Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg
Speaker 1: Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join
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Speaker 1: and always I'm Bloomberg Radio, the Bloomberg Terminal, and the
Speaker 1: Bloomberg Business App. It's been a great honor to know him,
Speaker 1: his public commitment to the United States from coming out
Speaker 1: of San Diego. Is a young buck out of Annapolis.
Speaker 1: James Travetus joins us now and addmirl and of course
Speaker 1: his work Carlisle is noted Emeralds Tavitas. I want to
Speaker 1: get down to the granular because I don't think enough
Speaker 1: of the granulars talked. Somebody has to pay for a
Speaker 1: Magura V five drone so it can sink a modestized
Speaker 1: ship of the Russian Navy. Is Washington saying to Ukraine
Speaker 1: as a generalization that we're not going to pay for
Speaker 1: a Magura V five drone or whatever so that we
Speaker 1: can assist you.
Speaker 2: Yeah, that's the message being delivered to Kiev right now.
Speaker 2: It's immensely frustrating to anybody who cares about the security
Speaker 2: of the country. Tom And it's not just drones, it's
Speaker 2: artillery shells, it's eight tacums long range missiles, it's getting
Speaker 2: the F sixteens onto the battlefield. All of that, we
Speaker 2: are failing the cause of freedom. Final thought, it's sixty
Speaker 2: billion dollars. That's okay an amount of money. Our defense
Speaker 2: budget is nine hundred billion dollars. So for five percent
Speaker 2: of our defense budget we break the Russian armed forces
Speaker 2: defeat Vladimir Putin. There's a business show that sounds like
Speaker 2: a pretty good ROI to me.
Speaker 1: How close are we to lend lease or before lend
Speaker 1: Lea's nineteen thirty eight, nineteen thirty nine, we're basically isolationists.
Speaker 1: America said we don't want to participate at that time
Speaker 1: in a European war. Is this just nothing more than
Speaker 1: an isolationist debate of a global America?
Speaker 3: I think it is.
Speaker 2: It feels eerily like the nineteen thirties. Go back and
Speaker 2: read the first volume of Winston Churchill's magisterial six volume
Speaker 2: set the Second World War. It's called The Gathering Storm.
Speaker 2: That's what it feels like.
Speaker 1: To me, and it feels like to me folks if
Speaker 1: you want to read it, particularly the kids out there.
Speaker 1: Warren Remembrance Hermann Valuk, which is just shocking on nineteen
Speaker 1: thirty eight, is a fiction. Paul jump in here, withever.
Speaker 4: Admiral, can you give us, based upon your sourcing kind
Speaker 4: of the latest on the battlefield in Ukraine today?
Speaker 2: I can no surprise as supplies dwindle to the Ukrainians.
Speaker 2: It puts real lift in the Russian armed forces, so
Speaker 2: they're moving forward. It's not yet the end of the
Speaker 2: road for Ukraine, but you can feel the wind behind
Speaker 2: the sales of Vladimir Putin. And by the way, it's
Speaker 2: all connected to his arrogance, his impunity and killing Alexander
Speaker 2: Navalni over the last few days. All of this is
Speaker 2: giving real lyft on the battlefield to the Russians. We
Speaker 2: better get this military aid to the Ukrainians or we're
Speaker 2: going to see more losses and the hole that's being
Speaker 2: dug will be much harder to get out of, Admiral.
Speaker 4: I think most students of history take away that boy.
Speaker 4: The Russian people, the Russian army can take un told
Speaker 4: amounts of pain and time. Is there any sense that
Speaker 4: Russia will bend here at all other than you know,
Speaker 4: I guess superior military.
Speaker 2: I think it's going to require a continued significant aid
Speaker 2: from the West.
Speaker 3: And yes, Russians can take a lot of pain.
Speaker 2: Go back and read One Day in the Life of
Speaker 2: Ivan Denisovich by the Nobel Laureate Alexander Solzanis.
Speaker 3: It's someone in goolag.
Speaker 2: These are tough people, and Putin is a tough long
Speaker 2: range player, but his soldiers are dying.
Speaker 3: In the hundreds of thousands.
Speaker 2: Hundreds of thousands of young men have departed the country
Speaker 2: Russia to avoid the draft long term. It's not a
Speaker 2: good hand of cards. We just need to keep our
Speaker 2: foot on the accelerator.
Speaker 1: James Trevitis with US the former NATO Supreme Commander program
Speaker 1: Note here the new Foreign Affairs magazine is extraordinary. Neil Ferguson,
Speaker 1: the and controversial historian, with a definitive essay there on
Speaker 1: just what the Edmund was talking about. Which is the
Speaker 1: detent the new kind of theme that's out there of
Speaker 1: a Kissinger realist policy versus whatever the new policy is
Speaker 1: that we're making up as we go. I want to
Speaker 1: go to our conversation Admiral on Bloomberg surveillance moments ago
Speaker 1: with a member of the Biden administration, and John Farrell
Speaker 1: asked the money question, what about India? I have hockey
Speaker 1: stick charts of exports from Kazakhstan in India into Russia.
Speaker 1: What is our political and military leverage with mister Mody
Speaker 1: as he faces a new election.
Speaker 2: First, let's let him get through his election. You know,
Speaker 2: nine hundred million people literally are going to go to
Speaker 2: the polls and vote in India.
Speaker 3: I think he'll win a strong, strong poll.
Speaker 2: Then he'll come back with real confidence in his third term.
Speaker 2: I think that's when we can go to him off
Speaker 2: stage and say, what will it take? Can we pull
Speaker 2: you away from this support line you are providing to Russia?
Speaker 3: You're right, Tom, India is the key.
Speaker 2: China is going to continue to support Putin. India is
Speaker 2: the swing vote here we need to focus on.
Speaker 1: Okay, I'm going to go there, folks. You're gonna rip
Speaker 1: up the scripture with James Trubus. Ramatana Guoh's, a definitive
Speaker 1: Gandhi biographer, has a blistering essay here begging the United
Speaker 1: States to impart its policy over to India. Is they
Speaker 1: actually become somewhat dominant with the struggling China. Do we
Speaker 1: have any military presence over there, Admiral? Do we exist
Speaker 1: in the Indian Sea of the South whatever this ocean
Speaker 1: is there from South Africa Durban on the way over
Speaker 1: to Indonesia.
Speaker 2: Yeah, Tom, that would be the Indian Ocean, the largest ocean.
Speaker 1: That's why I will you were on the boat and
Speaker 1: I was driving the taxicab.
Speaker 2: So we have a strong level of presence there because
Speaker 2: we sail through it both from the Pacific side and
Speaker 2: from the Red Sea side into the Arabian Gulf. We
Speaker 2: could do a lot more militarily with the Indians and
Speaker 2: the Indian military. I assure you would like to come
Speaker 2: more into focus with the United States by more of
Speaker 2: our systems. For decades they've been reliant on Russia. That's
Speaker 2: another piece of this. If we can insert US military
Speaker 2: cooperation with our Indian colleagues, I think we would go
Speaker 2: a long way toward pulling India in our direction.
Speaker 4: Ada, Well, let's pivot slightly to the Middle East. Boy,
Speaker 4: talk about another challenging situation there. What is your most
Speaker 4: up to date view of how this is playing out
Speaker 4: as likely to play out over the coming weeks.
Speaker 2: Humanitarian crisis most obviously hostages on top of it, that
Speaker 2: is going to continue to fester for probably two to
Speaker 2: three more months while the Israelis fully consolidate control. They're
Speaker 2: trying to reduce collateral damage. They're succeeding somewhat in doing so.
Speaker 2: That frame is going to freeze in two to three months,
Speaker 2: than a peacekeeping force will come in. Things will de
Speaker 2: accelerate at that point. The one I'm watching from an
Speaker 2: investment perspective are the attacks the Red Sea the potential
Speaker 2: effective closure of the Suez Canal by the Hoothys.
Speaker 3: We're going to need to put.
Speaker 2: More military missiles on targets ashore in order to stop
Speaker 2: that and keep the global commerce open.
Speaker 3: Those are the two main things I'm watching.
Speaker 4: Are you surprised that maybe we haven't had more success
Speaker 4: in that area in gaining greater control over the Red
Speaker 4: Sea and its shipping lanes.
Speaker 2: I'm not surprised, simply because Iran continues to refuel, recharge, organize,
Speaker 2: training and equip. The houthis right now, we're striking Kuthy
Speaker 2: targets ashore.
Speaker 3: If Iran does not get the.
Speaker 2: Message to cease and desist, we're going to have to
Speaker 2: start going after Iranian maritime targets, their ships, their warships,
Speaker 2: their platforms. I hope we don't get there, but that
Speaker 2: message has to get to Tayron. It's not going to
Speaker 2: get solved in Yemen, Edmirald, with.
Speaker 1: Great respect to the British, their ships can't get out
Speaker 1: of the harbor. I mean, I'm not going to mince words.
Speaker 1: And we have a prime Minister out of Southampton with
Speaker 1: all that heritage, our pride going and this goes to
Speaker 1: the Admirals Book of Stravetas. I'm so sorry. Remind me
Speaker 1: of the name of your book where you line up
Speaker 1: ten admirals in a row.
Speaker 3: It's called Sailing True North.
Speaker 1: Sailing True North. Rickover sail True North because he had
Speaker 1: a budget. Zoom, weall sail True North because he had
Speaker 1: a budget. Does our present navy have a budget? Are
Speaker 1: we going to be stuck in Southampton or Portsmouth like
Speaker 1: the British Navy? Yeah?
Speaker 2: On a scale that runs from the British challenges you're
Speaker 2: talking about, which are very real, to a fully sourced
Speaker 2: US Navy that can undertake its global mission. We're about
Speaker 2: three quarters of the way to where we should be,
Speaker 2: meaning we have about three hundred warships. I'll put it
Speaker 2: in really round numbers. We need about three hundred and
Speaker 2: fifty warships that would match what China has. China has
Speaker 2: the largest fleet in the world. If you ask me,
Speaker 2: as an admiral, which fleet would I rather have in
Speaker 2: a fight, I'd still take the American fleet because of
Speaker 2: our experience, our nuclear carriers, our submarine technology.
Speaker 3: But that edge we have is dwindling.
Speaker 4: Tom.
Speaker 2: We need to put emphasis on the maritime because everything
Speaker 2: we've talked about goes back to the sea and the
Speaker 2: oceans and the ability to keep global commerce moving.
Speaker 4: And that's the subject of a recent column of yours. Admiral.
Speaker 4: Russia's new threat is under not in space. Can you
Speaker 4: explain that.
Speaker 2: Yeah, we had a week where we were all shocked
Speaker 2: to hear from the intelligence community that Russia's thinking about
Speaker 2: putting a nuclear weapon in space.
Speaker 3: That would be bad. They haven't done it yet. They
Speaker 3: don't really have that technology.
Speaker 2: Yet what they do have is the ability to disrupt
Speaker 2: underwater cables that carry the entire Internet. Only five hundred
Speaker 2: cables carried the entire global Internet, all the commerce ten
Speaker 2: trillion transactions a day.
Speaker 3: Those are vulnerable targets on the bottom of the sea.
Speaker 3: Russia could go after them today.
Speaker 1: I have to end with a delicate question in given
Speaker 1: his public service for all Americans, whatever their political persuasion,
Speaker 1: it's delicate. Should the Secretary of Defense Admiral's so ill?
Speaker 1: Should he resign?
Speaker 2: He should do what his health demands. If he has
Speaker 2: the health and the vigor to act as Secretary of Defense.
Speaker 2: Lloyd Austin, a contemporary of mine, he should remain in
Speaker 2: office as long as his health permits.
Speaker 1: James Trevitis, thank you so much. Can't say enough about
Speaker 1: Leader's bookshelf. It's just one of my favorite favorite books.
Speaker 1: I'll put that out here in the blur today is
Speaker 1: well the former Supreme NATO commander. Just a terrific brief
Speaker 1: there joining us now the tennis player from Princeton, Andrew
Speaker 1: Howsby here on the economics of the moments of a
Speaker 1: small French trin do you get, Andrew? I'm going to
Speaker 1: cut to the chase. Forget about the b MP Perry
Speaker 1: By US Open tickets. Are you over in Paris at
Speaker 1: the best tennis court in the world. Are you watching
Speaker 1: out of the BMP perry By box the French Open
Speaker 1: with a just gorgeous green that they have.
Speaker 5: Unfortunately, Tom, I'm not but certainly missing out on that
Speaker 5: experience right now.
Speaker 1: It's great. I wandered into the courts one day when
Speaker 1: I was like fifteen years old. It's like magical, It's
Speaker 1: like surreal. Would be of us in Carl Ricadonna, Andrew
Speaker 1: Husby with us this morning. Andrew, Paul and I have
Speaker 1: completely ignored the parlor game. Give us an update on
Speaker 1: what you believe this FED would do?
Speaker 5: Sure well, thanks Tom So. At the moment, we think
Speaker 5: this is a FED and we're hearing it in the
Speaker 5: FED speak we've seen really since the December meeting, this
Speaker 5: is a FED that is very cautious about cutting too
Speaker 5: early here coming into this year. Think about the narrative.
Speaker 5: A lot of folks were thinking we might get a
Speaker 5: cut as soon as March, maybe even January, but the
Speaker 5: narrative is really shifted here. Our team did not subscribe
Speaker 5: to the March cut view. Yes, we had been up
Speaker 5: until last year, been up until last week rather been
Speaker 5: in the May camp. But we do think the January
Speaker 5: CPI report, along with the accumulation of stronger data, really
Speaker 5: does make us think that the Fed is going to
Speaker 5: move even a bit later than that. So we think
Speaker 5: ultimately it will be a June cut and a shallower
Speaker 5: path this year of cuts than we had previously envisioned.
Speaker 5: We see about one hundred basis points of cuts this
Speaker 5: year as the FED kind of eyes again the stronger
Speaker 5: inflation backdrop and most importantly, a stronger economic growth backdrop,
Speaker 5: which you know, there's an argument to be made that
Speaker 5: stronger growth itself can be disinflationary if the supply side
Speaker 5: is coming back, but it's hard to bet too strongly
Speaker 5: on that. So we think in that environment, the FED
Speaker 5: stays pretty cautious.
Speaker 2: Here.
Speaker 1: Well, what's so important here, folks, is the overlay of stimulus.
Speaker 1: Are we through the stimulus? Because I've had whispers this week.
Speaker 1: You know, I'm sorry, Andrew, we're distracted with Nvidia. I apologize,
Speaker 1: but with it, and Andrew, are we beyond the stimulus?
Speaker 1: I'm not so sure.
Speaker 5: It doesn't feel like it's all fully run off, whether
Speaker 5: you're thinking about the excess savings built up over the pandemic, Yes,
Speaker 5: a lot of that is run down, but you look
Speaker 5: at the after effects on say the equity market, there's
Speaker 5: a tendant wealth effect still coming through there. And as
Speaker 5: we're looking ahead to you know, just again where deficits are,
Speaker 5: they're still high. And as we come look ahead to
Speaker 5: the election, you're still looking at potential catalysts that could
Speaker 5: catalyze a more expansionary fiscal policy after the election too.
Speaker 5: So all of that suggests, you know, it certainly hasn't
Speaker 5: all run out just yet.
Speaker 4: Hey, Andrew, I think since the January inflation data, the
Speaker 4: CPI and a PPI data came out, we've actually had
Speaker 4: some people come into the studio and say, hey, you
Speaker 4: have to have in your scenario analysis a scenario where
Speaker 4: the Fed actually hikes rates this year. What do you
Speaker 4: think about that?
Speaker 5: Yeah, so, certainly at the moment, you know, we're thinking
Speaker 5: that sort of a scenario involves the just staying on
Speaker 5: hold for longer unless we really think that the so
Speaker 5: called neutral rate in the economy is really substantially higher
Speaker 5: and really remains substantially higher for this year next year.
Speaker 5: You know, it still feels as though policy is restrictive.
Speaker 5: We're seeing it in the data flow. We're seeing it,
Speaker 5: certainly in the inflation data itself. Inflation has come down
Speaker 5: pretty substantially, so it tells us that things are moving
Speaker 5: in the right direction. But certainly, you know, could the
Speaker 5: Fed hike again. You can entertain scenarios, but that's far
Speaker 5: from our base case at the moment. Again, we're focused
Speaker 5: on duration at the current level, not added hikes.
Speaker 4: So how about the one of the aspects of this
Speaker 4: economy that continues to amaze me as the labor market.
Speaker 4: How strong the labor market remains. Some are saying that
Speaker 4: the Fed really needs to see the unemployment rate, you know,
Speaker 4: maybe move above four percent, maybe four and a half percent.
Speaker 4: How are you guys thinking about this US labor market.
Speaker 5: Yeah, it's been surprised both in terms of the strength
Speaker 5: we saw in the last two jobs reports, are seeing
Speaker 5: job growth above three hundred thousand a month, and it's
Speaker 5: also surprising in that some of the revisions we've seen
Speaker 5: kind of reshape the path. So not only is recent
Speaker 5: job growth stronger, but it was stronger at the end
Speaker 5: of last year, and that's meant more income more spending
Speaker 5: and the like. Now the question for us, you know,
Speaker 5: when you look at factors like labor supply, we've seen
Speaker 5: a pretty substantial rebound in labor supply, and recently even
Speaker 5: the CBO had come out with a report saying, actually
Speaker 5: the labor force potential labor force is actually potentially much
Speaker 5: larger on account of immigration and the like. So you know,
Speaker 5: to us it says strong job growth. It's in part
Speaker 5: a function of businesses being a bit more confident as
Speaker 5: recession risk has faded, as the risk of further FED
Speaker 5: hikes has faded, so there's an incentive to potentially hire
Speaker 5: a bit more here.
Speaker 1: Yeah, go ahead, Well, I mean to go ahead, but
Speaker 1: the research node is extraordinary. I mean the ricodonic, you know,
Speaker 1: the concision of what Husby's doing with Rick and Donna
Speaker 1: and the team over there is extraordinary. Into the weekend, Andrew,
Speaker 1: what's the item of inflation that we need to think
Speaker 1: about when you sort out X number of components? What's
Speaker 1: the one year watching into March?
Speaker 5: So at the moment, you know, I know it's been
Speaker 5: a refrain for some time now, but it is really
Speaker 5: that services number x X. Housing. We've seen a lot
Speaker 5: of progress on goods. We expect that to continue through
Speaker 5: the first part of this year. But we think that
Speaker 5: there is a relationship between labor slack and that core
Speaker 5: services component of inflation, and in the January report that
Speaker 5: was quite strong pointing to you know, there may be
Speaker 5: some quirks here. It's the start of the year, businesses
Speaker 5: reset prices and the like, so we'll need to see
Speaker 5: a few more reports here to really be thinking about
Speaker 5: a dramatically different outlook here. But it really is services
Speaker 5: prices for us.
Speaker 1: I can't sign up about this. Interhusby, thank you so much,
Speaker 1: don't be a stranger with BMV Pery, their senior US
Speaker 1: economist with our question for Global Wall Street. This is
Speaker 1: the conversation of the day gene Monster with us across
Speaker 1: the next half hour. I can't say enough about his
Speaker 1: work from Piper Jeffrey long ago. It was research that
Speaker 1: made you stop, and we're thrilled that he could join
Speaker 1: us today from deep Water Asset Management Gene I quote
Speaker 1: from pre pandemic, pre pandemic capex Microsoft fifteen billion, twenty one,
Speaker 1: twenty three, twenty eight thirty five and they're going to
Speaker 1: buy from Nvidia enough where we've got a modeled CAPEX
Speaker 1: out fourteen months, fifteen months of forty five billion dollars.
Speaker 1: Do you have a vision of how that money spent,
Speaker 1: the efficacy of it, the safety of it. For our
Speaker 1: listeners and viewers, this global capex off Nvidia.
Speaker 6: Topic time, and it's not just Microsoft, it's Google, it's Apple.
Speaker 6: They haven't said as much. Meta has said this thirty percent.
Speaker 6: That's kind of the benchmark. Thirty percent increase, and they compute.
Speaker 6: And so when we think about this these layers of AI,
Speaker 6: there's two parts of the question. One is what does
Speaker 6: the ramp look like? And this is a thirty percent
Speaker 6: step up. If you look at Jensen Wong's comments from
Speaker 6: Nvidia this week, he talked about the chip, the GPU
Speaker 6: market being several hundred billion dollars over the next few years.
Speaker 6: It's about one hundred billion dollars today. So that kind
Speaker 6: of plays along this trajectory of twenty five percent growth.
Speaker 6: I think what your listeners should take away here is
Speaker 6: that there is a significant investment, a massive investment going
Speaker 6: on from these hyperscalers, these big tech companies. This is
Speaker 6: the first of four waves of investment that will probably
Speaker 6: last a decade and as far as what it means
Speaker 6: for our lives. I think it's going to be the
Speaker 6: most profound change, much more than what the Internet was
Speaker 6: last time we spoke about this. The spectrum that I
Speaker 6: have in terms of how to think about AI relative
Speaker 6: to our lives, I put a spectrum of zero one
Speaker 6: hundred electricities one hundred. The PC was a twenty mobile,
Speaker 6: twenty five Internet fifty and AI's ninety nine, and it
Speaker 6: would be one hundred if not for needing electricity. So
Speaker 6: it's a big This is a big deal, and I'm
Speaker 6: I think that your listeners just take away that the
Speaker 6: significance of this change is going to be more profound
Speaker 6: than the Internet.
Speaker 1: Jane. I want to frame this as something maybe we understand,
Speaker 1: unlike experts like you. I think of all the other
Speaker 1: compatriots and tech dana ives and such, and that is.
Speaker 1: There was the Model T, which was like, okay, well
Speaker 1: that's a fad, and then in nineteen twenty seven, nineteen
Speaker 1: thirty ish, the Model A showed up and Alfred Sloan
Speaker 1: was over at GM trying to make magic happen, and
Speaker 1: it was like, whoa wait, this automobile is going to
Speaker 1: be a real deal. It's actually going to work. Where
Speaker 1: are we within that continuum? Are we looking at AI
Speaker 1: as a fad? Are we to the model A, Are
Speaker 1: we to the Ford F one fifty pickup truck where
Speaker 1: it's entrenched. AI is entrenched in society.
Speaker 6: So from the impact of society right now, it's a
Speaker 6: model T and it is we're just still scratching the surface.
Speaker 6: And just to put some context on that, is that
Speaker 6: most of that spend when we see this just breath
Speaker 6: taking change in vidious business. And I want to just
Speaker 6: take a pause for a moment and put how breathtaking
Speaker 6: of a change this is. In Vidia's business for the
Speaker 6: previous three quarters before the AI lift off was down
Speaker 6: in averages seventeen percent per quarter. This business was in
Speaker 6: the toilet. And it has now since the three quarters
Speaker 6: that it's taken a step up. It is up two
Speaker 6: hundred percent on average per quarter. And so what we're
Speaker 6: seeing is this dramatic step up. And when we think
Speaker 6: about most of that spend, and the vast majority of
Speaker 6: it has been related to those hyperscalers building the Model T.
Speaker 6: It's related to but there has been an important data
Speaker 6: point that Jensen Wong talked about in the Nvidia call
Speaker 6: is a forty percent. They now believe of this, their
Speaker 6: current sales of chips are going to power our currently
Speaker 6: powering inference. Inference is what comes out of the model
Speaker 6: when you go into JGPT and put in a prompt
Speaker 6: and you get something back out. That's something that you
Speaker 6: get back out is called an inference. And so what
Speaker 6: that means is that it's actually people are actually using this.
Speaker 6: This is not big tech spending a bunch of money
Speaker 6: to build something that they hope people will come. This
Speaker 6: is big tech recognizing that the behavior is already there.
Speaker 6: Even though it's nascent, it is still it's taking off
Speaker 6: in concert, in lockstep with what their investment is. And
Speaker 6: so when I think about we're going to go from
Speaker 6: the Model T to the F one fifty to the
Speaker 6: cyber truck and about three to five years, and I
Speaker 6: think when you put that type of a scope and scale,
Speaker 6: most of the commentary I hear is this, this is
Speaker 6: an video led rally, and this is are we getting
Speaker 6: bubble ish? We're not even close to bubble. Bubble is
Speaker 6: when the market trades at one hundred times earnings, we're
Speaker 6: at twenty eight times.
Speaker 1: Paul Microsoft four hundred and fifteen dollars. For sure.
Speaker 4: It's been another great way to play. Jenda. I have
Speaker 4: to admit here in cocktail parties, I definitely use your
Speaker 4: kind of spectrum thing. They're talking about electricity where AI
Speaker 4: fits in. I give you full credit though.
Speaker 6: I want you to know but appreciate that. Yeah, thank you, Paul.
Speaker 4: It works. It really takes people's breathway to just give
Speaker 4: it some context. So, Gene, I want to talk about
Speaker 4: a competition here. When are the AMDs of the world
Speaker 4: or the other chip makers going to step up and
Speaker 4: be real competitive here? Maybe even maybe some of the
Speaker 4: customers like an Apple saying hey, we can build our
Speaker 4: own chips. Talk to us about how you think competition
Speaker 4: is going to evolve.
Speaker 6: So look for competition to start to have a meaningful
Speaker 6: end packed at least on in Nvidia's business, probably in
Speaker 6: two to three years. And specifically as we think about AMD,
Speaker 6: they're actually getting some traction. They're actually putting a significant
Speaker 6: effort into GPUs. Intel has just started that, but it's
Speaker 6: still just too nascent, and we're talking about low single
Speaker 6: digit percent market share of GPUs AMDs kind of around
Speaker 6: that ten percent in videas around eighty five percent, and
Speaker 6: so what it is the most important point to your
Speaker 6: question is it's not just about what the absolute market
Speaker 6: share is today, it's about what the trend in the
Speaker 6: market share is. Is AMD going to gain share? And
Speaker 6: my expectations is over the next couple of years, in
Speaker 6: Vidia's market share is probably going to be seventy percent
Speaker 6: or above. They may lose a little bit, they'll lose
Speaker 6: probably most of it to AMD, but it's still going
Speaker 6: to be huge share in what is a quickly growing market.
Speaker 6: Beyond that, three to five years, that's when things start
Speaker 6: to get more difficult. And I believe that AMB is
Speaker 6: going higher. I believe eventually three to five years it's
Speaker 6: going to hit the wall because of what you talked about. Ultimately,
Speaker 6: these hyper scalers are going to back off. One of
Speaker 6: the benefits that Nvidia has here is that they will
Speaker 6: lose business to the hyperscalers and they come out with
Speaker 6: their own chips, but it's unlikely those hyperscalers sell their
Speaker 6: chips to third parties. And if you think about these
Speaker 6: four waves of AI, there's still three more waves that
Speaker 6: need to be powered by publicly available GPUs, like in
Speaker 6: video Paul to.
Speaker 1: Frame in VIDIAT four hundred and the quiet of November
Speaker 1: last year to surge now to eight twenty, up nicely
Speaker 1: from yesterday. All this is critical, folks, It's only two
Speaker 1: point six standard deviations. That goes to mister Munster's comments
Speaker 1: that the exuberance really isn't there technically like you'd think
Speaker 1: given the light in the uproar.
Speaker 3: Exactly so.
Speaker 4: But Invindia at its core a gene it's a chip company,
Speaker 4: and what I've learned I'm not a tech honist, but
Speaker 4: what I've learned from reading tech research is that's a
Speaker 4: really cyclical business. So once I sell a chip to
Speaker 4: a customer, it's not like a software as a service
Speaker 4: where they're going to get me recurring red. That's kind
Speaker 4: of it for a while. So is there a tail
Speaker 4: end to this thing?
Speaker 3: There is?
Speaker 6: That's why you see that I think three to five
Speaker 6: years is that in video is going to hit the wall.
Speaker 6: There's going to be a very dark day. We're going
Speaker 6: to have this boom and bust I wanted to highlight
Speaker 6: kind of that scar tissue in terms of what their
Speaker 6: business has done before because of that dynamic that you
Speaker 6: talked about, and that eventually will come the question isn't not.
Speaker 6: I see the question more as what's the duration of
Speaker 6: this run? And I would come back to those four
Speaker 6: pillars just to recap. We're currently in right now the
Speaker 6: infrastructure build phase. Then we're going to go to applications
Speaker 6: that's like co pilots service now Salesforce, and then it's
Speaker 6: going to be heavy industry doing General of AI and
Speaker 6: the lastly countries with sovereigny I. And so there's I
Speaker 6: think that yes, there once everybody's full, but it's it's
Speaker 6: we're still got a long way to go before we
Speaker 6: get full with these chips.
Speaker 1: We're with Gene Monster of deep Water and it is
Speaker 1: a great thrill I think a harsh Over and Slot
Speaker 1: genius to have at Piper of Minnesota. Good morning to
Speaker 1: all of you listening up at Piper, Jeffrey Country and
Speaker 1: Gene Muster. It's like the Muppets thing. One of these
Speaker 1: teams is not playing like the other teams or whatever
Speaker 1: the Muppets song is. I got Microsoft up at Vidia
Speaker 1: up the whole thing, and Apple's given me no love
Speaker 1: at all. I mean, you know, Harsh has a neutral
Speaker 1: on it over at Piper. Whither Apple are they under
Speaker 1: a pressure to do something given the tech nirvana of
Speaker 1: the last three months.
Speaker 6: Yeah, yes, excruciating pressure. Of course, Tim Cook did not
Speaker 6: utter those two letters in all of twenty twenty three.
Speaker 6: He did proactively talk about AI for the first time
Speaker 6: and their December earnings call. I think that was a
Speaker 6: marked moment, and they're going to have something to say
Speaker 6: about AI, he said this year. Most likely that's going
Speaker 6: to be in June at their developer conference, and most
Speaker 6: likely they will announce a foundation model. These are really
Speaker 6: the core engines that always applications are built on. So
Speaker 6: Apple is the big challenge with Apple is they haven't
Speaker 6: grown for the past six quarters basically as a flat
Speaker 6: business if you kind of average it all out, and
Speaker 6: they haven't said anything about AI, and I think that
Speaker 6: they're in a great place to surprise people on AI
Speaker 6: this year.
Speaker 1: Let's surprise people Paul, and Paul's has been leading on this.
Speaker 1: He's been screaming about this his first gray hair. Paul
Speaker 1: free cash flow seventy billion is now one hundred and
Speaker 1: thirteen revenue two hundred and seventy four million is four
Speaker 1: hundred and thirteen million from the pandemic. And the answer
Speaker 1: here is their minting profit as mister Munter says, they're
Speaker 1: not growing.
Speaker 4: I know, and so I you know, how about a
Speaker 4: dividend for some folks here a meaningful dividend, But that's
Speaker 4: not in Tim Cook's wheelhouse. Hey, you know, Gene. One
Speaker 4: of the things I'm looking for as this AI sector
Speaker 4: industrymania kind of continues to evolve is kind of the
Speaker 4: bell Weather IPO and I know at deep Water, you
Speaker 4: guys see lots of early stage companies here, and I'm
Speaker 4: looking for like an AOL America Online was for the
Speaker 4: consumer internet search. We identified with Google Social, we identified
Speaker 4: with Facebook. Do you think there's going to be an
Speaker 4: AI company come public that just blows everybody away.
Speaker 6: Yes, we're really excited about that. I think that's probably
Speaker 6: a year two years away. But we're going to see
Speaker 6: a cast of foundational AI companies. These are not companies
Speaker 6: benefiting from AI. If you think about where AI sits
Speaker 6: like with inside Microsoft or what it will be in
Speaker 6: Apple or Meta, it's a small piece of it. But
Speaker 6: these companies are entirely their companies. Like hugging Face, this
Speaker 6: is an open platform for AI models. Many of you
Speaker 6: haven't heard of them, and I think that there's other
Speaker 6: companies like Androw, which uses a lot of AI with defense,
Speaker 6: and then this is going to be the one. Potentially,
Speaker 6: I think this will be the biggest surprise relative to
Speaker 6: up and comers and will be one of these megacap
Speaker 6: tech companies. Is x dot ai Elon's company, and what
Speaker 6: he did is this is I put this in the
Speaker 6: category of he's eighty percent genius, twenty percent luckiest man
Speaker 6: on Earth. The Twitter purchase, you know this X dot
Speaker 6: ai one's about twenty percent of that. They will use
Speaker 6: that data, which is the world's best data when it
Speaker 6: comes to real time intention that is critical data. They'll
Speaker 6: use that to inform and build X dot ai foundation model,
Speaker 6: and that is a massive opportunity. The message that Elon's
Speaker 6: had he refers to this as a truth seeking AI.
Speaker 6: There's been some comical things that have gone on and
Speaker 6: the image generation AI space relative to Google this week,
Speaker 6: which sets this X dot ai up for a massive opportunity.
Speaker 6: I believe this will hands down be Elon's greatest source
Speaker 6: of wealth.
Speaker 1: X dot ai.
Speaker 6: He's currently based on Bloomberg. He's he's worth two hundred
Speaker 6: and ten billion dollars today. X dot ai I believe
Speaker 6: will be a public company in the next three years,
Speaker 6: and I think it's going to be one of those
Speaker 6: megacap AI company.
Speaker 4: That's good stuff. I mean, again Elon in the seemingly
Speaker 4: in the nexus of everything of interest out there, all right,
Speaker 4: So talk to When I see a market grow like
Speaker 4: this is growing, and I see a mania around a
Speaker 4: certain situation like AI, I guess in the back of
Speaker 4: my mind, I also think, June gene boy, it just
Speaker 4: feels like Washington is going to feel like it needs
Speaker 4: to get involved here in regulating some of this. What
Speaker 4: do you think, how do you think Washington views AI
Speaker 4: and is that a risk?
Speaker 1: It's a risk.
Speaker 6: I mean, Washington has a genuine view that big tech,
Speaker 6: of course needs to be regulated. The AI conversation has
Speaker 6: more layers to it, of course, because of the national
Speaker 6: security piece to it. Is when you think about national defense,
Speaker 6: whether it's intelligence gathering, whether it's how some of these
Speaker 6: systems work, whether it's just how our countries GDP evolves
Speaker 6: powered by AI. Having a sovereign a strong AI, a
Speaker 6: strong tech is something that benefits the government. So when
Speaker 6: I think about government regulation over the past five years
Speaker 6: relative to big tech, it has been things around like
Speaker 6: the app store, or engagement around Instagram. They've been about
Speaker 6: Microsoft buying Activision. These things are petty compared to what
Speaker 6: is at stake when it comes to I think that
Speaker 6: ultimately that significance is going to benefit big tech.
Speaker 1: Gene. One final question, completely unfair. Let's go back to
Speaker 1: Piper Jeffrey's single best buy buy holds SOE with Jeane Munster.
Speaker 1: Can you acquire shares of Nvidia this morning?
Speaker 6: Yes, I think Nvidia is going to go higher. I
Speaker 6: think that if I based on my expectations, This is
Speaker 6: not investment advice.
Speaker 1: This is just how I see it.
Speaker 6: I think that this should appreciate at about fifteen percent
Speaker 6: a year for the next two to three years. I
Speaker 6: don't think we're going to have this massive growth, but
Speaker 6: I think this continues just to march higher based on
Speaker 6: all the things we're talking about.
Speaker 1: Most if you believe in AI.
Speaker 6: Believe it's as big as I believe it is, in
Speaker 6: Vidia is going higher.
Speaker 1: This is the class act. Most people Paul would have
Speaker 1: avoided their question. Yep, Genemunster nailed it. I honored to
Speaker 1: have you for a half hour. Beyond this historic week,
Speaker 1: this historic Thursday, and that we've seen gene monster with
Speaker 1: deep water daily headlines. I'll look at the front page
Speaker 1: as Lisa Matteo ave Lisia.
Speaker 3: Now it's pretty good.
Speaker 7: I never took French. All right, So we're starting with
Speaker 7: the Wall Street Journal. This is an interesting story because
Speaker 7: it's saying Meta knew about parents exploiting their own children
Speaker 7: with new paid subscription tools, and they did nothing about it. Now,
Speaker 7: this is disturbing on so many levels. First of all,
Speaker 7: the parents, these are parent managed accounts. They're using subscription
Speaker 7: feature to sell exclusive content. Their daughters wearing bikinis, wearing
Speaker 7: lear tards, no nudity, but it was sold to an
Speaker 7: audience that's overwhelmingly male. Some expressed central interest in the
Speaker 7: children and their comments and posts. So the parents knew
Speaker 7: what was going on. Teams inside Meta, they started raising
Speaker 7: alarms about this. They tried to warn Meta. Meta's response
Speaker 7: is that they built this automated system to prevent it
Speaker 7: from happening, but.
Speaker 2: It just didn't work.
Speaker 7: So this is just crazy on so many different levels.
Speaker 4: Yeah, starting with the parents. Yeah, yeah, that's where it's
Speaker 4: got to go.
Speaker 7: All right, what else, So we've heard about the returning
Speaker 7: to the moon right for the first time, all Right,
Speaker 7: this one is another piece of history. It was college students.
Speaker 7: The lander actually took a selfie as it landed. It
Speaker 7: was made by graduate students. This camera from every Riddle
Speaker 7: Aeronautical University in Daytona beachiev in Florida. And that is
Speaker 7: actually the alma mater of Intuitive Machine CEO.
Speaker 5: So that's the connection to.
Speaker 4: The school aerospace program, the aerospace the aerospace program.
Speaker 7: Yeah, it took him like four years to make it.
Speaker 7: And so it's this little box ejected from the lane
Speaker 7: and it was and it worked and they took the picture.
Speaker 7: And what's crazy is that a lot of the graduate
Speaker 7: students who did this, they weren't alive when you know,
Speaker 7: the first landing happened.
Speaker 4: I don't think we were taking selfie me as I
Speaker 4: recall with our Instamatic or whatever we had, the Kodak,
Speaker 4: it was.
Speaker 1: It was something. And you know, I remember, I literally
Speaker 1: remember the day up in Rochester when Hasselblad won the
Speaker 1: contract to be the camera that the astronauts carried around.
Speaker 1: That was a dark day. They were looking for the
Speaker 1: instematic to be going. That didn't quite work out. What
Speaker 1: else do you have?
Speaker 7: Uh, this is the financial times we were talking about
Speaker 7: the luxury market yesterday. So it says the LVMH is
Speaker 7: trying to Hollywood to promote a lot of their brands.
Speaker 3: It's a new venture.
Speaker 7: It's called twenty two Montaigne.
Speaker 4: My French accent is not as well as chilling. I
Speaker 4: I Killed Yeah, Brooklyn Brooklyn.
Speaker 1: That's a YouTube channel, but it's.
Speaker 7: A collaboration with them and super connector Shoot. So this
Speaker 7: is this company that connects brands to production companies. So
Speaker 7: they want to start doing advertising, product placement, original products,
Speaker 7: TV film and you've kind of seen it. Remember Breakfast
Speaker 7: with Tiffany's. You've seen it there, Well that's first s
Speaker 7: a Gucci, you've seen it.
Speaker 1: You walked by Tiffany's and there's the Audrey window and
Speaker 1: I think up second or third four John's got the
Speaker 1: Audrey dress. Guess what, Beyonce, he's driving the ship. I mean,
Speaker 1: the r No family is doing what you're saying.
Speaker 4: And this will be overseen by twe Arnaut, who is
Speaker 4: the eldest son the founder Bernard. So it's probably Bernard
Speaker 4: saying I got to give my son something something.
Speaker 1: So they have a whole bunch of the sons and
Speaker 1: the daughter runs Christian dear, can I do a TV
Speaker 1: shout out this weekend?
Speaker 3: Yes, the new Look.
Speaker 1: Can't say enough about on Apple TV. It's about all
Speaker 1: that Lisa Matteo's talking about, folks, about Coco Chanel and
Speaker 1: Christian Dior, and it's shocking how they hated each other.
Speaker 1: And it was all in the background of the nineteen forties,
Speaker 1: in the nineteen fifties. So it's just a whole run.
Speaker 4: I gotta check it out.
Speaker 1: Great, they'll wear bow tyes. Is that it? Or you're
Speaker 1: done on more?
Speaker 7: But you have to get to the vision pro users. Okay,
Speaker 7: So yesterday from the San Diego Police, they are putting
Speaker 7: out a warning. They're saying, don't use them when you're
Speaker 7: crossing the street because apparently people are doing that.
Speaker 4: Yeah, and they're getting run over.
Speaker 3: It's dangerous.
Speaker 7: And they posted a video. They're just warning people. They say,
Speaker 7: keep the virtual experiences on.
Speaker 3: The sidewalk, folks. But you've seen it.
Speaker 7: You've seen that. You've seen pictures of people job driving
Speaker 7: with the vision goggles on.
Speaker 4: I I don't know how that works.
Speaker 7: Very dangerous.
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