Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hyde in New York
Speaker 1: and Vlow in San Francisco.
Speaker 2: This is Bloomberg Tech coming up in video. The world's
Speaker 2: most valuable company underwhelms on earnings as investors digest decelerating growth.
Speaker 2: This as its CFO weighs in on the Trump administration's
Speaker 2: fifteen percent commission on.
Speaker 3: Chip sales, telling us the.
Speaker 2: Plan needs to be codified first, and we break down
Speaker 2: other earnings from the tech world, the Snowflake HP gaining
Speaker 2: on results and Dell on deck after the bell. But
Speaker 2: first are we check in on this market, which of
Speaker 2: course is dragged lower by one key stock we're looking
Speaker 2: in in video, off by nine tenths of a percent
Speaker 2: looking after ours trade yesterday, it was more than three
Speaker 2: percent lower, as people just digest a company that is
Speaker 2: now revenue in with.
Speaker 3: Both of fifty percent. But it's not a two.
Speaker 2: Hundred and sixty percent growth that we were used to
Speaker 2: in previous years. And I'm interested in the focus on
Speaker 2: China in particular.
Speaker 3: This is a company that.
Speaker 2: Has no h twenty sales for fiscal second quarter, no
Speaker 2: sales baked in for the third quarter, but there is
Speaker 2: opportunity there. Just listen to what jensup Huang said on
Speaker 2: the call.
Speaker 4: So I think the you know, the opportunity for us
Speaker 4: to bring Blackwell to the China market is a real possibility.
Speaker 4: And so we just have to keep advocating the sensibility
Speaker 4: of and the importance of American tech companies to be
Speaker 4: able to lead in win the AI.
Speaker 2: Race for more bluebergs Ian King, who covers semiconductors, who
Speaker 2: was up late last night, does this with us. Now, Look,
Speaker 2: China is the big overhang and why some think that
Speaker 2: perhaps the numbers were a little light, largely because we
Speaker 2: didn't know whether to factor in Chinese.
Speaker 3: Revenue or not.
Speaker 5: I yeah, I mean they said that in the release
Speaker 5: and there was nothing China related in there in terms
Speaker 5: of the data center stuff. Then on the call they
Speaker 5: gave us a slightly extended picture and said, look, if
Speaker 5: everything goes okay, if everything gets sorted out, we might
Speaker 5: have up to five billion dollars worth of Chinese revenue.
Speaker 5: And if you add that back into their forecast, then
Speaker 5: this is an amazing quarter for them. So there's a
Speaker 5: lot of moving parts.
Speaker 2: There is and it feels as though it's a knee
Speaker 2: jerk to send the shares lower, many would feel the
Speaker 2: analyst community out there saying, look, strip this out.
Speaker 3: And this was actually quite a rich beat.
Speaker 2: But in you got even more detail from the CFO,
Speaker 2: in particular collect cross walk us through what she said
Speaker 2: about that fifteen percent stake taking that the government wants
Speaker 2: on future H twenty sales.
Speaker 5: Yeah, I mean, I think it's important to frame this appropriately.
Speaker 5: This isn't some kind of political stand or dispute with
Speaker 5: the Trump administration. What she was doing was what investors
Speaker 5: would like to do, which is to you know, for
Speaker 5: sheer duty, which is saying, look, there is no mechanism
Speaker 5: by which I can give fifteen percent of this China
Speaker 5: related revenue to the government as statutes currently exist. Something
Speaker 5: will have to happen before I can do that. So
Speaker 5: she was really just making a point and reassuring investors that, look,
Speaker 5: we are running this company properly according to the rules
Speaker 5: that exist.
Speaker 2: So give us the detail on whether they do or
Speaker 2: do not have licenses to certain Chinese customers yet in
Speaker 2: the bag, and whether or not that two to five
Speaker 2: billion dollars worth for the quarter coming could become a
Speaker 2: reality in.
Speaker 5: Yeah, and again, I mean they were very clear to say, look,
Speaker 5: we've got a few licenses right now, but there are
Speaker 5: so many geopolitical variables in the mix here. What does
Speaker 5: Beijing want? What does Washington really want? Will there be
Speaker 5: more licenses? Will they be given quickly? And all of these,
Speaker 5: to be fair to video, are not knowable right now
Speaker 5: because as we know, things change on a daily basis.
Speaker 5: With a social media post, the whole world changes. So
Speaker 5: I think you know, when people calm down and look
Speaker 5: at what we said, they'll perhaps realize that this is
Speaker 5: something which you know, this is a company taking a conservative,
Speaker 5: perhaps measured approach to it and collect told us and
Speaker 5: that was a message that was given to investors. Look,
Speaker 5: we think we'll get some of this where you know,
Speaker 5: we're not saying this has all gone away, but we
Speaker 5: just don't know when and how much. So we're going
Speaker 5: to be careful, going.
Speaker 2: To be careful, Ian King always careful with this. Who ads,
Speaker 2: we appreciate it. Let's get an investor. Take someone who's
Speaker 2: dug deep onto the detail. Is Nazi Tengler, CEO CEO
Speaker 2: at Leffa Tengo Investments. You've been taking some money off
Speaker 2: the table with Vida recently, You've still got significant exposure.
Speaker 2: And Natzi, what's so interesting is this question mark on China.
Speaker 2: What's your read? Because again and again someone quit saying
Speaker 2: there's a fifty billion dollar opportunity here.
Speaker 6: Yeah, thanks for having me, Caroline, and I agree with
Speaker 6: Ian on just about everything he said. I mean, China's critical,
Speaker 6: of course, but they already took the charge last quarter,
Speaker 6: and so the big disappointment overnight was they came in
Speaker 6: below the whisper number, but their guidance did not include
Speaker 6: China at I think it was fifty four billion, and
Speaker 6: the whisper number was at fifty five. So if you
Speaker 6: back out China from the whisper number, they actually beat
Speaker 6: not only the street but the whisper number on guidance.
Speaker 6: So I'm giving it a triple play. A beat beaten rays,
Speaker 6: but I think it doesn't make I mean, if this
Speaker 6: was a disastrous report, the stock would be off significantly
Speaker 6: more than it is. We trimmed some at one seventy nine.
Speaker 6: That's where it's trading right now. We put it to
Speaker 6: work in some other names like Palanteer and CrowdStrike, and
Speaker 6: we got some good execution there, but it's still four
Speaker 6: percent of our portfolios and a candidate for our twelve
Speaker 6: Best Ideas portfolio. So I think that the report was excellent.
Speaker 6: Decelerating growth is something that Microsoft dealt with with Azure
Speaker 6: early days, from ninety percent now down to thirty. I mean,
Speaker 6: I don't think Nvidious valuation is even as expensive as
Speaker 6: Microsoft if you look at it on price earnings to
Speaker 6: growth basis below one time. So I think this is
Speaker 6: an opportunity.
Speaker 2: I mean, to that point, when a four point four
Speaker 2: trillion dollar company is still delivering in excess of fifty
Speaker 2: percent revenue and earn ex for the share growth, it's
Speaker 2: pretty extraordinary.
Speaker 3: But the opportunity still is so extraordinary.
Speaker 2: I think Jensen Hung did a very good job at
Speaker 2: reminding us four trillion dollars is how big AI infrastructure
Speaker 2: spend could be alone, but he wouldn't really give us
Speaker 2: an amount of how much his take is of that market.
Speaker 3: Can you do the math on that a little bit?
Speaker 7: Well?
Speaker 6: Yeah, I mean, if you look at at earnings growth
Speaker 6: expectations for twenty twenty fiscal year twenty twenty five, it's
Speaker 6: one hundred and thirteen percent growth. For twenty six it's
Speaker 6: fifty percent growth, so you if you factor that in
Speaker 6: to the total numbers, I mean, this could be an
Speaker 6: incrementalion one hundred billion dollars in revenues over the next
Speaker 6: twelve months. Don't forget too, Sovereign is starting to pick up.
Speaker 6: That was about twenty billion euro in expectations. And then
Speaker 6: you've got the buyback putting a floor under the stock.
Speaker 6: They announced a sixty billion dollar buyback. So the market
Speaker 6: share take from Nvidia continues to remain or grow. And
Speaker 6: what was interesting to me today is that you're seeing
Speaker 6: AMD and Broadcon up on the news, but in Vidia
Speaker 6: down slightly.
Speaker 2: It's really interesting actually that all the Chinese names are
Speaker 2: up on the news as well. You just think of
Speaker 2: what's happening with Smick, what you're having with other key
Speaker 2: players who are building out AI accelrators for China.
Speaker 3: AMD.
Speaker 2: It really reminds me of AMD because they'd beat and
Speaker 2: in any ways they raised, but they couldn't give clarity
Speaker 2: on the future of China and they were punished because
Speaker 2: of that.
Speaker 3: Do investors just need to understand.
Speaker 2: That it's very difficult to get real clarity on China.
Speaker 6: Yeah, and Caroline, remember too, there are investors and then
Speaker 6: there are the hedge funds and the algorithms, and the
Speaker 6: latter tend to drive the volatility. Investors like me look
Speaker 6: at opportunities like this and say, I want to be
Speaker 6: in this for the long term. So last summer we
Speaker 6: picked off in video at one hundred dollars a share.
Speaker 6: Remember last summer people were saying the story was over.
Speaker 6: It's not going to continue. The hyper six scalers can't
Speaker 6: continue to spend capex at this level. And not only
Speaker 6: did they do that, but many of them increase their
Speaker 6: capex budgets. So if you think about data center, it's
Speaker 6: twenty nine percent growth, right, But China, he's saying, could
Speaker 6: grow at fifty percent. So to answer your previous question,
Speaker 6: China's growing faster than the rest of the world. But
Speaker 6: twenty nine percent is unlikely to be the growth number.
Speaker 6: It's likely to be closer to thirty to forty percent
Speaker 6: in data center growth for Nvidia in the coming year
Speaker 6: or two. So I think again, as I've said, you
Speaker 6: want to take advantage of these periods of confusion or
Speaker 6: you know, melancholy around the stocks future performance and add
Speaker 6: to your holdings if you own it, and initiate if you.
Speaker 2: Don't, okay, and then the real opportunity is the fact
Speaker 2: that the cadence of innovation keeps them coming. You've got
Speaker 2: Blackwell Blackwell Ultra already in the FABS according to the CFO.
Speaker 2: So is the Ruben an architect show. Why does that
Speaker 2: take us?
Speaker 7: Yeah?
Speaker 6: I mean I think it takes us to quantum and
Speaker 6: then some I think, you know, robotics. We've launched a
Speaker 6: new fund that we're incubating at the firm and it's
Speaker 6: called New Ara Thematic and it's all of the above.
Speaker 6: So you know, it's not just nuclear, it's quantum, it's robotics,
Speaker 6: because photonics. So this is an area that investors need
Speaker 6: to be sure they're not underestimating. You know, I heard
Speaker 6: the naysayers overnight it's decelerating the growth. There's not ai
Speaker 6: trade is over. It's not even close to over. We're
Speaker 6: in the early stages, and I think you want to
Speaker 6: be continue to be looking around and look for those
Speaker 6: that are going to get left behind. And there will
Speaker 6: be companies I believe, like Adobe that will probably get
Speaker 6: left behind. But then you want to focus on the
Speaker 6: winners and you don't want to shy away from them
Speaker 6: too early. And this is I think Reuben is the
Speaker 6: next stage Blackwell had. We haven't even realized the staggering
Speaker 6: demand for Blackwell that Jensen Wong spoke about last night.
Speaker 6: So yeah, strap in it's going to be vol little
Speaker 6: bit volatile to the upside.
Speaker 2: It's interesting yesterday we had Jamigambetta of IBM on talking
Speaker 2: about their deal while that partnership with AMD, the fact
Speaker 2: that they're looking in the future of soup coop and
Speaker 2: computing twinning with the future of quantum as well. You're
Speaker 2: talking about that as an area of growth. Where are
Speaker 2: these companies, though, managing to pick away at in Video's
Speaker 2: chants really with inference? Because yes, they are the chip
Speaker 2: of choice, they are the architecture of choice when it
Speaker 2: comes to training models. Are they really the only game
Speaker 2: in town when it comes to inference?
Speaker 3: No, I mean I think not.
Speaker 6: But that doesn't mean it's just like, you know, maybe
Speaker 6: you could argue that Microsoft sort of pioneered cloud computing.
Speaker 6: Larry Ellison might disagree with us from Oracle, but but
Speaker 6: you can. But you know, you see eventually they that
Speaker 6: their growth slowed, but there's still a dominant provider and
Speaker 6: AWS obviously would disagree with me that as well. But
Speaker 6: so I think you have to step back look at
Speaker 6: where the marginal erosion is coming from. Yes, we know
Speaker 6: Apple and Microsoft are developing your own chips. That's that's fine.
Speaker 6: I don't think that's going to change the dynamic. It
Speaker 6: goes back to Jevon's paradox. So when we had the
Speaker 6: deep Seek news, you know, everybody sold the stocks. I
Speaker 6: happened to be on air that day and said, listen,
Speaker 6: this is an opportunity because Morbi gets more, and so
Speaker 6: I think this is I mean, that's that's really the story.
Speaker 6: That they can lose share and still be growing at
Speaker 6: rapid pace. And the margins. We haven't even talked about
Speaker 6: the margins. You know about seventy percent. I mean, I
Speaker 6: don't know what there is to complain about.
Speaker 2: Instagram add a sixty brilliant lot of stock buyback, I mean,
Speaker 2: and still the stock cast away some Nancy tang of
Speaker 2: lef at Tangra Investments. It's always so good Tavy on
Speaker 2: the show, Thank you very much. Indeed wearing a leather
Speaker 2: an ode to Jensen that I mean, well, coming up
Speaker 2: more in Nvidia as China trade tensions. Of course, they're
Speaker 2: weighing on earnings. We're going to speak with Teresa Payton
Speaker 2: for Alis Solutions CEO on the China AI landscape.
Speaker 3: This is Bloomberg Tech.
Speaker 2: Check in on those Nvidia shares we're off by let's
Speaker 2: call it nine ten percent for a more than four
Speaker 2: trillion dollar stock. That's thirty eight billion that you've just
Speaker 2: wiped out in terms of market capitalization in Vidia's business.
Speaker 2: I mean the overhang has been China clouding the area
Speaker 2: because of trade tensions. That the company now saying that
Speaker 2: unconventional plan of course by the Trump administration to charge
Speaker 2: a fifteen percent commission on AI chip sales to China
Speaker 2: when it hasn't progressed actually beyond its early stages. Let's
Speaker 2: check in what the CFO, Collect Crest told us earlier.
Speaker 2: She said to Bloomberg, I don't have to do this
Speaker 2: fifteen percent until I see something that is a true
Speaker 2: regulatory document. Let's get more from New Meg's executive editor.
Speaker 3: Mike Shephard.
Speaker 2: You really sit at the intersection of politics and technology mine.
Speaker 2: So the ball is in the administration's court. They've told
Speaker 2: us that they're going to take fifteen percent. Well, where's
Speaker 2: the regulatory approval here?
Speaker 8: Well, that's really the question of the hour here in Washington,
Speaker 8: in Silicon Valley and on Wall Street. When are we
Speaker 8: going to see the fine print on this? And as
Speaker 8: Ian noted at the top of the hour, the company
Speaker 8: is proceeding very carefully on this front. It doesn't want
Speaker 8: to commit without seeing something in writing, because the terms
Speaker 8: could even change, especially with this administration halfway through. So
Speaker 8: they want to make sure they see this imprint and
Speaker 8: if they understand the legal and regulatory mechanism under which
Speaker 8: they would make these payments to the US Treasury. Remember,
Speaker 8: it's not quite a tax, it's not quite an import fee.
Speaker 8: It's really kind of hard to figure out how they
Speaker 8: would define it. And in a way it is holding
Speaker 8: the company up a little bit in terms of making
Speaker 8: those sales once again of the age twenty AI chip
Speaker 8: to Chinese customers. They don't want to proceed too fast,
Speaker 8: as a CFO suggest that they had the right to do.
Speaker 8: They have some of the export licenses in hand. But
Speaker 8: then again, if they proceed without actually giving the government
Speaker 8: a cut, that does risk angering the administration. And this
Speaker 8: is a government that Jensen Wong, the CEO of Nvidia,
Speaker 8: has tried very hard to cultivate good terms with He
Speaker 8: is visited with President Donald Trump a number of times,
Speaker 8: and the two men have built this report. So they
Speaker 8: want to make sure they are treading carefully here, Caro,
Speaker 8: because they're playing the long game. They are looking ahead
Speaker 8: to how Trump can help them in China.
Speaker 2: And I think Jensen and his CFO are trying to
Speaker 2: really remind the administration just how much money's left on
Speaker 2: the table. Up to five billion dollars worth could be
Speaker 2: made in H twenty sales in this next quarter alone.
Speaker 2: They're talking about the fifty billion dollar opportunity of China
Speaker 2: sales if they can get a modified Blackwell architecture the country.
Speaker 2: And that really was what Jensen was talking about, his
Speaker 2: hopes to talk to Trump about that, and actually the administration,
Speaker 2: in fact, President Trump has put messages out posted on
Speaker 2: his truth social about the fact that he expects some
Speaker 2: sort of request.
Speaker 8: Yes, and he is signaling his openness to granting that
Speaker 8: permission to the company to sell a scaleback version of
Speaker 8: the market leading Blackwell chip to Chinese customers. Now, again,
Speaker 8: we would expect the president to insist on getting his cup.
Speaker 8: Would it be fifteen percent, would it be more? What
Speaker 8: other demands might he put there, But again, this would
Speaker 8: be very much in tune and in line with what
Speaker 8: the administration is doing, not only with Nvidia, but also
Speaker 8: in a way trying to, I guess, restore some of
Speaker 8: those economic and political ties with China that we've seen
Speaker 8: bruised over the years.
Speaker 2: Mike Shephard, we thank you so much, Bloomberg. Let's get
Speaker 2: more insight now. Teresa Payden's with us for Tallis Solution CEO,
Speaker 2: former White House Chief Information Officer. At the moment, we're
Speaker 2: seeing Chinese rivals gain on the back of this lack
Speaker 2: of Nvidio competition.
Speaker 3: Right now, what do you make of it?
Speaker 9: Well, all I know is we're going to have to
Speaker 9: figure out there's a long race here and a short
Speaker 9: race here, and we have to secure not only our
Speaker 9: global leadership but also our intellectual property. And that's really
Speaker 9: some of the underpinning of the discussions here of is
Speaker 9: there a fifteen percent? Is there not a fifteen percent?
Speaker 9: What does this mean from an export control? So a
Speaker 9: lot more to come on this, but obviously China is
Speaker 9: amping up their part in the race, trying to win
Speaker 9: the global war on who's going to dominate AI?
Speaker 3: What is the IP risk.
Speaker 9: Well, the IP risk. So even though we're talking about
Speaker 9: sending a modified chip over to China, in my opinion,
Speaker 9: based on my years of experience, it's like handing over
Speaker 9: the keys to your R and D lab and saying
Speaker 9: just be in the small QA lab, not in the
Speaker 9: bigger lab, and don't look around. You wouldn't hand the
Speaker 9: keys to your R and D lab to your competitor.
Speaker 9: And China is our global competitor here for this technology.
Speaker 9: So that really what we're thinking about here is how
Speaker 9: could they get access to these chips and perhaps reverse
Speaker 9: engineer everything from performance to how things behave. Really, you
Speaker 9: just don't know what they're going to be able to
Speaker 9: do once they have their hands on all these chips.
Speaker 2: Teresa, let's say you're back as the White House Chief
Speaker 2: Information officer. What are you advising President Trump as to
Speaker 2: whether Jensen should have access to the Chinese market.
Speaker 9: Well, I think this is a tough one because the
Speaker 9: private sector does have the right. You know, companies do
Speaker 9: have the right to sell their goods and services all
Speaker 9: around the globe. We don't have a blockade on selling
Speaker 9: technology and other goods and services to China. So this
Speaker 9: is a very delicate balance here between a White House
Speaker 9: administration and a private sector organization. And so really what
Speaker 9: you have to do is look at the laws we
Speaker 9: already have on the books, and then so what kind
Speaker 9: of safeguards is this US based company going to follow
Speaker 9: based on the laws on the books, What types of
Speaker 9: inspection processes, what types of control processes. There is a
Speaker 9: playbook for doing this, even though this technology is new,
Speaker 9: and so we have to look at this playbook. The
Speaker 9: question is is whether or not new rules and regulations
Speaker 9: are going to be codified. And I think that's the
Speaker 9: open question that in Nvidia is having to deal with.
Speaker 2: In Vidia put in its ten Q that it could
Speaker 2: be exposed to potential legal implications because of this fifteen
Speaker 2: percent issue.
Speaker 3: What would it face in terms of legal issues?
Speaker 9: Well, if we end up codifying some type of a
Speaker 9: new barrier to the market in China or enforcing one
Speaker 9: of the existing regulations in a way that hasn't been
Speaker 9: enforced before, then in Video would have to make the
Speaker 9: decision of am I now blockaded from actually selling to China?
Speaker 9: Or do I have a lot of burdens on me
Speaker 9: that maybe don't exist for other companies who are selling
Speaker 9: technology to China. Remember, you've got big tech who's in
Speaker 9: China's social media is in China. It's not just Nvidia
Speaker 9: who is selling goods and services to China. And so
Speaker 9: they may decide, well, this is an undue burden placed
Speaker 9: on us. So they may decide to take on a lawsuit,
Speaker 9: or they may find themselves answering to for example, Siphius.
Speaker 9: As you know, TikTok Usa has had a lot of
Speaker 9: legal challenges in legal bills as it relates to how
Speaker 9: they operate and sifias interpretations of how they operate. So
Speaker 9: I think they're just kind of looking at past cases
Speaker 9: president precedent and then also looking at the president's remarks
Speaker 9: as a potential future precedent and deciding that there could
Speaker 9: be a risk for a long protracted legal battle.
Speaker 3: Theresa.
Speaker 2: We heard from Jensen Wang there's a fifty billion dollar
Speaker 2: opportunity in this year alone in China, but push out
Speaker 2: five years. Does that exist at the rate that Chinese
Speaker 2: government trying to push their own companies away from the
Speaker 2: US tech stack.
Speaker 9: Yeah, it may not exist in the future. That is
Speaker 9: a tough one. All I can tell you is from
Speaker 9: the frontlines of working with companies who have done business
Speaker 9: with China. It is a very tricky proposition, especially as
Speaker 9: it relates to cutting edge technologies, whether it's sort of
Speaker 9: like clean energy, whether it's computer technology, and it's very
Speaker 9: difficult and challenging to really understand what the regulatory environment
Speaker 9: is going to be and the protection for your intellectual property.
Speaker 6: You know.
Speaker 9: Kind of the big elephant that we're not discussing in
Speaker 9: having all of these conversations is we have a new
Speaker 9: more detailed report from the FBI on Salt Typhoon, and
Speaker 9: the findings from that report are stunning. We're talking eighty
Speaker 9: countries were impacted, not just the United States, and the
Speaker 9: access to metadata, phone calls and other information. You know,
Speaker 9: this is one of those things in China denies that
Speaker 9: they had any part in this, but this is one
Speaker 9: of those things where we're seeing sort of this vacuum
Speaker 9: cleaner effect of China basically vacuuming up intellectual property data
Speaker 9: information to use it for economic espionage.
Speaker 2: That was a breach that really hit the major US
Speaker 2: carries in particular Verizon and AT and T and T Mobile.
Speaker 2: Teresa Payton, thanks for reminding of us off it for
Speaker 2: Alice Solutions and it's time now for Talking Tech and
Speaker 2: first Up d D Global will pay seven and forty
Speaker 2: million dollars to resolve a sharehold or lawsuit concerning it's
Speaker 2: fort twenty twenty one USIPO Now, an offering that not
Speaker 2: only attracted into its scrutiny from Beijing also preceeded the
Speaker 2: company's dlisting. The right Haling Giant announce the deal Thursday
Speaker 2: alongside its second quarter results. Plus Taiwan, the prosecutors have
Speaker 2: charged three people for allegedly stealing trade secrets from TSMC,
Speaker 2: alleging that proprietary tech was stolen to help improve a.
Speaker 3: Take Tokyo Electron Now.
Speaker 2: Taiwan is seeking jail terms for at least seven years
Speaker 2: for the Trio, citing threat to the islands, national security
Speaker 2: and delivery hero cub It's earnings guidance for the full
Speaker 2: year this after a week dollar in South Korean one cut,
Speaker 2: interprofit and free cashlow look. The company saw revenue rise
Speaker 2: nearly eight point four billion dollars in the first half,
Speaker 2: but faces increased competition for rivals in Asia and the
Speaker 2: Middle East. And coming up more on Nvidia, let's take
Speaker 2: a look at the stock and other global chip exposed names.
Speaker 2: Shine Light on ASML. It is lower in sympathy. That's
Speaker 2: the European hip equipment maker can look on though. This
Speaker 2: is the upstart in China trying to eat in on
Speaker 2: AI accelerators in that country. We're p fifteen percent record high.
Speaker 2: It has doubled its market cap in this month alone.
Speaker 3: This is Bloomberg Tech.
Speaker 2: Welcome back to Bloomberg Tech. We take a look at
Speaker 2: the earning story. Because benchmark's relatively flat, we're actually higher
Speaker 2: just on the likes of the Nasdaq one hundred. I'm
Speaker 2: looking at what's happening with Snowflake having an absolutely brilliant
Speaker 2: day best place that's November twenty twenty four.
Speaker 3: We're up eighteen percent.
Speaker 2: Are showing that the desire for Agenderki is working in
Speaker 2: their business right now.
Speaker 3: Revenue grow thirty two percent.
Speaker 2: They beat and they raised as well in terms of
Speaker 2: their forward looking guidance. The analysts across the street really
Speaker 2: liking the strength coming from this particular software company that
Speaker 2: many had anxiety perhaps that new AI startups the spell
Speaker 2: to eat.
Speaker 3: Into the business model.
Speaker 2: No, no, they're managing to show real growth here and
Speaker 2: retention of customers. Move on though, and we're all a
Speaker 2: little bit lackluster about what happened with Nvidia last night.
Speaker 3: Look, this is a company that delivered fifty six percent
Speaker 3: revenue growth for their fiscal second quarter.
Speaker 2: Fifty four billion dollars is promised for the fiscal third quarter,
Speaker 2: and that's not including any Chinese revenue.
Speaker 3: That's only upside.
Speaker 2: But this is already a company that was very close
Speaker 2: to its record highs were off by one and a
Speaker 2: quarter percent, but off of those lows in the pre
Speaker 2: market trade, here is the reaction on the results from
Speaker 2: a few analysts on Blueberg TV on Invidia.
Speaker 10: When we have a beat and stocks don't go up
Speaker 10: or as hot stock like in video doesn't go up
Speaker 10: where it starts to roll over a little bit, that
Speaker 10: suggests to a trader and a technical analyst that everyone
Speaker 10: who might own the stock already does. But we're nowhere
Speaker 10: near there yet.
Speaker 11: The reason the stock has recouped some of those losses
Speaker 11: and I think will rule retain strength is because of
Speaker 11: that guide. For Q three, it was very strong. It's
Speaker 11: really all about Q three, and it's because Blackwell and
Speaker 11: Blackwell Ultra are starting to ship, and if you know
Speaker 11: that story, you're not selling this stock right now.
Speaker 7: They were very good about signaling to the market that
Speaker 7: the chinahovertainning could continue and that has about a five
Speaker 7: billion dollar impact in the next quarters numbers. So, having
Speaker 7: said that, fifty four billion represents a very strong showing,
Speaker 7: which means they expect hyperscalers and other parts of the
Speaker 7: world to pick up that slack.
Speaker 2: More reaction for you now from an investor. Daniel Pilling's
Speaker 2: with US Sans Capital Ponio manager.
Speaker 3: So why is the stock down?
Speaker 12: Well, I think there's a few reasons. One stock had
Speaker 12: a good run into the quarter, and two it probably
Speaker 12: slightly a missed sort of the byside expectations and it
Speaker 12: was mainly around I think China. And then secondly black
Speaker 12: Hole is still a little bit supply constraints, so that
Speaker 12: ramping it as fast as they can, but I guess
Speaker 12: the ramp wasn't fast enough. But I would say though
Speaker 12: to us, those were pretty strong results and maybe one
Speaker 12: interesting fact to look at if you take out the
Speaker 12: China revenues completely out of the data center, then the
Speaker 12: rest of the world for them actually accelerated from about
Speaker 12: sixty ish percent growth in Q one this year to
Speaker 12: a guide that eighty percent growth in Q three this year.
Speaker 12: So actually in Nvidia X China has been accelerating, which
Speaker 12: which I think is really strong.
Speaker 3: I think that's a really interesting take. We had Vladimir
Speaker 3: Galibov from MDA.
Speaker 2: Yesterday talking about how Europe is stopped starting certain countries.
Speaker 2: You've got them up really going hard on sovereign AI,
Speaker 2: other countries less. So we got told twenty billion dollars
Speaker 2: for sovereign AI. Is that strong enough for you, Daniel, Yeah, I.
Speaker 12: Think that's a great number. But the truth of the
Speaker 12: game is still within high scalers and AI startups. I
Speaker 12: think that's where the real action is for now, and
Speaker 12: it's a much much much larger number, and I think
Speaker 12: the interesting aspects there are one as Jensen noted that
Speaker 12: reasoning AI is so much more compute intensive. He quoted
Speaker 12: one hundred two thousand times more on the one inside
Speaker 12: and then on the other inside though it's also much
Speaker 12: better so it reduces hallucinations. And he also mentioned that
Speaker 12: the return and invested capitally received from buying these ships
Speaker 12: is phenomenal.
Speaker 8: Right.
Speaker 12: He mentioned if you invest three million today, you can
Speaker 12: make thirty millions in token revenues in short order. So
Speaker 12: I think that's where the real action is as of today,
Speaker 12: and is.
Speaker 2: That why the real action is talking about where Rubin
Speaker 2: takes us the cadence of innovation over at in video.
Speaker 12: I think so. I think Ruben will again that the
Speaker 12: most important thing that Nvidia is doing is they're increasing
Speaker 12: the performance per what and they noted that it costs
Speaker 12: about fifty billion dollars for each one giga what data center.
Speaker 12: Ruben will again improve that performance per WHAT, which means
Speaker 12: that Nvidia's competitive situation improves on the one inside, but
Speaker 12: also on the other hand side, you can do more
Speaker 12: computer you can build better models with Ruben, which means
Speaker 12: it's a self fulfilling prophecy a little bit because whatever
Speaker 12: comes out of these models again have higher IQ and
Speaker 12: effectively bigger and better apps.
Speaker 2: You're not worried in any way about Amazon's trainium, about
Speaker 2: Google's TPU, the fact that the customers are innovating themselves.
Speaker 12: Yeah, no, I think it's our job to worry sometimes.
Speaker 12: But we've looked at this in detail out and I
Speaker 12: think the idea here is again to say, well, so
Speaker 12: here's in Vidia. They're building a giant system of a company.
Speaker 12: They have both networking CPUs, GPUs, hundreds of difference of
Speaker 12: suppliers and they put the software on top. They say,
Speaker 12: and we believe in this that they are the best
Speaker 12: performance for one supplier in the industry bar nobody else.
Speaker 12: And as long as that it's true, something like Trainium
Speaker 12: cannot compete simply because they don't have the scale, they
Speaker 12: don't have the system, and they don't have the software.
Speaker 12: So in Vidia to us remains the winner in the sense.
Speaker 2: And that's what's interesting about and what I'm trying to say, Look,
Speaker 2: we are more than just hardware in many ways, we
Speaker 2: are the one stop shop, and we're leaning more into that.
Speaker 2: Did it lean more into the future opportunities enough for
Speaker 2: you the robotic side of things, cause automotive remains a
Speaker 2: bit of an overhang when it comes to China. But
Speaker 2: thinking also about quantum and real future here, I.
Speaker 12: Think in Vidia is probably the company in the world
Speaker 12: that runs the fastest that I've ever seen. I mean,
Speaker 12: what they're trying to do is they're trying to align
Speaker 12: hundreds of difference of suppliers. They try to design a
Speaker 12: GPU on an annual cadence, and they're trying to update
Speaker 12: their systems on an annual to eighteen months cadence, which
Speaker 12: is unheard of. At the same time they're focusing on
Speaker 12: quantum robotics, et cetera, et cetera. So I think in
Speaker 12: Nvidia is running as fast as anything else I have
Speaker 12: ever seen. And if I may mention that too, I
Speaker 12: think quantum is probably going to slot into the Nvidia
Speaker 12: ecosystem by saying they have CPUs, they have GPUs, and
Speaker 12: at some point they'll have quantum somewhere in there too,
Speaker 12: And you can just switch between those various sort of
Speaker 12: compute layers.
Speaker 2: And that was what was interesting with IBM and AD's partnership,
Speaker 2: the idea that almost you reference how these reasoning models work.
Speaker 3: While I'm thinking of GPT five.
Speaker 2: How it just pushes you towards the best possible model
Speaker 2: for your question. We're going to have the best possible
Speaker 2: computing standard for your general task.
Speaker 12: Yes, I fully agree with that, the best possible as
Speaker 12: well as the cheapest and the fastest. And again I
Speaker 12: mean as we think through the next few years, the
Speaker 12: question is like how much more compute can a video sell?
Speaker 12: And as truthfully continues to be a question of the
Speaker 12: scaling laws, right, and we've seen with GROCK four that
Speaker 12: compute still provides better and bigger models. We're going to
Speaker 12: have black Wood clusters scaling in the next twelve months
Speaker 12: or six to twelve months, and hopefully we'll be seeing
Speaker 12: good results coming out of whatever comes after GROG four
Speaker 12: and chat GPT five, and that's ultimately truly going to
Speaker 12: drive the bus fund video in terms of demand and
Speaker 12: in terms of the revenue outlook.
Speaker 2: So you think we should think more about Colossus, We
Speaker 2: should think more about what Meta is doing in terms
Speaker 2: of well it's scaling in Louisiana.
Speaker 3: Should we figure China out entirely.
Speaker 2: Considering the government wants to push its own homegrown domestic
Speaker 2: talent anyhow.
Speaker 12: Yes, I think we should, and I would actually argue
Speaker 12: what China is doing seems to be relatively rational. What
Speaker 12: China is basically saying is that you're trying to sell
Speaker 12: the chip that's based off of an architecture that's three
Speaker 12: and a half years old. And secondly, we've also grown
Speaker 12: a local AI architecture or a stack that has caught
Speaker 12: up somewhat to that old chip. So unless you start
Speaker 12: selling us a newer derivative of Blackwell, we don't really
Speaker 12: maybe need you as much anymore as we needed you
Speaker 12: three years ago, so that all seems to make sense.
Speaker 12: And I don't know whether the licensing will work out
Speaker 12: or not, but the interesting piece is if it does,
Speaker 12: that's a big, big upside of time fun video because
Speaker 12: Jens noted is a fifty billion dollar market and if
Speaker 12: they're allowed to ship a derivative of the newest chip
Speaker 12: their market share that should be enormous because there is
Speaker 12: nothing in China that even can remotely compete with what
Speaker 12: Nvidia has.
Speaker 2: Fifty four billion dollar forecast for physical thirty culture and
Speaker 2: not even fracturing in China.
Speaker 3: And Daniel pilling A sounds capital. It's great to have
Speaker 3: you on.
Speaker 2: All about Nvidio, But there are several of China's big
Speaker 2: tech names also reporting earnings this week, including Ali Baba. Now,
Speaker 2: the company has been stepping up it's AI efforts since
Speaker 2: Chinese firm Deep Seat released its own R one model.
Speaker 2: Remember Blomberg's Isabelle Lee joins us. Now this stock has
Speaker 2: been on a tear this year at some forty two percent.
Speaker 2: What more can it give in terms of where it
Speaker 2: is on AI and cloud?
Speaker 13: I think it's like everything in tech, investors just want
Speaker 13: more and more and more, and even if you beat,
Speaker 13: it's still not enough. So for Alibaba, there's later to
Speaker 13: report on Friday, and they're likely to really highlight their
Speaker 13: AI strategy. But if you look at their peers, ten
Speaker 13: Cent and by Do, they're likely to kind of disappoint
Speaker 13: because it's really going to struggle or it may struggle
Speaker 13: to show how it's big investments in AI will be
Speaker 13: paying off. I mean, these companies ever since the chat
Speaker 13: gip they came into the picture, they've invested billions of
Speaker 13: dollars in AI, They've rolled out their llms, they've infused
Speaker 13: therm flag your products with that, but making money has
Speaker 13: been hard. Why because analysts are saying that Chinese users,
Speaker 13: unlike Western counterparts, are reluctant to spend on premium paid
Speaker 13: subscription models.
Speaker 2: What's also interesting is just everyone's trying to get on
Speaker 2: every other game. They will want to be like the
Speaker 2: megaaps to a certain extent, and you have a super
Speaker 2: ropp with may Twon for example, that the phase competition
Speaker 2: in food delivery, so.
Speaker 13: That too, and then I feel like if you look at,
Speaker 13: for instance, the ten cents earning this month, they showed
Speaker 13: revenue from that business including selling a services going more slowly.
Speaker 13: By Do also when it comes to the cloud business
Speaker 13: didn't expand fast enough, so I feel like, how will
Speaker 13: you improve to your point? And if you look at
Speaker 13: the contribution of AI, it's really going to dampen the
Speaker 13: gross outlook of Alibaba, I mean, and it comes at
Speaker 13: a time where their e commerce business is kind of
Speaker 13: struggling compared to the arrivals. Consumption in China still remains
Speaker 13: weak even as the economy slightly improves. So really lots
Speaker 13: of moving parts for Alibaba. But in relation to Nvidia, yesterday,
Speaker 13: we do have Bloomberg Intelligence saying that despite uncertainty over
Speaker 13: Invidia's ability to provide H twenty chips, all these three Alibaba,
Speaker 13: ten and by Doo are still well positioned, at least
Speaker 13: in the medium term.
Speaker 3: In begs as Vali, we love our breaking it down,
Speaker 3: thank you.
Speaker 2: Let's stick with Chinese firms, but shift gears to the
Speaker 2: automotive industry. Hong Kong shares of electric vehicle maker byd
Speaker 2: fell yesterday concerns about possible decreases in exports after Mexico
Speaker 2: announced plans to tariff China.
Speaker 3: For Let's bring in. Bloomberg's Craig Trudell so.
Speaker 2: BYD on the day had had some issues around maybe
Speaker 2: accessing Mexico, but boy, their sales in Europe going well,
Speaker 2: what were they were up threefold while Tesla actually saw
Speaker 2: sales drop forty percent.
Speaker 14: Yeah, we've seen BYD really put a dent in the
Speaker 14: European car market and take advantage of the softness for Tesla,
Speaker 14: maybe be a sort of factor in that softness where
Speaker 14: you know, it's not been uncommon now for BYD to
Speaker 14: actually outseell Tesla in this region, which would have been
Speaker 14: unthinkable even just a year ago. This was a company
Speaker 14: that was really sort of taking off in its home market,
Speaker 14: and yet overseas sales it's still had a long way
Speaker 14: to go. So we've seen some progress on the export business,
Speaker 14: I think we have seen maybe a little bit of
Speaker 14: a slowdown and some softness at home, And that's been
Speaker 14: the real story this year where you know, for all
Speaker 14: the sort of continued growth that we've seen out of BYD,
Speaker 14: there's some real questions starting to emerge about can they
Speaker 14: hit the full year sales figures that they were expecting
Speaker 14: for twenty twenty five.
Speaker 2: Yeah, because what they've already sold two point one five
Speaker 2: million in the first half of the year, but that's
Speaker 2: only a less than forty percent of what they're aiming
Speaker 2: to do for the full year, so having to discount
Speaker 2: in some ways.
Speaker 14: Yeah, and I think it's really an ironic story in China,
Speaker 14: right where you've seen so much state support for this industry,
Speaker 14: so much attempts to sort of foster this really competitive
Speaker 14: auto industry and particularly ev industry, and yet maybe we've
Speaker 14: seen sort of some overdoing of it. Right we have
Speaker 14: Chinese companies with by D maybe front and center, discounting
Speaker 14: their lineup in really aggressive fashion. Concerns about suppliers not
Speaker 14: getting paid in a timely manner, and you know, maybe
Speaker 14: some concerns too about you know, just how long this
Speaker 14: can continue if if we just see manufacturers, you know,
Speaker 14: aggressively discounting, at what point is enough enough? And do
Speaker 14: we see some companies go out of business? So you've
Speaker 14: seen this kind of campaign in China and the part
Speaker 14: of the government to do away with the you know
Speaker 14: what people refer to as a price for and yet
Speaker 14: some real reluctance on the companies to sort of sort
Speaker 14: of take heed.
Speaker 2: There most creature dell On BYD, we thank you.
Speaker 3: We're also keeping an eye on Dell today.
Speaker 2: The stock is climbing ahead of earnings release of its
Speaker 2: own after the close.
Speaker 3: Mesters looking for signs that the company.
Speaker 2: Will boost its forecast for AI server shipments has bring
Speaker 2: in blooming intelligence analysts reugin Ho regin is interesting that
Speaker 2: it's actually higher on the day when in video is down.
Speaker 2: Often they move in sympathy with one another. But we're
Speaker 2: expecting big things.
Speaker 15: Yeah, so there's a good thing. There are a couple
Speaker 15: of things that's going on with Dell this morning. A
Speaker 15: relative not only for AI but also for PCs, right,
Speaker 15: you know, and video was more China related. Dell has
Speaker 15: no China exposure as it relates to AI servers, and
Speaker 15: I do expect them to report seven billion dollars in
Speaker 15: AI server revenues. They guide you to about fifteen billion.
Speaker 15: Street some of the bullcase on the street has guided
Speaker 15: potentially guiding up to twenty billion. So that's the bogie
Speaker 15: that the street is looking for.
Speaker 2: HP is an interesting read if you're thinking about PCs
Speaker 2: and HP had really resilient PC strength. It's about the
Speaker 2: AIPC apparently, and actually the commercial adoption of that seems
Speaker 2: to be holding things up as well as Microsoft's upgrade
Speaker 2: reigin is that how we read across from perhaps HP
Speaker 2: to Dell.
Speaker 15: That's exactly it, so that that's the second tailwind for Dell.
Speaker 15: Let's keep in mind that Windows eleven upgrade cycle is
Speaker 15: actually going strong, and what we learned from the HP earnings,
Speaker 15: callers had only fifty percent of actually upgraded to Windows eleven,
Speaker 15: So that means we have an elongated Windows eleven cycle
Speaker 15: that's going to benefit Dell. How eighty percent of their
Speaker 15: revenues come from commercial PCs, and those are the customers
Speaker 15: who need to upgrade, and Dell should be a beneficiary
Speaker 15: from that upgrade cycle. And the PC business actually actually
Speaker 15: has been more resilient. So HP results essentially tell us
Speaker 15: that downside risk on the PC might be limited, at
Speaker 15: least for the near term.
Speaker 2: The thing with Dell is everyone's very bullish on it.
Speaker 2: We've got twenty two buys across the analyst zero cells,
Speaker 2: and actually the price is pretty close to overall consensus
Speaker 2: price targets. How much is already baked in to a
Speaker 2: good set of numbers. Yeah, so.
Speaker 15: From well, let me tell you how much is baked in?
Speaker 15: I think from a valuation perspective, fourteen times forward earnings.
Speaker 15: If you look at Hpe, which is another enterprise IT company,
Speaker 15: they're own trading around eleven times. So there was a
Speaker 15: lot of good news baked into the shares from evaluation standpoint,
Speaker 15: so sales upside is expected. Now I will want to
Speaker 15: cautions some people heading into the print. There are a
Speaker 15: couple of red flags. Other enterprise IT companies are not
Speaker 15: benefiting from an uptick and spending net APP report the
Speaker 15: last night, New Tanics, Cisco a couple of weeks back,
Speaker 15: they all cautioned US federal spending as being weaker than anticipated.
Speaker 15: Keep in mind that Dell has roughly about three percent
Speaker 15: sales exposure to the US FED. So if there is
Speaker 15: any pocket of weakness, that could be one and a
Speaker 15: yellow flag that I want to raise to investors heading
Speaker 15: into the print.
Speaker 2: So, Sarah, thank you, Lujin Hove, Senior analyst, Rubag Intelligence,
Speaker 2: so appreciate having you on. Let's get back to the
Speaker 2: key story of the day. Though it is in video
Speaker 2: the world's most valuable company, but there are other companies
Speaker 2: around it that tell us the hardware versus software story.
Speaker 2: Let's bring in Bloomberg Intelligence Senior analyst man Leep saying, Look,
Speaker 2: when we're anticipating Dell doing very well on AI servers,
Speaker 2: this just speaks to the strength of AI adoption that
Speaker 2: some are perhaps sleeping on a bit today.
Speaker 3: When it comes to in video's numbers.
Speaker 16: Yeah, and look, I mean when you look at the
Speaker 16: overall ecosystem. You know, this quarter we saw Microsoft Azure
Speaker 16: growth accelerating to thirty nine percent. Now Snowflake and Mango
Speaker 16: deb outperforming. Just when you connect the dots, you can
Speaker 16: see if Microsoft's AI consumption is going up and it's
Speaker 16: reflecting in their cloud numbers, who is the user of
Speaker 16: that cloud consumption. It's your Snowflake. And so from that perspective,
Speaker 16: you know it's all intertwined. Dell doing well, Microsoft deploying
Speaker 16: that on their clouds, Snowflake actually seeing an increment in
Speaker 16: their product growth because companies are deploying more AI agents.
Speaker 16: So you can see how the ROI question is getting answered.
Speaker 16: When it comes to that aispan, It's like the.
Speaker 2: Whole food chain, isn't it. You've got the picks and
Speaker 2: shovels of the end video and then got the user
Speaker 2: of that. That's Microsoft that's going into then the use
Speaker 2: case of Snowflake talk us through the Snowflake numbers. Because
Speaker 2: the shows are more than twenty percent. It was clearly
Speaker 2: some anxiety built into these numbers that we were going
Speaker 2: to see competitors take a bit of an edge on
Speaker 2: a GenTech.
Speaker 16: I mean, look, traditionally database businesses are very sticky. It's
Speaker 16: just right now we are in an environment for everyone
Speaker 16: is trying to figure out what gets disintermediated by llms
Speaker 16: and AI agents, and all the software companies were getting
Speaker 16: beaten up because everyone thought llms can do everything that
Speaker 16: these software products do. Well, guess what if you're trying
Speaker 16: to deploy an AI agent, llms don't have the data
Speaker 16: that you want to customize your chat pot on. Snowflake
Speaker 16: does or you know, data breaks does, and that's where
Speaker 16: Mango dB does, and all these database companies are what
Speaker 16: you need to custom your chat pot experience to your
Speaker 16: particular use case. And I think that's what you are
Speaker 16: seeing in the numbers. You're seeing them sequentially outperformed.
Speaker 3: I mean, can we look at Manga DV for a second.
Speaker 2: Two days you pointed this out, it is almost fifty percent.
Speaker 2: It is the best two day run for the company
Speaker 2: on record. So they really managed to push back also
Speaker 2: on that m I narrative that perhaps people aren't getting
Speaker 2: any bang for the buck when it comes to using
Speaker 2: AI pilots as well.
Speaker 16: When it comes to valuation multiples, what we have seen
Speaker 16: traditionally is companies that grow at thirty percent will trade
Speaker 16: at twenty times sales. But once that growth comes down
Speaker 16: below twenty percent, then multiple goes from twenty times to
Speaker 16: five times.
Speaker 3: Wow.
Speaker 16: So the multiple compression is always huge and software and
Speaker 16: that's why the top line growth is so important, I
Speaker 16: mean snowflake. Going back again to thirty percent plus growth,
Speaker 16: you will see a multiple expansion. It's not as if
Speaker 16: the story changed completely, but just the multiple that investors
Speaker 16: put on these companies growing over thirty percent versus under
Speaker 16: twenty percent, it's huge.
Speaker 2: But let's go to say, then a multiple on Nvidia,
Speaker 2: it's not that high. If you're thinking about a Blend
Speaker 2: and Ford version of the price to earnings estimated price
Speaker 2: to earnings, it's one of like thirty three times.
Speaker 4: Yeah.
Speaker 16: And look with Nvidia, the biggest concern is it's not
Speaker 16: a recurring business. Although they are proving that. You know,
Speaker 16: they can keep releasing a new architecture every year and
Speaker 16: it becomes a recurring refair cycle when it comes to
Speaker 16: their data center chips. But that's the biggest I would
Speaker 16: say risk is Right now, they are growing over fifty percent.
Speaker 16: They said Hyperscalers will increase their CAPEX by fifty percent
Speaker 16: next year, so that translates into similar growth for next year.
Speaker 16: But it's very hard to sustain that. I mean, do
Speaker 16: you think capex will keep growing fifty percent in perpetually? No,
Speaker 16: And if your largest customers are for Hyperscalers, then that's
Speaker 16: a big risk. And that's what you have to model
Speaker 16: for two years from now, three years from now.
Speaker 2: Man Nave saying he's always modeling for us from Bloomberg Intelligence.
Speaker 3: We thank him. That does it to this edition of
Speaker 3: Bloomberg Tech.
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