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 Edva though in San Francisco.
Speaker 2: This is Bloomberg Tech coming up in Vidio, the first
Speaker 2: five trillion dollar company as President Trump puts Blackwell at
Speaker 2: the heart of talks with China.
Speaker 3: We had the interview with Nvidio CEO Jensen one.
Speaker 4: Plus Alphabet, Microsoft and Meta all sut to report results
Speaker 4: after the closing bell today will drill down on what investors.
Speaker 5: Are looking for.
Speaker 2: An AI startup character AI will ban kids from having
Speaker 2: conversations with chatbots on its platform.
Speaker 3: We have more in that story later this hour, but first.
Speaker 4: We check in on these markets that are at a
Speaker 4: new record high five straight days of gains on the
Speaker 4: Nasdaq one D We're up four.
Speaker 5: Tenths of percent.
Speaker 4: It is our worth more than thirty three trillion, this
Speaker 4: entire benchmark. But there's one keen juggernaut ed underneath that
Speaker 4: and you're looking.
Speaker 3: At it, yep, and that is in Nvidia.
Speaker 2: Nvidia is the first company to reach five trillion dollars
Speaker 2: of market value of market capitalization, and one of the
Speaker 2: things we reflected on on the gain in the shares,
Speaker 2: if we could pre bring up that chart, is the
Speaker 2: idea that that value jump has happened very quickly from
Speaker 2: the four trillion dollar milestone. Why is the stock hire
Speaker 2: by four percent today in the session. It's because President
Speaker 2: Trump on board Air Force one saying will be speaking
Speaker 2: about Blackwell.
Speaker 3: It's a super duper chip.
Speaker 2: I think we may be talking about that with President Ji,
Speaker 2: and of course President Trump due to meet with China's leader.
Speaker 3: That's where the focus is.
Speaker 2: But in Vidia's role in it is what's driving the market.
Speaker 2: Let's stay on in video and bring in bloombergs Ian King,
Speaker 2: who leads our coverage as a semiconductor sector. The news
Speaker 2: is that the President has said that he will discuss
Speaker 2: Blackwell with China's President G. There is some explaining to
Speaker 2: do because the understanding of the market was this is
Speaker 2: Blackwell architecture for a deprecated lower power chip for China,
Speaker 2: not necessarily the leading edge, but there is actually quite
Speaker 2: a lot we don't know.
Speaker 6: Yeah, no, absolutely right, And if you just go by
Speaker 6: what the President has said yesterday or today and what
Speaker 6: he said previously, there's a gap.
Speaker 7: Right.
Speaker 6: Our understanding was they might be allowed to send part
Speaker 6: of this new chip line to China, but only a
Speaker 6: very reduced version of it. That was the understanding that
Speaker 6: would be better than what they can do now. That
Speaker 6: will be good for revenue. But if he's referring to
Speaker 6: the whole of the Blackwell line to effectively in Video's
Speaker 6: best chips, that's a massive expansion of the opportunity and
Speaker 6: would obviously explain a lot of excitement, but it's unlikely
Speaker 6: that that's the case.
Speaker 4: What's extraordinary is the level of excitement even prior to
Speaker 4: that statement on Air Force one, the fact that Jensen
Speaker 4: one was outlining how much rampant demand there is for
Speaker 4: Reuben and Blackwell, even without any China demand whatsoevery in.
Speaker 6: Yeah, No, you're absolutely right, and I think that would
Speaker 6: probably be the bigger driver of what's going on today
Speaker 6: if we sort of look at the Wall Street reaction.
Speaker 6: As you said, he put that number of half a
Speaker 6: trillion dollars of sales that he's sure he's going to
Speaker 6: get for these new chips over a five quarter period.
Speaker 6: So it's a little bit uncertain when it will exactly
Speaker 6: hit and how it will line up with Wall Street estimates,
Speaker 6: But you've got to remember that total revenue estimates for
Speaker 6: the company over the next couple of years are in
Speaker 6: the three hundred range. So five hundred is a lot
Speaker 6: more than three hundred. So regardless of how exactly that
Speaker 6: lines up and whether that's all captured in one year,
Speaker 6: is still a huge number. And really, as we saw
Speaker 6: from our TV interview with him yesterday, and as we
Speaker 6: saw from his appearance at the Big Show here in Washington,
Speaker 6: he's saying, look what bubble, don't worry about it.
Speaker 1: Ian.
Speaker 2: You've covered this industry since the late nineties, and you know,
Speaker 2: I was reflecting at the top of the show that
Speaker 2: the jump in market cap from four trillions five trillions
Speaker 2: quite recent. But there was so many headlines yesterday from
Speaker 2: Jensen Wong himself. You know, we heard from him for
Speaker 2: like an hour and a half in total after the keynote.
Speaker 2: Was there anything that was really important that jumped out
Speaker 2: that you think might have got lost in the wash
Speaker 2: of all of the news that happened.
Speaker 6: Yeah, I mean, he was trying. He's playing whackam all right.
Speaker 6: The biggest concern is that we're building ahead of the
Speaker 6: actual business case for AI. So a lot of what
Speaker 6: he said was like, hey, we're doing this this that
Speaker 6: was signing these deals to get rid of some of
Speaker 6: these blockages, were bringing these new products to market to
Speaker 6: get rid of some of these perceived blockages. Oh, by
Speaker 6: the way, here's our guaranteed revenue. And guess what, I'm
Speaker 6: on a plane to Asia to try and help sort
Speaker 6: out this big problem with China. So there was a
Speaker 6: huge amount of information given, but it was all channeled
Speaker 6: in the same direction, which is AI is real. We're
Speaker 6: going to make sure it's real, and we're going to
Speaker 6: get rid of some of these problems.
Speaker 5: Mexican King, Well, thank you so much for the roundup.
Speaker 4: And look in was just talking about the florry of
Speaker 4: partnerships that were announced yesterday. One key one of them
Speaker 4: in Video Planning to make a one billion dollar equity
Speaker 4: investment in Nokia. The announcement saw a massive search look
Speaker 4: at it in Nokia shares.
Speaker 5: We of course sat down with Jensen Wang.
Speaker 4: And Nokia CEO Justin Hootard about the news.
Speaker 8: For national security reasons, for economic reasons, our industry should
Speaker 8: be built on American technology, and for the very first
Speaker 8: time we can do that.
Speaker 9: We have a brand new product line.
Speaker 8: That takes advantage of computing, accelerated computing and AI, and
Speaker 8: we have a great partner to help us deal with Nokia.
Speaker 2: The market reaction kind of speaks for itself. There was
Speaker 2: a time where Nokia was already looking to America. You've
Speaker 2: been in the role since April. But may I start
Speaker 2: by asking you what role the administration played in bringing
Speaker 2: you both together? If this is indeed a strategic priority.
Speaker 10: I don't think there was anything specific that the administration
Speaker 10: did other than they've created the environment to support innovation.
Speaker 10: I mean, Jensen's talked about manufacturing, but it's also about
Speaker 10: R and D and innovation and technology leadership. And if
Speaker 10: you think about where this world is going, and all
Speaker 10: those incredible devices are gonna be built on video platforms, robotics,
Speaker 10: autonomous vehicles, augmented reality, virtual reality, we need a different
Speaker 10: kind of network in the future and that's what we realized,
Speaker 10: and that's why we wanted to forge this partnership so
Speaker 10: that we're building a network leveraging AI for AI services,
Speaker 10: and that's really the big change here.
Speaker 3: The technology is flowing both ways.
Speaker 2: I mean, what is it that you will be able
Speaker 2: to do with Nokia, Jensen un able to do on your.
Speaker 8: Own well, first of all, Nokia is in all of
Speaker 8: the world's base stations, and this air scale platform of
Speaker 8: Nokia's millions of base stations around the world, if our
Speaker 8: computers are not inside that base station doesn't help. It's
Speaker 8: no different than in videos tech computing platforms not inside
Speaker 8: of cars doesn't help. And so the first thing is
Speaker 8: we need a partner to get us into the world
Speaker 8: space station. We also remember we're bringing AI to radio networks,
Speaker 8: AI to RAM so that we can make wireless tech
Speaker 8: communications a lot more efficient. Second, we're bringing AI for
Speaker 8: the radio, meaning on top of these radio networks and
Speaker 8: these telecommunication network we're going to be able to provide
Speaker 8: AI services, which is going to be able to make
Speaker 8: it easier for us to do robotics and autonomous vehicles
Speaker 8: and industrial automation and reach all of the different places
Speaker 8: around the world. That's kind of hard to deal with.
Speaker 8: Wi Fi, celluar reads everything. And so we now have
Speaker 8: this fabric that we can deploy AI computing services on
Speaker 8: top of it. It's going to be completely revolutionary.
Speaker 3: In your world and in your market.
Speaker 2: Huawei is an influential player not just in Europe, I
Speaker 2: think also about the Middle East and Africa. How important
Speaker 2: is the relationship with Nvidia to be able to counter,
Speaker 2: you know, what Huawei does in those markets.
Speaker 10: Yeah, I look. I think for us, one of the
Speaker 10: principles I've had with my team is coming in has
Speaker 10: been do what we can do that no one else
Speaker 10: can do, and that is air scale. What we do
Speaker 10: with any rand software, the software that runs on it
Speaker 10: that we're going to be putting on on the Nvidia
Speaker 10: Arc platform, that do what we can do well, and
Speaker 10: partner with the.
Speaker 9: Best everywhere else.
Speaker 10: And this is a clear opportunity to partner with the best.
Speaker 10: And by the way, that's where America and the Western
Speaker 10: world succeeds because we don't necessarily have one company doing
Speaker 10: everything like Whuawei. We succeed because we partner aggressively. And
Speaker 10: you if you watch GtC today, it was hard to
Speaker 10: not find it obvious that you're partnering with everybody. But
Speaker 10: that's the advantage is this partnership. So we do what
Speaker 10: we do best, we let in Video do what they
Speaker 10: do best, and ultimately our customers win and ultimately for America,
Speaker 10: I think America will win because there'll be more innovation faster.
Speaker 8: Nobody knows telecommunications better than Nokia. They've been at it
Speaker 8: for a long time. They're all over the world, and
Speaker 8: between our two partnerships, we know how wireless telecommunications we
Speaker 8: have and we have accelerated computing all in this partnership.
Speaker 2: Nvidia CEO Jensen Wang and Nokia CEO Justin Hotard. There,
Speaker 2: let's get more on Nvidia this deal with Nokia. Vlad
Speaker 2: Galibov joins us. He's senior research director at Omdia, where
Speaker 2: he's responsible for cloud and data center research. Under this arrangement,
Speaker 2: that the technology flows both ways, but it's basically about
Speaker 2: wireless tech for use at the edge. You know, it
Speaker 2: was a huge surprise just going on the reaction of
Speaker 2: Nokia shares, but it's it's Nvidia moving into yet another
Speaker 2: new segment.
Speaker 3: What's your reaction to it, please?
Speaker 11: So it is I think we have seen the transition
Speaker 11: towards a virtualized radio access network be a little bit
Speaker 11: slower than what we would like. With this partnership, Nokia
Speaker 11: is basically promising to rewrite it. Stack up data is harder,
Speaker 11: stack updated software, stack optimize on Nvidia's software libraries and
Speaker 11: on Nvidia hardware. So I think it's very significant.
Speaker 2: Why does Nvidia need to make a one billion dollar
Speaker 2: equity investment in Nokia and own three percent of it
Speaker 2: in order to do this.
Speaker 11: I think that what we've seen in the past, whenever
Speaker 11: you ask a company to rewrite their software stack, it
Speaker 11: is costly. In fact, Amazon did something similar a little
Speaker 11: bit more under the radar when they started shipping their
Speaker 11: ARM CPU. What they did is they would enable software
Speaker 11: developers through funding to optimize their code for ARMED, to
Speaker 11: migrate their code from Excity six to ARM. In essence,
Speaker 11: what Nvidia is asking nok to do is to optimize
Speaker 11: their code for whatever is already virtualized from Xcity six
Speaker 11: to ARM, but also to move from a physical RAN
Speaker 11: appliances to a virtual RAN.
Speaker 4: What's extraordinary, Vlad here is the bigger picture.
Speaker 5: This is in Vidia time and time again.
Speaker 4: Basically making investments for people to ensure that in Vidio
Speaker 4: technology is integral across every industry group if you just
Speaker 4: go through not here when you think it telecoms, but
Speaker 4: they did deals across Lucid, across Uber. We think about
Speaker 4: robotaxes and thinking not just tell them communications I think
Speaker 4: are the future of software. When we think about what
Speaker 4: they've been doing with Palenteer of flood. Is there any
Speaker 4: other wide open space for in Vidia to get into.
Speaker 11: I think you're absolutely right. This is in Nvidia utilizing
Speaker 11: its cash stockpile in a very smart way by entering
Speaker 11: another market. The mobil infrastructure market itself is only thirty
Speaker 11: five billion, so I think Jensen understands that this is
Speaker 11: not going to be the holy grail. This is one
Speaker 11: of the many investments. I think that you see something
Speaker 11: very similar that I think will become more prominent in storage.
Speaker 11: I think that in Vidia has a lot more room
Speaker 11: to grow in a networking I think you'll see it
Speaker 11: growing a lot more in customer piece a consumer PC, right,
Speaker 11: because that's one of the things it wants to do.
Speaker 11: With Intel. I think you end up seeing it probably
Speaker 11: in their robot revolution in the future. They also said
Speaker 11: they want to be in cars, so I think that
Speaker 11: we can see that Jensen's strategy is just maximize your
Speaker 11: presence and specifically get your programming environment, the cold environment,
Speaker 11: to be ubiquitous.
Speaker 5: Just tell us how ubiquitous it already is.
Speaker 4: Flat because I think so many of us make the
Speaker 4: quick assumption that it's all about hardware and se inconductors,
Speaker 4: but this is a full tech stack, and the fact
Speaker 4: that they're so ingrained in terms of software as well.
Speaker 4: It's almost become the de facto king across every other
Speaker 4: big tech company.
Speaker 11: Yes, in fact, I myself underestimated it a little bit
Speaker 11: because you know, one of the things we know is
Speaker 11: a Nvidia advantage was the Envy Link, and we are
Speaker 11: starting to see more challengers in the networking domain. But
Speaker 11: the reality is the networking is not as sticky as software.
Speaker 11: Software is extremely sticky. The thing is they have made
Speaker 11: such a rich suite of tools, in essence, a programming
Speaker 11: language and so many tools that make it easier for
Speaker 11: different skill sets of programmers to develop. I think that's
Speaker 11: what's so impressive about the Nvidia software portfolio, and the
Speaker 11: fact that you can use it in for many optimized functions.
Speaker 11: I think that's what's very interesting. In essence, Jensen is asking,
Speaker 11: she's army of developers, I want you to help this industry,
Speaker 11: in this industry, and this industry and this industry. That's
Speaker 11: I think what's the most impressive.
Speaker 2: Flat The biggest disclosure that Jensen Woe made was the
Speaker 2: five hundred billion dollar figure of revenues that they say
Speaker 2: will come from just Blackwell Rubin specifically over five fiscal
Speaker 2: quarters excluding China. When that number went up on the
Speaker 2: screen on stage, a lot of people reacted, how far
Speaker 2: ahead is that figure than the model that you had
Speaker 2: for the data center.
Speaker 3: Bus says that n video is doing.
Speaker 11: It's I knew you were going to ask me this,
Speaker 11: so I did. Of course, that was what we were
Speaker 11: also watching yesterday. It's about one hundred billion high. So
Speaker 11: this creates about one hundred billion opportunity. I think it's
Speaker 11: very significant, particularly if we end up seeing the Black
Speaker 11: Veil deal with China, because that means that we then
Speaker 11: have more than one hundred billion of upside. I think
Speaker 11: when I think about the one hundred billion of upside
Speaker 11: that Jensen is showing us, I think of it as
Speaker 11: a backlog an order pipeline. There are a few concerns
Speaker 11: that I have along the way in terms of that
Speaker 11: materializing in my forecast. So I am going to start
Speaker 11: exploring bicking it in. But some of the things that
Speaker 11: I am concerned about are physical infrastructure availability and supply
Speaker 11: chain readiness, and power availability in the data center. I
Speaker 11: would say that these are the three things that I
Speaker 11: am most concerned about. Is all of the components that
Speaker 11: we need there in the supply chain. Specific is the
Speaker 11: physical infrastructure ready for the data centers because there's very
Speaker 11: long lead times on some physical infrastructure. And then finally
Speaker 11: it's the power.
Speaker 4: Black Can I jump in very briefly here because when
Speaker 4: you think about the supply chain, you think about the
Speaker 4: other components that are needed within data centers. S k
Speaker 4: Heinez says, it's full twenty twenty six chips late, it's
Speaker 4: sold out exactly.
Speaker 11: So the thing is with ESK Hannix, they are in
Speaker 11: the blackwell, but the rubbin is done with some sung
Speaker 11: So I think that there's some smart hedging of bets
Speaker 11: there from a memory perspective, But there's so many other aspects.
Speaker 11: There's packaging material and again in videos being very careful
Speaker 11: with how to balance the packaging material supply chain, but
Speaker 11: Nvidia has only been able to control the semiconductor part
Speaker 11: of supply chain. I'm worried about some fundamental materials like
Speaker 11: precious metals used in the building of the servers and
Speaker 11: the electrical equipment.
Speaker 4: So why where metals are key concern when we're thinking
Speaker 4: about US and China. Vlad Galibov joy to have you
Speaker 4: on Senior research director at Omdia. Thank you coming up
Speaker 4: more on Nvidia and it's border impact on the tech markets.
Speaker 5: It's a blue meg.
Speaker 2: Tech Nvidia has become the first five trillion dollar company.
Speaker 3: This is CEO Jensen.
Speaker 2: Wang's spree of deals propels the AI frenzy to new heights.
Speaker 2: Let's bring in Marghi Patel for Moore. She's a senior
Speaker 2: portfolio manager and head of the capital allocation team at
Speaker 2: all Spring Global Investments. Six hundred and twenty nine billion
Speaker 2: dollars in assets under advisement, about eleven billion dollars worth
Speaker 2: of Nvideo shares in your fun Margie, your reaction to
Speaker 2: this company being the world's first five trillion dollar market
Speaker 2: value company.
Speaker 12: Well, it really shows us. This representation is huge sea
Speaker 12: change in technology, which is artificial intelligence, and certainly it's
Speaker 12: the leader, it's way ahead.
Speaker 13: But honestly, it's like a tsunami.
Speaker 12: There's one big wave and the and there's wave after
Speaker 12: wave after wave, and we really don't know if we're
Speaker 12: even near the peak of artificial intelligence really being incorporated
Speaker 12: in all the different industries. So this is a qualitative
Speaker 12: change that we've never seen in our investment careers.
Speaker 4: So Margie, just to focus in on in Video at
Speaker 4: this moment, do you add to.
Speaker 5: That stake that you currently have.
Speaker 4: We've still got seventy three buys out there from the
Speaker 4: analyst community and in one sell even at a five
Speaker 4: trillion dollar valuation.
Speaker 13: Yeah.
Speaker 12: Well, it's very hard to be negative on in Vidia
Speaker 12: unless you see some negative development in the company. And
Speaker 12: just because the stock has gone up, and actually looking
Speaker 12: at my portfolio, I actually have some stocks that have
Speaker 12: actually are performed in Vidia this year gone up even
Speaker 12: more so, I would say that as long as a
Speaker 12: gross path looks pretty good for n India, that it
Speaker 12: would be a worthwhile add.
Speaker 4: I mean, look at Micron for example, of one hundred
Speaker 4: and fifty percent so far this year. Some of the
Speaker 4: alterias that have really managed to be swept up in
Speaker 4: what's needed in data centers and compute more broadly, where
Speaker 4: hasn't the market seen enough value yet?
Speaker 12: Well, I think really all the oxygen is being sucked
Speaker 12: out of other areas of the market and going into
Speaker 12: artificial intelligence, data storage, data centers, all the rest of that,
Speaker 12: and I think we're still continuing on that trail. All
Speaker 12: those companies have high cash flow to fund these activities.
Speaker 12: There's no sign that they're losing their enthusiasm to make
Speaker 12: investments to keep.
Speaker 13: A leading edge and viata.
Speaker 12: And really, if you look at some of those stocks,
Speaker 12: like Micron's a great example. If the worst thing you
Speaker 12: can say about it is the price has gone up
Speaker 12: a lot, that doesn't mean you ought to sell it here.
Speaker 12: So I think we're still somewhere in the middle of
Speaker 12: this huge wave of changing the whole economy, changing technology,
Speaker 12: and it's really too soon to say stocks are too high.
Speaker 13: I'm going to bail out.
Speaker 3: On that note, Margie.
Speaker 2: I spoke to Jensen one yesterday afternoon and I had
Speaker 2: to ask about his view on a market bubble.
Speaker 3: Let's listen to what he said.
Speaker 8: I don't believe we're in the eyebubble, and the reason
Speaker 8: for that is we're going through a natural trend position
Speaker 8: from an old computing model based on general purpose computing
Speaker 8: to accelerated computing. We also know that AI has now
Speaker 8: become good enough because of reasoning capability, research capabilities, its
Speaker 8: ability to think. It's now generating tokens and now generating
Speaker 8: intelligence that's worth paying for.
Speaker 2: Jensen's argument is the same it has been for the
Speaker 2: last two years, we're in the early innings of a
Speaker 2: shift from general purpose computing to accelerated computing. But the
Speaker 2: different bit now is he's saying AI is worth paying for.
Speaker 2: I think that he's saying there's real revenues on the
Speaker 2: software side. Is that the evidence here is that the argument, well, I.
Speaker 12: Think it's really not so much. We haven't actually seen
Speaker 12: revenue pourion. But I think it's a change that companies
Speaker 12: are making because they see that this is what they
Speaker 12: need for their future. And I think it's totally different.
Speaker 12: As he was making the point from say the Internet
Speaker 12: Bubble that people often make a comparison with the Internet
Speaker 12: bubble was about degregulation of the telecom industry and it
Speaker 12: was about moving data and voice faster through pipes. It
Speaker 12: wasn't a material change. This is artificial intelligence. All the
Speaker 12: new chips and so forth are really a fundamental change
Speaker 12: in how we perform all kinds of tasks related in
Speaker 12: our economy. And I think because it's happened so fast,
Speaker 12: it's really only been say one year or two years,
Speaker 12: it's hard to adjust to say we're looking on the
Speaker 12: verge of a whole new world and how we approach technology.
Speaker 12: So I think that's why people are a little discombobulated
Speaker 12: seeing how fast these socks have taken off.
Speaker 13: But they all have the cash flow to finance's growth.
Speaker 12: So it isn't as if they're artificially borrowing money to
Speaker 12: make investments that look pie in the sky.
Speaker 13: This looks the beginning of something.
Speaker 2: Yes, Margie, you mentioned cash flows. What's your position on
Speaker 2: the circular financing concern about Nvidia?
Speaker 12: Well, I think those partnerships where they've made equity acquisition
Speaker 12: and some of these companies is just a business partnership.
Speaker 12: It seems perfectly reasonable when they're striking up a deal
Speaker 12: between two companies. And again coming back to the companies
Speaker 12: like Invidia, they aren't borrowing money to financi's activity. They
Speaker 12: really have enormous cash flow that they're using and deciding
Speaker 12: how to best.
Speaker 13: To allocate that.
Speaker 12: So I think that companies, particularly the large companies, have
Speaker 12: an idea of where they can best get the long
Speaker 12: term returns on their cash flow, and that's what we're seeing.
Speaker 4: Margie Vitelli Allspring, thank you so much for joining us
Speaker 4: today on all Things at AI time out for talking tech.
Speaker 4: And first, Amazon is planning to invest another five billion
Speaker 4: dollars in data centers in South Korea. That's on top
Speaker 4: of the more than four billion dollars that are committed
Speaker 4: with partner sk Group back in June. Now, the new
Speaker 4: funding will support the buildout of AI infrastructure to twenty
Speaker 4: thirty one plus go to Group.
Speaker 3: Well, it's raise.
Speaker 4: It's fully of forecast, citing new initiatives and cost cuts.
Speaker 4: Indonesia's largest internet company posted its fifth straight positive quality
Speaker 4: result has been steadily narrowing losses since it's twenty two.
Speaker 4: IPO still investors remin cautious. The stock has fallen about
Speaker 4: twenty percent of the last twelve months. And Apple, while
Speaker 4: it's preparing major refreshes to its mac Boogair, iPad Mini
Speaker 4: and iPad airlineup, with plans to give the devices higher
Speaker 4: end OLED displays. Now that's according to sources, the iPad
Speaker 4: Mini will likely be the first A game in the upgrade,
Speaker 4: arriving as soon as next year.
Speaker 2: Welcome back to Bloomberg Tech. There is a lot to
Speaker 2: get through in the earnings context. That throw up the
Speaker 2: board and let's go through it one by one. Five
Speaker 2: Serve is a name that we have not used as
Speaker 2: much on this program, but the stock is down forty
Speaker 2: two percent at one point, down forty seven percent in
Speaker 2: the session, absolutely slashing its EPs guidance. Left one analyst
Speaker 2: at Jeffrey's saying that the level of this miss in
Speaker 2: the quarter gone and the cut to its outlook is
Speaker 2: difficult to comprehend. That's a payments processing name. Very interesting.
Speaker 2: Going also to telecommunication Verizon another one that we're watching
Speaker 2: are almost three percentage points the US of largest mobile
Speaker 2: service provider, of course, actually had a loss in wireless
Speaker 2: phone subscribers in three Q. But new CEO has this
Speaker 2: aggressive growth plan that we're looking at. Then there's Etsy,
Speaker 2: so this is kind of interesting. There's the earning story Caro,
Speaker 2: and then there's the change of the top. And you
Speaker 2: spoke with the company about that CEO change.
Speaker 3: Tell me more.
Speaker 4: Yeah, And it's actually a trusted veteran of Etsy that's
Speaker 4: coming to the four who's been at the business since
Speaker 4: twenty eleven and ran deepop and the company that they
Speaker 4: bought a few years ago. And we're talking really here
Speaker 4: about Christy Ptelgoyle being brought up from Chief Growth Officer
Speaker 4: to be CEO as of January the first, just Silverman
Speaker 4: and I chattered to him yesterday, and really, here's a
Speaker 4: man who's been at the Helm for eight years.
Speaker 5: He's did this company through the.
Speaker 4: Lockdown crisis, through supply chain crisis, and now he's positioning
Speaker 4: this business for artificial intelligence. Remember they did the deal
Speaker 4: with open ai already, and he thinks Etsy is uniquely
Speaker 4: positioned to win an AI. But he really thinks the
Speaker 4: more brutal more clearly, Cruti Patel Goyle is the person
Speaker 4: to steer it, with her really having done every single
Speaker 4: job he says over at Etsy apart from head of engineering,
Speaker 4: and he really thinks the amount of artificial intelligence and
Speaker 4: personalization she brought to deepop is going to be the
Speaker 4: winning formula. It feels as though there's some nervousness out
Speaker 4: there from the investor community right now, whether it's about
Speaker 4: the CEO or whether about of course, maybe about the
Speaker 4: forward looking guidance from some of its earnings. But let's
Speaker 4: talk about earnings more broadly right now, because after the
Speaker 4: bell we've got Alphabet, Microsoft, and Meta all set to
Speaker 4: report results. Let's take a look at what investors can
Speaker 4: expect and start with Meta. Bloemerg tech reporter Riley Griffin
Speaker 4: joins us. Now for Meta, we know the capital expenditure
Speaker 4: has been there. We know the focus has been on
Speaker 4: hiring and talent. What really Zark has to prove out
Speaker 4: is that it's really winning formula for advertising sales.
Speaker 14: No doubt, and we will be watching that capital expenditure
Speaker 14: number quite closely. So Meta has guided that it expects
Speaker 14: to spend as much as seventy two billion this year
Speaker 14: on capex, a lot of that going to AI, infrastructure,
Speaker 14: data centers, talent. Any revisions to that number will certainly
Speaker 14: interest Wall Street. We'll also be looking, as you said,
Speaker 14: at the core advertising business. So analysts want to see
Speaker 14: about fifty billion this quarter coming in and they're forecasting
Speaker 14: about fifty seven billion for the next Whether there is
Speaker 14: any weakness in those numbers will give pause to investors
Speaker 14: who are concerned that they're not going to see that
Speaker 14: return on investment from AI. So if we see beats there,
Speaker 14: it will be a good day for Meta.
Speaker 9: Just really quick, Riley.
Speaker 2: We're also now thinking about Meta's debt pile and it's
Speaker 2: borrowing to fund these projects.
Speaker 3: What do you know, Well, in.
Speaker 14: A lot of ways, Meta has been able to keep
Speaker 14: debt off its balance sheet. Think about the really notable
Speaker 14: deal with Blue Owl to finance construction at what's going
Speaker 14: to be Meta's biggest data center in Richland Parish, Louisiana.
Speaker 14: So they are taking really creative approaches to ensure that
Speaker 14: that debt isn't showing up. On today's quarterly report the.
Speaker 2: Books, Riley Griffin, thank you very much that stay with
Speaker 2: earnings this time, Alphabet, Bloomberg Big Tech reported Davy Alba
Speaker 2: here with the latest and actually with Alphabet really consistent
Speaker 2: spending Davy, but also Cloud and like GCP in recent
Speaker 2: weeks has been really interesting.
Speaker 3: What do we need to look for?
Speaker 15: Yeah, absolutely, ed, I think Capex and Cloud are the
Speaker 15: key units to watch out for. Last quarter, we saw
Speaker 15: that Alphabet changed its guidance to eighty five billion dollars
Speaker 15: for spending on AI infrastructure for twenty twenty five, which
Speaker 15: was a ten billion increase over its last guidance. So
Speaker 15: you know, Google is really showing its commitment to AI here.
Speaker 15: And then Cloud has been booming. You know, we've reported
Speaker 15: recently on the huge, high profile deal with Anthropic for
Speaker 15: Cloud to provide its specialized AI chips to the AI
Speaker 15: startup Anthropic, and this was deal valued in the tens
Speaker 15: of billions of dollars, So that is a unit that
Speaker 15: we will be certainly watching very closely. We also know
Speaker 15: that Cloud has existing commitments from AI startups that it
Speaker 15: knows will boost revenue for its unit up to fifty
Speaker 15: eight billion by twenty twenty seven.
Speaker 4: Yeah, I think will Street anam is anticipating what about
Speaker 4: a thirty percent growth for the cloud computing part of
Speaker 4: the business. But in terms of scale, Davy just remind us,
Speaker 4: I mean, what is it about eighty five percent of
Speaker 4: revenue still comes from advertising. That's still going to be
Speaker 4: where the real driver of revenue is going forward. Is
Speaker 4: there any worry about well competitive threat, particularly when it
Speaker 4: comes to search.
Speaker 3: Yeah.
Speaker 15: Absolutely. Search is still the core financial engine of Alphabet
Speaker 15: that has long been the case, and it's you know,
Speaker 15: being it's being pressured to prove that it can still
Speaker 15: be a driver of growth. And as AI rifle Circle,
Speaker 15: particularly open Ai with its AI powered search tools and
Speaker 15: a new web browser that it's launching, this unit is
Speaker 15: certainly under pressure right now.
Speaker 4: Yeah, all lies on Atlas Bloemags Davy Alba. Thank you
Speaker 4: as we head towards the closing bell and that set
Speaker 4: of numbers and rounding out the big earnings is of
Speaker 4: course going to be Microsoft, the tech giant, hot off
Speaker 4: the heels of that relationship reset we've seen with open Ai.
Speaker 4: Let's begain Michael Turn's managing director and senior technology analyst
Speaker 4: over at Wells Fargo Securities.
Speaker 5: Interesting to Microsoft.
Speaker 4: Trading down a bit today, but yesterday really got a
Speaker 4: lift past four trillion dollar market capitalization because we thought
Speaker 4: that clarity is there in terms of relationship with open Ai.
Speaker 4: What clarity do you want from the numbers tonight?
Speaker 9: Well, the tech.
Speaker 16: Investing market is going to be focused on Microsoft's capex.
Speaker 16: We're a billion above street at thirty one billion and
Speaker 16: expecting more than one hundred and twenty five billion.
Speaker 9: This fiscal year from Microsoft.
Speaker 16: Microsoft investors are clearly focused on two things.
Speaker 9: Your growth. Can the reacceleration continue.
Speaker 16: We've seen really strong net new Azure revenue trends over
Speaker 16: the past couple of quarters from the company, as well
Speaker 16: as what you're alluding to, the opening relationship. We caught
Speaker 16: it a sigh of relief yesterday, just that that announcement
Speaker 16: is out and we're seeing you saw the stock react
Speaker 16: well yesterday. Just some signs that the companies are working
Speaker 16: more closely together. Still after I think a lot of
Speaker 16: back and forth around what's happening between the two companies right.
Speaker 2: Now, Michael, But based on your model for Microsoft, like
Speaker 2: has has this unknown about the relationship with open now,
Speaker 2: I really been and overhang on the stock.
Speaker 16: I think, you know, I think it's the first time
Speaker 16: in a long time we've started a field questions on
Speaker 16: cloud market share. Azure has been the dominant market share
Speaker 16: gainer since chat.
Speaker 9: GPT took the world by storm.
Speaker 16: We've seen Azure just continue to outpace growth of the
Speaker 16: other hyperscalers. We're talking about a business that's approaching one
Speaker 16: hundred billion of annual revenue growing near forty These are
Speaker 16: unprecedented rates.
Speaker 9: But you know, with some of.
Speaker 16: The deals that we've seen announced away from Microsoft starting
Speaker 16: to show up, there have been questions around just the
Speaker 16: size and scale of the aspirations of open Ai and
Speaker 16: how much of that occurs to Microsoft versus the broader
Speaker 16: cloud hyperscaler ecosystem.
Speaker 3: So, you know, this is it, this is the conversation.
Speaker 3: Let's let's do this.
Speaker 2: So GCP has a one million TPU deal with Amthropic.
Speaker 2: Microsoft has started having a relationship with Amthropic AWS and
Speaker 2: Bedrock is kind of thinking, well, what else can we offer?
Speaker 2: Grock is now available on Azure. I think basically the
Speaker 2: landscapes changed.
Speaker 3: Does the higher.
Speaker 2: Ary change now aws as your GCP.
Speaker 16: I mean, we think Microsoft still has the lead in
Speaker 16: terms of market perception. That relationship with open Ai has
Speaker 16: been very advantageous. So we think Microsoft share games have
Speaker 16: been primary a function of two reasons. Number one, just
Speaker 16: the later stage movers to cloud are disproportionunately more skewed
Speaker 16: towards Microsoft and more traditional businesses, whereas Amazon when the
Speaker 16: early adopters, Microsoft seen the next wave of come to cloud,
Speaker 16: and then the relationship with open Ai is really improved
Speaker 16: the perception of innovation with an Azure and created an
Speaker 16: environment where startups or building using Azure really for the
Speaker 16: first time. And I think everyone wants access to opening
Speaker 16: Ice technology, which is embedded into Copilot. You can directly
Speaker 16: tap the opening IAPI through Azure. That's an exclusive agreement.
Speaker 16: Those things are holding firm. So we're still very confident
Speaker 16: in Microsoft's position, but the world has changed. What we
Speaker 16: underestimated was just how big the size of just a
Speaker 16: training market would be within the AI cloud market. So
Speaker 16: we're just seeing growth that we haven't seen in technology
Speaker 16: in quite a long time, and to.
Speaker 4: Prefer maybe Microsoft did too. The issue for them is supply,
Speaker 4: not demand. They're having to turn to other companies you
Speaker 4: analyze Call We've they're looking at Nebious an end scale
Speaker 4: to really be able to fulfill some of its overall
Speaker 4: cloud needs. How are you thinking about capital Expendit show
Speaker 4: rising for Microsoft in the next full year twenty.
Speaker 16: Six, I mean, we think it continues to go higher.
Speaker 16: We're modeling above consensus right now, or a billion above
Speaker 16: consensus for this quarter. We updated that just based on
Speaker 16: some of what you're saying. We hear the capacity constraints
Speaker 16: in the market. We hear data center capacity is still
Speaker 16: coming online. We think the most important thing beyond what
Speaker 16: Azure presents for the quarter is where they guide the
Speaker 16: December quarter should have a little bit less capacity constraints.
Speaker 16: So I think investors will be listening carefully to see
Speaker 16: how they characterize Azure growth for December as well. But
Speaker 16: you're right, this is a good problem to have for
Speaker 16: Microsoft in many ways. We have a business that we're
Speaker 16: saying as one hundred billion in scale and can't even
Speaker 16: keep up with demand right now. Just unprecedented levels of interest.
Speaker 4: What about the productivity tools? How much of a lock
Speaker 4: in does it have because of the.
Speaker 3: Software we can't get away from it.
Speaker 16: I think it's been the toughest mode to crack in software.
Speaker 12: Right.
Speaker 16: We've seen many companies try and the honustrays as we've
Speaker 16: just all been condition to work in Microsoft and very effectively.
Speaker 16: Copilot is a way to extend I think the productivity
Speaker 16: use case that is pretty interesting. From the numbers perspective,
Speaker 16: Investors are focused in on Microsoft three sixty five Commercial Cloud,
Speaker 16: which does embed the Copilot metrics as well. That business
Speaker 16: is forecast to grow thirteen to fourteen percent this quarter
Speaker 16: or any upside would likely be attributed to Copilot and
Speaker 16: could create I think the next big unlock for Microsoft
Speaker 16: to the productivity business could start to show growth improvement
Speaker 16: alongside Azure.
Speaker 2: Michael Touring Software, an list of equity research at Wells Fargo.
Speaker 3: Thank you so much.
Speaker 2: AI startup Character AI will ban kits from having conversations
Speaker 2: with chatbots on its platform. This follows growing pressure from
Speaker 2: lawmakers and a wrath of lawsuits alleging the company so
Speaker 2: characters are responsible for harms to children. Bloomberg's AI reporter
Speaker 2: Rachel Metz has the story Character for some time has
Speaker 2: been a very interesting startup and platform to follow, and
Speaker 2: I think we've even talked about some of the risks
Speaker 2: around the concept of an AI avatar, but this is
Speaker 2: a very specific line of reporting. I think best just
Speaker 2: to summarize it for us.
Speaker 13: Yeah, I mean Character AI.
Speaker 17: When it got its start a few years ago, the
Speaker 17: idea was that anybody could create or use any kind
Speaker 17: of chatbot. I mean they wanted people to make anything, really,
Speaker 17: so you'd see like video game character style chatbots like Mario.
Speaker 17: You'd see impersonations of celebrities like Elon Musk, so on,
Speaker 17: and so forth, all different kinds of things. It's kind
Speaker 17: of it's part of a wild West of the scene
Speaker 17: of AI chatbots that we're really in right now. But
Speaker 17: what you also saw is immediately this was very appealing
Speaker 17: to teenager in particular, like a huge portion of their
Speaker 17: users have always skewed younger, and over time we've seen
Speaker 17: a number of lawsuits being filed in general against companies
Speaker 17: that are offering AI chatbots, alleging certain types of harms
Speaker 17: to users, but in particular a bunch of them have
Speaker 17: been filed by parents against Character AI due to harms
Speaker 17: that they allege have happened to their teenagers, up to
Speaker 17: and including suicide.
Speaker 4: And then the regulators have become involved. FTC opens a
Speaker 4: regulatory investigation into all makers of these sort of AI
Speaker 4: chatbots as to how much children should be continuing conversations
Speaker 4: with them. We've got others can State of California trying
Speaker 4: to regulate at RACHEL.
Speaker 5: So are they running this in some way and how.
Speaker 4: Do they execute the limitation on age here?
Speaker 17: Yeah, I mean, I think this is a really interesting strategy.
Speaker 17: Just yesterday we saw a bill introduced in the Senate
Speaker 17: that seeks to outlaw the use of AI chatbots by
Speaker 17: people who are under eighteen, and and that's you know,
Speaker 17: like right in that same timeframe, we're seeing Character AI
Speaker 17: saying Hey, actually, that's basically what we're doing here. I mean,
Speaker 17: they're going to let their kid users who are roughly
Speaker 17: between the ages of thirteen and seventeen use different features,
Speaker 17: but they will not be able to have these end
Speaker 17: lists back and forth chats with their so called characters,
Speaker 17: that's what they call their chatbots. And I think, yeah,
Speaker 17: it is in many ways an effort to get ahead
Speaker 17: of some of the issues, but the company also told me, look,
Speaker 17: we think we don't know that there's still a lot
Speaker 17: we don't know about how these chatbots can impact kids,
Speaker 17: and so we think that this is the best thing
Speaker 17: to do right now.
Speaker 4: Rachel Matt, it's a great story. We urge people to
Speaker 4: go and read it. Thank you very much. Indeed, let's
Speaker 4: stay in the world of AI startups because one of
Speaker 4: the biggest backers in the industry is also one of
Speaker 4: its biggest winners. Nvidia has been growing the number of
Speaker 4: startup investments and makes each and every year when it
Speaker 4: mergs AI editors, I think of and is here to
Speaker 4: talk us through it because it's not so venture capital company,
Speaker 4: but its strategic part, the VC arm of it is
Speaker 4: just becoming a jugglenaw in the space.
Speaker 18: Yeah, it's definitely become the five trillion dollar benefactor of
Speaker 18: most of the AI industry right now. What we reported
Speaker 18: here is that just through October of this year, Indigia
Speaker 18: has backed fifty nine different AI startups, which already outpaces
Speaker 18: all of what it did last year. I think it's
Speaker 18: more than triple orquadruple will Get did a couple of
Speaker 18: years ago. And there's no sign of it slowing down,
Speaker 18: and I think there's a clear desire here to kind
Speaker 18: of support the wider ecosystem and industry and ways that
Speaker 18: probably come back and benefit India.
Speaker 2: One of the things we mentioned in the story is
Speaker 2: circular financing or the circular nature of what's happening in
Speaker 2: the AI ecosystem.
Speaker 3: What would NVIDIAs say about that?
Speaker 18: You know what they've said to us and to other
Speaker 18: outlets certainly is that there is no obligation here that
Speaker 18: the companies that it provides money to have to then
Speaker 18: turn around and buy Invigia chips. And that may be true.
Speaker 18: What's also true is that ob Nvidia is the market
Speaker 18: leader for AI chip, So if it helps prop up
Speaker 18: dozens or hundreds of AI startups with capital, some of
Speaker 18: that money is going to come back to Nvidia, and
Speaker 18: ultimately that feels part of a larger strategy. As we
Speaker 18: all know, in Vidia is very dependent on a handful
Speaker 18: of large tech firms who buy up the majority of
Speaker 18: its chips. If it can build future market leaders or
Speaker 18: even smaller firms with more capital, that's going to benefitting
Speaker 18: and help diversify its revenue stream.
Speaker 4: This great anecdote in the story coming from ourvindustry universe
Speaker 4: suits over at Perplexity, just saying how Jensen gets it
Speaker 4: done in terms of giving him access to GPUs that
Speaker 4: he needs exactly.
Speaker 18: I think it's not just about financial resources, it's about
Speaker 18: technical know how, it's about the network, and fundamentally, it's
Speaker 18: about being able to brand yourself as an Nvidia backed
Speaker 18: company that carries a lot of bonafides.
Speaker 2: Right now, Blue BIG's AI editor Seth Figman, thank you
Speaker 2: very much. Now coming up, we will stay with Nvidia
Speaker 2: as President Trump says he'll be discussing Blackwell chips with
Speaker 2: Chinese President Jijing, ting that conversation's next.
Speaker 3: This is Bloomberg Tech.
Speaker 5: We are going back to our top story.
Speaker 4: President Trump is set to meet with Chinese President's using
Speaker 4: pink tomorrow, with discussions expected to include in videos new
Speaker 4: black Well chips. Bloomberg Senior Tech editor Mike Sheppard joins
Speaker 4: us now, and video has just added a third of
Speaker 4: a trillion in the last two training days. Yes, there
Speaker 4: was a raft of its own announcements, but when I
Speaker 4: say new black Well ships, that's sort of the operative
Speaker 4: word here.
Speaker 5: New Are they going.
Speaker 4: To be allowed to sell some sort of dumb down
Speaker 4: version of a Blackwell architecture into China.
Speaker 7: Mike Well, that is the proposal of President Donald Trump
Speaker 7: is express willingness to entertain. Over the summer, he said
Speaker 7: that a deprecated version of the cutting edge black weld
Speaker 7: chip would be something he would be open to allowing
Speaker 7: sales of in China, but it's unclear whether the Chinese
Speaker 7: would welcome it, and also what the reaction might be
Speaker 7: here in Washington among Republicans and Democrats who remained skeptical
Speaker 7: about the wisdom of selling such advanced technology to a
Speaker 7: geopolitical rival.
Speaker 4: Carroll, what's so extraordinary is that what we heard articulated
Speaker 4: by Jensen, and here we have President Trump talking about
Speaker 4: Blackwell being in the discussion point Jensen went out and said,
Speaker 4: I've got half a trillion dollars worth of orders for
Speaker 4: Reuben and the newer architecture and Blackwell put together, with
Speaker 4: zero coming from China.
Speaker 5: So what do you think the likelihood is.
Speaker 4: Here that China even acquiesces, even wants to be buying
Speaker 4: any of this.
Speaker 7: Well, it's a great question because so far China has
Speaker 7: rejected the even dumber down chips the AH twenties that
Speaker 7: President Donald Trump had relented on allowing sales of in China.
Speaker 7: Earlier this year. You remember in April the Trump administration
Speaker 7: blocked the sales of the Age twenty, which have been
Speaker 7: designed for the China market. Then relented in August, but
Speaker 7: at that point authorities in Beijing said no, thank you
Speaker 7: and encourage local firms instead to buy domestically. And this
Speaker 7: is part of the Chinese government's effort to build up
Speaker 7: its own supply chain domestically, to try to turn to
Speaker 7: local producers and build up their own industry. So the
Speaker 7: question is will they even want the I guess dumbed
Speaker 7: down version of the blackwell should President Donald Trump persuade
Speaker 7: Hijinping to accept it?
Speaker 3: Now?
Speaker 7: One of the theories has been that maybe China is
Speaker 7: holding out for a more advanced version of the AI
Speaker 7: chips the Nvidia makes in hopes of deploying them across
Speaker 7: their industry. There's no question that they outperform on a
Speaker 7: chip per chip basis what is in the Chinese market.
Speaker 7: But one thing that China has been able to do
Speaker 7: is produce its AI chips, including Huawei as send at
Speaker 7: scale and deploy them at scale, and that makes up
Speaker 7: perhaps for some of the deficiencies and individuals chip performance
Speaker 7: that we've seen, so it'll be interesting to see how
Speaker 7: this all plays out and whether other bargaining chips may
Speaker 7: get tossed into the conversation as well.
Speaker 4: Caro on the pun, will we see Jensen and President
Speaker 4: Trump meet well?
Speaker 7: The two men indicated yesterday that they might see each
Speaker 7: other somewhere on the sidelines at the APEC summit in
Speaker 7: South Korea. Jensen left. We're not sure exactly what time
Speaker 7: he left Washington, but by now he would.
Speaker 13: Be at least close to soul.
Speaker 7: The President's meeting Machesian paying a schedule for ten pm
Speaker 7: our time tonight, so we'll be watching to see if
Speaker 7: the Jensen and Donald Trump crosspads. The two men regularly
Speaker 7: meet and speak by phone, Jensen said yesterday, so surely
Speaker 7: they will be in touch, and if Blackwell is approved,
Speaker 7: we might see an even bigger reveal.
Speaker 4: And we wish them all well with their jet lag.
Speaker 4: Bloombgs Mike Jefford, we thank you so much. She's been
Speaker 4: all across what's happening in Washington, and GtC.
Speaker 5: Does it for this edition of Bloomberg Tech. Tell you
Speaker 5: what we're also all across. After the closing bell.
Speaker 4: Join us to help break down the earnings out of
Speaker 4: these key companies Meta Alphabet, Microsoft, All focus on capital expenditure,
Speaker 4: All focus on how much demand there have for nvideo products.
Speaker 5: Of course, don't forget to check out our podcast as well.
Speaker 5: You can find on the termin as well as Apple
Speaker 5: and Spotify. This is Bloomberg