Speaker 1: Bloomberg Audio Studios, podcasts, radio News.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Prisner. Let's
Speaker 2: begin with tariffs. Late in the day in the States,
Speaker 2: we had the US Trade Court dealing a major blow
Speaker 2: to the Trump administration. It found the president's global tariffs
Speaker 2: illegal and as a result, the court has blocked these levees. Now,
Speaker 2: this ruling, to be fair, can be appealed by the
Speaker 2: Trump administration in federal court. Today, a panel of three
Speaker 2: judges at the US Court of International Trade in Manhattan
Speaker 2: sided with Democratic led States and a group of small businesses.
Speaker 2: They successfully argued that the Trump administration had wrongfully invoked
Speaker 2: an emergency law to justify these levies. We'll see where
Speaker 2: we go from here. Let's move on to the most
Speaker 2: important earnings report of the week. After the bell, we
Speaker 2: heard from Nvidia, and the company reported data center revenue
Speaker 2: for the latest quarter close to estimates. Perhaps more importantly,
Speaker 2: the chip maker gave a solid forecast for revenue in
Speaker 2: the current quarter despite a slow down in China, and
Speaker 2: Vidia is now expecting sales overall of about forty five
Speaker 2: billion dollars. That's after subtracting eight billion in lost Chinese
Speaker 2: sales because of those export controls. We heard earlier from
Speaker 2: Nvidia CEO Jensen Wong speaking on the impact of those
Speaker 2: export controls.
Speaker 3: The limitations are quite quite stringent, quite limited, if you will.
Speaker 3: H twenty is you know, as far down as we
Speaker 3: could take a hopper. We don't know how to make
Speaker 3: it even less, and so that's really the limit.
Speaker 4: But there aren't there aren't.
Speaker 3: You know, The limitations are quite stringent, so we have
Speaker 3: we have to really think through it. Whatever we make
Speaker 3: ultimately has to add value to the market.
Speaker 2: Jensen Wong. They're the CEO of Nvidia. By the way,
Speaker 2: you can watch the full conversation with Wog on the
Speaker 2: Bloomberg podcast channel. It's on YouTube, shares and invidio. We're
Speaker 2: up nearly five percent in late New York trading. Let's
Speaker 2: take a closer look at the story on in video
Speaker 2: with Daniel Newman. He is the CEO of Futurum Group. Daniel,
Speaker 2: thank you for making time to chat with me on this.
Speaker 2: What did we really see today that kind of can
Speaker 2: move the market in one way or another when it
Speaker 2: comes to in video.
Speaker 1: The overall reaction to the Nvidia print was very positive.
Speaker 1: Having said that the China woes are still not solved.
Speaker 1: In In fact, if anything, Wong gave further doubt and
Speaker 1: uncertainty to whether or not the company can really even
Speaker 1: participate in that market. But having said that, even with
Speaker 1: the multiple billions they couldn't ship this quarter, the write
Speaker 1: down which ended up being just a little bit less
Speaker 1: dug than what was expected, and the future sales, the
Speaker 1: guide and the result this quarter showed that there is
Speaker 1: a lot of positive momentum that must be taking place
Speaker 1: outside of the region. And one of the really important
Speaker 1: point is over the last several quarters, you've heard Long
Speaker 1: pivot his conversations towards new markets like physical AI, robotics,
Speaker 1: but also he's returned to talking about some of the
Speaker 1: core business markets segments like gaming and automotive, and those
Speaker 1: segments really outperformed, showing some really strong results, which I
Speaker 1: think is important at this particular time, as I think
Speaker 1: there's a little bit of fatigue on the data center
Speaker 1: conversation and despite we're so early in AI, after eight
Speaker 1: or nine continuous quarters of big in Vidia results in
Speaker 1: this sort of Nvidia event each quarter, people want to
Speaker 1: know how in Vidia is going to keep their growth,
Speaker 1: and he showed it's not just data center and China
Speaker 1: alone can't stop its momentum.
Speaker 2: Yes, the China market is no doubt very important for Invidio.
Speaker 2: I found it interesting today that the Trump administration said
Speaker 2: it will restrict the sale of chip design software to China.
Speaker 2: This comes to the issue of whether or not a
Speaker 2: company like Quahweh, for example, can develop AI chips that
Speaker 2: could someday compete with those of Nvidia. Do you think
Speaker 2: that's a big stretch.
Speaker 1: So we did hear about new rulings that could limit
Speaker 1: the EDA software, some of the design tools, as you suggested,
Speaker 1: and companies like Synopsis, which actually reported the same day
Speaker 1: here as in Nvidia, took a big hit here. I
Speaker 1: think there is a major chip being played unintended when
Speaker 1: it comes to Nvidia and its ability to access the
Speaker 1: Chinese market. And I think there is a bit of
Speaker 1: give and take.
Speaker 4: Now.
Speaker 1: Wong is doing all the right things of the statesmen,
Speaker 1: of the representative of A shareholders, and in Vidia wanting
Speaker 1: to access this market that is a tam of fifty
Speaker 1: billion plus dollars and holds half the world's AI researchers
Speaker 1: in it. The US is playing a slightly different game.
Speaker 1: We heard today about the possible blockade of certain terrorists.
Speaker 1: But the Trump administration does understand that winning the AI race,
Speaker 1: diffusing the Western and US based technology to everywhere in
Speaker 1: the world is to its advantage. But the question is
Speaker 1: does enable China. Does giving China access to any of
Speaker 1: Nvidia's leading data center chips or even some of the
Speaker 1: older ones like the Hopper chips they especially designed for China,
Speaker 1: does that actually slow China down? And this is where
Speaker 1: I don't entirely agree with Wong saying if we don't
Speaker 1: give them these chips, China will go faster and build
Speaker 1: I think Jijingping in the Chinese Party understands the importance
Speaker 1: of leading an AI. It understands that it wants to
Speaker 1: win because there are multiple decades of global economic leadership
Speaker 1: at stake here. I think China's going as fast as
Speaker 1: it can anyways. I think it's behind, but given its
Speaker 1: ability to build energy and given its ability to brute
Speaker 1: force through processes like they've done with Huawei as send,
Speaker 1: I think it's a big mistake to rule them out.
Speaker 1: So it puts a very tough juxtaposition for the Trump administration,
Speaker 1: but it's also tough for in Vidia shareholders to lose
Speaker 1: out on that market.
Speaker 2: So what about the adoption of AI technology by an
Speaker 2: American company? And I'm going to use Salesforce as an
Speaker 2: example because after the bell, Salesforce raised its gods for
Speaker 2: revenue on the full year, and that's probably a good
Speaker 2: indication that the company's latest AI product, known as agent Force,
Speaker 2: is on a path to contribute significantly to increased sales.
Speaker 2: Is this something we should see more of companies like
Speaker 2: Salesforce adopting AI and beginning to realize the return on investment.
Speaker 1: This is what we want to see as we've watched
Speaker 1: this massive infrastructure build out and the arms race that
Speaker 1: is building data centers everywhere in the world, empowering them
Speaker 1: with these and most advanced chips. The second part and
Speaker 1: where the sort of bubble crowd when it comes to
Speaker 1: AI comes into places. They're like, Yeah, all these hyperscalers
Speaker 1: are putting billions and billions of dollars into capex to build,
Speaker 1: But who's using this stuff? So companies like Salesforce, like
Speaker 1: service Now, like Workday, these applications company the ones that
Speaker 1: are powering businesses, Oracle and SAP seeing their AI offerings
Speaker 1: which aren't brand new per se, but have not necessarily
Speaker 1: contributed to earnings numbers as materially as investors would like
Speaker 1: to see. So if Microsoft spending eighty billion or Google
Speaker 1: spending seventy billion on capex, and then they're saying, hey,
Speaker 1: we've got a couple billion dollars of revenue from all
Speaker 1: of this, investment investors, well, they're still optimistic because you've
Speaker 1: seen it in the stock price. They're still kind of
Speaker 1: taking pause. Now, these applications, companies rolling out, these agents.
Speaker 1: These are the consumption layer, and this is the utilization
Speaker 1: of all this compute processing that's being built, these tokens,
Speaker 1: these agents, these applications. So seeing Salesforce's result today, seeing
Speaker 1: it mention about sixty percent of its deals have meaningful AI,
Speaker 1: seeing it stay it wants to hire two thousand sales
Speaker 1: reps to sell more of it. A bit ironic but
Speaker 1: yet interesting because you'd think maybe the agents could do
Speaker 1: the work. But I think that's all part of the
Speaker 1: process of getting us to this larger, more meaningful consumption
Speaker 1: that will prove to the market that this isn't a bubble,
Speaker 1: which I don't think it is.
Speaker 2: So it comes down to winners and losers. I can
Speaker 2: throw out names like Alphabet, like Microsoft, like Amazon. Even
Speaker 2: are you placing bets on companies that you think have
Speaker 2: a competitive advantage as the result of adopting AI right now?
Speaker 1: Well, first of all, the operating leverage of those hyperscaler
Speaker 1: and cloud companies and they're so much more right the Amazon,
Speaker 1: Microsoft and Google does provide them a huge advantage. Really,
Speaker 1: the only companies that are outside of those scale of
Speaker 1: the scale of those companies are the likes of an
Speaker 1: open Ai, which has so much funding behind it that
Speaker 1: it's able to go make six and a half billion
Speaker 1: dollar acquisitions of Jony Ives's company, and it's able to
Speaker 1: kind of lose billions of dollars a quarter to build
Speaker 1: out something that people will buy, consume, and utilize. I
Speaker 1: think the metric to watch is, look, we're going to
Speaker 1: build this infrastructure future out. It's a race with China.
Speaker 1: We are going to try to advance power, which, by
Speaker 1: the way, that power is a huge advantage to China
Speaker 1: and the US. Trying to deregulate some of what it's
Speaker 1: doing in nuclear, for instance, is going to be important,
Speaker 1: but it could take years to build up any sort
Speaker 1: of nuclear infrastructre sure, But in the end, it is
Speaker 1: going to be those applications, the ones that unlock the
Speaker 1: mass amounts of data. IBM CEO has told me the
Speaker 1: last time I spoke to, ninety nine percent of enterprise
Speaker 1: data has not yet touched AI. So while we've seen
Speaker 1: the entire Internet be scraped over the last couple of
Speaker 1: years to be utilized for these large language models like
Speaker 1: chat GPT, the enterprise has actually moved quite slow. Is
Speaker 1: in the earliest phase of adoption, and until businesses are
Speaker 1: really putting that AI to work at scale, we are
Speaker 1: necessarily going to completely provide confidence to the market that
Speaker 1: this AI transformation from infrastructure build out the basically the
Speaker 1: roads and the pathways, turns into businesses making money and
Speaker 1: making more efficient business decisions because of it. But that
Speaker 1: is where we are heading.
Speaker 2: Last question before I let you go, Daniel, you mentioned
Speaker 2: Johnny Ive and the deal he has with open Ai.
Speaker 2: Know now we know I've to be the designer for
Speaker 2: many of Apple's device Is the iPhone being one? Do
Speaker 2: you think the fact that I've is now partnering with
Speaker 2: open ai Sam Altman to come up with some hardware
Speaker 2: device that will essentially be designed for artificial intelligence, does
Speaker 2: that represent a wake up call for Apple.
Speaker 1: Apple has been shocking with its implementation of AI. I
Speaker 1: gave them the grace of several quarters with Apple Intelligence
Speaker 1: to say Apple can get there. And here's the crazy thing, Doug,
Speaker 1: is that Apple has such a committed and dedicated user
Speaker 1: base that I think it can actually continue to fumble
Speaker 1: and still be successful. Having said that, there does seem
Speaker 1: to be an inroads right now. You see what Google
Speaker 1: did at its recent IOW event in terms of some
Speaker 1: of the next generation technology that it's launching. Google of
Speaker 1: course has Android. They're building technologies right into devices and
Speaker 1: into the cloud. We'll see what Microsoft is developing. Apple seems,
Speaker 1: for whatever reason, to be so focused on supply chain,
Speaker 1: and of course the administrations put a lot of pressure there.
Speaker 1: But this isn't a new symptom for the company. This
Speaker 1: has been several quarters in a row. Underperforming, doesn't have
Speaker 1: an answer for large language models, hasn't had an answer
Speaker 1: for really the on device opportunity. I think that Apple.
Speaker 4: Is a little bit at risk.
Speaker 1: I also think Sam Altman's ambitions sometimes scale far beyond
Speaker 1: He was going to build seven trillion dollars worth of infrastructure.
Speaker 1: He's going to replace social media networks, and he's also
Speaker 1: going to take out Google. I think he's got he's
Speaker 1: got big ideas. So far, he's executed one of them,
Speaker 1: which is the generative AI movement becoming and chat GPT
Speaker 1: becoming the Kleenex of large language models. But I also
Speaker 1: think trying to get into hardware at scale is going
Speaker 1: to prove to be a very different challenge. I'm very
Speaker 1: conflicted as to whether that was a good use of
Speaker 1: six and a half billion dollars when the company's already
Speaker 1: burning cash.
Speaker 2: Daniel will leave it there. It's always your pleasure. Thank
Speaker 2: you so much. Daniel Newman there. He is the CEO
Speaker 2: at the Futurum Group. Joining us here on the Daybreak
Speaker 2: Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm
Speaker 2: dok Chrisner. The equity market in the US drifted lower
Speaker 2: in front of the results from Nvidia. We had the
Speaker 2: S and P down about six tens of one percent.
Speaker 2: That after that two percent rally on Tuesday. Joining me
Speaker 2: now for a closer look at market action is Tim Pagliara.
Speaker 2: He is the chairman also the chief investment officer at
Speaker 2: cap Wealth. Tim is on the line from Franklin Tennessee. Tim,
Speaker 2: It's always a pleasure to chat with you. There are
Speaker 2: so many things that we could talk about. We could
Speaker 2: begin with a story on the Nvidia earnings. We could
Speaker 2: talk about US fiscal policy and what we're hearing from
Speaker 2: the Fed. I'm curious as to where you are focused
Speaker 2: right now.
Speaker 5: I mean sped policy and as a wait and see
Speaker 5: approach right now, and the most significant thing for all
Speaker 5: of us to watch in the markets is whether the
Speaker 5: bond market is going to impose the discipline that cast
Speaker 5: risk cannot impose through spending cuts and getting the budget
Speaker 5: under control. So as the final details of this budget
Speaker 5: emerge and it's reconciled with the Senate, then you're going
Speaker 5: to see whether or.
Speaker 4: Not rates go higher or they go lower.
Speaker 5: If the perception is that we've made significant progress, for example,
Speaker 5: debt annual GDP spending goes from seven percent maybe to
Speaker 5: five percent, and the market thinks that that's significant, given
Speaker 5: the fact that we have made permanent tax cuts and
Speaker 5: we've increased a number of worthy things for working class
Speaker 5: people and everything from tax credits for seniors, to increase
Speaker 5: child tax credits for families, increase in the standard deduction.
Speaker 5: If that whole package satisfies the financial market, specifically the
Speaker 5: bond market. Then I think the Trump administration has had
Speaker 5: a big victory so far this year.
Speaker 2: So we're looking at a tenure that's under four point
Speaker 2: fifty right now in the New York session on Wednesday,
Speaker 2: Are you prepared to say that rates are going to
Speaker 2: get closer to four percent than they are five percent
Speaker 2: on the tenure?
Speaker 5: Now? My belief is, again the victory is if they
Speaker 5: stabilize where they are right now. It just all depends
Speaker 5: on the perception and the details that come from the
Speaker 5: reconciliation of what the House is proposed and what the Senate.
Speaker 4: Will how it will be adjusted.
Speaker 5: So you could see the ten year ago to five percent,
Speaker 5: I don't think you see it go going much below,
Speaker 5: say four and a quarter.
Speaker 2: Okay, we had the Nvidia earnings after the bill, and
Speaker 2: guidance I think was critical for the market. So a
Speaker 2: solid forecast from what we can tell, revenue for the
Speaker 2: current quarter will be around forty five billion, and amazingly,
Speaker 2: that's after subtracting eight billion in lost Chinese sales because
Speaker 2: of those export controls. Have you been a buyer of
Speaker 2: the AI trade, particularly through names in the chip space
Speaker 2: like in Nvidia.
Speaker 5: We've got a more expansive view of the AI trade.
Speaker 5: For example, we believe it's the applications that come from
Speaker 5: Navidia chips in AI. So we've been long term holders
Speaker 5: of Palenteer. Two years ago we made the decision to
Speaker 5: buy Palenteer instead of Navidia. We've also really beefed up
Speaker 5: our holdings in electric utilities. You know, the AI revolution
Speaker 5: is going to cause the country to have to double
Speaker 5: electricity output, you know, over the next ten years, and
Speaker 5: so we picked up Constellation Energy back during that real
Speaker 5: chio period in April at.
Speaker 4: You know, one hundred and eighty five dollars a share.
Speaker 4: Now it's over three hundred and five dollars.
Speaker 5: So these these things they kind of flash, the markets
Speaker 5: settle down, and you have to be very nimble, and
Speaker 5: you have to have a by list of things that
Speaker 5: you find attractive that really make up the whole AI trade.
Speaker 5: So it's electricity, it's data centers. Another big one is lumen.
Speaker 5: There's a cover story and Fortune this week about Kate
Speaker 5: Johnson and how she's leading the AI revolution through the
Speaker 5: technology infrastructure that has to be created between data centers.
Speaker 5: You know, Oracle, for example, has entered into a partnership
Speaker 5: with Lumen. They have one hundred data centers right now,
Speaker 5: either under construction or operational, and the infrastructure of transferring
Speaker 5: data between those centers to increase somatically, and Lumen's right
Speaker 5: in the middle of that. They also have agreements with
Speaker 5: IBM and Google, and a big agreement that they entered
Speaker 5: into with Microsoft.
Speaker 4: So you know, it's not it's not the chip.
Speaker 5: The chip's important, but it's the applications of that chip
Speaker 5: in commerce and how it's going to change everybody's lives.
Speaker 2: I'm just wondering whether or not some of the tension
Speaker 2: between the US and China has the potential to pretty
Speaker 2: dramatically hold back revenue growth for some big American tech players.
Speaker 2: Tonight we learned that the Trump administration will restrict sales
Speaker 2: of chip design software to China. We're told the Commerce
Speaker 2: Department has been sending letters to some leading providers of
Speaker 2: electronic design automation. And when you look at this this tension.
Speaker 2: We talked about the Nvidia story and the export controls
Speaker 2: and the degree to which even Jensen Wong, the CEO
Speaker 2: of Nvidia, was saying this is going to be a
Speaker 2: hindrance to our growth, the fact that we have these
Speaker 2: export controls where the Chinese market is concerned. Broadly speaking,
Speaker 2: do you think that some of this trade policy has
Speaker 2: the potential to restrain growth for American tech firms.
Speaker 5: Yes, but I think in the near term, you know,
Speaker 5: it's a national security issue. That's why you you know,
Speaker 5: saw Trump, I believe in the Middle East and Jensen
Speaker 5: Wong was shoulder to shoulder with the President, and they're
Speaker 5: attempting to give them additional outlets through kind of a
Speaker 5: Most Favored Nation status that they have imparted into the
Speaker 5: Middle East, you know, for AI development and anything that
Speaker 5: decentralizes the Chinese influence in artificial intelligence and moves it
Speaker 5: towards our partners, for example in India. And like I said,
Speaker 5: the Middle East should benefit companies like Navidia, and they'll
Speaker 5: be able to pick up the slack. You know, it's
Speaker 5: not a good place for them to be doing business
Speaker 5: in the first place. They'll you know, they're notorious for
Speaker 5: stealing their you know, proprietary technology, all of that, and
Speaker 5: so I think in the long run it'll have no impact.
Speaker 2: Short run, yes, so technology is obviously one part of
Speaker 2: the trade story. It's kind of interesting today that Wilburgh Ross,
Speaker 2: who of course, as we know, was Commerce Secretary during
Speaker 2: the first Trump administration, was saying that he expects the
Speaker 2: equity market in the US to sour by the end
Speaker 2: of late June if there is not progress on trade talks.
Speaker 2: That's a pretty tight timeline. If we don't get agreements
Speaker 2: by the end of June. Do you think that there's
Speaker 2: a real risk of some sort of upheaval in US equities?
Speaker 5: I think, you know, I would call fall short of
Speaker 5: calling it up evil. I think it will go back
Speaker 5: to a more heightened focus on valuation, and there's still
Speaker 5: issues relative to the valuations of companies and what they
Speaker 5: can reasonably deliver in terms of growth.
Speaker 4: So I think they're going to make a lot.
Speaker 5: Of progress by the end of June, or they wouldn't
Speaker 5: be advertising that as one of their objectives.
Speaker 2: Tim will leave it there. Thank you so much. It's
Speaker 2: always a pleasure. Tim Pagliara there. He is the chairman
Speaker 2: also the chief investment officer at cap Wealth. Joining from Franklin,
Speaker 2: Tennessee here on the Daybreak Asia podcast. Thanks for listening
Speaker 2: to today's episode of the Bloomberg Daybreak Asia edition podcast.
Speaker 2: Each weekday, we look at the story shaping markets, finance,
Speaker 2: and geopolitics in the Asia Pacific. You can find us
Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
Speaker 2: else you listen. Join us again tomorrow for insight on
Speaker 2: the market moves from Hong Kong to Singapore and Australia.
Speaker 2: I'm Doug Chrisner, and this is Bloomberg