WEBVTT - Nvidia Nears One Trillion, Fed Says Inflation May Be Cooling

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<v Speaker 1>This is Bloomberg Day Break Asia for this Friday, May

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<v Speaker 1>twenty sixth in Hong Kong, Thursday May twenty fifth in

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<v Speaker 1>New York and coming up today, Nvidia powers a rally

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<v Speaker 1>in tech stocks and Nears won trillion dollars in market value.

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<v Speaker 1>Trader is fully priced in another quarter point fed rayhike

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<v Speaker 1>within the next two policy meetings, and the Bank of

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<v Speaker 1>Japan Governor Kazua Ueida indicates his desire to hold on

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<v Speaker 1>to policy flexibility. Debt ceiling negotiations continue without a deal.

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<v Speaker 1>A January sixth perpetrator gets sentenced eighteen years in jail.

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<v Speaker 1>I'm Dan Schwartzman with Global News.

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<v Speaker 2>That's all straight ahead on Bloomberg day Break Asia, the

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<v Speaker 2>business news you need to start your day, and just

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<v Speaker 2>one fifteen minute podcast available on Apples, Spotify, the Bloomberg

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<v Speaker 2>Business app and everywhere you get your podcasts.

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<v Speaker 1>Good morning, I'm Richard Salavat and I'm Brian Curtiz. Here

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<v Speaker 1>are the stories we're following today.

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<v Speaker 3>Chip Macan Nvidia is now within touching distance of one

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<v Speaker 3>trillion dollars in market value. Now, this would become the only,

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<v Speaker 3>but only the ninth firm evetive hit that milestone. It

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<v Speaker 3>does come after in Vidia's surprise channas with a surging

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<v Speaker 3>revenue forecast, it propelled to jump in stocks linked to

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<v Speaker 3>artificial intelligence. We should know that in Video is the

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<v Speaker 3>bigs maker of advanced chips that are required to train

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<v Speaker 3>a generation AI services. We heard from Kyle Bass, founder

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<v Speaker 3>of Hayman Capital Managements, saying that investors should now be

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<v Speaker 3>looking at developing data centers to capitalize on the demand

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<v Speaker 3>for AI.

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<v Speaker 4>When you look at the data center market, it is

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<v Speaker 4>white hot. The US is reshoring on shoring this high

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<v Speaker 4>powered chip business, and in Vidia is leading the way,

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<v Speaker 4>you know, first with their GPUs and their gaming chips

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<v Speaker 4>and now their generative AI stuff. That is just again

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<v Speaker 4>white hot. I wouldn't short in Video. I think it's

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<v Speaker 4>just as has a long way to run here.

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<v Speaker 3>Meantime, Trader is betting against in Video, facing two point

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<v Speaker 3>three billion dollars in paper loss on Thursday, leon in

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<v Speaker 3>vid shs closing up twenty four percent in.

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<v Speaker 1>New York Well today, the amount of money the US

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<v Speaker 1>government has to pay its bills tumbled to forty nine

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<v Speaker 1>point five billion dollars, the lowest since twenty twenty one.

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<v Speaker 1>It raises the chances of a default early next month

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<v Speaker 1>if the statutory debt limit isn't raised or suspended before then.

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<v Speaker 1>Republicans and the White House are narrowing their differences, but

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<v Speaker 1>still have not reached an agreement over raising the debt limit.

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<v Speaker 1>Today we heard from Nobel Prize winning economist Paul Krugman.

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<v Speaker 1>He said that budget negotiators risk harming the nation by

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<v Speaker 1>cutting programs that support education and childcare.

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<v Speaker 5>What's happening right now is that in the effort to

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<v Speaker 5>hold down headline spending, right now, we're actually kind of

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<v Speaker 5>disinvesting in the country's future, and that's pretty alarming.

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<v Speaker 1>Krugman also pushed back on suggestions that the surge in

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<v Speaker 1>US government debt would undermine the dollar's role as the

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<v Speaker 1>world's reserve currency. There's simply no obvious candidate to replace it,

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<v Speaker 1>but he did say that the greenback could be hurt

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<v Speaker 1>by repeated confrontation over the debt ceiling and a series

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<v Speaker 1>of defaults.

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<v Speaker 6>Well.

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<v Speaker 3>In recent weeks, of course, we saw a First Republican trouble.

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<v Speaker 3>JP Morgan Chase came to the rescue. Well now, JP

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<v Speaker 3>Morgan Chases Justice and around about one thousand First republic

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<v Speaker 3>employees Bloomberg's and Kate's reports.

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<v Speaker 7>JP Morgan is offering full time or transitional jobs to

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<v Speaker 7>almost eighty five percent of the nearly seven thousand First

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<v Speaker 7>Republic staffers who are still working for the lender when

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<v Speaker 7>it collapsed, while the rest were told they would not

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<v Speaker 7>be hired. Those who are not being brought on by

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<v Speaker 7>JP Morgan will get wages and benefits covering sixty days,

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<v Speaker 7>and they'll be provided an additional love sum payment and

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<v Speaker 7>continuing benefits coverage. A spokesperson for JP Morgan says the

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<v Speaker 7>move is meant to bring clarity and closure to First

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<v Speaker 7>Republic employees in Washington and Kate's Bloomberg Daybreak Asia well.

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<v Speaker 1>On the FED, traders fully priced in another quarter point

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<v Speaker 1>rate hike by the Central Bank within the next two

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<v Speaker 1>policy meetings, and a more than one in two chants

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<v Speaker 1>that the high could arrive as soon as next month. Today,

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<v Speaker 1>Boston Fed President Susan Collins said that there are promising

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<v Speaker 1>signs that inflation is cooling and that may impact the

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<v Speaker 1>Fed's next move. Is Colin's speaking at the Community College

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<v Speaker 1>of Rhode Island.

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<v Speaker 8>While inflation is still too high, there are some promising

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<v Speaker 8>signs of moderation, and I believe that we may be

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<v Speaker 8>at or near the point where monetary policy can pause

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<v Speaker 8>raising interest rates, and this will provide an opportunity to

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<v Speaker 8>more fully assess the impact of the actions we've taken

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<v Speaker 8>to date.

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<v Speaker 1>Colin said that a low predictable inflation rate is needed,

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<v Speaker 1>and she added that officials should approach policy on a

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<v Speaker 1>meeting by meeting basis and take a comprehensive assessment of

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<v Speaker 1>information that's available at the time. Collins doesn't vote on

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<v Speaker 1>the Federal Open Market Committee this year. Policymakers will meet

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<v Speaker 1>next June thirteenth and fourteenth.

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<v Speaker 9>Thank you.

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<v Speaker 3>Japan Governor Kazuu Aida indicated his desire to hold onto

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<v Speaker 3>policy flexibility, playing down the importance of wages on any

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<v Speaker 3>single economic data sets a trigger for change. He spoke

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<v Speaker 3>to selected media in Tokyo.

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<v Speaker 10>On how wages might lead to policy change. We aren't

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<v Speaker 10>targeting wage growth itself. If we have sustainable and stable

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<v Speaker 10>inflation of two percent, it's natural that wages should also rise.

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<v Speaker 10>The key point for our policy decision is whether inflation

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<v Speaker 10>will rise in a stable and sustainable manner at two percent.

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<v Speaker 3>Way It's remarks leave room for the BOJ to nimble,

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<v Speaker 3>a b nimble about how and when it'll be convinced

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<v Speaker 3>about the prospect of price gains. It's a science which

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<v Speaker 3>you'll leave investors and should I say speculators guessing about

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<v Speaker 3>the trimming of policy change. The BOJ board next meets

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<v Speaker 3>on the fifteenth and sixteenth.

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<v Speaker 1>I'm Brian Curtis along with Rishad Salamat. We will be

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<v Speaker 1>looking more closely at all the enthusiasm over AI and

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<v Speaker 1>a little bit more on Nvidio and the spoils being

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<v Speaker 1>shared there, as well as some of the top stories.

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<v Speaker 4>We have.

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<v Speaker 1>Joanne Feene coming up, a partner and portfolio manager at

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<v Speaker 1>Advisors Capital Management. If we have time, we'll also get

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<v Speaker 1>to May twan's earnings jumping twenty seven percent and taking

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<v Speaker 1>a closer look at Ali Baba saying that he plans

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<v Speaker 1>to hire some fifteen thousand people this year, including three

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<v Speaker 1>thousand university graduates. That's all ahead. Now it's time for

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<v Speaker 1>global news. Well, debt sealing negotiations are ongoing, but no

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<v Speaker 1>deal is in sight. Dan Schwartzman has more from the

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<v Speaker 1>Bloomberg newsroom.

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<v Speaker 11>Dan, Yeah, Brian's not good right now. Negotiations are continuing,

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<v Speaker 11>with reports saying that the divide between the two sides

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<v Speaker 11>has now rowed, but there was no agreement in site.

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<v Speaker 11>President Biden and House Speaker Kevin McCarthy continued to communicate

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<v Speaker 11>from their offices, with Biden saying that he wouldn't agree

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<v Speaker 11>to certain Republican demands.

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<v Speaker 12>Republicans passed the bill that would make huge cuts and

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<v Speaker 12>important programs and millions of working in middle class Americans

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<v Speaker 12>count os huge cuts and number of teachers, police officers,

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<v Speaker 12>border control agents, and it increased white times for Social

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<v Speaker 12>Security claims, and I won't agree to that.

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<v Speaker 11>The President was speaking from the White House. Next Tuesday

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<v Speaker 11>is emerging as the possible deadline to get a deal done,

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<v Speaker 11>as Treasury Secretary Janet Yellen has said that her department

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<v Speaker 11>could run out of cash on June first. On June second,

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<v Speaker 11>social Security payments to millions of Americans' is due, which

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<v Speaker 11>has added pressure on both sides to work out a

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<v Speaker 11>deal soon.

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<v Speaker 9>Now.

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<v Speaker 11>Republican Congressman from Florida Byron Donald says, maybe it's best

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<v Speaker 11>to have a default if.

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<v Speaker 6>There's not enough sense between Republicans and Democrats to get

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<v Speaker 6>this done and do it the appropriate way, just because

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<v Speaker 6>they want to protect their political agenda nobody should be geting.

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<v Speaker 11>Paid Representative Donalds was speaking just to day after Fitch

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<v Speaker 11>Ratings placed the triple A credit rating for the United

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<v Speaker 11>States on watch, with a chance at a potential downgrade

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<v Speaker 11>if a deal is not reached in time. The leader

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<v Speaker 11>of the Oathkeeper is a right wing group that took

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<v Speaker 11>part on the January sixth attack on the US Capitol,

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<v Speaker 11>has been sentenced to eighteen years in prison. Stewart Rhodes

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<v Speaker 11>was sentenced by US District Judge I meet Meta in

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<v Speaker 11>Washington for action deemed amount of terrorism. The prison term

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<v Speaker 11>is the longest so far handed down in the government's

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<v Speaker 11>prosecution of more than one thousand people who stormed the

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<v Speaker 11>Capitol to try to disrupt the certification of Joe Biden's

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<v Speaker 11>election as president. The United States, along with coalition allies,

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<v Speaker 11>say they'll begin to train Ukrainian pilots to fly F

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<v Speaker 11>sixteen fighter jets shortly. Both Denmark and the Netherlands have

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<v Speaker 11>taken the lead on the initiative to have the pilots

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<v Speaker 11>ready to fly the American made jetting combat. Last week,

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<v Speaker 11>the Biden administration did in about face and decided to

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<v Speaker 11>allow countries to send the single engind fighters to Ukraine,

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<v Speaker 11>who have long been asking for them. South Korea and

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<v Speaker 11>the US have begun their biggest ever live fire drills.

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<v Speaker 11>The first day of the exercise took place just twenty

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<v Speaker 11>five miles from the border with North Korea, which has

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<v Speaker 11>threatened retaliation for the drills. Around two five hundred soldiers

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<v Speaker 11>and six hundred and ten pieces of equipment, which includes

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<v Speaker 11>fighter jets, tanks, and rocket launchers, participated. South Korean President

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<v Speaker 11>unsukyul has been advocating for joint drills between the two

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<v Speaker 11>allies after his predecessor moonjay In had suspended and scaled

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<v Speaker 11>them back during his reign, along with former President Trump

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<v Speaker 11>as both sides tried to improve relations with the North.

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<v Speaker 11>A man has been arrested in London after crashing his

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<v Speaker 11>car into the gates of Downing Street, the road which

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<v Speaker 11>includes the residence of the Prime Minister. The driver was

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<v Speaker 11>arrested by armed police officers who continued to investigate the incident.

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<v Speaker 11>There were no reported injuries following the crash, which occurred

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<v Speaker 11>around four to twenty in the afternoon. Prime Minister Rishi

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<v Speaker 11>Sunak's office did not comment if Sunek was in his

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<v Speaker 11>residence when the incident occurred. Global News twenty four hours

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<v Speaker 11>a day, powered by more than twenty seven hundred journalists

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<v Speaker 11>and analysts in more than one hundred and twenty countries.

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<v Speaker 11>I'm Dan Schwartzman. This is Bloomberg.

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<v Speaker 1>I'm Brian Curtis, along with Rashad Salama, and our guest

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<v Speaker 1>is Joan Feene, partner and portfolio manager at Advisors Capital Management. Joanne,

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<v Speaker 1>we laid out all the top stories today. Everybody knows

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<v Speaker 1>what's ongoing with the debt ceiling talks and FED positioning

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<v Speaker 1>in China's uneven recovery. You have to say one thing

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<v Speaker 1>about this year. It's been an excellent one for stock picking.

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<v Speaker 1>Do you think that continues?

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<v Speaker 13>Well, Hey, Brian, Yeah, I think so. And the reason

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<v Speaker 13>is there's still lots of sources of uncertainty. You mentioned right,

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<v Speaker 13>the debt sealing, but also you know the concern that

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<v Speaker 13>we could end up in a recession later on in

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<v Speaker 13>the year. Interest rates are going to remain high and

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<v Speaker 13>that's becoming an increasing challenge, certainly for some segments of

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<v Speaker 13>the consumer population.

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<v Speaker 3>All right, well certainly, but do you think that the

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<v Speaker 3>sin of reserve is in u of you getting it right?

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<v Speaker 9>Yeah? Broadly, Shad.

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<v Speaker 13>I mean, look, the inflation that emerged because of the

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<v Speaker 13>pandemic and the shortages and the ongoing strength and demand

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<v Speaker 13>because of all the government transfers certainly put the US

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<v Speaker 13>economy in a bit of a pickle. And it's you know,

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<v Speaker 13>it's it was severe and it's going to take a

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<v Speaker 13>long time to get inflation back down. You know, in

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<v Speaker 13>our view, they're doing the right thing here, and I

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<v Speaker 13>think they're trying to signal then interest rates are going

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<v Speaker 13>to have to remain high for longer than what the

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<v Speaker 13>market currently expects. Whether that leads us to a recession

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<v Speaker 13>in the form of a surge in unemployment has yet

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<v Speaker 13>to be determined, because that labor market is awfully strong.

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<v Speaker 13>So can the Fed balance Hey, maybe lower demand without

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<v Speaker 13>getting that unemployment up, that's the big question.

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<v Speaker 1>But Joan, don't you think where the rubber meets the

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<v Speaker 1>road is once you start seeing layoffs and recession kind

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<v Speaker 1>of settling in that even if inflation is a little high,

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<v Speaker 1>that the approach by the Fed may switch a little.

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<v Speaker 1>It may, you know, move a little bit more to

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<v Speaker 1>preventing a deep recession rather than bringing inflation down that

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<v Speaker 1>last mile from say four percent to two percent. Don't

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<v Speaker 1>you think that's likely given what we know about the FED, I.

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<v Speaker 9>Wouldn't say it's likely. Clearly they have a duel mandate.

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<v Speaker 13>You're right, they have to do stabilized prices and you know,

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<v Speaker 13>support maximum employment. However, the fedch credibility is at stake

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<v Speaker 13>here and that's what leads us to believe it's more

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<v Speaker 13>likely that they are going to keep pushing against the

0:11:45.200 --> 0:11:48.680
<v Speaker 13>inflation you know trends that we have, and so you

0:11:48.720 --> 0:11:50.920
<v Speaker 13>know it'd be unlikely for them to change that target

0:11:50.960 --> 0:11:52.720
<v Speaker 13>that's been communicated for just so long.

0:11:53.280 --> 0:11:56.000
<v Speaker 9>And you know, the data on the economy actually isn't

0:11:56.040 --> 0:11:56.400
<v Speaker 9>so bad.

0:11:56.400 --> 0:11:58.960
<v Speaker 13>We're certainly seeing some parts of the economy slow down,

0:11:58.960 --> 0:12:00.520
<v Speaker 13>but that's to be expected to give in the surge

0:12:00.559 --> 0:12:03.439
<v Speaker 13>parts of the economy saw during the during the COVID know,

0:12:03.520 --> 0:12:04.400
<v Speaker 13>height of the crisis.

0:12:04.840 --> 0:12:06.440
<v Speaker 9>But you know, look at the job numbers.

0:12:06.440 --> 0:12:09.480
<v Speaker 13>They've actually been revised over the last few weeks downwards

0:12:09.520 --> 0:12:09.960
<v Speaker 13>in terms.

0:12:09.840 --> 0:12:12.040
<v Speaker 9>Of those unemployment numbers the initial claims.

0:12:12.520 --> 0:12:15.040
<v Speaker 13>So it's not clear yet whether we're seeing any kind

0:12:15.040 --> 0:12:17.480
<v Speaker 13>of broad weakening and labor market remains.

0:12:18.440 --> 0:12:21.319
<v Speaker 1>You can't be you can't really be positive on equities

0:12:21.360 --> 0:12:22.040
<v Speaker 1>with your view.

0:12:22.559 --> 0:12:24.480
<v Speaker 9>We invest in specific equities.

0:12:24.559 --> 0:12:27.000
<v Speaker 13>So we typically hold between forty and fifty equities and

0:12:27.040 --> 0:12:30.480
<v Speaker 13>client portfolios in the various strategies that we offer, and

0:12:30.520 --> 0:12:32.920
<v Speaker 13>so we may not be positive on the overall.

0:12:32.559 --> 0:12:34.200
<v Speaker 9>Market like the S and P five hundred.

0:12:34.520 --> 0:12:36.440
<v Speaker 13>But as you started out saying, right, is this a

0:12:36.480 --> 0:12:37.960
<v Speaker 13>stock pickers situation?

0:12:38.040 --> 0:12:38.719
<v Speaker 9>I agree it is.

0:12:39.120 --> 0:12:41.800
<v Speaker 13>And so you know, you know, for example, you know

0:12:41.880 --> 0:12:44.600
<v Speaker 13>we since since Nvidia is in the news, right, you know,

0:12:44.679 --> 0:12:47.480
<v Speaker 13>we locked into AI many years ago. You know, I'm

0:12:47.480 --> 0:12:51.040
<v Speaker 13>a former semiconductor analyst, and so you know, looking at Nvidia,

0:12:51.160 --> 0:12:55.520
<v Speaker 13>A m D and Broadcom for example, all feed into

0:12:55.559 --> 0:12:58.240
<v Speaker 13>the growth of data centers. Then you layered AI on

0:12:58.280 --> 0:13:00.560
<v Speaker 13>top of that starting in the fall and became really

0:13:00.559 --> 0:13:03.920
<v Speaker 13>publicly understood. And you know, we've been in these stocks

0:13:03.960 --> 0:13:07.240
<v Speaker 13>for a long time. So there's room here still for

0:13:07.440 --> 0:13:10.600
<v Speaker 13>growth in real sales and in real profits in parts

0:13:10.600 --> 0:13:13.240
<v Speaker 13>of the economy, and I think that's where investors need

0:13:13.280 --> 0:13:14.160
<v Speaker 13>to focus their attention.

0:13:14.360 --> 0:13:15.840
<v Speaker 3>I want to pick up with that, and also just

0:13:15.880 --> 0:13:17.839
<v Speaker 3>to use the same analogy that Brian did and say,

0:13:17.840 --> 0:13:20.120
<v Speaker 3>you know where the rubber meats are is earnings. And

0:13:20.920 --> 0:13:23.520
<v Speaker 3>there are some people and indeed there's a lot of

0:13:23.520 --> 0:13:25.720
<v Speaker 3>evidence to show that these were no ways as bad

0:13:25.760 --> 0:13:29.079
<v Speaker 3>as fear and perhaps you know, the thing is that's

0:13:29.480 --> 0:13:31.240
<v Speaker 3>a shapey economies not heading off a cliff.

0:13:31.520 --> 0:13:34.360
<v Speaker 13>Yeah, I think that's that's certainly showing up in the data. Right,

0:13:34.400 --> 0:13:36.280
<v Speaker 13>all these earnings reports coming in a little bit better,

0:13:36.360 --> 0:13:38.280
<v Speaker 13>not all, but you know, on average coming in better

0:13:38.320 --> 0:13:41.400
<v Speaker 13>than expected. But we shouldn't, you know, overlook the areas

0:13:41.400 --> 0:13:44.600
<v Speaker 13>of weakness in the economy. You know, smartphones, PCs still

0:13:44.600 --> 0:13:47.040
<v Speaker 13>attle low. Looks like inventory is clearing, that's going to

0:13:47.040 --> 0:13:49.280
<v Speaker 13>be better. But the consumer you have to really watch

0:13:49.320 --> 0:13:50.760
<v Speaker 13>and differentiate the types of.

0:13:50.679 --> 0:13:51.880
<v Speaker 9>Consumers that are out there.

0:13:52.280 --> 0:13:55.040
<v Speaker 13>You know, I think the middle market of retail of

0:13:55.160 --> 0:13:58.319
<v Speaker 13>restaurants could face some real risk later on in the

0:13:58.400 --> 0:14:01.760
<v Speaker 13>year as consumers continue to tighten their budgets. That's why

0:14:01.800 --> 0:14:04.000
<v Speaker 13>we like instead, you know, a company like a TJ MAAX,

0:14:04.120 --> 0:14:07.679
<v Speaker 13>for example, show in the middle of the consumer market.

0:14:08.200 --> 0:14:12.640
<v Speaker 1>You mentioned Broadcom av Go there and also I mentioned

0:14:12.640 --> 0:14:16.080
<v Speaker 1>earlier that atvan Test in Japan was up sixteen percent.

0:14:16.559 --> 0:14:21.600
<v Speaker 1>Chip a chip testing devices company a TSMC rally twelve percent.

0:14:22.360 --> 0:14:24.680
<v Speaker 1>There are a lot of other companies that are benefiting

0:14:24.720 --> 0:14:28.720
<v Speaker 1>from this AI enthusiasm. How are you positioning there.

0:14:28.840 --> 0:14:31.160
<v Speaker 13>Yeah, so you know, we have different types of strategies

0:14:31.160 --> 0:14:33.120
<v Speaker 13>in our growth strategy. That's probably where we have the

0:14:33.160 --> 0:14:35.960
<v Speaker 13>most AI exposure, and it's you know, it's in Nvidia,

0:14:36.400 --> 0:14:41.240
<v Speaker 13>It's Broadcom, Microsoft, Amazon Service now on the software side,

0:14:41.280 --> 0:14:45.760
<v Speaker 13>Splunk on the software side, AMD more chips, Qualcom is

0:14:45.840 --> 0:14:49.280
<v Speaker 13>probably a little bit less exposed to AI, but potentially

0:14:49.320 --> 0:14:51.200
<v Speaker 13>we don't own it in our growth strategy. We owned

0:14:51.200 --> 0:14:54.200
<v Speaker 13>it imbalanced and then imbalanced, you know, which is a

0:14:54.200 --> 0:14:55.479
<v Speaker 13>more conservative strategy.

0:14:55.760 --> 0:14:57.680
<v Speaker 9>We don't go for as much as those are really

0:14:57.720 --> 0:15:00.640
<v Speaker 9>high volatile stocks. But Taiwan Semi is a there.

0:15:00.640 --> 0:15:04.560
<v Speaker 3>So actually, as you foremost semiconductor analyst Joe, and you

0:15:04.600 --> 0:15:08.760
<v Speaker 3>know what separates AMD from the rest NOTMD I beg

0:15:08.800 --> 0:15:13.160
<v Speaker 3>your Pardonervidia given what it actually produced in terms of

0:15:13.200 --> 0:15:15.720
<v Speaker 3>its results and its forecast. Nobody else has beaten that

0:15:15.840 --> 0:15:19.560
<v Speaker 3>bullish and you know, is anybody like that out there?

0:15:19.680 --> 0:15:20.520
<v Speaker 3>Is it just a one off?

0:15:20.600 --> 0:15:20.760
<v Speaker 4>You know?

0:15:20.840 --> 0:15:23.920
<v Speaker 13>It really does come down to the technology, and what

0:15:24.120 --> 0:15:26.680
<v Speaker 13>Nvidia has developed over time is a certain type of

0:15:26.720 --> 0:15:31.480
<v Speaker 13>graphic processing unit a GPU that can serve as a sidecar,

0:15:31.560 --> 0:15:35.040
<v Speaker 13>if you like, to the main processor in the servers CPU,

0:15:35.080 --> 0:15:38.800
<v Speaker 13>and that acceleration of computation is everything you need for AI.

0:15:39.200 --> 0:15:44.840
<v Speaker 1>Joined feoene partner and portfolio manager Advisor's Capital Management. This

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<v Speaker 1>is Bloomberg Daybreak Asia, your morning brief on the story

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