Latest / Bloomberg Intelligence / Meta to Spend Up to $27 Billion on Nebius AI Infrastructure

Transcript

Meta to Spend Up to $27 Billion on Nebius AI Infrastructure · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
• 0:10
  Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
• 0:14
  Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg
• 0:17
  Speaker 1: Business App. Listen on demand wherever you get your podcasts,
• 0:21
  Speaker 1: or watch us live on YouTube.
• 0:24
  Speaker 2: Boy, the tech news continues to come fast and hear us.
• 0:26
  Speaker 2: Let's get the latest with Ed Ludlow, be tech co host.
• 0:29
  Speaker 3: He's out there somewhere in California getting into trouble in
• 0:31
  Speaker 3: Silicon Valley. And I want to start with the meta
• 0:34
  Speaker 3: platforms paying twenty as much as twenty seven billion dollars
• 0:37
  Speaker 3: for cutting edge artificial intelligence infrastructure from Nebuas Group. Nebbus
• 0:41
  Speaker 3: Group stocks up thirteen percent today, all right, not bad?
• 0:45
  Speaker 2: Up fifty two percent. You're to date, okay, better up.
• 0:48
  Speaker 3: Three hundred and forty five percent on a trailing twelve
• 0:50
  Speaker 3: month basis.
• 0:52
  Speaker 2: Ed, let's just start with the basics. What is Nebbius Group.
• 0:54
  Speaker 3: What's going on over there?
• 0:55
  Speaker 4: Yeah, it's what we call a neo cloud. It's a
• 0:58
  Speaker 4: fancy way of saying it's a data set that just
• 1:01
  Speaker 4: runs AI workloads. Because prior to this point, lots of
• 1:05
  Speaker 4: data centers have done all kinds of software and storage,
• 1:09
  Speaker 4: and you know, Meta is pursuing this kind of everything strategy.
• 1:13
  Speaker 4: Meta is not a cloud computing company, but it has
• 1:16
  Speaker 4: a lot of compute demand, and so it's buying loads
• 1:19
  Speaker 4: of chips from in Video and AMD for its own
• 1:21
  Speaker 4: data centers. It's working on its own chips in house
• 1:23
  Speaker 4: that go into its own data centers, and then it's
• 1:25
  Speaker 4: basically leasing or renting capacity from a number of other players.
• 1:29
  Speaker 4: The difference with this Nebyis deal is like it's really big.
• 1:32
  Speaker 4: You know, it's twenty seven billion dollars over five years,
• 1:35
  Speaker 4: but upfront twelve billion dollars next year for dedicated capacity.
• 1:40
  Speaker 4: And that tells you that they've moved very quickly, and
• 1:42
  Speaker 4: it's a very serious arrangement.
• 1:44
  Speaker 5: And it adds to it's three billion dollar deal with
• 1:47
  Speaker 5: Nebus last year as well. You talk about Meta really
• 1:50
  Speaker 5: diversifying and not betting on just any one company, right,
• 1:54
  Speaker 5: I mean, it's kind of spread its chips everywhere.
• 1:57
  Speaker 1: Yeah.
• 1:57
  Speaker 4: The idea is that in an environment where you are
• 2:00
  Speaker 4: supply constrained, in other words, the demand that a company
• 2:03
  Speaker 4: has for compute power is greater than what exists in
• 2:07
  Speaker 4: the real world. They have found that diversifying is the
• 2:10
  Speaker 4: best way to get the compute needed for different workloads.
• 2:14
  Speaker 4: Meta is a very big and serious buyer of video chips.
• 2:18
  Speaker 4: You know, it's in the top five easily. But there
• 2:21
  Speaker 4: is benefit to designing at scale, Like the economics of
• 2:24
  Speaker 4: designing your own chips makes sense, particularly when it's for
• 2:27
  Speaker 4: running internal workloads. Right when I visited Meta's chip lab
• 2:31
  Speaker 4: last week, one of the chips they've come up with,
• 2:33
  Speaker 4: for example, trains the algorithm that does ranking and recommendations.
• 2:38
  Speaker 4: In other words, how ads show up in your timeline.
• 2:40
  Speaker 4: That's like very specific to them, and so it's paid
• 2:43
  Speaker 4: off the investment so far.
• 2:45
  Speaker 2: I'm just looking at the graph of this chart from DEBS.
• 2:48
  Speaker 3: I mean, when public in twenty eleven, kind of bouncing
• 2:50
  Speaker 3: around not doing anything, and then around the February of
• 2:54
  Speaker 3: twenty twenty two, at the price of twenty dollars a share,
• 2:56
  Speaker 3: people said, oh, this is an AI play, so we
• 2:59
  Speaker 3: go from twenty to one hundred and twenty eight dollars.
• 3:01
  Speaker 2: Where was that call ed Ludlow.
• 3:03
  Speaker 4: Well, there's also a history part of it, which is
• 3:06
  Speaker 4: that it was previously associated with the or, a property
• 3:10
  Speaker 4: of Yandex, which is a Russian cloud computing company. And
• 3:14
  Speaker 4: so you know, just simply due to what's the word
• 3:18
  Speaker 4: and I'm looking for, I guess sanctions. You know, it
• 3:23
  Speaker 4: changed itself. It is now an Amsterdam based company, so
• 3:25
  Speaker 4: that's a part of it, but it's completely I'm visualizing
• 3:28
  Speaker 4: the chart for our audio audience. But you know that
• 3:32
  Speaker 4: it completely coincides with the birth of the neo cloud
• 3:35
  Speaker 4: and demand specifically the data since that just run ai.
• 3:38
  Speaker 3: All right, here's another story that just recently crossed the
• 3:40
  Speaker 3: Bloomberg trouble again. Big numbers open ai and talks for
• 3:44
  Speaker 3: ten billion dollars joint venture with Pe firms. What's up
• 3:47
  Speaker 3: at that?
• 3:48
  Speaker 4: Yeah, so we've just moved our own version of this story.
• 3:52
  Speaker 4: And what I'm told by sources is that basically it
• 3:57
  Speaker 4: helps a lot for open ai to have some money
• 3:59
  Speaker 4: that's off the back sheet to go out there and
• 4:02
  Speaker 4: find a vehicle a mechanism to sell its software. And
• 4:07
  Speaker 4: so what these guys are doing is they've set up
• 4:08
  Speaker 4: an entity where those private equity companies in the first instance,
• 4:12
  Speaker 4: can go to all of the different kinds of companies
• 4:15
  Speaker 4: that they own and are trying to make better in
• 4:17
  Speaker 4: the classic pees style and say, you know what, why
• 4:19
  Speaker 4: don't you guys use open ai stuff. It's pretty good.
• 4:23
  Speaker 4: And so that gives like open ai a way of
• 4:25
  Speaker 4: going to market, and it gives these private equity firms
• 4:29
  Speaker 4: some exposure to open ai and a mechanism to do
• 4:32
  Speaker 4: business with them that also benefits all of their existing
• 4:35
  Speaker 4: portfolio of investment.
• 4:37
  Speaker 5: Do we think that this is going to be the
• 4:39
  Speaker 5: template that it starts to use more of these off
• 4:41
  Speaker 5: balance sheet adventures.
• 4:44
  Speaker 2: Yeah.
• 4:45
  Speaker 4: I think this is very interesting because like what I
• 4:48
  Speaker 4: hear from time to time across Silicon Valley for all
• 4:50
  Speaker 4: sorts of things is that there is benefit in having
• 4:52
  Speaker 4: multiple entities, be that a geographic split or be it
• 4:56
  Speaker 4: a business line split. And in part because you at
• 5:01
  Speaker 4: scale with enterprises, the open ai Private X story is
• 5:05
  Speaker 4: about selling open AI's platform to different enterprise companies. It's
• 5:10
  Speaker 4: just a sort of old archaic world where it seems
• 5:14
  Speaker 4: like going back to that model is what is in favor.
• 5:17
  Speaker 4: But this news that broke this morning is the first
• 5:20
  Speaker 4: real example I've seen of it. The idea has been
• 5:22
  Speaker 4: spoken about in the corridors for a little while. Stay
• 5:25
  Speaker 4: with us.
• 5:26
  Speaker 5: More from Bloomberg Intelligence coming up after this.
• 5:31
  Speaker 1: You're listening to the Bloomberg intelligence podcast. Catch us live
• 5:35
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 5:38
  Speaker 1: Otto with the Bloomberg Business App. Listen on demand wherever
• 5:42
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 5:46
  Speaker 5: One of the big movers was Dollar Tree, and the
• 5:49
  Speaker 5: outlook here from Dollar Tree was kind of mixed because
• 5:52
  Speaker 5: even though adjusted earnings per share is going to meet
• 5:55
  Speaker 5: the average channelist estimate, the outlook for revenue came in
• 5:59
  Speaker 5: a little bit light. So let's bring in Jen Bartashis.
• 6:02
  Speaker 5: She is our senior analyst covering retail staples and packaged foods,
• 6:05
  Speaker 5: and Jen, we've seen these value retailers do pretty well
• 6:10
  Speaker 5: in this current environment with a lot of higher income
• 6:13
  Speaker 5: consumers trading down. Yet this sales view did miss the
• 6:17
  Speaker 5: average analyssessment. Is that because analysts investors have gotten a
• 6:21
  Speaker 5: little bit ahead of themselves when it comes to the outlook.
• 6:24
  Speaker 6: Here, Well, it's a it's a good question, Scarlett, you know,
• 6:27
  Speaker 6: with regards to the overall revenue growth for Dollar Tree,
• 6:31
  Speaker 6: you know, last year was a real transition year for them.
• 6:33
  Speaker 6: They shed the family dollar unit, they're refocusing, they've been
• 6:36
  Speaker 6: you know, investing in the business, but that trade down
• 6:39
  Speaker 6: customer doesn't come all that often into stores. And so
• 6:42
  Speaker 6: while they bring a much higher basket and they're taking
• 6:45
  Speaker 6: their big, their big adopters of that higher price point
• 6:49
  Speaker 6: of three to five dollars, they're just not coming in
• 6:52
  Speaker 6: as frequently as kind of the core low income consumer.
• 6:55
  Speaker 6: And so I think the conservative view on the top
• 6:58
  Speaker 6: line is that there are a lot of things going
• 6:59
  Speaker 6: on right now. You've got, you know, fuel prices are
• 7:03
  Speaker 6: on the rise, You've got consumers who are her stretched,
• 7:05
  Speaker 6: and you've got a mixed behavior with regards to the
• 7:08
  Speaker 6: types of households that are coming into Dollar Tree.
• 7:11
  Speaker 2: So what's what's Dollar Tree and the other dollar stores?
• 7:14
  Speaker 3: How are they adjusting their strategies at all?
• 7:17
  Speaker 6: So with regards to strategy, they're you know, one of
• 7:21
  Speaker 6: the things that they really ran into trouble with and
• 7:23
  Speaker 6: this is why they went beyond that one dollar price
• 7:25
  Speaker 6: point back in twenty twenty two, was being able to
• 7:28
  Speaker 6: have a compelling variety of merchandise in the stores. So
• 7:32
  Speaker 6: the multi purchase, the multi price point strategy that Dollar
• 7:35
  Speaker 6: Tree is rolling out has been really effective for them
• 7:38
  Speaker 6: because it gives people, you know, slightly more choice of
• 7:43
  Speaker 6: what's in the store, and they can offer more compelling value,
• 7:46
  Speaker 6: So that's been a tactic that's really paying off. It's
• 7:49
  Speaker 6: just a question of you know, they're still in the
• 7:51
  Speaker 6: process of rolling that out to all of their stores,
• 7:54
  Speaker 6: so it's not everywhere yet, and so they're getting that
• 7:57
  Speaker 6: bump as stores are adopting these these these higher price points.
• 8:01
  Speaker 6: But once they're in all the stores, the question is
• 8:04
  Speaker 6: how sustainable will it be, So that's one of the
• 8:06
  Speaker 6: things that everyone is looking for.
• 8:09
  Speaker 5: And jen one thing we know about Dollar Tree is
• 8:11
  Speaker 5: that it has done better in terms of operations and
• 8:15
  Speaker 5: of performance because of this decision to divest its family
• 8:19
  Speaker 5: dollar chain, which was begun last year. How far long
• 8:22
  Speaker 5: that process is dollar Tree is it? You know, halfway done,
• 8:26
  Speaker 5: two thirds done, one hundred percent done.
• 8:28
  Speaker 6: So the divestitures is done. The question is the refocusing
• 8:33
  Speaker 6: on their own internal operations. So you know, with regards
• 8:36
  Speaker 6: to last year, they started to pay a little bit
• 8:38
  Speaker 6: more attention. They're really working at improving their supply chain efficiency.
• 8:42
  Speaker 6: They're working at improving store level productivity. They've invested in
• 8:47
  Speaker 6: wages in the stores to help have more employees there
• 8:50
  Speaker 6: at the right times and to provide the right amount
• 8:53
  Speaker 6: of customer service. But it's still early days. For their
• 8:56
  Speaker 6: overall transformation of the company now that it's back to
• 8:59
  Speaker 6: being just a single bit, and so it will probably
• 9:02
  Speaker 6: extend through this year that we see more of those
• 9:05
  Speaker 6: tactics start to take hold and to have a real
• 9:07
  Speaker 6: material impact on the business overall.
• 9:11
  Speaker 2: Let just Target, What is Walmart? What are they doing
• 9:13
  Speaker 2: in response here?
• 9:15
  Speaker 6: What's really interesting it, Paul, is that Dollar General as
• 9:20
  Speaker 6: a direct competitor in the dollar store space. They talk
• 9:23
  Speaker 6: about having over five hundred items that are at the
• 9:25
  Speaker 6: one dollar price point or below, so they're actually undercutting
• 9:28
  Speaker 6: Dollar Tree on some of that value play. If you
• 9:32
  Speaker 6: go into a Walmart or a Target, when you first
• 9:34
  Speaker 6: walk in, they have kind of those value alleys where
• 9:37
  Speaker 6: they have low priced items right at the front where
• 9:40
  Speaker 6: you can see them. So everybody has a strategy to
• 9:43
  Speaker 6: try to show value through some variety that's at very
• 9:47
  Speaker 6: low price points. But then when you get to the
• 9:49
  Speaker 6: big box guys there a competitive advantage really is in
• 9:52
  Speaker 6: the breadth of assortment that they carry, and if they
• 9:55
  Speaker 6: can be compelling on value across the store, that puts
• 9:58
  Speaker 6: them in a good position.
• 10:01
  Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this.
• 10:07
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 10:11
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 10:14
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 10:17
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 10:21
  Speaker 3: We have a great guest here, Michelle coursmo Joins, the
• 10:23
  Speaker 3: CEO of the National Restaurant Association.
• 10:26
  Speaker 2: Michelle, thanks so much for joining us here.
• 10:29
  Speaker 3: You know, one of the industries that was thought to
• 10:32
  Speaker 3: be impacted or could be impacted severely by some of
• 10:35
  Speaker 3: the change in immigration policy from this administration was the
• 10:38
  Speaker 3: restaurant business.
• 10:40
  Speaker 2: Has that in fact happened.
• 10:43
  Speaker 7: Well, it's interesting, Paul, when you look at last year,
• 10:47
  Speaker 7: we had some growth, but not really strong growth. It
• 10:50
  Speaker 7: was four point six percent nominal growth in less than
• 10:54
  Speaker 7: one percent full time growth. And we know that that
• 10:57
  Speaker 7: has a lot to do with the fact that consumers
• 10:59
  Speaker 7: were a lit little bit more weary. The immigration policies
• 11:03
  Speaker 7: and the immigration disruption definitely made a difference in restaurant business,
• 11:08
  Speaker 7: particularly people coming to sit down in family dining. You know,
• 11:12
  Speaker 7: it's interesting when you think about immigration, because one out
• 11:16
  Speaker 7: of every five people that work in restaurants was born
• 11:19
  Speaker 7: outside the US. Many of those are citizens, many of
• 11:22
  Speaker 7: those obviously are fully documented and able to work. But
• 11:27
  Speaker 7: in terms of an immigrant population, the restaurant industry very
• 11:30
  Speaker 7: much represents that.
• 11:33
  Speaker 3: So what are your operators telling you about, Maybe just
• 11:36
  Speaker 3: their access to the ability to attract and retain labors
• 11:41
  Speaker 3: have been a challenge for them.
• 11:42
  Speaker 7: Yeah, it's always tough to find and retain the best labor.
• 11:46
  Speaker 7: We're thinking about the value of working in restaurants as
• 11:50
  Speaker 7: people are considering do they go and work in healthcare?
• 11:52
  Speaker 7: Do they go and work in education? And people need
• 11:55
  Speaker 7: to know that you can find a great career in restaurants.
• 11:57
  Speaker 7: In fact, there's a lot of opportunity that this eight
• 12:00
  Speaker 7: out of every ten restaurant managers started an entry level
• 12:05
  Speaker 7: and so we know, I'm sorry, nine out of ten
• 12:07
  Speaker 7: started an entry level and eight out of ten owners
• 12:09
  Speaker 7: started in entry levels. So we know that there's a
• 12:11
  Speaker 7: lot of upward mobility. So finding people to come in
• 12:15
  Speaker 7: and then building that upward mobility is always a priority
• 12:17
  Speaker 7: for restaurant operators.
• 12:19
  Speaker 2: Michelle, talk to us about tariffs.
• 12:21
  Speaker 3: We're going into year two of this uncertain tariff regime
• 12:26
  Speaker 3: or situation. How is that impacting the restaurant industry. As
• 12:30
  Speaker 3: the industry figured out a way to kind of just
• 12:31
  Speaker 3: deal with it.
• 12:32
  Speaker 7: Yeah, it's interesting you talk about figuring out a way.
• 12:35
  Speaker 7: It has a little bit normalized that we have some
• 12:37
  Speaker 7: disrupted prices. Food and beverage tariffs have been pretty stable
• 12:41
  Speaker 7: for at least the last six months, and so that's
• 12:44
  Speaker 7: provided some more continuity in terms of pricing. But food
• 12:48
  Speaker 7: price is tough, right. Food prices have been steadily increasing
• 12:52
  Speaker 7: since before the pandemic, and that's something we're watching. So
• 12:56
  Speaker 7: it's often more now about availability. We know we don't
• 13:00
  Speaker 7: have enough cattle herd that exists today to meet the
• 13:05
  Speaker 7: beef demand in the United States, so that has an
• 13:07
  Speaker 7: impact on pricing. So we're seeing those types of activities
• 13:11
  Speaker 7: impact food prices almost more than terriff activity.
• 13:14
  Speaker 3: Today, I noticed going to restaurants more and more and
• 13:17
  Speaker 3: more signed saying we're going to charge you three percent
• 13:20
  Speaker 3: more if you use a credit card versus cash.
• 13:22
  Speaker 2: And that's a big, big issue.
• 13:25
  Speaker 3: Not for me because I walk around with a lot
• 13:26
  Speaker 3: of cash, but for most people, the younger folks, they
• 13:30
  Speaker 3: would know a fifty dollars both.
• 13:32
  Speaker 2: They tripped over it.
• 13:32
  Speaker 3: So I mean, talk to us about these swipe fees
• 13:35
  Speaker 3: and all that type of stuff.
• 13:37
  Speaker 7: Well, you are one of a quarter of restaurant patrons
• 13:42
  Speaker 7: who uses cash, but the vast majority three quarters are
• 13:46
  Speaker 7: using credit cards. And the US is the last country
• 13:50
  Speaker 7: nation really to have any kind of competition that exists
• 13:54
  Speaker 7: between our credit card carriers, and so without that competition,
• 13:59
  Speaker 7: it allows those carriers to charge what we see is
• 14:02
  Speaker 7: really high swipe fees, costing the average American at least
• 14:06
  Speaker 7: twelve hundred dollars a year because of the swipe fees
• 14:09
  Speaker 7: being higher in the US than say they are in
• 14:11
  Speaker 7: Europe or in Asia. And so that's something that restaurant
• 14:16
  Speaker 7: operators need to figure out how to account for, is
• 14:18
  Speaker 7: how do you manage three, sometimes four or five percent
• 14:22
  Speaker 7: depending on a credit card swipe fees. And so those
• 14:25
  Speaker 7: extra charges are helping people understand what a difference it
• 14:28
  Speaker 7: makes when you're using a credit card as supposed to
• 14:30
  Speaker 7: paying cash.
• 14:31
  Speaker 3: So what's the longer term trend, Michelle, just in terms
• 14:34
  Speaker 3: of people eating home versus eating out? I know that
• 14:36
  Speaker 3: pandemic upended a lot of people's kind of how.
• 14:40
  Speaker 2: They do things. What's the longer term outlook?
• 14:43
  Speaker 7: Well, long term outlook for restaurants is always great. In fact,
• 14:46
  Speaker 7: even today we talk about the numbers in our State
• 14:50
  Speaker 7: of the Industry survey that shows that seven out of
• 14:52
  Speaker 7: ten Americans are saying they'd spend more money in restaurants
• 14:55
  Speaker 7: if they had more disposable income. So you know that
• 14:57
  Speaker 7: the demand is there. There's always a pent up demand,
• 15:00
  Speaker 7: and people really like the taste and the flavor profile
• 15:04
  Speaker 7: for restaurants. The convenience, the speed, with lives getting faster
• 15:08
  Speaker 7: and busier, restaurants are definitely a win. The other thing
• 15:12
  Speaker 7: that's great about restaurants is that it's a pretty competitive industry,
• 15:15
  Speaker 7: and that competition causes each restaurant to figure out how
• 15:18
  Speaker 7: they can do better to get those customers in the door,
• 15:21
  Speaker 7: So the quality of the food is going up. Pricing
• 15:24
  Speaker 7: a stain competitive restaurant industry is a great business.
• 15:27
  Speaker 6: To be in.
• 15:29
  Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
• 15:34
  Speaker 1: and anywhere else you get your podcasts. Listen live each
• 15:37
  Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com,
• 15:41
  Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.
• 15:45
  Speaker 1: You can also watch us live every weekday on YouTube
• 15:49
  Speaker 1: and always on the Bloomberg terminal