AI Trade Bounces Back as Investors Buy the Dip

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Card's issued by JB Morgan Chase Bank and a member of the IC Subject to Credit Approval Terms Apply. Bloomberg Audio Studios. Podcasts, radio, news. Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco. This is Bloomberg Tech. I'm Tim Stenebeck in for Ed Ludlow coming up tech stocks showing signs of stabilizing as did buyers step in to support the battered AI trade. Plus, Anthropics IPO plans get impacted by the post-election sell-off, prompting prospective investors to rethink the company's expected valuation. And we're joined by the CEOs of Lyft and DraftKings to break down their earnings. That's all happening a little later this hour. But we've got to start on markets. This after that historic sell-off that we saw yesterday. With both the NASDAQ 100 and the socks falling the worst in years. It was the worst day for both of those going back to 2020. The NASDAQ 100 fell 6.4% the socks down more than 12%. Dip buyers coming in today, you got to squint though to see them in the context of the sell-off that we saw yesterday. We saw a little bit of good news today. Economic Readings reinforced speculations. The Fed will boost rates in December. But even with today's buying, the NASDAQ 100 this week still down by about four. And a half percent. Let's get more on this market rebound with Bloomberg's Ryan Vastelica. Ryan, what is today's dip buying in the context of what happened earlier this week? Well, I don't think it's all that surprising. Considering how dramatic and widespread the selling was yesterday. It's not super surprising to see some people come in. I've certainly spoken to people who feel like the selling was indiscriminate and excessive. There are values to be had following this weakness. But there continues to be a lot of uncertainty about what the regulatory environment is going to look like in the wake of the midterm elections. And because of that, there's a lot more questions that people have about the outlook for AI spending. And then because of that, the outlook for growth in major sectors like semiconductors. So still a lot of uncertainty out there. I don't think anyone is expecting the volatility to be over. But at least like today, it does seem like something of a bounce. Some people jumping in and seeing some opportunity. But how did the narrative change this week around hyperscalers, chip stocks, and even the neoclouds? Yeah, so the election was so decisive, including in states like Texas, where there's a lot of data center exposure. The idea, because so many candidates ran on moratoriums for data centers or calling for more regulation, a little bit more skepticism about AI overall. There is concern that maybe if they implement new regulations, new legislation that make it harder to build the data centers, that's going to follow through to weaker growth outlooks for the companies that really supply all the components involved in those projects. So chips, optical components, power generation companies, server racks, so on and so forth. Really down the whole supply chain, people thought maybe this really changes the growth outlook there, because while it might be difficult to get federal legislation, so many states really flip so dramatically, and with data centers being such a major theme of the vote, that people say maybe statewide legislation is more likely and that does have implications for some projects that are based in those individual states. Like I said, Texas being probably the most notable example. So as some investors sort of lick their wounds and pick up the pieces after yesterday's sell off Ryan, are they actually starting to think differently about how these companies are going to report earnings in the coming years? Well, we get results from core we on Tuesday, and that's the report that I am most interested to see next week. Just in terms of what they say about what the environment looks like for them, the outlook for them. I do think there's a lot of widespread optimism at the longer term AI narrative, but at least in the short term it does seem like things are a little bit more clouded and uncertain. All right Ryan, just look out there in Chicago. Check out Ryan's reporting on the Bloomberg Terminal and at Bloomberg.com. Let's go to Anthropic now because the company's IPO plans are running into a punishing post-election sell-off, prompting a rethink among prospective investors of the company's expected valuation, which could now be as low as $1.2 trillion. That's according to sources. Here discusses Bloomberg's AI Editor, Seth Figurman, Seth. We were talking one and a half to maybe $2 trillion, just a couple just a week ago at this point. What was it all the election that changed a rethink evaluation here? Well, think about it first. About a month ago, yeah, we were upwards of two trillion was the reporting that we and others had, and I think there have been a rethink even in recent weeks based on its recent financial numbers, whether growth was kind of at the same pace that I had been earlier this year. But yes, I think now there's a thinking back as the broader market kind of resets valuations and targets that Anthropic might also be hit there too. You know, there are prediction markets on whether or not Anthropic will leave an IPO. This was before yesterday's sell-off. Even IPO this year, I should say. But for all of the reporting that you and the team have done, our indication still that the company will make its debut before Thanksgiving. Yeah, I think as of right now, that's still what we are hearing, but I think the decisive moment for them is coming in the coming days. Ultimately, if they want to pull off IPO marketing and a road show and go public before Thanksgiving, they have to decide that in the next few days. This is a company that notably has not aligned itself with the Trump administration over the last few years. There was the dust up between the Department of Defense and Anthropic a few months ago. Is that looking like you could work to the company's advantage now that we're seeing a real change when it comes to Congress come to 2027? I think like a log of a tech company is they're going to have to kind of deal with being between Iraq and the hard place right now. You're right that they've sort of had a better tighter relationship with some Democrats. In fact, they've hired some former Biden administration officials. But Trump is still the president. This is still the regime that they operate under, and I think they've still received a fair amount of scrutiny, even from Democrats in recent months as they prepare to go public, and as their moguls are sort of at the band guard and having safety issues. Seth, we're talking about Anthropic and we have been, but where does all of this leave Sam Altman in open AI? Well, it's fine because now we're hearing these two companies. They're kind of potentially right around the same valuation as one another, and they're both trying to tap the markets for another key fundraiser, one in a private market, one in a public market, and I think they're kind of stretching at this point, potentially the appetite for how much more capital they can get, meet their needs at a moment when the market might feel a little bit more generous. Yeah, we'll be really interesting to see how both of these play out, especially the open AI side. Appreciate it. Seth, always good to see you. Check out Seth and his team's reporting too on the Bloomberg terminal. It has been a bumpy few days for the AI trade, and uncertainty still remains. Our next guest says, though, the fundamental demand for AI is still there. Michael Monahan is a portfolio manager at Founder ETFs. Michael, thanks so much for joining us. I want to start with Anthropic, because you love Founder-led companies. That's your entire thesis. You want to invest in companies that are still led by the people who founded them. Will you be buying into Anthropic's IPO? Thanks for having us, Tim, and that's right. We do invest in Founders. We believe that they have an extra level of vision, execution, and grit, and we will be buying into Anthropic Day 1. It meets our investment thesis. The fact that the companies, the fastest growing company from a billion to 40 billion in the history, we think it's very exciting. We think the revenue growth continues, and we think that this anti-datacenter pushback, which is a luxury belief, we think when the fact that these recently elected politicians need to create jobs for the constituents, we think that there'll be a softening of this anti-datacenter posture. Okay, you call it a luxury belief. Explain what you mean by that. It means that it's a belief that you can have when you don't need to put food on the table, when you don't need to pay the mortgage on your home for three or four kids. But if you're someone who has to pay a mortgage, take care of your children. It's a belief that goes against the wages that you're going to earn as an electrician or a sheet rock hanger or a coal miner to fire a facility to create electricity. I think the challenge, though, Michael, and perhaps we'll see more data in the coming days as the dust settles from this election, is that when it comes to the cost of living, the people who you're talking about, being able to afford putting food on the table, they do associate data centers with increasing their own cost of living. From the perspective of electricity, for example, they've seen their bills go up and they hear about these data centers that are so energy-hungry. How do you square that? Yeah, I think that's been rhetoric that's been pushed by politicians, but I'm not sure that the data supports that most every one of these data centers either brings their own power or pays to increase the capacity on the system they're tying into. So I think the data shows if anything, they're lowering the power costs in the areas that they're going into. So given that you think this is a luxury belief and that you think that these politicians who've spoken out against data centers in some of these states that's just Texas, Ohio, New York, when they do actually have to create jobs for their constituents, you think they'll ease up a little bit. Does that mean that you think the sell-off as a result of this is overdone? That's our viewpoint. We think the sell-off was very overdone. We saw the relief rally on Wednesday, markets like certainty. So once the certainty was put in place, we saw a relief rally. We got some selling going yesterday morning, I know Congressman, I'm sorry, put out this tweet about how she was going to block all data centers. But I think that now that we've worked through that, you've already seen a softening here in Texas from the governor, Tariqo has softened his position. And I think it's the reality that what Americans really want. They want to take care of their family. They want to earn a good living. And I think that progress is going to go forward to help support the voters that just want to take care of their families. And one of the ways they can do that is to lean into this American innovation. And there's also a patriotic element to it. We need to maintain superintelligence dominance to not fall behind another country. What's the risk, what's the risk in your view if the U.S. does fall behind? I think certainly if we don't invest in these data centers, we don't let the magic of capitalism work, we'll fall behind the Chinese and some of the others. And I think that the American middle class has been a great beneficiary of the U.S. being a dominant superpower for at least since World War II, and maybe a bit before that. So I think we want to continue to maintain that position. One of the ways that we can do that is maintain our dominant position in superintelligence. So were you buying yesterday? So we were a buyer yesterday, certainly it was a great opportunity to own some of these generational companies. Like what? So SpaceX, we think is a great opportunity in video, was a great opportunity yesterday. And I also bought more of the fund personally for myself. The fund that follows founder led companies. So we could, you said you've already, you already will be buying into Anthropic on day one. So where we started, as we just heard from Seth, the concerns about the valuation in recent days from this company, or not from this company, from investors I should say. Now thinking 1.2 trillion to 1.5 down from like 1.5 to 2 trillion dollars, is 1.2 trillion dollars where you'd want to buy in in terms of evaluation? Do you think that's a better value for you because it is less expensive and gives more of an opportunity for a runway and growth? Yes, we believe that we were excited to buy the company at 1.5 trillion and I can tell you we're much more excited to have the opportunity to buy it at 1.2 trillion. So we'd be, we were favorable at 1.5 trillion and I can tell you at 1.2 trillion we'll be working as hard as we can with Morgan Stanley and Goldman Sachs to get as much as we can on the opening print. I think a lot of people are concerned that this company grew so quickly in value in the private markets that there's not much opportunity left for growth as a public company. You know, double, triple, quadruple your money from an IPO. What do you say to them? You know, if you look historically, most of these great companies generate most of their value post IPO. I know there's some concern in the recent term about how long some of these have waited, but the growth we think still remains. There's nothing that prevents these to be 5X10X from here looking at the adoption of how fast these companies are growing and how fast they're being pulled into workflows. One of the examples I like to give on where growth could continue. The top 100 law firms build a hundred, excuse me, build 150 billion a year. We think super intelligence is going to go after a big piece of that and that's just one industry. I think there's plenty of industries to keep stacking up to generate additional growth for companies like Anthropic. Michael Monahan, portfolio manager at Founder ETFs, Mike, always great to speak with you. Appreciate your time. Well coming up, systemic funds, cutting tech exposure, stoking a trillion dollar tech stock around, we're going to have more on that next, this is Bloomberg Tech. Systematic funds, slashing tech exposure, deepening the Nasak 100's plunge and wiping out $2.3 trillion in market value as traders at Goldman Sachs say their phones are quote exploding with asks on how far the drop can go. Bloomberg's Natalia Kenny J. Vitch joins us now. Natalia that's the dust settles from yesterday's sell-off and we see a little bit of debying today. What are we learning about the technicals of yesterday's sell-off? Yeah, so it was driven by lots of technical factors. So for example, we know that there's a whole universe of the so-called systematic funds. They don't care about fundamentals, they follow the stock market direction. So whenever we see a big sell-off, the index hits a certain threshold, so they have to sell. They don't manage that much money, but it is important because when they sell, they do it very quickly and the market really feels that. So that is why we saw our selling across CTAs, wall controls, and it got like so. Okay, so how exactly do these funds work and adjust their positions on a day like yesterday or a week like this week? Yeah, so some funds like CTAs, they just follow specific thresholds, whether it's like a big move to the upside or down side, so they have to sell positions. Then we have a big universe, it's called wall control funds, volatility control. So when volatility spikes, they have to get rid of their exposure to, for example, US stock futures and go to cash. We saw a big spike in volatility index yesterday, the biggest move since the COVID-19. So they also had to adjust positions. So, for example, some data points, we saw that wall control funds reduced exposure by about 30 percentage points, and Barclay's Alex Altman is saying that sell-off can continue for the next 24 to 48 hours. So it means that, yes, we do see a rebound today, but they can't adjust positions that quickly. So there is some kind of selling pressure potentially happening today. Hey, just 30 seconds left with you on some of the biggest Wall Street trading deaths, some of whom you've spoken to in the past 24 hours, they urged clients to buy stocks before the elections. What have we heard from them since? Yeah, we have not heard that much, but we know that there was a lot of anxiety in markets, and only one big trading desk from Barclays was really careful. And Alex Altman was saying, you know, these elections will not resolve fundamental questions about the AI trade. So most of them were like super bullish, but we saw him move yesterday. Everybody check out an Italian Kinegevich's story. We barely scratch the surface here. That's Natalia Kinegevich from Bloomberg News. Thanks, Natalia. Well, coming up, lift share is dropping. After posting a surprise loss in its third quarter, shares down about five and a half percent right now. David Risher, the company CEO, joins us next. This is the Bloomberg Tech Minute brought to you by ChachiPT. I'm Carol Maser, Chinese automakers have become famous for turning cars into rolling smartphones decked out with large touch screens and flashy software. Now they're going back to design basics, touting the return of buttons and knobs. Three introduction of physical controls coincides with a broader push by Chinese regulators to overhaul the EV industry's potentially harmful design choices. China's Ministry of Industry and Information Technology proposed updated national vehicle standards that specify certain functions like those that control headlights or change gears should be physical rather than digital. While door handles have been the most high-profile change resulting in millions of cars being recalled, screens have also drawn scrutiny because they can pose a safety risk should they lose power or break. The trend of adding physical controls is not limited to China, with Mercedes-Benz Group also introducing buttons in its new models. 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Thanks so much for joining us on Bloomberg Tech. I want to talk potential M&A because you guys have been on this buying spree over the last couple of years. The European taxi app free now, TBR Global Show Ferring, get UK, you've been integrating them into the platform, some bike businesses too. What is your appetite for further M&A over the next year or two? So we're in a nice position right now and here's why. We have a very strong core business. Bookings are up 17% year on year. As you just mentioned active riders, it's sort of I don't know how many quarters of all-time active high riders we've had, including by the way, even on Halloween a couple days ago, again new all-time highs. So that's a very good core business. It produces about 1.1 billion dollars of cash trailing 12 months. It's about five quarters in a row. So that unlocks opportunities for growth. And as you said, we've purchased a couple of European assets because we were primarily a U.S. company. Now we're a much more global company. And so today, for example, a year after that acquisition, if you're a lift rider, you can open up your phone in London or Paris or Barcelona or Amsterdam and you can get a lift ride. So that's an amazing place to be. I don't want to speculate so much about future acquisition. We've got a lot on our plate right now just to integrate the current ones we've already got. But it's nice to be in a position where we can deliver a great service for our riders every single day in North America and then use that to sort of expand overseas. So where are you on integrating the recently acquired businesses? How is that going? Where are you in fully integrating them? And how do you see that affecting headcount? Yeah. So I'd say it's sort of still early days in integration. So anyone who's run a company before knows that you buy a company and then the real work starts. You know, you think it's all about the deal. But it's not about the deal. It's about how do you bring the two teams together, how do you bring the cultures together. And really importantly, how do you bring the technology platform together? So I think the biggest milestone we've just reached, as I say, is now across 120 cities. You can now use the lift app. But still, free now, which is the brand that we acquired and the company we acquired, that brand still exists. So we have to bring that under the lift, you know, sort of name, you know, across all of Europe. There's still more people integration us work to do. So I don't want to, but here's the last thing I'll say. And this is maybe kind of interesting in the AI world. These projects, integration projects, they're quite complex to bring two companies platforms together. We actually achieved that ahead of schedule. And the reason we achieved it ahead of schedule, or at least the first couple milestones, was largely because of AI. So we're seeing some productivity there, which is kind of fun and any CEO and certainly CFO likes to see productivity based on all this. So on the core driving business, how are you doing at attracting drivers to the service right now? Because I take a lot of lifts, I take a lot of ubers, I talk to the drivers a lot, they're common refrain is that the companies are still taking too much of the share of the fair. Yeah. So our driver supply and our driver hours are at an all-time high and all-time high. And this again is, as recent as a couple of days ago, for Halloween, we tracked this very, very closely because it was such a big night. Now, we about a year ago put in place something called the lift fee cap because I hear this feedback as well. In fact, I'm a driver on the lift platform. So I feel it on the other side too. We've said, and this is, you know, sort of worked into the, the arrangement we have with drivers, we will never take more than 30% of the fee that a rider pays after insurance has taken out, and the average is 15%. And literally, we rebate to drivers every single week. So I think the real answer is, as long as we do a good job by our drivers, they'll stick with us. And the proof is in the pudding, record all-time high riders, our drivers. I will say I'm a brag for a second. We have about a 50-point preference cap versus drivers who drive for the other guys. I think you mentioned their name a couple of years ago. So that's kind of cool too. I'm pretty proud of that. All right, I think we know the other guys you're talking about. Let's go from cars to bikes, something that's certainly close to me here in New York as a city bike user. E-bikes, one of the most popular parts of city bike, but you keep raising the price to use them. This year, E-bike went to 27 cents a minute for members, 41 cents for non-members. Talk to me about pricing power. How much do you have here before riders start saying an E-bike trip just isn't worth it? So it's a great question. So first, let's sort of scale this thing. I mean, you're right. We do in the summer, 200,000 rides a day in New York City alone. And we've reached, I think it's been five months of active, of all-time high-rides here in San Francisco on our bike system here as well. So clearly there's a lot of demand for the product. When it comes to price, it's actually quite carefully regulated. In New York City, we have a contractor with New York City to provide the bike service there. And we're only allowed to raise it a little bit some pieces. It's still a really good value. We do everything we can to keep the prices affordable as possible. I was actually just here with Daniel Murray, the Mayor of New York City, a couple of San Francisco couple weeks ago on stage with him talking about affordability and how important the bike is as an affordable option. So I hear you fairs do go up a tiny little bit, but still if you compare it to most other options, it's still a pretty great deal for riders. Just very briefly in the last few years, there was concern that, and there was even talk of you guys actually divesting from the bike business. Since then, it seems like your strategy has changed. Is it safe to say that right now, city bike is not for sale and will remain part of lift? It is not for sale and it is a great, great product for us. Every time I'm in New York, I use more city bikes, probably than I use lifts or subways, just because it's so fast, it feels great. You feel like you're Superman, you know, on the bike kind of, you know, jam it up and down the avenues. Look, it's a really important part of a lot of people's lives. And maybe I'll just zoom out and just say, you know, we don't control the economy, of course, but we have to recognize that you have some people who've got all the money in the world. It's crazy, right? And so we've got great products for them. Some people who want to save money, get out on a bike and have the time of your life. David Risher, CEO of Lift, joining us from San Francisco. David, good to see you. Thanks so much. Well, coming up hedge funds, really after a painful October, we're going to discuss that next right here on Bloomberg Tech. Welcome back to Bloomberg Tech. Let's get a check on these markets with Bloomberg's Isabelle Lee. Isabelle, what are you checking out? Hi, Ed. We're seeing a reversal of a reversal today because on Wednesday, we saw this massive rally, and on Thursday, we saw an even more massive sell-off. But today, Friday, you're seeing US stocks kind of stabilizing thanks to the rebound and chip makers you're seeing. The S&P, they're higher, by nearly 1% the Nasdaq, also up, by nearly 2% and the Philadelphia semi-conduct index higher by more than 4%. There's a lot of interesting cross-currents here. Earlier this morning, we got data that implied that the Fed could raise rates in December. And that's another story. But for now, at Tim, I think it's worse repeating that yesterday was such a massive sell-off. We saw nearly $4 trillion wiped out in the entire US ecosystem. I mean, it was really a mix of conviction-driven selling. It was a mix of systematic unwinding and even hedge funds really dumping their AI bets. Goldman Sachs even said that the sell-off has pushed markets into this really massive, extreme panic level. But the silver lining is that historically has preceded a strong rebound. And if you look at some of the big names, they're also green on your skin, alphabet, Microsoft, and Amazon, all higher, but at least 1%. So the irony of this all is on Wednesday, they rebounded because they saw the tighter regulation. Could maybe control the seemingly out-of-control AI ecosystem. On Thursday, it was that very prospect that cost the markets to really back down. But on Friday, again, it's the reversal of that. It sort of remains to be seen, Tim, whether this is the start or the recovery or whether this is just a temporary reprieve. Back to you, Tim. Lumin Berks is a belly. I mean, it's a belly get it. We both work losses, okay? I get it. It's all good. Yes. And you're both so smart and so fantastic. Oh, okay. I guess we have to go. It's belly on the markets. Another industry in a vulnerable position, hedge funds, a tech sell-off in various geopolitical events leading to a painful October, firms such as Wall-I Capital and Kirkus Wall-Dassad management, recording some of their worse months ever. Bloomberg's Hammer Parmar joins us with more. Okay, so this is irrespective of yesterday, right? This is not taking into account yesterday. Walk us through the pain that we saw in October and then connect it to what we saw yesterday. Yeah, so it's been an incredibly difficult and trying period for all these hedge fund managers, right? You saw a pain in October and then you saw some of the fallout from that in the past couple days. So you are seeing some of the worst numbers that these funds have seen in their history. Kirkus Wall had his worst month ever. You're seeing funds down 9%, 12%, 16%, one month alone in October and that is before the pain that we saw from this week. Now this week, what we have seen, is some funds then firing teams, selling off a lot of the equity positions, focusing on other areas, like Samlin, now focusing on financials, and basically firing the staff and selling off all of its other equity positions. Because of the pain, you're seeing this tumultuous domino effect of all of these firms just seeing the prices fall, needing to fix the books. I'm confused because these are called hedge funds, right? They're supposed to hedge so they don't experience the same pain that others sell or other owners feel in times of market turmoil. Exactly. And so the problem we're seeing here is correlation. We're seeing crowded trades. Structurally, a lot of these firms have similar risk parameters. So at a multi-strat, for example, when you've lost money, once you hit a certain threshold of losses, you then are put in a position where you need to exit. The firm might have to then kill some of your book or put you on hold. And so what happens is you see big firms selling off these shares in a big way, forcing down the stock price, more selling. And you see this really rippling through the space. And what this calls attention to is the leverage we see in the industry, is all the crowded trades, is all the firms kind of doing the same thing in a big way. And the pain being so widespread that it's taking down a lot of firms. Okay, very briefly, you mentioned multi-strat stockpickers. How are they doing? So not great. Typically, we expect them to produce at least a 1% gain a month. Right now, you're seeing losses of 2-3% in a month, which is not good for them. And the equity funds also struggling significantly to you. So unless things change this month, November is going to be another nasty month for these companies. It's the beginning of the month. Okay. So there still is three, four weeks to see how things play out right now. It's looking like the pain is pretty bad, at least in the first beginning of this month of November. Things can change fast. But, you know, a lot of these firms now will have to dig themselves out of a pretty big hole that they've made in October, and then the additional hole that they're probably seeing this week too. So we're going to be watching very closely to see how this plays out through the rest of the month. It's all looking great. And we'll be watching your reporting close, that's Emma Parmar. She covers hedge funds over at Bloomberg News. Well, shifting gears a little bit. Tesla will pair back production of its cyber truck next year. That's according to CEO Elon Musk. It suggests that the slow-selling model could actually be phased out. This is the company reorganized around driverless technology and AI. In a post on Yes X, Musk's set output will wind down at the company's Texas plan in mid-2027 to free up capacity for the cyber cab autonomous vehicle. Well, coming up, the blue wave might be giving some AI companies the blues. Many of the top tech names are bracing for new challenges after Democratic sweep in the midterm elections. We're going to dive deeper into AI policy with the former chief innovation officer at the Federal Reserve when we return. That's next. This is the Bloomberg Tech Minute brought to you by Chatchee PT. I'm Carol Maser. Chinese automakers have become famous for turning cars into rolling smartphones decked out with large touch screens and flashy software. Now they're going back to design basics. Touting the return of buttons and knobs. Three introduction of physical controls coincide with a broader push by Chinese regulators to overhaul the EV industry's potentially harmful design choices. China's Ministry of Industry and Information Technology proposed updated national vehicle standards that specify certain functions, like those that control headlights or change gears should be physical rather than digital. The trend of adding physical controls is not limited to China, with Mercedes Ben's group also introducing buttons in its new models. That's the Bloomberg Tech Minute brought to you by Chatchee PT. Get started at chatcheept.com Mac, Windows, iPhone or Android. It takes out the umbs, fixes the typos, and the result sounds like you wrote it four times faster than typing. So the email that used to take two minutes now takes 30 seconds. That's W-I-S-P-R-Flo.ai. They bring together local support and a broad range of resources to more than seven million customers. Offer expires January 21st, 2027. Please speak with a business banker for more information. JP Morgan Chase Bank NA, member FDIC. AI initiatives struggling to scale and ROI that remains frustratingly out of each. The challenge is in AI itself. It's having the infrastructure AI needs to succeed, which is right where Boomi says we got you. Tens of thousands of enterprises trust Boomi to connect data, applications, processes and AI. With Boomi, businesses can eliminate silos, automate workflows, strengthen governance, and create the foundation AI needs to perform at scale. Boomi turns a world of AI pain into a world of AI gain. As Boomi says, we got you. Head to boomi.com to learn more. House Republicans are requesting a briefing from NVIDIA CEO Jensen Huang on his dealings with an executive from NeoCloud provider Megaspeed. That's under investigation for spying on the U.S. on behalf of China. Join us now with more details on the story as Bloomberg's Maggie Eastland out in Washington DC. Maggie, what's going on here? Yeah, let me break it down. So three Republican lawmakers are asking Jensen Huang of NVIDIA to come in for a briefing specifically on his interactions with one executive at Megaspeed. That's a woman that the New York Times reported last week that U.S. officials are actively investigating as a Chinese spy. So lawmakers are clearly not satisfied with what NVIDIA has said so far, which is that all of its interactions with this company and Huang's interactions with this executive were normal and they're looking for more information. You know, this comes in the context of Democrats taking control of the Senate and the House this week. We're going to talk more about that in just a few minutes. They obviously have not taken power yet. But does the pressure, and this is House Republicans who are bringing this, does this up the pressure on executives like Jensen Huang and what he could face a preview of what he could face come January? Absolutely. I think that a lot of tech executives are now preparing for this and NVIDIA has actually shown some signs that it might be seeing the writing on the wall as well. Just today, one of my colleagues broke the news that in South Southeast Asia, NVIDIA is asking that any customers there that want to get its cloud stamp of approval to be an official NVIDIA partner have to actually enable something called flea intelligence, which would allow NVIDIA to track the chips, which is of course could be useful if they're trying to pay attention to potential smuggling. So that is one sign already that NVIDIA is taking this seriously and Democrats in January are set up the scrutiny even more. What could be the ultimate implications of at least this potential spy probe here? I think it's hard to say at the moment. There could be official legal action, but we have yet to see that against NVIDIA yet. All right. Bloomberg's Maggie Eastland down in Washington, DC. Maggie, thanks so much for joining us on Bloomberg Tech today. I want to dive deeper into the AI policy discussion. Joining us now is Suneena Tutasia, former chief innovation officer for the Federal Reserve System and current senior fellow at the Atlantic Council's Geo-economic Center. We've all been trying to figure out this week and I think we're not the only ones. Investors are trying to figure out this week what's actually happening when it comes to the data center build out over the next couple of years. Now that there has been this big shift across the country toward Democrats, some of whom ran on tickets supposed to data centers, is the market getting this right or are they over compensating here? Yeah, thanks, Tim. So the election certainly proved that AI is now a kitchen table issue for Americans, and that's going to continue into 2028. So you thought you were done talking about elections. You're not that we're right into 2028, but what's still TBD is how much of this election rhetoric is going to translate into Actionable policy, you know, I've been talking to a lot of the candidates, you know, some that have been reelected, some that are coming into it new It's clear that you know on the surface AI was an important Campaign issue for all of them, but then you get into the second and the third and the fourth derivative question and you start to realize It's kind of like a workshop test Yes, they all were talking about AI, but they were all talking about it from a very different vantage point, right? Right, so I'm talking about data centers. There's talking about control, safeguards, guard rails and the like So that gets me thinking, sure, there is a coalition around the concern of AI But as they all come into Congress, is there even a coalition around what the problem statement is? Let alone the solution that they work towards, right? So what I'm watching for from a policymaking perspective is really three tiers. So there's a federal. There's a Congress But then there's the states and then what are the regulatory agencies getting right? So from a federal and a Congress perspective, I think it would be who've been to really look at can we put singles on the board? Especially, you know, the White House is still a player in this So some of the things that the White House had already been talking about, you know whistleblower protection independent e-vows You think about, you know, testing on frontier models if Congress can unify on that get the White House on board Like those momentum on that. I want to go back to data centers for just a second because they're such a big topic this week And yesterday that was a big part of the sell-off. We had an interesting conversation with Michael Monahan over at Founders 100 ETF earlier And he said these politicians who ran on this and are pushing back on it are going to see the writing on the wall soon when they need to deliver For their constituents when it comes to affordability You worked at the Fed for us tell us what the economic impact of a data center is on a local community. Is it positive? Does it bring economic growth? What does the what do the data tell you? I think it's still being worked out. I don't know that everybody knows the full picture just yet I think on the data center front a lot of that work is Actually going to happen at the state level. Yeah, and if you look at it ten of the largest states Except for Florida now have a Democratic governor and those governors aren't going to sit it out So I think on a data center policy making I would actually look to the states and the work that's going to happen there Because a lot of permitting on the data centers is a state-level discussion the electricity the power and to your point about the data and the metrics to watch Again, less on the federal side and more on the state and the local side is what I would be watching for and then that also brings us to the regulatory agencies You know, there's been a lot of discussion and debate around how to regulate at the Frontier model and land side, but when you start applying AI in financial services or health care I have you regulated spaces those regulators are going to have a say anyways What what are the the federal regulatory agencies the the dance that they're going to have to do the needle They're going to have to thread pick whatever metaphor you want compare with what's happening in China How do you do that in a way and what's your message to to regulators to do this in a way where they don't lose out to China? Yeah, I mean the analogy I keep thinking about is a little bit of the aircraft carrier and speedboats I think some of these issues are more longer term and the harder and earlier questions and that will require more of a Sober slower approach and that's okay But then some of the things like you think about agentic commerce you already have a lot of financial Institutions trying to grapple with the notion of if Tim is gonna proxy his agent to start accessing his bank account Where's the liability not yet? I'll just tell you that I think a lot of banks that you are gonna tell you not to do it, right? But those are not issues that you can punt for later. Those are discussions that are being had now So I look at those are speedboat issues that need to be tackled now. So I think And again, I know I think the false debate to say if you start to tackle some of those questions You're gonna lose to China from a competitive perspective. I would also say You know listen I come from an innovation world and you want to be pushing the boundaries But at the same time this there's a misconception that regulation is an aftermath to innovation Is there a misconception in your view that this technology could destroy all of us? I'm not a doomer. I you know, I'm a stubborn optimist. I think we can strike the balance. How do we do that? I think by setting up the right guardrails. We've proven that we can do that with previous technologies and I mean Well, okay, very briefly the only one that comes to mind for me is nuclear weapons What's another technology that I'm not thinking of but I think even with that we've got smart people who are Working on it and we've got smart people who are talking about that. Hey, this is not all That there are dangers around it and we've got to be sober around it You know, we we were talking with a few of the builders around AI and the proliferation of fraud And one of the things in talking to a lot of builders that I heard was hey, the fact that we're talking about that Fraud can be extended due to AI Is something new that in the past with technologies? We hadn't right? There's more vigilance around it And the builders are now building capabilities with AI to combat that fraud, right? Will the preventative measures be at the same levels and will you know at the same at the same level at the same pace? No, but we're gonna play catch up and we will and we will meet the moment Sunaina, this has been a great chat. Appreciate you joining us on Bloomberg Tech. Thanks for having me Sunaina joining us here. Sunaina to Teja joining us here coming up. Jason Robbins CEO of draft kings joins us on the tail of a Disappointing earnings report. This is a Bloomberg tech Shares of draft kings plunging on a 2027 earnings forecast that missed estimates investors also not happy with third quarter revenue in a cut Outlook for the fiscal year 2026. It's down about 26% right now We're joined by the CEO of draft kings Jason Robbins. Jason To me, this was all about prediction markets not in the sense of competition But in the sense of stepped up investment in what you're doing with prediction markets You said $650 to $700 million as a result of this why are prediction markets so expensive for you to build out? Well, it's not the build out we actually built out I think what is now the best in class sports offering For much less we most of that was marketing investment to acquire customers We had unbelievable customer acquisition paybacks with the cohort we acquired so far this year So we leaned in and I mean this is one where we messaged that we we were going to follow the data and spend more I think it was a lot more than people thought there was some sticker shock I do think if you look at our earnings materials We put disclosed a lot of data on the paybacks and what the returns on those investments are and they look extremely attractive So I think once you know that dust settles and we start to be able to show that that people will see it was a good investment But there is certainly a reaction to the short term and I understand that but you know I think this will prove to be the the right move for us over the next year or two just a few months ago You expected to invest only 200 to 300 million in in predictions this year Do you think some of the sell-off is because investors Might not have the confidence that it sticks to 700 million. It doesn't become 900 million I don't I don't know about that I mean I think the fact that it was much higher than previous if you you know look at what that means for earnings this year I have reduced our earnings and that that's what people are upset about I don't I hope people don't think we're going to spend more that's already quite a bit of investment For this year and we did also note that we are getting a great return on that of that money We're spending the customers we acquired not even the ones that we you know are going to acquire the rest of you Just ones we required to date are going to generate 350 million of gross profit next year So you could see why we're excited about the paybacks on this and feel very good about that investment And this really is very similar to how we we've always managed the business There was a period where we were lost making in 2022 and 2023 in the early 2023 where we were Investing into into things and people you know we're a little skeptical of it and now they're like okay I get it those cohorts look really good and are producing real cash flow and the core business the non-predictions part of the business So I think this one's a little unique because you have the regulatory uncertainty So I think that's part of what makes investors skittish about it But I think you know what made us feel some conviction that this was the right thing is that even in a Regulatory scenario where sports contracts go away We still will be able to pay back these cohorts in roughly four years Which is a bit longer than our typical three-year target But still you know something I think that's acceptable given you know the paybacks are much much better in the event that sports contracts do Stick around what do you think that sports contracts will go away? I mean it looks like this is gonna go to the supreme court. What what what chance do you think it has in surviving? Well, I can't predict that I mean there's you know But you're spending a lot of money you're spending a lot of money on something that might not be a legal business, right? Well, yes, but we also have cross sell into other non-sports contracts as well as other products We have like lottery and pick six. So our 27 co our 26 cohorts going to pay back before what the projected supreme court decision date is So that investment we definitely feel good about the 27 cohort We think we'll not entirely pay back by that now obviously the court day could get pushed out But it will end up paying back just a couple years later So we also feel like that's the right decision but kind of back to what you're saying about the uncertainty. Here's how I would think about it. If you look at the landscape, whether it's the traditional prediction market operators like Polly Markets and Kalchis of the world or whether it's our traditional competitor set and the legal regulated gaming market, the, you know, fandals of the world, I think if you look at all of that competitive set, we are the only company that has positioned ourselves where we are in a great spot either way regardless of what the court outcome is. They are really counting on if you're, if you're a traditional prediction market operator, you're counting on that going your way. Otherwise, the whole business is in shambles. And if you're, you know, one of our traditional competitors who hasn't been able to make the progress that we've made on the predictions front, you're really counting on it getting shut down. Otherwise, you were way behind in something that now is a real part of, you know, the industry. So I think that's strategically how we, we've tried to position ourselves. And I don't think investors quite get that yet, but I think we should get credit for that that sure it costs money. I'm not saying it's free. We do think we're going to get a return on that money, but we've also strategically positioned ourselves so that we are not dependent on an outcome that we have no control over, whereas everyone else virtually in our competitive set is dependent on that outcome. Jason, we only have 30 seconds left, just on prediction markets. What role do you think they played in this year's elections? I mean, Kalchian Polly market are doing a victory lap right now, just very briefly. Well, I think obviously people looked at prediction markets to see how they were doing. We had a lot of traffic for that. There's not a lot of volume in terms of people actually going in there, though. So I'm not sure how accurate some of them are. The ones that have decent liquidity that really, you know, the bigger ones are probably pretty reflective of sentiment. But there's a lot of smaller ones where you can move the needle at very small volume. All right, Jason Robbins always get to catch up CEO of draftings joining us from Boston. Thanks, Jason. That is going to do it for this Friday edition of Bloomberg Tech. Do not forget to check out our podcast. You can find it on the terminal as well as anywhere you get your podcast. This is Bloomberg. This is Lavar Errington from two pros in a cup of Joe. Let me tell you about zero. That's XERO. Zero is a financial management platform that loves giving small business owners the clarity to have the confidence in their numbers. It puts accounting payments, payroll and analytics all in one place. So you always have one clear picture of your business with visual dashboards. Zero makes it easy to understand your cash flow. You know exactly what's coming in and what's going out. So you can make smarter decisions that can help grow your business. 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