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>> Today's trade all about Nvidia shares

were up by more than 8.7%. It had more

than $440 billion in market cap just

today.

>> That's incredible.

>> Like yesterday we talked to the CEO of

of Lamb Research. Okay.

>> Right. Right.

>> It's a big company.

>> Yep.

>> $400 billion in total market cap.

>> So what does it tell you?

>> Like well that's a question that Mandy

Singh is going to answer for us.

Salesforce shares also having their best

day in 6 years up more than 22 and a2%.

Mandy Singh is Bloomberg Intelligence

global head of technology research. He

joins us here in the Bloomberg

Interactive Brokers Studio. Wow. So I'm

going to pose the question to you that I

posed to Ian in the 2:00 hour and it's

something that uh Elizabeth on our team

pointed out earlier today. Uh the

postmarket reaction from the company's

stock versus what the stock did after

the call. a huge delta there. Why was

that?

>> I mean, that 70% number that they gave

for 2027 and their fiscal 2028 is what

drove all that optimism.

>> So, should we just ignore everything

about Nvidia numbers on an earnings day

until we hear from the CFO on the call?

>> Well, they don't normally give a future

one-year guide. So this was sort of uh

an aberration in terms of how they

guided uh in the second quarter but look

that's where uh they have the visibility

and also the supply commitments that

they have made you know it was up almost

$160 billion to their suppliers. So this

is your memory makers, your TSMC, they

have committed this much so that their

suppliers can expand capacity and still

they feel the demand is almost like 100%

but they are guiding for 70% and they

can't meet that demand.

>> So this is going beyond the

hyperscalers.

>> This is absolutely going beyond the

hyperscalers. And look with uh

hyperscalers we've seen the capex

expectations have gone up because of

what you know Microsoft said and what

Google said on their earnings call and

what they said was not only is the

upside coming from Neoclouds and these

new players which you alluded to SpaceX

could be huge in terms of you know the

hundred billion that they have added to

their guide for 2027. I mean this

company could do $650 billion in data

center revenue next year in 2027. So a

lot of that upside is coming from the

likes of SpaceX hyperscalers raising

their capex and neoclouds and that's

what they want. They want a much bigger

ecosystem of buyers of their chips.

We're getting more just superlatives

coming as the market closes and Ian King

writing that Nvidia's sales forecast

sends shares on its biggest rally going

back to 2025. I'm wondering about the

mode man deep and how deep Nvidia's mode

is when it comes to its semiconductor

technology.

I mean look, there is no doubt they have

competition and Google TPUs is the best

example that a custom ASIC is very

effective both in training and inference

workloads.

>> Okay, you're going to have to explain a

little bit of the jargon.

>> So training versus inference, right? We

I think a lot of people understand what

that is, but in terms of what Google's

TPU is doing versus what Nvidia's core

product does. the Google TPU which is in

its ninth generation they've been uh

creating this custom chip to run first

the search workloads and then the AI

workloads and Enthropic has used this

chip for both training their LLM and

Entropic is the best frontier LLM right

now so they didn't train on Nvidia

they've used Google TPUs for training

they've used Amazon tranium and Google

TPUs for inferencing workloads and now

they have started to use Nvidia IA

chips, but so far your best LLM has not

used Nvidia chips. And so even then

Nvidia continues to do so much better

every year partly because of you know

what they have done with regards to the

ecosystem they have created the neocloud

base that they have where the likes of

Corv Nibius these companies are growing

faster than your hyperscalers which are

growing fast as well. So because this

pie is so big and these LLM companies

have shown the revenue had it not been

for Enthropic reaching an ARR of 65

billion and you know going public soon

this would not have been possible. But

the fact that LLM companies have shown

the revenue has allowed these chip

companies like Nvidia and Broadcom to

say okay we can guide for you know next

year because the LLM companies want the

gigawatt capacity and so that's where

the revenues have enabled these

companies to really maintain this pace

of growth and so far uh you know the LLM

companies haven't disappointed now once

anthropic goes public and we learn about

their margins and Open AAI's margins and

if they're burning a lot of cash that

story could change then people may not

be willing to fund this you know at

unlimited pace but for now uh it sounds

like everyone is looking at the growth

uh that they are able to generate from

AI and then that's why the

infrastructure players who are the

beneficiaries of the capex continue to

do well.

>> Well you're talking about the growth all

the numbers that you were spitting out

to me. Um, at that same time, this is

the time that they're they're hiking the

prices for the servers. So, do companies

not care? Are they just going to pay the

price and and and move on? So, Nvidia

did guide to lower margins and so they

are absorbing some of the higher memory

costs. They are passing uh some of the

costs as well to their customers. So,

you're right, you know, there will be a

margin impact uh to companies that are

buying these servers and we will see

that in their margins over time. But for

now, AI has become an imperative for

every boardroom and there's no choice. I

>> I don't know. Um at that same time, um

the China market, it's something we've

been all talking about. How important is

it to Nvidia? Is that the key for their

future growth?

>> I mean, in this quarter, clearly, uh

China was very little in terms of the

revenue contribution and even in the

guide, it didn't sound like uh they're

really depending too much on China. So

that's where a new hyperscaler like

SpaceX is really making a ton of

difference and SpaceX is talking about

100 billion in ARR by the end of the

year. So they are talking big in terms

of ramping up capacity and they want to

be that compute provider that uses

Nvidia exclusively. So that's where I I

think uh it's not really about China at

this point of time but I just wonder in

2028 now they have guided for 2027 the

numbers would be so high that

maintaining this kind of growth rate

even doubledigit growth rate will become

tough for Nvidia at some point but they

keep pushing that out and that's where

you know the fact that everyone is going

all in in terms of their capex spend is

what's enabling them to maintain this

pace of growth.

Should we talk a little bit about

Salesforce?

>> No, it's not just Nvidia. It's

>> not just [laughter] uh Salesforce

jumping the most since 2020. It it was

actually like uh August of of 2020, the

last time the stock was up at least this

much today. Uh this after it gave an

outlook for strong revenue expansion,

deepening its partnership with

Anthropic. This is a really interesting

one because we talked to Brody Ford

earlier and I thought it was notable

that you had Mark Beni off sitting side

by side with Dario Amade of of Anthropic

because this is the company that is

supposed to be anthropic that is the

threat to the software as a service

companies and like Salesforce is the

poster child for that. What what did you

think of of this anthropic Salesforce

deal?

>> I mean to my mind Salesforce up until

last quarter kept touting their AI

products. the fact that they have their

agent force and you know they want to

upsell that. So clearly they seem to

have deviated from you know uh really uh

trying to upsell their own AI and now

this uh partnership with Enthropic to me

suggests that they are okay with

Enthropic taking you know the AI and the

analytics piece but they want to remain

the system of record because that's the

sticky part of their business. But

there's no doubt that Salesforce is

losing that upsell that they were able

to do uh to their customer base. So I

wouldn't get too excited. Really?

>> Yes. Because at the end of the day, it

it it wasn't worthy of a 22% stock move

if you ask me.

>> You think this is overdone?

>> Well, it was overdone before in terms

of, you know, the SAS apocalypse and how

much the market had reacted and how the

positioning had become. So from that

perspective, it it was more like

overdone before. And now this 22% move

is more of a reflection that look this

company still has a very sticky business

and uh it by partnering with Enthropic

some of the near-term risk around

complete displacements have gone away

and they are able to retain their

customer base.

>> So you talk partnering what about

acquisitions? Um anything else on the

horizon for them? We know they acquired

uh Finn back in what June.

>> Yeah I mean the only company that can do

acquisitions right now is Nvidia. We

heard rumor about them buying hugging

face for 13 billion and they look they

have the cash they will generate $200

billion in cash. So they can do back

stops they can finance neo clouds they

can do acquisitions and that's what has

changed in terms of earlier it used to

be all software companies doing

acquisitions and now it's uh your

semiconductors and your chipmakers doing

acquisitions.

>> Okay. What about Crowd Strike? Shares of

Crowd Strike jumped the most in over two

years on this Outlook beat. you in a do

you still cover you still cover all of

these companies.

>> I I I have a team thankfully that helps

me out but

>> we're going we're going [laughter] to

we're going to every company in the

NASDAQ composite with Mande. This is

interesting though the company projected

revenue for the full year that exceeded

analyst estimates evidence that the

cyber security industry continues to

benefit from AI fueled demand. Still

this this was a surprise to some folks

evidenced by the reaction in the stock.

Yeah, I think all these companies

whether it was PaloAlto Networks,

Crowdstrike, Octa, they said Mythos and

you know the some of the latest LLM

releases have created so much fear,

>> paranoia,

>> paranoia in the minds of all the CIOS

and CISOs that they want to figure out

what vulnerabilities they have in their

software and

>> but are these companies effective in

protecting companies from

>> I think it's too early to say that but

for now the enterprise plays is let's

boost our security uh posture and you

know make sure we don't get uh hacked by

one of these uh hackers using LLM to you

know penetrate your defenses and and so

that's what's driving I think a lot and

look the agentic AI is also a driver so

as enterprises roll out agents they need

to secure their agents so that's where

they're seeing some benefit as well

>> mandep we needed this thank you mandep

>> at all

>> bloomberg intelligence global head of

technology research joining us here in

our Bloomberg Interactive Brokers

studio. He can do it all. Check out his

research on the Bloomberg terminal and

his entire team's research on the

Bloomberg Terminal.

Stay with [music] us. More from

Bloomberg Business Week Daily coming up

after this.

>> You're listening to the Bloomberg

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Catch us live weekday afternoons from

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us live on YouTube.

>> Well, we continue our coverage of Meta's

landmark deal with State Attorneys

General across the US in which the

company agreed to pay up to $18 billion

and implement design changes such as

limiting the amount of time users under

18 can spend scrolling on its apps.

Here's California Attorney General Rob

Bont and West Virginia Attorney General

JB McCuskkey speaking on this deal

yesterday on Bloomberg.

>> This is a major breakthrough because

when it comes to protecting our

children's mental health, there is no

time to lose.

>> It has always been our goal to make sure

that every platform protects children in

the same way that Meta is going to be

protecting children. That was California

Attorney General Rob Monta and West

Virginia Attorney General JB McCusky

speaking on the Bloomberg yesterday.

This news really got us thinking again

about the Emmy and DuPont award-winning

documentary can't look away the dangers

of social media. It follows a team of

lawyers taking on tech giants advocating

for families whose children have been

deeply impacted by social media. The

original reporting of Bloomberg News

investigative reporter Olivia Carville

is throughout the film. Back with us is

the co-producer and co-director of Can't

Look Away: The Case against Social

Media, Matthew O'Neal. Matthew, good to

have you back on the program. We thought

of you a lot yesterday.

>> Glad glad to be back here. I think I've

been hearing from people all over the

country and the world with that

settlement because it resonates so much

with the themes in Can't look away.

>> Well, what was your reaction when you

first heard about the settlement? the

most I mean obviously the headline of

$17 billion seems like a lot but the

real meat of this settlement are the

changes that are being made by Meta as

part of the terms of the settlement. I

mean, if you look at a lot of the

allegations that the families were

making in Can't Look Away, that endless

scrolling uh caused their children to be

addicted, that the companies were doing

this on purpose, you know, these are

things that again, Meta admitted no

wrongdoing, but these are elements that

are going to be changed on the product

as part of the settlement, which is

incredible.

>> Well, where does Meta go from here?

Because we talk about the guardrails,

right? They're going to be setting up

some guardrails. Um, but how do

companies how are they able to find out

the actual na the age of kids because

kids are savvy. I mean let's let's be

real. They can kind of get around

different things. So how what's Meta's

kind of thought process as they go

through this?

>> Well, I can't speak for Meta, but I can

see for what the terms of the settlement

are. Yeah. In in terms of they've

committed to having an essentially an

inspector general of sorts that is going

to look into this and using more cutting

edge technology to root out and identify

what 13year-old like which users are

actually underage. It's one of the

points we made often talking about the

film is that if they can figure out that

I need a lawn mower or want to be

advertised for to ro about ro gain they

can figure out the age of their

consumers right and so they're being

held to that yeah good [laughter] um

>> ensuring I want to read from a statement

from Meta uh quote ensuring teens have a

safe and productive experience on our

platforms is an absolute imperative for

Meta we want to get this right for

parents and teens the company said this

in a statement yesterday uh after news

reports emerged of this uh settlement or

what's going on with the state attorneys

general. I I'm wondering, Matthew, if

you think you spent so much time with

these families, you've spent so much

time understanding what they've gone

through. If this is enough,

I don't think that for the loss that

these families endured, often uh the

death of a child, there can never be

enough. But uh having spoken with some

of the families since the settlement,

there is some solve in this in that

their story, they're speaking out,

they're being part of Can't Look Away,

part of multiple lawsuits, talking to

the AGs, being part of this movement

really that has led to change. Their

children's stories are going to make

other children safer. And this is a huge

step forward in this because critical in

this the statements that used to come

from Meta and the other social media

companies always put the onus onto

parents what they can do offering them

products that were designed to be safer

for teens. This settlement really puts

the onus back onto the company where the

responsibility uh will lie with the

maker of the product as opposed to the

user.

>> Well, since you mentioned that, I'm

going to go there. Um these changes are

going to take some time. So, what can

parents do in in the meantime to to

protect their kids? I know you have a

couple documents, too, that go along

with the with the the film that you

have.

>> Well, shameless plug. If you watch Can't

Look Away, there is a a watching guide

and it's in in front of the payw wall on

the Bloomberg site so that anyone can

access it and anyone can access the

talking points guide to watch it with

their children. I just had a friend

yesterday who bought his daughter a

phone and said that one of the

requirements was she's entering 8th

grade was that she sit with uh he and

his wife and watch can't look away and

they had use those documents to have a

conversation about it because talking to

your kids about what exists and what is

possible on these platforms is really

really important and I hate to as I'm

saying don't put the onus on parents I'm

saying parents here's something you can

do I believe that these uh platforms

need to be held responsible posible meta

is now being forced to take a step in

that direction. What's interesting about

the lawsuit is that it also there's

incentives that if the other social

media uh platforms also settle those

protections for children become even

more stringent uh and there's an

increase in the amount of money that's

paid. So that this really could be the

beginning of a shift for all the social

media companies.

>> You say it's the beginning, it could be

the beginning of a shift. What does the

shift ultimately look like from your

view? Well, I think it changes the way

that the companies rely strictly on

engagement of children. They're being

held responsible. It's the same thing

that goes back to the tobacco

settlement, of which many people have

made analogies for the big tobacco

settlement in the 1990s. It's not a

perfectly uh fair analogy, but one of

the things alleged in that lawsuit by

the attorneys general was that the

product was designed to addict people.

And that's what was happening with

tobacco. It was designed to have the

maximum capacity to get young people

addicted, to get you addicted. Adults

can make that decision with open eyes.

Children can't. That's also part of

this. You know, these products are being

designed to addict children. And now

these companies, specifically Meta, will

be held accountable. And it really

really I'm hopeful will be the beginning

of a sea change.

>> Now, this is going to be happening for

us um for you people in the US who use

um the product. So, what about

internationally? I mean, did you cover

any of that in the film? what's going on

around the world. Like you look at

Australia, they tried to ban it and it

it just didn't seem it's not doesn't

seem to work very well.

>> There have been a series of different

legislative moves all around the world

in the United Kingdom, in Australia, not

yet successfully here in the United

States, although there has been movement

in Congress and bipartisan uh movement.

It's one of those few areas where uh

both parties agree there needs to be

change. Um, however, this is a in the

end a financial incentive in their

largest market, the United States. So,

that is likely to lead to design

changes. I I certainly hope it does for

children all around the world. Uh before

we let you go, um I'm just curious about

if you're working on any sort of

followup, if other projects that are are

relevant to this right now. Very

briefly, [snorts]

>> the changing role of technology in

children's lives is going to be the most

urgent issue that we face. Uh and it's

not just about social media. uh you

cover the big AI companies all the time

and we want to be telling stories that

help make sure that technology is

responsible uh in the way it's designed

so that children can use it safely.

>> That's Matthew O'Neal. He's co-producer

and co-director of Can't Look A, the

Case against Social Media. He joins us

here in New York. If you are interested

in seeing the film and looking at the

supplemental materials too, you can do

that at bloomberg.com.

bloomberg.com/features.

That's bloomberg.com/features.

>> Stay with us. More from Bloomberg

BusinessWeek Daily coming up after this.

You're listening to the Bloomberg

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Catch us live weekday afternoons from

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on YouTube.

>> Well, last month S&P Global posted

quarterly results. They fell short of

analyst average estimate uh hurt by

factors including the US Iran war making

it harder to boost pricing on contracts

for its energy data news and analysis

unit. At the same time though revenue

from the firm's ratings business rose

17%. Revenue from its indexes business

its indices business was up 20%

year-over-year. That sets a little bit

of the stage for this edition of the CFO

briefing. And for that we welcome Eric

Abwaf CFO and EVP of S&P Global. the

more than 130 billion dollar market cap

financial information services firm. You

know it for its credit ratings,

benchmarks, and of course the indices.

Also the leader of our CFO coverage,

Nina Trendman. She's Bloomberg News

senior editor and editor of the CFO

briefing newsletter. You can subscribe

to it if you don't already at

bloomberg.com/cfo-briefing.

A big welcome to both of you. Eric, I

want to start with you. um your CFO,

your CEO rather, uh Martina said last

month that you expect $250 billion to

$300 billion in debt issuance this year

from hyperscalers or large tech

companies expanding AI capabilities. I

mean, we're talking about Nvidia today

and the impact on the trade. I'm curious

if we have any visibility beyond this

year into 2027, 28, 29,30 as we're

hearing from some of these companies.

What are you hearing?

>> We're hearing a number of scenarios,

right? scenarios that are at about the

same level, some higher, some a lot

higher, right? And that's what uh you

know, keeps uh you know, investors uh

excited. Um but over time, you know,

we'll we'll see. In a way, as a CFO, you

know, my job is preparation, right?

Preparation for those upsides,

preparation to be there for our clients,

preparation to make sure that our

ratings teams are ready with

methodologies that uh that they've

designed independently and uh and then

uh supporting them as they go. to follow

up maybe um the the AI related borrowing

that we've seen in in recent quarters of

course has smashed our records like how

far does S&P see a growing credit risk

at some point

>> you know it's uh it's hard to tell and

and in fact what we do is we help

provide benchmarks and transparency to

the industry right think about the $45

billion uh $45 trillion of debt that we

uh rate each year right that gives uh

investors all the way from retail all

the way to the biggest institutionals an

ability to really understand what is

going on in the uh the space both with

the hyperscalers the project finance

they're doing the data center uh builds

and in a way you know that's our

business to create that transparency

that insight and uh and over time that

uh that gives them the tools to make

better decisions you know forecasting

the future is not what we do right we

try to help folks interpret what's going

on today what to extrapolate what to

explore what to think about as upsides

and downsides and help them take it from

there with the most trusted and you know

uh valuable uh data that we have.

>> Yeah, I guess we we're all curious to

see what the future might hold.

[laughter]

>> We got I guess we have to ask the

eightball again, you know, we don't

know. None of us know. Go ahead.

>> If we all still have jobs in three years

time, [laughter] who knows? Who knows?

>> The robots will be doing this.

>> Um you made also significant significant

changes to the to portfolio. Um the

company recently spun out its automotive

business. So I'm curious talk to us

about the considerations for that change

and also is there more portfolio work

that you're expecting at this point?

>> Yeah, we've been we've been clear that

we're done with uh transformational M&A,

right? We uh we felt as we had navigated

the last uh this goes back two years,

you know, that we had one area the uh

the the auto data mobility business that

wasn't as core to what we do. It didn't

integrate with some of our other

benchmark businesses, you know, ratings,

indices, uh market data, energy. uh it

had different client bases, right? And

so it wasn't as as core to [snorts] to

uh uh to the rest of the company in some

ways was going to be more successful on

its own. So uh you know, we spent uh oh

15 months carving it out. That's a lot

of work from a finance and CFO

standpoint, but legal comms, all the

other uh the people team uh help help

with that work. And uh finally on July

1, we uh we spun it out uh and it's been

a success. So we're we're real pleased.

And uh you know, now we feel like we're

we're on our way. and they're on their

way too.

>> Thinking about the IPO markets this

year, do you regret in hindsight that

you didn't choose the route of a of an

IPO?

>> No, I think the the the the most natural

way to uh to separate a unit is actually

to spin because what we do is

effectively hand over the shares

literally the paper electronic shares to

our existing shareholders and they can

choose what to do with it, right? And we

didn't need the capital. We're a capital

rich company. We we create enormous

amount of capital. we've just upsized

our buyback. We've got uh we've got all

the capital we need. And this was about

doing the best thing we could for our

shareholders, which is giving them the

right to choose.

>> Well, a couple things you've talked

about um you've talked about M&A

activity, uh hyperscaler issuance,

refinancing, they've all supported

ratings. So, the question is how durable

is that?

>> You know, we see a lot of opportunity uh

ahead of us. If you look at what we call

the refinancing walls, right? the amount

the trillions of debt that we expect to

refinance out of that 45 billion it's

quite high. It's at some of the highest

levels that we've seen over the last few

years. And so there's really a couple

features. One is core economic growth

creates a need for debt and issuance and

uh rated issuance which is what we

provide. And part of it is you have a

natural refinancing that's going on. And

then that's supplemented by the ongoing

M&A activity. We're in a period where

we've got large M&A backlogs, lots of

announced M&A, and so that's playing

out. And we also have uh uh um the uh

the hyperscalers coming through as well.

But each one of those is a different

sector. You know, we have global,

[snorts]

local, uh governments, uh mortgage back

securities. We have a wide range. We

have leverage loans. We do both public

and private debt. So in some ways what

we're trying to do is be there in all

the the market uh segments and actually

uh help support those clients around the

uh uh around across all those.

>> We're speaking with Eric Abwa the chief

financial officer over at S&P Global and

Nina Treadman. She is Bloomberg News

senior editor and CFO briefing editor.

[laughter]

>> Thank you. Um just wondering thinking

about AI. It's one of the topics that

comes up in pretty much all of the

conversations for CFO briefing um that

we have these days. talk to us a little

bit about how you're using it in the

business and also how you're um thinking

about ROI which seems to be the biggest

challenges um that the CFOs are facing

at this point.

>> Sure. AI is really an accelerant for us

and primarily on the uh client and

revenue side, right? First, we've been

building AI functionality into our

products so that as clients access the

benchmarks and the vast amount of data

that we have, they do it through a set

of interfaces that they're uh

increasingly uh moving towards. Uh so we

we do it in uh within our products and

across all of our different products.

There are different kinds of AI

functionality that we're rolling out.

We're also connecting directly with our

clients in their uh uh uh technology

suites where they are uh tackling and

adopting the LMS, the frontier models,

the open source models that that range

and we're plugging directly into them.

We've uh we've signed up on a kind of

intercomp basis 500 of those clients.

they're using AI more and more and so in

a way it's a way for them to uh access

or trusted data right just in a

different way historically they

sometimes used it uh you know directly

through you know some interface that

they used to over time through APIs

right so which is uh computer-to

computer uh connections and now through

LMS and so in our minds it's just

another access point either through our

own uh uh products and services or

through the uh you know the new uh

avenues that are open to Eric, we just

had this fascinating conversation with

Jack Manley over at JP Morgan Asset

Management, and a key question that we

posed to him that everybody's trying to

figure out is productivity as a result

of these tools. Is there a way that as

CFO over at S&P, you've you've been able

to quantify the ROI that you're getting

from these tools, like how much you're

spending and how much it's giving you?

>> Yeah. On the on the revenue side, what

we're seeing is higher retention rates.

Okay. uh higher larger pipelines, more

usage, which over time comes back into

our uh our our pricing structures and

our economic value that we offer to to

clients. So, we're we're seeing that

kind of activity that can then that can

give us the information for ROI. And on

the productivity side, there's a whole

set of areas that we're rolling out uh

AI internally to do what we do more

efficiently. And those in particular are

very well uh um measured because in a

way what what we want to do is just make

sure that we're putting AI in the in the

in the best use cases where we can

actually get those uh those returns.

>> Uh what customers what are they what are

they willing to pay more for uh today?

>> I think customers are willing to uh pay

more for what is most unique and not

accessible generally on the web. Right?

Our data is all within our ecosystem,

right? it's behind a set of walls. And

even clients that want our data through

LMS and AI tools, it needs to be

permissioned, right? They need to have a

direct link and account with us so that

they can uh take advantage and uh and

benefit from our data much like they do

through the other uh venues that they

source. And what we found is you know

the first step is we're encouraging

usage because usage begets value and

value begets over time product service

uh expansion you know broader set of uh

uh services that they're buying for us

and some uh product lines there's direct

uh uh um offerings of AI ready data

that's that's curated and populated and

and designed in a way that makes it very

uh fil

uh large language models to uh uh to

benefit from. In other areas, it's part

of the core service, but over time, as

we renew with clients, we come back to

them and play back to them, hey, here's

how you're using our data. Here's how

you're using our data through AI. As you

use more of our data, let's have a a

thoughtful conversation about how you

benefit and how we should benefit. And

so, it comes through uh over time as

well.

>> Coming back to the cost part of the

conversation, um we know that companies

across the US have found out that AI is

actually more expensive than they

thought. many of them blowing through

their budgets um through half through

halfway through the year. How are you

managing token costs?

>> Well, you know, the the heart of the CFO

job is measurement, right? Because

measurement and information and uh what

we call sunlight is a wonderful uh

enhancement into what's really going on.

And so we've got quite a bit of uh uh

information that we've been building

around the usage of of AI, the token

usage, the token usage by division, by

product, uh by our clients, by us. And

then as we roll out AI tools internally,

whether it's to our software developers

who are able to add uh and develop

software code and add product feature

functionality, we're measuring how much

more effective they are, right? As well

as the uh the amount of token usage. So

to us it's a it's it's like other

investments. It's a it's something you

measure, monitor, uh refine, adjust,

right? Because that is the heart of what

a CFO does.

>> And it's going to be a conversation that

we're going to continue to be asking

people like you about because this is

what it is all about right now, Eric

Abwaf, CFO and EVP of S&P Global.

Joining us here, also the leader of our

CFO coverage, Nina Treadman. She's

Bloomberg News senior editor. She's

editor of the CFO briefing newsletter.

Check it out at

bloomberg.com/cfo-briefing

if you are not already a subscriber.

>> Stay with [music] us. More from

Bloomberg BusinessWeek Daily coming up

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>> Lisa, we spent a lot of time in recent

days talking about trade and tariffs as

it relates to the US and Canada.

>> Yeah. Yeah. Most definitely. And

especially because all the different

products and who's being affected like

those small businesses too.

>> Yeah. We cannot forget about the big one

though and that's China and the

relationship between the US and China.

The latest is that China said it would

monitor US actions related to tariffs

for alleged overcapacity and may take

counter measures underscoring lingering

friction despite a trade truce. Patrick

Pan, closely attuned to trade policy

between the US and China. He is joining

us here in the Bloomberg Interactive

Brokers Studio. He's global head of

marketing at XLAB. XLAB is the consumer

bike company that comes from XDS

International. Now, Patrick, even though

people haven't heard of XDS

International, unless they're in the

bike industry, they've probably ridden a

bike that's been made by XDS

International. Before we get to what you

guys are doing over at XLAB, can you

explain the contract manufacturing for

carbon fiber frames that XDS manu that

XDS International has done for decades

in Shenzen?

>> Yeah, XDS intern XDS as a whole as a

company started uh in 1995 and began

modestly with wheels manufacturing and

seat post manufacturing and then built

on a vertically integrated manufacturing

ecosystem from then on. eventually built

its own carbon fiber facilities in I

think 2005 2006. Uh as you've said it

it's since been a massive OEM for a lot

of the big brands that people have heard

of. Um a lot of the brands that are in

the world tour. Uh it I believe by

volume it is now the largest bicycle

manufacturer in the world and about a

year and a half ago it was decided that

now there is a a lot of the conditions

are appropriate for its in-house brand

XLAB to be to be born.

>> Okay. So, yeah, I want to explain a

little bit about this because this

didn't actually get on my radar until a

few months ago when I walked into a bike

shop in Brooklyn. I had just bought a

brand new bike. I was there uh getting

fitted for the bike. A friend of mine

manages the shop, and he said, "Hey,

before we jump on your bike, come check

this bike out. He takes me over to one

of the the top-of-the-line XLAB bikes,

shows it to me, and he says, "Guess how

much this thing costs?" And it's like

$7,000, which sounds like a lot of

money.

>> Mhm. But for a bike that comes with

top-of- the-line components, it's so

much cheaper than you would get from

like

>> So, how much do they go for normally?

>> 13.

>> Yeah. A bike of that caliber with those

specs would be around the 12, 13,

$14,000 range.

>> So, here's the thing that I don't

understand.

Does this cannibalize the XLAB or the

XDS business? Like why is a company that

uses XDS International to manufacture

its carbon frames okay with you guys

undercutting

their core business?

It's an interesting question. I think

that there there are two layers to this,

right? First is the fact is, you know,

we've we've put a lot of work into

building a world-class OEM business. And

so that model itself is highly

competitive from a quality perspective,

from a cost perspective, and there's

very little incentive for a brand who's

already working with XTS to not because

I think the the cost of switching would

be significant. Um, the other side of

this is I think we're assuming that the

cycling industry is a finite pie.

There's much more merit to say, look, a

lot of people can ride bikes. Most of

them are not buying bicycles. Why is

that? There's a misalignment in the

addressable market for who can ride

bikes versus who is actively

participating in the industry. If we

assume that we're always pushing towards

the tip of the pyramid, like you said,

right? It's we keep chasing better specs

naturally means higher prices. If we

keep pushing towards that tip, we're

sort of disregarding a massive

opportunity for new riders to enter. If

we can be the ones to change that

equation and start bringing in more

riders, then we're not going to be

taking away from competitors. We're

going to be growing the pie for

everybody as well, right?

>> I mean, the prices you're talking about,

it's crazy. Like, I'm thinking I go for

like a huffy. I mean, [laughter]

>> it's an insane hobby. Yeah. Cheaper than

golf, I would But I'm curious because

you had mentioned you you kind of

touched upon this a little bit how the

company is coming out now and you said

the the timing is right. So what makes

that timing right? Why now?

>> A number of things. I think because XTS

has now at this point

built a massive in-house R&D uh

capability that has since been able to

find out what are some of the best ways

to improve upon bikes. The other side of

this is, you know, going into the

pandemic, I should say, and I know Sam's

very well aware of this. Going into the

pandemic, a lot of uh people started

riding bikes, maybe picking it up for

the first time since they were a kid. Uh

the conditions were apt and so bike

brands started placing a lot of orders

for new inventory. uh when the market

corrected itself, a lot of the dealers

and the bike shops like the one in

Brooklyn that Tim goes to, uh were

probably left holding the bag with a lot

of excess inventory that they can't

necessarily move like and this was a

massive imbalance and XTS was no, you

know, stranger to that. We were some

some brands had placed massive orders

that they they cannot fulfill. So, we

were left with a lot of stuff

essentially. And so with all that excess

capacity, we thought, well, okay, these

can all be great bikes. Let's just let's

just do it. Let's just turn all of this

expertise into a genuine line of

performance bikes that we can do

ourselves. You know, the brand brand

name is big in the bike industry. Um,

and and certainly folks who watch the

tour def France this year saw the XDX

Aana team in the tour riding these

bikes, but I'm curious how you build.

You're you're in charge of marketing.

you're in charge of communicating to

customers and potential customers. How

do how do you get somebody to trust this

this brand name when for years they've

been, you know, with one of the big

American firms?

>> Sure. You know, I think a lot of times,

you know, people that are in the

industry are already aware that most of

the brand names that they know and trust

are made either in our factory or in a

similar factory.

>> People are aware of that in general. I

think those that are deeply embedded in

the industry are. I don't know if the

average consumer is,

>> right? That's what I mean.

>> But realistically, you know, at this

there really isn't anybody that's better

at carbon fiber than China is right now.

And among that group, right, the XTS

crop, I think, is quite top of the line.

So realistically, I think people are now

more and more understanding that if you

are chasing a quality build, a quality

bike, it is conceivable that the entire

thing is coming from China. And with

that assumption, then it's just about

the label that's on the down tube and

and I think people are, you know, aware

of that, too.

>> So, how do you come about with the price

if it's so much significantly lower? Um,

and then you're taking on these tariffs

at the at the same time, how do you keep

it at that price? Are are you absorbing

the cost or,

>> you know, when when tariffs as they have

been somewhat volatile, right, in in in

this past year? Uh, we we have been able

to absorb it. A lot of this, the merit

comes from the fact that we own the

entire manufacturing end to end. And so

this is as early as the raw spools of

carbon fiber being woven into sheets

that then become the frames with the

molds. Uh, and then all the way through

the paint shop. You know, when I say

vertically integrated, it's quite

literal. It's one building. First floor

is this, second floor, you know, all the

way up to the paint shop. So it's

surprising I think once you have all of

those pieces in house what that means

for the inefficiencies of having too

many suppliers layered on and this in

essence gives us a pretty strong control

over the entire cost structure and so

coming into this now our goal is to make

sure we can pass some of that efficiency

to the consumer and also equally

important is passing that on to the

dealerships as well. Patrick, we only

have about 30 seconds left, but we're

Bloomberg. We want numbers. We want

metrics. What can you tell us about

growth of the business, sales growth,

and and in terms of revenue and and what

you're seeing in this early stage?

>> When Next Lab launched in April this

year, you know, we were projecting well

some number that is significantly lower

than what we are right now. Um, I would

not be able to share hard numbers, but

we essentially 5xed the initial forecast

for coming into the US and we expect the

same as we launch into uh other major

markets in the coming year.

>> Patrick Pan, he's global head of

marketing at XLAB.

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