AWS Races to Address Widespread Outage | Bloomberg Tech
Summary
Market Outlook: The NASDAQ 100 reached a new record high with a risk-on tone in the markets, driven by optimism around US-China trade talks and notable gains from companies like Apple.
Company Performance: Apple hit a record high, driven by an upgrade from Loop Capital citing trends in the iPhone upgrade cycle, while Amazon's stock rose despite a significant AWS outage affecting major clients.
Cloud Computing: AWS experienced a widespread outage due to operational failures in its Northern Virginia data center, highlighting the fragility and overdependence on major cloud providers like Amazon.
Investment Themes: The podcast discussed the concentration risk in digital infrastructure, likening it to utilities, and emphasized the need for diversification in cloud services to mitigate overdependence on a few major players.
AI and Technology: IBM and Grock announced a partnership to enhance AI capabilities, focusing on providing faster and cost-effective AI solutions, which is expected to drive significant productivity improvements.
Trade and Economic Relations: US-China trade negotiations are crucial, with discussions focusing on rare earths and other critical materials, impacting the tech supply chain and broader economic relations.
Social Media Litigation: Social media giants like Meta and Snap face upcoming litigation over platform designs allegedly causing user addiction and mental health issues, marking a significant legal challenge for the industry.
Crypto Market: Bitcoin miners are expanding into AI data centers, leveraging their secured power grids, while the crypto market shows resilience despite recent volatility and regulatory challenges.
Transcript
[Music] Bloomberg Audio Studios, podcasts, radio, news. Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Lelo in San Francisco. This is Bloomberg Tech. Coming up, Amazon says its cloud service is recovering after widespread outages affected customers like Zoom, Snapchat, and Coinbase. >> Plus, US China trade talks resuming this week as President Trump lists rare earths among his top priorities. And IBM and Grock partner up to provide greater access to the full potential of enterprise AI. We'll discuss with them later this hour. >> But first, let's check in on these markets. dead. I'm sat in London this week, but I can see from across the pond, 1.3% on the NASDAQ 100, a new record high. There's a risk on tone throughout the markets. We're looking towards those China US trade talks, but there are some notable gainers underneath the hood. >> Yep, Apple is a big points driver to the upside at the index level. Apple has touched its first record high of 2025. That's the first record high since December of 2024. We have an upgrade at loop to buy like many recently citing trends in the iPhone upgrade cycle. We're going to have a lot more on this story throughout the hour, but clearly this is a big jump for the company and it's really impacting markets at the macro level. We're also looking at Amazon, the parent of cloud computing AWS. The stock's actually up a percentage point. a massive outage overnight, principally around one US data center in North Virginia, the US East1 site, but it has had repercussions for the public sector, the private sector, and technology companies of all types. Let's get out to Bloomberg's Yaj Sun, who's been reporting on this throughout the incident. Very simply, Yajou, uh what happened and what have the ramifications been? >> Yeah, Ed. Uh so this morning Amazon reported that um they're experiencing operational failure across multiple services uh in its data center hub in Northern Virginia. Uh even though the issue occurred in eastern uh the northeast of the United States, uh the impact was really felt far and wide. Uh some of the victims uh of this um of this outage include uh trading platform Robin Hood um Lloyds the British bank uh HMRC the British tax tax authority as well as perplexity the AI platform. Um so the company said that the issue has been largely fixed but there are res residual effects and uh this definitely uh gives me flashback of the crowd strike outage last year which you might remember a buggy update from crowd strike uh really paralyzed uh nearly half the world's computers and left uh people scrambling at airports and sent bankers home early because they simply couldn't turn on their computers. Yeah, it does remind us of the importance of a very few very powerful players when it comes to our tech infrastructure. It hasn't been that significant an incident for Amazon in and of itself for many years now. Was it 2021? But tell us about the learnings that Amazon's going to push forward for AWS. >> Yeah, I think this really speaks to the fragility of overdependence on uh the very few uh you know hyperscaler cloud operators that we have. Uh AWS is the world's largest cloud provider. Um uh its business uh surpasses Google and Microsoft and um I believe AWS bralists predict that this unit is going to bring in about 126 billion to the company. Uh Amazon itself has said that uh the company is going to invest uh around a hundred billion or so uh into uh building data centers and uh model training. uh given that you know so much of our AI training and inference is run on these data centers uh cloud cloud computing services these days uh I think Amazon will really have to um think about business continu continuity so that uh this does not happen again >> yeah Joe lots of our audience here on Bloomberg tech are highly technical it might be their job to deal with their cloud computing provider loads of people will be watching and be like I don't understand any of this I don't understand what happened I spent a lot of time reading about DN DNS and reading about Dynamo DB, the data center database that the AWS relies on. Have they actually answered the why of what happened? How could they let this happen? >> Uh they have not answered why. Uh so DNS is a system that translates web addresses to IP addresses. So uh your apps and your websites can load. Uh I think we will uh throughout the US day uh the company will say exactly what happened. uh will probably let us know. Um but I think um it's ve I think it's um it's very telling that a very small part um of the digital infrastructure can create such a ripple effect throughout the global economy and um I think we will see um if the company will say anything about how you know um if there will be um if what they will do uh to satisfy their customers going forward and I'm sure you'll be the first one to help us reporter son we so appreciate you jumping on today. Thank you. Let's get to the wider impact. Look on the tech sector at large today. We're in risk on mode. Anna Rathman's with us. Grenadilla advisory founder and CEO. And Anna, look, we see these technical glitches and the realization and well, maybe just remembering the idea that we do depend on a few very big players, not just for our infrastructure, but for the market to go higher, too. What do you make of the rally today? >> Yeah, the rally. I mean especially for Amazon it seems like there was no glitch today because Amazon is also up with the rest of the market. Um as as regards to Amazon I do think that there is a concentration problem. Everyone talks about the stock market concentration. I mean this is sort of the same thing. I think we have to start looking at digital infrastructure almost as utilities. You really can't live without it. Um and so from that standpoint I think um barriers to entry are high but we need to start thinking about sort of diversifying our exposure. Uh with regards to the rest of the market um I think there is a lot of excitement certainly not only in tech but in other areas of the markets as well. I mean last week we learned about Walmart and open AI. Um today we learned about Cleveland cliffs and rare earths exploration. I feel like what's happening now is something that investors have been waiting for for a long time, which is to see the expansion of the tentacles of AI reaching the different parts of the economy and different parts of the markets. And um this makes us feel a lot better about the AI play and AI development because it's becoming stickier. We can't peel this off as easily. We can't just say, "Okay, those are the data centers that are going to go dark and we may not use it for 10 years." this is becoming more of a real thing in our daily lives. >> It's so interesting that you're talking about the broadening out effect in the markets. But let's just go back to the first point about the over focus. Um there are basically an oligopoly when it comes to cloud provision. I'm here in Europe because we've got our tech summit in London and one of the key debates is to be had is Europe's overdependence on other global players. The fact that they don't make their own chips but they also don't have their own cloud providers. What do you make, Anna, of whether that might indeed change as we all think about sovereign AI and sovereign cloud? >> Yeah, so I think the concentration risk we talked about earlier, it applies to everybody. This was a global event, right? And so, um, you do need to think about diversifying your exposure. Um, but we've had stuff like this in the past, maybe not as large as Amazon, but I think, uh, the previous speaker talked about crowd strike, crowd strike. Um it really it requires a massive amount of investment and a massive amount of effort to get that done. Um and so far the effort has been coming from a select few uh regions and countries. Um certainly Europe probably needs to think about um having their own infrastructure as well, but um it's not as as easy to do as it is to say. >> And uh Apple's just touched 4% in the session again hitting a record high for the first time this year. uh it's a big factor at the index level. Um what do you make of all of these upgrades on optimism around iPhone? >> Yeah. So um especially with the regards to the negotiations with China, um it is really nice to see sales up in the United States because then it makes Apple look like less dependent on some of this rhetoric between China and the US. But I would also say that there's a little bit of a spending uh pulling forward of spending. Um when you think that iPhones or anything is going to cost four, 5% more in a year, are you really going to wait for iPhone 18? No. You're going to buy it today, especially if you have an iPhone X or iPhone 9. I can't even remember the numbers anymore. Um but a lot of people have been keeping them and if they're going to renew it, they're going to renew it now rather than waiting until next year. So I think we're seeing some of that pulling forward effect as well. >> The optimism in technology markets today seems to be around earnings in particular and what's to come this week, but trade negotiations are also to come this week. Balance those two risk factors for us. >> Well, earnings is fundamental and in my mind it's much much more important and I do think that the stock prices will react to uh earnings. With regards to trade talks, I mean, I feel like the market is rising. Um, ever since the first day when President Trump said that he may not meet with President Xi, um, it's been going up and I think that's the market basically calling bluff on both countries. China is an export dependent country. It needs to export rare earth minerals as much as we need to buy them. US is a consumer-based economy. We need to be able to import cheaper goods from China as much as you know China needs to export them. We need each other. So I think the markets are saying okay the deal is probably going to get done. It's just a matter of time. >> Anna Rafen of Grenadilla Advisory. Thank you very much. Now coming up Meta, Tik Tok, Snap, and many more are under pressure. We're going to discuss why social media giants are about to face a mountain of litigation. That's next. This is Bloomberg Tech. [Music] Social media giants are about to face a wave of litigation. Meta, Snap, Bite, Dance, Alphabet are set to appear in court over two consolidated lawsuits accusing them of knowingly designing their platforms to addict users, resulting in depression, anxiety, insomnia, and self harm. for more Olivia Carville who's been following these lawsuits joins us now. And in one of the key lines in your story about this, Olivia, you talk about how one lawyer who's going to be representing the federal cases says all told this is a massive legal siege on the social media industry. Why is it all coming in this wave? I mean, we have been seeing these lawsuits filed in state and federal court over a number of years now. This all started back in 2022 after Francis Hagen kind of blew the whistle on Facebook releasing a trove of documents about how the social media giant was kind of impacting youth mental health. Following that, we saw plaintiffs attorneys really focus in on that and start to file lawsuits against these companies accusing them of harming children. And over the course of 3 years, all of those lawsuits, well, the majority of them now, have been consolidated into two different litigation tracks in state court and in federal court. We're going to see these cases come to the courtrooms next year. And it's going to be, you know, as he mentioned in the story, a massive legal siege on the social media industry. We're expecting to see, you know, a number of trials next year and possibly thousands of plaintiffs waiting in the wings once those trials close. >> Olivia, a part of the reason that this litigation has been pending for quite a long time is that the social media companies have had this liability shield, right, that has protected them in some sense from user harm litigation. explain that shield and why it's now not preventing these pieces of litigation moving forward. >> Yeah, that's right. I mean, the Communications Decency Act, this is a federal law that has long protected social media platforms and really any internet platform from facing user harm lawsuits. What that law does is it provides an immunity shield or a blanket that says you cannot file a lawsuit against these companies for the content that exists on their sites. What these cases are trying to do is sidestep that immunity blanket by saying this is not about the content that users are posting to Facebook, to Instagram, Snapchat or Tik Tok. This is about the design of the platforms that these companies intentionally designed their platforms to try and addict young users and resulting in many harms to kids from, you know, mental health harms like depression, anxiety all the way through to self harm and suicidal issues. Olivia, often the markets ignore potential legal threats for big tech companies and it has been notable that actually a lot of companies have been trying to update the protections for children in particular. I think of Instagram just last week. How have they set themselves up to really tackle this in an forward going way? Yeah, as these cases have been piling up in the courtrooms, we've seen almost every one of the defendants start to update their policies to really try and get better, stronger safeguards for kids. And you saw that recently with what Meta announced on Instagram. And that's certainly true, but at the same time, this litigation is not going away. These allegations stand in court. And I think what's remarkable about the kind of position that we're in right now is that as of next year, we're going to see the alleged victims of social media enter the courtroom for the first time in the US. So these cases are going to be tried. Juries are going to hear testimony from teenagers, from experts, from company insiders as well about whether or not social media has actually harmed the mental health of youth. A lot of people have been asking that question, but a jury will have to face that question for the first time next year. >> Olivia Carville, we thank you very much for bringing us the latest. Now we turn our attention to talking tech. First up, sales of Apple's iPhone 17 are off to a strong start in the US and in China. Now, the latest iPhone model has outsold its predecessor in their respective first 10 days by 14%. It's all according to Counterpoint Research. The research firm attributes the boost to an improved display, more storage, and the upgraded A19 chip. Plus, Londonbased fintech Revolute has been cleared to launch banking operations in Mexico. It's the second regulatory green light in Latin America this month after Colombia approved it to create a bank. The region is central to Revolute's growth plans. The company says it expects quote millions of people in Mexico. And China says it has irrefutable evidence of a US cyber attack on its national timekeeping agency dating back to 2022. Beijing accuses Washington of exploiting vulnerabilities in the mobile phones used by the agency's employees to steal sensitive data. The US National Security Agency didn't immediately respond to request for comment. >> One of the things I want is China's going to buy soybeans. I want China to stop with the fentinel. Very, you know, normal things. I don't want them to play the rare earth game with us. >> President Trump there aboard Air Force One outlining his expectations for upcoming trade talks with China. Discussions that could have major implications for the global tech supply chain and semiconductor industry. Bloomberg senior tech editor Mike Shepard joins us now on the latest. Important conversations to strike up again in Malaysia this week. >> They certainly are, Cara. And we're going to be watching exactly as you said for what the US might be willing to give up in return for those three key areas that President Donald Trump outlined uh on Air Force One yesterday. One of them, of course, is rare earths. That matters a lot for the tech industry. All those critical minerals going into so many different products, but not just in tech. Uh they go into autos, they even go into defense equipment. So this is something that is crucial for the US to reach an agreement on after China moved to start to impose export controls on sales of those critical materials to buyers here in the US. That really hit a nerve with US negotiators. But another sore point, Carol, and while it's not exactly tech, it is important perhaps in it in in a uh connected way and that is soybeans. The president has been disgruntled along with his advisers that China is not buying any soybeans from US producers this year and that is taking aim at a key source of political support for the president here in the US and he wants China to start buying those soybeans again. That was 12 billion in purchases in 2024. It has zeroed out this year. So again, it's on the table. But Carol, the question is what will the US give up in return? And does that mean a relaxation of some of those export controls on critical technology that Beijing has chafed against uh for the past several years? Will it mean a relaxation of limits on exports of AI chips or perhaps semiconductor manufacturing equipment like what we see made by ASML and Tokyo Electron? This will be all on the table uh later this week when Scott Bessant meets with his Chinese counterpart in Malaysia later this week. Mike, overnight a lot of headlines on Nexeria. Can you just help us understand what's happening in that case study scenario, what the US government is agreved about relative the Dutch? Well, Ed, this is a fascinating shideshow really to the broader conflict between the US and its allies and China over technology, but in this case, it all boils down to one company based in the Netherlands. next period. Uh the US is concerned that its parent company WingTech has a plan to siphon critical chipm technology out of European hands and into China to bolster the domestic industry. And it put pressure on Dutch authorities to seize control and replace the CEO which happened uh at the end of last month. Uh we learned about this all last week through court filings in the Netherlands and China is responding forcefully. It has imposed restrictions on exports of Nexperia products that were made in China. And we've also seen messages in WeChat to Nexperia employees in China saying that they do not have to listen to the new management uh running Nextperia based in in the Netherlands. So this is something we will want to watch closely as we see the Dutch taking on the world's second largest economy over the fate of this company which also I will say Ed provides a lot of semiconductors legacy chips mind you but still to the auto industry and consumer electronics producers >> Mike Shepard thank you very much another story proxy advisor Glass Lewis is urging Tesla shareholders to vote against Elon Musk's potentially trillion dollar pay package the second major proxy firm to do so ahead of Tesla's November 6th annual meeting. Let's get out to Bloomberg's Global Autos Craig Trudeell. I'm reading the the Glass Lewis note and they're worried about I think shareholder dilution, but uh just summarize why they're proposing and recommending voting against this comp package. >> Yeah, I I think uh you you put the nail on the head there in terms of dilution being an issue. I think and this goes back to uh you know sort of criticism that uh you know the the uh judge in Delaware sort of leveled at at uh the initial pay package that Tesla's board arranged for Musk back in 2018. Uh this is a a case of of a CEO who's already quite aligned with uh the future of his his his company by virtue of of the substantial stake that he has in the company. uh and and there's a question on the part of of uh you know the these proxy advisers of uh just you know to what degree is it is it necessary or appropriate uh to to hand over more uh control of of this company and issue so many shares that would dilute uh the the current shareholder base of of Tesla. Now Tesla Craig has said that the glass Lewis recommendation is quote misguided in an expost and they're talking about the recommendations attempting to override the mandate of our shareholders delivered to Elon and ignore the staggering financial results that were delivered under Elon's leadership. Just what is the argument coming from the business right now? Yeah, I I think uh it's it's interesting because, you know, you you sort of uh at some points hear Tesla, you know, talk about the idea that they're more than just a car company. And yet it's interesting that they they sort of uh compare their performance uh versus other car companies and and they're by virtue of doing that comparison you know make themselves uh look you know awfully different from from these companies that for a long time uh they've said you know we shouldn't be compared with those with those companies. So uh of course there there is uh you know some some some reason uh to uh sort of celebrate the returns that this company has managed under Musk. We should acknowledge that as well. >> We'll see if that celebrating happens on Wednesday when their earnings come. Bloomberg's crew. We thank you. [Music] >> Welcome back to Bloomberg Tech. The vibe in tech markets right now is a lot of anticipation around earning season. 85% of the S&P 500 has already beaten profit expectations. NASDAQ 100's up 1.4%. A big factor is good vibes around Apple and also other names pushing higher despite negative news headlines. Let's get out to some of the top stories of the day with Bloomberg equities reporter Nora Melinda. And let's start Nora with Amazon and AWS. Yes, lots to keep an eye on right now, Ed, and pertaining to uh Amazon here. Of course, we know this has been a discussion all day long about the widespread outage that was seen here, this disruption from AWS that affected a lot of different companies, including Roblox, Fortnite, Snapchat, a few others here. So, we are seeing shares currently rebounding, but we were seeing some weakness earlier in the trading session as it was really falling behind, lagging a lot of its mag seven peers. But if you look about a year-to- date basis here, looking at shares of Amazon, down about 2% here. So definitely something to keep an eye on as we just think about the broader landscape of this company. And it's also notable that it's one of the key points additions, but not the one, but Apple. Let's switch gears to a company that's at a new record high, helping the index from an underly focus today. Nora, talk us through Apple and why it's rallying. Yes, Apple shares down just shy of 5% year to date, but really seeing some green on the screen today. Of course, this comes after the fact that we did see over the first 10 days of the sale of the iPhone 17 series. We are seeing that it outsold the iPhone 16 by about 14%. So, you did see Loop Capital upgrading the stock to buy from hold. Of course, under underscoring the positive iPhone demand trends, but we are seeing shares of Apple, as you mentioned, Caroline, rallying for a record high today. really strong today as well. Starting to see like that 4% add to now a 4% rally on the year finally breaking into positive territory. Bloombergs Nora Melinda, we thank you so much. Look, let's shift gears to other areas that are rallying in particular crypto and crypto stocks are actually doing better this Monday than underlying Bitcoin is. We're looking at Bitcoin miners in particular. They're outperforming in general the original cryptocurrency as they expand further into AI data centers. A Canorovich is with us, August co-ceeo and co-founder to discuss all things crypto. But I just want to dwell on that for a moment. This desire for compute has seen companies pivot. Coreweave once upon a time was a crypto miner and now it's a key NEO cloud. What are you making of others trying to ride that wave and hiring key executives to do so? >> Look, at the end of the day, you're going to go where, you know, whoever pays you the most uh and where you can sell the highest price. And uh to your point, the Bitcoin miners have a secured grid power. It gives them that strategic advantage if you think about data center space. And so I think right now they're definitely coming out as a favorite and you're seeing that demand across the board. So it's going to be very interesting. You know, today uh Bitcoin isn't used, Bitcoin blockchain isn't used uh for processing transactions, but it'll be interesting to see if that has any effect on the line. >> In recent weeks, it's been very interesting to track how bitcoins behaved in the moment. Sometimes it can seem severe in the context of risk, headlines about trade, the president's relationship with China, but I think you could give us some historical context that things are actually more calm through the Bitcoin lens than than at least the headlines might suggest. >> Yeah, absolutely. So on October 10th, we had our newest uh Bitcoin Black Friday, which saw 19 billion in roughly uh liquidations across a number of exchanges. uh you know it was a very large move but relative to your point Ed you know Bitcoin only moved the price moved 12% and if we had looked at you know call it 2020 or 2018 we probably would have seen that move over 40%. And so you know the maturation of the space is definitely here. Uh the liquidations were clearly isolated to a number of exchanges. Uh but it did show that while there was price maturation in terms of the technology that actually exists in the space, there's a lot of work that needs to happen uh for it to reach the level of a New York Stock Exchange or CME. And so we're really looking forward to that level of progress in the industry. >> Okay. What has to happen? >> Yeah, it's a number of things I would say. you know, first off, it's a level of coordination. And so, if you think about um you know, what happens in uh circuit breakers, for example, when something happens in the market, you don't necessarily have um you know, an uncoordinated circuit breaker. You have a number of different exchanges uh that are speaking to one another. The second is also if you think about inventory and so there's never really an instance, for example, where you can't move from one uh exchange to another, which you see very often happen uh in crypto. when an exchange goes down uh then someone can't necessarily send funds into the exchange to top up on margin calls and so you see this level of cascading liquidations which is exactly what we saw. Another thing that happens is you know even if you think about margin calls or the you know standardized risk metrics uh typically in traditional finance that's completely standardized across all of these exchanges. Um and today we think about institutional uh overseas exchanges as almost isolated islands uh of risk. Each one has their own methodology. And so when some of this happens in the market, when you get this level of volatility, it's very very hard to track, you know, across all of the different venues that you're trading and so you get this level of liquidations. I mean, 19 billion is a number we haven't seen historically before. Uh but again, Bitcoin performed quite well relative to that as did, you know, some of the other um ETFs, you know, XRP, ETH, and Salana. >> Let's talk about those ETFs because you are definitely the voice we want to hear about settlement, about management of software. You're thinking about the ways in which the underlying infrastructure is going to support the growth here. But when we think about regulation that could see the SEC, I think it's got 130 ETF applications on its desk. If the government ever opens back up again, they'll be able to start allowing them to go through. There's a lot of particularly leveraged versions or very idiosyncratic altcoins. Is that the way you want to see the industry progressed? >> Look, at the end of the day, I think access is the most important, but I agree with you. There's there's definitely a point where there's just attention deficiency. And so you can't look at and underwrite a hundred of these different uh structures. And so the biggest thing when I think about some of these structures and and teams is really who who is the management uh behind some of these and what's the underlying risk in terms of the strategies. You know, you're seeing some of these um digital asset treasuries or ETFs. They might just be buying the underlying. they may just be staking, but to your point, Caroline, you're seeing some of these others that are taking on leveraged uh looping and other levels of risk. And you know, you just want to make sure that you have some level of um understanding of the underlying structure. And so I would say for some of these um it is a little bit gray. You know, we are pretty excited of this level of access going into you know whether it's Avalanche, Athena, you know, there's the access really opens it up to a net new market where people are willing to pay for that premium in order to get access. But you are right, the underlying risk is not the same for all of them. >> It's been a while since we've had you on the show and we've spoken. I just wanted to get your reflection on this administration's legislative efforts across crypto and the work that David Sax has been doing and how you feel it has or hasn't worked. >> Without a doubt, it has been night and day relative to, you know, previous conversations that we've had. we have been able to hire in the United States across the board and tell people that we work in crypto and you know historically if you think about a year ago that was just not possible and we were thinking about you know moving the company offshore hiring overseas and so if you know relative to conversations that we've had with folks even in Asia we're seeing a lot of focus transition back to the United States and that is just incredibly compelling as someone who is building here in the US and we're really really excited about the communication and support that we're getting from this administration. >> Just very quick, do you support the dollarization thesis that that David and others are trying to put in place? >> Yes, absolutely. And you're seeing a lot of that, you know, happening with some of the stable coin legislation where it is going to strengthen the dollar by having a lot of these global stable coins uh be backed by the dollar as the underlying. And so, you know, I do think it, you know, leads to a stronger US dollar, but it, you know, it'll see what the administration can do within now and the next 3 years and whether they're able to get everything over the finish line of August. Great to have you back on the show. Thank you very much. [Music] IBM and Grock are announcing a strategic partnership to give clients ultra high-speed, low latency AI capabilities via Grock's inference technology. For more on how this partnership is going to provide greater access to the full potential of enterprise AI. We're joined by Rob Thomas, senior vice president of software and chief commercial officer at IBM, and Jonathan Ross, CEO and founder of Grock. And Jonathan, I want to start with you. You know, the way that I look at this is it's a very interesting go-to market channel for you, a sales channel. Think about all of the clients that IBM has and how you've tried to grow the company. Explain how people will access LPUs through this or through the cloud matrix. >> Absolutely. It's an extraordinary opportunity for both of us. Uh IBM is going to uh have their sellers sell at Grock Skew and so now you'll be able to directly access uh our speed. the uh advantages that we offer. Uh you could think of it a little bit like uh offering broadband in the era where dialup wasn't fully rolled out and people were still trying to connect to the internet. Our LPUs are just uh significantly faster. But we also keep the cost down. Just imagine if you were to offer broadband and you charged more uh per bit of data that was uh sent over the line. It would be uneconomical. Broadband increases the demand. Uh with agentic use cases, it's particularly important to reduce the speed. You don't want to ask a question, wait 10 minutes later, and come back. You'd rather get the answer in under a minute. Rob, under this arrangement with Jonathan, does IBM make any sort of financial investment into Grock or is there some kind of sales or revenue split? Explain the economics of this deal for you guys. Big picture is we have a lot of momentum in AI with Watson X as we said on our earnings last quarter $7.5 billion dollars as a book of business and we're trying to solve the client problem of how do they deploy AI faster. So this partnership is all about what Jonathan said which is 5x performance at 20% of the cost. We've seen it with Watson X running on Grock and so we will be distributing Grock as part of our go to market and there's a revenue share as part of that but we are really excited because we've seen clients already getting an impact to how they're deploying AI because of the integration of our technology together. >> Let's talk about that Rob a little bit more because you're the man who's in charge of the software business. You're also really responsible for the world revenue and profitability of your company. So help us understand why Grock was the obvious choice. How is it helping your clients get answers faster on the inference side of things? >> We looked at every possibility in the market and the clients are looking for significant performance. So some of that changes how your call center operates or how your supply chain runs and then you combine that with a fraction of the cost. Suddenly the economics make sense. AI does have a cost problem and we think this breaks through that. In IBM, we've said we're going to drive four and a half billion of productivity by the end of this year. That's another example of AI truly having an impact. And the number one question I get from clients now is how are you doing that at IBM and can you help us do that? And we think the combination of IBM and Grock can make this a reality for any company. Well, let's dig into that a little bit now with you, Jonathan, because the integration with Watson X orchestrate, what does that look like on your side? How does that happen and happen seamlessly? >> So, uh the Watsonx uh um API is available for anyone to use today. It'll be invisible to most users. Uh it'll simply work. We have a compatible API. Uh and this is something we've been working on. Uh we will also work on some lower level integrations uh with VLM which is um a technology that IBM is very deeply involved in but it should just be transparent. You should just get more speed. Just imagine one day you come home you had dialup and now you have broadband and it costs less. Rob, where's the demand coming from on your side like IBM Granite or or some other agentic workload that they want to run using the Grock LPUs? Are these public sector names? Are they private sectormemes? I'm trying to understand who you're serving with it. >> As often happens, I would say financial services have been early adopters. But the thing that has changed in the market in the last 6 months is everything is moving to multimodel. We have IBM models that we open sourced which are the granite models. We announced a partnership with Anthropic. We have a partnership with Mistral and Llama just to name a few. What is incredible about what Jonathan and team have built is any model can run and get instant improvement running on the LPUs from Grock. So I think this is a combination of a multimodel world accelerating inference with Grock. I think this is a great combination. >> Jonathan, does this capacity already exist or are you supply constrained still? You got to go out and build it either in Saudi, Finland, here in the States. So the entire world is supply constrained and I would actually expect that to continue for at least the next 5 to 10 years when it comes to AI. Um our advantage is that we have a supply chain that actually ramps much faster. So uh customers will be able to come to IBM uh put in an order and we will be able to fulfill that um faster than you would be able to with other technologies. Uh but the supply constraints are real and this is another reason to start working with IBM sooner. the sooner you get access to that capacity, the sooner you're going to have it. I can't tell you how many startups come to us. Um, and other companies come to us and they are looking for capacity because some of them are actually growing 10, 20 or even 30% per week or per month. Uh, which is an astronomical growth rate. But by approaching uh us early, we can uh build to your needs. You were just mentioning Rob about all the partnerships you have when it comes to LLMs and the offerings that you're intertwining within yours. Will you go to others to ensure that inference is as fast as possible or is it this exclusive with Grock? >> We are open to working with anybody in the ecosystem of AI around what we're doing specifically on the acceleration with Grock. We want to lean into this partnership. That's why this is the one that we've announced today because we have confidence working together with Grock. As Jonathan mentioned, we're also enabling some of the lower level technologies and open source like VLM. So, this is the right place to be when it comes to inference. But when you think broadly about what's happening in AI, we have many companies working with us on agents. Last week, we announced S&P Global is now running on Watson X orchestrate as an example. So we're always open to new partnerships >> and let's just talk about Jonathan the goto market strategy here of teaming with the age-old juggernaut that is IBM that has so many deep relationships across global enterprises but is that how you're going to work this going forward is teaming up with companies that have those legacy relationships or do you still go out there and win the business yourself? So I would say this is a peanut butter and jelly sort of relationship in the sense that um often times when we meet with sea level executives. Uh those sea-level executives turn to their tech teams and ask them to evaluate Grock and I've been in meetings where the CTO did that and the response from the person is I already use Grock. Um it's my default for everything. So we already have the bottoms up. We have 2.3 million developers already building on us. For comparison, OpenAI has 4 million. Now, going to those deep relationships from IBM and the fact that IBM is a trusted partner who's been delivering for decades. You put those two together and that's an amazing go to market motion. >> Well, it's been great having you both on to talk about the go to market strategy. Jonathan Ross, CEO of Grock, of course, Rob Thomas of senior vice president of software over at IBM. We thank you both very much indeed. Now, coming up, we're going to be diving into Amazon's souring relationship with its contract delivery firms. And also, we got to remind you what's happening in the moment. President Trump signing critical minerals agreements with the prime minister of Australia. You can catch more on live go. This is Bloomberg Tech. Mr. President [Music] >> President Trump speaking in a bilat with Australian leaders says that China may pay a 155% tariff if there is no deal made by November 1st. He's also saying that he is expecting to meet with Xi in a couple of weeks. He will meet with Xi in South Korea in a couple of weeks. Uh the headlines not doing much to move markets in the moment. Cara, >> oh I would in fact >> we're not but we'll keep everyone a breast of it and they can tune in on live go as well if you want to see it throughout. But right now, we're about to talk about how we're taking a look inside Amazon's deteriorating relationship with its contract delivery firms, which have tangled with Amazon for years, often over what they consider unre unreasonable delivery targets that are monitored 24/7 by AI. Now, tensions flared earlier this year when the company passed along some big bills to repair aging delivery vans. Newworks Amazon reporter Spencer Sofa took this deep dive for us and you really hone in on certain individuals who decided to become entrepreneurial in spirit teaming with Amazon and then the profits just fell away. Talk us through it. >> Yes. So Amazon has what they call delivery service partners. They've got 4,500 of them globally. These are basically small businesses that lease vans, hire drivers, and get those packages to your doorstep. Um, and so it's it's almost like a franchise, but it's technically not a franchise. And so a lot of them are saying, "Hey, listen. The costs of our of doing business are going up faster than Amazon is is uh paying us for these packages. Um, they're in these lopsided agreements. They don't have any negotiating power. They basically have to take what Amazon offers them. Uh, and then so some of them are taking the ultimate step of of quitting. And when they do that, they realize, hey, I've been doing this seven years and I don't really have anything." Spencer, Amazon did recently hike the the proportion that these guys get on a per package bas basis, but on your reporting like what's the direction of travel here? Where are we headed? >> Well, the direction of travel is that logistics is a high-risisk business. If you have a bunch of car collisions or dog bites or anything that's going to push up your vehicle insurance rates or your workers compensation rates, you're going to have a difficult time. And and if you don't, you will you will make money. Um, and so some of that is going to be your operational practices and some of that's going to be luck. >> Uh, Bloomberg Spencer Soaper, thank you very much. Just real quick, car update on AWS. They're saying that the root cause overnight was an internal subsystem, but they're not saying any more than that other than there are issues still remaining. Uh, that does it for this edition of Bloomberg Tech. And what an addition it was. >> And so much more to come. Ed, I'm sat here in London because it's the Bloomberg Tech Summit. It's kicking off tonight. In fact, I'm hosting a debate on Europe's future in the chip wars. But then tomorrow, we're going to be tuning into the summit as it goes live over in Morgate, conversations with leaders in tech and AI and VC. You don't want to forget to check out all of that. Also on the podcast, you can find it on the terminal as well as online on Apple, Spotify, and iHeart. From San Francisco, from London for the next day or two, this is Bloomberg Tech. [Music] Heat.
AWS Races to Address Widespread Outage | Bloomberg Tech
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[Music] Bloomberg Audio Studios, podcasts, radio, news. Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Lelo in San Francisco. This is Bloomberg Tech. Coming up, Amazon says its cloud service is recovering after widespread outages affected customers like Zoom, Snapchat, and Coinbase. >> Plus, US China trade talks resuming this week as President Trump lists rare earths among his top priorities. And IBM and Grock partner up to provide greater access to the full potential of enterprise AI. We'll discuss with them later this hour. >> But first, let's check in on these markets. dead. I'm sat in London this week, but I can see from across the pond, 1.3% on the NASDAQ 100, a new record high. There's a risk on tone throughout the markets. We're looking towards those China US trade talks, but there are some notable gainers underneath the hood. >> Yep, Apple is a big points driver to the upside at the index level. Apple has touched its first record high of 2025. That's the first record high since December of 2024. We have an upgrade at loop to buy like many recently citing trends in the iPhone upgrade cycle. We're going to have a lot more on this story throughout the hour, but clearly this is a big jump for the company and it's really impacting markets at the macro level. We're also looking at Amazon, the parent of cloud computing AWS. The stock's actually up a percentage point. a massive outage overnight, principally around one US data center in North Virginia, the US East1 site, but it has had repercussions for the public sector, the private sector, and technology companies of all types. Let's get out to Bloomberg's Yaj Sun, who's been reporting on this throughout the incident. Very simply, Yajou, uh what happened and what have the ramifications been? >> Yeah, Ed. Uh so this morning Amazon reported that um they're experiencing operational failure across multiple services uh in its data center hub in Northern Virginia. Uh even though the issue occurred in eastern uh the northeast of the United States, uh the impact was really felt far and wide. Uh some of the victims uh of this um of this outage include uh trading platform Robin Hood um Lloyds the British bank uh HMRC the British tax tax authority as well as perplexity the AI platform. Um so the company said that the issue has been largely fixed but there are res residual effects and uh this definitely uh gives me flashback of the crowd strike outage last year which you might remember a buggy update from crowd strike uh really paralyzed uh nearly half the world's computers and left uh people scrambling at airports and sent bankers home early because they simply couldn't turn on their computers. Yeah, it does remind us of the importance of a very few very powerful players when it comes to our tech infrastructure. It hasn't been that significant an incident for Amazon in and of itself for many years now. Was it 2021? But tell us about the learnings that Amazon's going to push forward for AWS. >> Yeah, I think this really speaks to the fragility of overdependence on uh the very few uh you know hyperscaler cloud operators that we have. Uh AWS is the world's largest cloud provider. Um uh its business uh surpasses Google and Microsoft and um I believe AWS bralists predict that this unit is going to bring in about 126 billion to the company. Uh Amazon itself has said that uh the company is going to invest uh around a hundred billion or so uh into uh building data centers and uh model training. uh given that you know so much of our AI training and inference is run on these data centers uh cloud cloud computing services these days uh I think Amazon will really have to um think about business continu continuity so that uh this does not happen again >> yeah Joe lots of our audience here on Bloomberg tech are highly technical it might be their job to deal with their cloud computing provider loads of people will be watching and be like I don't understand any of this I don't understand what happened I spent a lot of time reading about DN DNS and reading about Dynamo DB, the data center database that the AWS relies on. Have they actually answered the why of what happened? How could they let this happen? >> Uh they have not answered why. Uh so DNS is a system that translates web addresses to IP addresses. So uh your apps and your websites can load. Uh I think we will uh throughout the US day uh the company will say exactly what happened. uh will probably let us know. Um but I think um it's ve I think it's um it's very telling that a very small part um of the digital infrastructure can create such a ripple effect throughout the global economy and um I think we will see um if the company will say anything about how you know um if there will be um if what they will do uh to satisfy their customers going forward and I'm sure you'll be the first one to help us reporter son we so appreciate you jumping on today. Thank you. Let's get to the wider impact. Look on the tech sector at large today. We're in risk on mode. Anna Rathman's with us. Grenadilla advisory founder and CEO. And Anna, look, we see these technical glitches and the realization and well, maybe just remembering the idea that we do depend on a few very big players, not just for our infrastructure, but for the market to go higher, too. What do you make of the rally today? >> Yeah, the rally. I mean especially for Amazon it seems like there was no glitch today because Amazon is also up with the rest of the market. Um as as regards to Amazon I do think that there is a concentration problem. Everyone talks about the stock market concentration. I mean this is sort of the same thing. I think we have to start looking at digital infrastructure almost as utilities. You really can't live without it. Um and so from that standpoint I think um barriers to entry are high but we need to start thinking about sort of diversifying our exposure. Uh with regards to the rest of the market um I think there is a lot of excitement certainly not only in tech but in other areas of the markets as well. I mean last week we learned about Walmart and open AI. Um today we learned about Cleveland cliffs and rare earths exploration. I feel like what's happening now is something that investors have been waiting for for a long time, which is to see the expansion of the tentacles of AI reaching the different parts of the economy and different parts of the markets. And um this makes us feel a lot better about the AI play and AI development because it's becoming stickier. We can't peel this off as easily. We can't just say, "Okay, those are the data centers that are going to go dark and we may not use it for 10 years." this is becoming more of a real thing in our daily lives. >> It's so interesting that you're talking about the broadening out effect in the markets. But let's just go back to the first point about the over focus. Um there are basically an oligopoly when it comes to cloud provision. I'm here in Europe because we've got our tech summit in London and one of the key debates is to be had is Europe's overdependence on other global players. The fact that they don't make their own chips but they also don't have their own cloud providers. What do you make, Anna, of whether that might indeed change as we all think about sovereign AI and sovereign cloud? >> Yeah, so I think the concentration risk we talked about earlier, it applies to everybody. This was a global event, right? And so, um, you do need to think about diversifying your exposure. Um, but we've had stuff like this in the past, maybe not as large as Amazon, but I think, uh, the previous speaker talked about crowd strike, crowd strike. Um it really it requires a massive amount of investment and a massive amount of effort to get that done. Um and so far the effort has been coming from a select few uh regions and countries. Um certainly Europe probably needs to think about um having their own infrastructure as well, but um it's not as as easy to do as it is to say. >> And uh Apple's just touched 4% in the session again hitting a record high for the first time this year. uh it's a big factor at the index level. Um what do you make of all of these upgrades on optimism around iPhone? >> Yeah. So um especially with the regards to the negotiations with China, um it is really nice to see sales up in the United States because then it makes Apple look like less dependent on some of this rhetoric between China and the US. But I would also say that there's a little bit of a spending uh pulling forward of spending. Um when you think that iPhones or anything is going to cost four, 5% more in a year, are you really going to wait for iPhone 18? No. You're going to buy it today, especially if you have an iPhone X or iPhone 9. I can't even remember the numbers anymore. Um but a lot of people have been keeping them and if they're going to renew it, they're going to renew it now rather than waiting until next year. So I think we're seeing some of that pulling forward effect as well. >> The optimism in technology markets today seems to be around earnings in particular and what's to come this week, but trade negotiations are also to come this week. Balance those two risk factors for us. >> Well, earnings is fundamental and in my mind it's much much more important and I do think that the stock prices will react to uh earnings. With regards to trade talks, I mean, I feel like the market is rising. Um, ever since the first day when President Trump said that he may not meet with President Xi, um, it's been going up and I think that's the market basically calling bluff on both countries. China is an export dependent country. It needs to export rare earth minerals as much as we need to buy them. US is a consumer-based economy. We need to be able to import cheaper goods from China as much as you know China needs to export them. We need each other. So I think the markets are saying okay the deal is probably going to get done. It's just a matter of time. >> Anna Rafen of Grenadilla Advisory. Thank you very much. Now coming up Meta, Tik Tok, Snap, and many more are under pressure. We're going to discuss why social media giants are about to face a mountain of litigation. That's next. This is Bloomberg Tech. [Music] Social media giants are about to face a wave of litigation. Meta, Snap, Bite, Dance, Alphabet are set to appear in court over two consolidated lawsuits accusing them of knowingly designing their platforms to addict users, resulting in depression, anxiety, insomnia, and self harm. for more Olivia Carville who's been following these lawsuits joins us now. And in one of the key lines in your story about this, Olivia, you talk about how one lawyer who's going to be representing the federal cases says all told this is a massive legal siege on the social media industry. Why is it all coming in this wave? I mean, we have been seeing these lawsuits filed in state and federal court over a number of years now. This all started back in 2022 after Francis Hagen kind of blew the whistle on Facebook releasing a trove of documents about how the social media giant was kind of impacting youth mental health. Following that, we saw plaintiffs attorneys really focus in on that and start to file lawsuits against these companies accusing them of harming children. And over the course of 3 years, all of those lawsuits, well, the majority of them now, have been consolidated into two different litigation tracks in state court and in federal court. We're going to see these cases come to the courtrooms next year. And it's going to be, you know, as he mentioned in the story, a massive legal siege on the social media industry. We're expecting to see, you know, a number of trials next year and possibly thousands of plaintiffs waiting in the wings once those trials close. >> Olivia, a part of the reason that this litigation has been pending for quite a long time is that the social media companies have had this liability shield, right, that has protected them in some sense from user harm litigation. explain that shield and why it's now not preventing these pieces of litigation moving forward. >> Yeah, that's right. I mean, the Communications Decency Act, this is a federal law that has long protected social media platforms and really any internet platform from facing user harm lawsuits. What that law does is it provides an immunity shield or a blanket that says you cannot file a lawsuit against these companies for the content that exists on their sites. What these cases are trying to do is sidestep that immunity blanket by saying this is not about the content that users are posting to Facebook, to Instagram, Snapchat or Tik Tok. This is about the design of the platforms that these companies intentionally designed their platforms to try and addict young users and resulting in many harms to kids from, you know, mental health harms like depression, anxiety all the way through to self harm and suicidal issues. Olivia, often the markets ignore potential legal threats for big tech companies and it has been notable that actually a lot of companies have been trying to update the protections for children in particular. I think of Instagram just last week. How have they set themselves up to really tackle this in an forward going way? Yeah, as these cases have been piling up in the courtrooms, we've seen almost every one of the defendants start to update their policies to really try and get better, stronger safeguards for kids. And you saw that recently with what Meta announced on Instagram. And that's certainly true, but at the same time, this litigation is not going away. These allegations stand in court. And I think what's remarkable about the kind of position that we're in right now is that as of next year, we're going to see the alleged victims of social media enter the courtroom for the first time in the US. So these cases are going to be tried. Juries are going to hear testimony from teenagers, from experts, from company insiders as well about whether or not social media has actually harmed the mental health of youth. A lot of people have been asking that question, but a jury will have to face that question for the first time next year. >> Olivia Carville, we thank you very much for bringing us the latest. Now we turn our attention to talking tech. First up, sales of Apple's iPhone 17 are off to a strong start in the US and in China. Now, the latest iPhone model has outsold its predecessor in their respective first 10 days by 14%. It's all according to Counterpoint Research. The research firm attributes the boost to an improved display, more storage, and the upgraded A19 chip. Plus, Londonbased fintech Revolute has been cleared to launch banking operations in Mexico. It's the second regulatory green light in Latin America this month after Colombia approved it to create a bank. The region is central to Revolute's growth plans. The company says it expects quote millions of people in Mexico. And China says it has irrefutable evidence of a US cyber attack on its national timekeeping agency dating back to 2022. Beijing accuses Washington of exploiting vulnerabilities in the mobile phones used by the agency's employees to steal sensitive data. The US National Security Agency didn't immediately respond to request for comment. >> One of the things I want is China's going to buy soybeans. I want China to stop with the fentinel. Very, you know, normal things. I don't want them to play the rare earth game with us. >> President Trump there aboard Air Force One outlining his expectations for upcoming trade talks with China. Discussions that could have major implications for the global tech supply chain and semiconductor industry. Bloomberg senior tech editor Mike Shepard joins us now on the latest. Important conversations to strike up again in Malaysia this week. >> They certainly are, Cara. And we're going to be watching exactly as you said for what the US might be willing to give up in return for those three key areas that President Donald Trump outlined uh on Air Force One yesterday. One of them, of course, is rare earths. That matters a lot for the tech industry. All those critical minerals going into so many different products, but not just in tech. Uh they go into autos, they even go into defense equipment. So this is something that is crucial for the US to reach an agreement on after China moved to start to impose export controls on sales of those critical materials to buyers here in the US. That really hit a nerve with US negotiators. But another sore point, Carol, and while it's not exactly tech, it is important perhaps in it in in a uh connected way and that is soybeans. The president has been disgruntled along with his advisers that China is not buying any soybeans from US producers this year and that is taking aim at a key source of political support for the president here in the US and he wants China to start buying those soybeans again. That was 12 billion in purchases in 2024. It has zeroed out this year. So again, it's on the table. But Carol, the question is what will the US give up in return? And does that mean a relaxation of some of those export controls on critical technology that Beijing has chafed against uh for the past several years? Will it mean a relaxation of limits on exports of AI chips or perhaps semiconductor manufacturing equipment like what we see made by ASML and Tokyo Electron? This will be all on the table uh later this week when Scott Bessant meets with his Chinese counterpart in Malaysia later this week. Mike, overnight a lot of headlines on Nexeria. Can you just help us understand what's happening in that case study scenario, what the US government is agreved about relative the Dutch? Well, Ed, this is a fascinating shideshow really to the broader conflict between the US and its allies and China over technology, but in this case, it all boils down to one company based in the Netherlands. next period. Uh the US is concerned that its parent company WingTech has a plan to siphon critical chipm technology out of European hands and into China to bolster the domestic industry. And it put pressure on Dutch authorities to seize control and replace the CEO which happened uh at the end of last month. Uh we learned about this all last week through court filings in the Netherlands and China is responding forcefully. It has imposed restrictions on exports of Nexperia products that were made in China. And we've also seen messages in WeChat to Nexperia employees in China saying that they do not have to listen to the new management uh running Nextperia based in in the Netherlands. So this is something we will want to watch closely as we see the Dutch taking on the world's second largest economy over the fate of this company which also I will say Ed provides a lot of semiconductors legacy chips mind you but still to the auto industry and consumer electronics producers >> Mike Shepard thank you very much another story proxy advisor Glass Lewis is urging Tesla shareholders to vote against Elon Musk's potentially trillion dollar pay package the second major proxy firm to do so ahead of Tesla's November 6th annual meeting. Let's get out to Bloomberg's Global Autos Craig Trudeell. I'm reading the the Glass Lewis note and they're worried about I think shareholder dilution, but uh just summarize why they're proposing and recommending voting against this comp package. >> Yeah, I I think uh you you put the nail on the head there in terms of dilution being an issue. I think and this goes back to uh you know sort of criticism that uh you know the the uh judge in Delaware sort of leveled at at uh the initial pay package that Tesla's board arranged for Musk back in 2018. Uh this is a a case of of a CEO who's already quite aligned with uh the future of his his his company by virtue of of the substantial stake that he has in the company. uh and and there's a question on the part of of uh you know the these proxy advisers of uh just you know to what degree is it is it necessary or appropriate uh to to hand over more uh control of of this company and issue so many shares that would dilute uh the the current shareholder base of of Tesla. Now Tesla Craig has said that the glass Lewis recommendation is quote misguided in an expost and they're talking about the recommendations attempting to override the mandate of our shareholders delivered to Elon and ignore the staggering financial results that were delivered under Elon's leadership. Just what is the argument coming from the business right now? Yeah, I I think uh it's it's interesting because, you know, you you sort of uh at some points hear Tesla, you know, talk about the idea that they're more than just a car company. And yet it's interesting that they they sort of uh compare their performance uh versus other car companies and and they're by virtue of doing that comparison you know make themselves uh look you know awfully different from from these companies that for a long time uh they've said you know we shouldn't be compared with those with those companies. So uh of course there there is uh you know some some some reason uh to uh sort of celebrate the returns that this company has managed under Musk. We should acknowledge that as well. >> We'll see if that celebrating happens on Wednesday when their earnings come. Bloomberg's crew. We thank you. [Music] >> Welcome back to Bloomberg Tech. The vibe in tech markets right now is a lot of anticipation around earning season. 85% of the S&P 500 has already beaten profit expectations. NASDAQ 100's up 1.4%. A big factor is good vibes around Apple and also other names pushing higher despite negative news headlines. Let's get out to some of the top stories of the day with Bloomberg equities reporter Nora Melinda. And let's start Nora with Amazon and AWS. Yes, lots to keep an eye on right now, Ed, and pertaining to uh Amazon here. Of course, we know this has been a discussion all day long about the widespread outage that was seen here, this disruption from AWS that affected a lot of different companies, including Roblox, Fortnite, Snapchat, a few others here. So, we are seeing shares currently rebounding, but we were seeing some weakness earlier in the trading session as it was really falling behind, lagging a lot of its mag seven peers. But if you look about a year-to- date basis here, looking at shares of Amazon, down about 2% here. So definitely something to keep an eye on as we just think about the broader landscape of this company. And it's also notable that it's one of the key points additions, but not the one, but Apple. Let's switch gears to a company that's at a new record high, helping the index from an underly focus today. Nora, talk us through Apple and why it's rallying. Yes, Apple shares down just shy of 5% year to date, but really seeing some green on the screen today. Of course, this comes after the fact that we did see over the first 10 days of the sale of the iPhone 17 series. We are seeing that it outsold the iPhone 16 by about 14%. So, you did see Loop Capital upgrading the stock to buy from hold. Of course, under underscoring the positive iPhone demand trends, but we are seeing shares of Apple, as you mentioned, Caroline, rallying for a record high today. really strong today as well. Starting to see like that 4% add to now a 4% rally on the year finally breaking into positive territory. Bloombergs Nora Melinda, we thank you so much. Look, let's shift gears to other areas that are rallying in particular crypto and crypto stocks are actually doing better this Monday than underlying Bitcoin is. We're looking at Bitcoin miners in particular. They're outperforming in general the original cryptocurrency as they expand further into AI data centers. A Canorovich is with us, August co-ceeo and co-founder to discuss all things crypto. But I just want to dwell on that for a moment. This desire for compute has seen companies pivot. Coreweave once upon a time was a crypto miner and now it's a key NEO cloud. What are you making of others trying to ride that wave and hiring key executives to do so? >> Look, at the end of the day, you're going to go where, you know, whoever pays you the most uh and where you can sell the highest price. And uh to your point, the Bitcoin miners have a secured grid power. It gives them that strategic advantage if you think about data center space. And so I think right now they're definitely coming out as a favorite and you're seeing that demand across the board. So it's going to be very interesting. You know, today uh Bitcoin isn't used, Bitcoin blockchain isn't used uh for processing transactions, but it'll be interesting to see if that has any effect on the line. >> In recent weeks, it's been very interesting to track how bitcoins behaved in the moment. Sometimes it can seem severe in the context of risk, headlines about trade, the president's relationship with China, but I think you could give us some historical context that things are actually more calm through the Bitcoin lens than than at least the headlines might suggest. >> Yeah, absolutely. So on October 10th, we had our newest uh Bitcoin Black Friday, which saw 19 billion in roughly uh liquidations across a number of exchanges. uh you know it was a very large move but relative to your point Ed you know Bitcoin only moved the price moved 12% and if we had looked at you know call it 2020 or 2018 we probably would have seen that move over 40%. And so you know the maturation of the space is definitely here. Uh the liquidations were clearly isolated to a number of exchanges. Uh but it did show that while there was price maturation in terms of the technology that actually exists in the space, there's a lot of work that needs to happen uh for it to reach the level of a New York Stock Exchange or CME. And so we're really looking forward to that level of progress in the industry. >> Okay. What has to happen? >> Yeah, it's a number of things I would say. you know, first off, it's a level of coordination. And so, if you think about um you know, what happens in uh circuit breakers, for example, when something happens in the market, you don't necessarily have um you know, an uncoordinated circuit breaker. You have a number of different exchanges uh that are speaking to one another. The second is also if you think about inventory and so there's never really an instance, for example, where you can't move from one uh exchange to another, which you see very often happen uh in crypto. when an exchange goes down uh then someone can't necessarily send funds into the exchange to top up on margin calls and so you see this level of cascading liquidations which is exactly what we saw. Another thing that happens is you know even if you think about margin calls or the you know standardized risk metrics uh typically in traditional finance that's completely standardized across all of these exchanges. Um and today we think about institutional uh overseas exchanges as almost isolated islands uh of risk. Each one has their own methodology. And so when some of this happens in the market, when you get this level of volatility, it's very very hard to track, you know, across all of the different venues that you're trading and so you get this level of liquidations. I mean, 19 billion is a number we haven't seen historically before. Uh but again, Bitcoin performed quite well relative to that as did, you know, some of the other um ETFs, you know, XRP, ETH, and Salana. >> Let's talk about those ETFs because you are definitely the voice we want to hear about settlement, about management of software. You're thinking about the ways in which the underlying infrastructure is going to support the growth here. But when we think about regulation that could see the SEC, I think it's got 130 ETF applications on its desk. If the government ever opens back up again, they'll be able to start allowing them to go through. There's a lot of particularly leveraged versions or very idiosyncratic altcoins. Is that the way you want to see the industry progressed? >> Look, at the end of the day, I think access is the most important, but I agree with you. There's there's definitely a point where there's just attention deficiency. And so you can't look at and underwrite a hundred of these different uh structures. And so the biggest thing when I think about some of these structures and and teams is really who who is the management uh behind some of these and what's the underlying risk in terms of the strategies. You know, you're seeing some of these um digital asset treasuries or ETFs. They might just be buying the underlying. they may just be staking, but to your point, Caroline, you're seeing some of these others that are taking on leveraged uh looping and other levels of risk. And you know, you just want to make sure that you have some level of um understanding of the underlying structure. And so I would say for some of these um it is a little bit gray. You know, we are pretty excited of this level of access going into you know whether it's Avalanche, Athena, you know, there's the access really opens it up to a net new market where people are willing to pay for that premium in order to get access. But you are right, the underlying risk is not the same for all of them. >> It's been a while since we've had you on the show and we've spoken. I just wanted to get your reflection on this administration's legislative efforts across crypto and the work that David Sax has been doing and how you feel it has or hasn't worked. >> Without a doubt, it has been night and day relative to, you know, previous conversations that we've had. we have been able to hire in the United States across the board and tell people that we work in crypto and you know historically if you think about a year ago that was just not possible and we were thinking about you know moving the company offshore hiring overseas and so if you know relative to conversations that we've had with folks even in Asia we're seeing a lot of focus transition back to the United States and that is just incredibly compelling as someone who is building here in the US and we're really really excited about the communication and support that we're getting from this administration. >> Just very quick, do you support the dollarization thesis that that David and others are trying to put in place? >> Yes, absolutely. And you're seeing a lot of that, you know, happening with some of the stable coin legislation where it is going to strengthen the dollar by having a lot of these global stable coins uh be backed by the dollar as the underlying. And so, you know, I do think it, you know, leads to a stronger US dollar, but it, you know, it'll see what the administration can do within now and the next 3 years and whether they're able to get everything over the finish line of August. Great to have you back on the show. Thank you very much. [Music] IBM and Grock are announcing a strategic partnership to give clients ultra high-speed, low latency AI capabilities via Grock's inference technology. For more on how this partnership is going to provide greater access to the full potential of enterprise AI. We're joined by Rob Thomas, senior vice president of software and chief commercial officer at IBM, and Jonathan Ross, CEO and founder of Grock. And Jonathan, I want to start with you. You know, the way that I look at this is it's a very interesting go-to market channel for you, a sales channel. Think about all of the clients that IBM has and how you've tried to grow the company. Explain how people will access LPUs through this or through the cloud matrix. >> Absolutely. It's an extraordinary opportunity for both of us. Uh IBM is going to uh have their sellers sell at Grock Skew and so now you'll be able to directly access uh our speed. the uh advantages that we offer. Uh you could think of it a little bit like uh offering broadband in the era where dialup wasn't fully rolled out and people were still trying to connect to the internet. Our LPUs are just uh significantly faster. But we also keep the cost down. Just imagine if you were to offer broadband and you charged more uh per bit of data that was uh sent over the line. It would be uneconomical. Broadband increases the demand. Uh with agentic use cases, it's particularly important to reduce the speed. You don't want to ask a question, wait 10 minutes later, and come back. You'd rather get the answer in under a minute. Rob, under this arrangement with Jonathan, does IBM make any sort of financial investment into Grock or is there some kind of sales or revenue split? Explain the economics of this deal for you guys. Big picture is we have a lot of momentum in AI with Watson X as we said on our earnings last quarter $7.5 billion dollars as a book of business and we're trying to solve the client problem of how do they deploy AI faster. So this partnership is all about what Jonathan said which is 5x performance at 20% of the cost. We've seen it with Watson X running on Grock and so we will be distributing Grock as part of our go to market and there's a revenue share as part of that but we are really excited because we've seen clients already getting an impact to how they're deploying AI because of the integration of our technology together. >> Let's talk about that Rob a little bit more because you're the man who's in charge of the software business. You're also really responsible for the world revenue and profitability of your company. So help us understand why Grock was the obvious choice. How is it helping your clients get answers faster on the inference side of things? >> We looked at every possibility in the market and the clients are looking for significant performance. So some of that changes how your call center operates or how your supply chain runs and then you combine that with a fraction of the cost. Suddenly the economics make sense. AI does have a cost problem and we think this breaks through that. In IBM, we've said we're going to drive four and a half billion of productivity by the end of this year. That's another example of AI truly having an impact. And the number one question I get from clients now is how are you doing that at IBM and can you help us do that? And we think the combination of IBM and Grock can make this a reality for any company. Well, let's dig into that a little bit now with you, Jonathan, because the integration with Watson X orchestrate, what does that look like on your side? How does that happen and happen seamlessly? >> So, uh the Watsonx uh um API is available for anyone to use today. It'll be invisible to most users. Uh it'll simply work. We have a compatible API. Uh and this is something we've been working on. Uh we will also work on some lower level integrations uh with VLM which is um a technology that IBM is very deeply involved in but it should just be transparent. You should just get more speed. Just imagine one day you come home you had dialup and now you have broadband and it costs less. Rob, where's the demand coming from on your side like IBM Granite or or some other agentic workload that they want to run using the Grock LPUs? Are these public sector names? Are they private sectormemes? I'm trying to understand who you're serving with it. >> As often happens, I would say financial services have been early adopters. But the thing that has changed in the market in the last 6 months is everything is moving to multimodel. We have IBM models that we open sourced which are the granite models. We announced a partnership with Anthropic. We have a partnership with Mistral and Llama just to name a few. What is incredible about what Jonathan and team have built is any model can run and get instant improvement running on the LPUs from Grock. So I think this is a combination of a multimodel world accelerating inference with Grock. I think this is a great combination. >> Jonathan, does this capacity already exist or are you supply constrained still? You got to go out and build it either in Saudi, Finland, here in the States. So the entire world is supply constrained and I would actually expect that to continue for at least the next 5 to 10 years when it comes to AI. Um our advantage is that we have a supply chain that actually ramps much faster. So uh customers will be able to come to IBM uh put in an order and we will be able to fulfill that um faster than you would be able to with other technologies. Uh but the supply constraints are real and this is another reason to start working with IBM sooner. the sooner you get access to that capacity, the sooner you're going to have it. I can't tell you how many startups come to us. Um, and other companies come to us and they are looking for capacity because some of them are actually growing 10, 20 or even 30% per week or per month. Uh, which is an astronomical growth rate. But by approaching uh us early, we can uh build to your needs. You were just mentioning Rob about all the partnerships you have when it comes to LLMs and the offerings that you're intertwining within yours. Will you go to others to ensure that inference is as fast as possible or is it this exclusive with Grock? >> We are open to working with anybody in the ecosystem of AI around what we're doing specifically on the acceleration with Grock. We want to lean into this partnership. That's why this is the one that we've announced today because we have confidence working together with Grock. As Jonathan mentioned, we're also enabling some of the lower level technologies and open source like VLM. So, this is the right place to be when it comes to inference. But when you think broadly about what's happening in AI, we have many companies working with us on agents. Last week, we announced S&P Global is now running on Watson X orchestrate as an example. So we're always open to new partnerships >> and let's just talk about Jonathan the goto market strategy here of teaming with the age-old juggernaut that is IBM that has so many deep relationships across global enterprises but is that how you're going to work this going forward is teaming up with companies that have those legacy relationships or do you still go out there and win the business yourself? So I would say this is a peanut butter and jelly sort of relationship in the sense that um often times when we meet with sea level executives. Uh those sea-level executives turn to their tech teams and ask them to evaluate Grock and I've been in meetings where the CTO did that and the response from the person is I already use Grock. Um it's my default for everything. So we already have the bottoms up. We have 2.3 million developers already building on us. For comparison, OpenAI has 4 million. Now, going to those deep relationships from IBM and the fact that IBM is a trusted partner who's been delivering for decades. You put those two together and that's an amazing go to market motion. >> Well, it's been great having you both on to talk about the go to market strategy. Jonathan Ross, CEO of Grock, of course, Rob Thomas of senior vice president of software over at IBM. We thank you both very much indeed. Now, coming up, we're going to be diving into Amazon's souring relationship with its contract delivery firms. And also, we got to remind you what's happening in the moment. President Trump signing critical minerals agreements with the prime minister of Australia. You can catch more on live go. This is Bloomberg Tech. Mr. President [Music] >> President Trump speaking in a bilat with Australian leaders says that China may pay a 155% tariff if there is no deal made by November 1st. He's also saying that he is expecting to meet with Xi in a couple of weeks. He will meet with Xi in South Korea in a couple of weeks. Uh the headlines not doing much to move markets in the moment. Cara, >> oh I would in fact >> we're not but we'll keep everyone a breast of it and they can tune in on live go as well if you want to see it throughout. But right now, we're about to talk about how we're taking a look inside Amazon's deteriorating relationship with its contract delivery firms, which have tangled with Amazon for years, often over what they consider unre unreasonable delivery targets that are monitored 24/7 by AI. Now, tensions flared earlier this year when the company passed along some big bills to repair aging delivery vans. Newworks Amazon reporter Spencer Sofa took this deep dive for us and you really hone in on certain individuals who decided to become entrepreneurial in spirit teaming with Amazon and then the profits just fell away. Talk us through it. >> Yes. So Amazon has what they call delivery service partners. They've got 4,500 of them globally. These are basically small businesses that lease vans, hire drivers, and get those packages to your doorstep. Um, and so it's it's almost like a franchise, but it's technically not a franchise. And so a lot of them are saying, "Hey, listen. The costs of our of doing business are going up faster than Amazon is is uh paying us for these packages. Um, they're in these lopsided agreements. They don't have any negotiating power. They basically have to take what Amazon offers them. Uh, and then so some of them are taking the ultimate step of of quitting. And when they do that, they realize, hey, I've been doing this seven years and I don't really have anything." Spencer, Amazon did recently hike the the proportion that these guys get on a per package bas basis, but on your reporting like what's the direction of travel here? Where are we headed? >> Well, the direction of travel is that logistics is a high-risisk business. If you have a bunch of car collisions or dog bites or anything that's going to push up your vehicle insurance rates or your workers compensation rates, you're going to have a difficult time. And and if you don't, you will you will make money. Um, and so some of that is going to be your operational practices and some of that's going to be luck. >> Uh, Bloomberg Spencer Soaper, thank you very much. Just real quick, car update on AWS. They're saying that the root cause overnight was an internal subsystem, but they're not saying any more than that other than there are issues still remaining. Uh, that does it for this edition of Bloomberg Tech. And what an addition it was. >> And so much more to come. Ed, I'm sat here in London because it's the Bloomberg Tech Summit. It's kicking off tonight. In fact, I'm hosting a debate on Europe's future in the chip wars. But then tomorrow, we're going to be tuning into the summit as it goes live over in Morgate, conversations with leaders in tech and AI and VC. You don't want to forget to check out all of that. Also on the podcast, you can find it on the terminal as well as online on Apple, Spotify, and iHeart. From San Francisco, from London for the next day or two, this is Bloomberg Tech. [Music] Heat.