1 00:00:00,240 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,880 Speaker 1: Eastern on Apple Coarclay, and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,520 Speaker 1: or watch us live on YouTube. 6 00:00:23,160 --> 00:00:27,080 Speaker 2: Through TikTok Chinese parents Byte Dance, they have closed the 7 00:00:27,160 --> 00:00:30,960 Speaker 2: deal to transfer transfer parts of their US operations to 8 00:00:31,000 --> 00:00:34,720 Speaker 2: American investors, securing the app's future in the US and 9 00:00:34,840 --> 00:00:37,760 Speaker 2: avoiding a shutdown, which I know is big for the 10 00:00:37,840 --> 00:00:40,800 Speaker 2: gajillions of folks that are on TikTok. Matthew Sheltenhelm joins 11 00:00:40,880 --> 00:00:44,000 Speaker 2: us here. He's a media litigation analyst for Bloomberg Intelligence. 12 00:00:44,240 --> 00:00:46,839 Speaker 2: He's based down there in Washington, d C. Matt talk 13 00:00:46,880 --> 00:00:49,800 Speaker 2: to us about this deal for TikTok. This seems to be, 14 00:00:50,400 --> 00:00:53,280 Speaker 2: I guess, probably the best outcome for certainly TikTok users. 15 00:00:53,280 --> 00:00:54,520 Speaker 3: What do you what do you make of it? 16 00:00:55,280 --> 00:00:55,520 Speaker 2: Yeah? 17 00:00:55,560 --> 00:00:58,080 Speaker 4: I think this is getting to be the end of 18 00:00:58,120 --> 00:01:03,360 Speaker 4: this long lingering drama, this big open question of how 19 00:01:04,080 --> 00:01:08,759 Speaker 4: is this effective ban on this app going to play out? 20 00:01:09,120 --> 00:01:09,959 Speaker 3: This looks like. 21 00:01:09,880 --> 00:01:14,960 Speaker 4: A resolution that should keep TikTok continuing to operate in 22 00:01:15,000 --> 00:01:20,480 Speaker 4: the United States and under a new structure that is 23 00:01:20,560 --> 00:01:24,200 Speaker 4: majority owned in the US itself. I think there are 24 00:01:24,680 --> 00:01:29,200 Speaker 4: real questions about whether this really adheres to all the 25 00:01:29,319 --> 00:01:33,200 Speaker 4: limits in the law that Congress adopted. But at the 26 00:01:33,240 --> 00:01:34,920 Speaker 4: same time, I'm not sure there's going to be much 27 00:01:34,959 --> 00:01:38,600 Speaker 4: will to push back on that. At this point, it's 28 00:01:38,680 --> 00:01:41,480 Speaker 4: looking like this might be the end of this saga, 29 00:01:41,600 --> 00:01:44,920 Speaker 4: and it might let TikTok continue under this new structure. 30 00:01:45,440 --> 00:01:47,760 Speaker 2: So one of the concerns I think a lot of 31 00:01:47,800 --> 00:01:51,960 Speaker 2: folks kind of carried was didn't want the Chinese government 32 00:01:51,960 --> 00:01:57,800 Speaker 2: to access have access to US residents data, their personal information. 33 00:01:58,160 --> 00:01:59,720 Speaker 2: Do we have safeguards up for that? 34 00:01:59,840 --> 00:02:02,160 Speaker 3: Now? How does this deal assure that? 35 00:02:03,200 --> 00:02:06,080 Speaker 4: Well, so, you know, at the time that that this 36 00:02:06,160 --> 00:02:09,280 Speaker 4: all played out in the courts, TikTok was pushing for 37 00:02:09,280 --> 00:02:13,840 Speaker 4: for an arrangement called Project Texas, which had Oracle overseeing 38 00:02:14,000 --> 00:02:16,520 Speaker 4: a lot of this data and and and protecting it 39 00:02:16,520 --> 00:02:19,320 Speaker 4: from going, you know, in theory, back to China. 40 00:02:19,040 --> 00:02:20,400 Speaker 3: Where where it would be at risk. 41 00:02:20,680 --> 00:02:23,440 Speaker 4: What we see here is sort of a similar arrangement 42 00:02:23,560 --> 00:02:27,200 Speaker 4: that they all ultimately settled on, where Oracle and other 43 00:02:27,360 --> 00:02:32,000 Speaker 4: US investors run this new entity, and that new new 44 00:02:32,240 --> 00:02:36,800 Speaker 4: entity would be in charge of overseeing US data under 45 00:02:37,120 --> 00:02:41,720 Speaker 4: Oracle's leadership. So it's a very similar arrangement in that sense. 46 00:02:42,080 --> 00:02:44,840 Speaker 4: The thing that that's sort of not clear here, though, 47 00:02:45,000 --> 00:02:47,280 Speaker 4: is that the law also says there can't be any 48 00:02:47,320 --> 00:02:52,520 Speaker 4: sort of operational relationship between the US entity and Byte Dance, 49 00:02:53,040 --> 00:02:55,520 Speaker 4: and and there's when you read through the materials. We 50 00:02:55,560 --> 00:02:57,680 Speaker 4: don't have the actual contracts here, but when you read 51 00:02:57,680 --> 00:03:00,120 Speaker 4: through the press release, it doesn't say much at all 52 00:03:00,200 --> 00:03:06,239 Speaker 4: about limiting any sort of operational relationship between the US 53 00:03:06,400 --> 00:03:09,240 Speaker 4: entity and bytenance. That was really an animating concern. So 54 00:03:09,600 --> 00:03:12,560 Speaker 4: I'm not sure that they've they've checked all the boxes 55 00:03:12,600 --> 00:03:14,840 Speaker 4: in that sense, but there are protections here. This is 56 00:03:14,880 --> 00:03:18,959 Speaker 4: a US entity under Oracle's leadership checking on this data. 57 00:03:20,000 --> 00:03:22,560 Speaker 2: Does this arrangement have any precedent for some of the 58 00:03:22,600 --> 00:03:24,920 Speaker 2: other Chinese companies that operate in the US. I'm thinking 59 00:03:24,919 --> 00:03:28,600 Speaker 2: like an Ali Baba or a tencenter by do does 60 00:03:28,639 --> 00:03:29,760 Speaker 2: that have any application? 61 00:03:31,600 --> 00:03:34,839 Speaker 4: You know, it's it's really difficult to say that this 62 00:03:34,960 --> 00:03:38,080 Speaker 4: is anything more than a one off. This this you know, 63 00:03:38,160 --> 00:03:42,360 Speaker 4: the TikTok situation sort of drove a unique pushback. It 64 00:03:42,440 --> 00:03:45,760 Speaker 4: was a strange situation where Congress was aligned on this 65 00:03:46,360 --> 00:03:50,800 Speaker 4: and we had Democrats and Republicans joining together saying absolutely, 66 00:03:50,840 --> 00:03:53,640 Speaker 4: we need to ban this app unless we fix this. 67 00:03:54,840 --> 00:03:58,640 Speaker 4: And you haven't really seen anything like that for other 68 00:03:58,720 --> 00:04:02,320 Speaker 4: apps come together, and especially with President Trump pushing back 69 00:04:02,400 --> 00:04:07,000 Speaker 4: on this, that really discouraged lawmakers from stepping up on 70 00:04:07,080 --> 00:04:09,160 Speaker 4: this issue. So I don't really see a lot of 71 00:04:09,200 --> 00:04:12,160 Speaker 4: read through to other companies right away. 72 00:04:12,920 --> 00:04:16,080 Speaker 2: So this new entity, it's got some private I guess 73 00:04:16,160 --> 00:04:18,599 Speaker 2: equity our americ American investors, private equity investors. 74 00:04:18,640 --> 00:04:21,560 Speaker 3: Is there? Where does a value a crew here? How 75 00:04:21,600 --> 00:04:22,279 Speaker 3: does that work? 76 00:04:22,360 --> 00:04:24,320 Speaker 2: Is there gonna be an IPO of this US business 77 00:04:24,320 --> 00:04:26,360 Speaker 2: at some point or would just stay privately held? 78 00:04:26,400 --> 00:04:26,800 Speaker 3: Do you think? 79 00:04:27,400 --> 00:04:30,040 Speaker 4: You know, it's really tough to say. We've had some 80 00:04:30,120 --> 00:04:34,400 Speaker 4: reporting that suggests there's a revenue share arrangement that you 81 00:04:34,440 --> 00:04:37,920 Speaker 4: know goes you know, for all of the TikTok data 82 00:04:38,000 --> 00:04:41,680 Speaker 4: going forward, but really unclear. You know, we don't have 83 00:04:41,760 --> 00:04:45,680 Speaker 4: the terms of of this arrangement and how it plays 84 00:04:45,680 --> 00:04:49,200 Speaker 4: out going forward, So a lot of missing details on 85 00:04:49,640 --> 00:04:52,400 Speaker 4: questions like that, and we're kind of reading between the 86 00:04:52,440 --> 00:04:54,800 Speaker 4: lines on the press releases. What we know here is 87 00:04:54,839 --> 00:04:57,919 Speaker 4: this follows the law in the sense that byte Dance 88 00:04:58,000 --> 00:05:02,240 Speaker 4: ownership falls below twenty perc as that was a key 89 00:05:02,320 --> 00:05:05,839 Speaker 4: term in the law. It's not clear that it goes 90 00:05:05,880 --> 00:05:09,520 Speaker 4: beyond that in you know, obviously byt Dance would still 91 00:05:09,560 --> 00:05:12,840 Speaker 4: own the algorithm here, which was a big driver. And 92 00:05:12,920 --> 00:05:16,040 Speaker 4: so this new entity doesn't own, you know, the most 93 00:05:16,080 --> 00:05:19,240 Speaker 4: valuable piece of this business. So that you know that 94 00:05:19,440 --> 00:05:23,719 Speaker 4: definitely limits you know, future returns for this new entity. 95 00:05:24,760 --> 00:05:27,920 Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this. 96 00:05:31,760 --> 00:05:35,440 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 97 00:05:35,560 --> 00:05:38,640 Speaker 1: weekdays at ten am Eastern on Apple, Coarcklay, and Android 98 00:05:38,640 --> 00:05:41,960 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 99 00:05:42,000 --> 00:05:45,120 Speaker 1: you get your podcasts, or watch us live on YouTube. 100 00:05:46,000 --> 00:05:47,400 Speaker 3: Let's get back to some stocks. 101 00:05:47,480 --> 00:05:51,240 Speaker 2: Intel shares pluned about fifteen percent after Chief executive officer 102 00:05:51,400 --> 00:05:54,919 Speaker 2: lipboot Ten gave a lackluster forecast and warned that the 103 00:05:55,040 --> 00:05:57,680 Speaker 2: chip maker was struggling with manufacturing problems. 104 00:05:57,760 --> 00:06:01,120 Speaker 3: Let's get some more analysis on that. Angelo Zino joins us. 105 00:06:01,120 --> 00:06:05,600 Speaker 2: He's a senior vice president equity analyst for cfr A Research. 106 00:06:06,040 --> 00:06:08,680 Speaker 2: Joining us via zoom here. Angel talk to us about 107 00:06:08,760 --> 00:06:12,000 Speaker 2: Intel the stocket had such a twelvemonth ride here. Now 108 00:06:12,000 --> 00:06:13,960 Speaker 2: it's pulling back on some I guess some guidance that 109 00:06:14,000 --> 00:06:15,520 Speaker 2: was a little lesson where the street wanted. 110 00:06:16,640 --> 00:06:19,440 Speaker 5: Yeah, so thanks for having me, and you're absolutely right. 111 00:06:19,520 --> 00:06:21,720 Speaker 5: I mean, i'd say that the biggest takeaway here is 112 00:06:21,800 --> 00:06:26,360 Speaker 5: absolutely the guidance and listen, it's the biggest issue is 113 00:06:26,680 --> 00:06:29,839 Speaker 5: actually not a demand issue. They're finally actually seeing improving 114 00:06:29,880 --> 00:06:32,760 Speaker 5: demand for their products. The bigger issue is that they 115 00:06:32,800 --> 00:06:37,200 Speaker 5: are supply constrained in many respects, and that's problematic. A 116 00:06:37,200 --> 00:06:39,640 Speaker 5: lot of this is being self inflicted in the sense 117 00:06:39,680 --> 00:06:42,440 Speaker 5: that they were, you know, many respects, quote flat footed, 118 00:06:42,560 --> 00:06:45,719 Speaker 5: didn't have the inventory to really meet that the expected 119 00:06:45,800 --> 00:06:48,040 Speaker 5: higher demand here going into the first half of the year, 120 00:06:48,240 --> 00:06:50,800 Speaker 5: so you know, they're going to have to be some 121 00:06:50,839 --> 00:06:54,360 Speaker 5: adjustents being made here. The key really is going to 122 00:06:54,400 --> 00:06:59,960 Speaker 5: be the recent ramp or unveiling of their eighteen A technology. 123 00:07:00,600 --> 00:07:02,960 Speaker 5: We're going to have to see some yield improvements there 124 00:07:03,080 --> 00:07:06,720 Speaker 5: and the hope is that results in better supply as 125 00:07:07,360 --> 00:07:09,360 Speaker 5: we go into the second half of the year and 126 00:07:09,440 --> 00:07:13,720 Speaker 5: also potentially announced to new external customers later in the year. 127 00:07:14,560 --> 00:07:16,320 Speaker 6: And of course we're setting up for what's going to 128 00:07:16,320 --> 00:07:20,640 Speaker 6: be a gigantic week of earnings. It typically gets a 129 00:07:20,720 --> 00:07:23,120 Speaker 6: super busy around that now, and of course we've got 130 00:07:23,200 --> 00:07:28,840 Speaker 6: big tech reporting to Tesla Metal and Microsoft Apple. How 131 00:07:28,920 --> 00:07:30,720 Speaker 6: high is the bar right now? Because I think about 132 00:07:30,720 --> 00:07:33,080 Speaker 6: what happened with the banks, and you know, by and 133 00:07:33,160 --> 00:07:36,000 Speaker 6: large they came in when in with decent results, but 134 00:07:36,280 --> 00:07:39,600 Speaker 6: because some areas were not as good as had been anticipated, 135 00:07:40,080 --> 00:07:42,600 Speaker 6: they didn't get the reception that they normally would have. 136 00:07:44,000 --> 00:07:44,200 Speaker 7: Yeah. 137 00:07:44,320 --> 00:07:46,560 Speaker 5: No, I think that's a good question, And listen, I 138 00:07:46,600 --> 00:07:48,680 Speaker 5: think it depends on the name we're talking about in 139 00:07:48,720 --> 00:07:50,520 Speaker 5: this instance. Like if you were to ask me about 140 00:07:50,560 --> 00:07:52,520 Speaker 5: a name like Alphabet, which is you know, more than 141 00:07:52,560 --> 00:07:57,080 Speaker 5: double off its April lows and you know it's coming 142 00:07:57,160 --> 00:08:00,679 Speaker 5: on here really really hot, I'd say, is very little 143 00:08:00,680 --> 00:08:03,240 Speaker 5: margin for or they better throw out some Gemini three 144 00:08:03,320 --> 00:08:06,200 Speaker 5: numbers that are just really eye popping in many respects. 145 00:08:06,280 --> 00:08:07,720 Speaker 5: But when we start thinking about a lot of the 146 00:08:07,760 --> 00:08:10,840 Speaker 5: other megacap tech names, I think a good one would be, 147 00:08:11,080 --> 00:08:14,000 Speaker 5: you know, a name like a Microsoft Valuations there I 148 00:08:14,000 --> 00:08:16,360 Speaker 5: think are really enticing. At this point in time, it's 149 00:08:16,360 --> 00:08:20,320 Speaker 5: been a relative underperformers since they've reported Q three results. 150 00:08:20,680 --> 00:08:23,800 Speaker 5: Expectations have actually gone up so that the you know, 151 00:08:23,840 --> 00:08:27,200 Speaker 5: we're looking at fairly enticing valuations across certain names. A 152 00:08:27,400 --> 00:08:29,640 Speaker 5: Metas I think another good example where it seems like 153 00:08:29,640 --> 00:08:32,360 Speaker 5: there's a lot of bad news baked into the name. 154 00:08:32,480 --> 00:08:34,640 Speaker 5: So it all depends on the name we're looking at it. 155 00:08:34,720 --> 00:08:36,640 Speaker 5: At this point in time, I would say, you know, 156 00:08:36,720 --> 00:08:39,559 Speaker 5: when we look across the board of Big Tech, I'd 157 00:08:39,600 --> 00:08:43,160 Speaker 5: say the most important thing, or I'd say the one 158 00:08:43,200 --> 00:08:45,080 Speaker 5: item that everybody has to look out for is the 159 00:08:45,120 --> 00:08:49,280 Speaker 5: cap X targets here for this upcoming quarter and for 160 00:08:49,320 --> 00:08:51,640 Speaker 5: the upcoming year. And the biggest reason I say that 161 00:08:51,720 --> 00:08:54,480 Speaker 5: is we've got so many bottlenecks going on, you know, 162 00:08:55,480 --> 00:08:59,400 Speaker 5: component price increases. It'll be interesting to see how much 163 00:08:59,400 --> 00:09:03,000 Speaker 5: of an increase we get, you know, from these Cyperscollers Angela. 164 00:09:03,080 --> 00:09:05,440 Speaker 2: As it relates to Intel, where is the problem in 165 00:09:05,480 --> 00:09:09,840 Speaker 2: the getting enough supply the supply chain issue? Except we 166 00:09:09,880 --> 00:09:12,400 Speaker 2: hear from others other than Intel as well, what's going 167 00:09:12,440 --> 00:09:12,960 Speaker 2: on out there? 168 00:09:13,760 --> 00:09:17,439 Speaker 5: I mean, I think, you know, it depends in many instances, 169 00:09:17,440 --> 00:09:19,839 Speaker 5: but you know, the biggest bottleneck across the supply chain 170 00:09:20,000 --> 00:09:24,040 Speaker 5: right now is absolutely the memory bottlenecks, right I mean, 171 00:09:24,240 --> 00:09:26,400 Speaker 5: we've seen it in the stock prices for many of 172 00:09:26,440 --> 00:09:29,199 Speaker 5: these stories related names. But you kind of look at 173 00:09:29,200 --> 00:09:31,439 Speaker 5: the kind of the shift towards high bandwidth memory, the 174 00:09:31,960 --> 00:09:36,080 Speaker 5: greater memory that's needed as we shift, especially from high 175 00:09:36,080 --> 00:09:38,600 Speaker 5: band with memory two three to high band with memory 176 00:09:38,600 --> 00:09:41,680 Speaker 5: four as Reuben launches in the middle of this year, 177 00:09:42,520 --> 00:09:44,800 Speaker 5: there is you know, there is a ton of demand 178 00:09:44,920 --> 00:09:48,360 Speaker 5: out there for memory and there's just not enough supply 179 00:09:48,440 --> 00:09:50,480 Speaker 5: out there, so it's going to result in you know, 180 00:09:50,760 --> 00:09:52,880 Speaker 5: we think a number of issues in areas, you know, 181 00:09:52,920 --> 00:09:57,920 Speaker 5: specifically across the more cyclical areas in the markets like 182 00:09:57,920 --> 00:10:00,199 Speaker 5: like PCs and smartphones where they may not even be 183 00:10:00,280 --> 00:10:03,640 Speaker 5: able to get the actual chips in certain instances. As 184 00:10:03,679 --> 00:10:06,760 Speaker 5: far as the AI server demand is concerned, though, you're 185 00:10:06,760 --> 00:10:09,840 Speaker 5: going to see pricing hikes, and again that's going to 186 00:10:09,880 --> 00:10:13,160 Speaker 5: have an impact on these hyperscalers and likely need for 187 00:10:13,240 --> 00:10:16,880 Speaker 5: them to increase spend if they want to sustain some 188 00:10:16,920 --> 00:10:19,280 Speaker 5: of these cloud type growth numbers. 189 00:10:19,640 --> 00:10:22,319 Speaker 6: Angela, you said you're going to watch for Capex announcements, 190 00:10:22,320 --> 00:10:24,600 Speaker 6: and that's kind of been the theme for the last 191 00:10:24,640 --> 00:10:29,440 Speaker 6: couple of earnings cycles. How much more increases are we 192 00:10:29,480 --> 00:10:31,840 Speaker 6: going to see in these cavex budgets or have the 193 00:10:31,880 --> 00:10:34,199 Speaker 6: companies pretty much telegraphed what they need to. 194 00:10:35,920 --> 00:10:37,480 Speaker 3: Again, I think it depends on the name. 195 00:10:37,600 --> 00:10:39,720 Speaker 5: So you know, I think Microsoft did a really good 196 00:10:39,800 --> 00:10:41,840 Speaker 5: job in kind of ripping off the band aid last 197 00:10:41,920 --> 00:10:44,160 Speaker 5: quarter in terms of saying, hey, listen, we're going to 198 00:10:44,240 --> 00:10:48,400 Speaker 5: go from moderating our CAPEX spend to actually accelerating the 199 00:10:48,480 --> 00:10:51,480 Speaker 5: investments that are needed in throw out exact numbers. But 200 00:10:51,520 --> 00:10:56,079 Speaker 5: the street is, you know, pretty much they understand that 201 00:10:56,280 --> 00:10:59,439 Speaker 5: Microsoft is probably going to have to continue to increase 202 00:10:59,480 --> 00:11:03,920 Speaker 5: their spend because of the elevated demand on the cloud side. 203 00:11:03,960 --> 00:11:07,440 Speaker 5: I will say this from ours and from my understanding, 204 00:11:07,440 --> 00:11:09,960 Speaker 5: I would say there's probably at least five to ten 205 00:11:10,000 --> 00:11:15,240 Speaker 5: percent at the very least upside or need to when 206 00:11:15,280 --> 00:11:18,560 Speaker 5: you look at the CAPEX numbers for a meta and 207 00:11:18,559 --> 00:11:20,719 Speaker 5: an alphabet, where you need to at least boost the 208 00:11:20,760 --> 00:11:22,800 Speaker 5: number the Street numbers out there by at least five 209 00:11:22,840 --> 00:11:27,360 Speaker 5: to ten percent, And hopefully that's something that's well understood 210 00:11:27,360 --> 00:11:27,959 Speaker 5: in the markets. 211 00:11:28,880 --> 00:11:32,000 Speaker 3: Stay with us more from Bloomberg Intelligence coming up after this. 212 00:11:35,920 --> 00:11:39,600 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live 213 00:11:39,679 --> 00:11:42,760 Speaker 1: weekdays at ten am Eastern on Apple Coarclay and Android 214 00:11:42,800 --> 00:11:46,080 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 215 00:11:46,160 --> 00:11:49,680 Speaker 1: you get your podcasts, or watch us live on YouTube. 216 00:11:50,000 --> 00:11:52,880 Speaker 6: Big Tech moves ahead, plows ahead, and China is now 217 00:11:53,080 --> 00:11:56,520 Speaker 6: saying to its tech firms, its homegrown tech firms, get ready, 218 00:11:56,520 --> 00:11:58,679 Speaker 6: you can buy some Nvidia H two hundred chips. 219 00:11:58,760 --> 00:12:01,160 Speaker 3: Nice. Okay, that's good for video, Maybe. 220 00:12:00,920 --> 00:12:03,240 Speaker 6: It's good for in video, it's good for in vidio sales. 221 00:12:03,280 --> 00:12:05,280 Speaker 6: And I mean, does in video then pay a portion 222 00:12:05,320 --> 00:12:06,480 Speaker 6: of that to the US government? 223 00:12:06,640 --> 00:12:08,760 Speaker 3: Ah, that's right? Is that part of the deal. Let's 224 00:12:09,120 --> 00:12:10,000 Speaker 3: ask ed Ludlow. 225 00:12:10,080 --> 00:12:12,240 Speaker 6: He is b Tech's co anchor and he joins US 226 00:12:12,240 --> 00:12:15,440 Speaker 6: now from San Francisco, And is this the chip that 227 00:12:16,040 --> 00:12:18,360 Speaker 6: the company in video would need to share some of 228 00:12:18,400 --> 00:12:20,240 Speaker 6: the proceeds with the US government on? 229 00:12:21,000 --> 00:12:23,760 Speaker 8: That's the agreement on the US government side. And you 230 00:12:23,800 --> 00:12:26,680 Speaker 8: guys summarized it really well, because the biggest consideration and 231 00:12:26,720 --> 00:12:29,160 Speaker 8: hold up on this hasn't even really been the US government. 232 00:12:29,200 --> 00:12:31,960 Speaker 8: It's been well, do the Chinese government even want to 233 00:12:32,040 --> 00:12:34,600 Speaker 8: allow in Vidia to put the H two hundred into China? 234 00:12:35,559 --> 00:12:39,080 Speaker 8: Two things, you know, when I speak to sources on 235 00:12:39,080 --> 00:12:42,840 Speaker 8: the White House side, they always caution, wait until we 236 00:12:42,840 --> 00:12:45,720 Speaker 8: actually see some chips up and running in China. Right now, 237 00:12:45,760 --> 00:12:49,280 Speaker 8: this is just negotiation in the public forum and on paper. 238 00:12:50,280 --> 00:12:54,240 Speaker 8: But when it comes to this sort of revenue sharing 239 00:12:54,240 --> 00:12:57,319 Speaker 8: agreement with the US government, in Vidia's position has always 240 00:12:57,360 --> 00:12:59,760 Speaker 8: been that they ad buide by US laws. And when 241 00:13:00,200 --> 00:13:03,280 Speaker 8: I spoke to the CFO and Video, her point was, 242 00:13:03,280 --> 00:13:06,000 Speaker 8: we're a publicly traded company in the US, and until 243 00:13:06,000 --> 00:13:09,960 Speaker 8: there is a codified mechanism that allows Nvidia to share 244 00:13:10,000 --> 00:13:12,880 Speaker 8: revenues with the US government, she is bound by the 245 00:13:12,960 --> 00:13:15,840 Speaker 8: rules of sarbainez Oxley in the SEC. And so that 246 00:13:15,960 --> 00:13:18,120 Speaker 8: part is still kind of missing as well. But our 247 00:13:18,160 --> 00:13:21,240 Speaker 8: reporting on this overnight did move in VideA shares and 248 00:13:21,320 --> 00:13:24,720 Speaker 8: also TSMC's eighty rs, because this is apparently a fifty 249 00:13:24,720 --> 00:13:28,080 Speaker 8: billion dollars addressable market that for Nvidia's currently zero. But 250 00:13:28,240 --> 00:13:30,920 Speaker 8: also there's the reporting that they have been ramping up 251 00:13:30,960 --> 00:13:35,600 Speaker 8: production capacity with TSMC in anticipation of getting the green. 252 00:13:35,480 --> 00:13:39,800 Speaker 2: Light, and I know investors have effectively removed all Chinese 253 00:13:39,840 --> 00:13:43,679 Speaker 2: related revenue from the forecast for it in video is there. 254 00:13:43,880 --> 00:13:46,360 Speaker 2: What's the point where they start putting that back in there. 255 00:13:47,080 --> 00:13:49,880 Speaker 8: I'd wager that they've remodeled already a little bit. I mean, 256 00:13:49,880 --> 00:13:51,920 Speaker 8: when we were in Vegas to the beginning of the month, 257 00:13:52,400 --> 00:13:55,920 Speaker 8: Bloombergsy and King was sat next to me ten feet 258 00:13:55,960 --> 00:13:58,520 Speaker 8: from Jensen Huang, the CEO of and Video, and said, 259 00:13:58,880 --> 00:14:01,560 Speaker 8: you told us about the five hundred billion dollar figure 260 00:14:01,760 --> 00:14:05,800 Speaker 8: over the next five fiscal quarters that assumes zero revenue 261 00:14:05,840 --> 00:14:09,160 Speaker 8: from China. Could that number get bigger? And Gentsmong's answer 262 00:14:09,320 --> 00:14:12,720 Speaker 8: was yes, it could get bigger, in particular because we 263 00:14:12,760 --> 00:14:14,440 Speaker 8: think we might get some revenues from the H two 264 00:14:14,520 --> 00:14:17,400 Speaker 8: hundred in China. So from that point in early January, 265 00:14:17,440 --> 00:14:20,240 Speaker 8: you'd expect the cell side at least to start trying 266 00:14:20,280 --> 00:14:23,960 Speaker 8: to calculate something. But very difficult because again this is 267 00:14:24,000 --> 00:14:26,560 Speaker 8: a sort of tip for tap behind closed doors at 268 00:14:26,560 --> 00:14:31,160 Speaker 8: the moment, and no H two hundred has moved into Chinese. 269 00:14:30,680 --> 00:14:33,320 Speaker 6: It's all very theoretical right now. No H two hundred 270 00:14:33,320 --> 00:14:36,720 Speaker 6: has actually moved. Everyone's still negotiating everything. What about the 271 00:14:36,880 --> 00:14:40,440 Speaker 6: H twenty processor it's less powerful? Yeah, well you know 272 00:14:40,720 --> 00:14:43,520 Speaker 6: I had to look these up, but the H twenty 273 00:14:43,560 --> 00:14:46,960 Speaker 6: processors is less powerful. But is it still useful to 274 00:14:47,240 --> 00:14:49,400 Speaker 6: Chinese tech companies to do what they need to do? 275 00:14:50,120 --> 00:14:53,600 Speaker 8: So exactly the right point in scarlet. I really appreciate 276 00:14:53,600 --> 00:14:56,520 Speaker 8: you bring it back to H twenty. H twenty even 277 00:14:56,560 --> 00:15:00,920 Speaker 8: more deprecated than H two hundred. When the White House 278 00:15:00,960 --> 00:15:03,720 Speaker 8: and the presidents sat down to decide if they wanted 279 00:15:03,720 --> 00:15:06,880 Speaker 8: to allow Nvidia to do this, the calculus that they considered, 280 00:15:07,080 --> 00:15:09,120 Speaker 8: and I know I've seen the briefing document that was 281 00:15:09,160 --> 00:15:13,320 Speaker 8: shared with the President, is we either export zero technology, 282 00:15:13,360 --> 00:15:15,800 Speaker 8: no matter how deprecated it is, all we let them 283 00:15:15,840 --> 00:15:18,440 Speaker 8: have the absolute latest, or we land somewhere in the 284 00:15:18,480 --> 00:15:21,600 Speaker 8: middle better technology but not the absolute best. And they 285 00:15:21,680 --> 00:15:24,360 Speaker 8: landed on that part in the middle on the basis 286 00:15:24,400 --> 00:15:28,000 Speaker 8: that H twenty isn't that useful, but you want American 287 00:15:28,040 --> 00:15:31,680 Speaker 8: companies to have access and be the main player lead 288 00:15:31,720 --> 00:15:35,640 Speaker 8: the technology stacking an important market China. So two hundred 289 00:15:35,680 --> 00:15:38,720 Speaker 8: is better than H twenty. It's not the absolute latest 290 00:15:38,760 --> 00:15:42,479 Speaker 8: and greatest, but it prevents China from having the impetus 291 00:15:42,840 --> 00:15:46,480 Speaker 8: to allow its domestic champions to try and catch up. 292 00:15:46,680 --> 00:15:48,720 Speaker 8: And that was the calculation that they've made. 293 00:15:49,040 --> 00:15:52,120 Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this. 294 00:15:55,640 --> 00:15:59,320 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live 295 00:15:59,400 --> 00:16:02,800 Speaker 1: weekdays at ten am Eastern on Applecarclay, and Android Auto 296 00:16:02,880 --> 00:16:05,960 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 297 00:16:06,000 --> 00:16:09,360 Speaker 1: get your podcasts, or watch us live on YouTube. 298 00:16:09,760 --> 00:16:13,640 Speaker 2: President Donald Trump assuming JP Morgan Chase and it's CEO 299 00:16:13,760 --> 00:16:17,560 Speaker 2: Jamie Diamond for five billion dollars that's accusing them of 300 00:16:17,600 --> 00:16:21,520 Speaker 2: illegally quote deep banking quote his business is due to 301 00:16:21,600 --> 00:16:22,280 Speaker 2: his politics. 302 00:16:22,320 --> 00:16:24,600 Speaker 3: Let's see what there's any meat to the bone here. 303 00:16:24,600 --> 00:16:28,560 Speaker 2: Eliot Stein, Bloomberg intelligence litigation analyst, joints this here. We 304 00:16:28,680 --> 00:16:30,560 Speaker 2: have to be quick because Elliott he bills us by 305 00:16:30,600 --> 00:16:33,680 Speaker 2: the hour. Here, Elliott is just talk to us about 306 00:16:33,720 --> 00:16:34,080 Speaker 2: this case. 307 00:16:34,080 --> 00:16:36,560 Speaker 3: Does this have merit? Do you think? 308 00:16:37,760 --> 00:16:40,240 Speaker 7: I don't think it does. And the bank came out 309 00:16:40,280 --> 00:16:42,760 Speaker 7: and said yesterday too that they don't think it does either. 310 00:16:43,680 --> 00:16:46,880 Speaker 7: You know that the challenge for President Trump and the 311 00:16:46,920 --> 00:16:50,960 Speaker 7: affiliated Trump entities that are assualing is that the customer 312 00:16:51,040 --> 00:16:55,920 Speaker 7: agreements with JP Morgan allowed the bank to close accounts 313 00:16:56,000 --> 00:17:00,800 Speaker 7: for any reason at any time. And Trump's complained concedes 314 00:17:00,800 --> 00:17:02,960 Speaker 7: that they acknowledge that, so they can't really sue for 315 00:17:03,040 --> 00:17:06,199 Speaker 7: breach of contract. So they're stuck with what's called a 316 00:17:06,480 --> 00:17:09,680 Speaker 7: breach of the implied covenant of good faith and fair dealing, 317 00:17:09,720 --> 00:17:12,639 Speaker 7: which is sort of saying that JP Morgan violated the 318 00:17:12,680 --> 00:17:17,560 Speaker 7: spirit of the contract by, you know, allegedly deep banking 319 00:17:17,800 --> 00:17:21,040 Speaker 7: Trump for political reasons, which is unlawful, But they don't 320 00:17:21,080 --> 00:17:24,639 Speaker 7: cite what law was violated. So I think the Trump 321 00:17:25,760 --> 00:17:28,200 Speaker 7: entities are gonna have a hard time winning this case, 322 00:17:28,200 --> 00:17:30,000 Speaker 7: and I think JP Morgan is a good shot of 323 00:17:30,040 --> 00:17:33,359 Speaker 7: winning on its anticipated motion to dismiss. 324 00:17:33,640 --> 00:17:36,280 Speaker 6: Let me ask a dumb question, Elliott, is this Donald 325 00:17:36,320 --> 00:17:40,280 Speaker 6: Trump the private citizen suing JP Morgan and Jamie Diamond 326 00:17:40,359 --> 00:17:43,720 Speaker 6: or the White House suing JP Morgan and Jamie Diamond. 327 00:17:43,600 --> 00:17:49,639 Speaker 7: Who lives right, it's Trump in his individual capacity, and 328 00:17:49,680 --> 00:17:56,399 Speaker 7: then many Trump organization entities. And you know they're saying 329 00:17:56,440 --> 00:18:01,680 Speaker 7: that after the January sixth riots, JP Morgan closed their account, 330 00:18:01,760 --> 00:18:04,639 Speaker 7: so at that point he wasn't president anymore. 331 00:18:04,680 --> 00:18:08,240 Speaker 2: In any event, is our scenario where maybe just JP Morgan, 332 00:18:08,240 --> 00:18:10,120 Speaker 2: I guess if they don't win summary judgment, maybe they 333 00:18:10,320 --> 00:18:12,080 Speaker 2: just settle out of court or something like that. 334 00:18:12,720 --> 00:18:15,520 Speaker 7: Yeah, I mean, you know that that's certainly within the 335 00:18:15,520 --> 00:18:18,520 Speaker 7: realm of possibilities. I think the Bank's definitely gonna take 336 00:18:18,520 --> 00:18:20,440 Speaker 7: a shot on a motion to dismiss. You know, we'll 337 00:18:20,440 --> 00:18:24,399 Speaker 7: probably see that in the coming weeks and then you know, 338 00:18:24,400 --> 00:18:25,919 Speaker 7: and I think they have a good shot at winning that, 339 00:18:26,000 --> 00:18:29,000 Speaker 7: but you know, it's a pretty low bar generally for 340 00:18:29,040 --> 00:18:31,679 Speaker 7: a plaintiff to get over and motion to dismiss. They 341 00:18:31,760 --> 00:18:34,600 Speaker 7: just have to allege, you know, plausible allegations. 342 00:18:35,440 --> 00:18:36,920 Speaker 3: But so let's say JP. 343 00:18:36,760 --> 00:18:39,000 Speaker 7: Morgan loses on its motion to dismiss and the case 344 00:18:39,040 --> 00:18:42,200 Speaker 7: proceeds into discovery. JP Morgan will have another shot on 345 00:18:42,240 --> 00:18:46,439 Speaker 7: summary judgment to try to avoid trial and say that 346 00:18:46,480 --> 00:18:49,160 Speaker 7: there's not enough you know, facts developed to warrant going 347 00:18:49,200 --> 00:18:52,920 Speaker 7: to trial. I think if they lose that, then you're 348 00:18:52,960 --> 00:18:55,800 Speaker 7: talking about a settlement rather than going to trial. And 349 00:18:55,840 --> 00:18:59,320 Speaker 7: we've seen Trump sort of win settlements from other you know, 350 00:18:59,400 --> 00:19:01,919 Speaker 7: business and these that he's sued, especially in the media 351 00:19:01,960 --> 00:19:07,960 Speaker 7: space like ABC and Paramount and YouTube, Google and others, 352 00:19:07,960 --> 00:19:10,000 Speaker 7: you know, sort of in this like fifteen to twenty 353 00:19:10,000 --> 00:19:14,360 Speaker 7: five million dollar ring. So that's potentially an outcome that 354 00:19:14,520 --> 00:19:16,160 Speaker 7: we're not rolling out down the road. 355 00:19:17,960 --> 00:19:20,760 Speaker 6: So the other angle to this is that JP Morgan 356 00:19:21,280 --> 00:19:25,400 Speaker 6: has asked or says it has asked multiple administrations under 357 00:19:25,400 --> 00:19:29,800 Speaker 6: different presidents to change rules that oversee it and other 358 00:19:29,880 --> 00:19:32,600 Speaker 6: banks that quote put us in this position, put us 359 00:19:32,640 --> 00:19:35,119 Speaker 6: in this position to perhaps restrict some clients access to 360 00:19:35,160 --> 00:19:41,880 Speaker 6: banking services because of various requirements or overviews. What kind 361 00:19:41,960 --> 00:19:46,200 Speaker 6: of rules are in place that that JP Morgan might 362 00:19:46,240 --> 00:19:47,160 Speaker 6: be put in this position? 363 00:19:48,080 --> 00:19:48,240 Speaker 1: Right? 364 00:19:48,320 --> 00:19:53,360 Speaker 7: So, during the Bien administration, the bank and regulators sort 365 00:19:53,359 --> 00:19:57,240 Speaker 7: of made it easier for banks to close accounts for 366 00:19:57,880 --> 00:20:01,560 Speaker 7: legal or reputational risk. You know, they got a lot 367 00:20:01,560 --> 00:20:04,800 Speaker 7: of criticism from that from industries like the crypto industry 368 00:20:04,880 --> 00:20:10,920 Speaker 7: and certainly from you know, other conservative causes who said 369 00:20:11,280 --> 00:20:16,679 Speaker 7: that banks were closing accounts for you know, related to 370 00:20:16,720 --> 00:20:20,640 Speaker 7: industries that maybe were considered you know, not woken off 371 00:20:20,720 --> 00:20:24,520 Speaker 7: or not popular on the left, like gun industries and 372 00:20:24,560 --> 00:20:26,560 Speaker 7: things like that. So we've sort of seen a shift 373 00:20:26,600 --> 00:20:29,320 Speaker 7: away from that now in the Trump administration, where the 374 00:20:29,320 --> 00:20:32,520 Speaker 7: bank and regulators were sort of stopping that, stopping what 375 00:20:32,560 --> 00:20:35,960 Speaker 7: they what they call Operation Choke point two point zero 376 00:20:36,880 --> 00:20:40,719 Speaker 7: and saying that, you know, banks should not be closing 377 00:20:40,760 --> 00:20:45,760 Speaker 7: accounts so easily for reputational reasons. And actually we've seen 378 00:20:45,760 --> 00:20:49,360 Speaker 7: several states implement laws too saying that banks can't close 379 00:20:49,440 --> 00:20:52,960 Speaker 7: accounts for political reasons, like Florida, for instance, where this 380 00:20:53,080 --> 00:20:56,159 Speaker 7: lawsuit was brought, but those laws were not in place 381 00:20:56,440 --> 00:20:59,280 Speaker 7: back in twenty twenty one. The Florida law for thence 382 00:20:59,480 --> 00:21:01,600 Speaker 7: didn't come in to effect until twenty twenty four. So 383 00:21:01,640 --> 00:21:03,360 Speaker 7: that sort of goes to the point I was making 384 00:21:03,400 --> 00:21:07,119 Speaker 7: earlier that you know, there's no law here that Trump 385 00:21:07,119 --> 00:21:10,359 Speaker 7: can point to that say that JP Morgan violated. 386 00:21:10,880 --> 00:21:13,680 Speaker 2: I guess we've got my attention here on this story. 387 00:21:13,680 --> 00:21:17,720 Speaker 2: Elliott was naming CEO Jamie Diamond personally in the suit. 388 00:21:17,760 --> 00:21:18,880 Speaker 2: What's the strategy there? 389 00:21:18,880 --> 00:21:19,240 Speaker 3: Do you think? 390 00:21:20,320 --> 00:21:22,439 Speaker 7: You know? I mean, it's hard to say exactly what 391 00:21:22,520 --> 00:21:25,760 Speaker 7: the strategy there is. I I you know, Diamond and 392 00:21:25,800 --> 00:21:29,240 Speaker 7: Trump have sort of been going back and forth, you know, 393 00:21:29,359 --> 00:21:33,960 Speaker 7: on various issues related to for instance, Trump sort of 394 00:21:34,000 --> 00:21:37,440 Speaker 7: attacking the Federal Reserve and also his proposal to cap 395 00:21:37,760 --> 00:21:40,960 Speaker 7: credit card interest rates at ten percent, and you know, 396 00:21:41,119 --> 00:21:44,320 Speaker 7: it goes back even farther for several years. You know, 397 00:21:44,640 --> 00:21:47,360 Speaker 7: Jamie Diamond has said things over the years that were 398 00:21:47,359 --> 00:21:49,520 Speaker 7: critical of Trump and then walk them back. So I 399 00:21:49,520 --> 00:21:52,440 Speaker 7: think there is a little bit of tension between the two. 400 00:21:52,520 --> 00:21:54,360 Speaker 7: So you know, it may be as simple as that, 401 00:21:54,680 --> 00:21:56,480 Speaker 7: just trying to sort of poke him in the eye. 402 00:21:56,520 --> 00:21:59,479 Speaker 7: A little to you know, and then maybe bring them 403 00:21:59,480 --> 00:22:01,400 Speaker 7: to the table for some sort of settlement. 404 00:22:02,800 --> 00:22:06,840 Speaker 6: We also know that the Trump his company or his 405 00:22:06,920 --> 00:22:09,639 Speaker 6: companies have also suited other companies like Capital One, BBC, 406 00:22:09,760 --> 00:22:11,920 Speaker 6: THANW York Times. Have any of those come to anything, 407 00:22:12,920 --> 00:22:13,520 Speaker 6: So you know, the. 408 00:22:13,720 --> 00:22:17,640 Speaker 7: One that is most analogous is the one against Capital One. 409 00:22:17,359 --> 00:22:22,320 Speaker 7: The claims are almost identical, but we don't have a 410 00:22:22,359 --> 00:22:25,520 Speaker 7: definitive ruin in that case. Like the JP Morgan case, 411 00:22:25,560 --> 00:22:28,439 Speaker 7: the Capitol one case was filed in Florida State court 412 00:22:28,920 --> 00:22:32,560 Speaker 7: that actually got removed to federal court for sort of 413 00:22:32,800 --> 00:22:36,240 Speaker 7: arcane reasons that only lawyers appreciate. So I won't bore 414 00:22:36,280 --> 00:22:40,119 Speaker 7: you with it, but I don't think JP Morgan is 415 00:22:40,160 --> 00:22:43,480 Speaker 7: going to have the same reasons for removing it to 416 00:22:43,520 --> 00:22:45,600 Speaker 7: federal court. So I think the JP Morgan case may 417 00:22:45,600 --> 00:22:49,400 Speaker 7: stay in state court. But in the Capital one case, 418 00:22:49,440 --> 00:22:52,000 Speaker 7: we're waiting for a decision from the court on Capitol 419 00:22:52,000 --> 00:22:55,520 Speaker 7: One's motion to dismiss, which I think will be informative 420 00:22:55,560 --> 00:22:57,160 Speaker 7: with the next to the JP Morgan case. 421 00:22:58,440 --> 00:23:03,119 Speaker 1: This is the Bloomberg Intelligen podcast, available on Apple, Spotify, 422 00:23:03,280 --> 00:23:06,760 Speaker 1: and anywhere else you get your podcasts. 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