1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,360 Speaker 2: with Lisa Bromwitz and a Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:35,840 Speaker 2: Bloomberg Terminal and the Bloomberg Business app. 10 00:00:36,520 --> 00:00:36,960 Speaker 3: So here's the. 11 00:00:37,000 --> 00:00:40,120 Speaker 2: Lass this morning. President Trump's policy stoken concerns about the 12 00:00:40,159 --> 00:00:43,320 Speaker 2: dollars dominance each four percent of Cornell University. Righting the 13 00:00:43,360 --> 00:00:46,880 Speaker 2: dollars de throning is unlikely, Luckily for the United States 14 00:00:46,960 --> 00:00:50,199 Speaker 2: and unfortunately for the dollars detractors, there appears to be 15 00:00:50,240 --> 00:00:53,360 Speaker 2: no competitor strong enough. Each war joins us now for more. 16 00:00:53,400 --> 00:00:55,440 Speaker 2: Each one. Welcome back to the program sir. It's always 17 00:00:55,440 --> 00:00:58,000 Speaker 2: good to get your thoughts on Bloomberg Surveillance. Let's take 18 00:00:58,000 --> 00:01:01,640 Speaker 2: it from the top. What's the difference between diversification and 19 00:01:01,760 --> 00:01:02,640 Speaker 2: de dollarization? 20 00:01:04,160 --> 00:01:07,240 Speaker 4: So the two could very well be related John, what 21 00:01:07,400 --> 00:01:10,400 Speaker 4: is the reality the world faces is that if you're 22 00:01:10,400 --> 00:01:14,680 Speaker 4: holding you know, more than fifty seven percent of your assets, 23 00:01:14,720 --> 00:01:18,200 Speaker 4: that is reserves in one currency or one asset class, 24 00:01:18,240 --> 00:01:20,680 Speaker 4: you really should be diversifying, which is something that the 25 00:01:20,720 --> 00:01:23,119 Speaker 4: world has been trying to do for a long time. 26 00:01:23,160 --> 00:01:25,319 Speaker 4: So there are very good reasons to step away from 27 00:01:25,360 --> 00:01:27,959 Speaker 4: the dollar now. The issue, of course, is that the 28 00:01:28,000 --> 00:01:30,560 Speaker 4: dollar is very important, not just as a reserve currency, 29 00:01:30,600 --> 00:01:33,880 Speaker 4: but as a payment currency, as a funding currency, and 30 00:01:33,959 --> 00:01:37,040 Speaker 4: in all of those respects. The reality is that there 31 00:01:37,080 --> 00:01:41,240 Speaker 4: simply isn't another currency that can out muscle the dollar. Certainly, 32 00:01:41,240 --> 00:01:43,720 Speaker 4: a world in which there were multiple currencies that were 33 00:01:43,720 --> 00:01:47,200 Speaker 4: competing on an even basis might be a more efficient world. 34 00:01:47,200 --> 00:01:50,480 Speaker 4: It could create more discipline and more incentives or discipline 35 00:01:50,480 --> 00:01:53,480 Speaker 4: from the issuers of those currencies. But that's not quite 36 00:01:53,480 --> 00:01:55,680 Speaker 4: the world we live in right now, and the weaknesses 37 00:01:55,680 --> 00:01:58,560 Speaker 4: of the other currencies are still keeping the dollar in 38 00:01:58,680 --> 00:01:59,680 Speaker 4: pretty good shape. 39 00:02:00,040 --> 00:02:02,040 Speaker 2: Let's talk about some of those weaknesses. It feels like 40 00:02:02,080 --> 00:02:04,120 Speaker 2: for money that China is just a Nonstanzer because of 41 00:02:04,120 --> 00:02:08,120 Speaker 2: the lack of capital mobility. What about the Europeans is Ishua, 42 00:02:08,160 --> 00:02:09,000 Speaker 2: where do they fit in? 43 00:02:10,160 --> 00:02:12,840 Speaker 4: That would be a very logical alternative to the dollar, 44 00:02:12,880 --> 00:02:15,320 Speaker 4: and in fact, when the Euro was created in two thousand, 45 00:02:15,840 --> 00:02:19,240 Speaker 4: there was an upsurge of excitement about an alternative to 46 00:02:19,280 --> 00:02:22,120 Speaker 4: the dollar finally, and the euro did seem ready to 47 00:02:22,160 --> 00:02:23,360 Speaker 4: fulfill those promises. 48 00:02:23,639 --> 00:02:24,840 Speaker 5: In the first seven. 49 00:02:24,680 --> 00:02:27,560 Speaker 4: To eight years after its creation, the share of the 50 00:02:27,560 --> 00:02:30,240 Speaker 4: Euro in foreign exchange reserves, for instance, went up by 51 00:02:30,240 --> 00:02:33,560 Speaker 4: about eight percentage points from about twenty to twenty eight 52 00:02:33,560 --> 00:02:36,760 Speaker 4: percentage twenty eight percent, and there was a sense that 53 00:02:36,800 --> 00:02:40,239 Speaker 4: the euro was an unstoppable linear paths to taking over 54 00:02:40,280 --> 00:02:40,919 Speaker 4: from the dollar. 55 00:02:41,400 --> 00:02:42,639 Speaker 5: But then it all ended. 56 00:02:42,800 --> 00:02:46,800 Speaker 4: The global financial crisis and the Eurozone debt crisis revealed 57 00:02:47,280 --> 00:02:50,520 Speaker 4: that Europe does not quite have all the elements of 58 00:02:50,600 --> 00:02:53,600 Speaker 4: a monitory union. Yes, there is monitor union, but the 59 00:02:53,639 --> 00:02:57,080 Speaker 4: true banking union, the fiscal union, and other parts of 60 00:02:57,120 --> 00:03:00,200 Speaker 4: economic union did not really hold together. So you think 61 00:03:00,200 --> 00:03:03,000 Speaker 4: about the core part of the Eurozone, you know, countries 62 00:03:03,040 --> 00:03:05,840 Speaker 4: like Germany, Austria and the Netherlands and Swan that's a 63 00:03:05,960 --> 00:03:09,760 Speaker 4: much smaller share of the overall Eurozone bond market, and 64 00:03:09,919 --> 00:03:13,119 Speaker 4: even those core countries and not exactly doing very well 65 00:03:13,200 --> 00:03:16,720 Speaker 4: right now. Germany is struggling, for instance, so it doesn't 66 00:03:16,800 --> 00:03:19,600 Speaker 4: look like Europe is ready to step up and take 67 00:03:19,639 --> 00:03:22,000 Speaker 4: on the mantle. And certainly since two thousand and eight, 68 00:03:22,280 --> 00:03:24,560 Speaker 4: the euro has done very poorly. It's shared as a 69 00:03:24,560 --> 00:03:28,640 Speaker 4: payment currency, it's shares a reserve currency, have all fallen 70 00:03:28,720 --> 00:03:31,400 Speaker 4: back to about the pre Euro levels. 71 00:03:32,120 --> 00:03:35,080 Speaker 3: This is the institutional weakness that you're talking about that 72 00:03:35,160 --> 00:03:38,280 Speaker 3: leads the dollar to remain on a much longer leash 73 00:03:38,280 --> 00:03:40,280 Speaker 3: than any currency should rightfully have. 74 00:03:40,680 --> 00:03:41,600 Speaker 4: That's your words. 75 00:03:41,840 --> 00:03:43,560 Speaker 3: At the same time, the dollar is still in a 76 00:03:43,640 --> 00:03:46,520 Speaker 3: leash and Steve England are a Standard Chartered said overnight 77 00:03:47,320 --> 00:03:49,880 Speaker 3: that a US dollar and race crunch could emerge if 78 00:03:49,880 --> 00:03:54,120 Speaker 3: the fiscal bill steepens the debt path without boosting growth. 79 00:03:54,200 --> 00:03:56,320 Speaker 3: How much do you see that as a possibility, say 80 00:03:56,320 --> 00:03:58,760 Speaker 3: in twenty twenty six or twenty twenty seven. 81 00:04:00,080 --> 00:04:02,720 Speaker 4: You know, by all logically so the dollars should not 82 00:04:02,800 --> 00:04:06,480 Speaker 4: be where it is. We're seeing that macroeconomic policies in 83 00:04:06,520 --> 00:04:09,760 Speaker 4: the US, especially the physical deficit and debt levels, do 84 00:04:09,840 --> 00:04:13,560 Speaker 4: not show any real discipline by US policymakers. The key 85 00:04:13,640 --> 00:04:17,280 Speaker 4: elements of the institutional framework that are crucial to underpinning 86 00:04:17,320 --> 00:04:20,800 Speaker 4: the dollar's dominance, you know, the independence of the central bank, 87 00:04:20,839 --> 00:04:24,320 Speaker 4: the FED the system of checks and balances, the rule 88 00:04:24,360 --> 00:04:27,480 Speaker 4: of law. All of these have certainly taken a pretty 89 00:04:27,520 --> 00:04:30,800 Speaker 4: strong beating. But the reality is that if you put 90 00:04:30,839 --> 00:04:35,400 Speaker 4: the whole package together, the institutions, but also financial market 91 00:04:35,480 --> 00:04:38,320 Speaker 4: depth and size, and the dynamism of the US economy, 92 00:04:38,920 --> 00:04:41,960 Speaker 4: even if the US does very poorly in each of 93 00:04:41,960 --> 00:04:45,359 Speaker 4: these dimensions in a relative sense, it's still doing better 94 00:04:45,400 --> 00:04:47,600 Speaker 4: than the rest of the world. And that's a difficulty. 95 00:04:48,040 --> 00:04:50,719 Speaker 4: But having said that, we have certainly seen a fall 96 00:04:50,800 --> 00:04:54,160 Speaker 4: off in the dollar's share of global asset flows and 97 00:04:54,200 --> 00:04:56,599 Speaker 4: so on in the last four to five months. But 98 00:04:56,640 --> 00:04:59,360 Speaker 4: it's worth keeping in mind that from September of twenty 99 00:04:59,400 --> 00:05:02,720 Speaker 4: twenty four to about January of twenty twenty four, just 100 00:05:02,760 --> 00:05:05,919 Speaker 4: still about inauguration day for the new president, the dollar 101 00:05:06,040 --> 00:05:08,920 Speaker 4: on a trade weighted basis rose by about ten percent, 102 00:05:09,160 --> 00:05:12,760 Speaker 4: possibly making it quite overvalued. And then it's fallen back 103 00:05:12,800 --> 00:05:15,039 Speaker 4: by about ten percent to about where it was in 104 00:05:15,080 --> 00:05:17,600 Speaker 4: September twenty twenty four. So if you want to tell 105 00:05:17,640 --> 00:05:20,840 Speaker 4: a very negative story about the dollar, you start in January. 106 00:05:21,160 --> 00:05:23,400 Speaker 4: If you want to tell a different story about the dollar, 107 00:05:23,440 --> 00:05:27,120 Speaker 4: that things have changed but not really in a fundamental sense, 108 00:05:27,400 --> 00:05:29,520 Speaker 4: you go back to September twenty twenty four, and not 109 00:05:29,640 --> 00:05:30,679 Speaker 4: that much has changed. 110 00:05:31,080 --> 00:05:33,320 Speaker 6: We know the president hates trade deficits. Do you think 111 00:05:33,360 --> 00:05:36,039 Speaker 6: any of this is strategic to boost US exports? 112 00:05:37,440 --> 00:05:40,599 Speaker 4: That's a very interesting question. We've heard very mixed messages 113 00:05:40,720 --> 00:05:44,119 Speaker 4: from the administration about whether they want a weaker dollar 114 00:05:44,160 --> 00:05:47,320 Speaker 4: in the short run and a long stronger dollar in 115 00:05:47,360 --> 00:05:50,080 Speaker 4: the long run. Trump certainly has spoken about how he 116 00:05:50,160 --> 00:05:53,160 Speaker 4: wants a dollar to remain the dominant currency, but at 117 00:05:53,160 --> 00:05:56,520 Speaker 4: the same time, in many of the issues that we've 118 00:05:56,560 --> 00:05:59,480 Speaker 4: had with other countries, including countries that the US is 119 00:05:59,520 --> 00:06:02,640 Speaker 4: running a t that the US is running a trade 120 00:06:02,680 --> 00:06:06,760 Speaker 4: surplus with the Trump administrations argue that many of those 121 00:06:06,760 --> 00:06:10,520 Speaker 4: countries are manipulating their currencies to keep them weak, suggesting 122 00:06:10,560 --> 00:06:13,760 Speaker 4: that the US would prefer that those currencies be stronger 123 00:06:13,760 --> 00:06:18,320 Speaker 4: and the dollar be weaker. That mixed messaging certainly should 124 00:06:18,320 --> 00:06:21,400 Speaker 4: be hurting the currency, and it probably is, but it 125 00:06:21,400 --> 00:06:24,120 Speaker 4: doesn't seem to be a fundamental aspect of policy that 126 00:06:24,160 --> 00:06:27,479 Speaker 4: they're trying to weaken the dollar through the messaging, but 127 00:06:27,600 --> 00:06:30,479 Speaker 4: certainly the policies they're putting in place. You know, the 128 00:06:30,640 --> 00:06:33,640 Speaker 4: increased likelihood of the US recession later this year because 129 00:06:33,680 --> 00:06:38,640 Speaker 4: of all the tariff troubles, the increasing fiscal deficit levels, 130 00:06:38,960 --> 00:06:41,640 Speaker 4: all of those are certainly going to weaken the dollar. 131 00:06:42,080 --> 00:06:43,480 Speaker 2: I have no doubt this is going to be an 132 00:06:43,480 --> 00:06:46,960 Speaker 2: ongoing conversation, particularly with you, sir, each four percent there 133 00:06:46,960 --> 00:06:59,400 Speaker 2: of Cornow University joining us now the Republican Congressman French Shell, 134 00:07:00,160 --> 00:07:03,560 Speaker 2: Arkansas Congressman Hill, welcome back to the program, sir. Let's 135 00:07:03,560 --> 00:07:06,120 Speaker 2: get into this. I want to understand so here on 136 00:07:06,160 --> 00:07:07,760 Speaker 2: Will Street. As you know, there's a big sense of 137 00:07:07,760 --> 00:07:10,960 Speaker 2: self importance when you put this bill together. How much 138 00:07:10,960 --> 00:07:13,360 Speaker 2: attention do you pay to the bond market, fixed income on 139 00:07:13,440 --> 00:07:15,000 Speaker 2: what's happening on Will Street? 140 00:07:17,120 --> 00:07:19,320 Speaker 5: Well, Jonathan, great to be with you. 141 00:07:19,360 --> 00:07:23,080 Speaker 1: Look, Republicans in the House and Senate have collaborated for 142 00:07:23,160 --> 00:07:26,320 Speaker 1: over a year on the components of this bill, and 143 00:07:26,400 --> 00:07:30,400 Speaker 1: certainly very intensely since the election. We wanted to deliver 144 00:07:30,480 --> 00:07:35,880 Speaker 1: on President Trump's campaign promises. First, redeploy federal spending, cut 145 00:07:35,880 --> 00:07:38,520 Speaker 1: out some of the federal spending but we don't particularly 146 00:07:38,560 --> 00:07:42,080 Speaker 1: agree with, and reinvest in the border and reinvest in defense. 147 00:07:42,680 --> 00:07:47,840 Speaker 1: And secondly, a block a twenty two percent tax increase 148 00:07:47,920 --> 00:07:51,119 Speaker 1: on families by extending the tax cuts and Jobs Act. 149 00:07:51,160 --> 00:07:55,560 Speaker 1: Those were the fundamental components, and we did and believe 150 00:07:55,640 --> 00:08:00,800 Speaker 1: that between the Trump regulatory policies and growth policies and 151 00:08:00,960 --> 00:08:04,960 Speaker 1: tax policies, that we would get some acceleration and economic 152 00:08:05,040 --> 00:08:06,880 Speaker 1: growth from the provisions in. 153 00:08:06,840 --> 00:08:10,600 Speaker 5: The tax code. But we also focused on cutting spending. 154 00:08:10,240 --> 00:08:12,239 Speaker 1: And in the House bill, we cut one point five 155 00:08:12,800 --> 00:08:15,440 Speaker 1: trillion dollars in spending over the next ten years. 156 00:08:15,960 --> 00:08:18,960 Speaker 6: Congressman, there's a handful of vocal Cenaters already who want 157 00:08:19,040 --> 00:08:21,840 Speaker 6: major changes to this bill. Is it going to look 158 00:08:21,920 --> 00:08:24,360 Speaker 6: remotely like anything you sent over to the Senate. 159 00:08:26,120 --> 00:08:28,320 Speaker 1: Well, I'm not going to make predictions about what will 160 00:08:28,360 --> 00:08:31,440 Speaker 1: happen in the Senate. We legislate every single day in 161 00:08:31,480 --> 00:08:34,600 Speaker 1: the House. They legislate periodically over in the Senate, and 162 00:08:34,640 --> 00:08:37,760 Speaker 1: so when they do, they have a lot of concentrated 163 00:08:37,800 --> 00:08:41,400 Speaker 1: effort on it. They have to work by consensus in 164 00:08:41,440 --> 00:08:43,920 Speaker 1: the two parties there, even more so than we do 165 00:08:44,040 --> 00:08:44,640 Speaker 1: in the House. 166 00:08:45,600 --> 00:08:47,120 Speaker 5: So I don't want to predict that. 167 00:08:47,240 --> 00:08:49,880 Speaker 1: But look, I want to be clear that John Thune 168 00:08:49,880 --> 00:08:54,280 Speaker 1: and Mike Johnson and President Trump have collaborated on the 169 00:08:54,320 --> 00:08:58,400 Speaker 1: background and details of these bills. And that's why, based 170 00:08:58,440 --> 00:09:01,160 Speaker 1: on what I've witnessed in the House the last five months. 171 00:09:01,720 --> 00:09:02,240 Speaker 5: I want to. 172 00:09:02,200 --> 00:09:06,160 Speaker 1: Echo Speaker Mike Johnson's point, which is this is a 173 00:09:06,200 --> 00:09:09,839 Speaker 1: delicate dance and a delicate balance, and so the Senate 174 00:09:09,920 --> 00:09:13,760 Speaker 1: has to consider any major changes very very carefully. 175 00:09:13,760 --> 00:09:16,200 Speaker 6: I think, can a bill be big or can it 176 00:09:16,200 --> 00:09:17,320 Speaker 6: be beautiful or can. 177 00:09:17,200 --> 00:09:17,800 Speaker 3: It be both? 178 00:09:19,360 --> 00:09:21,839 Speaker 1: Well, when you've got President Trump, you've got both at 179 00:09:21,880 --> 00:09:26,600 Speaker 1: all times. So I think it can be significant in 180 00:09:26,600 --> 00:09:32,000 Speaker 1: its policy direction and change, as well as very beneficial 181 00:09:32,040 --> 00:09:35,480 Speaker 1: to American families and the growth of the American economy. 182 00:09:35,480 --> 00:09:36,079 Speaker 5: And I think. 183 00:09:35,960 --> 00:09:39,720 Speaker 1: That's delineated in the in the scope of the bill 184 00:09:39,760 --> 00:09:40,920 Speaker 1: that we passed in the House. 185 00:09:41,160 --> 00:09:44,720 Speaker 3: Congressman of course Emory was talking and referencing what Elon 186 00:09:44,800 --> 00:09:47,160 Speaker 3: Musk was talking about as he seemed to distance himself, 187 00:09:47,200 --> 00:09:50,720 Speaker 3: saying he's a bit disappointed that the current iteration of 188 00:09:50,760 --> 00:09:54,080 Speaker 3: the bill does increase the deficit, and as he said, 189 00:09:54,120 --> 00:09:56,400 Speaker 3: it seems to undermine some of the progress made by 190 00:09:56,480 --> 00:10:00,560 Speaker 3: efforts in Doge. Do you agree, does it concern that 191 00:10:00,640 --> 00:10:03,440 Speaker 3: there is this increase in the deficit with out real 192 00:10:03,480 --> 00:10:05,599 Speaker 3: offsets for the longer term. 193 00:10:06,679 --> 00:10:09,200 Speaker 1: Well, I think the work by Doze over the first 194 00:10:09,240 --> 00:10:12,960 Speaker 1: fund months of them and has done a lot to 195 00:10:13,160 --> 00:10:19,280 Speaker 1: uncover productivity loss, needs for reform and full time equivalent positions, 196 00:10:19,679 --> 00:10:24,360 Speaker 1: how to reform IT systems make them more reliable, reduced waste, 197 00:10:24,360 --> 00:10:27,600 Speaker 1: fraud and abuse. All those things found by Doze are helpful, 198 00:10:28,120 --> 00:10:30,680 Speaker 1: and I think they informed Chairman Tom Cole, the chairman 199 00:10:30,720 --> 00:10:34,600 Speaker 1: of the House Appropriations Committee, and his colleagues exactly how. 200 00:10:34,559 --> 00:10:37,200 Speaker 5: To better focus f y twenty six spending. 201 00:10:37,600 --> 00:10:40,960 Speaker 1: When we get back into session next week, you'll see 202 00:10:41,000 --> 00:10:46,160 Speaker 1: the hearings in the House Appropriations Committee start quickly, and 203 00:10:46,200 --> 00:10:49,080 Speaker 1: I think that's where the Doge work will be best 204 00:10:49,360 --> 00:10:52,400 Speaker 1: reflected is in looking at f y twenty six. 205 00:10:52,920 --> 00:10:55,280 Speaker 3: Do you think that the current iteration of the bill 206 00:10:55,360 --> 00:10:58,520 Speaker 3: does enough to reduce growth to offset some of the 207 00:10:58,640 --> 00:11:01,400 Speaker 3: constraints that you're seeing with tariffs, with the idea that 208 00:11:01,400 --> 00:11:04,680 Speaker 3: even Walmart in your home state in Ventonville is being 209 00:11:04,720 --> 00:11:07,200 Speaker 3: told to eat it and you're seeing profit margins contract 210 00:11:07,240 --> 00:11:10,520 Speaker 3: or expectations for it. If you have both the deficit 211 00:11:10,640 --> 00:11:13,320 Speaker 3: increasing and you have the potential for companies having to 212 00:11:13,320 --> 00:11:16,360 Speaker 3: cut back, does that worry you well? 213 00:11:16,360 --> 00:11:19,120 Speaker 1: As I've said on your show before, I remain concerned 214 00:11:19,120 --> 00:11:23,160 Speaker 1: about the uncertainty in the tariff strategy. I think we've 215 00:11:23,160 --> 00:11:27,280 Speaker 1: got regulatory reform going absolutely in the right direction. I 216 00:11:27,320 --> 00:11:31,559 Speaker 1: believe that the tax preservation of no cuts for households 217 00:11:31,640 --> 00:11:35,360 Speaker 1: and tax incentives for business are good in the bill, 218 00:11:35,400 --> 00:11:39,320 Speaker 1: including major tax incentives to bring a new plant and 219 00:11:39,400 --> 00:11:42,319 Speaker 1: facilities to the United States for construction. 220 00:11:43,000 --> 00:11:45,400 Speaker 5: But we need to make sure we have clarity on 221 00:11:45,480 --> 00:11:47,200 Speaker 5: the tariff issue. And you're right. 222 00:11:47,280 --> 00:11:51,040 Speaker 1: Doug McMillan, the CEO of Walmart, met with President Trump 223 00:11:51,080 --> 00:11:54,840 Speaker 1: made it very clear to him how quickly he believes 224 00:11:54,880 --> 00:11:56,360 Speaker 1: that tariff clarity. 225 00:11:56,000 --> 00:11:58,160 Speaker 5: Needs to be found or it's going to. 226 00:11:58,160 --> 00:12:02,800 Speaker 1: Impact store shelves and store prices. 227 00:12:02,679 --> 00:12:03,600 Speaker 5: Across the country. 228 00:12:03,600 --> 00:12:06,600 Speaker 1: And I think you've seen that reflected in the Macy's 229 00:12:06,679 --> 00:12:08,720 Speaker 1: report that you had just a few minutes ago. 230 00:12:08,960 --> 00:12:11,439 Speaker 6: Did you get a send speaking to a Walmart congressman 231 00:12:11,480 --> 00:12:13,160 Speaker 6: that we will get clarity by July. 232 00:12:13,040 --> 00:12:17,600 Speaker 1: Ninth, Well, I believe that what I've heard from business, 233 00:12:17,840 --> 00:12:20,800 Speaker 1: Dillard's Department store here at Little Rock, Arkansas, one of 234 00:12:20,840 --> 00:12:25,120 Speaker 1: the biggest retailers in the South, the Walmart headquartered in Bentonville, Arkansas, 235 00:12:25,520 --> 00:12:28,000 Speaker 1: as well as a number of small manufacturers here in 236 00:12:28,040 --> 00:12:32,000 Speaker 1: the state and large, that they want clarity soon, meaning 237 00:12:32,760 --> 00:12:37,720 Speaker 1: may June early July, because that's going to really impact 238 00:12:38,280 --> 00:12:42,160 Speaker 1: plan shipments, plan purchases, and what's going to be on 239 00:12:42,200 --> 00:12:45,080 Speaker 1: the shelves for back to school and this fall. So 240 00:12:45,080 --> 00:12:48,720 Speaker 1: it's very important, particularly in the retailing industry, other industries 241 00:12:48,720 --> 00:12:52,240 Speaker 1: and manufacturing. Maybe there's a little bit more leeway based 242 00:12:52,280 --> 00:12:55,920 Speaker 1: on inventories that's been built over the inventory that's been 243 00:12:55,960 --> 00:12:58,319 Speaker 1: built over the first few months of this year. 244 00:12:58,440 --> 00:13:00,280 Speaker 2: In Congressman, just before you go, I have a he 245 00:13:00,320 --> 00:13:02,319 Speaker 2: might want to weigh in on this, the anthropic CEO 246 00:13:02,800 --> 00:13:05,120 Speaker 2: and what he had to say to Axios the AI 247 00:13:05,200 --> 00:13:08,480 Speaker 2: could wipe out half of all entry level white college jobs. 248 00:13:08,840 --> 00:13:10,880 Speaker 2: We sleep walking into a bit of a disaster. 249 00:13:12,720 --> 00:13:17,400 Speaker 1: Well. I served last year on the Speaker Johnson's bipartisan 250 00:13:17,559 --> 00:13:22,080 Speaker 1: Full House AI task Force. We had hearings all year 251 00:13:22,120 --> 00:13:25,240 Speaker 1: from every segment and walk of life, from education to 252 00:13:26,120 --> 00:13:29,720 Speaker 1: healthcare to service businesses, and we came up with a 253 00:13:29,760 --> 00:13:32,760 Speaker 1: series of principles, and one is you have to keep 254 00:13:32,800 --> 00:13:36,840 Speaker 1: a human in the loop in applying AI, either internally 255 00:13:36,920 --> 00:13:40,400 Speaker 1: or externally in a business application or a government application. 256 00:13:41,160 --> 00:13:43,120 Speaker 1: And if you use it as a tool, I think 257 00:13:43,160 --> 00:13:46,559 Speaker 1: it's going to be a very big productivity. 258 00:13:47,640 --> 00:13:50,680 Speaker 5: Tool to boost economic output. 259 00:13:51,240 --> 00:13:53,880 Speaker 1: And from what we heard in testimony, I didn't hear 260 00:13:54,080 --> 00:13:58,560 Speaker 1: the armageddon approach in the short run because it's such 261 00:13:58,600 --> 00:14:01,600 Speaker 1: a immer urging, early stage tool. 262 00:14:01,600 --> 00:14:03,040 Speaker 5: It's accelerating rapidly. 263 00:14:03,760 --> 00:14:05,920 Speaker 1: But I think if we keep a human in the loop, 264 00:14:06,000 --> 00:14:08,960 Speaker 1: as we apply it internal and externally in our businesses 265 00:14:08,960 --> 00:14:11,640 Speaker 1: and then government, that we're going to continue to have 266 00:14:12,559 --> 00:14:15,240 Speaker 1: employees that use it effectively and that it's not going 267 00:14:15,280 --> 00:14:19,040 Speaker 1: to be as catastrophic in the short run, particularly as 268 00:14:19,120 --> 00:14:20,720 Speaker 1: that predictions that prediction. 269 00:14:21,000 --> 00:14:23,280 Speaker 2: We hope you write Congressman Hell, it's going to see 270 00:14:23,280 --> 00:14:26,240 Speaker 2: you as always, Congressman Franchl on the LESIS needs the 271 00:14:26,280 --> 00:14:38,160 Speaker 2: smaller invest us bracing front video results south to the closing. 272 00:14:38,200 --> 00:14:40,640 Speaker 2: Now as China Rex spoke cubs, why on the chip 273 00:14:40,680 --> 00:14:43,080 Speaker 2: maker joining us not to look ahead? Mandev Singh of 274 00:14:43,160 --> 00:14:46,120 Speaker 2: Flimperg Intelligence Mandate, Welcome to the program, sir. What are 275 00:14:46,160 --> 00:14:49,840 Speaker 2: you focused on? Lights of the Southternoon, Well, we know. 276 00:14:49,960 --> 00:14:53,200 Speaker 7: That China is the focus, but for me, growth margin 277 00:14:53,360 --> 00:14:56,920 Speaker 7: is where we can determine. You know, in video's pricing 278 00:14:57,000 --> 00:15:00,880 Speaker 7: power and right now everyone is fixated on power supply. 279 00:15:01,120 --> 00:15:05,640 Speaker 7: Six months back, you know, everyone was fixated on supply 280 00:15:05,800 --> 00:15:09,560 Speaker 7: of GPUs. I feel that concern has alleviated and the 281 00:15:09,640 --> 00:15:12,440 Speaker 7: focus is more on power and so what I want 282 00:15:12,520 --> 00:15:16,360 Speaker 7: to know is how does that affect Nvidia's gross martin 283 00:15:16,440 --> 00:15:20,480 Speaker 7: in terms of supply concerns abating And look, the geopolitical 284 00:15:20,640 --> 00:15:23,840 Speaker 7: tensions are still there. They may have to remove some 285 00:15:23,920 --> 00:15:26,640 Speaker 7: of their supply chains, but in the end, it comes 286 00:15:26,680 --> 00:15:29,760 Speaker 7: down to growth smartin because that's the biggest determinant of 287 00:15:30,080 --> 00:15:31,320 Speaker 7: Nvidia's free cash flow. 288 00:15:31,600 --> 00:15:34,240 Speaker 3: There's also a question, Mandy, but about the hyperscalers that 289 00:15:34,280 --> 00:15:36,440 Speaker 3: have come under some unique pressures, and thinking of Google 290 00:15:36,520 --> 00:15:39,120 Speaker 3: or Alphabet the parent company of Google, how much do 291 00:15:39,160 --> 00:15:43,080 Speaker 3: you expect some of these companies to increasingly become competitors, 292 00:15:43,280 --> 00:15:45,640 Speaker 3: not just customers, and for that to be part of 293 00:15:45,680 --> 00:15:47,960 Speaker 3: the narrative mix stemming from earnings today. 294 00:15:49,200 --> 00:15:49,840 Speaker 5: Absolutely. 295 00:15:49,880 --> 00:15:53,920 Speaker 7: I mean, look, we know Nvidia's revenue is concentrated with 296 00:15:54,000 --> 00:15:57,800 Speaker 7: the five big hyperscalers, and we also know OpenAI is 297 00:15:57,960 --> 00:16:00,920 Speaker 7: trying to branch out on its own comes to building 298 00:16:00,960 --> 00:16:04,640 Speaker 7: its data centers, et cetera. So from that perspective, you 299 00:16:04,680 --> 00:16:09,480 Speaker 7: know the commodification of llams. So if Gemini is catching 300 00:16:09,600 --> 00:16:13,560 Speaker 7: up to open Ai, that's bad news for Nvidia. And 301 00:16:13,960 --> 00:16:18,760 Speaker 7: look for Nvidia. Clearly they want the llams to standardize 302 00:16:18,800 --> 00:16:22,720 Speaker 7: on their chips, but there are a lot of alternatives emerging, 303 00:16:23,400 --> 00:16:26,640 Speaker 7: especially in China. And if you know, Chinese aren't getting 304 00:16:26,680 --> 00:16:29,440 Speaker 7: the supply of GPUs and they're still able to train 305 00:16:29,520 --> 00:16:32,480 Speaker 7: the models. They are setting up a precedent that you 306 00:16:32,640 --> 00:16:36,520 Speaker 7: can do influencing without Nvidia GPUs, and that is what 307 00:16:36,600 --> 00:16:40,800 Speaker 7: will determine in this AI infrastructure supercycle. What sort of 308 00:16:40,880 --> 00:16:43,560 Speaker 7: market share will Nvidia have two years from now or 309 00:16:43,600 --> 00:16:44,520 Speaker 7: five years from now. 310 00:16:44,600 --> 00:16:46,560 Speaker 2: The stock is positive in the pre market by zero 311 00:16:46,600 --> 00:16:49,480 Speaker 2: point six percent, mandep appreciate your time. Manday's sing there 312 00:16:49,480 --> 00:16:51,960 Speaker 2: a bloomberg and salentence to build on the conversation. Joining 313 00:16:52,040 --> 00:16:55,120 Speaker 2: us now Frankly of HSPAC, who has a whole writing 314 00:16:55,120 --> 00:16:57,520 Speaker 2: on the stock and a one hundred and twenty dollars 315 00:16:57,560 --> 00:17:00,120 Speaker 2: price target on Nvidia. Frank welcome to the program. I 316 00:17:00,160 --> 00:17:01,680 Speaker 2: just want to build on some of the conversation we've 317 00:17:01,720 --> 00:17:04,160 Speaker 2: already had so far this morning and understand from your 318 00:17:04,200 --> 00:17:08,000 Speaker 2: perspective why this won't be the Beaten Rays quarter that 319 00:17:08,080 --> 00:17:10,280 Speaker 2: maybe some people got used to in years gone by. 320 00:17:11,400 --> 00:17:13,400 Speaker 8: Yeah, I think if you look at the Beaten Rays, 321 00:17:13,480 --> 00:17:15,720 Speaker 8: we haven't really seen that for the last couple of 322 00:17:15,800 --> 00:17:19,159 Speaker 8: quarters in Video since the second half last year, so 323 00:17:19,240 --> 00:17:21,960 Speaker 8: I think what you're seeing is that. And one of 324 00:17:22,000 --> 00:17:23,880 Speaker 8: the reasons I think we see is that there's still 325 00:17:23,920 --> 00:17:26,480 Speaker 8: some ongoing challenges they're facing this year which they didn't 326 00:17:26,520 --> 00:17:28,879 Speaker 8: face last year. You know, Number one, you had, you know, 327 00:17:28,960 --> 00:17:32,600 Speaker 8: the supply chain is still having some ongoing issues, especially 328 00:17:32,680 --> 00:17:34,879 Speaker 8: on the downstream side and the way they ramp their 329 00:17:35,320 --> 00:17:39,360 Speaker 8: their NVL rack architecture. We've had the China ban come 330 00:17:39,400 --> 00:17:41,800 Speaker 8: through earlier as well, and also I think the GtC 331 00:17:42,000 --> 00:17:45,000 Speaker 8: road map that was launched it wasn't as exciting as 332 00:17:45,040 --> 00:17:48,680 Speaker 8: people had hoped. We're not seeing a huge spec migration 333 00:17:48,800 --> 00:17:52,119 Speaker 8: that will drive this incredible pricing power going forward. So 334 00:17:52,200 --> 00:17:55,000 Speaker 8: these I think were the headwinds that I think you're 335 00:17:55,000 --> 00:17:57,200 Speaker 8: in Video is facing in the first half of the year. 336 00:17:57,800 --> 00:18:00,280 Speaker 8: And I think as you go into earnings, I think 337 00:18:00,280 --> 00:18:02,679 Speaker 8: there will be a major surprise. I think the market 338 00:18:02,680 --> 00:18:06,119 Speaker 8: has gotten used to that already. Expectations for earning for 339 00:18:06,200 --> 00:18:09,080 Speaker 8: the revenue has come down over the last three months, 340 00:18:09,160 --> 00:18:11,120 Speaker 8: so I don't think there will be a big disappointment either. 341 00:18:11,560 --> 00:18:13,880 Speaker 8: So I think the focus there will be probably as 342 00:18:13,880 --> 00:18:15,880 Speaker 8: we go into twenty twenty six, there's a. 343 00:18:15,880 --> 00:18:18,560 Speaker 3: Question, frank about the supply side of this story with 344 00:18:18,600 --> 00:18:22,840 Speaker 3: respect to supply chains and other issues, just creating enough 345 00:18:22,920 --> 00:18:25,480 Speaker 3: chips to really meet demand. And then there's a question 346 00:18:25,520 --> 00:18:28,080 Speaker 3: around the demand and how much is coming from China 347 00:18:28,160 --> 00:18:31,480 Speaker 3: versus the Middle East to versus hyperscalers. Which side of 348 00:18:31,480 --> 00:18:33,080 Speaker 3: the equation do you think is going to be the 349 00:18:33,119 --> 00:18:35,360 Speaker 3: more important one this earning season. 350 00:18:36,560 --> 00:18:39,600 Speaker 8: I think the focus will be, you know, the narrative 351 00:18:39,680 --> 00:18:43,560 Speaker 8: someone has actually changed quite a bit, especially after the 352 00:18:43,880 --> 00:18:47,480 Speaker 8: I think the Middle East AI deal, because that represents 353 00:18:47,840 --> 00:18:51,720 Speaker 8: a new greenfield market opportunity for Nvidia that you know, 354 00:18:51,800 --> 00:18:54,080 Speaker 8: over the long run, could perhaps double the revenue from 355 00:18:54,080 --> 00:18:56,280 Speaker 8: where we are today. So I think that has been 356 00:18:56,280 --> 00:18:58,520 Speaker 8: probably the biggest change, the big reason why the stock 357 00:18:58,520 --> 00:19:01,960 Speaker 8: has rebounded off the recent lows. However, I think, you know, 358 00:19:02,160 --> 00:19:06,320 Speaker 8: to get confirmation that this demand, this from the moist 359 00:19:06,359 --> 00:19:08,879 Speaker 8: will materialize, we're going to have to see between now 360 00:19:08,880 --> 00:19:12,040 Speaker 8: and in the year whether the supply chain expectations for 361 00:19:12,119 --> 00:19:14,879 Speaker 8: next year does continue to reverse. Because since the beginning 362 00:19:14,880 --> 00:19:17,879 Speaker 8: of the year, what we've seen is that the capacity 363 00:19:17,920 --> 00:19:20,959 Speaker 8: on their chip side allocation has been coming down, so 364 00:19:21,000 --> 00:19:23,800 Speaker 8: this is trend starts to reverse as we get into 365 00:19:23,920 --> 00:19:26,680 Speaker 8: next year, that will be seen as a very important indicator. 366 00:19:26,840 --> 00:19:29,159 Speaker 8: We may not see that for another couple of months, 367 00:19:29,520 --> 00:19:31,280 Speaker 8: but that will be something I think is really critical 368 00:19:31,320 --> 00:19:34,719 Speaker 8: because that establishes your baseline for twenty twenty six that 369 00:19:34,720 --> 00:19:37,520 Speaker 8: it can grow again. But I think prior to this narrative, 370 00:19:37,840 --> 00:19:41,000 Speaker 8: it was just really the hyperscalar. Capex will slow and 371 00:19:41,400 --> 00:19:44,360 Speaker 8: they will also see more of a focus on their 372 00:19:44,359 --> 00:19:46,600 Speaker 8: own chip, the ACIK chip, and that's why we see 373 00:19:46,600 --> 00:19:49,040 Speaker 8: Broadcom seeing a very strong growth for next year as well. 374 00:19:49,119 --> 00:19:51,280 Speaker 6: Frank, it is a pretty remarkable moment in a photo 375 00:19:51,320 --> 00:19:54,360 Speaker 6: op when you have Jensen Wang basically standing in between 376 00:19:54,440 --> 00:19:57,360 Speaker 6: President Trump and check Muhammad Benzaia and Abu Dhabi when 377 00:19:57,359 --> 00:20:01,480 Speaker 6: they signed this AI partnership. But whether you put all 378 00:20:01,480 --> 00:20:04,440 Speaker 6: of these deals together across the Gulf, is it enough 379 00:20:04,440 --> 00:20:06,560 Speaker 6: of an offset for what's happening with China? 380 00:20:08,040 --> 00:20:12,320 Speaker 8: I think right now the narrative clearly is there to 381 00:20:12,359 --> 00:20:15,320 Speaker 8: suggest that it is. I mean, they've talked about six 382 00:20:15,400 --> 00:20:19,399 Speaker 8: hundred gigawads that potentially over the next ten years or 383 00:20:19,400 --> 00:20:22,399 Speaker 8: so could double their revenue to two hundred billion. But 384 00:20:23,240 --> 00:20:26,960 Speaker 8: you know that's the narrative. Whether it materializes or not, 385 00:20:27,119 --> 00:20:29,560 Speaker 8: we'll have to see. I think again, as we see 386 00:20:29,640 --> 00:20:32,600 Speaker 8: next year that a supply chain start to see upper revisions. 387 00:20:32,720 --> 00:20:35,040 Speaker 8: We've been in a downward revision since beginning of the year. 388 00:20:35,160 --> 00:20:37,640 Speaker 8: Now does that start reversing course, I think that will 389 00:20:37,680 --> 00:20:39,600 Speaker 8: be important thing to see because that's going to be 390 00:20:39,680 --> 00:20:41,679 Speaker 8: the most I think a very important driver for Nvidia 391 00:20:41,720 --> 00:20:44,560 Speaker 8: next year. The hyperscalar will slow down. I think they 392 00:20:44,640 --> 00:20:46,600 Speaker 8: know that, and I think they've been preparing for that, 393 00:20:46,640 --> 00:20:49,919 Speaker 8: which is why I think at Computex Jensen also talked about, 394 00:20:50,160 --> 00:20:53,879 Speaker 8: you know, willing to sell the networking chips so he 395 00:20:53,920 --> 00:20:56,080 Speaker 8: doesn't have to buy the hyper skirits don't have to 396 00:20:56,080 --> 00:20:58,440 Speaker 8: buy the complete solution from him. So I think he's 397 00:20:58,480 --> 00:21:01,960 Speaker 8: become more open minded about selling other chips besides the 398 00:21:02,119 --> 00:21:02,760 Speaker 8: entire solution. 399 00:21:03,040 --> 00:21:04,680 Speaker 2: Frank, just to wrap it up, we'd love a thought 400 00:21:04,720 --> 00:21:07,840 Speaker 2: from you on the man himself, the leadership Jensen, Tim 401 00:21:07,920 --> 00:21:10,399 Speaker 2: Kirk increasingly out in the cold at the moment with 402 00:21:10,440 --> 00:21:13,440 Speaker 2: regards to the relationship with the President of the United States. 403 00:21:13,480 --> 00:21:14,720 Speaker 2: What does Jensen doing right? 404 00:21:16,400 --> 00:21:19,080 Speaker 8: Yeah, I think it's an interesting one because he Jensen 405 00:21:19,119 --> 00:21:21,760 Speaker 8: clearly has expressed desire to continue to sell into China. 406 00:21:21,840 --> 00:21:23,840 Speaker 8: He's been very vocal about it. In fact, I think, 407 00:21:24,040 --> 00:21:26,919 Speaker 8: you know, they are working on another chip that they 408 00:21:27,080 --> 00:21:31,280 Speaker 8: plan to sell into China that can, I guess, get 409 00:21:31,280 --> 00:21:33,200 Speaker 8: around some of the restrictions we're seeing today. But on 410 00:21:33,200 --> 00:21:35,639 Speaker 8: the other hand, I think he's also quite supportive of 411 00:21:35,760 --> 00:21:39,120 Speaker 8: the losing of the AI diffusion. You know, the deal 412 00:21:39,160 --> 00:21:41,040 Speaker 8: in the sat Arabia I think was a good start. 413 00:21:41,200 --> 00:21:44,080 Speaker 8: So I think he's also been very supportive and appreciative 414 00:21:44,119 --> 00:21:46,639 Speaker 8: of the administration about going in that direction. 415 00:21:46,840 --> 00:21:50,239 Speaker 2: Frank, given his pursuit of China though, and China as 416 00:21:50,280 --> 00:21:52,600 Speaker 2: a major customer, do you see tension down the road 417 00:21:52,640 --> 00:21:54,200 Speaker 2: between the two individuals. 418 00:21:55,560 --> 00:21:57,639 Speaker 8: I think, you know, what video has proven to be 419 00:21:57,720 --> 00:22:00,720 Speaker 8: is very adaptable. So they've been, you know, every time 420 00:22:00,760 --> 00:22:04,679 Speaker 8: there's been a restriction and Vidia has advited and followed it, 421 00:22:05,240 --> 00:22:08,760 Speaker 8: they just come up with another chip that basically falls 422 00:22:08,800 --> 00:22:11,560 Speaker 8: below the criteria benchmark. And so I think he will 423 00:22:11,600 --> 00:22:14,119 Speaker 8: continue to do that, but again in a fashion that 424 00:22:14,200 --> 00:22:17,480 Speaker 8: I think is pretty much well telegraphed. So I don't 425 00:22:17,600 --> 00:22:20,720 Speaker 8: see it as being a negative source attention. I think, 426 00:22:20,840 --> 00:22:22,119 Speaker 8: you know, he still doesn't want to give him an 427 00:22:22,200 --> 00:22:24,080 Speaker 8: Chinel market. But at the same time, I think he's 428 00:22:24,119 --> 00:22:27,199 Speaker 8: also looking to follow whatever the restrictions are placed, and 429 00:22:27,240 --> 00:22:29,720 Speaker 8: he'll find ways to meet them. 430 00:22:29,800 --> 00:22:32,200 Speaker 2: So got it, Hey, frank, I appreciate your time. Frankly 431 00:22:32,320 --> 00:22:35,000 Speaker 2: the of HSVAC on Nvidio earnings from them a little 432 00:22:35,040 --> 00:22:39,480 Speaker 2: bit later this afternoon. This is the Bloomberg Sevenants podcast, 433 00:22:39,600 --> 00:22:43,520 Speaker 2: bringing you the best in markets, economics, angio politics. You 434 00:22:43,560 --> 00:22:46,320 Speaker 2: can watch the show live on Bloomberg TV weekday mornings 435 00:22:46,320 --> 00:22:49,280 Speaker 2: from six am to nine am Eastern. Subscribe to the 436 00:22:49,280 --> 00:22:52,800 Speaker 2: podcast on Apple, Spotify or anywhere else you listen, and 437 00:22:52,840 --> 00:22:55,920 Speaker 2: as always, on the Bloomberg Terminal and the Bloomberg Business app.