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Speaker 1: Bloomberg Audio Studios, podcasts, radio News.

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Prisner. Let's

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Speaker 2: begin with tariffs. Late in the day in the States,

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Speaker 2: we had the US Trade Court dealing a major blow

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Speaker 2: to the Trump administration. It found the president's global tariffs

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Speaker 2: illegal and as a result, the court has blocked these levees. Now,

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Speaker 2: this ruling, to be fair, can be appealed by the

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Speaker 2: Trump administration in federal court. Today, a panel of three

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Speaker 2: judges at the US Court of International Trade in Manhattan

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Speaker 2: sided with Democratic led States and a group of small businesses.

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Speaker 2: They successfully argued that the Trump administration had wrongfully invoked

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Speaker 2: an emergency law to justify these levies. We'll see where

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Speaker 2: we go from here. Let's move on to the most

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Speaker 2: important earnings report of the week. After the bell, we

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Speaker 2: heard from Nvidia, and the company reported data center revenue

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Speaker 2: for the latest quarter close to estimates. Perhaps more importantly,

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Speaker 2: the chip maker gave a solid forecast for revenue in

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Speaker 2: the current quarter despite a slow down in China, and

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Speaker 2: Vidia is now expecting sales overall of about forty five

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Speaker 2: billion dollars. That's after subtracting eight billion in lost Chinese

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Speaker 2: sales because of those export controls. We heard earlier from

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Speaker 2: Nvidia CEO Jensen Wong speaking on the impact of those

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Speaker 2: export controls.

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Speaker 3: The limitations are quite quite stringent, quite limited, if you will.

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Speaker 3: H twenty is you know, as far down as we

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Speaker 3: could take a hopper. We don't know how to make

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Speaker 3: it even less, and so that's really the limit.

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Speaker 4: But there aren't there aren't.

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Speaker 3: You know, The limitations are quite stringent, so we have

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Speaker 3: we have to really think through it. Whatever we make

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Speaker 3: ultimately has to add value to the market.

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Speaker 2: Jensen Wong. They're the CEO of Nvidia. By the way,

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Speaker 2: you can watch the full conversation with Wog on the

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Speaker 2: Bloomberg podcast channel. It's on YouTube, shares and invidio. We're

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Speaker 2: up nearly five percent in late New York trading. Let's

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Speaker 2: take a closer look at the story on in video

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Speaker 2: with Daniel Newman. He is the CEO of Futurum Group. Daniel,

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Speaker 2: thank you for making time to chat with me on this.

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Speaker 2: What did we really see today that kind of can

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Speaker 2: move the market in one way or another when it

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Speaker 2: comes to in video.

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Speaker 1: The overall reaction to the Nvidia print was very positive.

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Speaker 1: Having said that the China woes are still not solved.

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Speaker 1: In In fact, if anything, Wong gave further doubt and

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Speaker 1: uncertainty to whether or not the company can really even

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Speaker 1: participate in that market. But having said that, even with

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Speaker 1: the multiple billions they couldn't ship this quarter, the write

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Speaker 1: down which ended up being just a little bit less

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Speaker 1: dug than what was expected, and the future sales, the

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Speaker 1: guide and the result this quarter showed that there is

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Speaker 1: a lot of positive momentum that must be taking place

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Speaker 1: outside of the region. And one of the really important

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Speaker 1: point is over the last several quarters, you've heard Long

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Speaker 1: pivot his conversations towards new markets like physical AI, robotics,

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Speaker 1: but also he's returned to talking about some of the

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Speaker 1: core business markets segments like gaming and automotive, and those

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Speaker 1: segments really outperformed, showing some really strong results, which I

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Speaker 1: think is important at this particular time, as I think

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Speaker 1: there's a little bit of fatigue on the data center

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Speaker 1: conversation and despite we're so early in AI, after eight

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Speaker 1: or nine continuous quarters of big in Vidia results in

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Speaker 1: this sort of Nvidia event each quarter, people want to

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Speaker 1: know how in Vidia is going to keep their growth,

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Speaker 1: and he showed it's not just data center and China

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Speaker 1: alone can't stop its momentum.

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Speaker 2: Yes, the China market is no doubt very important for Invidio.

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Speaker 2: I found it interesting today that the Trump administration said

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Speaker 2: it will restrict the sale of chip design software to China.

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Speaker 2: This comes to the issue of whether or not a

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Speaker 2: company like Quahweh, for example, can develop AI chips that

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Speaker 2: could someday compete with those of Nvidia. Do you think

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Speaker 2: that's a big stretch.

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Speaker 1: So we did hear about new rulings that could limit

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Speaker 1: the EDA software, some of the design tools, as you suggested,

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Speaker 1: and companies like Synopsis, which actually reported the same day

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Speaker 1: here as in Nvidia, took a big hit here. I

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Speaker 1: think there is a major chip being played unintended when

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Speaker 1: it comes to Nvidia and its ability to access the

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Speaker 1: Chinese market. And I think there is a bit of

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Speaker 1: give and take.

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Speaker 4: Now.

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Speaker 1: Wong is doing all the right things of the statesmen,

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Speaker 1: of the representative of A shareholders, and in Vidia wanting

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Speaker 1: to access this market that is a tam of fifty

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Speaker 1: billion plus dollars and holds half the world's AI researchers

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Speaker 1: in it. The US is playing a slightly different game.

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Speaker 1: We heard today about the possible blockade of certain terrorists.

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Speaker 1: But the Trump administration does understand that winning the AI race,

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Speaker 1: diffusing the Western and US based technology to everywhere in

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Speaker 1: the world is to its advantage. But the question is

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Speaker 1: does enable China. Does giving China access to any of

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Speaker 1: Nvidia's leading data center chips or even some of the

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Speaker 1: older ones like the Hopper chips they especially designed for China,

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Speaker 1: does that actually slow China down? And this is where

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Speaker 1: I don't entirely agree with Wong saying if we don't

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Speaker 1: give them these chips, China will go faster and build

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Speaker 1: I think Jijingping in the Chinese Party understands the importance

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Speaker 1: of leading an AI. It understands that it wants to

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Speaker 1: win because there are multiple decades of global economic leadership

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Speaker 1: at stake here. I think China's going as fast as

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Speaker 1: it can anyways. I think it's behind, but given its

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Speaker 1: ability to build energy and given its ability to brute

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Speaker 1: force through processes like they've done with Huawei as send,

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Speaker 1: I think it's a big mistake to rule them out.

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Speaker 1: So it puts a very tough juxtaposition for the Trump administration,

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Speaker 1: but it's also tough for in Vidia shareholders to lose

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Speaker 1: out on that market.

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Speaker 2: So what about the adoption of AI technology by an

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Speaker 2: American company? And I'm going to use Salesforce as an

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Speaker 2: example because after the bell, Salesforce raised its gods for

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Speaker 2: revenue on the full year, and that's probably a good

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Speaker 2: indication that the company's latest AI product, known as agent Force,

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Speaker 2: is on a path to contribute significantly to increased sales.

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Speaker 2: Is this something we should see more of companies like

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Speaker 2: Salesforce adopting AI and beginning to realize the return on investment.

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Speaker 1: This is what we want to see as we've watched

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Speaker 1: this massive infrastructure build out and the arms race that

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Speaker 1: is building data centers everywhere in the world, empowering them

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Speaker 1: with these and most advanced chips. The second part and

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Speaker 1: where the sort of bubble crowd when it comes to

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Speaker 1: AI comes into places. They're like, Yeah, all these hyperscalers

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Speaker 1: are putting billions and billions of dollars into capex to build,

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Speaker 1: But who's using this stuff? So companies like Salesforce, like

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Speaker 1: service Now, like Workday, these applications company the ones that

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Speaker 1: are powering businesses, Oracle and SAP seeing their AI offerings

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Speaker 1: which aren't brand new per se, but have not necessarily

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Speaker 1: contributed to earnings numbers as materially as investors would like

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Speaker 1: to see. So if Microsoft spending eighty billion or Google

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Speaker 1: spending seventy billion on capex, and then they're saying, hey,

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Speaker 1: we've got a couple billion dollars of revenue from all

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Speaker 1: of this, investment investors, well, they're still optimistic because you've

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Speaker 1: seen it in the stock price. They're still kind of

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Speaker 1: taking pause. Now, these applications, companies rolling out, these agents.

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Speaker 1: These are the consumption layer, and this is the utilization

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Speaker 1: of all this compute processing that's being built, these tokens,

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Speaker 1: these agents, these applications. So seeing Salesforce's result today, seeing

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Speaker 1: it mention about sixty percent of its deals have meaningful AI,

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Speaker 1: seeing it stay it wants to hire two thousand sales

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Speaker 1: reps to sell more of it. A bit ironic but

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Speaker 1: yet interesting because you'd think maybe the agents could do

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Speaker 1: the work. But I think that's all part of the

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Speaker 1: process of getting us to this larger, more meaningful consumption

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Speaker 1: that will prove to the market that this isn't a bubble,

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Speaker 1: which I don't think it is.

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Speaker 2: So it comes down to winners and losers. I can

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Speaker 2: throw out names like Alphabet, like Microsoft, like Amazon. Even

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Speaker 2: are you placing bets on companies that you think have

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Speaker 2: a competitive advantage as the result of adopting AI right now?

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Speaker 1: Well, first of all, the operating leverage of those hyperscaler

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Speaker 1: and cloud companies and they're so much more right the Amazon,

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Speaker 1: Microsoft and Google does provide them a huge advantage. Really,

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Speaker 1: the only companies that are outside of those scale of

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Speaker 1: the scale of those companies are the likes of an

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Speaker 1: open Ai, which has so much funding behind it that

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Speaker 1: it's able to go make six and a half billion

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Speaker 1: dollar acquisitions of Jony Ives's company, and it's able to

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Speaker 1: kind of lose billions of dollars a quarter to build

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Speaker 1: out something that people will buy, consume, and utilize. I

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Speaker 1: think the metric to watch is, look, we're going to

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Speaker 1: build this infrastructure future out. It's a race with China.

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Speaker 1: We are going to try to advance power, which, by

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Speaker 1: the way, that power is a huge advantage to China

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Speaker 1: and the US. Trying to deregulate some of what it's

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Speaker 1: doing in nuclear, for instance, is going to be important,

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Speaker 1: but it could take years to build up any sort

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Speaker 1: of nuclear infrastructre sure, But in the end, it is

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Speaker 1: going to be those applications, the ones that unlock the

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Speaker 1: mass amounts of data. IBM CEO has told me the

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Speaker 1: last time I spoke to, ninety nine percent of enterprise

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Speaker 1: data has not yet touched AI. So while we've seen

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Speaker 1: the entire Internet be scraped over the last couple of

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Speaker 1: years to be utilized for these large language models like

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Speaker 1: chat GPT, the enterprise has actually moved quite slow. Is

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Speaker 1: in the earliest phase of adoption, and until businesses are

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Speaker 1: really putting that AI to work at scale, we are

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Speaker 1: necessarily going to completely provide confidence to the market that

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Speaker 1: this AI transformation from infrastructure build out the basically the

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Speaker 1: roads and the pathways, turns into businesses making money and

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Speaker 1: making more efficient business decisions because of it. But that

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Speaker 1: is where we are heading.

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Speaker 2: Last question before I let you go, Daniel, you mentioned

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Speaker 2: Johnny Ive and the deal he has with open Ai.

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Speaker 2: Know now we know I've to be the designer for

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Speaker 2: many of Apple's device Is the iPhone being one? Do

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Speaker 2: you think the fact that I've is now partnering with

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Speaker 2: open ai Sam Altman to come up with some hardware

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Speaker 2: device that will essentially be designed for artificial intelligence, does

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Speaker 2: that represent a wake up call for Apple.

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Speaker 1: Apple has been shocking with its implementation of AI. I

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Speaker 1: gave them the grace of several quarters with Apple Intelligence

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Speaker 1: to say Apple can get there. And here's the crazy thing, Doug,

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Speaker 1: is that Apple has such a committed and dedicated user

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Speaker 1: base that I think it can actually continue to fumble

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Speaker 1: and still be successful. Having said that, there does seem

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Speaker 1: to be an inroads right now. You see what Google

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Speaker 1: did at its recent IOW event in terms of some

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Speaker 1: of the next generation technology that it's launching. Google of

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Speaker 1: course has Android. They're building technologies right into devices and

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Speaker 1: into the cloud. We'll see what Microsoft is developing. Apple seems,

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Speaker 1: for whatever reason, to be so focused on supply chain,

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Speaker 1: and of course the administrations put a lot of pressure there.

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Speaker 1: But this isn't a new symptom for the company. This

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Speaker 1: has been several quarters in a row. Underperforming, doesn't have

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Speaker 1: an answer for large language models, hasn't had an answer

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Speaker 1: for really the on device opportunity. I think that Apple.

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Speaker 4: Is a little bit at risk.

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Speaker 1: I also think Sam Altman's ambitions sometimes scale far beyond

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Speaker 1: He was going to build seven trillion dollars worth of infrastructure.

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Speaker 1: He's going to replace social media networks, and he's also

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Speaker 1: going to take out Google. I think he's got he's

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Speaker 1: got big ideas. So far, he's executed one of them,

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Speaker 1: which is the generative AI movement becoming and chat GPT

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Speaker 1: becoming the Kleenex of large language models. But I also

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Speaker 1: think trying to get into hardware at scale is going

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Speaker 1: to prove to be a very different challenge. I'm very

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Speaker 1: conflicted as to whether that was a good use of

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Speaker 1: six and a half billion dollars when the company's already

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Speaker 1: burning cash.

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Speaker 2: Daniel will leave it there. It's always your pleasure. Thank

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Speaker 2: you so much. Daniel Newman there. He is the CEO

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Speaker 2: at the Futurum Group. Joining us here on the Daybreak

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Speaker 2: Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm

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Speaker 2: dok Chrisner. The equity market in the US drifted lower

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Speaker 2: in front of the results from Nvidia. We had the

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Speaker 2: S and P down about six tens of one percent.

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Speaker 2: That after that two percent rally on Tuesday. Joining me

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Speaker 2: now for a closer look at market action is Tim Pagliara.

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Speaker 2: He is the chairman also the chief investment officer at

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Speaker 2: cap Wealth. Tim is on the line from Franklin Tennessee. Tim,

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Speaker 2: It's always a pleasure to chat with you. There are

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Speaker 2: so many things that we could talk about. We could

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Speaker 2: begin with a story on the Nvidia earnings. We could

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Speaker 2: talk about US fiscal policy and what we're hearing from

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Speaker 2: the Fed. I'm curious as to where you are focused

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Speaker 2: right now.

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Speaker 5: I mean sped policy and as a wait and see

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Speaker 5: approach right now, and the most significant thing for all

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Speaker 5: of us to watch in the markets is whether the

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Speaker 5: bond market is going to impose the discipline that cast

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Speaker 5: risk cannot impose through spending cuts and getting the budget

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Speaker 5: under control. So as the final details of this budget

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Speaker 5: emerge and it's reconciled with the Senate, then you're going

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Speaker 5: to see whether or.

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Speaker 4: Not rates go higher or they go lower.

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Speaker 5: If the perception is that we've made significant progress, for example,

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Speaker 5: debt annual GDP spending goes from seven percent maybe to

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Speaker 5: five percent, and the market thinks that that's significant, given

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Speaker 5: the fact that we have made permanent tax cuts and

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Speaker 5: we've increased a number of worthy things for working class

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Speaker 5: people and everything from tax credits for seniors, to increase

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Speaker 5: child tax credits for families, increase in the standard deduction.

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Speaker 5: If that whole package satisfies the financial market, specifically the

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Speaker 5: bond market. Then I think the Trump administration has had

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Speaker 5: a big victory so far this year.

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Speaker 2: So we're looking at a tenure that's under four point

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Speaker 2: fifty right now in the New York session on Wednesday,

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Speaker 2: Are you prepared to say that rates are going to

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Speaker 2: get closer to four percent than they are five percent

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Speaker 2: on the tenure?

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Speaker 5: Now? My belief is, again the victory is if they

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Speaker 5: stabilize where they are right now. It just all depends

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Speaker 5: on the perception and the details that come from the

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Speaker 5: reconciliation of what the House is proposed and what the Senate.

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Speaker 4: Will how it will be adjusted.

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Speaker 5: So you could see the ten year ago to five percent,

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Speaker 5: I don't think you see it go going much below,

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Speaker 5: say four and a quarter.

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Speaker 2: Okay, we had the Nvidia earnings after the bill, and

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Speaker 2: guidance I think was critical for the market. So a

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Speaker 2: solid forecast from what we can tell, revenue for the

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Speaker 2: current quarter will be around forty five billion, and amazingly,

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Speaker 2: that's after subtracting eight billion in lost Chinese sales because

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Speaker 2: of those export controls. Have you been a buyer of

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Speaker 2: the AI trade, particularly through names in the chip space

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Speaker 2: like in Nvidia.

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Speaker 5: We've got a more expansive view of the AI trade.

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Speaker 5: For example, we believe it's the applications that come from

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Speaker 5: Navidia chips in AI. So we've been long term holders

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Speaker 5: of Palenteer. Two years ago we made the decision to

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Speaker 5: buy Palenteer instead of Navidia. We've also really beefed up

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Speaker 5: our holdings in electric utilities. You know, the AI revolution

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Speaker 5: is going to cause the country to have to double

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Speaker 5: electricity output, you know, over the next ten years, and

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Speaker 5: so we picked up Constellation Energy back during that real

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Speaker 5: chio period in April at.

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Speaker 4: You know, one hundred and eighty five dollars a share.

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Speaker 4: Now it's over three hundred and five dollars.

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Speaker 5: So these these things they kind of flash, the markets

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Speaker 5: settle down, and you have to be very nimble, and

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Speaker 5: you have to have a by list of things that

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Speaker 5: you find attractive that really make up the whole AI trade.

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Speaker 5: So it's electricity, it's data centers. Another big one is lumen.

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Speaker 5: There's a cover story and Fortune this week about Kate

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Speaker 5: Johnson and how she's leading the AI revolution through the

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Speaker 5: technology infrastructure that has to be created between data centers.

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Speaker 5: You know, Oracle, for example, has entered into a partnership

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Speaker 5: with Lumen. They have one hundred data centers right now,

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Speaker 5: either under construction or operational, and the infrastructure of transferring

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Speaker 5: data between those centers to increase somatically, and Lumen's right

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Speaker 5: in the middle of that. They also have agreements with

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Speaker 5: IBM and Google, and a big agreement that they entered

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Speaker 5: into with Microsoft.

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Speaker 4: So you know, it's not it's not the chip.

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Speaker 5: The chip's important, but it's the applications of that chip

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Speaker 5: in commerce and how it's going to change everybody's lives.

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Speaker 2: I'm just wondering whether or not some of the tension

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Speaker 2: between the US and China has the potential to pretty

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Speaker 2: dramatically hold back revenue growth for some big American tech players.

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Speaker 2: Tonight we learned that the Trump administration will restrict sales

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Speaker 2: of chip design software to China. We're told the Commerce

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Speaker 2: Department has been sending letters to some leading providers of

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Speaker 2: electronic design automation. And when you look at this this tension.

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Speaker 2: We talked about the Nvidia story and the export controls

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Speaker 2: and the degree to which even Jensen Wong, the CEO

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Speaker 2: of Nvidia, was saying this is going to be a

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Speaker 2: hindrance to our growth, the fact that we have these

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Speaker 2: export controls where the Chinese market is concerned. Broadly speaking,

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Speaker 2: do you think that some of this trade policy has

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Speaker 2: the potential to restrain growth for American tech firms.

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Speaker 5: Yes, but I think in the near term, you know,

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Speaker 5: it's a national security issue. That's why you you know,

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Speaker 5: saw Trump, I believe in the Middle East and Jensen

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Speaker 5: Wong was shoulder to shoulder with the President, and they're

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Speaker 5: attempting to give them additional outlets through kind of a

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Speaker 5: Most Favored Nation status that they have imparted into the

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Speaker 5: Middle East, you know, for AI development and anything that

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Speaker 5: decentralizes the Chinese influence in artificial intelligence and moves it

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Speaker 5: towards our partners, for example in India. And like I said,

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Speaker 5: the Middle East should benefit companies like Navidia, and they'll

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Speaker 5: be able to pick up the slack. You know, it's

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Speaker 5: not a good place for them to be doing business

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Speaker 5: in the first place. They'll you know, they're notorious for

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Speaker 5: stealing their you know, proprietary technology, all of that, and

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Speaker 5: so I think in the long run it'll have no impact.

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Speaker 2: Short run, yes, so technology is obviously one part of

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Speaker 2: the trade story. It's kind of interesting today that Wilburgh Ross,

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Speaker 2: who of course, as we know, was Commerce Secretary during

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Speaker 2: the first Trump administration, was saying that he expects the

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Speaker 2: equity market in the US to sour by the end

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Speaker 2: of late June if there is not progress on trade talks.

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Speaker 2: That's a pretty tight timeline. If we don't get agreements

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Speaker 2: by the end of June. Do you think that there's

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Speaker 2: a real risk of some sort of upheaval in US equities?

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Speaker 5: I think, you know, I would call fall short of

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Speaker 5: calling it up evil. I think it will go back

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Speaker 5: to a more heightened focus on valuation, and there's still

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Speaker 5: issues relative to the valuations of companies and what they

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Speaker 5: can reasonably deliver in terms of growth.

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Speaker 4: So I think they're going to make a lot.

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Speaker 5: Of progress by the end of June, or they wouldn't

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Speaker 5: be advertising that as one of their objectives.

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Speaker 2: Tim will leave it there. Thank you so much. It's

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Speaker 2: always a pleasure. Tim Pagliara there. He is the chairman

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Speaker 2: also the chief investment officer at cap Wealth. Joining from Franklin,

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Speaker 2: Tennessee here on the Daybreak Asia podcast. Thanks for listening

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Speaker 2: to today's episode of the Bloomberg Daybreak Asia edition podcast.

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Speaker 2: Each weekday, we look at the story shaping markets, finance,

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Speaker 2: and geopolitics in the Asia Pacific. You can find us

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Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 2: else you listen. Join us again tomorrow for insight on

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Speaker 2: the market moves from Hong Kong to Singapore and Australia.

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Speaker 2: I'm Doug Chrisner, and this is Bloomberg