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Speaker 2: Joining us now on the program to take a closer
Speaker 2: look at Nvidia is Louis Novellier, who is chairman and
Speaker 2: founder of Navalier and Associates. So, Louis, there wasn't a
Speaker 2: lot of nervousness leading into this print by Nvidia because
Speaker 2: the hyperscalers had already told us that they were buying
Speaker 2: big time in Vidia chips. But going forward, is that
Speaker 2: still the most important thing to watch or are there
Speaker 2: some other metrics that you have that will tip us
Speaker 2: on if and when business actually slows.
Speaker 3: Well, certainly, with two hundred and sixty two percent sales growth,
Speaker 3: obviously they're not going to be able to sustain that
Speaker 3: much longer. Even super microcomputers slowing their sales. They're going
Speaker 3: from two one hundred and forty five percent next quarter.
Speaker 3: But I the order book is strong, the margins are ridiculous.
Speaker 3: The Blackwell chip is finally going to get implemented. That's
Speaker 3: a given a nice little turbo boost. It really boils
Speaker 3: down to how fast they can put all this in
Speaker 3: the cloud and build all these great new data centers
Speaker 3: so we can do AI via the cloud. And of
Speaker 3: course there's also a rush to boost electricity to fuel
Speaker 3: all this, and so there's a lot of plays socio
Speaker 3: of AI. But it remains very healthy and we just
Speaker 3: went into extra innings on the AI rally today.
Speaker 1: What is your sense on the degree to which AI
Speaker 1: is being adopted, how quickly that's occurring. Jensen Wog during
Speaker 1: the conference call with analyst was talking about an expansion
Speaker 1: into consumer internet companies, enterprise, sovereign AI, automotive healthcare. I
Speaker 1: mean it seems to be spreading out. Do you have
Speaker 1: a sense of the rate of change or the rate
Speaker 1: of adoption?
Speaker 4: Oh, it's unbelievable.
Speaker 3: I think the biggest problem is the way they're doing AI.
Speaker 3: Not everybody should do it the really fancy way. I
Speaker 3: have friends that are in the chip business and they
Speaker 3: build AI chips for samps and things like that, and Essentially,
Speaker 3: when you look at everything, you can get errors.
Speaker 4: So you want to look at correlated things.
Speaker 3: And you know, the intelligence community missed nine to eleven,
Speaker 3: they missed October seventh. So you can get what we
Speaker 3: call garbage and garbage out if you look at too
Speaker 3: much stuff. So it's very important when they implement all
Speaker 3: this AI that they just put in the things that
Speaker 3: are correlated versus the kitchen saying.
Speaker 1: You are talking about the training data that they're using
Speaker 1: to create these models.
Speaker 3: Right, correct, correct, And you know I build I built
Speaker 3: stock models and I'm very proud of them, and that
Speaker 3: they're online free and we great stocks, A, B, C,
Speaker 3: D F and and uh so I'm kind of a
Speaker 3: programmer to begin with. And but what's interesting is when
Speaker 3: you build a model, the more factors you put in,
Speaker 3: the more errors you're going to make. So my friends
Speaker 3: that are building chips, now it's for consumer products. They're
Speaker 3: they're basically chips are mimicking our pets in our household.
Speaker 3: You know, our pets plot against us and figure out
Speaker 3: who we are and and and then try to condition us,
Speaker 3: you know, And so that's what consumer AI will be doing.
Speaker 3: You know, the new alexas of the world and things
Speaker 3: like that, and I just think it's recording. They don't
Speaker 3: go overboard and do it like the NSA or c
Speaker 3: i A.
Speaker 2: Let's talk a little bit about some of these second, third,
Speaker 2: and fourth derivative place. Probably in the most immediate we
Speaker 2: can look at some of the Asian suppliers for sure,
Speaker 2: TSMC is a big one obviously, with Strawn and Skix
Speaker 2: and Samsung. Are you playing those as well, and if so,
Speaker 2: what do you like?
Speaker 4: No, I'm not.
Speaker 3: I'm playing the companies that are built making the electric
Speaker 3: demand go up, So that would be something like an
Speaker 3: eton An, Mcore, a Quantum Services, Vista Corporation. And I'm
Speaker 3: helping companies secure the cloud. That would be things like CrowdStrike,
Speaker 3: a New Annex, NTNX, Parsons, and virtual holdings. So it's
Speaker 3: all cloud and security. It's that's kind of where we're at.
Speaker 1: So we also got news of a ten for one
Speaker 1: stock split and an increase in the dividend of one
Speaker 1: hundred and fifty percent is or would in Nvidia be
Speaker 1: better served taking that money into plowing it back into
Speaker 1: R and D or do you think they're adequately taking
Speaker 1: care of kind of what's necessary on on the research
Speaker 1: and development front.
Speaker 4: Oh, they spent over two billion dollars on that Blackball chip.
Speaker 4: That's why I know we can compete with them.
Speaker 3: And I mean if AMD wants to even try to
Speaker 3: compete with them, they're not going to. And you know,
Speaker 3: Apple and others have announced they're going to get in
Speaker 3: the AI chip business. But that's the that's the cheap
Speaker 3: AI stuff that it's not as fancy as what Navidia does.
Speaker 3: So I think Navidia has a monopoly. They're going to
Speaker 3: continue monopoly to the end of the decade. You know,
Speaker 3: Jensen said he wants to double the processing speeds every
Speaker 3: year and then eventually at the end of the decade
Speaker 3: they'll have chips in a basically impliance sized device that
Speaker 3: will replace data centers. You know, all these chips have
Speaker 3: to be liquid cooled, and.
Speaker 4: They run hot and they suck a lot of electricity.
Speaker 3: So the electricity play is my big play at this moment.
Speaker 2: Yeah, and you mentioned Eating and Quanta Services and companies
Speaker 2: like that. What about on the cooling side, which you
Speaker 2: just referenced, like Carrier or General HVAC companies that supply
Speaker 2: cooling systems to data centers, is that also in your
Speaker 2: in your target range.
Speaker 3: Not yet, but I can tell you it's hard to
Speaker 3: get air conditioners. I'm in Florida now. We ordered some.
Speaker 3: It's going to take a while. Most of them come
Speaker 3: from Monterey, Mexico, although the crane ones are coming in heavy.
Speaker 3: But the uh, you know, they put the server farms,
Speaker 3: a lot of them in the desert so they can
Speaker 3: open them up at night and they actually cool themselves
Speaker 3: because the deserts get cold at night.
Speaker 4: And you know, I have a home in Reno where
Speaker 4: Apple and Google have server farms there, and so it's
Speaker 4: but the server farms are always going to go. There's
Speaker 4: cheap electricity.
Speaker 3: But no, Navidia and super Micro should be about eighty
Speaker 3: percent or AI investments, and those two stocks are about
Speaker 3: twenty percent of my portfolio. Not no, no, no, because
Speaker 3: they just don't have the results.
Speaker 4: Yeah. Sorry, it's uh.
Speaker 3: I mean, I know they're rallying in the wake of
Speaker 3: what Navidia did, but they just don't hit my criteria.
Speaker 4: I'm pretty picky.
Speaker 3: I got to have my sales growth, my margin expansion,
Speaker 3: positive anser visions.
Speaker 4: I got a surprise, you know, so they got a
Speaker 4: guide hired.
Speaker 1: What about the memory chips that a Micron would develop
Speaker 1: to go hand in hand with an Nvidia product.
Speaker 4: Not yet. I have friends and Boise that ex Micron people.
Speaker 3: That's my buddy who's building chips for Samson, and Micron
Speaker 3: has not shown up on my radar, although it has
Speaker 3: improved dramatically.
Speaker 2: All right, Louis, thanks so much for joining us here
Speaker 2: live on the program. Louis Novelier, chairman and founder of
Speaker 2: novel Year and Associates. The chip maker in Nvidia announced
Speaker 2: revenue up two hundred and sixty percent from the same
Speaker 2: quota last year. It also had a big beat on
Speaker 2: the bottom line and second quarter revenue will be about
Speaker 2: twenty eight billion dollars. Joining us now for some discussion
Speaker 2: is Vlad Savov Bloomberg Tech editor, So, Vlad that two
Speaker 2: hundred and sixty that means that revenue tripled, more than
Speaker 2: tripled from last year, profit tripling as well? Who does that?
Speaker 5: And Vidia? The hilarious thing, Brian, is we're back here
Speaker 5: doing this all over again. I mean, three months ago,
Speaker 5: we're having a conversation, maybe we're previewing MVDA earnings and
Speaker 5: we were saying expectations as sky high. Can Nvidia meet them?
Speaker 5: And it did. He's doing it all over again, and
Speaker 5: maybe three months from now we'll do it over again.
Speaker 5: It's we can't see the top of this cycle. The
Speaker 5: thing that's happening right now, it's worth saying. I mean,
Speaker 5: I've been covering a Video since it was still a
Speaker 5: purely gaming company. Gaming revenue was estimated at two point
Speaker 5: six billion. It came in at two point six billion.
Speaker 5: This is all about AI. This is all about data centers.
Speaker 1: No doubt about that. And I think we can say
Speaker 1: safely that this is pretty much a monopolist right at
Speaker 1: this point. There's no chip company that can touch in video.
Speaker 5: That's a bit of a tough time to put in
Speaker 5: it because it's not by any sort of unfair competition.
Speaker 5: The competition is wide open if anybody wants to compete
Speaker 5: with in video, and you can be sure that companies
Speaker 5: are trying. AMD is the closest competitor they can try it.
Speaker 5: It's just the technology is that clearly ahead. Everybody is
Speaker 5: deploying in video's AI acceleration protocols that he has developed itself.
Speaker 5: It has developed this with billions of dollars of investment
Speaker 5: and over many years, and people have just adopted this
Speaker 5: technology because the best that there is out there right now.
Speaker 2: Yeah, there's just so many superlatives with this. It's not
Speaker 2: like we're, you know, all pushing in VideA. It's just
Speaker 2: one of these things. It tends to be a freak
Speaker 2: of nature here at this point data centers. You mentioned
Speaker 2: that's the big thing. It's eighty five to eighty seven
Speaker 2: percent of total sales. We've seen the stock triple in
Speaker 2: a year, and we mentioned that revenue and profit had tripled,
Speaker 2: and so it means that the stock is really no
Speaker 2: more expensive now than it was a year ago. The
Speaker 2: forward pe is thirty five.
Speaker 5: You're right, Bran. I was just looking at our charts
Speaker 5: on the terminal and one of the things that stands
Speaker 5: out is that the quarterly sales now are bigger than
Speaker 5: the videohead annual sales as recently as one or two
Speaker 5: years ago. It really is just a skyrocketing of sales.
Speaker 5: And it's worth saying. I mean, we keep talking about
Speaker 5: AI on a daily basis, is the predominant topic in tech,
Speaker 5: and one of the highlights actually for me from Video's
Speaker 5: earnings is that still about forty percent of these sales
Speaker 5: are coming from the biggest US tech companies. You're talking Meta, Google, Microsoft,
Speaker 5: all the ones that have said AI is a big priority,
Speaker 5: big thing that we're doing, and they're investing most heavily
Speaker 5: in video chips. If you want to have some sort
Speaker 5: of balance here, there is a question to ask, when
Speaker 5: will those companies say we have enough of these chips.
Speaker 5: When will those companies start tapering off that spending and
Speaker 5: start investing in more software investments.
Speaker 1: Well, look at the story earlier in the week with
Speaker 1: Amazon delaying the purchase of the last the most to
Speaker 1: let me call it, the recent generation, in favor of
Speaker 1: withholding fund so that they could buy the next generation
Speaker 1: of these chips. So there's going to be this constant
Speaker 1: cycle of upgrade and that's going to be driving a
Speaker 1: lot of the sales growth going forward, I would imagine.
Speaker 1: But you know, Okay, so maybe the company is not
Speaker 1: a monopolist in the strictest sense of the term, but
Speaker 1: if you dominate the market to such an extent, you
Speaker 1: do have enormous pricing power, right, and so they are
Speaker 1: in a position to raise prices on the next generation
Speaker 1: of these advanced chips in a way that is going
Speaker 1: to continue to feed that revenue growth.
Speaker 5: That's right, perfectly fair to say. One of the things
Speaker 5: that CEO Jensen Wang did say after the earnings is
Speaker 5: that the company is trying to broaden out is customer base.
Speaker 5: You've got to keep in mind we're here in Hong Kong.
Speaker 5: Asian companies are just as eager to get hold of
Speaker 5: those chips. I mean, the situation right now is Nvidia
Speaker 5: has far more customers than it has chips to supply.
Speaker 5: When you talk to TSA and seeing the likes, there
Speaker 5: is still some constraints in advanced packaging to put these
Speaker 5: chips together. So Nvidia is very much in an enviable
Speaker 5: position today.
Speaker 2: Yeah, I heard Mike Wilson from Morgan Stanley say that
Speaker 2: the only thing about AI is that, you know, we
Speaker 2: haven't really seen it in the sales outside of Nvidia.
Speaker 2: I'm not sure that's really true, because you are seeing
Speaker 2: a lot of companies report higher revenues and stronger growth
Speaker 2: as a result of let's say power supply or cooling
Speaker 2: systems or whatever. But how long is it before this
Speaker 2: really does trickle down to the average Joe.
Speaker 5: Honestly, it really is a matter of the software side
Speaker 5: of things. We just saw Microsoft announce it so called
Speaker 5: co pilot plus PCs. Those are based on Quotcom chips
Speaker 5: almost entirely. That's one aspect of the chip market where
Speaker 5: Nvidia is not a player. Quotcom is trying to get
Speaker 5: in on Intel's turf and basically takeover is the leader
Speaker 5: in PCs, because when you think of PCs, it's really
Speaker 5: laptops nowadays, that's the leading thing. They are the ones
Speaker 5: that are going to show us over the next few
Speaker 5: weeks and months how competing the AI features are going
Speaker 5: to be for end users. That part really hasn't come
Speaker 5: to fruition yet because it's still really early. Everyone is
Speaker 5: just buying the immediate chips to train stuff. But the
Speaker 5: next the next wave of innovation and the next wave
Speaker 5: of chip buying, as far as Ahi goes, is going
Speaker 5: to be in the end devices, the stuff that Quocom
Speaker 5: is setting.
Speaker 2: Yeah in Frience Flat, Thanks very much, Flat Salvov, Bloomberg
Speaker 2: Tech Editor with us. We are joined online by Lorraine
Speaker 2: Tan who's director of Asia Equity Research at morning Star
Speaker 2: on the markets. So at the moment, Lorraine, we're not
Speaker 2: seeing this huge follow through from the optimism surrounding in
Speaker 2: Nvidia to the broader markets in Asia, but it shows
Speaker 2: you these are big markets and there are a lot
Speaker 2: of factors.
Speaker 6: Yes, that's right, so you know, while you know Nvidia
Speaker 6: does provide some relief that at least that's not a
Speaker 6: risk trigger. I think the broader events are the ones
Speaker 6: that is going to drive Asian market direction. And first
Speaker 6: and foremost is people are still wondering when the Fed's
Speaker 6: going to cut, what the inflation numbers are going to
Speaker 6: look like coming up that would allow for that. So
Speaker 6: I think that still tends to be a key factor
Speaker 6: that the markets are looking for in terms of direction.
Speaker 4: Lorraine.
Speaker 1: One of the big ideals here in the States after
Speaker 1: the bell was obviously the Nvidia earnings shattering on estimates
Speaker 1: for sales. I mean, so the guidance here are very
Speaker 1: positive for the current quarter. This is something that is
Speaker 1: really kind of a revolution in the US. I don't
Speaker 1: know how you're seeing AI play out in parts of
Speaker 1: Asia China. Let's put that aside for a moment. We
Speaker 1: can talk about what you're maybe seeing in Singapore, and
Speaker 1: if you could tie in the issue of energy, because
Speaker 1: I know you spent a number of years over the
Speaker 1: course of your career focusing on energy and utilities, and
Speaker 1: we know that AI generally speaking is very energy intensive.
Speaker 6: Yeah, so I think there's a little bit of a
Speaker 6: difference here because in video is benefiting because it's got
Speaker 6: the platform to really extract the value from all the
Speaker 6: AI activities that are going on. So you've got obviously
Speaker 6: some fall flow through to the chip companies, but really
Speaker 6: the chip cycles are going to be driven by the
Speaker 6: broad industry, and for us, we do like that space,
Speaker 6: but it's going to be partly driven by the handful
Speaker 6: replacement cycle that we expect in twenty twenty five. So
Speaker 6: there are slightly different nuances there. In Asia, I think
Speaker 6: it's harder to pinpoint specific companies that are going to
Speaker 6: benefit from what's going on in AI. So even within
Speaker 6: let's say China, when we look at what's going on
Speaker 6: in a cloud space, it's really the national telephone telecommunication
Speaker 6: companies that are benefiting. But even then the percentage of
Speaker 6: to their revenue is not as huge as what we
Speaker 6: want it to be. Obviously, for by DO, this will
Speaker 6: become a gross driver for them in the future, but
Speaker 6: it's still not quite it's still not you know, as
Speaker 6: the significant or it's harder for us to tell whether
Speaker 6: they're going to be able to make a profit out
Speaker 6: of it so soon.
Speaker 2: We've looked a lot at some of these derivative markets
Speaker 2: and areas sectors. Electrification is a big thing, the independent
Speaker 2: power producers in addition to the actual utilities themselves. And
Speaker 2: then you have you know, the HVAC companies, you have
Speaker 2: industrials generally, and a lot of the enthusiasm has spread
Speaker 2: to a lot of different sectors. But investors are still
Speaker 2: looking for companies like Snowflake that stumbled at one point
Speaker 2: in the future and are undervalued. Are you finding companies
Speaker 2: that are undervalued or are you sort of swamped by
Speaker 2: all these markets with all these games.
Speaker 6: Actually, we're still looking at we still see value in
Speaker 6: the markets even within the US that we think is
Speaker 6: slightly overvalued. You know, we're you know, we're looking at
Speaker 6: things like even Fortunate that we have a by call on.
Speaker 6: You know, these are stocks that are laggered and but
Speaker 6: we think that they're still upside potential for sure. Even
Speaker 6: healthcare names that are not within the that haven't benefited
Speaker 6: from the BCD drug run up, you know, there's still
Speaker 6: value there that would come back to the broader farmers
Speaker 6: space as well. Within Asia, definitely. You know, we've seen
Speaker 6: value China remains in our views, somewhat undervalued despite the
Speaker 6: recent run up. Probably would be a little bit more
Speaker 6: cautious in jumping into more real estate China real estate
Speaker 6: names that have come up the from the bottom. But
Speaker 6: definitely we still like the chip sector for the most part.
Speaker 6: In Japan, we'd like the lagging factory automation names. They
Speaker 6: also benefit from basically a cyclical improvement, basically inventory levels coming.
Speaker 1: Back to normal, So chips. I'm also thinking South Korea
Speaker 1: and we just had to be okay raising growth it's
Speaker 1: growth forecast for this year to a level of two
Speaker 1: and a half percent, up from two to one. The
Speaker 1: last projection was made in February. How are you feeling
Speaker 1: about the South Korean market, particularly the chip makers like
Speaker 1: Samsung and sk Heinex.
Speaker 6: Yeah, we do like Samsung. I think we still have
Speaker 6: a bikon on Samsung, but we are more so focused
Speaker 6: on the laggards regardless of where they are. So even
Speaker 6: within that space industry leader TSMC, we we think they're
Speaker 6: still upside potential there. Media tech on the Taiwan side
Speaker 6: is another name that we prefer. I think overall, we
Speaker 6: probably see a little bit more value in some of
Speaker 6: the Taiwanese names on the chip side relative to let's say,
Speaker 6: specific to Japanese or Korean chip makers at this stage.
Speaker 2: And you know, we've talked a lot this morning about
Speaker 2: b HP and Anglo and uh, it's interesting that you
Speaker 2: know b HP is looking at copper mining but not
Speaker 2: wanting to do it itself. But buy buy it, buy Anglo.
Speaker 2: I'm curious what your thoughts about M and A. He's
Speaker 2: been picking up a little bit here of late. What
Speaker 2: what sort of message does it send?
Speaker 6: I think when I think, what it means is that
Speaker 6: for companies still having holding a lot of cash, and
Speaker 6: I think that's across the board the number of companies
Speaker 6: that we see and for those you know where you
Speaker 6: have equity values also be at relatively low levels. That
Speaker 6: probably means it's a good time to look for acquisitions
Speaker 6: and and we do expect that to you know, basically continue,
Speaker 6: particularly for those companies that can that do have the
Speaker 6: cash flow to afford it. Definitely, you know, debt levels
Speaker 6: of debt servicing is a little bit tougher now and
Speaker 6: obviously getting funding is a little bit harder now. So
Speaker 6: I think where you're probably seeing a little bit more
Speaker 6: appetite for by some companies to consolidate.
Speaker 1: We were just talking here in New York about a
Speaker 1: Report City Group considering reducing some of its office foot
Speaker 1: print in Singapore. Remote work is obviously gaining traction. How
Speaker 1: is the commercial real estate market there in the Line
Speaker 1: City very quickly?
Speaker 6: Tier one basically the top grade real estate is still
Speaker 6: highly demanded. If you look at the CBD areas, occupancy
Speaker 6: rates are still high at about nine so we don't
Speaker 6: actually expect any decline in rental rates unfortunately for US.
Speaker 2: Laurene, thank you so much for joining us. Lorraine Tan,
Speaker 2: their director of Asia Equity Research, Morning Star.
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