OpenAI inks AMD Chips Deal Worth Tens of Billions of Dollars

Interactive Transcript

Speaker A The FIFA World Cup 26 is coming to North America. Get closer to where business meets the beautiful game with a hospitality package featuring premium seats and entertainment. Get closer to wins on and off the pitch. Register interest@hospitality.FIFA.com Interest hi, I'm Stephen Carroll. And I'm Caroline Hepker, here to introduce.

Speaker B You to a podcast that brings you.

Speaker A The news you need to start your day in just 15 minutes.

Speaker B It's called Bloomberg Daybreak Europe Edition, covering all the top stories across Europe and around the world. Each weekday morning, we're up early to bring you the Latest news. By 7am we've got everything you need to know, from geopolitics and global events.

Speaker A To economics and what's moving markets. I'm covering it all from London and.

Speaker C I'm in the EU's capital, Brussels.

Speaker B We have 3,000 journalists and analysts around the world to tell you what's happening.

Speaker C What it means and why it matters.

Speaker B It's more than just business headlines, from.

Speaker A The price of your breakfast to global shifts in power, economics and money aren't.

Speaker B Just part of the story, they're often the driving force.

Speaker C So start your day with us on.

Speaker B Bloomberg Daybreak Europe Edition. For the news you need to know and the context to make sense of it. Find new episodes of Bloomberg Daybreak Europe.

Speaker A Edition by 7am London time on Apple.

Speaker B Spotify or wherever you get your podcasts.

Speaker D Bloomberg Audio Studios podcasts, radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple Car Play and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

Speaker E The big I think news that probably really surprised people to the upside was this news on Advanced Micro Devices signing that deal with OpenAI and amd just ripping adding $100 million in market cap today on that news. The numbers around these AI stories are just bigger and bigger. Every single time I tell it makes me feel uncomfortable. Some of the numbers that are being thrown around makes me think about like I woke up this morning looking at this news. I felt like, man, it just feels toppy to me this whole AI story.

Speaker A Toppy as in early 2007 or like mid 2007 or late 2007.

Speaker E I don't know, it just feels like there's just too many big numbers being thrown around too quickly. I'm not sure where the returns are. It's one of those types of things. But Ed Ludlow, this is his bailiwick. He's a Bloomberg tech co host. He is out There in Silicon Valley, supposedly. Who knows where this guy is all the time. Ed, what do you make of this news? These are some big names. OpenAI, AMD.

Speaker C Yeah. I mean, the deal. The specifics of the deal are really important. What is OpenAI going to use AMD's technology for? It's going to use it for inference. In other words, running the models that already exist, not training them. It is 6 gigawatts of capacity. The reason that that figure is critical is that it equates to the peak electricity demand of most major US Cities. Like, these are huge numbers, as you say. But it just speaks to what's happening to the mind of the participants in the industry, which is they will need this capacity. You guys are using words like top and bubble, and I think that's completely fair. Maybe you saw my column this morning on the debt role in what's happening. But I would say the AMD has done something interesting here which is different to what Nvidia did, which is they will issue stock to OpenAI. AMD shares going to OpenAI, but only once OpenAI spent some money and actually built some stuff. So where's Open Air going to get the money?

Speaker A Well, that's why Sam Altman has been traveling the world, meeting with all kinds of investors, trying to get some funding. You said the specifics matter, Ed, but we don't know how much this partnership, this deal, is worth beyond the very generic tens of billions of dollars, right? That could be $10 billion. That could be $99 billion.

Speaker C Yes, that's correct. I mean, AMD CFO framed it as being tens of billion dollars of revenue opportunity. But that's why I think the specifics of the terms I've made a careful examination of them are really important to understand versus what Nvidia did with OpenAI. So Nvidia said it was going to invest $100 billion into OpenAI. We don't even know if that was cash or chips in lieu of cash. But basically, Nvidia would get some equity in OpenAI in return. In this instance, AMD and OpenAI, open air is getting AMD shares, but they are deliverable in tranches against milestones which relate to literally building the data centers. So for each gigawatt of capacity that comes online, Nvidia would then say, okay, I'm sorry, AMD would then say, here is this tranche of stock. And that's why I'm saying, focus on the Open Air obligation here. They need actual money to dig up the dirt, put the foundations in, get the data center up and put the servers in right before any of this stock comes into play.

Speaker E Stay with us. More from Bloomberg Intelligence coming up after this.

Speaker A The FIFA World Cup 26 is coming to North America next summer. It's the ultimate celebration of sports and culture and an opportunity to elevate your company. Get closer to where business meets the beautiful game with a premium hospitality package. Build partnerships in the best seats and suites. Achieve goals over world class food and beverage. Get closer to wins on and off the pitch. For Register interest@hospitality.FIFA.com Interest Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. Hi, I'm Karen Moscow.

Speaker B And I'm Nathan Hager. Each morning we're up early putting together the latest episode of Bloomberg Daybreak US Edition.

Speaker E It's your daily 15 minute podcast on.

Speaker B The latest in global news, politics and international relations.

Speaker A Listen to the Bloomberg Daybreak US Edition podcast each morning for the stories that matter with the context.

Speaker B You find us on Apple, Spotify or anywhere you listen.

Speaker D You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

Speaker E Got an M and a trade in the regional bank business? I think it's kind of a big one. I like this one. Fifth Third bank corporate buying Comerica for about $10.9 billion in stock, JP Morgan, Goldman Sachs and Keith Rutten Woods. Those are the bankers getting paid. I always take a look at that first and foremost. I go to the last paragraph of every column, every story about an M and a trade to see who gets paid. Herman Chan joins us here. He covers the regional banks for Bloomberg Intelligence. You like this deal, Herman?

Speaker F Yeah, I think it's a win win for both. Comerca has been sort of in the doldrums over the past couple years after the SBB debacle. It's taken some long time to get it under its own footing and they've gotten a lot of agitated, agitated investors and activists pushing for a sale. And this was a great outcome. On the other hand, for Fifth Third, it's a great deal. It moves them into growth, growthier markets in Texas and California.

Speaker E Yeah.

Speaker F Supplements their Michigan presence and really builds out their branching presence across the Southeast and Southwest.

Speaker A So within the regional banking space, what does this deal put pressure on? Who does this deal put pressure on to make a move of their own?

Speaker F Yeah. So that's a question. The follow on question like who's next? So there are other banks that are operating within the size of of a fifth third that have also done deals like a PNC and Huntington. And the others that are still on the sidelines are banks like regions in the Southeast, Key Corp in Ohio, Ohio as well, and M and T and citizens in the Northeast. So those are the ones that probably are going to get asked a lot of questions on the 3:2 earnings go about M and A.

Speaker E So what do we know about the Trump administration and its view towards bank consolidation? Are they opined on this at all?

Speaker F Yes. So we can see that these bank deals are getting approved at much faster clip. So I mentioned Huntington earlier. They're buying a bank in Texas named Veritex. That's right. And, and it's going to take them about 98 days from deal close for merger announcements. And that contrasts with under the Biden administration it's taken 400 to 600 days for a large deal. So these deals under Trump are being fast tracked and it's really encouraging the management teams to really go out there and search for deals.

Speaker A So for so long a lot of people had commented that the US is overbanked. By one count there is almost 4,500 FDIC insured banking institutions here. Are we still overbanked, Herman?

Speaker F I would say so. There's a lot of competition this and that's the reason why come America is looking to sell because they, they were lacking in a retail branch presence. They mostly bank middle market commercial customers that are great but it doesn't create the diversity that they needed during times of stress like the SBB environment. And so that was a lesson learned for, for a lot of the banking industry that you need to diversify your depos. And, and one way to diversify is the sell to a larger organization.

Speaker A Which segment of the banking industry is bloated needs to streamline the most.

Speaker F Yes. So there you mentioned 4,500 banks like is does there need to be that many banks within the United States? Probably not. They don't have the scale to operate a retail branch presence. They don't have the, the capabilities on the fee side and the advisory side to really help their customers on the commercial side. And you see so much from not only larger banks but also the fintechs that are just you know, biting at the heels on the consumer side. So it's a really tough operating environment and we expect more consolidation over the next several years.

Speaker E All right, riddle me this year, why do banks even have branches? I hear banks, I'm not adding branches. I've been into a branch in years.

Speaker A Across the street from Bloomberg headquarters. Citigroup.

Speaker F Citi branch right across the. A lot of it is marketing and a lot of it is scale. So for a bank like Fifth Third, they're growing organically in the Southeast and that's been a major growth driver for them.

Speaker E But I need a branch.

Speaker F You don't need a branch, but you need the branch for a marketing aspect. So you need to.

Speaker E It's like a big billboard, right?

Speaker F It's a big billboard.

Speaker A Big expensive billboard.

Speaker F Yeah. In markets where you have a lot of foot traffic and higher growth markets. So it's a big billboard and it's been a proven growth driver for banks. But on the other hand, branches are declining. So if you have critical mass and scale in your existing markets, you can trim your branch presence and not affect your depositors. But if you're entering new markets, then opening new branches is the way to think.

Speaker E I could find my checkbook.

Speaker A That raises the question, does a fintech that wants to be a bank need to therefore have a retail presence? Do they need to open up a branch also across the street from our office?

Speaker F So that's, that's the beauty of the fintech motto is that they're issuing the branches. It's not a requirement. It's a lower cost to serve because you don't have the physical retail presence. And it's one way to really compete effectively with these, with these legacy banks where you have a really easy to use app and you, you aren't burdened by this cost basis of owning the physical presence.

Speaker E All right, so when we had a couple little blow ups in your world a couple years ago, I found this. KRE the SPDR S&P Regional Banking ETF.

Speaker F That's right.

Speaker E How are the regional banks trading these days?

Speaker F Yeah, so they're really doing all right. We're talking about price, the tangibles around 1.5 to 1 point times ish. During the height of the weakest point during the SBB debacle, it was less than one time. So they've rebounded really nicely despite some of the uncertainty on the economy and with tariffs and, and so we've seen some growth from them, especially on the commercial lending side. That's really helped grow their top line.

Speaker B The forces shaping markets and the economy are often hiding behind a blur of numbers.

Speaker A So that's why we created the Big Take from Bloomberg podcast to give you the context you need to make sense of it.

Speaker F All.

Speaker B Every day in just 15 minutes, we dive into one global business story that matters.

Speaker A You'll hear from Bloomberg journalists like Matt Levine.

Speaker F A lot of this meme stock stuff.

Speaker E Is, I think, embarrassing to the Sec.

Speaker A Amanda Mull, who writes our BusinessWeek Buying Power column.

Speaker B Very few companies who go viral are, like, totally prepared for what that means.

Speaker A And Zoe Tillman, senior legal reporter. Courts are not supposed to decide elections. Courts are not really supposed to play a big role in choosing our elected leaders. It's for the voters to decide.

Speaker B Follow the Big Take podcast on the iHeartRadio app, Apple Podcasts or wherever you listen.

Speaker D You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business, Apple Listen on demand, wherever you get your podcasts or watch us live on YouTube.

Speaker E Quite a management change in the telecom space. Verizon Communications named Dan Schulman chief executive officer, replacing Hans Vestberg. That's effective immediately. Looking over at the stock for Verizon, down 4% today, although it's up about 4% year to date. Let's see what this means for Verizon and for the telecom space. We're joined by John Butler, senior telecom analyst for Bloomberg Intelligence, down there in our Princeton office. Hey, John. So a change at the top for Verizon. Was this expected or is this something new for the company?

Speaker G Not at all, Paul. I mean, you know, when you think merger Monday, I've had a lot of busy Mondays lately, but the last piece of news I expected was this change in leadership at Verizon. The company had really been sort of, I guess prepping the head of the consumer business or grooming is a better word. Some Orion Sampath who is just a phenomenal talent in my opinion, and he's been sort of pushed out there doing a lot of investor conferences and giving the investment community the impression that he was the next in line. So when the news broke this morning that Dan is taking over as CEO, it really surprised a lot of people, including me.

Speaker E So what's the company saying here? Why do you think they chose this outsider versus somebody that, again, an insider that maybe the street thought was going to be the next in line?

Speaker G You know, I think for telecoms, all three of the majors, the wireless business is slowing very rapidly on them. We're seeing subscriber growth down a lot this year. There's a lot of pressure on pricing. And I think the thought is Dan Shulman used to be CEO of PayPal. He's got experience at Amex in the consumer finance business. So they're thinking in terms of how to monetize the 150 million consumer relationships they have to move into adjacencies. The naming of Schulman in my mind tells me they're looking to tap the consumer finance market. You know, they've already got a credit card business. I think it's probably doing pretty well, but they're not actually in the loan business there, but they're doing a lot of device financing. And so I think the hope may be, this is my speculation maybe that they can take that perhaps a step deeper into the consumer finance market and maybe other adjacencies to be able to monetize that base a little bit more and diversify away from the slowdown in wireless.

Speaker E You know, Verizon, they've kind of dabbled over the years in other businesses, purchasing AOL and Yahoo. So what's the focus going forward here? Is it to try to just manage the wireless business as, you know, the decline in the wireless business as best they can?

Speaker G So again, it's the strategy here, Paul, I think is to sort of build off that base that they have. The wireless business is stable. It's not going anywhere. It's typically a GDP plus business. Again, we're seeing a slowdown now, so it could move down to a GDP like growth rate. But again, it's all about extension. So all three of the majors here are pushing hard into consumer broadband. They're doing very well. They're both in the fiber and the fixed wireless access business. But even that business is starting to mature a bit as it saturates here in the US So the question becomes what's next? And maybe the what's next could be consumer finance. If you look at T Mobile, they've tapped the outdoor advertising market, which actually is growing double digit. I never would have guessed. But there the thought is, hey, as people carry around these phones, we know where they are, perhaps we can leverage that and come up with very innovative ways of increasing eyeballs on our outdoor advertising. So I think they're looking for that type of creative thinking to come up with new ways of generating growth. And again, you're trying to leverage that huge core base of wireless subs that you have.

Speaker E Just looking at their balance sheet, John, this is a, this is company, Verizon, it's got $170 billion of total debt there. How's the, how does the market feel about their balance sheet?

Speaker G So I think of the big three, Verizon is probably at a point where they want to be in terms of financing the business. Can they load on a bunch more debt? It's, it's hard to say. I'm going to defer to our credit analyst for that, Steve Flynn, but I don't view their ability to finance new ventures as an issue here at all. It's a very cash rich business. Wireless that is. And you know, I think that will allow Verizon to bankroll any of the new ventures they plan to push into from here.

Speaker E And one thing I certainly Pro shareholders is 6.6% dividend yield. Is that safe?

Speaker G I think it is safe. That's a good question. I think Verizon of the big three really sort of gets it when it comes to the importance of the dividend to the investment community. There's a lot of telecoms out there at and T included that have cut the dividend in the past and learned the hard way that that really, I call it the third rail of telecom. I mean, you do not want to cut the dividend. Yeah. So my call here is that I think the dividend is safe. Yes.

Speaker A So that's why we created the Big Take from Bloomberg podcasts to give you the context you need to make sense of it all.

Speaker B Is, I think, embarrassing to the sec.

Speaker A Amanda Mull, who writes our Business Week Buying Power column.

Speaker B Very few companies who go viral are like totally prepared for what that means.

Speaker A And Zoe Tillman, senior legal reporter, Courts are not supposed to decide elections. Courts are not really supposed to play a big role in choosing our elected leaders. It's for the voters to decide.

Speaker B Follow the Big Take podcast on the iHeartRadio app, Apple Podcasts or wherever you listen.

Speaker D You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10am EAS Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

Speaker E Let's get an update on what's going on in the auto industry, particularly its transition from internal combustion engines to electric vehicles. I'm not sure where we are in the process now if we've kind of lost some momentum or what's going on there. But let's check in with our next guest. They have some thoughts here. He's a Founder and chairman of Envorso joining us. Envorso is a consulting firm specializing in digital transformation, AI and software driven innovation with a focus in part on the auto industry. Adrian, thanks so much for joining us here. Give us a sense of where you think we are here in this country and then we can go globally if you want on this, I guess, transition to electric vehicles.

Speaker B Yeah, no, thanks for having me. I think if you take a look at it, we are transitioning to an electric vehicle sort of infrastructure and a future going forward with software defined vehicles. Various sort of like companies have got certain advantages over others. Companies like Stellantis have pulled back a little bit. I think some of the traditional autos have spent too much money on it and have achieved less than stellar results and they tend to be pulling back a little bit. Whereas companies like Tesla Lucid Rivian are kind of pushing forward. I think overall the next sort of 2026, 2027, you're going to see an increasing acceptance of the electrical vehicle market as we go forward in the marketplace.

Speaker A Yeah, your former employer Ford, among those legacy automakers that have perhaps spent too much and maybe aren't seeing enough return. In the meantime, where are we? Adrian, now that the $7500 US tax credit is gone, how much momentum did that halt?

Speaker B I think, you know you saw like a 7%, 7.4% I think increase in quarter to quarter revenues for Tesla. I think that's going to be hard to sustain going into Q4, so that will be difficult primarily because it was a bit of a pull ahead. But as you look going into 2026, you're going to see in particular with Tesla, with the advances of a sort of sub $30,000 model, Ford are working hard to come out with a sub $30,000 model as well. So I think there's a big shift to apply software defined vehicles. But the major issue is that is that the costs went too high. So a lot of the automotive makers are now focusing on the sub $30,000 category to try and get something in there to try and get a sort of market presence. In particular I'm interested in seeing how Tesla's launch goes with the model and I think if that goes well and if you can get some of the robo taxi legislation slash provides pilots to improve, I think you're going to see a really big uptick because the technology is pretty cool.

Speaker A Right? Well, you mentioned a couple of times a sub 30,000 EV and of course we're not there yet, but you do see that around the world, Chinese EVs are cheap and incredibly technologically advanced and they're available everywhere except the United States. Do we get to a point where we might one day see Chinese made EVs in the U.S.

Speaker B I think that's, that's, that's an ecumenical decision up to the Congress. So I think right now there's very serious sort of tariffs on the Chinese vehicles coming into the US And I think the idea there is to give the US Automakers a chance to play catch up. I mean, if you go to Europe, you will see some $30,000 Chinese EVs that are really high quality. And I think it's really in the US we're really sort of like playing catch up a little bit. So I think the tariffs there are there designed to give us a head start or to give us a. Well, not a head start, but catch up time.

Speaker A Play catch up, yeah.

Speaker E What's this mean for the legacy automakers, boards, the GMs, the Volkswagens? I mean, it's a tough game for them because they got to wean themselves off of these ice cars, vehicles that make a lot of money for them, F150 trucks and whatnot. How do you think they're going to work this out?

Speaker B Well, it's like every sort of transition in the economy. The traditional automakers come from a sort of modular basis where they buy modules from multiple suppliers. So you may have 100 modules in a particular vehicle or 100 plus modules in a particular vehicle and they have to integrate that together. That's a very complex sort of scenario versus something like a Chinese EV that's a startup or a Tesla where they have two to three modules in the vehicle that they have to integrate. So it's a different framework from where you're coming from. And so the automakers in the US have got the capital, they've got the experience and they've got the knowledge they will pull it off. They just need time to get there. They have to move from over 100 modules down to less than 10. And they got to do that within three to four years. It's a difficult challenge.

Speaker A It's a difficult challenge. I know you're in the business of vehicles and auto suppliers. I want to get your take on the financial troubles of First Brands and Tricolor, which are of course tangentially linked to the auto industry. What does it say about the strength of the auto industry that these two companies have fallen to financial disfavor so quickly and taken so many people by surprise? I know there are some idiosyncratic reasons behind them, but it does speak volumes about a certain segment of the US consumer that is having trouble keeping up in this economy.

Speaker B Yeah, I think US consumer is sort of like, I think it was sort of pushed towards EVs and there's been a negative reaction as part of that. But as people buy EVs and become more stealth mode, I think people are going to start adopting them them faster and faster. I know the people that I am familiar with that have been very skeptical of EVs. Once they get an EV, they start to really like it. The difficulty still becomes down to fear of, you know, long, long trips, travel, charging networks, that sort of thing. But I think as the consumer becomes more confident and that is only going to happen by stealth, that's only going to happen incrementally. But as they do so, it will be, it will be positive. The key thing is getting Tesla to get out there because they are the market leader and they are setting the tone for the rest of the industry. If they continue to do that and then gm, Stellantis and Ford are able to follow suit, then I think the future is bright for the automotive world in the US Provided the tariffs keep the Chinese out for the next sort of foreseeable future.

Speaker D This is the Bloomberg Intelligence podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 10am to noon eastern on bloomberg.com the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.

Speaker A So that's why we created the Big Take from Bloomberg podcast to give you the context you need to make sense of it all.

Speaker E Is, I think, embarrassing to the Sec.

Speaker A Amanda Mull, who writes our BusinessWeek Buying Power column. Very few companies who go viral are.

Speaker B Like, totally prepared for what that means.

Speaker A And Zoe Tillman, senior legal reporter. Courts are not supposed to decide elections. Courts are not really supposed to play a big role in choosing our elected leaders. It's for the voters to decide.

Speaker B Follow the Big Take podcast on the iHeartRadio app, Apple Podcasts, or wherever you listen.

OpenAI inks AMD Chips Deal Worth Tens of Billions of Dollars

Interactive Transcript

Topics Covered

Related Episodes

Out on a Limb | Nov 2nd | Hillhurst United Church

How Do You Respond to Jesus? John 5:16–47 :Daily Devotional, Daily Bible Study

Episode 240: Otto Aerospace CEO Paul Touw talks teardrop, laminar flow, and Phantom 3500

Burnout, Breakthroughs, and the Power of Getting Back Outdoors | Gun Talk Hunt

Share Episode