. AMAZON WITH THE ACQUISITION AND TRAINING GOT GOING, SO MICROSOFT WAS A BIT OF A LATE COMER TO THIS. I THINK WHAT PEOPLE WERE LOOKING FOR IN THIS THIRD GENERATION OF CHIPS IS WHETHER IT IS AT SCALE, WHETHER WE WILL START MATURING THESE THINGS. THIS SIGNAL, MULTI-GIGAWATT DEPLOYMENT, THAT'S A TON. THEY PROBABLY ONLY GOT 12 GIGAWATTS IN THEIR DATA CENTER TODAY TO THAT THEY REAL INDICATOR IF THEY WANT TO CONTINUE PUSHING FOR IT, BECAUSE IT BUILDS BETTER MAPS FOR NVIDIA WHEN IT COMES TO EFFICIENCY. ED: IT IS INTERESTING, AGAIN NEAR FRESH RECORD HIGHS ITSELF. I THINK WE NEED TO REMIND THE AUDIENCE, MATT, THAT IT IS AT HYPERSCALE, A HUGE BUYER OF ACCELERATORS OR GPU'S, WORKING ON ITS OWN CHIPS, TRYING TO EXPLAIN THAT SCALE AND WHAT THE COMMITMENT IS FOR DATA CENTERS FOR AI. MATT: THEY ARE SPENDING HUNDREDS OF BILLIONS OF DOLLARS, LIKE THEIR BIG PEERS, AMAZON, GOOGLE, META, CLOSELY FITTING THEM OUT WITH NVIDIA RIGS COMING TO MAKE THE AI CHIP. ONE OF THE INTERESTING THINGS ABOUT THE MICROSOFT ANNOUNCEMENT THIS MORNING AS THEY ARE NOT GOING TO RENT COMPUTING POWER OF THEIR CHIP TO THIRD PARTIES, SO THERE'S ENOUGH INTERNAL DEMAND FOR THINGS LIKE COPILOT, GITHUB, THAT THEY CAN USE THE CHIPS TO SATISFY SOME OF THAT WORK, AND SAVE SOME OF THOSE NVIDIA PRESSES CHIPS FOR CUSTOMERS. ED: THAT'S INTERESTING, META HAS A SIMILAR STRATEGY COMMITS ABOUT INTERNAL WORKLOAD. MICROSOFT VERY NEAR RECORD HIGHS. THANK YOU VERY MUCH TO BLOOMBERG'S MATT DAY. FRESH MORNING OF THE FLOOD OF MONEY INTO AI. BROADCOM CEO'S SAYS SOME INVESTORS HAVE NO CLUE WHAT THEY ARE BETTING ON, AND HE COMPARED THE FRENZY TO A CASINO. THERE ARE SIGNS THE MARKET IS GETTING A LITTLE MORE CAUTIOUS. INVESTORS ARE NOW DEMANDING HIGHER RETURN THAN TAKING A HARDER LOOK AT THE RISK BEHIND AI FINANCING. >> THE MARKET HAS SPOKEN, AND IT'S NOT A BAD THING, BECAUSE NOW PEOPLE ARE ASKING FOR HIGHER RETURNS. ALSO LOOKING AT STRUCTURES, AND THEY ARE MAKING SURE THAT WHATEVER MONEY IS NOW BEING WHO HEARD INTO THE WHOLE AI ECOSYSTEM WILL LEAD TO SOME LONG TERM -- R.O.I., THAT CAN BE DISPUTED BACK TO DEBT OR BOND OR EQUITY HOLDERS. ED: SO STARTING THE WEEK, THE NASDAQ 100 LOWER, STILL NEAR RECORD HIGHS AFTER A FOURTH STRAIGHT WEEKLY GAIN LAST WEEK. AND HEADING INTO EARNINGS SEASON, THERE'S THIS INTERESTING SET UP IN TECH. DESPITE THIS RALLY, THE SECTOR NOW TRADES AT THE BIGGEST DISCOUNT TO ITS OWN HISTORICAL EVALUATIONS OF ANY GROUP IN THE S&P 500. THAT LINES UP WITH RESEARCH FROM FIDELITY, WHO SINCE THE SUMMER REALLY HAS BEEN WRITING THAT TECH HAS BEEN DRIVEN BY RISING EARNINGS EXPECTATIONS, NOT RISING VALUATIONS. I'M REALLY GLAD TO SAY SHE'S BACK WITH US HERE ON "BLOOMBERG TECH." THAT SEEMS LIKE THE MATH HERE, AND THE CALCULUS IS EARNINGS, VALUATIONS, AND YOU BEEN WRITING A LOT ABOUT THAT SINCE JULY, REALLY. WHERE ARE WE AT? >> YEAH. IT IS FAIRLY RARE TO SEE A 30% MULTIPLE CONTRACTION OVER IN A YEAR. WHEN YOU LOOK FROM THE 1990'S, THE TECHNOLOGY SECTOR HAS EXPERIENCED LESS THAN 5% OF THE TIME. THE INTERESTING PART YOU HIGHLIGHTED, YOU KNOW, THE STOCK MARKET IS A DISCOUNTING MECHANISM, AND TECHNOLOGY STOCKS HAS A VERY CLEAR RELATIONSHIP WHEN YOU LOOK FOR THE DATA. THERE'S A MULTIPLE TRANSACTION, AND THEN TRADING AT THE S&P 500, AT THE BOTTOM QUARTILE FOR THE HISTORICAL RANGE SINCE THE 1960'S. WHEN YOU SEE THAT, IT FUELS YOUR RISK REWARD, MEANING THE BIGGER MULTIPLE COLLECT -- CORRECTION, THE MORE LIKELY THE STOCKS ARE TO OUTPERFORM. THAT IS EVEN TRUE IS EARNINGS DECLINE, RIGHT? SO IF YOU LOOK AT ANY TIME YOU SEE MULTIPLE CORRECTIONS LIKE THIS, ESPECIALLY MOST OF THE TIME IS ON STRONG EARNINGS. SO THE BIGGEST QUESTION I GET, YES, BUT THEY SHOULD BE CHEAP IF WE ARE SEEING PEAK EARNINGS. THERE IS SOME TRUTH TO THAT. THEY HAVE MULTIPLE CONTRACTIONS. THE QUESTION IS, IS MULTIPLE CONTRACTION REFLECTED WITH PEAK EARNINGS? HISTORICALLY, 77% OF THE TIME, OR EARNINGS CONTINUE TO GROW AFTER THE MULTIPLE CORRECTION WE SEEM, AND THEN THAT GETS VERY STRONG THROUGHOUT THE PERFORMANCE, BUT YOU EVEN GET STRONG ODDS ABOUT PERFORMANCE WHEN THE FUN MEETS THE RANGE EVEN IF EARNINGS DECLINE, WHICH IS KIND OF A LONG-WINDED, QUANTITATIVE WAY TO SAY, LUCK, WHEREVER YOU ARE AFRAID OF IN TERMS OF CAPEX, R.O.I. COME A LOT ABOUT MY BE PRICED INTO THE STOCKS. ED: THE LONG-WINDED, QUANTITATIVE ANSWER IS WHY I LOVE TO HAVE YOU ON THE SHOW, DENISE, DON'T WORRY ABOUT THAT. THIS WAS FRESH ON THE BLOOMBERG THIS MORNING, THIS IS THE TABLE THAT CALCULATES THE PRICING RATIOS, AND THEN IT USES WEEKLY DATA WITH A FIVE-YEAR LOOK BACK. IN THE MAIN POINT IS THAT TECH HAS THE LARGEST DERATING, RIGHT? RELATIVE TO ITS FIVE-YEAR NORM. THAT IS AHEAD OF EARNINGS. THAT IS WHY WE ARE TALKING. THERE ARE STRONG FUNDAMENTALS. SO EVERYONE'S EXPECTATIONS, YOU CAN SEE OUTPERFORMANCE IN TECH GOING FORWARD. IS THAT WHAT YOU SEE? DENISE: CERTAINLY THE RISK-REWARD IS HUGE. ONCE YOU SEE THAT MULTIPLE CORRECTION, THAT IS USUALLY A BETTER SIGNAL THAN SOME NOISE, RIGHT? THE MARKET ALMOST ALWAYS GET THAT RIGHT FROM THAT PERSPECTIVE. THAT EARNINGS CONTINUES TO GROW, THE VALUATIONS SUPPORT MORE OFTEN THAN NOT PRICES IN A FAIR AMOUNT OF BAD NEWS. IT IS KIND OF A CAN STILL CLIMB THE WALL FOR IT, RIGHT? AND I THINK THAT'S TRUE FOR THE OVERALL STOCK MARKET, BUT I THINK TECHNOLOGY LOOKS MORE LIKE LEADERSHIP WHEN YOU LOOK AT THE DATA, WHEN YOU LOOK AT THE GOVERNMENT DATA IN TERMS OF SPENDING AND TECHNOLOGY, AND THEY DO BREAK IT OUT. WE HAVE DATA CENTERS GOING BACK TO 2020 COULD WHEN YOU LOOK AT IT, YES, IT IS FLOWING FROM A SECOND DERIVATIVE PERSPECTIVE, AND THAT IS EVEN ON THE JUNE, TO ACCOUNT FOR THE GDP DATA, AND IT IS PROBABLY GOING TO SLOW DOWN FURTHER. SOME EQUITY INVESTORS WOULD SAY THE SECOND DERIVATIVE SLOWDOWN IS HERE. THAT HAS NOT BEEN A PROBLEM FOR THE STOCK IS LIKELY, BECAUSE THE VAST MAJORITY OF SLOWDOWNS IN TECH CAPEX, BECAUSE IT HAS BEEN A SECULAR TREND, DON'T END IN A CONTRACTION. IN FACT, THE BETTER THE STARTING POINT EVEN IN A SLOWDOWN, THE LIKELY TECHNOLOGY STOCKS CAN OUTPERFORM. WHICH KIND OF GETS BACK TO, BY THE TIME YOU SEE THE DATA, THE STOCK MIGHT HAVE ALREADY DISCOUNTED IT, HISTORICALLY. ED: YOU'RE TALKING ABOUT, AND YOU BEEN WRITING ABOUT, HOW IMPORTANT TECH HAS BEEN TO THE U.S. ECONOMY, AND IN THAT ANSWER, YOU ARE SEEKING TO WHAT IS HAPPENING WITH THAT SPENDING WOULD SLOW DOWN. WHAT ARE SOME OF THE HEADWINDS IN YOUR MODELS FOR THE TECH SECTOR, RIGHT? WHAT IS SOMETHING THAT WOULD FACILITATE A SLOWDOWN IN THE SPENDING? DENISE: YOU ARE ALREADY SEEING THE SLOWDOWN, SO I DON'T EVEN THINK WE HAVE TO INDICATE WHETHER OR NOT IT IS GOING TO SLOW. IT IS HERE IN THE ACCOUNTS ALREADY. I THINK YOU SEE A SECULAR TREND FROM TECHNOLOGY SPENDING OR CAPEX BEING 2% OF GDP BACK IN THE 1960'S NOW 7%. SO WE ARE DEPENDENT ON TECH CAPEX, AN INTERESTING PART IS, LOOK, YOU CAN ARGUE IT WILL BE DIFFERENT THIS TIME, BUT WE HAVE THIS HISTORICAL DATA, AND YOU CAN SEE ONE, THIS TREND IS VERY SECULAR, UNLIKE RESIDENTIAL INVESTMENT, WHICH KIND OF GOT US IN THE CROSS HAIRS IN THE FINANCIAL CRISIS, BUT TWO, SLOWDOWNS DON'T USUALLY END IN A CONTRACTION. THERE'S ONLY BEEN FOUR CONTRACTION SOME OF THE FINANCIAL CRISIS, THE DOT-COM BUBBLE, AND TWO RECESSIONS IN THE 1970'S. THAT'S HOW STRONG THE SECULAR TREND IS. WE ARE ALREADY SEEING THAT IN THE DANA. THEN YOU CAN SAY, ALL RIGHT, LET'S ASSESS THE DEPENDENCY OF THE U.S. ECONOMY ON THIS SECULAR TREND, AND WHAT YOU FIND IS THAT WHEN YOU SEE THE SLOWDOWNS, USUALLY TECHNOLOGY, USUALLY CAPEX AND GDP GROWTH TO THE REST OF THE SECTORS ACTUALLY ACCELERATE. WHICH ALMOST TELLS YOU WHAT I THINK WE KIND OF KNOW AS INVESTORS, THE CAPEX IS MORE OFTEN THAN NOT, WHICH IS NOT TO SAY EVERY TIME, A LEADING INDICATOR FOR THE U.S. ECONOMY. SO AS MUCH AS WE ARE AFRAID OF THE FACT THAT THE U.S. ECONOMY IS DEPENDENT ON TECHNOLOGY, IT MIGHT ACTUALLY BE SIGNALING FUTURE GROWTH. ED: DENISE CHISHOLM HAVE OF COME A REALLY GREAT TO HAVE YOU BACK ON THE PROGRAM. THANK YOU VERY MUCH INDEED. COMING UP, NVIDIA AND CISCO ARE TEAMING UP ON ADVICE TO ADDRESS THE AI INFRASTRUCTURE. WE WILL BE JOINED BY CISCO PRESIDENT AND CHIEF PRODUCT OFFICER JEETU PATEL NEXT. THIS IS "BLOOMBERG TECH." ED: OK, CISCO AND NVIDIA ARE PARTNERING TO INTRODUCE A NEW PLUG-IN TO MOVE DATA FASTER. THIS IS AIMED AT BOOSTING NETWORK CAPACITY AS THE DEMAND FOR AI RESEARCHERS. BASICALLY IT A LOT OF AI, YOU ARE IN A SITUATION WHERE YOU HAVE THOUSANDS OF GPU'S, IN THE FUTURE, HUNDREDS OF THOUSANDS OF GPU'S, CAN THEY NEED TO BE ABLE TO MOVE QUICKLY, MOVE AND TALK TO EACH OTHER IN REAL TIME. THERE IS A BRILLIANT VOICE TO DISCUSS THIS TECHNOLOGY, AND THAT IS CISCO PRESIDENT AND CHIEF PRODUCT OFFICER JEETU PATEL. IT IS GREAT TO HAVE YOU BACK ON THE SHOW. I'M TRYING TO GET INTO THE SORT OF BALANCE BETWEEN THE LEHMANS AND THE GOING INTO THE DETAIL OF THE U.S., BUT WHAT IS THE PROBLEM YOU ARE SOLVING FOR HERE? JEETU: THE PROBLEM WE ARE SOLVING FOR, FIRST, IF WE TAKE A STEP BACK AND SAY, WHAT IS HAPPENING RIGHT NOW IN AI? THE AMOUNT OF TRAFFIC THAT IS GOING TO GET GENERATED WITH THESE AGENTS, WHICH IS THE SECOND BIG PHASE OF AI THAT WE ARE IN NOW, ESPECIALLY THESE PERSONAL AGENTS THAT ARE GOING TO BE GROWING EXPONENTIALLY. SO WHAT YOU ARE STARTING TO SEE IS YOU NO LONGER HAVE TO MAKE SURE THAT YOU HAVE THE RACK ITSELF SCALING, BUT NOW WHEN YOU ARE STARTING TO SEE IN DATA CENTERS IS YOU ARE GOING TO NEED TO HAVE HUNDREDS OF THOUSANDS OF GPU'S OVER TIME WITHIN A DATA CENTER THE NEED TO ACT AS ONE FASTER. SO WHAT YOU NEED TO DO IS YOU NEED TO MAKE SURE THAT THOSE TRANSMISSIONS CAN'T JUST HAPPEN WITH WIRE, THEY NEED TO HAPPEN WITH TRANSMITTERS, WHICH BASICALLY THE RIGHT WAY THAT WE GO OVER THE FIBER. SO WHAT WE HAVE DONE IS WE HAVE PARTNERED WITH NVIDIA TO HAVE THE NEXT GENERATION PLUGGABLE OPTICS, A STANDARD CALLED ULTRA DENSE, A PRODUCT CALLED USSB, AND WHAT THAT ALLOWS YOU TO DO IS IT ALLOWS YOU TO HAVE THE EXACT SAME HIGHWAY WHERE YOU CAN ACTUALLY HAVE MANY MORE CALLS GO THROUGH, AND SO IT IS GOING TO HAVE AT LEAST 4X THE BANDWIDTH, AND YOU HAVE 1.3X MORE POWER EFFICIENT THAN WHAT YOU USED TO HAVE. SO MUCH MORE TRAFFIC PATTERNS THAT CAN BE ACCOMMODATED WITH THIS NEW COLLABORATION THAT WE ARE DOING WITH NVIDIA. ED: THERE ARE SO MANY PEOPLE WATCHING THE SHOW THAT WANT TO BE INSIDE THE DATA CENTER, AND, YOU KNOW, IT IS REALLY HARD TO COMPREHEND WHAT IS HAPPENING. THE MODULES CONVERT THAT ELECTRICAL SIGNAL FROM THAT SWITCH INTO LIGHT. THAT IS THE TECHNOLOGY. HUGE AMOUNTS OF DATA TRAVELING OVER FIBER. CRITICALLY IMPORTANT. I'M TRYING TO GET, THE GIGABITS VERSUS THE FIVE GENERATION TECHNOLOGY, THE ONE AT THAT LEVEL. GO WITH THAT A LITTLE BIT. JEETU: YEAH. THE OTHER STANDARDS THAT ARE EMERGING, WHAT THIS ALLOWS YOU TO DO IS, YOU KNOW, IT IS BUILT AND DEPLOYED AND KIND OF SERVICE AND MANAGED IN THE SAME WAY THAT THEY ARE, SO YOU DON'T HAVE TO HAVE A FULL RE-ARCHITECTURE OF THE DATA CENTER. THAT IS A HUGE ADVANTAGE OF THIS KIND OF STANDARD AND THIS FORMAT, AND YOU HAVE UP TO, YOU KNOW, 15 LANDS OR 32 LANES OF 400 GIGABYTES PER SECOND -- GIGABITS PER SECOND GOING THROUGH, SO IT IS MORE BAND WITH MUCH FASTER. IF YOU TAKE A STEP BACK, WHAT YOU NEED TO MAKE SURE YOU HAVE IS, VISA SWITCHES WITHIN A DATA CENTER NEED TO TRANSMIT, YOU KNOW, TRAFFIC AT VERY LOW LATENCY, SO THAT YOUR GPU'S DON'T REMAIN IDLE. THAT IS WHAT WE ARE TRYING TO DO OVER HERE IS MAKE SURE YOU ACTUALLY HAVE EXTREMELY FAST TRANSMISSION AT VERY LOW LATENCY AND VERY HIGH-POWERED EFFICIENCY. ED: WHY DOES CISCO NEED TO WORK WITH NVIDIA ON THIS, NVIDIA SPECIFICALLY? JEETU: LOOK, ONE THING THAT YOU HAVE TO KEEP IN MIND IS THIS IS AN ECOSYSTEM PLAY IN GENERAL IN THIS MARKET. IT IS VERY HARD FOR ANY SINGLE COMPANY TO JUST GO OUT AND DO EVERYTHING. WE NEED TO MAKE SURE WE ARE WORKING WITH PARTNERS. AND NVIDIA MAKES GPU'S, THEY MAKE THESE RACK SYSTEMS, AND THEY REALLY GO OUT AND CLICK THE DATA CENTERS AND REMAKE THE NETWORKING THAT GOES OUT AND CONNECTS THESE DATA CENTERS. WE HAVE THESE FIBER-OPTIC MODULES, AND WE WANT TO MAKE SURE THE STANDARDS WE ARE COLLABORATING WITH OTHERS TO DO THAT. AND SO WE ARE REALLY LOOKING FORWARD TO COLLABORATING WITH NVIDIA FOR THE NEST -- WITH NVIDIA. THE NICE PART ABOUT NVIDIA AS WE HAVE A GREAT PARTNERSHIP WITH THEM. WE CAN KEEP LOOKING FOR DIFFERENT AVENUES TO KEEP PUSHING, CHALLENGING THE LIMITS AND KEEP PUSHING THIS FORWARD. ED: RIGHT. YOUR STARTING POSITION WAS AI IS SUPPLY CONSTRAINED, RIGHT? THAT SUPPLY RELATIVE TO DEMAND, I FIND WHERE THE DEMAND, A TOKEN HAS BEEN INTERESTING. THE AGENCY USING 5X THE TOKENS, HUMAN POWER USERS, RIGHT? HOW IS THAT SORT OF EXACERBATING THE PROBLEM THAT YOU ARE TRYING TO SOLVE FOR? JEETU: SO IT IS A VERY INTERESTING PROBLEM THAT WE ACTUALLY FACE RIGHT NOW, WHICH IS AS WE MOVE FROM THIS ERA OF CHATBOTS TO AGENTS, THESE AGENTS ARE FAR MORE CONSUMPTIVE ON NETWORK BANDWIDTH AND EVEN THE HUMANS CONDUCTING THE SAME TASK. IT TAKES ABOUT 500% MORE FOR AN AGENT TO CONDUCT THE SAME TASK COMPARED TO WHAT A HUMAN WOULD TAKE FOR THE SAME TASK. SO WHAT YOU ARE STARTING TO FIND IS A TREMENDOUS AMOUNT OF NEED FOR MORE AND MORE KIND OF TECHNOLOGY INNOVATIONS THAT CAN PUSH THE ENVELOPE, SPECIFICALLY DATA CENTERS. AND SO NOW, WHAT WE ARE AT THE POINT IS TODAY, SUB 2% OF HUMAN BEINGS IN THE WORLD ARE USING AGENTS IN ANY KIND OF POWER USER CAPACITY, AND MY PREDICTION IS THAT WITHIN THE NEXT, I DON'T KNOW, 15 MONTHS OR SO, YOU PROBABLY HAVE 30% TO 40% HUMAN USE THESE AGENTS AND A POWER USER CAPACITY. SO THERE WILL BE AN EXPONENTIAL RISE BUT IT WAS 2% OF HUMANS USING THESE AGENTS, WE ARE STILL COMPLETELY SATURATED SUPPLY COULD YOU HAVE TO MAKE SURE YOU DON'T JUST BUILD MORE DATA CENTERS, YOU MAKE THE EXISTING DATA CENTERS MORE -- ED: LET ME JUMP IN ON THAT. USCP, YOU HAVE TO DISCUSS THE ECONOMICS. THE TECHNOLOGY WORKED WITH ON A VIDEO HOW DOES THAT CHANGE THE SPEED TO GET SOMETHING ONLINE BUT ALSO THE ECONOMICS OF RUNNING THAT CENTER? JEETU: THE TOTAL COST OF OWNERSHIP ACTUALLY KEEP GOING DOWN, AS YOU START TO THINK ABOUT COST OF TOKENS. THE COST OF TOKENS ACTUALLY GET FAR MORE EFFICIENT THAN WHAT IT HAS BEEN, AND WHAT YOU ALSO SEE OVER HERE IS THE POWER EFFICIENCY IS 1.3X, SO 1.3X MORE POWER EFFICIENT THAN WHAT YOU HAD, WHICH WOULD HAVE A DIRECT CORRELATION TO WHAT YOUR COST OF TOKENS WOULD BE WITH THIS WHOLE INTEGRATION. 4X MORE BANDWIDTH DENSITY, 1.3X MORE POWER EFFICIENCY, 16 LANES OF GIGABITS OF SCALABLE TRAFFIC, OR YOU CAN GO UP TO 32 LANES. AND SO THOSE ARE THE STEPS. THE KEY POINT OVER HERE, IT IS BUILT, DEPLOYED, SERVICED, AND MANAGED THE SAME WAY AS TODAY PLUGGABLE'S, SO CUSTOMERS CAN GET MORE OUT OF THE ARCHITECTURE OF DATA CENTERS. ED: CISCO CHIEF PRODUCT OFFICER AND PRESIDENT JEETU PATEL, THANK YOU SO MUCH. ELON MUSK WANTS TO SPEED UP DEVELOPMENT AND ONCE HIS COMPANY TO BE THE INDUSTRY AT ITS OWN GAME. WE GO INTO THAT NEXT. THIS IS "BLOOMBERG TECH." ♪ ED: ELON MUSK WAS TO PUT THE CHIP INDUSTRY ON FAST-FORWARD. HIS GOAL, EVENTUALLY, HE SAYS, MAKE CHIPS BETTER THAN ANYONE ELSE. BLOOMBERG HAS THIS STORY. MORE TALKS FROM MUSK ON PARTLY THE TARIFF INITIATIVE, BUT, YOU KNOW, HIS CHIP-MAKING AMBITION, WHAT IS HE SAYING ESSENTIALLY HERE? BOTH HIS AMBITION AND THE REASONS FOR IT. >> WELL, HE OUTLINES THAT HE CURRENTLY KNOWS NOTHING ABOUT CHIPS, BUT HE CAN LEARN THEM VERY QUICKLY. AND HE CONVINCED TESLA AND DATA SKILL CUSTOMIZATION, THEY CAN PRODUCE MORE. ED: HE TALKED ABOUT SOMETHING ABOUT HOW TESLA IS RUN, SPACEX IS WRONG, HE WANTS TO MOVE QUICKLY, SO THERE IS THIS IDEA OF THE HEIR TO RIVER -- THE ITERATIVE PROCESS. IN NORMAL PEOPLE SPEAK, WHAT IS HE TALKING ABOUT? >> HE IS TRANSFERRING BECAUSE COMPANY TO CHIP MAKING. IT IS NOT COMPLETELY FOREIGN TERRITORY FOR THE COMPANY, BUT HE MADE MUCH OF THE FACT THAT WHEN HE WALKS GROUND IN THE CHIP FACTORY, HE WAS SEEING THE SAME EQUIPMENT EVERYWHERE YOU GO, AND HE IS CONVINCED THE WAY TO IMPROVE THE MANUFACTURING PROCESS IS TO HAVE YOUR OWN KIT, SO YOU CAN DO IT BETTER, SIMPLER, FASTER THAN YOUR COMPETITORS. HE IS CERTAINLY PUTTING HIS MONEY WHERE HIS MOUTH IS. HIS FACTORY HAS A NEW INITIAL INVESTMENT OF $16 BILLION. AND THEY WILL GET MORE AS THEY TAKE OVER THE DATA ACROSS THE PLATFORMS. ED: HE DID ACKNOWLEDGE THAT TAKE ONE DESIGN FROM DESIGN TO FABRICATION IN TWO YEARS, HE WANTS TO DO 10. HE SEEMS TO THINK HIS TEAMS ARE CAPABLE OF THAT. KIEL: HE CERTAINLY DOES, AND, YOU KNOW, HE HAS ESTABLISHED HIMSELF IN THESE BUSINESSES. BUT ANYONE WILL TELL YOU THAT IT IS EXTREMELY DIFFICULT TO DO EVEN A PERCENTAGE OF WHAT HE IS PROPOSING ON DOING NOW, AND DOING IT FROM FOUNDING START. THE JURY IS PRETTY MUCH OUT. AND HE DID SAY, IT MAY TAKE US YEARS TO DO THIS. ED: BLOOMBERG'S KIEL PORTER, THANK YOU VERY MUCH INDEED. HYPERSCALERS SHOW NO SIGNS OF SLOWING, ESPECIALLY ON THE AI BUILDOUT, BUT THE COST OF BUILDING DATA CENTERS IS BALLOONING. WE HAVE THIS EXCLUSIVE BREAKDOWN OF THE EXPENSES. THAT IS NEXT. THIS IS "BLOOMBERG TECH." ♪ ED: WELCOME BACK TO "BLOOMBERG TECH." LET'S GET OUT TO NEW YORK WHERE YAHAIRA IS STANDING BY. YAHAIRA: IT IS TIME FOR TALKING TECH. AMAZON COULD BE CLOSING IN ON ANOTHER BIG A IDEA. COMPANY IS IN TALKS TO BUY A STARTUP FOR AROUND $7 BILLION ACCORDING TO THE WALL STREET JOURNAL. THAT COMES AFTER ANTHROPIC WALKED AWAY FROM THE POTENTIAL $6 BILLION DEAL FOR DECART LAST MONTH. PLUS, ANOTHER BIG BET ON CYBERSECURITY BY IONQ. IT IS BUYING A COMPANY FOR UP TO $1.3 BILLION IN STOCK, EXPANDING THE BUSINESS AS COMPANIES PREPARE FOR EMERGING AI AND QUANTUM THREATS. THE DEAL FOLLOWS IONQ ACQUISITION OF CHIPMAKER SKY SKY WATER EARLIER THIS YEAR -- SKY WATER EARLIER THIS YEAR. A CHINESE AI FIRM IS LOOKING TO LEAD A FUNDRAISING ROUND. IT WAS FOUNDED BY A FORMER TOP AI SCIENTIST OVER AT TENCENT. ED: THANK YOU. LET'S TAKE A LOOK AT TODAY'S BIG NUMBER. $30 MILLION. THAT IS THE ESTIMATED COST OF BUILDING A GIGAWATT DATA CENTER IN TEXAS RIGHT NOW. AND IT IS THE COST OF MATERIALS, POWER, AND LABOR -- AND AS THE COST OF MATERIALS, POWER, AND LABOR RISE, THAT NUMBER IS EXPECTED TO GET BIGGER. THE EXPENSES TO BUILD A DATA CENTER IN ABILENE, TEXAS, BASED ON ESTIMATES FROM BLOOMBERG INTELLIGENCE. OUR MANAGING EDITOR IS HERE TO BREAK IT DOWN WITH AS. THE BIGGEST PIECE CONSISTENT WITH THE THEME OF TODAY'S SHOW IS CHIPS. THAT IS A BIG CHUNK OF IT. BREAK DOWN THE $30 BILLION FOR THE GIGAWATT DATA CENTER. WHAT IS IT MADE UP OF? >> YEAH, THAT IS EXACTLY RIGHT. THANK YOU FOR HAVING ME. THE OBVIOUS BIG PIECE IS THE SERVERS, CHIPS, NETWORKING THAT GOES INTO THEM, AND NOT JUST THOSE FANCY AI CHIPS, THE GPUS, TPUS, BUT THE MEMORY CHIPS THAT HAVE SHORT AND COST. THIS WAS REALLY ENLIGHTENING BECAUSE IT SHED LIGHT ON THE OTHER 50% TO 60% OF THE DATA CENTER COSTS, WHICH THE BULK OF IT IS THE LAND. POWER, LAND, THE KIND CONNECTED TO THE POWER GRID HAS GOTTEN UNCONTROLLABLY EXPENSIVE. THE DESIGN, ENGINEERING, CONSTRUCTION OF THE SHELL ITSELF. IT IS A BROAD OVERVIEW OF WHY WE ARE SEEING THESE HYPERSCALERS SPENT $850 BILLION IN A SINGLE YEAR. ED: THIS IS A MUST READ. GO TO BLOOMBERG.COM AND CHECK IT OUT. HOW IT IS PRESENTED, BROKEN DOWN VISUALLY, IT HELPS UNDERSTAND WHAT GOES INTO MAKING A DATA CENTER. THE BIG NUMBER OF $30 BILLION IS GOING TO GO UP. WHERE ARE WE SEEING INFLATION FOR THE BUSINESS OF DATA CENTER CONSTRUCTION? LYNN: WHERE ARE WE NOT SEEING INFLATION, ED? IT IS CERTAINLY BAKED INTO EVERY CATEGORY OF THIS BREAKDOWN. I JUST MENTIONED THAT POWER LAND IS GETTING SUPER EXPENSIVE. THE DESIGNERS, THE ENGINEERS, THE WORKFORCE LABOR IS GETTING VERY EXPENSIVE, THE CONSTRUCTION. I AM TALKING ABOUT THE ROBERTSON WHEELS LIKE COPPER AND CONCRETE AND STEEL ARE THROUGH THE ROOF. AS WE COVER IN THE STORY ITSELF, THE DEMAND FOR GAS, FIRE, POWER GENERATORS, THE TURBINES THEMSELVES THAT MAKE THE ELECTRICITY THAT POWERS THE DATA CENTERS ON-SITE IS SO HIGH THAT THEY ARE TALKING ABOUT A LEAD TIME OF TWO AND A HALF TO I WANT TO SAY 10 YEARS GOING INTO 2035 FOR DELIVERY OF ONE OF THESE THINGS. ED: YOU OPENED THE STORY WAS THE POINT THAT JUST FOUR COMPANIES HAVE EXPECTED SPENDING OF $750 BILLION. I DON'T KNOW WHY BUT IRELAND AND DON'T'S GDP GETS A BIT -- IRELAND AND BELGIUM'S GDP GETS A BIT OF A SHOT. THE SCALE IS ENORMOUS. GIVE US THE BIGGER PICTURE OF WHAT IS HAPPENING ACROSS THE INDUSTRY. LYNN: THAT IS A COMPLIMENT. I THREW THAT IN THERE ON PURPOSE. I WANTED TO GIVE SOME SIZE AND SCOPE BECAUSE THIS IS A BUILD OUT THE WORLD HAS HONESTLY NEVER SEEN BEFORE. I THINK THE HIGHWAY SYSTEM IN THE UNITED STATES IS REALLY THE ONLY ONE PEOPLE HAVE THROWN OUT THERE AS A COMPARABLE INFRASTRUCTURE PROJECT. THE SCALE IS DIFFICULT TO WRAP YOUR HEAD AROUND. SO I WANTED TO GIVE SOME FIGURES. ONE OF THEM WAS THIS IS MORE THAN THE ENTIRE GDP OF IRELAND OR BELGIUM. THE OTHER IS THAT MORE THAN HALF OF WHAT ALL THE COMPANIES IN THE S&P 500 SPEND IN A SINGLE YEAR. ANOTHER ONE WAS YOU COULD CUT A $5,500 CHECK FOR EVERY HOUSEHOLD IN THE U.S. WITH THAT KIND OF MONEY. ED: YES. IT REALLY IS A MUST READ. CHECK IT OUT ON THE BLOOMBERG TERMINAL AND BLOOMBERG.COM. A VISUAL BREAKDOWN OF WHAT $30 BILLION GETS YOU OR WHAT IS NEEDED TO BUILD A GIGAWATT IN TEXAS. THANK YOU VERY MUCH. SOME NEWS FROM OVER THE WEEKEND. ANTHROPIC HAS RELEASED A REPORT ON MORE ROGUE ACTIONS BY VARIOUS GENERATIONS OF ITS CLOUD AI MODELS. RECENTLY, IT'S AI SUBMITTED A FAKE TIP TO PHILADELPHIA POLICE ABOUT A HOMICIDE. IT ALSO SENT IN 20 VISA APPLICATIONS VIA A PUBLICLY AVAILABLE FORM ON THE STATE DEPARTMENT'S WEBSITE. ANTHROPIC SAID THE LATEST CASES HAD MINIMAL REAL-WORLD IMPACT, BUT ANTHROPIC HAS RESTRICTED SOME TYPES OF INTERNET ACCESS FOR ITS AI MODELS DURING TESTING. THE TRUMP AND IT NOW REQUIRES AI COMPANIES TO NOTIFY AFFECTED PARTIES. COMING UP, WE WILL HAVE A CONVERSATION WITH VISTA SHARES ABOUT WHAT THE MARKET IS GETTING RIGHT AND WHAT THE MARKET IS GETTING WRONG WHEN IT COMES TO AI INVESTMENT. YOU HAD SOME VERY INTERESTING COMMENTS AT THE TOP OF THE HOUR ABOUT A LOT OF PEOPLE DON'T HAVE A CLUE WHAT THEY ARE INVESTING IN WHEN IT COMES TO AI RIGHT NOW. THAT CONVERSATION IS NEXT. THIS IS "BLOOMBERG TECH." ♪ WITH EARNINGS SEASON GETTING UNDERWAY AND THE MARKET REASSESSING THE RISKS SURROUNDING AI INVESTMENT, QUESTIONS ABOUT VULNERABILITIES OF THE AI BOOM, THERE ARE MORE HEADLINES. DAVID FETHERSTONHAUGH BRINGS US UNIQUE -- A UNIQUE PERSPECTIVE. DAVID: THANKS FOR HAVING ME. ED: WE KIND OF STARTED THE PROGRAM WITH THIS REFLECTION FROM A CEO SAYING INVESTORS DO NOT HAVE A VERY GOOD GRASP OF WHAT IT IS THEY ARE INVESTING IN IN THE FIELD OF AI. I FOUND THAT TO BE A SURPRISE. DAVID: YEAH. IT KIND OF HITS ON THREE ELEMENTS THAT WE KIND OF COME BACK TO QUITE FREQUENTLY, WHICH THE FIRST IS THERE IS A LOT OF NOISE IN THE MARKET. AND IT IS REALLY SEPARATED. THE WHOLE AI TRADE CAN BE. IT IS THREE LAYERS. ARE THE LABS GROWING, HYPERSCALERS MONETIZED, AND CAN YOU PROVE THE APPLICATION LAYER AND ROI? ALL OF THAT CHANGES DEPENDING ON WHERE YOU ARE IN THE LAYER AS TO THE MIX OF WHAT YOU SPEND IT ON AND THE, BUT WHAT IS INTERESTING ABOUT HIS COMMENTS AS HE IS SAYING BLAIR ONE IS NOT PUBLIC. THE IS OPERATING ON THIS OK CITY -- THIS OPACITY. NO ONE CAN SEE WHAT IS GOING ON. ED: THAT IS RIGHT. JUST A RECAP ON THAT IS THERE WAS A DISCREPANCY WHERE THEY WERE ON A CALENDAR BASIS WITH ARR BUT ALSO WHETHER THEY WERE REPORTING GROSS OR NET REVENUE. WATCH THE EPISODE FROM LAST WEEK. YOU BASICALLY BELIEVE IT IS A GOOD THING WHEN OPENAI AND ANTHROPIC GO PUBLIC. IT MAKES IT MORE TRANSPARENT. DAVID: FOR THE WHOLE ECOSYSTEM, IT CAN DECOUPLE VALUATION AND THE PRIVATE INVESTOR LENDS OF WHAT PEOPLE HAVE AT THEIR ENTRY POINTS BUT FROM AN ECOSYSTEM PERSPECTIVE, THE ROI STORY AS I MENTIONED OUT IS THE LAB ARR NUMBERS. THE SECOND IS THE ROI FROM THE HYPERSCALER PERSPECTIVE. THE THIRD BEING THE MONETIZATION LAYER FOR THE APPS. YOU HAVE THE FIRST LAYER HIGHLY VISIBLE. PEOPLE END UP GRASPING AT THE NEXT LAYER. THE NEXT LAYER IS THE HYPERSCALER STORY. PEOPLE JUST STARTED GETTING COMFORTABLE WITH IT LAST QUARTER. THE NEXT QUARTER WILL ALWAYS BE THE MOST IMPORTANT QUARTER OR THIS QUARTER IS THE MOST IMPORTANT QUARTER. IT WILL ALWAYS BE THAT WAY SO YOU CAN TELL CONSISTENT GROWTH. AS YOU AND YOUR LAST GUEST ALLUDED TO, THE SCALE OF WHAT IS GOING TO SPEND RIGHT NOW IS GETTING PEOPLE A LITTLE BIT NERVOUS, AND THEY WANT TO SEE ROI. IF THEY CANNOT GET ROI FROM THE FIRST LAYER, THERE IS THIS TENSION BEING PLACED ON SOMETHING TAKING TIME TO DEVELOP AND SHOULD TAKE TIME TO DEVELOP, BUT KIND OF GIVING PEOPLE A LITTLE TIME TO PAUSE. ED: JENSEN HUANG, LENA PADILLA CEO, TALKS -- THE NVIDIA CEO, TALKS ABOUT THIS. TO SOME PEOPLE, IT IS IN THEIR MIND YOU ARE IN ONE LAYER OR ANOTHER. IT SOUNDS LIKE TO YOU YOU FEEL COMFORTABLE BEING INVESTED ACROSS THE FIVE LAYERS. AM I READING THAT RIGHT? DAVID: THE WAY WE INTERPRET IT, GREAT FOLLOW-UP TO YOUR LAST SEGMENT, FOR THE MOST PART WE FOLLOW WHERE THE CAPITAL EXPENDITURE IS GOING IN THE INDUSTRY. WHERE IT IS TODAY AND WHERE WE THINK IT IS GOING. ED: IN TERMS OF WHERE IT IS BEING DEPLOYED? DAVID: WHERE IT IS BEING DEPLOYED, EXACTLY. WE WANT TO BE INVESTED IN THE NET EARNERS. PART OF WHAT REINFORCES THE FLYWHEEL OF WHAT I VIEW AS DEMAND AND DELIVERY. YOU WANT TO SEE THERE IS POSITIVE SIGNALS ON MONETIZATION TO GET COMFORTABLE. BECAUSE AS WE SEE THE SCALE OF WHAT IS GOING INTO THE EARNERS OF CAPEX IS SO LARGE, SO PEOPLE ARE STARTING TO LOOK FOR THE ROI ON THE ACTUAL DEMAND SIDE OF THINGS. FOR THE MOST PART, ALL IT CHANGES REALLY IS WHEN YOU MOVE FROM FRONTIER LAB ARR TO HYPERSCALER ROI TO MONETIZATION, -- APP MONETIZATION, IT REINFORCES THE DELIVERY MECHANISMS. EVEN THE DEBATE OF OPEN-SOURCE VERSUS CO-SOURCE IS A DELIVERY MECHANISM. IT CHANGES THE COMPOSITION OF WHERE YOU ARE AND WHAT YOU NEED AS PART OF THE ACTUAL PHYSICAL MAKEUP. IT DOES NOT REPLACE THE NEED FOR THE PHYSICAL MAKEUP. IT IS A REINFORCING LOOP. THAT IS WHY THERE IS CONSTANT TENSION BETWEEN THE SCALE OF WHAT YOU ARE SEEING IN THE INVESTMENT DOLLARS GOING INTO THE INDUSTRY AND PEOPLE MAKING SURE THERE IS AN ACTUAL ROI TO IT. ED: YOU SAID DOLLARS. EVERYTHING WE TALK ABOUT IN THIS CONTEXT IS LARGELY FOCUSED ON WHAT IS HAPPENING IN THE U.S. I AM NOT EVEN TALKING ABOUT CHINA RIGHT NOW. WE HARDLY EVER TALK ABOUT EUROPE, OTHER JURISDICTIONS FROM AN INVESTMENT OPPORTUNITY STANDPOINT. DO YOU LOOK OUTSIDE OF THE U.S.? DAVID: YEAH. CLOSE TO A MAJORITY OF OUR HOLDINGS ARE INTERNATIONAL. ANOTHER PART OF OUR THESIS INITIALLY WHEN WE LAUNCHED THE FUND IN SEPTEMBER OF 2024 WAS AROUND THE IDEA A LOT OF U.S. INVESTORS GET EXPOSURE TO SOME OF THE CRITICAL CROWN JEWELS OF THE AI TRADE AT THE TIME. THOSE ARE THE COMPANIES IN TAIWAN, SOUTH KOREA. A LOT A PROVIDED EXPOSURE TO THAT WAS ON A PROPORTIONAL BASIS OF WHAT WAS GOING INTO A DATA CENTER. WE VIEWED THAT MEMORY WAS THIS VERY STRONG BOTTLENECK. THERE WAS NO REAL PRICE ALLEVIATION HAPPENING. YOU COULD STILL SEE A LOT OF -- THAT WAS BACK IN 2024. A LOT OF IMPROVEMENT IN THE UNDERLYING FUNDAMENTALS OF THE COMPANY HAS BEEN IN PRICE, NOT QUANTITY. A LOT OF MARGIN EXPANSION YOU CAN SEE WITH MICRON. EXCEPTIONALLY STRONG GROWTH MARGINS. WE HAVE BEEN TRACKING A LOT OF THIS GLOBAL SUPPLY CHAIN TRADE AND REALLY FOLLOWING THE DOLLARS OF WHERE WE THINK IT WILL BE TODAY AND NOT ONLY WERE WE THINK IT WILL GO IN THE FUTURE. THAT IS A CRITICAL THING TO UNDERSTAND. ED: THANK YOU FOR JOINING US. DAVID: THANK YOU FOR HAVING ME. ED: BYD IS PLANNING ON GOING A HIRING SPREE IN EUROPE AND INCREASING WORKFORCE TO ABOUT 40,000 PEOPLE BY THE END OF THE DECADE THERE. THIS MAY BE ONE OF THE BIGGEST NON-EUROPEAN AUTO EMPLOYERS IN THE REGION. CHINA AND THE EU AGREED TO CURB THE NUMBER OF HYBRID VEHICLES THAT WOULD BE IMPORTED FROM THE ASIAN COUNTRY. BYD'S EXECUTIVE PRICE PRESIDENT -- VICE PRESIDENT SPOKE WITH BLOOMBERG. >> WE NEED TIME TO UNDERSTAND WHAT THIS MEANS SO WE DON'T HAVE THE DETAILS YET, BUT I WANT TO ENSURE BYD COMMITMENT IN EUROPE IS VERY DEEP, LONG-TERM. WE WILL BUILD OUT NOW. AFTER CHALLENGES RAMP UP, IN Q4 WE WILL START MASS PRODUCTION. WE CAN INVEST MORE IN EUROPE. IN THE PAST TWO YEARS, WE QUALIFIED MORE THAN 250 EUROPEAN VENDORS TO BE BYD GLOBAL VENDORS. NOW WE ARE BUILDING OUR R&D IN EUROPE. SO STEP BY STEP WILL INVEST MORE , NOT ONLY FOR MANUFACTURING, BRINGING JOBS, BUT ALSO INVEST MORE FOR R&D AND REALLY BUILDING THE ECOSYSTEM IN EUROPE. >> BYD OBVIOUSLY HAS AN INCREASING MARKET SHARE IN EUROPE. THE LATEST NUMBERS FOR CHINESE CARS INCLUDING BYD IS ABOUT 12% OF THE SALES OF THE NEW CARS REGISTERED IN EUROPE. WHERE DO YOU SEE BYD GOING FORWARD IN TERMS OF MARKET SHARE IN EUROPE? >> I THINK BYD IS IN THE FRONT RUNNING AND FAST-GROWING HERE BECAUSE A LOT OF CONSUMERS VERY MUCH APPRECIATE BYD IS NOT JUST A CAR BUT A TECHNOLOGY COMING. THEY ENJOY THE CAR, SAVING THE MONEY, ESPECIALLY WITH THE MIDDLE EAST CONFLICT, THE OIL PRICE INCREASING. NOW MORE PEOPLE ARE SERIOUSLY CONSIDERING BYD ELECTRIC CARS. ON THE BACK OF THIS, WE INTRODUCED EIGHT, THE FIRST BYD MODEL IN EUROPE CARRYING THE FAST CHARGING TECHNOLOGY. CAROLINE: YOUR PRICE COMPETITIVENESS IS ONE OF YOUR COMPETITIVE ADVANTAGES. WITH THESE NEW RESTRICTIONS, TARIFFS ON EV'S AND HYBRIDS, ARE YOUR PRICES GOING TO GO UP IN EUROPE? STELLA: YOU SEE WHAT WE ARE DOING NOW. IN THE PASSIVE OF YEARS WE TURNED BYD TO BE A MORE LOCAL COMPANY. ED: BYD'S EXECUTIVE VICE PRESIDENT ALONG WITH CAROLINE FOR THE PARIS MOTOR SHOW. COMING UP IN THE SHOW, APPLE IS SET TO RELEASE NEW SMART HOME DEVICES INCLUDING A SMART LOCK, DOORBELL, AND THERMOSTAT. MORE DETAILS WHEN WE COME BACK. THIS IS "BLOOMBERG TECH." ♪ ED: LET'S GET BACK TO OUR TOP STORY. MICROSOFT'S PLANTED AVOIDANCE CHIPS AT MULTI-GIGAWATT SCALE WHICH IS AN IMPORTANT STEP TO REDUCING ITS RELIANCE ON NVIDIA CHIPS. WE EXPECT ADOPTION TO BEGIN WITH HIGH-VOLUME FIRST PARTY APPLICATIONS WHERE MICROSOFT CONTROLS THE MODELS, SOFTWARE STACK, AND WORKLOAD UTILIZATION, WRITES ANURAG. YOU GOT RIGHT TO THE POINT THAT IT IS FOR INTERNAL WORKLOADS. IT WAS A KEY PIECE IN THE REPORTING, NOT TO GIVE THE CAPACITY TO THIRD PARTIES. ANURAG: YEAH. WHEN YOU THINK ABOUT IT, MICROSOFT HAS A LOT OF AI WORKLOADS COMING IN NOW FOR THEIR OWN BUSINESS, AND YOU HAVE TO FIGURE OUT WHAT TO DO BECAUSE IT COSTS A LOT OF MONEY TO TAKE CARE OF THOSE WORKLOADS. WE ALL KNOW MICROSOFT HAS BEEN ABLE TO ABSORB SO MUCH OF AI WORK WITHOUT SACRIFICING THEIR MARGINS, SO THEY HAVE TO DO WHATEVER THEY CAN TO PROTECT THAT, WHETHER THAT IS MODEL SWAPPING OR WHETHER THAT IS THEIR OWN. ED: SO WITH THE MAIA 300, THIS IS INFERENCE. YOU ARE FOCUSED ON THE COST OF THE TOKEN. TELL ME ABOUT THAT. WHAT YOU ALSO ACKNOWLEDGE ON THE TRAINING SIDE, FRONTIER MODEL SIDE, NVIDIA STAYS AS THE MAIN COMPLETE LEVEL. ANURAG: I THINK THAT IS GOING TO BE THE CASE FOR A WHILE NOW. THE QUESTION THAT IS COMING TO DEMAND IS COMING MORE FROM THE FRONTIER LABS THAN MICROSOFT TRYING TO PUSH IT DOWN THE THROAT OF FRONTIER LABS. IN THE CASE OF AMAZON, THEY HAVE ANYONE TO DIVERSIFY AND CONVINCE ANTHROPIC FOR EXAMPLE TO USE SOME OF THEIR CHIPS TO DO TRAINING WORK AS WELL. WHERE MICROSOFT IS, EVEN IF THEY CAN GET A PORTION OF THE DIFFERENCE ON THEIR OWN SHIPS, IT WILL SAVE THEM A LOT OF MONEY , WHICH IS ONE OF THE MOST IMPORTANT METRICS EVERY INVESTOR IS LOOKING FOR, WHICH FIRMS A FEW YEARS DOWN THE ROAD WILL STILL BE FREE CASH FLOW POSITIVE BECAUSE WERE WE ARE STANDING TODAY, WE DO NOT SEE AN END TO THIS AI CAPEX SPENDING AT LEAST FROM THE HYPERSCALERS AND PROVIDERS. ED: ANURAG, THANK YOU VERY MUCH. APPLE HAS A FEW NEW PRODUCT SET TO RELEASE VERY SOON. THE COMPANY IS LAUNCHING A REVAMPED MACBOOK PRO, AN IPHONE, AND A OF SMART -- AND A NEW LINE OF SMART HOME DEVICES. HERE TO GIVE US THE DETAILS IS MARK GURMAN, WHO LEADS OUR CONSUMER TECHNOLOGY. TOMORROW IS A MOMENT YOU HAVE DONE A LOT OF REPORTING ON. WE KNOW A LOT OF WHAT IS TO COME BUT REMIND US THE EXPECTATION. MARK: YEAH, IT IS A BUSY TIME FOR APPLE. THE IPHONE DUO GOES ON PREORDER THIS FRIDAY. IT GOES ON SALE THE FOLLOWING FRIDAY. AT THE END OF THIS MONTH, THEY ARE GOING TO ANNOUNCE A TOUCHSCREEN MACBOOK PRO AND SIX VERSIONS OF THE LOW-END MACBOOK PRO AND THE REVAMPED IPAD MANY. TOMORROW IS THERE WELCOME EVENT IN NEW YORK CITY. THEY SENT OUT INVITATIONS LAST WEEK. I REPORTED IN RECENT WEEKS THEY WILL ANNOUNCE A NEW SMART HOME HUB, A NEW MINI, AN APPLE TV UPDATE, AND THESE ARE INTERTWINED BY THE SIRI AI. THIS IS QUITE A BIG MOMENT FOR THEIR SMART HOME STRATEGY AND A REBOOT FOR THE STRATEGY. IT HAS BEEN A LONG TIME COMING AND MAY I SAY FINE LOOKING. ED: I WILL ASK THE AUDIENCE TO READ "POWER ON" FOR THE DETAILS ON THE PRODUCTS AND THE RELEASES TO COME. I WANTED TO ASK YOU ABOUT SOMETHING HE REPORTED A COUPLE WEEKS AGO ON WHAT JOHN TERNUS IS BEING DONE DIFFERENT. ONE IS NOT HAVING SUCH A FIXED SCHEDULE ON THE EVENTS THEMSELVES AND THE RELEASE OF PRODUCTS BEING MORE FLUENT. HOW DOES THIS TOMORROW FIT INTO THAT CHANGE OR NOT? MARK: IT DOES NOT REALLY. THIS IS MORE OF A LONG-TERM THING. HE IS TRYING TO MAKE APPLE RUN WITH THE HARDWARE ENGINEERING ORGANIZATION. THERE HAVE BEEN SMALL-SCALE LAYOFFS TO REMOVE PROJECT MANAGERS AND OTHER PEOPLE IN THE ORGANIZATION, TRYING TO REDUCE THE NUMBER OF PEOPLE WORKING ON THESE THINGS, THE NUMBER OF PEOPLE IN THE MIDDLE, MIDDLE MANAGERS SO TO SPEAK, MAKING IT RUN FASTER. SO THAT IS REALLY THE APPROACH HE IS TAKING. ED: VERY QUICK, THE PRODUCT THAT YOU, MARK GURMAN, ARE MOST EAGER TO SEE. MARK: PROBABLY THE IPHONE DUO AND HOW IT IS DOING AND HOW MANY PEOPLE WILL BUY IT AND WHAT THE RECEPTION WILL BE. THAT IS THE ONE TO KEEP AN EYE ON THIS FALL. ED: BLOOMBERG'S MARK GURMAN, THANK YOU VERY MUCH. THERE IS THE NEWSLETTER BUT ALSO DOWN THE PODCAST ON THURSDAYS WHEREVER YOU GET YOUR PODCASTS. POWER ON WITH MARK GURMAN. EVERYWHERE THERE ARE PODCASTS. REAL QUICK BEFORE YOU GO, A ROUGH OPENING WEEKEND FOR AARON SORKIN'S RETURN TO THE FACEBOOK STORY. THE MOVIE BROUGHT IN $5.5 MILLION AT THE U.S. BOX OFFICE, FINISHING FIFTH OVER THE WEEKEND. THE FILM STARS JEREMY STRONG AS MARK ZUCKERBERG AND IS A COMPANION TO THE 2010 HIT "THE SOCIAL NETWORK." $5.5 MILLION U.S. AT THE U.S. BOX OFFICE. I HAVE NOT SEEN IT YET. I WILL. BUT I DON'T KNOW. IF YOU ARE SURPRISED BY THAT, FIND ME ON THE SOCIALS. LET'S TALK ABOUT IT. INTERESTING START TO THE WEEK. THERE IS A LOT TO RECAP FROM THE SHOW. BIG EMPHASIS ON WHAT IS HAPPENING IN THE WORLD OF SEMICONDUCTORS STILL. RECAP THE SHOW AND THE PODCAST. YOU KNOW EXACTLY WHERE TO FIND IT ON THE BLOOMBERG TERMINAL AND THE BLOOMBERG PLATFORMS AS WELL AS ONLINE ON APPLE, SPOTIFY, AND IHEART. THANK YOU FOR BEING WITH US TO START YOUR WEEK IN THE WORLD OF TECHNOLOGY. THIS IS "BLOOMBERG TECH."