Tech Selloff Deepens on Data Center Policy Fears

[00:00:00] Speaker 1: Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco. [00:00:13] Speaker 2: This is Bloomberg Tech. I'm Tim Stenevec in New York in for Ed Ludlow. Coming up, it is a market meltdown. The NASDAQ 100 sinking more than 6% as the chipmaker sell-off deepens. NVIDIA currently down under pressure more than 8%. Plus, agility robotics hits the public market. CEO Peggy Johnson joins us live in the hour. And post-midterm jitters taking full control of Elon Musk-led companies. Both SpaceX and Tesla tumbling again today. Shares losing more than $430 billion from their combined market values. SpaceX down more than 10%, Tesla down almost 11%. First, though, we got to check in on these markets. Look at that. The NASDAQ 100 down right now 5.6%. Just an ugly morning for tech stocks. It was down earlier as much as 6.2% at its lows, the worst intraday going back to March of 2020, the depths of the pandemic. Chipmakers weighing on the index. NVIDIA, Micron, and AMD all weighing down the NASDAQ 100. The socks also getting pummeled, now down about 38% from that June record. Investors just bailing from the sector on speculation that the Democratic sweep in Congress will usher in a new era of regulation for the AI industry. In the S&P 500, there are some areas of green. Investors rushing for safety in defensive areas like consumer staples and health care, which are ever so slightly higher today. Let's jump right into these chipmakers, though. Joining us now from San Francisco is Bloomberg's Ian King. Ian, what is today? I want to get to AMD. I want to get to Qualcomm. But I want to start with what's happening with the chip sector today. What is driving the flight from the sector? [00:01:54] Ian King: I mean, the industry itself had already told us, look, we are concerned that we can't get enough data centers built fast enough to meet demand, to house all of these chips we're making. Power is the issue. Building the buildings is the issue. Getting the land, getting the approval. This was already in people's minds. And now you have a change in the political landscape, which indicates that that issue may become even more difficult, that things may take longer. And so what we've seen is a bet that things are going really fast at the speed of the chip industry. And now we're seeing a pause. We're seeing people express concern that maybe they can't go as fast as they want to. [00:02:36] Speaker 2: Does it change your view of the cycle of where we are in the build out? [00:02:41] Ian King: I mean, I don't have a view of the cycle. It's, you know, we've seen these patterns. You and I have spoken about these patterns exist, right? The chip industry has always experienced this cyclical inability to match supply and demand. It's just a factor of its existence over the last 50 years. Even people like Jensen, Wine, the CEO of NVIDIA, and Lisa Su, the CEO of MD, have said, look, at a certain point, supply and demand is going to move in a different direction. And we're going to go back into these kind of situations that we've been in before. The difference this time has been, well, the extent to which demand is strong and how long that would last. We're now seeing other concerns, other concerns that would indicate that the actual process of making this all real is becoming more difficult. [00:03:31] Speaker 2: I promised we'd get to AMD and Qualcomm. AMD down 15.8 percent, Qualcomm down right now 13.5 percent. Just on Qualcomm, the challenge that the company is facing, is it idiosyncratic or is it part of a bigger story here? [00:03:45] Ian King: Qualcomm has been a stock that's suffered this year, even when the chip stocks were up 60, 70 percent. And that's because it's in transition. It's smartphone market that it has depended on for years and been so successful. It is not a growth market at the moment. There are other issues related to the supply chain that are holding its back. And in a transition, it's becoming more of an automotive chip maker. It's becoming more of a networking chip maker. But these things take time. And in the process of that transition, you're going to see margins squeezed, which is what people are reacting to today. [00:04:20] Speaker 2: Bloomberg's Ian King out there in San Francisco. Ian, thanks so much. I know you've got a busy day coming up ahead of you. Appreciate your time. I want to dive deeper into tech markets. Joining us now is Anna Rathbun, founder and CEO of Grenadilla Advisory. Anna, Ian doesn't have a view on where we are in the cycle, but I'm wondering if you do and if that changed, given what we saw happen on Tuesday. [00:04:40] Anna Rathbun: You know, I think it's a hiccup to the broader market cycle of building these AI infrastructure buildings, data centers. And it's a big hiccup. And that's partly because the markets have sort of priced in an undisrupted build out of AI into the future. And now we have a disruption potentially in the form of, you know, more legislation potentially, you know, moratoriums, tax breaks might go away, you know, you name it. So I think this is just the market readjusting itself and correcting itself for when it's going to get paid for a lot of these investments that we've been making into the data centers. [00:05:19] Speaker 2: OK, so make the call for us. How big of a correction is this going to be? [00:05:22] Anna Rathbun: Well, you know, I think some stocks today, even just today, they're in correction, if not starting yesterday. So from a stock level, there are corrections already happening. But I think it's useful to look at this disruption from two different perspectives. One, there are companies that are going to get paid simply because there's CapEx, right? So, you know, hyperscalers have been borrowing. We know they're going to CapEx. You know, companies like NVIDIA, chip makers, construction, anything that goes into the data centers, they're going to get paid. Even as the data center build out slows down, it's still going to get built. The companies that are going to get paid when the data center is done, when it comes live, those are going to be delayed for a long time. And there isn't going to be cash inflow that they were expecting sooner. Now it's going to be later. So if you look at from those two perspectives, the companies are going to react differently. And stock market is going to ultimately, after today's and yesterday's knee-jerk reaction, price those things in differently, in my opinion. [00:06:25] Speaker 2: Do the midterms change your thesis long-term at all about where you're putting your money? [00:06:29] Anna Rathbun: No. I do think that this is a momentary disruption. And a lot of the sell-off, I think, may be a buying opportunity for some of the high-quality names. But over the long term, it's not like we're going to be stopping the build-out of AI data centers. It's just slowing down. That changes the profile of the internal rate of return, not necessarily that the companies are going to get paid. Now, having said that, there are companies that are much more highly levered. And this is going to be a quality game. Do you have the cash to actually wait it out? Because that's what delaying does, is that you have to continue to be going concerned. And that puts pressure on highly levered companies. And neoclouds in general are not only highly levered, but they get paid when data centers go live. So that's a double whammy for certain industries. [00:07:17] Speaker 2: I know you have sort of a glass is half full view, or maybe there's a silver lining here about what could actually happen politically as a result of this blue tsunami that we saw this week. Talk a little bit about that and sort of the discipline angle when it comes to cash burn. [00:07:33] Anna Rathbun: Yeah, I mean, so when there was nothing, no hurdle, we were thinking borrow, borrow, borrow. We're going to build this as fast as we can. We're going to build it faster than our competitors. And we're going to buy capacity faster than our competitors and more, right? So there was no discipline here. Do it as fast as possible. But the political process has told us that there may be some hurdles here. And that hurdles, there may be a positive side to this, which is that now it may put some discipline, financial discipline, to these companies, putting money to work and building these things. The worry was always that, OK, if you build it as fast as you can, at some point you're going to overbuilt. And perhaps that will actually mitigate some of that risk in the future. [00:08:20] Speaker 2: The NASDAQ 100 is down close to 6%. It was down 6.2% earlier in the session. That was the worst day going back to the COVID deaths of March of 2020. Are you actually buying today or are you waiting to buy? [00:08:32] Anna Rathbun: You know, I'm dipping it. I'm dipping it because sometimes you don't want to be catching a falling knife. But most of my clients are very long-term investors. And some of the prices look very, very cheap. So if you're thinking long-term and that AI build-out is going to happen over the long-term, it might be potentially a point to go in. [00:08:52] Speaker 2: Anna Rathman of Granadilla Advisory. And it's always good to catch up with you, especially on a day such as today. Appreciate your time. Well, Micron suspends plants for a memory chip plant in Taiwan due to a labor dispute. That's according to sources. Throwing into question the fate of a major production base for crucial AI components. Tension between Micron and its workers flared this year after employees demanded higher compensation, seeking more of the record profits generated from the AI build-out. Coming up, more trouble for Tesla. The carmaker continuing to fall as investors worry about the impact of the mid-term elections. Shares of Tesla over the last two days down almost 14 percent. This is Bloomberg Tech. Shares of Tesla falling on more worries that Democrats taking control of Congress will stifle Elon Musk's efforts to expand his business empire. Joining us now is Bloomberg's Craig Trudeau. We see Tesla down in the last two days about 13 percent, SpaceX down for a second day in a row. What is the concern that investors have? [00:10:01] Speaker 5: I think chief among them is probably the data centers that these companies are trying to stand up, you know, mostly on the part of SpaceX, but also Tesla. You have the TerraFab project that they're working on with SpaceX that is at least AI adjacent, working on, you know, doing semiconductors together. I think also just a sort of overarching, Elon's, you know, turned himself into kind of a target-rich billionaire over the last few years. He has sort of given the Democrats a lot of reasons to kind of make him into the boogeyman. And so there's understandably a lot of, you know, consternation about, you know, with this very sweeping change in power, does that incentivize the Democrats that are, you know, coming into office both in Washington and in places like Texas, where both of his companies are headquartered, to really come after him and his business? Does it change the story of a potential Tesla-SpaceX tie-up? I think it maybe sort of reinforces why we've been hearing that these, that there's a sort of push afoot to get this deal together early next year. These are two big companies. There's real potential for this to be a complicated transaction, even though it's, you know, one hand working with the other. Because of things like Tesla's, you know, major presence in China and, you know, how that conflicts with SpaceX being a major U.S. contractor and defense contractor. And yet, you know, some sort of understanding or view that if you sort of take your time with a deal like this, if you want to get it done, maybe that's not such a smart strategy if this is a deal that's going to take some time and there's some risk that the GOP not only gives up Congress, but also the White House. [00:11:48] Speaker 2: I'm glad you brought in the SpaceX part of the business, the defense contracting business, because that's what I'm thinking about right now. I mean, this is a company that the U.S. government relies on. It's a company that other governments rely on for Star Shield. Right. Doesn't Elon hold a lot of cards here? [00:12:04] Speaker 5: I think he absolutely does. And especially from a perspective of, you know, space launches, but Starlink and Star Shield has really just, you know, become something where, you know, we've seen a lot of reporting around the idea of attempts to stand up competitors by, you know, governments to try and not have all their eggs in one basket. And yet we're a couple of years into all of those efforts, and it's hard to sort of fathom that anyone's going to be able to stand up a meaningful competitor anytime soon, in part because nobody's getting to space at the rate that SpaceX is. So it's not just that the satellites and the network itself is impressive. It's also, you know, the ability to sort of, you know, get those up into space that, you know, no one else possesses that ability either. [00:12:53] Speaker 2: Wow. Tesla down about 10% right now. SpaceX just today down about 8.7%. A big thank you to Craig Trudell of Bloomberg. Well, let's get back to another top story today. Apple planning to raise about $7 billion from its first investment-grade bond offering in more than a year to help fund share buybacks. Bloomberg intelligence analyst Robert Schiffman writes that Apple's return to the bond market appears more opportunistic than funding-driven. He joins us now. Let's start there and then get to the bigger context of what's happening in markets today. Why is this opportunistic for Apple? [00:13:27] Speaker 6: Well, listen, I think Apple has to be in consideration once again for the tech code status. It's at all-time stock highs, got $5 trillion market cap, AAA ratings, and bond spreads tighter than peers. You know, so why borrow? It's cheap money. Remember, this is not a neocloud at 17% yield. They're going to borrow 10-year money in the belly of the curve in and around 5.5%. It's a real opportunity, particularly with treasuries rallying, to lower their weighted average cost of capital, buy back stock, help shareholders, and do it without damaging bondholders. So timing's pretty good. Yeah. Okay. Listen, this is a flight-to-quality type market, and this is as quality as you can get. You know, Apple is probably the new unicorn, right? If you look at this whole hyperscaler space, everyone is bleeding cash. They're all looking to raise money. You know, we think Apple's going to generate $150 billion of free cash in fiscal 2027. So what do they need to do with it? You know, I don't think there's a big M&A out there. They recently got rid of, you know, they have a new CEO that came in. They got rid of their net cash neutral balance sheet target, which I think gives them free will to buy back a lot more stock and potentially even raise dividends. [00:14:41] Speaker 2: Well, let's talk a little bit about the equity side of things. On the equity side, Apple is the best performer of the mag-7 so far this year. And in a day where the NASDAQ composite's down more than 4%, the NASDAQ 100 was down over 6%. Apple's only down eight-tenths of 1%. Your view on the sell-off, because we've spoken to you a lot in the past about neoclouds. Neocloud's under so much pressure right now. Some of the chip names under big pressure. The SOX is down about 38% from that June all-time high. Is the sky falling? [00:15:09] Speaker 6: Absolutely not. I do think, though, in markets of uncertainty, a simple sell-first, ask questions later. You know, people are just trying to figure out what the impact of a change in Congress is going to be. It feels like it's going to be negative. I don't think it's going to be nearly as bad as what people are thinking. Your last guest, you know, was one of the few bulls that are out there. We agree. We tend to think that, you know, there might be some sort of delays in terms of cash coming in. But that also means there might be some delays in cash going out. I think that's actually going to boost the balance sheets, at least to the hyperscalers. When we're talking about the BBB and Uxpays, I think those names are all fine. Again, I still think that most of the NEOs are going to be able to get funded because we're still talking about working capital issues and not ultimate demand issues. That being said, this market is split between have-and-have-nots. But when you've got a tape like today where it's very hard to long and it's very easy just to get a little bit lighter and say we're going to figure it out later, that's what happens. But just look at what's happening in the credit markets. Credit spreads, particularly across high-quality tech today, are generally flat to a little bit tighter. So we're not having the same sort of move. This is an equity valuation issue about timing of cash flows, not actually ultimately receiving those cash flows. [00:16:26] Speaker 2: Bloomberg Intelligence analyst Robert Schiffman joining us on a day when on the equity side we're certainly seeing a sea of red. Robert, appreciate your time as always. Well, coming up, a milestone for U.S. humanoid developers. Agility Robotics is going public. CEO Peggy Johnson joins us to discuss the IPO and what's to come for the company. That's coming up next on Bloomberg Tech. Agility Robotics is betting humanoid robots can become a big business. Now Wall Street gets to weigh in. The company going public and begins trading on the NASDAQ today under the ticker AGLT. Joining us now is Agility's CEO, Peggy Johnson. Peggy, today's market move notwithstanding and what happened in the election this week. We'll get to that in just a second. Big picture, why is now the right time to test investor appetite for a humanoid robot company? [00:17:26] Speaker 7: Well, thanks for having me. Now is the right time because we have customer commitments. We have pending orders. We are scaling up manufacturing. And all of this is focused on filling the labor gap that is growing by the day. It's very hard to fill these tasks that are physically challenging, repetitive, very injury prone at times. And Agility's Digit robot is ready to step in and do that. [00:17:55] Speaker 2: This is the first dedicated humanoid company to go public in the U.S. It's certainly a major milestone for a category that I think for a lot of people, and including investors, still has a lot to prove. On the timing of this, with the route that we're seeing in markets today and this week, the changing of the guard in Washington in the House and the Senate come January, was this still a good time to debut? [00:18:19] Speaker 7: Well, you know, the market will move by the minute, but we are building a business for the next decade, and we are in it for the long run. I will say, even with the changing of the guard, robotics is a very bipartisan issue. Both sides recognize the growing labor gap, and as we move to reshore more manufacturing into the U.S., we are going to need robots like Digit to help us augment the scarce human labor that we have to step into these roles. So, for us, it's the right time. We're well capitalized. We're already working, and while it may be the early innings for this business, we are already on the field and playing. [00:19:03] Speaker 2: Do you mean with GXO Logistics? Where else? [00:19:07] Speaker 7: GXO Logistics is one of our customers, and in fact, they just doubled down. They are now deploying into two additional facilities beyond the Georgia facility that we have been operating at. We have Schaeffler, who has deployed robots in their North Carolina plants. A number of customers that we have brought on just over the last few months, another four additional customers, including Agco, an agricultural manufacturing company. It's a new category for us that is looking to bring robots on into their Heston, Kansas facility. [00:19:42] Speaker 2: You know, one thing I wonder about when it comes to humanoid robots working alongside actual human beings is from a psychological perspective and from a safety perspective, how you ensure that it's done in a way that actually works. [00:20:00] Speaker 7: Right. We need to augment what humans are doing, and so you can think of the robot as helping the humans do the tasks, offload the tasks that are physically challenging for them. One of the things that we did with our next generation robot, Digit 5, is make it safe to be cooperatively operating in close proximity with humans. So, up until now, all humanoids have been limited to operations inside of fenced off areas, typically doing a single task at a time. Now, with Digit 5, our next gen that will be available the first half of next year, Digit comes out of the work cell and can take on a number of different tasks throughout the facility, and also can operate through several shifts because of a fast-charge battery that we have deployed in Digit 5. So, we've really stepped up to the needs of our customers, we're listening to them, and we're continuing to build in the features that they need to get the job done. [00:21:01] Speaker 2: Why not stay private for longer? You know, this is still an emerging category. Deployments are still limited. Why not stay private and avoid the scrutiny of being publicly traded until you're bigger and you have more customers? [00:21:17] Speaker 7: We decided to go public, and we went forward with Churchill Capital 11. We combined with the business yesterday. We have a growing pipeline of customers that we needed to accelerate our ability to deliver upon. We've already have 30 customers in our pipeline. That'll grow to over 100 by the end of next year. This is an existential problem for many companies who can't find this labor. So, the time was now. We have 300 million in pending orders. We're ramping up our factory, which can make a total of 10,000 units annually, and we didn't want to wait any longer. We wanted to get the resources that we need in order to scale properly. [00:21:58] Speaker 2: Peggy Johnson, CEO of Agility Robotics. Thank you so much for joining us. Do appreciate your time. Well, coming up, the rotation out of tech slamming semis and neoclouds. Look at this. The SOX down 8.3%. It's off its worst levels of the session. Still down more than 36% from those June highs. The neoclouds also getting punished. In just a few minutes, we're going to speak to Bloomberg's Brody Ford. About really what's driving these markets. The NASDAQ 100 off its worst level, still down 4.3%. And Bitcoin down at about 76,666. More on Bloomberg Tech next. This is Bloomberg. Welcome back to Bloomberg Tech. I'm Tim Stenebeck. In for Ed Laudlow. Let's get a check on these markets with Bloomberg's Isabel Lee. Isabel, what are you watching? [00:23:02] Speaker 8: Ed, you're seeing a complete turnaround from trading. You said it at the top of the show. It is a market meltdown. You're seeing the S&P and the NASDAQ snap two days of gains, both lower with the S&P lower by nearly 2%. And the NASDAQ lower by nearly 4%. And among the reasons driving those is a sell-off in chipmakers. You're seeing the Philadelphia Semiconductor Index seeing its worst week since the April 2025 tariff meltdown. At least that's the last I checked. And there are many cross-currents here, Tim. But among one of the most distinguishable ones is investors are now worried that we're entering a new era of AI regulation thanks to the Democratic blue sweep that we're seeing. So it really jitters all over the screen. And if you flip up the board, you're going to see some individual names. These are the hyperscalers all deeply in the red, Tim. Yesterday, it was a markedly different story because all of them were in the green. And it was on the view that maybe with this new administration or this new Congress, we will see a slower build-out of these data center companies. And maybe that will ease the enormous capital spending burden on these companies. But today is just a different day. And that's why it is red on your screen. And finally, let's end it. Don't forget Tesla and SpaceX. We had to talk about Tesla and SpaceX because this is kind of a midterm story. Still, you're seeing the two stocks sell off. And that's after the unexpected win of the Democratic Party in the state of Texas, which is the home of both of these countries. And we know that Elon Musk is one of the biggest backers of the Republican Party, donating some half a billion dollars to that state, to that cost, actually. And you're seeing both of them really suffer because they also have the mergers in place. And what will it mean for that? Back to you, Tim. [00:24:29] Speaker 2: Bloomberg's Isabel Lee with an update. Thanks so much, Isabel. Well, a rough day for markets as semiconductor earnings reports like those from Qualcomm and Arm dragged down the Nasdaq and the Sox. We just got an update from Isabel, but worth looking at this. The Nasdaq 100 off its worst levels of the day, still down 4.6%. It was down 6.2. Earlier, the Sox down 8.7% off more than 35% from those June records. Qualcomm shares off its worst levels, but still down 11.7%. Arm holdings down about 11% right now. Joining us now is Bloomberg's Ryan Vestelica to give us a deeper understanding of a breakdown of what's happening in these markets. Ryan, I want to pick up where Isabel left off and the different story that we're seeing today with the hyperscalers versus what we saw yesterday. What changed? [00:25:16] Speaker 1: Ryan Vestelica That is a great question. Ryan Vestelica Now, hyperscalers yesterday were very strong. A lot of people I spoke to sort of indicated that if we do see more regulation, more legislation on data centers prohibiting the buildout or at least slowing it, that will mean that the hyperscalers may not have to do as much capex as they indicated. Ryan Vestelica That would be a positive for their cash flow that helped lift those stocks yesterday. Ryan Vestelica But it does seem like today everything is getting caught in the undercurrent. We're seeing a lot of weakness in chips because if we see less data center building, that really has a lot of implications for their growth outlook, for their demand outlook. Ryan Vestelica That also could have some implications for hyperscaler growth, as I'm sure you know, in the most recent reports we got, we saw a lot of strong growth in cloud computing businesses, which is very tied to AI demand, and that's where all the data centers are really functioning. Ryan Vestelica So those are what people are watching right now. Ryan Vestelica The regulatory outlook seems incredibly uncertain relative to just a week ago. Ryan Vestelica As Isabella mentioned, there were huge flips in state like Texas, which is where a lot of these companies have a lot of exposure, where a lot of data centers were expected [00:26:25] Speaker 2: to be built. A lot of that is up in the air right now, Ryan, I think one question that a lot of people have right now is about, okay, is this a buying opportunity? I posed that question to Anna Rathman over at Grenadilla Advisory. She said it is a buying opportunity. In fact, they're doing some some nibbling, but she doesn't want to catch a falling knife. Ryan Vestelica What are you hearing from the folks that you talked to? [00:26:46] Speaker 1: Ryan Vestelica Yeah, I actually just got off the zone with someone and I asked him that same question. He said, you know, if you look at a company like Nvidia, right now they have so many orders that are really out stripping the supply that they have, and you would need to see business come down a lot before supply was bigger than demand. We've seen a lot of positive earnings revisions for them. The multiple is right now, I think less than 13. So just just incredibly cheap based on sort of these traditional metrics. But even with all of that, he said there's still so much uncertainty that he's not yet willing to buy. He wants to think things settle a little bit before he feels comfortable sort of nibbling at the edges here. But certainly you can make a case for things being overdone right now. But I think a lot of people are still really reassessing what is this regulatory outlook going to look like? And what are the growth implications of that? I think right now that is still a real question and something people don't have a lot of clarity on. [00:27:40] Speaker 2: Ryan Vestelica Yeah, we're certainly seeing that play out in markets today. You can see right there on the screen the carnage that we're seeing when it comes to some of these sectors right now. Ryan Vestelica, thanks so much for your time this morning. Neocloud stocks today also in the red. Look at this. Core Weave down almost 10 percent. Nebius Group down more than 14 percent. You've got IREN down 14.5 percent. This comes as Microsoft, which helps start the boom in so-called Neoclouds, appears to have a little case of so-called buyer's remorse over some of the tens of billions of dollars in contracts that it signed with data center operators. Bloomberg's Brody Ford joins us now with more. First on Microsoft, Brody, what are we learning? [00:28:20] Speaker 9: As you said, Microsoft really helped create the Neocloud boom. Way back in 2023, they signed a big deal with Core Weave. For a lot of these Neocloud names we know, their first big contract was with Microsoft, so they got in sooner than anybody else. Now we're reporting that Microsoft is getting sick of the Neoclouds. They're finding that they can't control the delays, that the costs are higher than their internal projects, and so they're stepping up scrutiny, they're stepping away from some projects, and they're prioritizing their first-party in-house builds [00:28:55] Speaker 2: over these Neocloud companies. So then who is the beneficiary? Because look, we all know the story, Brody, there's a shortage of compute out there. If the Neoclouds can't satisfy it for a hyperscaler like [00:29:07] Speaker 9: Microsoft, who does satisfy it? It's a good question, right? Because you can make an argument that there's so much demand out there that even if Microsoft steps back, a company like Meta or Google could step in. But it could be a bad indicator for this whole category of company if their earliest patron is saying, "Hey, I'm getting sick of working with you guys." I'm a little shocked to look at [00:29:32] Speaker 2: that CoreWeave shares, not at the worst levels ever, but getting pretty close to him, Brody. Down, though, off the highs of last year, more than 76%. We did see some issues when it came to CoreWeave's bonds in recent weeks. Are people starting to whisper concerns like that again? [00:29:51] Speaker 9: You hear a lot of anxiety about the Neoclouds out there. I mean, it's a bit of a trendy thing right now. I think Elon was saying that they're going to have guppy level death. We don't quite have evidence for that, but borrowing costs are going up and there's increasing questions about their ability to deliver. These companies' whole value proposition is being able to get computing up there quickly. And so if they can't get capital and they can't move as quick as they want, it really is a bad indicator. [00:30:20] Speaker 2: Bloomberg's Brody Ford out there on the West Coast. Check out Brody's story on the Bloomberg terminal and at Bloomberg.com. Well, coming up, drone delivery startup ZipLine expanding its partnership with Walmart as it reaches a $20 billion valuation. We'll hear from the company's CEO next. This is Bloomberg Tech. Defense tech firm Shield AI is buying radar company Echodyne for $5.3 billion. It's also raising $2.5 billion in new funding. The deal now giving Shield a nearly $29 billion valuation once this is all complete. Gary Steele is CEO of Shield AI and joins us now. Gary, welcome. A lot of news to get to. I want to start with this acquisition of Echodyne. I mean, this is a huge acquisition, not just for a private company, but no matter which way you slice this, more than $5 billion is a lot of money. Why is this the best use [00:31:20] Speaker 10: of money for you? Echodyne is a great set of capabilities and enters a very important market for Shield. Echodyne is an industry leader in counter UAS or counter drone technology, and we think there's a tremendous amount of growth there. And this will be a core part of our overall long-term strategy as a next-generation defense tech company. You sell AI-enabled software systems to U.S. and [00:31:43] Speaker 2: allied militaries. We have conflicts between Russia and Ukraine right now following Russia's invasion of Ukraine in the Middle East too. We saw a big, I would say like a big change in how the American public views politicians this week with the blue tsunami that we saw. I'm curious if that changes the outlook for you at all with areas of business growth. You know, it's interesting. Unfortunately, [00:32:09] Speaker 10: we live in a world where there's conflicts all over the globe, and as a result of that, we've continued to see tremendous demand. Clearly, there will be change within the U.S. and Department of War, but we think that the kinds of capabilities that we're delivering, the fact that we can deliver at a much better price performance, that is great for every U.S. citizen and great for individuals around [00:32:28] Speaker 2: the world. We've seen over the last 18 months to two years, this administration has been very friendly, not just to the defense primes, but also to the startups, including Anduril and yourself. Does that change with a Democratic-controlled Senate and House? Well, I think that our core value proposition [00:32:45] Speaker 10: is we're doing things fundamentally differently. We're delivering next generation technology and putting that in the hands of warfighters. And whether you're on one side of the aisle or the other, I think that that's an important set of characteristics that we can continue to deliver and deliver great value around. So I don't anticipate a radical change to the thinking. And the world needs companies like S.H.I.E.L.D. We need to be able to continue to provide great technology, put it in the hands of [00:33:13] Speaker 2: warfighters to keep everyone safe. Will you still, Gary, have people in Congress who understand what you're doing and, in your view, understand the need for your technology? Absolutely. Absolutely. We've had very good support from both sides of the aisle. Okay. Well, you mentioned that, unfortunately, we do live in a time with a lot of conflict, but the voters spoke this week and one issue that they were not happy about was the war in Iran. If the U.S. does actually end that war anytime soon, what does that actually do to your business? And I already understand you said there is a lot of conflict going on, but you're supporting that war effort right now. [00:33:45] Speaker 10: So we've been engaged in a variety of conflicts around the globe. We don't specifically comment on the work that we're doing with respect to the conflict in Iran, but the reality is there's tremendous demand today across Department of War as well as foreign militaries for the kinds of capabilities that we're delivering that leverage AI to get simply different outcomes at much different prices. And EchoDyn really doubles down on that. The price performance that they deliver and the kinds of capabilities that they deliver are critical to finding drones. And it's just an obvious segment that will continue to grow and it's going to grow at a very rapid pace. Well, let's say we do, as a world, [00:34:29] Speaker 2: get to a time of more stability and more peace. Are you able to pivot your business to be more defensive [00:34:36] Speaker 10: than offensive? Well, much of what we do is defensive. And I look at EchoDyn as a very good example of the work that they've been doing. They serve the needs of militaries around the globe, but they also serve the needs of civil organizations for public safety and those kinds of use cases. And so if we were fortunate enough to see a world of less conflict, we still have great confidence in our ability to continue to drive great demand for the kinds of technology that we're building and [00:35:06] Speaker 2: delivering. On the fundraising side of things, I mentioned that you are raising two and a half billion dollars. You're valued at more than double the valuation that you had earlier this year when you raised two billion dollars at a 12.7 billion dollar valuation. How difficult was it to raise money [00:35:21] Speaker 10: over the last few months? You know, it's been interesting. There's a tremendous amount of interest in defense tech right now. And I think that interest really reflects the belief amongst the investor community that the amount of change that needs to happen in defense creates a great investable opportunity. I think Shield represents one of those and the outcomes that we're delivering in terms of mission outcomes on the battlefield. But also from a financial perspective, we just look like a very interesting company. So we've attracted a lot of interest as a result of that. And we feel very [00:35:53] Speaker 2: fortunate. Gary Steele, CEO of Shield AI, thanks so much for joining us on this news today. Well, speaking of drones, the drone delivery startup Zipline has hit a 20 billion dollar valuation after raising a billion dollars. And it's expanding a commercial partnership with Walmart. CEO Keller Clifton spoke with Bloomberg tech's Ed Ludlow about how the company got here and where it goes next. [00:36:15] Speaker 11: At this point, Zipline has built out many super centers with Walmart over the last two years. And I think both we and they have been quite startled by the level of customer demand. I mean, we deliver the vast majority of the 100,000 SKUs in that super center to your home in a way that, again, feels like teleportation. As a result of this, we just announced this national partnership, beginning with 300 super centers and then expanding beyond that based on performance. And so, you know, this to get working together with Walmart, we're going to expand to every metro and then eventually every home in the US. Can we talk a little bit about manufacturing? You know, [00:36:56] Speaker 12: you've actually made it really clear the demand side of this story. Operationalizing it, like how quickly can you guys build one unit, a drone for delivery? What does that look like? Where does it [00:37:08] Speaker 11: happen? Well, I mean, yeah, hardware is hard and hardware is hard. It takes time. We have this big, complicated global supply chain. We build all 43 major sub assemblies that go into the aircraft. We're not just manufacturing the aircraft. We also manufacture the small delivery robot that we're lowering close to people's homes. We call the droid. We're manufacturing the docks and the towers that make up the ground infrastructure that we're installing at these charging sites across these metros. We also manufacture the drop boxes, which are essentially the mailboxes that we're integrating with all these different businesses to make it easy to pick up. So all of that is manufactured, big complicated global supply chain. All of it is manufactured in Zipline's factory, which is actually right next to the airport here in San Francisco. And then that goes out through our logistics streams out to all of our maintenance depots and these metros. And then we operate this hardware for customers. So all of those things combined, it's not just a really complicated engineering problem. There's also a huge amount of manufacturing and operations and logistics, maintenance wrapped up. You know, we always really think of it as like, yeah, it's a complicated company, but we want to make the service simple. Like, you know, any of our customers can download the app, get access to all these amazing brands, order whatever they need and have it delivered in 10 to 15 minutes. You say it's a complicated company. [00:38:30] Speaker 12: You've explained the sort of history of the company, the 10 year history where it started largely in Africa present day. What's 2026 like been been like for you, Keller? Would you say that this is this is the [00:38:45] Speaker 11: inflection point? I think it's an interesting moment. I mean, you know, we, I mean, obviously, partly when we started the company, it was illegal. So it was hard to get investors to give us money because they were like, well, we don't invest in illegal things. And for this reason, zipline had to launch outside. Well, they didn't have visibility for you to operationalize. Exactly. And I think for the first few years, I mean, zipline wasn't even clearly like an economic venture. You know, it kind of reminds me a bit of, you know, SpaceX's original idea was they were going to buy a Russian ICBM and launch a terrarium onto the surface of Mars. You know, it was more of a mission than a company. It seems so cool. It seemed like an amazing adventure, something that we really believed in. And as we have evolved over the last 10 years, I mean, during those, during those years, investors only wanted to invest in social media and SaaS. The idea of any capex, it was like, that was, you know, not investable by VC. And so it's kind of amazing, you know, obviously, the last two years, we see this incredible acceleration in robotics and AI and hardware. I think a newfound belief that the US can build infrastructure and hardware here in a competitive way. I think that's super important for the future of America. But I think that, you know, more than ever, these opportunities are just way bigger than we originally anticipated. [00:39:56] Speaker 2: That was Zipline CEO Keller Clifton speaking with Bloomberg's Ed Ludlow. Well, let's take a look at markets. The Nasdaq sinking as the chip sell-off deepens. We're seeing a concern when it comes to some of these names that for a lot of this year and last year have been really high flying. The Nasdaq 100 off its lows, but still down close to 5%. We're going to dig deeper into this market fallout next. This is Bloomberg Tech. Let's take a look at how markets are faring right now. The Nasdaq 100 off its worst levels of the day, but still down close to 5%. The stocks, look at that, the Philadelphia Semiconductor Index. Maybe some people could argue that chips have had some technical difficulties over the last few months. I mean, this is an index that is down more than 35% from those June all-time highs. Joining us now to discuss the sell-off, Mandeep Singh of Bloomberg Intelligence. Mandeep, I want to start big picture. Yeah. And ask you, what shifted this week? Apart from the election, is there something else going on here? [00:41:13] Speaker 13: There is, because when you look at, you know, expectations for the remainder of 2026 and 2027 in terms of just the data center build out, there is expectation that, you know, certain gigawatts would come online. And a bulk of that, I would say 40% of that is in two states, which got flipped over with the promise that, you know, they will do something about this data center build out. And clearly, I think the voters had some sort of opinion on, you know, how they perceive the AI build out. So, from that perspective, right now, the market is still digesting. We didn't see a big reaction yesterday. And today we see a big move in the stock. So, it's a delayed reaction. I would have expected that to happen, you know, even 24 hours earlier. Yeah. What's interesting to me on that, Mandeep, [00:42:06] Speaker 2: is the hyperscalers under pressure today. You did not see that yesterday. I think some investors thought yesterday, maybe, okay, this would be a check on some of the spending. But now, [00:42:14] Speaker 13: everything's moving lower. AI is all, you know, kind of together in terms of how this build out would affect them. So, I don't think anyone is perfectly insulated here. Hyperscalers do have a relatively better positioning compared to, I would say, the chip makers, because they have the live capacity. So, if you can't have new data centers come online, the existing data centers become more valuable and hyperscalers are the ones who are renting that capacity. Okay. What about neoclouds? I was [00:42:46] Speaker 2: shocked to see that CoreWeave is down more than 75% from its highs of last year. Brody's got a great story out. We spoke to him about it regarding Microsoft potentially pulling back a little bit. What's your [00:42:56] Speaker 13: view there, very briefly? I mean, that's where if you are leasing to, you know, a handful of customers and your customer base is so concentrated where two or three customers decide your fate and suddenly they're like, oh, we're looking at, you know, uh, different options when it comes to whether we want to lease or not. And, you know, that's where the long-term agreements come into play, what sort of pricing, uh, they have logged in and, uh, what do they do about the leverage? In the case of neoclouds, it's just the leverage that they have and what kind of ROI it's embedded in, in the debt that [00:43:30] Speaker 2: they have already taken. Mandeep Singh of Bloomberg Intelligence, he is the man for this moment. Check out his research and his entire team's research on the Bloomberg terminal. The Nasdaq 100 down about 5% right now. That is going to do it for this edition of Bloomberg Tech. Don't forget to check out our podcast. You can find it on the terminal as well as online on Apple, Spotify, and iHeart. Keep it on Bloomberg for up to the second movements on these markets. This is Bloomberg.