Tesla Plans Additional $25 Billion in Spending | Bloomberg Tech 4/23/2026

Kind: captions Language: en Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ledllo in San Francisco. >> This is Bloomberg Tech. Coming up, Tesla plans for $25 billion in additional spending this year to support Elon Musk's AI ambitions. >> And Intel shares jump after the company pledges to support Musk's advanced chip manufacturing project, Terrafab. And we'll break down more tech earnings and tech news. We'll hear from the CEOs of Lyft, Service Now, and IBM. >> And first, for the last day this week together in New York, Ed, we look at what these markets are up to. And we're actually managing to cling on to some sort of green in the NASDAQ 100, less so for the NASDAQ more broadly. And look, we are seeing pressure more on the investor mindset with oil climbing up again 510% higher. We're above 102 on Brent. The geopolitical context remains. It impacts certain earnings like with Service Now for example, but we're all tracked on earnings today. >> Yeah, it's been exhausting frankly being on Eastern time and covering Tesla's earnings in particular, right? Really simple storing, massive commitment to spending a lot of money to actually get going on the two big projects, Robo Taxi Taxi and Optimus the humanoid robot. The headline capex $25 billion for this year. But actually the shares are down significantly not just because of that but because of the commentary they will enter negative free cash flow for the balance of this year. That's a lot of money stuff but there's some execution as well. Let's get to Bloomberg's Craig Trudeell who leads our coverage of autos around the world. That's where we probably start right in the quarter. Things look really good and then Tesla told us Craig we are going to spend in a multi-year investment cycle and things got a little bit sour. Yeah, I I think you know part of what uh you know made the numbers look so good was maybe there was a moment where everyone wondered whether or not Tesla was actually going to go forward with this sort of highwire act of of uh you know spending the $20 billion plus in in capex that was outlined just a few months ago. uh you know for for them to actually uh only have you know roughly two and a half billion dollars of capex in the first quarter uh that that sort of sent a signal potentially that uh spending wasn't going to be quite at the pace uh that was flagged. Instead Musk hops on the call and and says oh no we're going ahead with that and then some. And I think that does give some people pause when you have a car business that yes is is looking a little bit better than it was a year ago but a year ago it was really in a brutal place. >> Hold that uh uh graphic on the screen. Just let me say something real quick, Caro. The reason at first things looked so rosy is that capex in the quarter was basically not trending toward the 20 billion for the full year anyway. Everyone was like, "Oh, they're under spending." And then it got confusing because they were like wrong, going to spend a lot more. Take it away. >> And Elon Musk really tried to articulate, Craig, why that spending is necessary. Well, we're going to get to Terafab and chips in a moment, but with you, I want the underlying fundamentals of where he's spending on cyber cabab. What about the humanoid robot focus? I mean, this is what investors care about. Less about car sales, more about AI. >> Yeah, I think that's right. And I think there's been uh honestly a lot of patience with uh being able to sort of look past the idea that a lot of these projects have not earned meaningful return and and you know, may not for for the time being. Uh but you know, we've gotten to a place now where this is a a company that, you know, is primarily a car business. uh where a couple years now they have have uh actually seen decline in in their sales and decline in their position in their most important uh segment and uh we don't have clear indications of when exactly you know this robo taxi project is is actually going to be meaningful. We had uh if anything a bit of incremental indication that maybe next year uh but uh that's you know a bit far off and then also some indications too that uh the the optimist robot may not be uh you know ready on on the timeline as as previously flagged. So uh some some negative indicators from that perspective as well. >> You shock me. Craal a slower timeline. Bloomberg's crit we thank you so much on all things cars, fundamentals, robots. More on Tesla though when Elon Musk is planning to spend $3 billion to build a research facility in Texas. Part of that ambitious chip manufacturing project dubbed Terraab. Bringing Intel along for the ride. Bloomberg's Ian King in San Francisco could really articulate why 3 billion. Is this some sort of like pilot that they do to see whether they can actually make the chips? Yeah, I mean this is a longestablished practice in the semiconductor industry where you make what's called a pilot line and this is your way of showing well does my manufacturing technology work and do my designs work and you're kind of doing it on the cheap. $3 billion you know I know that's a lot to me and maybe not much to you but in the chip industry it really isn't very much at all. Um it's about 10% of what it would cost to build you know a leading edge full-size fab. Last night, the news about Elon Musk's chip ambitions came in the Q&A portion of the earnings call, and I needed some help. I turned to you for that help to understand the pilot line bit that you just explained, but he dropped a big piece of news. He said that the initiative will use Intel's 14A process. What is Intel's 14A process? Why did Intel shares jump when that headline hit? Yeah, this process that we're talking about, this is basically the the recipe that they use to create semiconductors and they're looking for outside users of that. Basically, they don't have enough of their own work, their their own demand for their own designs to be able to fill their factory. So, they need outside customers. So, this raised the possibility that guess what, you know, Elon Inc. is going to be a customer of Intel in some way. We don't know whether he's just going to license that and do it himself or whether he's going to actually help Intel fill its fabs. And uh hopefully we'll find out later today when Intel reports. >> Bloomberg's Ian King again really jumped in and helped with understanding that when the news broke in Tesla's earnings call last night. There's a by the way coming the Philadelphia semiconductor index or socks that's the main gauge of chip stocks in the United States actually around the world but the US shares is up for a 16th straight session. 16 straight days of gains, which is a record. And that's astonishing when you think about the direction of travel um in news flow, the war in Iran. We've talked about how the war in Iran has impacted the chip supply chain, Caro, but but it's not even slowing down. We're up almost 3% in the session. >> That is just a phenomenal piece of data analysis that you bring time and time again from Bloomberg. But what's more important is also just how we navigate this and what it means for the likes of Tesla and Intel as they try to bring chips into just about everything. This is about AI and the use cases. Pierre Ferigu of New Street Research says Tesla has a strong advantage versus peers to quote win in autonomy robo taxi humanoid robots. He maintains a buy rating on the stock with a $600 price target. You join us now. How important is Terraab to that vision you have on winning the AI race for Tesla? >> Yeah, it's a good question, Caroline. Um, the Terrafab is like an enhancer for for for Tesla and for SpaceX. Um, it's really like a play that is I would say five to 10 years out and probably closer to tens than five. And the idea is that now that we know compute is everything, you can achieve miracles um with compute, the key is going to become how can you uh deploy compute faster than your competitors and at a lower unit cost. And what Elon Musk is doing today with Tesla and SpaceX, it's really a project sitting sitting between the two. Uh he gets started to be in a position to manufacture inhouse. So you know vertical like uh integration is actually a major factor of cost savings in an industry where everybody has very high gross margins >> and he's going to control the space at which he can actually build uh chips and as he's planning to throw them into space and to to deploy data centers in space and he has like a pretty large uh rocket to do that. That's that's opened and forgive me for interrupting you but but what you're saying doesn't match what Elon Musk is saying right because he got asked this on the call are you doing terraab the initiative to manufacture chips at scale because of unit economics and his response was no he consistently says because I don't believe that TSMC and Samsung can match the supply that Elon Inc needs uh to fulfill those long-term ambitions. >> Yeah. Um I think it's okay to say that uh today but the unit economics of TSMC probably Terafab is never going to beat them but TSMC is now charging on average a 65 and growing person gross margin. So if you have your own manufacturing capabilities in house whether you work magic against TSMC on unit economics or not you are actually working magic on your own unit economics. Therefore, the efficiency gain, look, all of this needs to eventually be put to work. We need to vindicate a $25 billion capex expenditure pier. Is it vindicated? How if we're already seeing Optimus perhaps behind schedule if we're already questioning really how quickly regulators can allow CyberCab and the autonomous vision on the road, does it match the spending in the here and now? It all depends Caroline on the the time frame you set for yourself. Um to put into perspective $25 billion of capex. Um if you include terraab about half that money is going to be spent I think on compute um to be uh in the same league as the frontier players in in AI and you need AI for FSD you need AI for Optimus and on top of that you have the partnership with Grock of course with XAI. Then the second aspect is Tesla this year is set to generate about $15 billion of operating cash flow. So you know the negative free cash flow of Tesla this year might be $10 billion if they manage to spend fast enough of the 25 billion which might be a challenge and they have a balance a cash balance today of about $45 billion. So we're talking things that at the scale of Tesla uh is actually very reasonable. Then in terms of how do you get a return on that um robotaxi there is a broad consensus that once it is uh you know uh really scaled out it's a multi- trillion dollar opportunity. >> So I mean if the cost to get into the race and win it is $25 billion this year it's a good price. >> Yeah. >> And then you have Optimus a million Optimus a year. How much value is there in that? Now the thing is that it's going to take many years before we get there. So, it's a long um it's a long duration investment. >> You know, $25 billion is the big number and later in the show we'll explain why it's the big number. Pierre, did you wake up this morning in the camp uh of which some of your colleagues are in that there is further evidence now that eventually SpaceX will merge with Tesla? >> I won't tell you. Um I think it's going to become more and more challenging uh not to do it for sure. a terafab project which is like the pilot line at Tesla and the first large scale manufacturing fab at SpaceX the cross um uh accounting and you know pricing between the two is going to become difficult. uh yesterday Elon explained how you know Optimus robots will remain connected to the cloud if they are rem if they need very large cloud deployments it might be space data center deployments >> right >> and so there will be a question on how much Tesla pays for like space on uh on Starship etc etc so there are a lot of good reasons for the merger uh to happen uh now you know does that mean it's going to happen I wouldn't bridge that gap yet >> Pierre Ferugu of New Street Research always a joy having you on the show thank you for the analysis Now we are also watching shares of other earnings that have come thick and fast over in Europe. Look how Nokia outperforms up more than 5%. Again an AI an infrastructure story in many ways for Nokia that manages to see European stocks on the higher side for its particular play. But boy are we in the eye of the software storm right now. >> That's an ouchie. >> IBM 8% Service Now down the most in its history. And that's after we once again have to ask CEOs to prove a negative and they're finding it very hard to do so. They had 22% growth in subscription and still the stock dives. We're going to be hearing more from the CEO of Service Now later this hour. Let's stick around with all of that. But Ed, what else have we got coming up? >> Yeah, we're going to talk about SKH Heinix posting a sharp jump in quarterly profit on booming AI memory demand. But how long is that going to last? This is Bloomberg Tech. Let's look at Korean trading now. SK Highix flat, but the South Korean semiconductor manufacturer actually reported a fivefold jump in quarterly profit, but the results are instead leaving investors questioning actually the longevity of the AI boom. Bloomberg Asia stocks reporter who's here in New York with us Kyang Lee can articulate why the stock was under pressure with such a phenomenal set of profits. >> Yeah, absolutely. It was an absolutely stunning quarter but also you have to note that the shares have risen 90% so far this year and if you look at the past year the share has rose more than have risen more than fivefold. Um the positioning is pretty crowded. So even uh this even the strong earnings can trigger sell on the news but I think investors wants more evidence to see that earning growth is more structural than cyclical and that's going to take more than a couple of months. Um so if you look at the uh memory chip in the past there has been boom and bust cycle and even though people agree that this is the super cycle that's unprec unprecedented um this is still subject to the could be subject to the downtrend this is a trillion dollar question when that downturn could start >> we're talking about the lucrative market for high bandwidth memory I always think about it as the funnel it allows the GPU to take the data quickly and process it quickly so you got SKH highinex you got Samsung and then Micron on in the United States. Beyond the numbers, was there evidence that SK is winning a little bit in that market for HBM? >> Yeah, actually SK Highness is actually the biggest the supplier of the HBM. It has about 60% market share last year, but the rivals Samsung and Micron are catching up, especially Samsung. But what's interesting is that because a lot of these memory names have been diversifying um reallocating their production resources to HBM, we're seeing shortages in the traditional B drama. that's giving pricing power to these membrane makers and that's why we're seeing the strong numbers this quarter for SKH >> Bloom Lee great to have you on Bloomote Tech. Thank you very much. A lot of news out there today, Cara. >> There is a lot from Asia. In fact, let's go there. It's time for talking tech. First up, Soft Bank is seeking a $10 billion loan secured by its shares in OpenAI. According to sources, the Japanese conglomerate has been piling on debt as founder Masayoshi Sun seeks to position himself really as a lynch pin in the global AI boom. the cost of ensuring SoftBank's debt. Well, that's jumped after that news came out. Plus, Tencent has unveiled a major upgrade to its foundational AI model with major advances in areas from complex reasoning, in particular to coding. It's the first big test for the company since it recruited a top researcher from OpenAI. The model has been made available via a suite of 10-centent products. And TSMC plans to hold off on adopting ASML's most cuttingedge machine for chip production until 2029 as it looks to save money. That's a major blow for the Dutch maker of semiconductor manufacturing equipment. Now, TSMC is its largest customer according to Bloomberg supply chain data. And by the way, Ed, look, each of these advanced lithography machines cost over $400 million a piece. If you're looking at the top end, >> at the top end, a lesson we learned on the show the other day. A lot of people are out shopping right now. And coming up, Lyft is claiming its territory in London, Europe's largest ride hailing market. David Risher, he's the CEO of Lyft. He's been shopping and buying up some interesting companies. We're going to discuss that next. This is Bloomberg Tech. Lyft is doubling down on its international expansion with a deal to acquire gets UK business. This marks Lyft's third acquisition in just a year in a move to really catch up with its larger rival Uber. David Risha, CEO of Lyft, joins us to share more on the company's growth strategy. The growth strategy is international growth. David, what was it about gets UK optionality here that you liked? >> So, it is the big guy when it comes to London's black cabs and London's black cabs are awesome. I suspect Caroline, you've taken one or two in your life and you know they're amazing, right? So, it's the best way to get around London and that's the idea is we are a customer obsessed company. We wanted to make sure that we could increase our footprint in London. This roughly doubles the size of our rides in London, which is wonderful. And I think something like 75 to 80% of London cabs who have an app um are going to have access to Lyft customers over time. So it's a great win-win. >> Now David, you know, I think the best way to get around any city is to bike. And I'm pleased that you're also doing the bike optionality, the Santi bikes you have in London. Just what does this mean in terms of capital intensiveness? What does this mean in terms of investment you need to make in these new cities? >> Yeah. So it's not a very big capital raise. I mean, the nice thing about the sort of, let's say, traditional ride share business, the one that we're in, is we don't own a lot of assets, right? The London cabies own their own cars. So, really what this does is it allows cabbies, taxi cab drivers, who are, as you know, brilliant um to sort of make even uh more of their time, right? They're going to have more customers thanks to the Lyft app and our promotion of of um the Get by Lift app. So, anyway, that'll be great. Um they also have a big businessto business audience. Uh they actually do work with the BBC. Uh they do work with the Economist. uh they do work with the Royal Albert Hall. So they've got a really nice stable base um that we can build on and then as you know mobility changes over time becomes more autonomous and so forth it just gives us a bigger footprint. Uh in the UK >> I want to understand David how this works in practice in Western Europe the taxi cab is part of the culture and in London of all places the black cab is at the heart of what it is to be a Londoner or a visitor to that city. So, how does the consumer respond to a big American tech company coming in and bringing a brand like get uh into its fold? >> I mean, I hope well, right? What we hope to do is bring the same customer obsession uh that we've that we bring here every single day in North America, you know, all across the world. As you guys know, we acquired Free Now last year. They also have a significant presence in London, across all of Europe really. And we've seen great growth um with that brand and with our riders there because they're now seeing you know an even better experience. So look that's our general strategy is you know customer obsession is what drives profitable growth and I just love to your point the fact that we're going to be with the London cab system in such a deep way uh because it's frankly going to teach us something about great service. London cabies are amazing in that way and hopefully it'll allow us to bring even better technology um and sort of invest more in the in the whole marketing of the idea of of taking a a taxi when you're in London. David, you um you've joined us regularly on Bloomberg Tech and you've been generous with your time in explaining how you've come into Lyft over now almost three years I think right and put your print on it. The first part of the story was uh getting Lyft to be a cash flow positive, but you are in this kind of M&A strategy. And so could you explain how going shopping and and acquiring companies in different markets is going to impact the final financial health of the business and and free cash flow in particular. >> For sure. So yeah, it was actually my three-year anniversary just last week, Ed. So three years now. And and thank you loving every minute of it. Look, if you think of the stages, you're right. At first, we were uh we were losing money. We were losing cash. Now, we're making money. We're profitable quarter after quarter after quarter. Uh we're throwing off over a billion dollars in cash. So, what that allows us to do now is to grow through acquisition. Exactly. To your point, we can take that cash and put it to use. How are we growing? We're growing largely internationally. Why? Because that improves our sort of footprint and over time improves our economics because this is a scale business. And then if you look at the next stage of course with self-driving cars, you know, again, having a large footprint and having a large scale, frankly, is going to matter even more. So, this is the sort of journey we're on. It's a step-by-step journey. Uh, but I love where we're going, and I love the fact that both our financial results and our customer results are improving every day as a result. >> How does the profitability focus fit into the robo taxi and autonomous focus? I mean, that I can tell you black cabbies aren't going to love that in many ways, David. Well, so I think you're talking about two things. I think you're right. Anytime you've got a big shift, you have a set of people who are um you know doing something today and maybe they're worried they won't be doing that tomorrow. That's something we're very very focused on in Lyft. I can give you a very specific example. We're now rolling out um autonomous cars in Nashville with our partner Whimo over the course of this year. And we just announced that half of the employees in our very large new depot in Whimo that will excuse me in Nashville are drivers. Half the employees are drivers. Right. So, so part of it is we have to help that transition happen. When it comes to profitability, look, self-driving cars overtime, frankly, should improve the economics of rid share. It should lead to uh because, you know, they they they don't have a lot of the cost. They don't have the same insurance costs and so forth. But that's going to take a long long time. I think right now it's really kind of early days for that. We're just trying to figure out a way to kind of make the transition in a very, I hope, very thoughtful way. >> David Risha, CEO of Lyft, back in San Francisco. I'm here in New York. We're grateful to have you all the same. Now, coming up, we're going to get back to today's big story, and that is Tesla. Um, the stock is down because of the massive commitment to spend money on the big projects, AI, robotics, and robo taxi. All of which we just discussed a little bit with Lyft CEO. It's my last day in New York City, but there's so much more to do. We'll be right back. It is halftime. This is Bloomberg Tech. Welcome back to Bloomberg Tech. Our top story is Tesla's earnings. It's a story about a massive investment cycle, and it's time for the big number. The big number is $25 billion. That is Tesla's capex commitment for the full fiscal year 2026. So, you're asking, why is it a big number? And why are the shares down? Well, the most that Tesla's ever spent in a full year is about 11 billion. That was in 2024. But now we know about the robot line, the Optimus line going up in Fremont, the bigger one going up in Texas, how they're going to expand cyber cab production. They're going to need the funds. And when it comes to chips, a lot of people's reaction to to this was that 25 billion is a big number, but it's a drop in the ocean for the industry. What's up, >> let's have a quick look at what's happening with Microsoft. There is some news that they're going to be offering voluntary retirement to some 7% of the workforce of the US workforce as it currently stands. It's voluntary buyouts to just a small percentage. The stock is currently under pressure by 2 and a.5% but once again this is going to fit into an AI narrative where people can do more with AI productivity tools and therefore how does that affect the labor market? As of now Microsoft saying they're going to be offering voluntary retirement to 7% of the United States workforce. Ed, but let's go back to Tesla as well within all of this because that is the earnings we're focusing on. Investors may be betting less on EV sales and on AI and robotics these days, but vehicles are still for the moment the company's bread and butter. So, let's dive back into Tesla's quarterly performance from that angle. Jessica Coldwell's hit this Edmund's head of insights. So, actually better return to some sort of growth particularly I was interested to see in Europe as well as in US and Asia. Yeah, I mean that really is their core business. And I mean I think what we're seeing is an EV market. It's not very, you know, not very linear in terms of growth. We're going to see starts and stops and all those type of things like we've seen here in the US, especially in regards to the federal tax credit, but this market is going to continue to grow. So, it's not as if it's hit the end of a runway or even close to the end of the runway. It's just beginning, but it's going to look a little lumpy like to get to full electrification, which I think most automakers are on the same page thinking that is really the end goal here. I think the end goal as well and the stops and the starts. How much is that to do with oil? >> Well, right now it's tricky. I mean, we're not necessarily seeing a massive consumer just push to interest right now because of gas prices. And it's interesting because in 2022 when Russia invaded Ukraine, we actually saw a much stronger traffic push towards EVs online um than we're seeing right now. And I think a lot of that has to do with general affordability because even though gas prices are high, especially markets where Tesla does very well like California, >> it's not high enough to make people want to buy, you know, $40, $50,000 vehicle. So, it's a bit of a different paradigm right now than we've seen in past gas price spikes in 2022 and even in 2008. >> So, this is the difficulty in understanding, Jessica. This is what the CFO VBNA said. Whilst the recent increase in gas prices has had a positive impact on the order rate, this improvement started before the uptrend in gas prices and basically what he goes on to say is that Tesla credit themselves with having a broader offering and a more affordable offering. Um, try and wade through the data and see if you agree with Tesla's CFO. >> Well, they have an affordable offering and as far as EVs go, right? I mean, and they have, I think, vehicles, particularly the Model Y, that match a lot of consumer preferences. It's not a random sports car or, you know, a large sedan or anything like that that matches up. And Tesla has been pretty elastic in terms of pricing. They've dropped prices, they've raised prices, they do a lot to match demand. So, I wouldn't necessarily say that their, you know, sales were skyrocketing before gas prices. Um, but I think what they do well is they're well known. They saw increase in share in California sales in the first quarter. It was a smaller pie, but they got a bigger part of it. Um because I think people also know their brand too. So I mean they're synonymous with EVs. So people just looking for an EVs, they think of Tesla. So they have an advantage there. >> Um I was talking a minute ago about the big number which was capital expenditures guide for the year. The small number for me was the FSD subscription um take rate. So they ended last year with 1.1 million FSD subscribers and it's gone up a little bit to 1.28 million. It's only available in the United States and some limited parts of Europe. If you think about how many Teslas there are on the roads around the world, that does to me seem like the small number. >> I mean, it it really is. And I think a part of it is the consumer acceptance and understanding of what it is, the safety of it all. Um, I think it's something that's exciting that people like it. They're thinking, "Oh, this car helps can help me drive. That's fantastic. I can focus on other things." But it really still is, you know, it's largely unknown to, I'd say, the majority of consumers. And Tesla does have a lot of more mainstream consumers. They sure they had some early adopters, but now they're getting mainstream folks that are maybe not as tech forward as, you know, as we all think. >> Yeah. Just how does Elon Musk tackle that? Because look, his huge pay package is actually linked to adoption of FSD and in many ways he sort of apologized for the small number as Ed tells us about. >> Yeah, I mean, I think it's something that is it's it's going to take time. It's going to have to grow. I mean, they have a lot of hands in different pots at this point. So, I'm not sure how he's going to accomplish it all. But, I think, you know, obviously education is important thing. How this is going to fit the regulation because there's anytime there's any to sort of crash. I mean, the news is definitely more proportionate than than what you'd see any any place else. Um, and I just think that you're going to have to work on the public acceptance of these type of technologies. I mean, people are very wary. We just heard about AI replacing jobs. it just all becomes a bit of a not a scary black box but something to that effect to a lot of consumers. >> I guess the last headline that we can give our audience is that Musk said that by the end of this year in the US FSD unsupervised. In other words, eyes off the road, hands off the road. We'll see if that happens. Jessica Cwell, head of insights at Edmonds. Thank you very much. Another top story and we're turning to another of Musk companies. SpaceX is playing a bigger role in President Trump's Golden Dome project than previously known. According to sources, SpaceX is among a group of companies developing the operating system underpinning the missile defense system. Let's get the latest with Bloomberg's Mike Shepard who's in DC. Let's start just with the details Bloomberg's reporting because this is an important story. >> It is. It's important because Golden Dome is one of the president's signature initiatives when it comes to protecting the US against the ballistic missile attack. It's worth $185 billion over the course of the program so far. And SpaceX will be providing together with other companies a critical component in it. Think of it as the glue that holds all these networks together. It will be essentially the operating system that helps to govern military operations once this thing gets up off the ground. And it is an expansion of the role that SpaceX had already been playing in the project. It had been building satellites through its Starlink uh platform and it had also been uh developing a military communications network through its Star Shield uh technology and that is a classified version of Starlink that offers uh encryption especially for military use. said, >> "Mike, where are we with the vision and then the action towards Golden Dome and really what the other puzzle pieces are that need to be put in place?" >> Well, Carol, if you want to think of it as a puzzle, there are still a lot of pieces to the side looking to be placed uh in the right spots. uh there is a long way to go before this thing actually becomes act you know uh in place and an effective uh defense against the kinds of missile threats uh that have been warned about for years uh from China uh from Russia and now even from Iran. There are questions about you know the extent to which US adversaries could try to uh strike the homeland here and this is the reason why the uh US has moved in this direction and it has turned to one of its most reliable space contractors SpaceX to really help get this up off the ground and SpaceX is working with a couple of other signature names who have taken on increased roles in working with the government that includes Anderil Industries and Palunteer technologies as well on developing this uh communications and this operating system that uh we've been reporting on today. >> You know that that last point is so crucial. SpaceX has this legacy with US government which is about 10 to 15 years in duration hundreds of millions billions in contracts NASA and the defense apparel. But if you look at those other names Anderil Impulse we're talking much smaller contracts right in the context of this broader story. >> That's right. They are much smaller contracts and yet they are part of this larger ecosystem. Ed and when you uh turn the focus back to uh SpaceX also we do see this company on the move. They are getting ready for an IPO later this year that could value the venture at almost $2 trillion. And they're also making moves in other directions to shore up other parts of the product line that could help in this venture too. They have reached an agreement or at least uh to have the rights to acquire Cursor AI for up to $60 billion. And the idea would be to use its coding and debugging ability to help the XAI segment of uh of SpaceX uh in its development and advancing its products. And you could see very easily integrating those artificial intelligence capabilities as well into this kind of operating system we've just been talking about. >> Bloomberg's Mike Shepard on Golden Dome. We appreciate it. Thank you. Now coming up, easier to use AI tools. Well, they've sparked an increase in abusive imagery online. That's according to the difficulties of investigators. More on that research next. This is Bloomberg Tech. Child pornography. And it's always been a major scourge of the internet, but a surge of abusive material created with AI tools is making it hard for investigators to pass the real from the fake. And that can be the difference in knowing which cases need urgent attention. Kurt Wagner, one of the reporter reporters on today's big take, joins us now. It's a difficult read whether you're a parent or not, Kurt, but really this is about prioritization. This is about a lack of resource for many who are trying to understand which child to go out there and help and which one is actually an AI generated piece of content. >> Caroline, we spent six months working on this. We talked to dozens of law enforcement officials who are at the front lines specifically of child safety crimes and what they told us is that because of AI, the number of reports and tips they have to sip through is is jumping exponentially. And when you are sifting through, as you point out, and not sure whether the the image or the video you're looking at depicts a real child in in physical danger or something that has been totally fabricated by an LLM or some other generative AI tool, they spend a lot of time basically tracking down leads that don't lead to actually helping a child in danger. And the fear is that the more this happens, the more they there is a risk that a real child who's being harmed is going to get overlooked because everyone's busy focused on the AI generated stuff. >> There there is a mechanism here. So when a technology company or a social media company finds that content that we're talking about, they report it, they are required to report it to the National Center for Missing and Exploited Children, NCMEC. And from that there is other data available. What does the data tell that organization Kurt? >> So ideally when a big tech or media company finds this and reports it ed they would include a lot of detail about the image or video right maybe an IP address a location uh you know how it was created or what types of tools were used. And then Nickmick, that organization you mentioned, they receive all of these from all around the country and then redistribute them out to state uh experts, state investigators. The problem is that a lot of the tips that are coming into Nickmick, especially those that are AI related, do not have any of that necessary data to actually go do anything, right? There is no IP address. There is maybe no location. And so Nickmick is being flooded with these tips and doesn't have anything to do with them. And so we've seen Congress actually make a big deal about this. there was just a uh an investigation by Senator Grassley of Iowa where he's trying to challenge these companies to report more useful information to Nickmick because if they just get a video or photo but nothing else with it, there's no way that they can go and actually try to to stop a crime. >> Kurt, I think the numbers are important here and they're astounding. Last year, the clearing house received one and a half million reports of suspected CESAM with ties to AI tools, but the previous year it had just been 67,000 reports. And in 2023, it's 4,700, which is already too many, but one and a half million. So, so just talk us through the the sudden exponential growth that you're talking about and the ways in which people are trying to tackle it. >> Yeah. I mean, less than 5,000 two years ago, now 1.5 million in just two years and and and growing and expected to continue to grow. And when you think about why that is, I mean, you just have to look around at at the, you know, ease of use of these AI tools that have come up, right? uh all of these companies are spending tens of billions of dollars on data centers and and and products trying to move as fast as humanly possible to get these AI tools, the generative AI tools into the hands of everyday consumers. Of course, the downside being that that also helps the bad guys. And so while AI related reports are still a small sliver of the total number of reports that people get, you can see Caroline how it's growing exponentially and and expected to continue. Kurt, you you said at the beginning of our conversation, you spent 6 months reporting this. As part of the reporting, you've of course had responses from a range of technology and and actually in particular AI companies. We've been showing those responses on on air throughout the conversation, but how would you summarize the industry's response either directly to your reporting or to the issue that you that you are talking about? A lot of the big companies are telling us that hey we have safeguards in place right we we don't allow if someone goes to chat GPT and and tries to role play with a child which is something that now happens they say that they have alerts set up that they can detect that report it get it taken down I think the issue Ed is when you think about um open- source models what we've heard is that some of the open- source technology gets used people download it to their personal device and then they train it to create more child abuse material. And that is where the technology can get really dangerous because people are, you know, able to tailor it towards a specific uh thing that they want to create without any oversight from the the companies themselves. And so when you're using a mainstream product owned and operated by the company, there tends to be more guard rails. But when people are able to kind of take this stuff, put it on their personal device and manipulate it uh themselves, that's where, you know, these tools can become very powerful in a bad way. Blue Curt Wagner, thank you. Now, coming up, Warner Brothers shareholders approved the $110 billion sale to Paramount, but they don't sign off on everything. We have the details from the investor meeting next. This is Bloomberg Tech. Texas Instruments is up almost 19% on track for its best day since 2000 at a record high. The biggest maker of analog chips. Massive demand from all the industrial machinery that goes into building a data center. That's the story that's one of the best performers today. >> I've got the reverse. The worst performer on the S&P 500. In fact, the worst performance ever for Service Now. after its earnings. We caught up with the CEO, Bill McDermott, as he tries to push back on the negativity around software. Just take a listen to what he had to say. Even though subscription growth is still 22%, you beat on revenue. What more can you tell a market right now, Bill? >> I think it's very important to deal with facts. Um, we're a $15 billion enterprise software company, the fastest to ever get there, growing at more than 20%. We had a beat and raise quarter and we reiterated our fullear guidance. So, that's the baseline for the conversation and we are a growth company and I'll take the interview anywhere you want it want it to go. >> Let's talk about geopolitical headwinds. Let's talk about acquisition, integration, expenses. Maybe there's some of the areas that investors and and the analysts had said, look, it made for a bit more of a messy quarter than perhaps would have been easier for you to tell the story on. What is the underlying growth rate of AI at the moment of adoption of the service now products? >> Yeah, what you have to realize is AI is the product. It's the whole platform. So the platform is fully autonomous. So when a customer buys our AI platform, it is enabling every function of their company to be a native AI company. So it's all AI now. And that's another thing we said we would do 20 in 2026 a billion of net new uh annual contract value on pure AI additive to the platform. Yesterday we upped it to a billion and a half and I think we'll run through that. So if there's anything that the investors wanted, they probably wanted a bigger beat. So we're beating every quarter. Maybe they wanted a bigger beat. And then the second thing is, and it is true, we acquired a couple of companies. That was Service Now CEO Bill McDermott. Sticking with software, we're looking at IBM at one point in the session having its biggest uh lowest level since a year ago, April 2025. Software, AI, same story. >> It is. And also similarly for IBM it's a macro uncertainty that meant they didn't upgrade their revenue fullear expectations but >> they held it. >> They held it and that seemed cautious. Look I spoke with Arvin Krishna just yesterday after the amid the earnings and he looked said I got better margins better profit better cash but he did see that there's a macroeconomy concern and so he wasn't going to raise his guidance. But look he's talking about AI as well. It infiltrates all of it. It's not just a model that they see tailwinds. The market doesn't yet believe it at the moment. There is angst, Ed, about these software businesses being disrupted by that. >> I just want them to say in the future we will make more money. This is the timeline. That's all. >> And for now, they can't. But for now, we talk about what's happening with a deal. WD as we know it. Warner Brothers Discovery and Paramount both down. Paramount down by 5%. But we got that approval of the deal, $110 billion acquisition of the company by Paramount Skydance. But let's turn our attention to what comes next. Bloomberg's media reporter Hannah Miller. The investors okay with it? Now we got to see if the regulators are. >> Yes, that's the next step. Um is to overcome any regulatory obstacles that crop up uh including antitrust reviews um in both the US and Europe. >> Senator Elizabeth Warren has posted on X in the last couple of minutes that the Paramount Warner Brothers deal is an antitrust nightmare. Is that how the world feels about this, Hannah? >> I think that's certainly how Hollywood feels about this. Um why is that? We've had a lot of uh celebrities, actors, writers, directors come forward and actually sign an open letter protesting the deal, arguing that this will affect jobs, it'll lower production. Uh it'll mean higher costs. Um they think that this consolidation, it would have too much power in Hollywood. >> I mean, it's getting personal. If you go on TikTok, there's Jane Fonder in pretending to be CBS news anchors that are being disrupted in the future. Just what is the tactics that Hollywood now deploys? what is it that we're likely to expect in terms of the timeline? >> I think we've already seen them really, you know, make a big fuss about it in the press. Um, this open letter was a great move. Um, we've seen a lot of celebrities post on social media. Um, politicians have also come forward and, you know, expressed uh concern about the deal. So, you know, the there is going to be uh this sort of public relations battle that'll be on the horizon. >> At some point, we'll talk about the tech story. I remember Viacom CBS, Paramount Plus, HBO Max, that will be discussed at some point. Bloomberg's Hannah Miller, thank you very much. That does it for this edition of Bloomberg Tech. >> It has been such fun having you sat next to me. >> It's been great. It's been a hell of a week. I mean, uh, news flow-wise, markets wise, earnings wise, but I think we've we've been across it all. >> You have. You're going to jet back to the West Coast. Don't forget to check out the podcast. You can find on the terminal as well as online on Apple, Spotify, and iHeart. from New York for this Thursday. This is Bloomberg Tech.