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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Applecarclay, and Android Auto with the Bloomberg Business App.

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Speaker 2: One of the names that Tatiana was talking about was Nvidia, AMD.

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Speaker 2: These companies, chip companies cutting a deal potentially with President

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Speaker 2: Trump to pay fifteen percent on China AI chip sales

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Speaker 2: and to deal with the US government. And I can't

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Speaker 2: recall seeing similar type deals before. But let's get the

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Speaker 2: latest on this. Ed loved though he covers all the

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Speaker 2: technology stuff for Bloomberg. He's out there in London, but

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Speaker 2: he's back home in London right now. Ed, thanks so

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Speaker 2: much for joining us here. Can you break down kind

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Speaker 2: of this deal for Nvidian AMD.

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Speaker 3: How did this whole thing come about?

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Speaker 4: Yeah, I mean, it's an unprecedented arrangement if you consider

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Speaker 4: it simply an export tax. You know, what we understand

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Speaker 4: from sourcing is like this is a quid pro quo

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Speaker 4: that export licenses for Nvidia and AMD to be permitted

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Speaker 4: to sell a specific chip that each of the companies

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Speaker 4: had designed for the Chinese market. They will give up

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Speaker 4: fifteen percent of future revenues. And you know that the

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Speaker 4: math's important. You know, historically those numbers you were going

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Speaker 4: over in the past segment prior segment twenty four percent

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Speaker 4: for AMD, thirteen percent from video. Those are from the

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Speaker 4: last fiscal year. And the state of player has been

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Speaker 4: that in Vidia and AMD have not been allowed to

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Speaker 4: sell product directly into China. They haven't done. You know,

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Speaker 4: in Vidia has the only company that's commented on this

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Speaker 4: reporting and story, and they did so very purposefully, saying

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Speaker 4: we have not yet shipped any of our so called

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Speaker 4: H twenty chip. But you know that the market in

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Speaker 4: one hand sees this is really positive. You know, they

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Speaker 4: have been campaigning to be able to sell into China.

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Speaker 4: And on the other hand, you know there's a caution

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Speaker 4: retail because they'll pay a levy on it, you know,

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Speaker 4: in the billions of dollars on a fiscal year basis,

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Speaker 4: and China may have something to say about it. But

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Speaker 4: this is all according to people familiar of course.

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Speaker 5: Hey, and what could this mean for in video and

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Speaker 5: AMD pushing i mean even deeper into the Chinese market.

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Speaker 4: So video in particular, Jens Among the CEO, has been

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Speaker 4: very consistent that it's important to have access to the

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Speaker 4: Chinese market because fifty percent of all of the research

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Speaker 4: in the world that goes into AI is either being

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Speaker 4: done in China or it's being done by a Chinese national.

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Speaker 4: You know, there is a deep research R and D

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Speaker 4: development footprint. Call it what you will, and if you

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Speaker 4: look at the cell side reaction this morning, they the

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Speaker 4: analysts all back Jensen on this line of argument that

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Speaker 4: if you're not allowed to sell American technology into China,

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Speaker 4: you're handing that market over to a domestic champion. In

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Speaker 4: this case it's Huawei, and that's not a new warning.

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Speaker 4: Jensen Wang has come on Bloomberg Television and made a

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Speaker 4: very explicit warning on that behind closed doors. As we've reported,

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Speaker 4: he's met with President Trump in the White House and

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Speaker 4: discussed that. But before all of these restrictions came into place,

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Speaker 4: the important bit was that China was a really big

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Speaker 4: end market and the policy of the current administration kind

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Speaker 4: of took that away with immediate effect. From in Nvidia's case,

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Speaker 4: America's most important technology company. They would love to be

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Speaker 4: getting back to booking billions of dollars of revenues on

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Speaker 4: a fiscal quarter basis. But the really key they're not

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Speaker 4: yet currently able to this reporting around a deal that

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Speaker 4: would allow them to is very interesting, but again unprecedented.

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Speaker 2: It seems like there's a thread here if you think

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Speaker 2: about President Trump and his ability or willingness or need

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Speaker 2: to generate revenue from some of our exports from the

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Speaker 2: technology companies, whether it's a direct investment by Apple into

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Speaker 2: US manufacturing or these export type taxes. Here is this

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Speaker 2: kind of a theme that's developing in Silicon Valley.

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Speaker 4: The administration loves big round numbers, especially when it comes

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Speaker 4: to investments by technology companies into domestic operations. The thing

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Speaker 4: about this specific piece of reporting fifteen percent of China

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Speaker 4: specific revenues is you can model for it. You know

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Speaker 4: this pool, you know better than anyone. The cell side

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Speaker 4: must be having a field day this morning because they

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Speaker 4: can start doing the math and they'll say, okay. In

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Speaker 4: the most bullish scenario, Nvidia might book seven billion dollars

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Speaker 4: of revenue in fiscal two Q twenty twenty six. Oh

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Speaker 4: my goodness, America is going to book one billion dollars

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Speaker 4: of tax or one billion dollars of costs on that,

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Speaker 4: and so you know, the President is getting it done

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Speaker 4: his way. But you know, the question that we don't

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Speaker 4: know and we don't have the reporting on it, is

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Speaker 4: whose idea? Is this the companies themselves or was it

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Speaker 4: some deal making by the president. You'd expect that giving

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Speaker 4: up fifteen percent is better than having zero, and they'd

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Speaker 4: rather have that China market access.

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Speaker 5: So how is China expected to react to all this?

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Speaker 4: So in two different ways, there is the concern that

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Speaker 4: is emerging out of China that having a American technology

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Speaker 4: come into the country in the form of a high

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Speaker 4: performance GPU or an AI chip gives some security risk

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Speaker 4: to China's national security because of the accusation that Nvidia

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Speaker 4: and AMD have engineered some sort of backdoor access into

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Speaker 4: that technology, something that both companies dispute and refute unwaveringly.

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Speaker 4: So that's the first part, and then you go back

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Speaker 4: to the domestic champion bit. You know, the H twenty

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Speaker 4: and in Vidia's case, and the mi I THREEH eight

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Speaker 4: in AMD's case, were specifically engineered for the Chinese market

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Speaker 4: to make compromises to both sides. They're very low performance

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Speaker 4: chips relative to what is at the cutting edge for

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Speaker 4: both of those companies, and Huawei is the leader in

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Speaker 4: China domestically speaking, it has chips that are better than

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Speaker 4: those chips that our American companies have for export, so

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Speaker 4: they also don't want to give up some of that momentum.

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Speaker 4: And it will be interesting to see because you guys

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Speaker 4: probably will have seen what's going on with lithium and

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Speaker 4: c ATL in the markets this morning as well. This

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Speaker 4: has become a point of bargaining and negotiation between two countries.

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Speaker 4: Technology going into China in exchange for raw materials going

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Speaker 4: the other way. But there are pros and cons that

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Speaker 4: each side's weighing up, and it's not a perfect swap

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Speaker 4: right now.

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Speaker 3: So we have any sense of timing here?

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Speaker 2: Ed this kind of came out of nowhere when is

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Speaker 2: implement Yeah.

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Speaker 4: Really great question. It did kind of come out of nowhere.

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Speaker 4: And again AMD have not commented publicly on this. Nvidia

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Speaker 4: put out a very purposeful and pointed statement. They don't

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Speaker 4: address the fifteen percent at all. They're they're neither acknowledging

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Speaker 4: it or denying it, but they do say we follow

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Speaker 4: us rules, which they say every single week at the moment,

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Speaker 4: but there's a part in the statement that says, we

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Speaker 4: haven't shipped AGE twenty to China for months, but we

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Speaker 4: hope export control rules will let America compete in that market.

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Speaker 4: So that makes it sound like they're saying, just to

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Speaker 4: Wall Street, don't don't don't model this into your top

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Speaker 4: line assumptions just yet. But we think that we're getting

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Speaker 4: closer for sure.

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Speaker 5: Now you mentioned timing, so I mean the US China

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Speaker 5: trained two truth that's expected to expire tomorrow.

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Speaker 4: Correct, yes, but again you know, Okay, guys, give me

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Speaker 4: a break. I'm in London usually San Francisco technology focused.

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Speaker 4: I ain't covering this White House necessarily. But the point

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Speaker 4: is that semiconductors have had an ad hoc arrangement, haven't they,

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Speaker 4: Not just in the context of China, but in other

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Speaker 4: markets as well. India and electronics has been one. And

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Speaker 4: what's so interesting about Nnvidia and AMD and semi conductors

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Speaker 4: is that we have so much reporting about the rest

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Speaker 4: of the technology sector, where American officials have been flying

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Speaker 4: around the world saying to our trade partners, don't do

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Speaker 4: business with China except in the case of chips. So

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Speaker 4: you know, the deadlines I think the President's about being

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Speaker 4: extended in various cases anyway, but it is to pardon

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Speaker 4: the pun, that that's where we stand. AI chips are

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Speaker 4: Trump's bargaining chip right in what he wants to achieve

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Speaker 4: with China.

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Speaker 2: So, ed, when you talk to people in the valley,

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Speaker 2: are they just saying, this is the new world order?

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Speaker 3: We need to.

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Speaker 2: Be open to cutting deals with this administration. Again, whether

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Speaker 2: it's a commitment to invest in the US or you know,

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Speaker 2: paying attacks, is this kind of the new world order?

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Speaker 6: Do you think?

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Speaker 4: Yeah, it's a difference between the companies that are zigging

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Speaker 4: with the president and those that are zagging against the president.

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Speaker 4: You know, Intel is a good example of that. You know,

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Speaker 4: the reporting is that Intel's CEO will be headed to

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Speaker 4: the White House to get a good old fashioned dressing

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Speaker 4: day today. You know, their strategy has not been in

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Speaker 4: line with what's happening with Nvideo and Apple, which is

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Speaker 4: we're committing, mister President, here's hundreds of billions of dollars.

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Speaker 4: Actually those numbers are worth looking at with the microscope.

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Speaker 4: They're a little bit sort of made up, but you

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Speaker 4: know that's kind of what corporate America's got on board with.

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Speaker 4: But with the Huawei example, really quick because I look

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Speaker 4: over my shoulders, see where the president's at. It's not

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Speaker 4: just that if you don't sell American tech into China,

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Speaker 4: they won't use it. They'll use Chinese tech. China wants

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Speaker 4: to sell US tech into international markets as well. And

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Speaker 4: so you know the position of the valley is flood

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Speaker 4: the world with American technology and just drown out the

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Speaker 4: competition wherever it comes from.

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Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Otto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 5: All right, so we've been hearing a lot about the

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Speaker 5: impact of tariffs on big businesses, right, but small US

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Speaker 5: companies they are really getting squeezed with President Trump's new levies.

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Speaker 5: Here to break it down for us is Brendan Murray.

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Speaker 5: He's Global Bloomberg Global Trade Editor. He's joining us from London,

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Speaker 5: So thanks for joining us.

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Speaker 3: Brendan.

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Speaker 5: First off, I got to ask you how much of

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Speaker 5: a financial hit are we talking about?

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Speaker 6: Well, the US Chamber of Commerce recently put a number

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Speaker 6: on this and they're saying that there are about two

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Speaker 6: hundred and thirty six thousand small business importers in the US.

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Speaker 6: Now those are companies that have less than five hundred employees,

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Speaker 6: and they say that if you apply the amount that

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Speaker 6: they import and you combine that with the tariff right

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Speaker 6: that they would be paying, they're looking at about two

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Speaker 6: hundred billion dollars a year the tariff bill for these

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Speaker 6: small importers that have to pay these new tariffs that

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Speaker 6: present Trump rolled out. So that works out too, about

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Speaker 6: nine hundred thousand dollars per company per year. So you know, imagine,

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Speaker 6: you know, if that were if that bill suddenly arrived

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Speaker 6: on your on your desk at your at your retail

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Speaker 6: shop or other small business, you know, and yet that's

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Speaker 6: you know, oftentimes would wipe out any sort of profit

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Speaker 6: margin you might have. So, uh, the small businesses have

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Speaker 6: are speaking to two politicians in Washington through the National

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Speaker 6: Retail Federation and the US Chamber of Commerce and trying

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Speaker 6: to have their voices heard because all anybody can hear

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Speaker 6: these days is the stock market is is is ignoring

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Speaker 6: the trade war, but it certainly isn't you know? The

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Speaker 6: trade war is certainly having an impact on these small

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Speaker 6: companies that don't have the wherewithal to absorb the higher

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Speaker 6: costs and the higher administrative duties that that that they

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Speaker 6: have to that they're facing now.

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Speaker 2: So, Brendan, we've seen we just finished up the second quarter,

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Speaker 2: are about to finish up the second quarter uh earnings period,

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Speaker 2: and it seems like most of the companies, when they

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Speaker 2: talk about tariffs are saying, hey, we're eating it in

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Speaker 2: our margin for the most part.

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Speaker 7: Uh.

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Speaker 3: Can small businesses do that?

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Speaker 4: Not?

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Speaker 6: Really, not in the long term. They are also trying to, uh,

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Speaker 6: you know, get creative with putting putting good. You know,

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Speaker 6: a lot of them stockpiled up before the tariffs took effect.

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Speaker 6: A lot of them are doing things like these bonded

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Speaker 6: warehouses where you don't owe the tariff bill until later on. Uh.

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Speaker 6: So there are there are ways to kind of uh

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Speaker 6: put off the tariff payment that you're going to owe

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Speaker 6: the government, uh, but not forever, and eventually it's going

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Speaker 6: to have to be passed on to the consumer. Maybe

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Speaker 6: the exporter that you buy it from will cut you

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Speaker 6: a little break, but between the exporters, the importers and

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Speaker 6: the consumers, you know, this this this extra cost is

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Speaker 6: just going to get distributed throughout the supply chain.

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Speaker 5: Hey, Bernnie, can you get a little bit into why

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Speaker 5: why this is so important, because small businesses are really

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Speaker 5: the source of more than half the country's job creation

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Speaker 5: right in recent years.

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Speaker 6: Yeah, exactly. I mean, you know, as small as the

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Speaker 6: small businesses, you know, they they're not the ones we

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Speaker 6: read about in headlines all the time, but they are.

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Speaker 6: They are the ones that are where, you know, lots

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Speaker 6: of new jobs are being created. And you know, we

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Speaker 6: we read a lot about the you know, the big

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Speaker 6: publicly traded companies that lay off tens of thousands of workers,

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Speaker 6: but you know, we've got millions of small businesses that

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Speaker 6: are hiring just a couple every day, and and so

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Speaker 6: it is a it is a big constituency for economic

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Speaker 6: activity that's often overlooked because we think of the American

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Speaker 6: economy as being driven by uh, you know, s and

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Speaker 6: p five hundred companies, when in fact, it's the uh

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Speaker 6: you know, it's these companies with you know, less than

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Speaker 6: fifty employees often that that are that are driving a

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Speaker 6: lot of the employment and uh and investment in the

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Speaker 6: you know, in various you know, regions, across the country.

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Speaker 2: So I think what I'm what I'm also hearing from

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Speaker 2: and seeing in your reporting and is just I guess

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Speaker 2: the uncertainty.

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Speaker 3: If you're I guess, if.

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Speaker 2: You're a big wal Mart or just a big corporation

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Speaker 2: Parcter and Gamble, you probably got teams of people who

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Speaker 2: can deal with all these changing UH tariffs. Small businesses,

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Speaker 2: I'm guessing don't have those resources, So I guess they're

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Speaker 2: just left to fend for themselves.

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Speaker 6: Yeah, pretty much. I mean, or they're or they're you know,

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Speaker 6: they're calling up you know, a customs broker or someone

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Speaker 6: some expert who it's you know, imagine if you're you know,

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Speaker 6: if your tax you know, you're filling out your taxes

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Speaker 6: went from one one page you know, uh a one

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Speaker 6: pager to the I R S too, you know, fifty pages.

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Speaker 6: You know you're gonna you're gonna probably need some help

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Speaker 6: figuring that out if you want to do it right,

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Speaker 6: you know, want to be audited later. So this is

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Speaker 6: essentially what these companies, these small businesses are facing, is

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Speaker 6: all this extra administrative uh paperwork, electronic paperwork, but it's

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Speaker 6: still you know, you still have to fill out the

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Speaker 6: forms correctly. Otherwise the Customs Bureau is going to come

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Speaker 6: is going to come at you and penalize you if

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Speaker 6: you if you, if you misclassify a good under one

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Speaker 6: HS code, you know when that that a teriff applies

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Speaker 6: to that when it doesn't. So it can get really complicated,

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Speaker 6: especially when you know eighty different countries have different different

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Speaker 6: tariff levels now, and then you know on top of

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Speaker 6: that you have the sectoral specific care of steel aluminum cars,

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Speaker 6: it's coming on pharmaceuticals and chips. So it's just creating

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Speaker 6: this this real complex web of bureaucracy that that small

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Speaker 6: businesses just don't have the capacity to handle.

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Speaker 5: Yeah, and what are some especially being here with those

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Speaker 5: higher import costs. I mean you gave some big figures

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Speaker 5: earlier in the last thirty seconds or so, can you

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Speaker 5: explain kind of breakdown into detail about where those costs

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Speaker 5: are coming from?

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Speaker 6: Yeah, I mean basically, if you if if you're an importer,

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Speaker 6: you have to put up a customs what's called a

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Speaker 6: customs bond, and that is basically a guarantee. It's a

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Speaker 6: type of insurance that the customs bureau is going to

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Speaker 6: get paid down the road. And so it's a bit

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Speaker 6: of it's sort of like cash and reserve, and now

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Speaker 6: you suddenly have to put up about twenty percent maybe

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Speaker 6: fifty percent more, and so that really kind of drains

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Speaker 6: your It comes right out of your your cash flow,

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Speaker 6: your working capital, and it you know, can essentially, you know,

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Speaker 6: paralyze your your your operation if you don't have that

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Speaker 6: to draw on. So yeah, so if you add all

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Speaker 6: of these, you know, hundreds of thousands of incidents together,

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Speaker 6: you know, what you wind up with is about half

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Speaker 6: of new job creation created by these small businesses, you know,

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Speaker 6: feeling the real pain from this, from these new tariffs.

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Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast Catch us a

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Speaker 1: low weekdays at ten am. He's done on Apple, Cocklay

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Speaker 1: on YouTube.

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Speaker 3: Well, in the media front today we had Paramount.

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Speaker 2: It's actually called Paramount or sky Dance, because Skydance acquired Paramount,

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Speaker 2: which what used to be Viacom, which used to be

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Speaker 2: free about it anyway, so it's Paramount sky Dance. They're

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Speaker 2: buying the UFC rights for seven points seven billion dollars

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Speaker 2: Ultimate Fighting Championship. I'm not a fan, but I know

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Speaker 2: there's ga jillions of people out there that love that

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Speaker 2: stuff and they're paying a big penny for Let's see

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Speaker 2: what it means for the company. Keitha Ranganath and joins

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Speaker 2: this year. She covers all the big media companies. Gith,

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Speaker 2: does this make sense? Is this a good deal for Paramount?

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Speaker 7: You know, Paul, it's really no one saw this coming.

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Speaker 7: I mean, the Paramount Skydance Dance transaction just closed last

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Speaker 7: week August seventh, and we were still kind of waiting

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Speaker 7: for some inkling of what the go to strategy or

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Speaker 7: the go forward strategy would be from you know, David

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Speaker 7: Ellison's team, and here you go with a bang, you know,

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Speaker 7: paying almost eight billion dollars for UFC rights. Now they

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Speaker 7: are premier sports rights, so they're definitely making a big

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Speaker 7: statement here. Yes, you're absolutely right. UFC has over one

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Speaker 7: hundred million fans in the United States. Their current deal

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Speaker 7: is with ESPN. They were getting paid about five hundred

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Speaker 7: million a year, so this is you know, more than

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Speaker 7: one hundred and twenty percent search. So it is definitely

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Speaker 7: a pretty Penny. And what Paramount is hoping is that

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Speaker 7: this really gets them onto the sports arena, so makes

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Speaker 7: them a must have platform. And we're talking here about

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Speaker 7: Paramount Plus, which is their streaming platform, which is known

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Speaker 7: for really some great scripted content and some sports, but

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Speaker 7: this is really a big way for them to kind

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Speaker 7: of make a statement, make a really bold splash on

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Speaker 7: the sports streaming stage.

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Speaker 5: All right, KEITHA, I'm trying to check this in stride

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Speaker 5: because my husband is a big UFC fan, so he

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Speaker 5: watches it on ESPN. So does this mean that I

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Speaker 5: have to get Paramount Plus on time?

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Speaker 3: Don't don't tell me that, get.

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Speaker 7: The sorry, Lisa, Yes you do. Because everything all of

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Speaker 7: the UFC contents. So, you know, what we'd initially thought

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Speaker 7: was that UFC was kind of going to split these packages.

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Speaker 7: You know, they have the Fight Night, which is the

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Speaker 7: weekly bi weekly kind of uh you know, matchups that

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Speaker 7: you see, and then they have their big marquee events,

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Speaker 7: which are the numbered events with you know, the likes

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Speaker 7: of o Connor McGregor all these other big superstar players

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Speaker 7: and you got to pay out of your pocket for

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Speaker 7: that pay per view. They're actually now making all of

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Speaker 7: that content both the market events as well as the

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Speaker 7: fight nights all available to Paramount Plus subscribers. So there's

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Speaker 7: no pay per view anymore. But yeah, unfortunately your husband's

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Speaker 7: going to have to subscribe to Paramount Plus.

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Speaker 3: This is what I think you do.

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Speaker 2: You every streamer you put on, you have to take

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Speaker 2: one off, go to the family.

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Speaker 3: Okay, we're putting on Paramount Plus. What are you giving back?

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Speaker 5: What are we giving back?

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Speaker 3: Yeah, exactly, that's how you do it.

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Speaker 7: Thank you.

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Speaker 3: The stock market doesn't care.

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Speaker 2: The stocks off one point two percent today, it's at

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Speaker 2: a fifty two week low. What is realistically the bold

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Speaker 2: case for Paramount Skydance Corporation?

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Speaker 7: Yes, I think you know, we really need of course,

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Speaker 7: you know, this kind of tells us that they're definitely

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Speaker 7: going to keep the streaming platforms. See some of the

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Speaker 7: some of the concerns Paul, before, you know, before the

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Speaker 7: deal actually closed, was what is sky Dance really interested in?

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Speaker 7: So they don't really have any expertise in running TV assets.

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Speaker 7: All that they really cared about was the Paramount studio

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Speaker 7: because you know, sky Dance is a big studio and

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Speaker 7: they were really really interested in the studio assets. So

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Speaker 7: we really didn't have any direction in terms of what

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Speaker 7: they were going to do with the cable networks. Viacom

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Speaker 7: has a bunch of those. You have the CBS broadcast network,

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Speaker 7: you have the Paramount plus streaming platform. What this deal

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Speaker 7: signals is they're definitely interested in the streaming platform and

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Speaker 7: the CBS broadcast network. Because you know, they did say

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Speaker 7: that they're going to simulcast some of those UFC games

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Speaker 7: on the CBS broadcast networks. I think that is going

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Speaker 7: to be a core part of their portfolio. What we're

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Speaker 7: still not clear about is what they're going to do

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Speaker 7: with some of the cable networks. So you know, whether

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Speaker 7: it's a BET or an MTV or a Comedy Central,

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Speaker 7: we really don't know what the strategy is there. Chances

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Speaker 7: are they might look to monetize those assets, you know,

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Speaker 7: sell them, but really I think the big play for

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Speaker 7: a Paramount is going to come down to make these

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Speaker 7: bigger and bigger investments. If they really want to be

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Speaker 7: a credible, you know, streamer, they have to obviously go

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Speaker 7: after these big deals, which is exactly what they did

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Speaker 7: today with the UFC. We'll have to wait and watch

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Speaker 7: and see exactly what their aspirations are, but It depends

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Speaker 7: if they're if they're willing to kind of make these

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Speaker 7: big investments, they could become, you know, arguably one of

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Speaker 7: the top three or one of the top four platforms.

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Speaker 5: And is this just another sign of the impact of

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Speaker 5: sports live events on streaming? I mean, Apple, Netflix, YouTube, Amazon,

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Speaker 5: I mean you name it. Talk more about the impact

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Speaker 5: of sports and live events on streaming.

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Speaker 7: Yeah, I'm really glad you bring that up, Lisa, because

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Speaker 7: this seer actually is. I would say it's a watershed

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Speaker 7: moment for media because this is the very first time

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Speaker 7: in the history of media that you have all sports

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Speaker 7: becoming available on a streaming service. So previously you needed

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Speaker 7: your PATV subscription in order to get access to sports.

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Speaker 7: You won't need that anymore. Starting August twenty first.

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