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0:09[music] Bloomberg Tech is live from the heart of Silicon Valley with Ed Lello in San Francisco. This is Bloomberg Tech. Coming up, Meta raising its bet on AI, boosting its planned equity offering to almost $98 billion. is one of the largest ever. Plus, Anthropic's IPO could be the biggest ever. And a defining test for the AI boom as its S1 filing reveals staggering growth, spending, and losses.
0:40And Andreal is getting into laptops, teaming up with Qualcomm to build a new computer with a US supply chain. Andreal founder Palmer joins us for an exclusive conversation. Let's get right to our top story and that is Meta boosting an equity offering $98 billion almost in total. What's interesting this lock down half a percentage point it's been down in nine of the last 10 sessions but it's been a multiaceted story about [music] uh this continued throughout the year right we've seen big tech hyperscalers
1:09in particular come and tap the markets there are specific tranches there's a breakdown and there's an interesting uh number of participants going on in this let's get to Bloomberg tech's Sarah Frier and Sarah I want to start with you know this is uh oversubscribed there's a lot of demand for these meta shares but they're in different increments and different classes of stock. Just give us the basics.
1:29Well, it is overs subscribed for what has been put out there now. The stock split is not scheduled to happen until the new year. So, we will see what happens when they're the non- voting shares are out there. So, we're not going to see this all at once. Um, but this is a good sign for Meta that there is a lot of demand for it today. Now this is this is a tremendous amount of uh companies coming to market having
1:56asks in the tens nearly hundred billions for money for the AI boom. So, if you're an investor and you're looking at investing in in META or the anthropic IPO or the or maybe um you you're involved in the bond market, um this is this is a moment when all these companies are companies are coming out to try and see what they can do to build out AI infrastructure and Meta's well suited for this because they're not doing um debt, they're doing equity, but
2:24Google and Intel did that earlier this year and it was a success. So, what Meta has done is sell $25 billion of common stock, $12.5 billion uh offering on preferred shares, and then there's the $60 billion at the market share sale program, which is the class C non- voting shares. And we went into the backstory of that in yesterday's program. Now, there is a lawsuit uh filed against the company and Mr.
2:50Zuckerberg. Explain why there's some resistance from shareholders on this.
2:55They're calling Zuckerberg a boardroom bully because they're saying that he he lingered the idea that he would have to leave the state in order to get away from the Bloomberg billionaire. Sorry, not the Bloomberg, the California billionaire's tax. Um, and and that's just not the case because at his wealth as of this summer is what will be calculated for the tax. And so the the the lawsuit just says, you know, this is not um this is not really a legitimate
3:24way to have asked the board for this. Um I will say the the last time Zuckerberg tried to do this, um he also was blocked by a shareholder lawsuit. Uh and then he decided to drop the plan to do a stock split. Um that was back in in 2017. He said that, you know, actually he didn't need it because the stock was gaining so much anyway. Um, but there's there's a long history here of Meta's investors trying as they may to um to challenge
3:52the company, but ultimately Zuckerberg is the one with the voting control.
3:58What Meta said is they were doing this $60 billion of class C stock in part to diversify their fundraising efforts to finance AI, but to give Mr. Zuckerberg liquidity so that he could cover a potential tax bill from the California billionaire tax if it passes in the midterms next week. Bloomberg, Sarah Fry, thank you very much. Um, so AMD, Nvidia, and Broadcom are participating in this equity raise uh that Meta is doing. But away from the equity race, we also got confirmation this morning that
4:26Meta has installed AMD's Helios Rackcale AI systems is now testing it ahead of a broader roll out. This is AMD's answer to Nvidia's fully integrated AI systems.
4:37Meta already uses AMD CPUs to power its Muse AI agent and AMD GPUs for AI training, ranking and recommendation systems. Um, I want to get back to this massive equity offering and get the analyst reaction with Mandep Singh of Bloomberg Intelligence and it was interesting uh your react yesterday was kind of uh spot on right and how conservative the initial number was.
5:00It's there's demand there Sarah outlined that um it's a big number that Meta is doing. What's your kind of latest thinking on this, Mandy?
5:07Yeah, look, I think what they're trying to do is to make sure that they can uh, you know, do the fundraising ahead of uh the Anthropic IPO and we don't know the scale of uh Enthropics raise. Uh, it looks like based on the positive reaction to the S1 filing that they may be, you know, going north of$undred billion dollars or so. So it's good that uh you know meta is out in the market right now and it seems to be overs subscribed and look as long as they can
5:36show uh you know frontier capabilities for uh a consumer agent that they are developing I think market has seen the fundamentals of anthropic to suggest inference margins are good enough for all these companies to invest in training and you know being at the frontier. So from that standpoint also I think the story right now is a good one for meta that look Muse is a frontier model when it comes to uh consumer side of agent AI.
6:06Mandep in this uh equity offering AMD is putting a billion dollars in Nvidia is putting $3 billion in. I think if you do the math then Broadcom is also doing a billion dollars. So people inevitably go back to the question of circular financing. what what's the BI take on on them participating?
6:24Yeah, look, when you're talking about 98 billion in potential equity raise, uh this is still a small amount, you know, 5 to 6% of the overall equity raise, but there is no doubt that, you know, the optics aren't great. I mean, Meta holds a warrant against uh AMD shares and now AMD is uh you know, buying back uh some of their equity issuance. So there is that circularity but the scale of it is so big that you can't just rely on you
6:52know the circular aspect and uh obviously uh the offering is five times overs subscribed so it's not just you know uh the vendors uh kind of participating in in that issuance and there are a lot uh more other folks who want a piece of this right now that that is really important I mean that just came out about an hour ago that Meta's uh 25 billion part one of this stock sale did end five times overs subscribed. What what did you make Mandep of of how Meta communicated all
7:21of this? So if if you if you go just on the written word, Meta does the class C non voting shares to give them flexibility in financing and then you get into the regulatory filing and and you read the backstory and it seems like they did it because it keeps Mark Zuckerberg focused, gives him liquidity to cover the the potential tax bill from the California billionaires tax. You know, people can read that, you know,
7:49they're sensible. Um why does it matter that Mr. Zuckerberg gets this mechanism?
7:55Well, I mean, he's the founder and the majority owner, and if he wants it that way, then I I guess uh you know, bankers have to come up with a way to do that.
8:05And it's no different from what Alphabet has done, you know, with their two classes of shares where, you know, the voting rights uh will be uh will remain the majority voting rights will remain with the founder. And uh to my mind, the market timing is good. I mean I thought Alphabet did really well in terms of timing the $85 billion issuance. So from that perspective they're doing it in two tranches and uh going by the reception of the first tranch I think they will
8:34feel better about you know what they plan to do with the new class of shares in 2027.
8:39Can I ask you about timing? I think when Meta published the date of its most recent earnings and call, there was some idea in the market that that was also to time the equity offering. Like is is that a logical conclusion?
8:54Yeah, I think they really wanted to go ahead of uh this whole entropic uh you know uh raise and and we know everyone is excited about the size of this IPO.
9:05It could surpass SpaceX. So you want to be ahead of that you know in terms of raising any any any sort of funding here and we're going to get deep into uh everything else that we learned from that from anthropics s1 filing but clearly there's a need for capital and the market's willing to provide it. Bloomberg intelligence is deep singing.
9:24Thank you very much. So coming up anthropics IPO could be the largest in history but it's S1 is raising big questions about the enormous cost of this AI boom. That's next. This is Bloomberg Tech. [music] [music]
9:46[music] Anthropic IPO shaping up to be a defining test for the AI boom. Its S1 filing is setting the stage for what could be the biggest offering in history. But it also reveals just how much money anthropics burning to keep up that growth and raises some big questions about whether the math adds up. Bloomberg Shireen Gafari has been leading our coverage of the company and uh it's been an astonishing 24 hours since the S1 hit. Your your piece overnight was so so important because
10:16basically the story is quite simple. Extraordinary growth. The growth is now decelerating and they warned that it won't last forever and we finally understand all of the money stuff. just take me inside the report you put to the terminal this morning.
10:32Sure. So, really this is the first time that we're having uh a test on Wall Street of the pure play generative AI business model. Uh right and we're getting a full picture or at least much fuller than we've had before of anthropics financials. And what we've seen is proof of the staggering growth uh one of the fastest growing startups of all time in terms of their revenue going from virtually nothing uh just four years ago to now a thousand over
11:01a,000% year-over-year growth in 2025.
11:05But we're also seeing tremendous losses um right over 80.7 billion net loss on revenue of 16.3 billion in the first 6 months of 2026. And what the S1 didn't show that Anthropic did warn about in its uh risk factors is what's going to happen in future quarters and even in Q3 because we didn't get a look at Q3. We don't know about Q4 from the S1 in terms of those raw numbers and that revenue growth could slow.
11:33The the filing really took us inside the economics of of what being a Frontier Lab is. Um could you explain that a little bit? They have so much cash. It's kind of crazy, but the the the economics of compute, like a lot of people picked that out and were like, "Okay, we feel better about this this company's business model."
11:53That's right. I think generative AI is so new. If you think about it, it wasn't at all clear that these agents would even work. Uh now we have coding agents really pioneered. Anthropic was the first to market with a really killer coding uh automated tool that hasn'tar arguably completely changed the game in terms of how some leading software engineers are working. And I think there's real proof of concept that's now backed up in these numbers. That revenue extreme revenue growth that we saw the
12:22over,000% gains were from the the full force of those coding agents rolling out. But uh there are extreme losses as well and there's this these concerns about circular financing the huge amounts of debt that the company's going to take on and they have laid out in the perspectus in the of S1 that they need to take on more um to keep financing these operations. It is extremely resource inensive to build these models and beyond coding what is going to be the next big use case to take off is the
12:50real question I have.
12:52Bloomberg Sharing Gafari it's a must readad on the Bloomberg terminal and bloomberg.com today. Thank you very much. Broadcom's arranging a $63 billion deal to finance the purchase of chips for Anthropic. It's being done through a new special purpose vehicle with committed financing from several firms to buy Broadcom chips and then lease them back to Anthropic. It's a funding alternative to traditional unsecured bonds and equity. Joining us now with the React, Robert Shiffman of Bloomberg Intelligence. You're writing about this because the structure is interesting.
13:22Um, what does it tell you? What have you learned from it? Well, what a wildly bullish way to start off the week both for credit and for equity. You know, the question of whether or not there's enough demand out there to um justify all this AI spend, I think that's been answered. You know, we've heard Jensen Wong say demand is off the charts. We've heard alternative asset managers say growth is parabolic. The real question has been can it be funded? And when we saw cororeweave unsecured go to 15% yields, people were really questioning
13:51that and that pushed CDS for a lot of the hyperscalers wider. What did we learn this week? The amount of capital that is available to fund this is dramatic. It's excessive. There's more of it to go around than I think that the the market understands. And that's being proven whether it's through secured SPVs, unsecured deals, or now massive amounts of equity, 95 billion plus from Meta, what's likely to be near hundred billion from Anthropic. The funding is
14:20there. And um you know, I've heard you ask a few times this morning about circular financing. I just think the market needs to get over it. There's some circular financing going on and it's positive. It's not a negative. I don't think that term should be used or thought of negatively.
14:33I appreciate we're coming to this from the credit perspective, but you know, you read Anthropics S1 just like everyone else, right? It was interesting to talk to Mandep a moment ago about Meta's equity offering and the context of its timing against an anthropic IPO.
14:47I I just looked at the balance sheet and and you know, like with Anthropic, like that's kind of extraordinary. What What was your conclusion?
14:53Yeah, you just said it. You know, I don't think most people realize that Anthropic was sitting on $130 billion of cash. And again, they're likely to add, let's say, SpaceX style levels, another $87 billion of cash. They have some of their largest holders that have options that can add another $50 billion of cash. And oh, by the way, this $63 billion deal is in addition to over 60 billion of other SPVS they've already put in place. So the financing for Anthropic to build the AI future that
15:22they're they're promising is there now. They just need to build it uh and have it work and monetize it. But I think the questions about is there enough capital out there to fund this is being answered this week.
15:34Uh just just two things quickly to jump in. you know, we we do not know what the target raise is for this Anthropic IPO.
15:41Bloomberg reported that the expectation is that Anthropic tries to match or exceed what SpaceX did, which is what you referenced there. The other thing is that they are on the hook for hundreds of billions of dollars in different commits that range from a year to 20 years. You know, that's hard to model for in matching the financing against the commitment, isn't it?
15:59Yeah. Listen, everyone else has the same sort of issue. Meta has over $800 billion of future commitments. You know, that's what you have to do to build an AI network of the future. It's not going to be all debt. Um there's just a lot of contractual commitments, but they have.
16:15But I think the financing is going to be there. The Ebbit growth that we're going to see is going to be there. The amount of limited leverage is going to be low enough that they're going to be able to borrow in a lot of different ways, whether it's equity or credit to get built what they need to have built and to pay off these commitments. The thing is like first half 26 the data we have compute cost is 55% of revenue and like there's not a lot to go on from there but I guess we'll find out. Robert Schiffman of Bloomberg Intelligence thank you very much. Okay coming up in
16:42the show professor Erica Franklin Fowler from Wesleyan University joins us. We're going to discuss the rise of AI generated political acts and what that means for the upcoming midterms which are 7 days away. This is been back.
17:00[music] Just one week to go until the US midterms. Opposition to data centers isn't the only AI issue that's playing out with voters. The technology is being used to make more political ads than ever. The Wesleyan Media Project, a research group at Wesleyan University, found more than $137 million is being spent on AI generated ads. Erica Franklin Fowler, who led that research, joins us. And I I would like to start
17:29just with the with the scope of the research, what that $130 million of spending represents, and where it comes from.
17:37Sure. Yeah, we we've tracked over 220 ads so far, and that number will increase at $137 million on AI ads. There's a whole different type of ad that's being aired this cycle. Some of the uses of AI are pretty like unremarkable. They look very very much like traditional advertising. But then there's a lot of additional categories of AI use that include candidate deep fakes for example.
18:05Okay. Okay. So, let let's start with the first part of that which is uh those ads that are created with with it sounds like intention by the respective political parties and the forces behind them. Um is it is it evenly split across the political divide? Um are there specific races like gubanatorial races versus other things that that you're seeing this most present?
18:28Yeah, we're tracking all all of the AI use that we can find across different races. Um it's definitely not all uh from both sides. The first our first analysis showed that there were both parties were using it. Um but the second two releases that we've put out have shown a real increase on the Republican side at least of the type that we're we're able to detect. So more more than 80% have come from Republican sponsors.
18:53That's either candidates or outside groups specifically. And more than 70% of the ads don't have a disclaimer on them. I I guess that we we won't know until the the results of the midterms come out, but have you any measure of the effectiveness of of an AI generated ad in in a in a political context?
19:13We're working on that and research will be coming out that I think will answer that question. I mean, as I said, some of these ads don't look any different than than ads that we've seen in prior cycles. So I would expect that some of them may be average, you know, have average effectiveness. And then I think there's quite a bit that um take a satirical tack on uh on advertising specifically and I'm not sure that that's always an effective strategy, but again [clears throat] more research will
19:44Okay, we are showing an example of an AI generated ad. you you had also mentioned in in your previous uh response to me the the issue of deep fakes. Now, in in past election cycles around the world, but but certainly here in the United States, we've covered on this program the the issue of deep fakes and and often they're put into the cycle by bad actors maliciously. Is that the case here?
20:13Um there I think I would say there are two different types of deep fakes that we're seeing on air. The first is the type that's hyper realistic where you have a candidate doing or saying something that they didn't do or didn't say. And I think that is very concerning. Um the second type is what I would call the satire or parody use. So it's a candidate doing something or saying something that they didn't necessarily say or do, but it's clear from the context that the ad that it's not real. For example, we've seen candidates appear in bobbleheads or in
20:43pockets of corporations or politicians to underscore a point of a candidate being in the pocket of special interests, for example. And I don't think an average viewer would be fooled by that type of use. Um, but it's an interesting way of of utilizing AI video.
21:00Again, we're seven days out from the midterms. Um, I just uh showed the audience an an example of an AI generated political ad and I said it's AI generated and we annotated it to say it was AI generated. But how common is that practice uh of of letting the the voter or the audience know that it is AI generated?
21:23It's not common. There's no federal regulation requiring use for federal candidates. So what we have is basically a patchwork of state requirements. And so sometimes some of the ads that have gotten into our database will carry a label where we can't otherwise tell that the ad has used AI. But the vast majority 70% of the ads that we've identified that use AI do not have a disclaimer on them.
21:49Okay. To finish very quickly, like the number seems big, it's not that big really. Are these effective?
21:56Are the ads effective?
21:59Are they effective in in influencing the voter?
22:02Well, advertising in general, I would say, matters at the margin. It maybe matters less than the average citizen thinks that it does. Um, so whether any one given ad can make the difference, I think, is is not really unless the race is very very close. Um, not going to be an issue here.
22:21But I do think Erica Franklin, professor of government at Western University. It's been great to have you on. Thank you very much indeed. [music] Okay, welcome back to Bloomberg Tech.
22:37Technology stocks up generally speaking for a second straight day. Uh we're in the thick of earnings season and if you think about the discussions we were having just before that that period started. A lot of people focus on how important the these technology earnings are going to be. Some big ones to come in the next couple of days.
22:54Outperformance and chip stocks. the socks is up for a third straight [music] day. A part of this is the kind of shot in the arm to the AI trade of Anthropic [music] filing its S1, filing publicly for an IPO. Um, that got a lot of people thinking about what that means. A Frontier Lab [music] going public or filing to go public for the third time. But yes, earnings is a part of it. So third quarter earnings report came out pre-market today. The company posting its strongest quarter yet across revenue. joining us to dive
23:23deeper into the report is so far CEO Annie not uh quality of the beat 2027 confidence diversification beyond lending agentic payment opportunity like there's a lot that that people like out there and I I thought we would start a conversation a little bit differently this this quarter by me asking you what you were surprised by in the performance of your own company. Yeah, you know, I think the big question for us going into the quarter and really the back half of
23:50the year was how effective could we be at managing the interest rate risk as rates were going higher? Would we slow down growth? Would we be able to pass on to the consumer higher interest rates on loans? And the answer to that question is definitively yes. In fact, I feel as confident now of our business performing well in a rising rate environment as I feel it would perform in a declining rate environment. And that's a testament to the technology that we have, the data
24:19that we have, and our ability to real time pass on higher benchmark rates to consumers and higher prices on loans while still driving growth in the rest of our business. Um, we've mentioned on the call that we now have eight businesses that are generating $100 million of annual revenue or more. Um, 87% of our products are now non- lending products. So, we have great diversification. Um, but when there is some cyclical issues or macro issues with lending, we're able to navigate through them and still drive
24:49accelerating revenue growth. So, we grew 44% year-over-year and that was driven by 35% member growth. And we're at the point now where we're driving member growth, but we're also driving more products per member, which allowed our products to grow 44%. So you can see the symmetry between 44% growth in products, 44% growth in revenue. The business is a lot easier to understand when you think about it on those terms and then factor in can we handle economic uncertainty um
25:18to make sure that we're driving that product growth and revenue for product and that's what we're able to do in the quarter. Well, case in point, operationally, um, lending is still growing strongly. You know, I I see that revenue grew 44%, adjusted EBIT DAR grew 70%. And so, I think a lot of people this morning are thinking, you know, how much more operating leverage is left for you in the business if you if you're you things are going well, right, Anthony?
25:42But how much more you can squeeze out of that?
25:44Yeah, we think our EBAM margins can increase over time to as high as 40% or more. and that our net income margin, which was 17% this quarter, uh would range between 20 and 30% likely to the higher end of that. Um we're going to focus on making sure we deliver 30% incremental net income margin so we can reinvest the other 70 cents in additional growth drivers. We set an objective to get to 100 million product 30, which is a increase from where we
26:14are today at 27 million. It's a very aspirational goal. It's not easy to get to, but it's definitely achievable. If we can drive that 4x increase in products, it doesn't take that big of an imagination to see a 4x increase in earnings from the 61 cents we're at today in 2026.
26:30You know, in addition to that, we laid out that not only do we have the eight businesses that are greater than $100 million of revenue, our goal by 2030 is to have five businesses that are greater than a billion dollars. Another five businesses that are greater than 500 million and a final five businesses that are greater than 100 million. So, we're going to continue to focus on members, more products per member, and revenue per product. But that's how it should stake out from a business standpoint.
26:56Thank you for taking us to 2030 because I want to ask you a much bigger picture longerterm question which is about AI agents and whether you genuinely believe this is a technology question. You genuinely believe we end up in a world where AI agents move money and make purchases on behalf of of SoFi customers and and that is a business for you.
27:18I think we can definitely end up in a world where AI agents find the best deals, the best interest rates on checking and savings, the best interest rates on loans, the best services, etc. Um, SoFi is going to win in that world.
27:31We are we have a superior value proposition and we have a unique competitive advantage. the breadth of our products and each one of them having superior in economics gives us a higher lifetime value and that higher lifetime value allows us to offer the consumer better interest rates on on loans and better interest rates on checking and savings and other services. So AI I think is going to increase transparency of what's available. I think when we're on that shelf we'll look better than anyone else. It'll increase the
27:59awareness of SoFi which is a limiting factor in what we grow which is why we have to continue to spend on marketing. Um and so I think in a AI world will definitely compare better than anyone else. Do do I think AI agents will start to make payments? Yes.
28:15There are companies that provide automatic payments today, automatic trading today. If you go on SoFi today, you can set up bill pay. You can set up recurring investments. They're being done by machines. It's not super intelligence. It's linear intelligence.
28:26But if you can do it with linear intelligence, you can do it with agent intelligence. It really comes down to whether or not the consumer, the member is willing to do that. I think a brand like SoFi, who's a trusted brand, provides FDIC insurance as a national bank um and a Fed bank holding company has a better chance of building that trust and reliability with consumers than any other technology company or financial services company. So I think we win both on trust and better products.
28:56SoFi shares up more than 14% on track for their best day since April of 2025. And not CEO of SoFi, thank you so much for your time here on Bloomberg Tech. There's a lot going on around the world. Let's get out to New York where Bloomberg's Isabelle Lee is standing by.
29:10Hi Ed. It's time now for talking tech. First up, Intel making a big bet on quantum computing. The chipmaker agreed to buy an Israeli startup Classic Technologies for about $2.3 billion.
29:22That's according to sources. We have CEO Lip Bhutan saying that the deal will turn Intel's quantum unit into a full stack business and that says the company looks to gain ground in a potentially huge new market. The deal is expected to close in the first half of next [music] year. Plus, Alibaba has won a US court ruling in its challenge to a defense department blacklist. A federal judge ordered the Trump administration to stop enforcing a ban on Pentagon doing businesses with companies that lobby for Alibaba. The judge did not rule on
29:51Alibaba's challenge to its inclusion [music] on that list, which was added on June 8th. And Apple is acknowledging a display problem with some of its new twistable iPhone duos. Customers say the inner screen cracked after just hours [music] or days of use, sometimes after a crunching sound when unfolding the phone. Bloomberg independently verified the issue with more than half a dozen customers. And Apple says that a small number of devices are affected [music] and customers should contact Apple Care for a replacement. Ed.
30:20Okay, thank you Isabelle. Staying with Apple, the company rolling out another round of Mac updates, unveiling a new 24-in iMac and entry-level 14in MacBook Pro. Both machines get Apple's new M6 chip along with Wi-Fi 7 and Bluetooth 6. The iMac starts at about $1,500 while the MacBook Pro starts at just under 2,000. And there's more to come. Apple expected to unveil its first ever touchscreen MacBook Pro on Wednesday.
30:48Coming up, we speak with Palmer Lucky, founder of Anderil, a new collaboration with Qualcomm, a focus of a fully US manufactured computer, a laptop, and [music] the future of that segment in this country. More when we return. This is Bloomberg Tech. [music] [music] Defense tech startup Anderil is joining forces with chipmaker Qualcomm on blue chip, an effort to rebuild an American computer supply chain and reduce dependence on overseas manufacturing.
31:27The first product will be a laptop designed assembled in the US with circuit board assembly planned at Andreal's Arsenal 1 factory in Ohio. Uh joining us now for an exclusive conversation, Anderil founder Palmer Lucky. This is something that you you've talked about the problem you've talked about, but I think a good place to start, Palmer, is why why Anderil is getting into computers?
31:49Well, we're getting into computers because America invented the computer industry. We perfected it and then we shipped it overseas. And that might make sense from an economic perspective, but think about the things that I'm working on. Think about the things that the military is working on. Think about critical industries like u you know medical hospitals power plants. There's a lot of people who are building stuff running on Chinese-made computers. And I think it's crazy to have an entire country depend entirely on its largest strategic adversary for its most
32:16critical economic powerhouses. And so didn't actually set out originally to build American computers because we wanted to. We tried to get other people to do it. We tried to get them to invest in this because I can't be in the business of selling autonomous weapons that are controlled by Chinese equipment and we weren't able to make it happen.
32:33So, we decided this is something that we were going to invest in. We're going to bring silicon back to the valley. We're going to work with the best companies in the United States to build a computer that's not just designed here, not just even assembled here, but actually made in the United States. Everything from the chips to the glass to the metals to the batteries to the plastics, everything. I I have a lot of questions on at the component level and and how this works with the supply chain. But you've raised some interesting points which is um in the first instance who
33:02blue chip is actually for like this is a rug what we'd call a rugged computer right um directed at the military the public sector first responders emergency services or or your ambition is broader than that.
33:16Look my ambition is broader. Where we're starting is with these military applications because those are the most challenging requirements in terms of the heat requirements, the shock requirements, the the the weather proofing required, the security required. If I can build a computer that meets the military's needs, it's going to be more than enough to meet everyone else's needs. And so I'd say right now we're focused on government and then critical industry. So think about defense companies that are handling classified data. uh uh energy companies that are building grid critical they
33:45build grid grid critical systems that need to really understand every piece of hardware and not have back doors planted into their machines by a foreign adversary. Uh you America has understood the importance of domestic manufacturing in other areas for a very long time. Uh I was propagandized at a young age. My dad was a car salesman selling Buick, Pontiac, GMC and Hummer. And if uh if we didn't have American automotive, you can guess where we would be in the automotive space. Okay, so there's the product, but in this first phase of blue
34:15chip, you you have to go about rebuilding a supply chain, the displays, uh, you know, Qualcomm is going to come with the CPU, GPU, and and NPU, but but I mean, how do you do that? Where do you start?
34:30It's really tough. We've been working on this for years. There's so many things where we've sent them overseas. And you, it's not just about the chips. Qualcomm has announced that they're going to be making the chips in Arizona. Uh the the thing is the chips aren't enough. One of the problems with the US subsidies and investments in semiconductors is at the end of the day we don't have any ability to package them and then turn them transform them into useful products. So from a certain point of view American semiconductor subsidies have really just
34:57been a subsidy of Chinese-made laptops of Chinese-made computers because that's where they go to actually get turned into products. We want to make sure that America's capturing that entire value chain here. And it's really tough. We're working with suppliers who either have never been in the computer industry or they haven't been in the computer industry for about 20 years now when the last US plant shut down after the elite sold us out and sent everything overseas.
35:21We are live on Bloomberg television and on Bloomberg radio um speaking to Palmi, the founder of Anderil about Blue Chip, which is an initiative to have a 100% US manufactured uh computer, a a laptop and I think future products. We'll get to the rest.
35:38Starting with a laptop. I I mean, you know, the question that you're raising is, is it realistic? Is it even possible to reduce dependence on China 100% uh at the component level and the raw materials level?
35:52Look, I think that I have a more realistic view than this than almost anybody. One of the problems with all these analysts that are telling you that it's going to cost $37,000 to build an American iPhone or $100,000 to buy an American computer, they're trying to prop up a status quo that the mega corporations want to keep going. They want to outsource everything. They want to hire cheaper non-American labor and they are willing to say and do anything to convince you that it can't be fixed, that it can't come back, that America is
36:20this helpless, neutered, postrelevant empire. And it is just not the case. How do I know that? Because I have to make stuff in America every day because I work in the defense industry. The stuff that Andrew makes every day is not actually that different from a computer.
36:35My drones are basically computers. They have memory, a GPU, a CPU, sensors, batteries, uh, you know, a rugged integration. The only difference between an Android attack drone and a laptop is a keyboard and a screen. And that is not that hard to figure out, especially for a guy like me who started Oculus and comes from the consumer electronic space. And so, we're not going to let people lie about what America can and can't do anymore. We're just going to do it.
37:03Um, that was my question. What is Andrew's advantage here in doing this?
37:07And I think you've outlined it. You also said you tried to get one of the few companies that actually has had to get good at this. Look, I'm personally sanctioned by the Chinese Communist Party. I'm a separatist terrorist according to them. Anal is sanctioned, too. So, we've had to develop a we've had to develop a life independent of China in a way that most American companies say they cannot, but in reality just don't want to do. And so, we're the right company to be able to do this. And uh I I I think that our
37:35experience over the last 10 years learning how to build these advanced systems without a reliance on our foreign adversaries, that's why I'm so confident that this is going to be maybe not a piece of cake, but there's a reason I know this is doable.
37:51A question I got for you from the analysts, for what it's worth, is who are you going to convince to manufacture displays in the US?
37:59That is a great question. I the official answer is that we're gonna have more to announce in 2027. I'm hoping that we have something to say at CES, but to tell you a little bit more, we're talking with multiple vendors right now and we've got a plan with multiple vendors to solve that specific problem.
38:15So, I'm not ignoring it right now. The display is made in another country in these prototypes we've been showing. The glass on it is made in an American company. uh much of the assembly of the display is made in the United States, but the actual panel itself currently is made in another country. We're about 90% US and allies right now, but we have a clear technical roadmap to 100% US. I can't tell you just who it is just yet, honestly, because we're still we're still negotiating it.
38:44I want to shift gears slightly. you know, I haven't actually caught up with you this year, which is unbelievable, but um our colleagues at Bloomberg Intelligence, which is our in-house research, launched coverage of Anderil back in August, and they're they're very closely following the balance between your software business latis and and manufacturing ramp that's happening in Ohio. And I think that, you know, it would be really useful to hear how you're balancing that, you know, those two programs, how they're integrated.
39:13Well, look, at its core, Andreal is an AI company. Our name Andreal Industries, the acronym is AI for a reason. But we started 10 years ago when AI wasn't cool, when no one was paying attention to it. You know, we've got more people working on software in Anderol than in all our hardware products combined.
39:29Lattis is the AI brain that makes all of our fighter jets and submarines and missiles and everything go. And we're applying that software expertise to this as well. So, we have to build a laptop that's not just running Microsoft Office or, you know, a web browser to check your your Gmail. We have to work with a lot of legacy government applications that were designed in the 2000s, the '9s, even the 80s. We need to be compatible with a lot of things that most consumer laptops never even need to think about. We need drivers to be able to interface with legacy systems that similarly hardware systems that have
39:58been around for a decade. That takes a lot of software work. And so again, Andre is in a bit of a different place than most other companies where we're not just a hardware manufacturer. We are a very very competent software developer as well and we're doing things that nobody else is doing.
40:14This is also the first opportunity I've I've had to ask you about project meridian. You Elon Musk mute Grinch leading that project. I know this might sound like like an odd starting question, but what are those meetings actually like? Like when you guys get together, what are the problems that you debate with each other?
40:32Well, a few things. One, there's actually about 20 people that are on Project Meridian. You're right. We were we we were named uh three like we're the three chairs of the steering committee.
40:40Uh look, we're just getting started, right? It's a it's a 120day project. I think that it's still starting to come together. The whole project's being run by the MITER Corporation. Um and they've done a lot of analysis of this type of thing before. Uh what I've seen is that everyone is bringing a very different unique perspective. Uh like I I I think it's matter of public record. And so hopefully I'm not getting in trouble here, but like Rick Smith, CEO, founder of Axon, is one of the other people there and he's bringing a really unique perspective on things that can reduce collateral damage, reduce impact on
41:09civilian lives in warfare. You have other people who are coming from the computing industry, other people who are coming from the automotive industry. So, it's it's a lot of different perspectives and uh again, we need to wait until this thing gets further along, but at least my personal opinion is I'm hoping that the report reflects the diversity of different perspectives that people are bringing to the table. I don't want this to just be a think tank report that says the same five things that everyone's known for 10 years.
41:36Look, we all know what the threat is in the Pacific. We all know what the threat is on the bio and the chem side. I would really like this to focus on the things that otherwise might not get attention including things that might not get my attention.
41:48Um, we're live on Bloomberg television radio. We're speaking of Palmer Lucky. I just asked about Project Meridian. I mean that the reports due in January, right? And I I get that that's going to publish. You have to wait for that. But but that was really interesting rather than just a think tank. I think people are asking, have you found evidence that there are things the Pentagon can do differently, should do differently in how it it conducts itself?
42:11I think they can, but I don't think that's really what this is about. I think there's been a lot of talk about how this is about how the Pentagon operates. The reality is, I mean, you can go watch the announcement. It's about what the future of warfare looks like, particularly thinking about 2040, 2050, the things where you don't necessarily have a daily impetus to really spend your time thinking about what it might look like and what steps you might take today if you're building towards that future. uh the the things the Pentagon can change in terms of faster procurement, in terms of more
42:41lean development cycles, or things that I think everyone's learning from Ukraine, like the ability to very rapidly procure the things that work, and then critically stop buying things when they're no longer working. That's maybe the most important thing we've seen out of Ukraine, giving units the decision to buy or stop buying things when they're no longer relevant, no longer working. I mean, that's a that's a really really powerful development.
43:03But I think everyone knows that we need to do it, but it's the difference between knowing that you're fat and losing weight. You can know what you need to do, but sometime you got to eat eat less and move more, but it's so painful that it takes time sometimes to make it happen. And I think that's the problem in the DoD. They all know what the problems are, and it's really painful to actually go about solving it.
43:25Uh Palmer we we have two minutes here which regrettably but we're seven days from the midterms and I think a lot of people look at okay if we get a blue wave does that have a material impact on defense spending actually lots of people see a tighter defense spending budget being good for like Anderil nimble uh you know solutions cost effective solutions but just how are you preparing for that look I've seen these arguments this idea that when belts tighten the more efficient companies are going to do better you know when you have to decide which things to preserve and which
43:55things not to preserve. The things that are most relevant are probably going to win. Uh I think that even with a blue wave, you're not necessarily going to see a huge change in defense spending. Look, I could be wrong. I'm not a politician. I'm an engineer. So, you're asking me to speculate outside of my area of expertise, but a lot of the Democrats, like I talked to Republicans and Democrats. the Democrats who are in control of the budget. Democrats who are in control of the defense budget, they understand that we're in a really unique
44:24period in time. They understand that the world that we're in does need investment to replace some of these legacy systems and that we're facing a very near-term threat. And and this is not just the US that's recognizing this. I mean, Japan is now talking about how they need to engage with no taboos with the idea that they can amend their constitution so that Japan is able to host nuclear weapons. I mean, we are living in a world where everything is on the table.
44:49And so, look, the defense budget will go up, it'll go down, it'll go up, it'll go down. As of right now, I think most people on the red and the blue side agree that America needs to be investing in new technology. And uh I I I think I'm going to be fine no matter what happens.
45:08Just remind us very quickly for blue chip, the first shipments next year.
45:13That's right. So, we're going to be going into production next year. We're going to have more to announce next year. I don't have information on the exact pricing, the exact timelines. If you've been paying attention, if you've been paying any attention at all, you'll know this is maybe the hardest time in history to predict the pricing and delivery timelines of computer chips because of this AI boom, right? It's not that I don't want to tell you the date. It's that I can't give a date or an exact price that I'm confident that I'm going to be able to
45:42hit when I'm delivering next year. And so, we'll have more to say next year.
45:45We're going to be in production next year. We're already actually in early prototype production right now. And we're going to be building these at Arsenal 1 and in a variety of other places with about two dozen other American companies and getting them out to you. [music] Palmer Lucky, founder of Vanderil back on Bloomberg Tech. Really appreciate your time. Thank you. That does it for this edition of Bloomberg Tech. Check out the podcast. That was an interesting longer conversation, but so much in equity markets, earnings season, and the world of technology. From San Francisco,
46:13[music] this is Bloomberg Tech.
