Meta Boosts Equity Offering to $98 Billion, Raising Its AI Bet

[00:00:00] Speaker 1: Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco. [00:00:14] Speaker 2: This is Bloomberg Tech coming up. Meta raising its bet on AI, boosting its planned equity offering to almost $98 billion, one of the largest ever. Plus, Anthropics IPO could be the biggest ever and a defining test for the AI boom as its S1 filing reveals staggering growth, spending and losses. And Anderil is getting into laptops, teaming up with Qualcomm to build a new computer with a U.S. supply chain. Anderil founder, Palmer Luckey, 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, the stock down half a percentage point. It's been down in nine of the last 10 sessions, but it's been a multifaceted story about, this continues throughout the year, right? We've seen big tech, hyperscalers in particular, come and tap the markets. There are specific tranches, there's a breakdown, and there's an interesting number of participants going on in this. Let's get to Bloomberg Tech's Sarah Fryer. And Sarah, I want to start with, you know, this is 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. [00:01:20] Speaker 1: Well, it is oversubscribed 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 the non-voting shares are out there. So we're not going to see this all at once, but this is a good sign for Meta that there is a lot of demand for it today. Now, this is a tremendous amount of companies coming to market, having asks 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 Meta or the Anthropic IPO, or maybe you're involved in the bond market, this is a moment when all these companies are coming out to try and see what they can do to build out AI infrastructure. And Meta is well suited for this because they're not doing debt, they're doing equity. But Google and Intel did that earlier this year, and it was a success. [00:02:20] Speaker 2: So what Meta has done is sell $25 billion of common stock, $12.5 billion 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 filed against the company and Mr. Zuckerberg. Explain why there's some resistance from shareholders on this. [00:02:46] Speaker 1: They're calling Zuckerberg a boardroom bully because they're saying that he lingered the idea that he would have to leave the state in order to get away from the California billionaire's tax. And that's just not the case because his wealth as of this summer is what will be calculated for the tax. And so the lawsuit just says this is not really a legitimate way to have asked the board for this. I will say the last time Zuckerberg tried to do this, he also was blocked by a shareholder lawsuit, and then he decided to drop the plan to do a stock split. That was back in 2017. He said that, you know, actually he didn't need it because the stock was gaining so much anyway. But there's a long history here of Meta's investors trying, as they may, to challenge the company. But ultimately, Zuckerberg is the one with the voting control. [00:03:50] Speaker 2: What Meta said is they were doing this $60 billion of Classy 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's tax if it passes in the midterms next week. Bloomberg, Sarah Fry, thank you very much. So AMD, NVIDIA, and Broadcom are participating in this equity raise that Meta is doing. But away from the equity raise, we also got confirmation this morning that Meta has installed AMD's Helios Rackscale AI systems, is now testing it ahead of a broader rollout. This is AMD's answer to NVIDIA's fully integrated AI systems. Meta already uses AMD's CPUs to power its Muse AI agent and AMD GPUs for AI training, ranking, and recommendation systems. I want to get back to this massive equity offering and get the analyst reaction with Mandeep Singh of Bloomberg Intelligence. And it was interesting. Your react yesterday was kind of spot on right on how conservative the initial number was. There's demand there. Sarah outlined that. It's a big number that Meta's doing. What's your kind of latest thinking on this, Mandeep? [00:04:59] Speaker 3: Yeah, look, I think what they're trying to do is to make sure that they can, you know, do the fundraising ahead of the Anthropic IPO. And we don't know the scale of Anthropic's raise. It looks like based on the positive reaction to the S1 filing that they may be, you know, going north of $100 billion or so. So it's good that, you know, Meta is out in the market right now and it seems to be oversubscribed. And look, as long as they can show, you know, frontier capabilities for 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 that it comes to a consumer side of agentic AI. [00:05:57] Speaker 2: Mandeep, in this 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's the BI take on them participating? [00:06:16] Speaker 3: Yeah, look, when you're talking about $98 billion in potential equity raise, 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 AMD shares and now AMD is, you know, buying back 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 know, the circular aspect. And obviously, the offering is five times oversubscribed. So it's not just, you know, the vendors kind of participating in that issuance. And there are a lot more other folks who want a piece of this right now. [00:07:00] Speaker 2: That is really important. I mean, that just came out about an hour ago that Meta's $25 billion part one of this stock sale did end five times oversubscribed. What did you make, Mandeep, of how Meta communicated all of this? So 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 you read the backstory and it seems like they did it because it keeps Mark Zuckerberg focused, gives him liquidity to cover the potential tax bill from the California billionaire's tax. You know, people can read that, you know, they're sensible. Why does it matter that Mr. Zuckerberg gets this mechanism? [00:07:47] Speaker 3: Well, I mean, he's the founder and the majority owner. And if he wants it that way, then I guess, you know, bankers have to come up with a way to do that. And it's no different from what Alphabet has done, you know, with their two classes of shares where, you know, the voting rights will be, will remain. The majority voting rights will remain with the founder. And 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 going by the reception of the first tranche, I think they will feel better about, you know, what they plan to do with the new class of shares in 2027. [00:08:31] Speaker 2: Can 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 that a logical conclusion? [00:08:46] Speaker 3: Yeah, I think they really wanted to go ahead of this whole anthropic, you know, raise. And we know everyone is excited about the size of this IPO. It could surpass SpaceX. So you want to be ahead of that, you know, in terms of raising any sort of funding here. [00:09:06] Speaker 2: And we're going to get deep into 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 Bandeep Singh. Thank 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. Anthropics IPO is shaping up to be a defining test for the AI boom. It's 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 Ghafari has been leading our coverage of the company. And it's been an astonishing 24 hours since the S1 hit. Your piece overnight was so, so important because basically 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. [00:10:24] Speaker 4: Sure. So really, this is the first time that we're having a test on Wall Street of the pure play generative AI business model. 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, one of the fastest growing startups of all time in terms of their revenue going from virtually nothing just four years ago to now 1,000, over 1,000 percent, your growth in 2025. But we're also seeing tremendous losses, right, over 80.7 billion net loss on revenue of 16.3 billion in the first six months of 2026. And what the S1 didn't show that Anthropics did warn about in its 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. [00:11:25] Speaker 2: The filing really took us inside the economics of what being a frontier lab is. Could you explain that a little bit? They have so much cash. It's kind of crazy. But the economics of compute, like a lot of people picked that out and were like, okay, we feel better about this company's business model. [00:11:45] Speaker 4: That'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. Now we have coding agents really pioneered. Anthropic was the first to market with a really killer coding automated tool. That hasn't 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 over 1,000 percent gains, were from the full force of those coding agents rolling out. But there are extreme losses as well, and there are these concerns about circular financing, the huge amounts of debt that the company is going to take on. And they have laid out in the prospectus in the S1 that they need to take on more to keep financing these operations. It is extremely resource-intensive to build these models. And beyond coding, what is going to be the next big use case to take off is the real question I have. [00:12:44] Speaker 2: Bloomberg Shereen Ghafari, it's a must-read 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 Anthropik. 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 Anthropik. It's a funding alternative to traditional unsecured bonds and equity. Joining us now with your React, Robert Shiffman of Bloomberg Intelligence. You're writing about this because the structure is interesting. What does it tell you? What have you learned from it? [00:13:17] Speaker 5: 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 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 core weave unsecureds go to 15% yields, people were really questioning that. 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 market understands. And that's being proven, whether it's through secured SPVs, unsecured deals, or now massive amounts of equity. Ninety-five billion plus from Meta, what's likely to be near a hundred billion dollars from Anthropic. The funding is there. And, 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. [00:14:25] Speaker 2: I 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 Mandeep a moment ago about Meta's equity offering and the context of its timing against an Anthropic IPO. I just looked at the balance sheet and, you know, like with Anthropic, that's kind of extraordinary. What was your conclusion? [00:14:45] Speaker 5: Yeah, 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 they're promising is there. Now they just need to build it 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. [00:15:26] Speaker 2: Just two things quickly to jump in. And, you know, we do not know what the target raise is for this Anthropic IPO. Bloomberg 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? [00:15:51] Speaker 5: Yeah, 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. There's just a lot of contractual commitments that they have. But I think the financing is going to be there. The EBITDA 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. [00:16:23] Speaker 2: The thing is, like, first half 26, the daily 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 Shiffman of Bloomberg Intelligence. Thank you very much. OK, coming up in the 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 seven days away. This is Bloomberg Tech. Just one week to go until the U.S. 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 would like to start just with the scope of the research, what that $130 million of spending represents and where it comes from. [00:17:29] Speaker 6: Sure, yeah, we've tracked over 220 ads so far, and that number will increase, about $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 deepfakes, for example. [00:17:57] Speaker 2: Okay, so let's start with the first part of that, which is those ads that are created with, it sounds like, intentioned by the respective political parties and the forces behind them. Is it evenly split across the political divide? Are there specific races, like gubernatorial races versus other things, that you're seeing this most present? [00:18:20] Speaker 6: Yeah, we're tracking all of the AI use that we can find across different races. It's definitely not all from both sides. Our first analysis showed that there were both parties were using it. 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 able to detect. So more than 80% have come from Republican sponsors. That's either candidates or outside groups specifically. And more than 70% of the ads don't have a disclaimer on them. [00:18:53] Speaker 2: I guess that we won't know until the results of the midterms come out, but have you any measure of the effectiveness of an AI-generated ad in a political context? [00:19:05] Speaker 6: We'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 ads that we've seen in prior cycles. So I would expect that some of them may have average effectiveness. And then I think there's quite a bit that take a satirical tack on advertising specifically. And I'm not sure that that's always an effective strategy, but again, more research will tell. [00:19:36] Speaker 2: Okay. We are showing an example of an AI-generated ad. You had also mentioned in your previous response to me the issue of deepfakes. Now, in past election cycles around the world, but certainly here in the United States, we've covered on this program the issue of deepfakes. And often, they're put into the cycle by bad actors, maliciously. Is that the case here? [00:20:05] Speaker 6: I think I would say there are two different types of deepfakes 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. 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 it's not real. For example, we've seen candidates appear in bobbleheads or in pockets 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. But it's an interesting way of utilizing AI video. [00:20:52] Speaker 2: Again, we're seven days out from the midterms. I just showed the audience 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 of letting the voter or the audience know that it is AI-generated? [00:21:15] Speaker 6: It'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. [00:21:41] Speaker 2: Okay, to finish very quickly, the number seems big. It's not that big, really. Are these effective? Are the ads effective? Are they effective in influencing the voter? [00:21:54] Speaker 6: Well, advertising in general, I would say, matters at the margin. It maybe matters less than the average citizen thinks that it does. So whether any one given ad can make the difference, I think, is not really, unless the race is very, very close, it's not going to be an issue here. [00:22:13] Speaker 2: Erica Franklin Fowler. Erica Franklin Fowler, Professor of Government, AT Wesleyan University. It's been great to have you on. Thank you very much indeed. Now, coming up, SoFi's stock is absolutely surging. We're going to speak to the CEO, Andy Nuno, next. Has the company finally silenced some skeptics? Where's the momentum? Big earnings conversation coming up. This is what markets look like. Half time in the program here in the city of San Francisco. Tech hire. Conduct is outperforming. Pretty common story of the balance of this year. Be right back. This is Bloomberg Tech. Okay, welcome back to Bloomberg Tech. Technology stocks up, generally speaking, for a second straight day. We're in the thick of earnings season. And if you think about the discussions we were having just before that period started, a lot of people focus on how important these technology earnings are going to be. Some big ones to come in the next couple of days. Outperformance in chip stocks, the stocks is up for a third straight day. A part of this is the kind of shot in the arm to the AI trade of Anthropic filing its S1, filing publicly for an IPO that got a lot of people thinking about what that means. It's a frontier lab going public or filings go public for the third time. But yes, earnings is a part of it. SoFi's third quarter earnings report came out pre-market today. The company posting its strongest quarter yet across revenue joining us to dive deeper into the report. SoFi's CEO, Anna Inodo. Quality of the beat, 2027 confidence, diversification beyond lending, agentic payment opportunity. There's a lot that people like out there. I thought we would start our conversation a little bit differently this quarter by me asking you what you were surprised by in the performance of your own company. [00:24:03] Speaker 7: Yeah, you know, I think the big question for us going into the quarter and really the back half of the 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 that 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. We've mentioned on the call that we now have eight businesses that are generating $100 million of annual revenue or more. 87% of our products are now non-lending products. So we have great diversification. But when there is some cyclical issues or macro issues with lending, we're able to navigate through them and still drive accelerating 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 to 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. [00:25:41] Speaker 2: Well, the case in point, operationally, lending is still growing strongly. I see that. Revenue grew 44%. Adjusted EBITDA 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 things are going well, right, Anthony, but how much more you can squeeze out of that? [00:26:02] Speaker 7: Yeah, we think our EBITDA margins can increase over time to as high as 40% or more, and that our net income margin, which was 17% this quarter, would range between 20% and 30%, likely to the higher end of that. We're going to focus on making sure we deliver 30% incremental net income margin so we can reinvest the other $0.70 in additional growth drivers. We set an objective to get to $100 million. Which is an increase from where we are 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 forex increase in products, it doesn't take that big of an imagination to see a forex increase in earnings from the $0.61 we're at today in 2026. You 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 $8 billion. 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. [00:27:14] Speaker 2: Thank you for taking us to 2030, because I want to ask you a much bigger picture, longer term 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 SoFi customers, and that is a business for you. [00:27:36] Speaker 7: I 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, et cetera. SoFi is going to win in that world. 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 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 awareness of SoFi, which is a limiting factor in what we grow, which is why we have to continue to spend on marketing. And so I think in an AI world, we'll definitely compare better than anyone else. Do I think AI agents will start to make payments? Yes. There 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. But 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 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. [00:29:14] Speaker 2: SoFi shares up more than 14% on track for their best day since April of 2025. And I know the 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 Isabel Lee is standing by. Hi, Isabel. [00:29:28] Speaker 8: Hi, 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, Plastic Technologies, for about $2.3 billion. That'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's as the company looks to gain ground in a potentially huge new market. The deal is expected to close in the first half of next year. Plus, Alibaba has won a U.S. 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 Alibaba's challenge to its inclusion 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 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 and customers should contact AppleCare for a replacement. Ed. [00:30:37] Speaker 2: Okay, thank you, Isabel. Staying with Apple, the company rolling out another round of Mac updates, unveiling a new 24-inch iMac and entry-level 14-inch 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. Coming up, we speak with Palmer Luckey, founder of Anderil, a new collaboration with Qualcomm, a focus of a fully U.S.-manufactured computer, a laptop, and the future of that segment in this country. More when we return. This is Bloomberg Tech. 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. The first product will be a laptop, designed, assembled in the U.S., with circuit board assembly planned at Anderil's Arsenal One factory in Ohio. Joining us now for an exclusive conversation, Anderil founder, Palmer Luckey. This is something that you've talked about, the problem you've talked about. But I think a good place to start, Palmer, is why? Why Anderil's getting into computers? [00:32:07] Speaker 9: Well, 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 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 critical economic powerhouses. And so Anderil 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. So 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. [00:33:11] Speaker 2: I have a lot of questions at the component level and how this works with the supply chain. But you've raised some interesting points, which is, in the first instance, who Blue Chip is actually for. Like, this is what we'd call a rugged computer, right, directed at the military, the public sector, first responders, emergency services, or your ambition is broader than that? [00:33:34] Speaker 9: Look, 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 weatherproofing 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, energy companies that are building 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. America has understood the importance of domestic manufacturing in other areas for a very long time. I was propagandized at a young age. My dad was a car salesman selling Buick, Pontiac, GMC, and Hummer. And if we didn't have American automotive, you can guess where we would be in the automotive space. [00:34:29] Speaker 2: Okay, so there's the product. But in this first phase of Blue Chip, you have to go about rebuilding a supply chain. The displays, you know, Qualcomm is going to come with the CPU, GPU, and NPU. But, I mean, how do you do that? Where do you start? [00:34:47] Speaker 9: It's really tough. We've been working on this for years. There's so many things where we've sent them overseas. And it's not just about the chips. Qualcomm has announced that they're going to be making the chips in Arizona. The thing is, the chips aren't enough. One of the problems with the U.S. 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 been 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 is 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 U.S. plants shut down, after the elites sold us out and sent everything overseas. [00:35:39] Speaker 2: We are live on Bloomberg Television and on Bloomberg Radio speaking to Palmer Luckey, the founder of Anderil, about Blue Chip, which is an initiative to have a 100% U.S.-manufactured computer, a laptop. And I think future products may come in the future. Starting with a laptop. We'll get to the rest later. Starting with a laptop. I mean, you know, the question that you're raising is, is it realistic? Is it even possible to reduce dependence on China 100% at the component level and the raw materials level? [00:36:10] Speaker 9: Look, 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 megacorporations 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 this helpless, neutered, post-relevant 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 Anderil makes every day is not actually that different from a computer. My drones are basically computers. They have memory, a GPU, a CPU, sensors, batteries, a rugged integration. The only difference between an Anderil 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 electronics 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. [00:37:21] Speaker 2: And that was my question. What is Anderil's advantage here in doing this? And I think you've outlined it. You also said you tried to get others to do it. [00:37:27] Speaker 9: We're 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. Anderil is sanctioned, too. So 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 I think that our experience 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. [00:38:08] Speaker 2: A 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 U.S.? [00:38:16] Speaker 9: That is a great question. The official answer is that we're going to 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. So I'm not ignoring it right now. The display is made in another country for these prototypes we've been showing. The glass on it is made in an American company. 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% U.S. and allies right now, but we have a clear technical roadmap to 100% U.S. I can't tell you just who it is just yet, honestly, because we're still negotiating it. [00:39:02] Speaker 2: I want to shift gears slightly. You know, I haven't actually caught up with you this year, which is unbelievable. But our colleagues at Bloomberg Intelligence, which is our in-house research, launched coverage of Anderil back in August. And they're very closely following the balance between your software business, Lattice, and a 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. [00:39:31] Speaker 9: Well, look, at its core, Anderil is an AI company. Our name, Anderil 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 Anderil than in all our hardware products combined. Lattice 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 Gmail. We have to work with a lot of legacy government applications that were designed in the 2000s, the 90s, even the 80s. We need to be compatible with a lot of things that most consumer laptops never even need to think about. Well, we need drivers to be able to interface with legacy systems that similarly, hardware systems that have been around for a decade. That takes a lot of software work. And so, again, Anderil 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. [00:40:29] Speaker 2: And we're doing things that nobody else is doing. This is also the first opportunity I've had to ask you about Project Meridian. You, Elon Musk, Newt Grinch leading that project. I know this might sound 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? [00:40:49] Speaker 9: Well, a few things. One, there's actually about 20 people that are on Project Meridian. You're right. We were the three chairs of the steering committee. Look, we're just getting started, right? It's a 120-day project. I think that it's still starting to come together. The whole project is being run by the MITRE Corporation. And they've done a lot of analysis of this type of thing before. What I've seen is that everyone is bringing a very different, unique perspective. Like, I think it's a matter of public record, so hopefully I'm not going to get 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 civilian lives and warfare. You have other people who are coming from the computing industry, other people who are coming from the automotive industry. And so it's a lot of different perspectives. And 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. Look, we all know what the threat is in the Pacific. We all know what the threat is in 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. [00:42:06] Speaker 2: We're live on Bloomberg Television and Radio. We're speaking to Palmer Luckey. I just asked about Project Meridian. I mean, the report's due in January, right? And I get that that's going to publish. You have to wait for that. 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, and how it conducts itself? [00:42:29] Speaker 9: I 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 think 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. The things the Pentagon can change in terms of faster procurement, in terms of more lean 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 really, really powerful development, but 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 sometimes you've got to 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. [00:43:43] Speaker 2: Palmer, 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 solutions, cost-effective solutions. But just how are you preparing for that? [00:44:05] Speaker 9: 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 things not to preserve, the things that are most relevant are probably going to win. 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 talk 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 period 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 this is not just the U.S. 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. And 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 I think I'm going to be fine no matter what happens. [00:45:25] Speaker 2: Just remind us very quickly for blue chip, the first shipments next year. [00:45:31] Speaker 9: That'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 hit when I'm delivering next year. So we'll have more to say next year. We'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 One and in a variety of other places with about two dozen other American companies and getting them out to you. [00:46:16] Speaker 2: Palmer Luckey, founder of Anderil, 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, this is Bloomberg Tech.