WEBVTT - Daybreak Holiday: Markets, Nvidia, Bitcoin 0:00:02.880 --> 0:00:05.080 Thank you so much for joining us on this special 0:00:05.240 --> 0:00:08.800 edition of Bloomberg Daybreak. US markets are closed for the 0:00:08.840 --> 0:00:12.520 Memorial Day holiday. I'm Nathan Hager, and coming up this hour, 0:00:12.600 --> 0:00:14.520 we'll look ahead to earnings from one of the so 0:00:14.600 --> 0:00:18.160 called Magnificent Seven in videos out with its quarterly report 0:00:18.200 --> 0:00:20.759 on Wednesday, we get a preview with Ban Deep Saying, 0:00:20.800 --> 0:00:24.919 Global head of Tech research at Bloomberg Intelligence. Plus bitcoins 0:00:25.000 --> 0:00:28.480 back at record levels. We'll ask Bloomberg Intelligence Senior commodity 0:00:28.560 --> 0:00:32.600 strategist Mike mcgloon where he thinks the crypto currency is headed, 0:00:32.880 --> 0:00:36.520 and p JIM Fixed Income Chief US economist Tom Porcelli 0:00:36.560 --> 0:00:38.640 will join us with his thoughts on how long the 0:00:38.720 --> 0:00:41.680 FED can stay on hold. But we want to begin 0:00:41.880 --> 0:00:44.760 with a look at the stock market. After a turbulent 0:00:44.960 --> 0:00:48.760 few months, stocks have basically recovered their losses since President 0:00:48.760 --> 0:00:52.280 Trump's Liberation Day tariff announcement in early April. So we 0:00:52.320 --> 0:00:53.920 thought now would be a good time to bring you 0:00:53.960 --> 0:00:57.760 a special roundtable on equities, and for that we're pleased 0:00:57.760 --> 0:01:01.600 to welcome Invesco Global Markets strat just Brian Levitt and 0:01:01.680 --> 0:01:05.000 Barry Ritholts, the founder of ritt Holt's Wealth management and 0:01:05.120 --> 0:01:08.600 host of Bloomberg's Masters in Business podcast. It is great 0:01:08.640 --> 0:01:11.240 to have the both of you with us. Barry, I'll 0:01:11.240 --> 0:01:11.920 start with you. 0:01:12.319 --> 0:01:13.080 Is this just. 0:01:13.160 --> 0:01:17.679 A Washington dependent equity market at this point? 0:01:18.760 --> 0:01:23.000 Well, no doubt, Washington policy decisions are having an big 0:01:23.120 --> 0:01:29.200 impact on the market's expectations for the economy and corporate 0:01:29.240 --> 0:01:34.280 revenue and profit. Look, the President calls himself tariff man, 0:01:34.360 --> 0:01:37.000 says tariff's are the most beautiful word in the dictionary. 0:01:37.720 --> 0:01:41.000 We know what he did in the first term, and 0:01:41.080 --> 0:01:45.520 so the consensus seem to have been pre April, Hey, 0:01:45.600 --> 0:01:48.800 we'll get some ten percent tariffs here and there, and 0:01:49.480 --> 0:01:53.559 that's already built into our models. But when you suddenly 0:01:53.720 --> 0:01:58.120 and unexpectedly drop one hundred percent tariffs on one hundred 0:01:58.160 --> 0:02:03.000 and eighty two countries plus penguins in the Antarctica, the 0:02:03.080 --> 0:02:06.680 market has to stop and say, oh, we failed. You know, 0:02:06.760 --> 0:02:09.400 this is a failure of our imagination. We did not 0:02:09.560 --> 0:02:13.959 anticipate tariffs this large. This is going to take ten 0:02:14.040 --> 0:02:17.919 twenty percent off of corporate revenues. And profits always fall 0:02:17.960 --> 0:02:21.600 faster than revues. Maybe this is twenty thirty percent off 0:02:21.639 --> 0:02:24.960 of corporate profits four quarters from now. We have to 0:02:25.040 --> 0:02:29.640 adjust our prices down and what will you off like 0:02:29.760 --> 0:02:33.200 fourteen percent twelve percent? When the ninety day pause came in, 0:02:34.000 --> 0:02:37.040 that was on the way to going much lower as 0:02:37.120 --> 0:02:42.280 a discounting mechanism. The pause gave everybody some help that 0:02:42.680 --> 0:02:46.639 all right, maybe our original assessment was correct, but it's 0:02:46.680 --> 0:02:48.440 still very much up in the air. 0:02:49.520 --> 0:02:52.440 Brian, I'll turn it over to you. Has the market 0:02:52.520 --> 0:02:58.200 sort of shaken out where the policy direction is going now? 0:02:58.240 --> 0:03:02.360 Have we adjusted to the second term of President Trump? 0:03:03.680 --> 0:03:06.040 Not entirely. Barry makes a great point about it. 0:03:06.080 --> 0:03:08.400 I mean, we remember we had a tarif rate that 0:03:08.639 --> 0:03:12.440 was quite low a year ago, and now we're talking 0:03:12.480 --> 0:03:17.040 about fifteen eighteen percent average effective rates. So, yes, we've 0:03:17.080 --> 0:03:21.839 had a pause. Yes we've seen tower freights come down 0:03:21.880 --> 0:03:25.880 on countries such as China, but it's still not entirely 0:03:26.040 --> 0:03:28.840 clear where this is ultimately heading. Now, what's good for 0:03:28.919 --> 0:03:31.919 the market, or what the market is at least expecting, 0:03:32.639 --> 0:03:35.720 is that things are going to get incrementally better from 0:03:35.760 --> 0:03:39.440 here on the policy front. There's no guarantee, but that 0:03:39.520 --> 0:03:42.240 seems to be the market's expectation and does seem to 0:03:42.280 --> 0:03:46.800 be the modus operandi of President Trump. I look back 0:03:46.840 --> 0:03:49.560 to the twenty eighteen environment. If you remember the fourth 0:03:49.640 --> 0:03:53.520 quarter of twenty eighteen, stocksfell twenty percent during the US 0:03:53.640 --> 0:03:56.600 China trade war, you got a ninety to eight pause. 0:03:57.000 --> 0:03:59.920 You did not get a Phase one China trade deal 0:04:00.440 --> 0:04:04.480 for really another year, but the markets continued to perform 0:04:04.640 --> 0:04:08.480 well amid expectations that policy was going to get better. 0:04:09.440 --> 0:04:11.800 We are under a ninety day pause, as you mentioned, 0:04:12.040 --> 0:04:15.880 we're heading toward what I think a lot of lawmakers 0:04:15.920 --> 0:04:18.360 in Washington are hoping to be a big tax and 0:04:18.400 --> 0:04:22.159 spending cut bill around ninety days or so from now. 0:04:22.720 --> 0:04:26.480 Is July turning into a pivot point for the equity market? 0:04:26.480 --> 0:04:26.760 Berry? 0:04:28.320 --> 0:04:30.960 Maybe you know I love to do the compare and 0:04:31.040 --> 0:04:36.279 contrast with how the FED communicates changes in policy with 0:04:36.400 --> 0:04:39.560 how this White House does. You know, before the Fed 0:04:39.600 --> 0:04:41.840 says we're going to shift our regime, and now we're 0:04:42.120 --> 0:04:45.279 either raising rates or cutting rates. You get to notice 0:04:46.040 --> 0:04:49.719 six meetings in advance, three meetings in advance. Hey, we're 0:04:49.760 --> 0:04:54.360 tracking PCE and CPI. The month before the meeting, all 0:04:54.400 --> 0:04:57.480 the FED governors and presidents fan out and they speak 0:04:57.520 --> 0:05:00.120 at the Petroleum Club of Houston and the Economic a 0:05:00.200 --> 0:05:03.200 Club of New York and everywhere else, and so when 0:05:03.279 --> 0:05:07.320 the change happens, it's not a shock. You don't surprise 0:05:07.480 --> 0:05:10.880 the markets. I think part of the problem here is 0:05:11.040 --> 0:05:17.760 not just the policy itself, but how completely shocking and 0:05:17.800 --> 0:05:21.320 surprising it was to markets. As it turns out, mister 0:05:21.440 --> 0:05:26.920 market doesn't care for surprises, and that's something that I 0:05:27.080 --> 0:05:29.479 wish the White House would take a page from the 0:05:29.480 --> 0:05:32.160 Federal Reserve's communication strategy. 0:05:32.880 --> 0:05:36.280 Yeah. Look, the S and P five hundred, as everyone knows, 0:05:36.400 --> 0:05:40.200 is overvalue compared to its long term average, driven primarily 0:05:40.240 --> 0:05:44.120 by a handful of names. Other markets are not as overvalued, 0:05:44.200 --> 0:05:49.560 particularly non US markets obviously value in disease MidCap stock. 0:05:49.720 --> 0:05:53.560 So it's one of these times where it may make sense. 0:05:53.640 --> 0:05:58.080 It probably does make sense to lower the valuation of 0:05:58.080 --> 0:06:01.480 the portfolio as we nab gate this period of policy 0:06:01.560 --> 0:06:04.520 uncertainty and as we grapple with higher interest rates. 0:06:05.040 --> 0:06:09.000 We're speaking with Brian Levitt. He is the global market 0:06:09.080 --> 0:06:12.600 strategist at Invesco, and Barry Ridtholtz is with us as well, 0:06:12.640 --> 0:06:16.039 founder of Ridolts Wealth Management, host of Bloomberg's Master's in 0:06:16.160 --> 0:06:20.200 Business podcast. Barry, we have had a lot of attention 0:06:20.760 --> 0:06:25.360 on the bond market particularly with the yields going up 0:06:25.960 --> 0:06:28.880 in response to what's happening out of Washington, d C. 0:06:29.520 --> 0:06:32.200 Where do you see the bond market going and could 0:06:32.200 --> 0:06:35.320 it potentially pose a headwind for equities going forward? 0:06:36.560 --> 0:06:40.280 Sure, always the bond markets are the adult in the room. 0:06:40.640 --> 0:06:42.840 But let me throw a little bit of a curve 0:06:42.880 --> 0:06:45.680 ball at you. I think Carvel was right in the 0:06:45.760 --> 0:06:51.000 nineteen eighties and the nineteen nineties. Once the new millennium started, 0:06:52.400 --> 0:06:57.520 it seemed like leadership in terms of influencing DC policy 0:06:58.600 --> 0:07:01.240 moved to the equity mark mart So let me give 0:07:01.279 --> 0:07:04.600 you just three quick examples. I have a vivid recollection 0:07:04.680 --> 0:07:09.720 of FED Chairman Ben Bernanke testifying in October eight to Congress, 0:07:10.240 --> 0:07:13.360 and after a few fiery speeches, they voted down money 0:07:13.400 --> 0:07:17.400 and authority to the FED. Market sold off really hard. 0:07:18.280 --> 0:07:22.920 By that Friday, everybody reconvened and they gave the Fed 0:07:22.920 --> 0:07:28.360 everything they wanted. So ten twelve thirteen percent gets DC's attention. 0:07:29.320 --> 0:07:33.880 I love what happened in March twenty twenty during the pandemic. 0:07:34.520 --> 0:07:41.160 Republicans and Democrats couldn't agree on renaming a library in Washington, DC. 0:07:41.680 --> 0:07:47.840 Talk about something with so minor Then the NBA canceled 0:07:48.480 --> 0:07:52.240 the schedule after a thunder Jazz game where the center 0:07:52.480 --> 0:07:56.440 tested positive for COVID. Once the NBA canceled their season, 0:07:56.840 --> 0:08:00.360 the dominos all began to fall. And it was a 0:08:00.400 --> 0:08:03.600 week or two later we passed the single biggest fiscal 0:08:03.640 --> 0:08:07.880 stimulus as a percentage of GDP since World War Two, 0:08:08.040 --> 0:08:11.400 the Cares Act. And now we see the same thing 0:08:11.480 --> 0:08:15.680 that took place in April twenty twenty. The bond market 0:08:15.760 --> 0:08:21.040 has certainly been driving the debate about the dollar and 0:08:22.280 --> 0:08:26.960 fiscal policy and deficits, But it was the stock market 0:08:27.080 --> 0:08:30.080 sell off hey down five percent, down five percent, down 0:08:30.120 --> 0:08:33.200 five percent, three days in a row that got the 0:08:33.200 --> 0:08:37.480 White House's attention. And that's when the President called uncle, 0:08:38.000 --> 0:08:42.319 not rising yields, but falling equity prices. I want to 0:08:42.360 --> 0:08:46.120 be reincarnated as the stock market, not the bond market. 0:08:46.400 --> 0:08:46.600 Yeah. 0:08:46.640 --> 0:08:49.520 I mean that raises the question the whole idea that 0:08:50.480 --> 0:08:54.440 the president uses the stock market as a scorecard for 0:08:54.600 --> 0:08:57.880 how his policies are going. So, Brian, as we head 0:08:57.880 --> 0:09:01.440 into the second half, where do you see things going 0:09:01.440 --> 0:09:06.280 for the stock market? Could it sway what happens in Washington, DC. 0:09:07.920 --> 0:09:12.640 Yeah. Our leading indicators of the economy are still pointing 0:09:12.679 --> 0:09:15.840 to below trend and lower growth, and the inflation momentum 0:09:15.920 --> 0:09:18.200 is picking up, So that's a little bit of a 0:09:18.240 --> 0:09:19.480 more challenged environment. 0:09:19.520 --> 0:09:23.199 You're not there that often. Most of the time. You're 0:09:23.240 --> 0:09:25.920 more in a recovery expansion or slow down field in 0:09:25.960 --> 0:09:29.760 which stocks can do quite well. So in an environment 0:09:29.800 --> 0:09:32.480 where leading indicators are pointing lower, you tend to want 0:09:32.480 --> 0:09:36.640 to be a little bit more defensive, expect more volatility 0:09:37.080 --> 0:09:39.160 in the markets. I think you're right, and I think 0:09:39.200 --> 0:09:43.400 Barries right that ultimately we will get a better policy response. 0:09:43.640 --> 0:09:48.160 Ultimately as the economy weakends, Federal Reserve will be able 0:09:48.200 --> 0:09:52.040 to lower interest rates. When that happens is probably not 0:09:52.120 --> 0:09:55.080 as soon as people think, and the administration will likely 0:09:55.160 --> 0:09:58.160 continue to move away from its worst impulses on trades. 0:09:58.240 --> 0:10:01.360 So you could be in a channel lenging short term 0:10:01.400 --> 0:10:06.920 period here, because typically when you're leading indicators are rolling over, 0:10:07.000 --> 0:10:10.040 you need a policy response, and for the first time 0:10:10.080 --> 0:10:12.920 in a very long time, it's going to be a 0:10:13.040 --> 0:10:16.440 challenge in the United States to get that policy response. 0:10:16.480 --> 0:10:19.920 On the other side, in Europe, China, the UK, you 0:10:20.040 --> 0:10:22.719 will be getting that policy response, which is why you're 0:10:22.760 --> 0:10:25.679 starting to see or you have been seeing momentum pick 0:10:25.760 --> 0:10:28.080 up in non US assets. 0:10:27.920 --> 0:10:31.080 And Barry, are you looking for a challenging environment as well. 0:10:31.120 --> 0:10:33.520 I mean, we've heard from the likes of Jamie Diamond 0:10:33.559 --> 0:10:36.640 and JP Morgan Chase saying he can't take stagflation off 0:10:36.640 --> 0:10:38.760 his table into the second half. 0:10:39.480 --> 0:10:42.439 Well, well, Jamie reversed his views. Not too long ago. 0:10:42.559 --> 0:10:45.000 He had said, Eh, you know, tas will be fine, 0:10:45.040 --> 0:10:47.520 We'll work a way through it, before we had that 0:10:47.600 --> 0:10:54.120 big surprise. My expectations really are dependent on who is 0:10:54.320 --> 0:10:58.840 the potus whisperer, Who is the last person that the 0:10:58.960 --> 0:11:03.680 president here before he goes into making a key decision. 0:11:04.440 --> 0:11:07.720 If it turns out that the majority of the times, 0:11:08.200 --> 0:11:13.120 the last person to influence President Trump is Treasury Secretary 0:11:13.240 --> 0:11:17.320 Scott Besson, well we'll be fine. He's a Wall Street guy. 0:11:17.760 --> 0:11:23.960 He understands how markets, dollars, bonds work. I'm comfortable with 0:11:24.200 --> 0:11:29.000 him as the potus whisperer. If, on the other hand, 0:11:29.040 --> 0:11:33.600 it's Peter Navarro, who is you know, one and only 0:11:33.679 --> 0:11:37.560 one economist who seems to think that tariffs are a 0:11:37.600 --> 0:11:41.040 fantastic idea. Hey, that little smooth holy thing, all right, 0:11:41.120 --> 0:11:43.200 that was a one off. That didn't work, but we 0:11:43.240 --> 0:11:46.760 should try it now. If he's the most influential advisor 0:11:47.360 --> 0:11:51.839 that the president listens to, well, then you know the 0:11:51.880 --> 0:11:55.720 worst case scenario is, yeah, we're gonna get rate cuts, 0:11:55.760 --> 0:11:59.720 but it's going to be in response to a stagflationary 0:12:00.000 --> 0:12:02.720 maybe even a recessionary environment. 0:12:04.040 --> 0:12:06.240 To be a fly on the wall in Washington, d C. 0:12:06.840 --> 0:12:08.560 Thank you for this to the both of you, Berry 0:12:08.640 --> 0:12:12.600 Ridtholtz of Ridtholtz Wealth Management in Bloomberg's Master's and Business podcast, 0:12:12.880 --> 0:12:17.000 and thanks as well to Investco Global market strategist Brian Levitt. 0:12:17.200 --> 0:12:19.840 Up next, we're going to preview earnings this week from Nvidia. 0:12:19.920 --> 0:12:23.240 Bloomberg Intelligence Global head of Tech Research Mandeep Sing will 0:12:23.320 --> 0:12:26.440 join us as the special Memorial Day edition of Bloomberg 0:12:26.520 --> 0:12:30.480 Daybreak continues. It's twenty minutes past the hour. I'm Nathan Hager. 0:12:31.080 --> 0:12:45.040 This is Bloomberg. Welcome back to this special edition of 0:12:45.080 --> 0:12:48.520 Bloomberg day Break. US markets are closed for the Memorial 0:12:48.600 --> 0:12:51.480 Day holiday. I'm Nathan Hager. Wall Street gets back to 0:12:51.520 --> 0:12:54.760 work this week with a key earnings report on the docket. 0:12:54.800 --> 0:12:57.520 On Wednesday, after the close of trading, we get the 0:12:57.600 --> 0:13:01.600 latest quarterly numbers from Nvidia, So what should we expect 0:13:01.600 --> 0:13:05.040 from the AI chip giant. Let's bring in man Deep 0:13:05.080 --> 0:13:07.280 Singh for se mencers in that regard. Mandeep of course, 0:13:07.320 --> 0:13:11.280 as the global head of Tech research at Bloomberg Intelligence. 0:13:11.559 --> 0:13:13.560 Man Deep, it's great to have you on with us. 0:13:13.640 --> 0:13:16.440 And you know, Nvidia investors have kind of gotten used 0:13:16.440 --> 0:13:20.480 to blowout results quarter after quarter, So is that the 0:13:20.559 --> 0:13:22.240 expectation this time around? 0:13:23.080 --> 0:13:25.680 I think there are a few variables to keep in mind. 0:13:25.760 --> 0:13:29.880 So the first one is on the demand side. Everything 0:13:30.160 --> 0:13:34.199 really looks strong when it comes to the commentary from 0:13:34.320 --> 0:13:38.800 hyperscalers that we've heard around CAPEX. I mean pretty much 0:13:38.880 --> 0:13:44.680 everyone raised their CAPEX slightly. They had positive outlook on 0:13:45.480 --> 0:13:49.440 even the early twenty twenty six view. So the US 0:13:49.520 --> 0:13:54.880 hyperscaler spin really strong. The one area that obviously will 0:13:54.880 --> 0:13:57.679 be a slight head wind is the China exposure. And 0:13:57.720 --> 0:14:03.160 we know in Nvidia wrote down about fifteen billion dollars 0:14:03.200 --> 0:14:07.359 of their inventory of H twenties because of the restrictions. 0:14:07.440 --> 0:14:12.520 So the most likely scenario right now is they may 0:14:12.559 --> 0:14:16.680 not be able to sell to China anytime soon, even 0:14:16.720 --> 0:14:20.320 if they come up with a different variant. I think 0:14:20.440 --> 0:14:25.280 chances are they'll find it hard to overcome the restrictions, 0:14:25.360 --> 0:14:28.880 so that's a negative. At the same time, they had 0:14:29.960 --> 0:14:32.800 new sovereign deals in the Middle East a couple of 0:14:32.800 --> 0:14:39.560 weeks back, UAE and I think Qatar, and just overall, 0:14:39.680 --> 0:14:42.480 the sentiments seems to be improving when it comes to 0:14:42.600 --> 0:14:48.320 sovereign demand outside of China. So there are different sort 0:14:48.360 --> 0:14:52.600 of variables driving the demand side, but overall, look, the 0:14:52.600 --> 0:14:57.840 market is still undersupplied and in video chips are still 0:14:57.880 --> 0:15:01.200 the most performant when it comes to accelerators that you 0:15:01.320 --> 0:15:04.600 need for AI. So from that perspective, I mean in 0:15:04.680 --> 0:15:08.640 Nvidia still has that mode when it comes to the 0:15:08.760 --> 0:15:10.160 AI accelerator market. 0:15:10.280 --> 0:15:12.480 Yeah, to your point, it really has been a busy 0:15:12.600 --> 0:15:16.040 quarter leading up to these results from Nvidia, a lot 0:15:16.040 --> 0:15:19.360 of headlines coming out for the AI chip company, and 0:15:19.560 --> 0:15:23.360 including some headlines from the CEO himself, Jensen Wong. He 0:15:23.440 --> 0:15:27.960 was at the computechs AI event in Taipei last week 0:15:28.080 --> 0:15:32.440 unveiling his latest raft of technologies aimed at keeping the 0:15:32.480 --> 0:15:35.520 AI demand boom going. Here he is talking about the 0:15:35.600 --> 0:15:38.240 latest in Vidia accelerator chips. Let's listen. 0:15:38.240 --> 0:15:42.480 In this year in Q three will upgrade to Grace 0:15:42.520 --> 0:15:47.200 Blackwell GB three hundred. The GB three hundred will increase. 0:15:47.640 --> 0:15:53.479 Is the same architecture, same physical footprint, same electrical mechanicals, 0:15:54.040 --> 0:15:56.320 but the chips inside have been upgraded. 0:15:57.200 --> 0:15:59.960 So what kind of further commentary could we get from 0:16:00.000 --> 0:16:03.760 from Jensen Wong on the GB three hundred when we 0:16:03.800 --> 0:16:05.080 get these earnings this week. 0:16:05.400 --> 0:16:08.160 Yeah, the big thing that the street is focused on 0:16:08.440 --> 0:16:11.920 is what does the GB three hundred do in terms 0:16:12.120 --> 0:16:16.240 of the gross margins, because remember in Vidia's gross margins 0:16:16.760 --> 0:16:20.760 have come down slightly with this Blackwell launch compared to 0:16:20.840 --> 0:16:24.800 the Hopper architecture, which was the prior architecture, and the 0:16:24.880 --> 0:16:28.960 expectation is that gross margins go back to mid seventy percent. 0:16:29.040 --> 0:16:32.200 This quarter there'll be more like seventy one seventy two percent, 0:16:32.680 --> 0:16:36.200 but in the second half everyone is expecting those gross 0:16:36.200 --> 0:16:40.720 margins to go up, primarily diriven in by GB three hundred. 0:16:40.960 --> 0:16:46.760 Ass your clip just noted so clearly. You know they 0:16:46.760 --> 0:16:53.080 are talking about bigger scale of these compute architectures that 0:16:53.520 --> 0:16:57.840 all the hyperscalers are looking to use, and the reasoning models, 0:16:57.880 --> 0:17:01.360 which really I think took off post Deep Seek earlier 0:17:01.360 --> 0:17:05.640 in the year, do require much more compute than the 0:17:06.160 --> 0:17:09.679 you know, the previous sort of way of using AI 0:17:09.880 --> 0:17:12.600 when it comes to just giving in your prompt in 0:17:12.680 --> 0:17:16.119 chatbot and getting a response. So the reasoning models have 0:17:16.320 --> 0:17:19.359 driven up the consumption of compute and that will be 0:17:19.640 --> 0:17:24.399 a key driver of the outlook that Nvidia is going 0:17:24.480 --> 0:17:26.560 to give in their earnings report. 0:17:26.880 --> 0:17:29.960 And we're speaking with man Deep Singhy's the global head 0:17:29.960 --> 0:17:33.320 of Tech research at Bloomberg Intelligence as we look ahead 0:17:33.880 --> 0:17:37.240 to in Vidia's latest earnings report coming up later this week. 0:17:37.880 --> 0:17:43.359 You mentioned the importance of Nvidia broadening its market beyond 0:17:43.359 --> 0:17:46.400 the hyperscalers, these deals that we saw in the Gulf 0:17:46.560 --> 0:17:50.560 in recent weeks in Saudi Arabia, the United Arab Emirates. 0:17:50.960 --> 0:17:55.600 How important is it for Nvidia to capture that market 0:17:55.640 --> 0:18:01.040 those sovereign investors into the A boom. 0:18:01.480 --> 0:18:03.280 Yeah, I mean, I look at it this way. When 0:18:03.280 --> 0:18:06.920 you look at the five hyperscalers here in the US, 0:18:08.000 --> 0:18:11.240 they are growing their capex by about forty to forty 0:18:11.240 --> 0:18:16.199 five percent this year, and Nvidia's data center revenue is 0:18:16.280 --> 0:18:20.400 expected to grow about fifty five percent this year. So 0:18:20.480 --> 0:18:25.720 you can see how Nvidia is still so much exposed 0:18:25.760 --> 0:18:28.000 to the hyperscale capex growth. 0:18:28.400 --> 0:18:28.760 Now. 0:18:29.320 --> 0:18:33.880 You know, there are obviously buyers of Nvidia chips outside 0:18:33.960 --> 0:18:38.480 of hyperscale, the US hyperscalers, but you know, you need 0:18:38.520 --> 0:18:43.000 bigger entities. We're talking about a company that is almost 0:18:43.000 --> 0:18:46.480 going to do two hundred billion dollars in revenue this year, 0:18:46.640 --> 0:18:50.080 and for that number to keep growing even at a 0:18:50.160 --> 0:18:53.600 twenty five to thirty percent clip, you need to find 0:18:53.680 --> 0:18:57.159 those large incremental buyers. You can't just have, you know, 0:18:57.320 --> 0:19:01.280 enterprises with five to ten million dollars of IT budgets 0:19:01.280 --> 0:19:05.320 spending on GPU compute. You need much bigger because we're 0:19:05.359 --> 0:19:10.000 talking much bigger numbers now, and so sovereigns do kind 0:19:10.080 --> 0:19:13.719 of come across as entities that can spend big on 0:19:13.840 --> 0:19:16.760 capex and they can spend for a few years. It 0:19:16.840 --> 0:19:19.360 won't be just a one and done sort of thing. 0:19:19.680 --> 0:19:22.439 And so from that perspective, it's huge that you know, 0:19:22.680 --> 0:19:26.600 Nvidia is exposed to these sovereign buyers. I'm more curious 0:19:26.600 --> 0:19:31.720 to see what sort of llms or products come out 0:19:31.720 --> 0:19:34.879 of the spend from the likes of Saudi Arabia or 0:19:35.040 --> 0:19:39.720 UAE who plan to spend big on Nvidia accelerators, because 0:19:39.720 --> 0:19:41.679 at the end of the day, you have to have 0:19:41.800 --> 0:19:45.960 something unique then what OpenAI or Gemini is offering in 0:19:46.040 --> 0:19:47.600 terms of chatblock functionality. 0:19:47.800 --> 0:19:49.600 Yeah, and I guess you have to wonder as well 0:19:49.680 --> 0:19:53.399 whether those sovereigns can come through on some of the 0:19:53.440 --> 0:19:56.560 pledges they've made around the deals that were announced in 0:19:56.600 --> 0:20:00.000 recent days. I mean, we've been talking about multi hundreds 0:20:00.080 --> 0:20:04.320 of billions, if not multiple trillions of dollars in announcements 0:20:04.359 --> 0:20:05.359 coming out of that event. 0:20:06.040 --> 0:20:09.640 Yeah. Absolutely, I mean the numbers are big, and these 0:20:09.680 --> 0:20:13.120 are multi year commitments, as has been the case even 0:20:13.160 --> 0:20:16.720 in the US. We know about the project's target. You know, 0:20:16.800 --> 0:20:20.080 even Apple has talked about investing up to five hundred 0:20:20.119 --> 0:20:22.720 billion dollars here in the US. I'll be curious to 0:20:23.320 --> 0:20:26.440 kind of learn more about what Apple plans to invest 0:20:26.520 --> 0:20:30.000 on because so far, Apple has been the one large 0:20:30.040 --> 0:20:33.680 tech company that has not invested big when it comes 0:20:33.720 --> 0:20:37.920 to the GPU and the accelerated compute infrastructure. So that 0:20:38.000 --> 0:20:41.240 could be a positive for Nvidia if Apple comes in 0:20:41.400 --> 0:20:45.199 as another hyperscaler who wants to stand you know, this 0:20:45.400 --> 0:20:50.359 big GPU infrastructure. But clearly that hasn't happened, and that's why, 0:20:50.400 --> 0:20:54.840 you know, you need the bigger entities like the four 0:20:54.920 --> 0:20:59.000 or five existing hyperscalers to come in to sustain this 0:20:59.560 --> 0:21:02.440 revenue growth that we've seen out of Nvidia. 0:21:03.040 --> 0:21:06.680 Do you see Nvidia sustaining the growth of its valuation 0:21:07.560 --> 0:21:10.880 given the news that's come out in recent months, We've 0:21:10.880 --> 0:21:14.119 been talking about the deep Seek breakthrough in China, so 0:21:14.280 --> 0:21:18.320 much competition in the space. Now, can investors continue to 0:21:18.400 --> 0:21:23.320 drive up the value of this company into the next 0:21:23.320 --> 0:21:23.960 few quarters. 0:21:24.359 --> 0:21:26.840 I Mean, the good thing for Innvidia is it's been 0:21:26.960 --> 0:21:31.560 growing nicely into its multiple, so it's never really traded 0:21:31.720 --> 0:21:35.280 at a crazy multiple. And that's still the case because 0:21:35.320 --> 0:21:38.000 you know when a company is growing over fifty percent, 0:21:38.480 --> 0:21:42.040 I mean you know, it's almost doubling its revenue in 0:21:42.680 --> 0:21:46.480 less than two years, So clearly you know it's growing 0:21:46.560 --> 0:21:51.360 nicely into the valuation. And look, when it comes to Nvidia, 0:21:51.800 --> 0:21:56.359 like they have a very successful mode in terms of 0:21:56.480 --> 0:22:00.199 having the most performant chip, they have the scale, they have, 0:22:00.280 --> 0:22:03.480 the high margins, I mean gross margins in excess of 0:22:03.520 --> 0:22:08.639 seventy percent is something desirable for any company, and they're 0:22:08.640 --> 0:22:10.800 doing it as a semiconductor company. So there are a 0:22:10.840 --> 0:22:13.680 lot of things that are working well for them. And 0:22:14.359 --> 0:22:18.200 if AI is this secular trend and I think everyone 0:22:18.320 --> 0:22:21.159 sort of agrees on that this is a you know, 0:22:21.200 --> 0:22:24.879 a fifteen to twenty year trend and videos is still 0:22:25.080 --> 0:22:29.600 most exposed to kind of growth in that AI infrastructure. 0:22:29.720 --> 0:22:33.199 Is just a question of can it happen in a sustainable, 0:22:33.640 --> 0:22:36.399 you know, twenty five to thirty percent every year growth 0:22:36.440 --> 0:22:39.440 type of scenario from here on or will there be 0:22:39.720 --> 0:22:43.480 you know, peaks and troughs in terms of a capeic 0:22:43.600 --> 0:22:48.439 digestion period and then you know, things picking back. So 0:22:48.920 --> 0:22:51.960 that's the sort of question that everyone is trying to 0:22:51.960 --> 0:22:55.480 grapple with. But there is no doubt that Nvidia has 0:22:55.640 --> 0:22:58.800 almost got a monopoly when it comes to training work cloths, 0:22:58.880 --> 0:23:02.240 and even on the inference side, they continue to have 0:23:02.960 --> 0:23:04.280 a dominant chare right now. 0:23:04.520 --> 0:23:06.480 Yeah, and I wanted to ask you if you think 0:23:06.600 --> 0:23:11.800 Nvidia maintains that monopolistic position that mote when you know 0:23:11.920 --> 0:23:15.840 it's facing competition from the likes of Advanced micro Devices 0:23:15.880 --> 0:23:18.040 and you know so many other competitors that want to 0:23:18.119 --> 0:23:20.359 chip away at this chip giant. 0:23:20.880 --> 0:23:26.080 Yeah, look, there is competition from AMD or Google's TPUs 0:23:26.200 --> 0:23:30.359 or even now we've started hearing Huawei being a potential competitor. 0:23:30.760 --> 0:23:36.000 But when it comes to price, you know, performance as 0:23:36.040 --> 0:23:39.720 well as you know the power aspect of their chips. 0:23:40.119 --> 0:23:43.800 They are still way above everyone else, and that's why 0:23:43.840 --> 0:23:47.600 you know, these AI workloads are pretty demanding when it 0:23:47.640 --> 0:23:51.439 comes to the floating point operations that are required and 0:23:51.520 --> 0:23:55.800 the power efficiency that's required. Nvidia has so far managed 0:23:55.840 --> 0:23:58.280 to say at least you know, a year or two 0:23:58.320 --> 0:24:00.800 ahead of everyone else in terms of what they are 0:24:00.840 --> 0:24:04.399 able to offer versus the competition. And then they also 0:24:04.520 --> 0:24:08.520 have this software mode that others are still developing when 0:24:08.560 --> 0:24:12.399 it comes to their chips. So I do think their mode, 0:24:12.720 --> 0:24:15.920 at least for now, seems sustainable. But you know, we're 0:24:15.960 --> 0:24:20.320 talking big numbers, and when everyone is fixated on this 0:24:20.560 --> 0:24:25.120 multi year opportunity, there will be workarounds. And their customers 0:24:25.440 --> 0:24:28.640 are also potential competitors. When you think about the likes 0:24:28.640 --> 0:24:31.440 of Google and Amazon. I mean, these are the biggest 0:24:31.520 --> 0:24:35.320 customers of Invidia chips, but they're also developing their own chips. 0:24:35.320 --> 0:24:38.959 So clearly there is that threat that over time they'll 0:24:39.080 --> 0:24:42.800 try to reduce their dependency on Nvidia, and I think 0:24:42.840 --> 0:24:46.200 it will happen. It's just a question of how long 0:24:46.240 --> 0:24:48.639 will it take them to develop their own chips so 0:24:48.680 --> 0:24:51.520 that you know they can completely move out of that 0:24:51.680 --> 0:24:52.840 Nvidia dependency. 0:24:53.320 --> 0:24:55.000 Well, we don't have too long to wait for those 0:24:55.080 --> 0:24:58.359 latest numbers on in Vidia's latest quarter. We get the 0:24:58.400 --> 0:25:02.840 results Wednesday after the close. Thanks for the preview ahead 0:25:02.840 --> 0:25:05.840 of it, Man Deep Saying, the global head of Tech 0:25:05.920 --> 0:25:09.879 research at Bloomberg Intelligence. Up next, the big move to 0:25:09.880 --> 0:25:12.320 the upside for bitcoin. We look ahead at what's a 0:25:12.359 --> 0:25:17.480 head for crypto with Bloomberg Intelligence Senior Commodity strategist Mike mcgloone. 0:25:17.640 --> 0:25:20.439 It's thirty seven minutes past the hour. I'm Nathan Hager, 0:25:20.840 --> 0:25:34.600 and this is Bloomberg. Welcome back to the special edition 0:25:34.640 --> 0:25:37.879