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

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Speaker 2: This is the Bloomberg Daybreak europ podcast, available every morning

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Speaker 2: on Apple, Spotify or wherever you listen. It's Thursday, the

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Speaker 2: twenty ninth of August in London. I'm Stephen Carroll coming

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Speaker 2: up today. Shares an Nvidia tumble after the company's results

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Speaker 2: fail to live up to investor hopes. Despite meeting or

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Speaker 2: beating expectations across the board, French prosecutors charged the CEO

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Speaker 2: of Telegram over the app's alleged criminal use. Plus rich pickings,

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Speaker 2: why think tanks are lobbying the labor government to hike

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Speaker 2: taxes on the country's wealthiest. Let's start with a roundup

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Speaker 2: of our top stories. Shares in Nvidia tumbled and after

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Speaker 2: hours trading after it failed to live up to investor

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Speaker 2: hype with its latest set of results. The chip giant

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Speaker 2: is expecting revenues of thirty two and a half billion

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Speaker 2: dollars for the current quarter, slightly above consensus expectations but

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Speaker 2: far from the blowout numbers. Markets have become used to

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Speaker 2: news of production snags with its next generation Blackwell chips

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Speaker 2: added to the disappointment, but speaking to Bloomberg and Video

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Speaker 2: CEO Jensen Huang defended the rollout.

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Speaker 3: We're going to have lots and lots of supply and

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Speaker 3: we will be able to ramp starting in Q four.

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Speaker 3: We have billions of dollars of revenues and we'll remp

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Speaker 3: from there into Q one, into Q two and two

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Speaker 3: next year. We're going to have a great next year

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Speaker 3: as well.

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Speaker 2: Jensen Huang's bullish sentiment wasn't enough, and Vidio dropping almost

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Speaker 2: seven percent in late trading. The disappointing outlook threatens to

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Speaker 2: dampen the AI frenzy that has transformed in Vidia into

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Speaker 2: the world's second most valuable company. As in Video struggles

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Speaker 2: to meet lofty hopes for AI generated profit, another leader

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Speaker 2: in the industry is gaining more investor backing. Bloomberg understands

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Speaker 2: that open ai is getting closer to raising funding at

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Speaker 2: a valuation of more than one hundred billion dollars in

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Speaker 2: around lead by a one billion investment from Thrive Capital.

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Speaker 2: The financing would create one of the world's most valuable

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Speaker 2: entre backed startups, underscoring growing demand for generative artificial intelligence.

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Speaker 2: The CEO I excuse me, French prosecutors. The CEO of

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Speaker 2: Messaging Up Telegram has been charged over alleged criminal activity

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Speaker 2: on the platform. The decision comes days after he was

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Speaker 2: stopped at a French airport. Boomberg's teaba at a Baiyo

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Speaker 2: has the details.

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Speaker 4: The charges against Pavel Durov paint a picture of a

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Speaker 4: platform almost entirely uncooperative with authorities. That's what Paris prosecutors

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Speaker 4: had to say is they ordered the Telegram chief to

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Speaker 4: post five million euros bail and forbade him from leaving

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Speaker 4: France yesterday. Jurov has been questioned by police for four

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Speaker 4: days as part of an investigation into the possible criminal

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Speaker 4: responsibility of the platform's executives. Allegations against him include refusing

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Speaker 4: to help agencies run legal wire taps on suspects. For

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Speaker 4: their part, Telegram says its CEO has nothing to hide,

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Speaker 4: but the charges as they stand appear to include a

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Speaker 4: maximum sentence of ten years. In London, Tiwa Adubayo Bloomberg Radio.

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Speaker 2: Israel has launched a large scale military operation in the

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Speaker 2: West Bank. The army says they're trying to combat what

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Speaker 2: they describe as terrorist activity. PASTENI officials say ten people

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Speaker 2: have been killed and eleven others injured in the raids,

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Speaker 2: which also saw soldiers block access to hospitals. Former US

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Speaker 2: Defense Secretary William Cohen says this operation would have been

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Speaker 2: planned for some time.

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Speaker 5: As far as the West Bank is concerned, I think

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Speaker 5: the Israelis have adopted a policy of preemption. They are

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Speaker 5: not going to wait to be attacked. They were seeing

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Speaker 5: a plan evolved with Hispolo in Lebanon and they attacked.

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Speaker 5: They're going to do the same thing in the West Bank.

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Speaker 5: I don't think it came about overnight. I think this

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Speaker 5: as long in the planning. I don't think the Biden

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Speaker 5: administration on Biden Harris administration had any foreknowledge of this.

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Speaker 2: William Cohen, speaking there to Bloomberg Television. The Israeli military

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Speaker 2: said the operation was a preemptive strike, claiming Iran has

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Speaker 2: been smuggling weapons into the West Bank. A spokesman for

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Speaker 2: the Palestinian presidency in the West Bank said the IDF's

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Speaker 2: moves will not bring security and stability to anyone. Thames

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Speaker 2: Water says it will have to increase the amount it

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Speaker 2: charges consumers by nearly sixty percent to stay afloat. The

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Speaker 2: UK's largest water company, doubled down on proposals for blockbuster

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Speaker 2: fee increases in the next six years. It's a challenge

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Speaker 2: to the regulator off what, which has already rejected a

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Speaker 2: plan to up fees by a smaller amount. Thameswater's CEO

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Speaker 2: says the rules imposed in it make it uninvestible. It

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Speaker 2: needs to find three point three billion pounds by next

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Speaker 2: May to stay solvent. And Labour's tax plans have become

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Speaker 2: the focus of intense lobbying efforts as the new government

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Speaker 2: looks for ways to raise more revenue. Left wing think

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Speaker 2: tanks are pushing for higher taxes. Representatives for the Mega

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Speaker 2: Richer warning of possible fire sales and their client's lead

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Speaker 2: leaving the UK. Bloomberg James Wilcock has more.

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Speaker 6: It was these words that kick started the speculation.

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Speaker 7: And we'll be honest with you. There is a budget

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Speaker 7: coming in October and it's going to be painful. We

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Speaker 7: have no other choice given the situation that we're in.

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Speaker 7: Those with the broadest shoulders should bear the heavier burden.

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Speaker 6: After Keir Starmer's speech, the question many are asking is

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Speaker 6: who is in the crosshairs to pay more. The IPPR

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Speaker 6: I think, well known for its influence on labor, say

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Speaker 6: it should be those benefiting from capital gains, expensive properties

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Speaker 6: and large inheritances. Banking stocks also dropped in London yesterday

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Speaker 6: as traders bet they too could be targets. Labour's top

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Speaker 6: team face a tough balance with raising revenue to meet

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Speaker 6: their promises of a better state without cutting off the

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Speaker 6: UK's growth, which in a sudden reversal finds itself at

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Speaker 6: the top of the G seven in London. James Wilcock,

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Speaker 6: Bloomberg Radio.

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Speaker 2: Now, in a moment, we'll bring you up interview with

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Speaker 2: the video CEO and talk you through the reaction that

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Speaker 2: we've seen on markets to those results. But first, do

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Speaker 2: you know whether Resto mod is I didn't. I have

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Speaker 2: to admit it's a classic car that's been restored and

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Speaker 2: modified from the original, traditionally the sort of thing that

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Speaker 2: you might have found a neighbor tinkering with in a garage.

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Speaker 2: But our colleague Conna Elliott has been writing about how

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Speaker 2: the idea of arresto mod has gone very upscale and

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Speaker 2: now people are reworking luxury cars from Porsches to Lamborghini's

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Speaker 2: and as latest piece as a window into this world,

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Speaker 2: it's not just a hobby anymore, but something that's become

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Speaker 2: a small niche industry producing high end products with better craftsmanship,

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Speaker 2: improved technology and bespoke detailing, and sky high prices to match.

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Speaker 2: So the models that are created are rare, sometimes unique.

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Speaker 2: They're also increasingly nostalgic as the world turns towards electric cars.

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Speaker 2: It's fascinating piece why car collectors are paying through their

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Speaker 2: nose for Resto mods. You'll find it on bloomberg dot

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Speaker 2: com and on the terminal. Let's bring you more now

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Speaker 2: on those results from in Video, which is pointed investors

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Speaker 2: with an underwhelming forecast and use of production issues with

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Speaker 2: its next generation chips, and video CEO Jensen Wang has

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Speaker 2: been speaking to Bloomberg's Ed Ludlow. They began by discussing

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Speaker 2: the issues with the Blackwell chips. Here are some of

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Speaker 2: the highlights of that conversation.

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Speaker 3: We have started volume production. Volume production will ship in

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Speaker 3: Q four. Q four, we will have billions of dollars

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Speaker 3: of Blackwell revenues and we will ramp from there. We

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Speaker 3: will ramp from there. The demand for Blackwell far exceeds

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Speaker 3: its supply, of course in the beginning, because the demand

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Speaker 3: is so great, but we're going to have lots and

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Speaker 3: lots of supply, and we will be able to ramp

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Speaker 3: starting in Q four. We have billions of dollars of

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Speaker 3: revenues and we will ramp from there into Q one,

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Speaker 3: into Q two and two next year. We're going to

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Speaker 3: have a great next year as well.

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Speaker 8: Jensen, what is the demand for accelerated computing beyond the

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Speaker 8: hyperscalers and meta.

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Speaker 3: Hyperscalers represent about forty five percent of our total data

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Speaker 3: center business. We're relatively diversified today. We have hyperscalers, we

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Speaker 3: have Internet service providers, we have sovereign ais, we have

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Speaker 3: industries enterprises, so it's fairly fairly diversified a site outside

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Speaker 3: of hyperscalers the other fifty five percent. Now, the application

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Speaker 3: use across all of that, all of that data center

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Speaker 3: starts with accelerated computing. Accelerated computing does everything, of course,

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Speaker 3: from the models the things that we know about, which

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Speaker 3: is generative AI and that gets most of the attention,

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Speaker 3: but at the core we also do database processing, pre

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Speaker 3: and post processing of data before you use it for

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Speaker 3: generative AI, trans coding, scientific simulations, computer graphics of course,

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Speaker 3: image processing of course, and so there's tons of applications

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Speaker 3: that people use our accelerated computing for and one of

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Speaker 3: them is generative AI. Let's see what else can I say?

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Speaker 8: I think that's that lever jump in Jensen. Please on

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Speaker 8: sovereign AI. You and I've talked about that before, and

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Speaker 8: it was so interesting to hear something behind it that

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Speaker 8: in this fiscal year there will be low double digit

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Speaker 8: I think you said billions of dollars in sovereign AI sales.

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Speaker 8: But to the lay person, what does that mean? It

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Speaker 8: means deals with specific governments, if so.

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Speaker 3: Were, it's not necessarily. Sometimes it deals with a particular

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Speaker 3: regional service provider that's been funded by the government, and

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Speaker 3: oftentimes that's the case in a case of in the

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Speaker 3: case of Japan, for example, the Japanese government came out

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Speaker 3: and offered subsidies of a couple of billion dollars I

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Speaker 3: think for several different internet companies and telcos to be

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Speaker 3: able to fund their AI infrastructure. India has a Sovereign

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Speaker 3: AI initiative and they're building their AI infrastructure. Canada, the UK, France, Italy,

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Speaker 3: missing somebody, Singapore, Malaysia. You know, a large number of

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Speaker 3: countries are subsidizing their regional data centers so that they

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Speaker 3: could become able to build out their AI infrastructure. They

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Speaker 3: recognize that their countries knowledge, their country's data, digital data

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Speaker 3: is also their natural resource, not just the land they're

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Speaker 3: sitting on, not just the air above them. But they

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Speaker 3: realize now that their digital knowledge is part of their

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Speaker 3: natural and national resource, and they had to harvest that

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Speaker 3: and process that and transform it into their national digital intelligence.

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Speaker 3: And so this is what we call sovereign AI. You

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Speaker 3: could imagine almost every single country in the world will

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Speaker 3: eventually recognize this and build out their AI infrastructure.

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Speaker 8: Jensen, you explain clearly that demand to build generative AI

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Speaker 8: product on models or even at the GPU level is

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Speaker 8: greater than current supply in black class case. In particular,

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Speaker 8: explain the supply dynamics to me for your products and

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Speaker 8: whether you see an improvement sequentially quarter on quarter or

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Speaker 8: at some point by the end of fiscal year into

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Speaker 8: next year.

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Speaker 3: Well, the fact that we're growing would suggest that our

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Speaker 3: supply is improving, and our supply chain is quite large,

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Speaker 3: one of the largest supply chains in the world. We

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Speaker 3: have incredible partners and they're doing a great job supporting

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Speaker 3: us in our growth. As you know, we're one of

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Speaker 3: the fastest growing technology companies in history, and none of

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Speaker 3: that would have been possible without very strong demand but

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Speaker 3: also very strong supply. We're expecting Q three to have

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Speaker 3: more supply than Q two, We're expecting Q four to

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Speaker 3: have more supply than Q three, and we're expecting Q

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Speaker 3: one to have more supply than Q four, And so

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Speaker 3: I think our supply, our supply condition going into next

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Speaker 3: year will be in will be a large improvement over

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Speaker 3: this last year.

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Speaker 2: That's the CEO of and Vidia, Jensen Wang, speaking to

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Speaker 2: Bloomberg's Ed Ludlow, just after their results were published, and

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Speaker 2: you can listen to that interview in full on the

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Speaker 2: Bloomberg Talks podcast. All of our key conversations with decision

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Speaker 2: makers in one place. But we want to focus next

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Speaker 2: on the market reaction. Shares in Nvidia falling almost seven

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Speaker 2: percent and after hours in the back of those results,

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Speaker 2: at one points they were down over eight percent. We've

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Speaker 2: got Bloomberg TV anchor Pretty Group to with us for

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Speaker 2: more on the market reaction. This is one of those

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Speaker 2: things if you look at the numbers in Vidio met

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Speaker 2: or beat expectations on every measure based on what markets

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Speaker 2: were expecting. The consensus expectations Why wasn't that enough?

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Speaker 1: This is what happens when you're an A plus student.

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Speaker 1: This is this is the this is the down.

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Speaker 2: Not familiar with it all.

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Speaker 1: I have no idea, no no clue whatsoever, as I'm

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Speaker 1: sure you have no clue whatsoever. Look, this is this

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Speaker 1: is a really important piece of the equation because you've

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Speaker 1: seen it in other companies before. You've seen this in

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Speaker 1: Microsoft as Asia product. You've seen it in Apple as well,

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Speaker 1: where you have these gains of I'm going to give

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Speaker 1: you Microsoft as an example, thirty forty percent in the product,

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Speaker 1: and enough starts the market starts to expect that. So

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Speaker 1: when you get to say twenty nine percent in one quarter,

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Speaker 1: it actually takes a big hit. You're seeing the exact

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Speaker 1: same dynamic within Vidia here, where you've seen these massive

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Speaker 1: bumps and beats quarter over quarter. That it's the margin

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Speaker 1: of the beat that matters. Now, that margin of the

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Speaker 1: beat is that came in softer than expected, and that's

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Speaker 1: what tanked the stock. Simply that maybe you did get

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Speaker 1: an A plus plus this quarter, you got an A

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Speaker 1: minus or an A and I'm sure that you know

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Speaker 1: translates very well for how grading system in Europe works.

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Speaker 1: But I think this is important, especially when it comes

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Speaker 1: to where the growth is coming from. Because you looked

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Speaker 1: at the data center's demand still very good. If you

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Speaker 1: look at some of the gaming chips demand, which remember

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Speaker 1: and Vidia came to fruition or came to promise because

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Speaker 1: of their visual gaming chip. That was kind of their

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Speaker 1: their original claim to fame. Look at their automotive units

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Speaker 1: that actually came in softer then expected. That's not unfamiliar

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Speaker 1: to what we're seeing here in the EV space. I

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Speaker 1: should also add, even though you had some really good

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Speaker 1: numbers across the board, some really good beats, I was

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Speaker 1: talking about a fifty billion dollars buyback for the share

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Speaker 1: as well, and yet the market didn't respond to that.

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Speaker 1: So I'm curious what happens at the US open today.

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Speaker 2: Yeah, definitely want to watch. I mean, look, this is

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Speaker 2: a company that's so large though that it's also a

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Speaker 2: macro story. What's the sort of broader market reaction.

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Speaker 1: Well, this is coming with a little bit of concern,

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Speaker 1: and I should preface this by saying, going into Nvidia

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Speaker 1: earnings for the first time in the last couple of quarters,

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Speaker 1: you actually had investors look at downside protection. So I'm

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Speaker 1: going to get a little nerdy here, but the options

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Speaker 1: market was actually looking at how you hedge a downside

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Speaker 1: in Nvidia, to the point that the five most traded

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Speaker 1: contracts in the S and P five hundred were Nvidia puts,

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Speaker 1: So basically that insurance against a drop. And this is

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Speaker 1: a really big deal because in previous iterations there has

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Speaker 1: been no downside protection. People were really one hundred percent

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Speaker 1: on the Nvidia train. And that's the first time you

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Speaker 1: kind of saw some jinners, which has only been magnified

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Speaker 1: since you got those results. Add on the fact that

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Speaker 1: you've got numbers out of Salesforce, you got numbers out

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Speaker 1: of CrowdStrike, both of which missed on their revenue, and

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Speaker 1: of course Nvidia didn't miss on their revenue, but they

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Speaker 1: didn't beat as high. And a lot of that is

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Speaker 1: because enterprise demand right now, so your business is your

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Speaker 1: big corporates that are investing in computer infrastructure or AI, etc.

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Speaker 1: Aren't doing it with as much enthusiasm as they did before.

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Speaker 1: That's where the slowing demand is coming from. Whereas consumer

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Speaker 1: demand and consumer products are ramping up. Remember, we have

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Speaker 1: in addition to the tech space, we have an Apple

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Speaker 1: iPhone deb on September ninth, where they're going to be

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Speaker 1: revealing their first gen AI iPhone. And that's a big

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Speaker 1: deal because it speaks to the idea of how much

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Speaker 1: consumer adoption regular like regular mass consumer adoption actually is

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Speaker 1: attracted to an AI product, whereas before and all this

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Speaker 1: investment is mostly coming from a lot of the bigger companies,

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Speaker 1: and that's where the capex spend is coming from.

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Speaker 2: Yeah, and of course all of that very much feeding

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Speaker 2: into the outperformance of the MAC seven and what we've

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Speaker 2: seen on markets. Look, let's think about what we should

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Speaker 2: be looking at next. We're watching chip makers in Asia

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Speaker 2: this morning in Europe later US hours. One of the

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Speaker 2: key benchmarks you're watching.

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Speaker 1: Well, we already said TSMC shares take a little bit

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Speaker 1: of a beating in the Asia session, but in terms

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Speaker 1: of the broader market reaction, you actually aren't seeing as

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Speaker 1: bad of a reaction as expected. People were expecting this

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Speaker 1: to be this big macro event when it comes to

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Speaker 1: things like the South Korean Index, for example, which is

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Speaker 1: very heavily weighted towards chips, Japan, crypto bonds, et cetera.

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Speaker 1: You're not seeing that macro reaction. And I wonder how

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Speaker 1: much of this is because a lot of the pain

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Speaker 1: points in Vidio had to do with delays in their

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Speaker 1: Blackwell chips specifically as opposed to saying well, AI demand

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Speaker 1: is ending.

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Speaker 2: Okay, Curti Goute, thanks so much for talking us through. Now,

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Speaker 2: the Prime Minister care Starmer has warned people to brace

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Speaker 2: for short term pain as the government prepares its budget

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Speaker 2: for October. Public finances are facing a massive shortfall and

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Speaker 2: intense lobbying is underway to influence who will bear the

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Speaker 2: cost of that. Joining us now for more details as

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Speaker 2: our UK Politics reporter James Wilcock. James, what, first of

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Speaker 2: all have Labor said already about what they're going to do?

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Speaker 6: Well, Stee, this has kind of been the story of

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Speaker 6: the stomma for sort of Labour's fiscal policy. We knew

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Speaker 6: before the election they've committed to no raiss to corporation tax,

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Speaker 6: national Insurance VAT income, the big ones, and they also

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Speaker 6: committed to not changing the fiscal rules. Now there's some

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Speaker 6: up to date reporting from our Senior Economy Report of

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Speaker 6: older that they might be wiggling on that, but still

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Speaker 6: there's a straight jacket that's been crafted and then over

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Speaker 6: the summer they've come into office and found that the

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Speaker 6: government had already spent twenty billion pounds that wasn't accounted for.

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Speaker 6: That's when the doom and gloom began, which culminated this

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Speaker 6: speech to this week from Keir Starmer where he said

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Speaker 6: the area is going to be pain and it's going

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Speaker 6: to be felt by those with the broader shoulders. That

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Speaker 6: has really set the cat amongst the pigeons of those

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Speaker 6: who might have the broader shoulders.

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Speaker 2: So what sort of pressure is the government now being

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Speaker 2: put under it by various larby groups.

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Speaker 6: Quite because there's going to be people unhappy no matter

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Speaker 6: which way this goes. I mean it always is with

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Speaker 6: tough decisions. So you have the ippbr Institute for Public

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Speaker 6: Policy Research. They are left leaning think tanks often have

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Speaker 6: a lot of influence on labor policy. They want the

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Speaker 6: government to address what they call the capital versus income distinction,

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Speaker 6: which is basically, we get paid is one way most

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Speaker 6: of us make money. The other one is we get

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Speaker 6: it from wealth. And they would say that wealth is

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Speaker 6: taxed between about ten to twenty eight percent income it

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Speaker 6: goes up to forty five percent. There's a big distinction there,

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Speaker 6: and they would be unhap if that wasn't equalized because

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Speaker 6: it would harm leveling up, and they see that was

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Speaker 6: a good way to raise revenue. So you're looking at

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Speaker 6: capital gains tax, inheritance tax. You then have some of

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Speaker 6: the ultra wealthy their lobby in the government saying if

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Speaker 6: capital gains is going to go up, all our clients

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Speaker 6: will take their money outside the UK and there's risks

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Speaker 6: of a fire sale. You have pension groups who are

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Speaker 6: trying to protect tax free sort of perks they have

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Speaker 6: around their pensions. And you also have groups in the

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Speaker 6: private equity sector lobbying for the stuff. Now that's all

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Speaker 6: tax I have to point out. There is one big

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Speaker 6: group that everyone leaves out of this debate, which is

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Speaker 6: the group's lobbying for labor to do more. This is

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Speaker 6: a government that has promised to reform the state and

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Speaker 6: do a lot more with money. The groups we always

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Speaker 6: talk about are ones just trying to raise revenue to

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Speaker 6: cover the books. What we don't talk about enough is

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Speaker 6: what the revenue label will have to raise to do

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Speaker 6: new things to actually prove itself as a government that

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Speaker 6: beyond just the kind of missing twenty billion will be

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Speaker 6: a key question going forward as to how much reeves

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Speaker 6: the Chancellor will need to raise to do more than

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Speaker 6: just kind of stay afloat.

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Speaker 2: This is Bloomberg Daybreak Europe, your morning brief on the

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