WEBVTT - Nvidia, AMD AI Deal, Intel CEO to Meet Trump 0:00:00.320 --> 0:00:13.680 Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is live 0:00:13.720 --> 0:00:17.520 from coast to coast with Caroline Hyde in New York 0:00:17.800 --> 0:00:20.280 and Vla Loow in sentrances. 0:00:19.680 --> 0:00:25.880 Go this is Bloomberg Tech coming up video and am 0:00:25.960 --> 0:00:29.280 d a great p fifteen percent of their revenues from 0:00:29.360 --> 0:00:31.960 Chinese AI chip sales to the US government. 0:00:32.240 --> 0:00:34.800 Plus Intel CEO Lib Boutan is set to visit the 0:00:34.800 --> 0:00:37.840 White House today, just days after President Trump. 0:00:37.640 --> 0:00:41.920 Called for his resignation and lithium prices and stock spike 0:00:42.080 --> 0:00:46.159 after c atl Holtz operations at a major mine in China. 0:00:46.600 --> 0:00:47.400 But we returned to. 0:00:47.360 --> 0:00:50.800 These public markets and ed this is an entire show 0:00:51.120 --> 0:00:54.320 really focused on the semiconductor world. So I bring you 0:00:54.680 --> 0:00:57.080 the chip sector in particular, and I'm looking at the 0:00:57.080 --> 0:01:01.080 socks of course, the Phillies. The Philadelphia Semiiconductor index is 0:01:01.120 --> 0:01:03.040 currently up almost a percentage point. We're coming off of 0:01:03.200 --> 0:01:05.720 la highs. But really a focus on the macro picture 0:01:05.800 --> 0:01:08.319 right now when near record hires, the stocks, bonds waiver, 0:01:08.360 --> 0:01:10.960 We're looking at inflatory data, but we on the show 0:01:11.000 --> 0:01:13.400 are looking at semiconductors. Dive into them for a moment. 0:01:14.000 --> 0:01:16.920 There are so many chip stories Micron is raising its 0:01:16.920 --> 0:01:20.679 guidance for the current period because of pricing power, particularly 0:01:20.680 --> 0:01:23.120 in dram There's a lot going on in high bandwidth 0:01:23.160 --> 0:01:26.200 as well. Intel's up four point eight percent. Its CEO, 0:01:26.319 --> 0:01:29.040 Lip Bhutan is off to the White House to meet 0:01:29.040 --> 0:01:31.880 with President Trump. Will bring the reporting later in the hour. 0:01:32.080 --> 0:01:35.840 Then the top story, Nvidia and AMD, according to a 0:01:35.880 --> 0:01:40.000 Bloomberg source, have agreed to give the United States fifteen 0:01:40.120 --> 0:01:44.600 percent of any revenues from chip sales to China, AI 0:01:44.680 --> 0:01:48.720 chiphails to China in exchange for export licenses in what 0:01:48.840 --> 0:01:51.000 is a very clear quid pro quote character. 0:01:51.120 --> 0:01:54.000 It is unprecedented. Many people say, let's get out to 0:01:54.040 --> 0:01:56.840 Bloomberg Balance of Power host Joe Matthew, who we welcome 0:01:56.880 --> 0:02:00.200 to the show for the perspective of the administration, I 0:02:00.240 --> 0:02:01.400 do this, Je. 0:02:02.200 --> 0:02:03.480 Well, boy, it's a great question. 0:02:04.120 --> 0:02:07.760 It is unprecedented, remembering the golden share that the White 0:02:07.760 --> 0:02:11.280 House scored in the Al the Pond takeover of US Steel, 0:02:11.400 --> 0:02:13.280 this is a whole new level and it's raising a 0:02:13.320 --> 0:02:16.280 lot of questions, beginning here in Washington, at least with 0:02:16.440 --> 0:02:20.200 National security. Wall Street might have slightly different questions here, 0:02:20.240 --> 0:02:22.600 but of course, remembering that these chips were going to 0:02:22.600 --> 0:02:24.560 be off limits to the Chinese, and it's something that 0:02:24.600 --> 0:02:26.400 we've talked about a lot here on the air. That 0:02:26.480 --> 0:02:28.160 was only a couple of weeks ago. Then you saw 0:02:28.200 --> 0:02:31.400 the turn to making them available. The licenses even after 0:02:31.440 --> 0:02:35.640 that moment were not actually being given to Nvidia or 0:02:35.680 --> 0:02:36.880 AMD for a couple of weeks. 0:02:36.880 --> 0:02:38.560 So this apparently unlocks the license. 0:02:38.639 --> 0:02:40.920 But my goodness, the role of the administration is now 0:02:41.200 --> 0:02:44.079 playing in business. I think we can say openly that 0:02:44.200 --> 0:02:47.880 the US government is now part of the semiconductor industry. 0:02:47.960 --> 0:02:51.000 They're invested in the business. And the big question is 0:02:51.040 --> 0:02:54.239 where's the line. If fifteen percent is enough to get 0:02:54.480 --> 0:02:57.640 the H twenties on sale in China, is there a 0:02:57.720 --> 0:03:01.120 number that Jensen Wang can come up with to sell 0:03:01.160 --> 0:03:01.680 even more. 0:03:02.040 --> 0:03:04.040 I want to point out that AMD has not said 0:03:04.080 --> 0:03:06.880 anything about this reporting. It was first the ft, then 0:03:06.880 --> 0:03:10.400 it was US. Nvidia has said something. They've said a lot, actually, 0:03:10.720 --> 0:03:13.840 but they haven't addressed the fifteen percent number. To your point, Joe, 0:03:14.200 --> 0:03:16.960 what they've indicated is that so far, at least I 0:03:17.000 --> 0:03:20.360 think in this fiscal year, they haven't shipped any H 0:03:20.440 --> 0:03:23.280 twenties to China. So that's important for Wall Street to 0:03:23.320 --> 0:03:26.440 kind of model for But boy, they're kind of indicating 0:03:26.520 --> 0:03:29.200 that they're getting what they want in some sense because 0:03:29.320 --> 0:03:32.520 China is such a key market. And the President seems 0:03:33.000 --> 0:03:35.640 right now, if this reporting is accurate, to be willing 0:03:35.680 --> 0:03:38.040 to oblige them because he's getting something in return. 0:03:38.080 --> 0:03:38.760 He's done a deal. 0:03:39.080 --> 0:03:40.280 That's right, He's done a deal. 0:03:40.560 --> 0:03:42.520 And this is the same president who just days ago, 0:03:42.560 --> 0:03:46.080 of course, asked for the resignation of the Intel CEO. 0:03:46.120 --> 0:03:48.560 As you mentioned, Lip Bhutan is at the White House 0:03:48.600 --> 0:03:51.480 today and it had us last week asking the question 0:03:51.520 --> 0:03:53.600 if President Trump is in fact the chairman of the 0:03:53.640 --> 0:03:57.080 board at any major company. We've seen him do this before, 0:03:57.120 --> 0:04:00.000 calling for boycotts of certain goods, calling for personnel change, 0:04:00.160 --> 0:04:03.960 is calling for policy changes within companies. You've certainly seen 0:04:04.000 --> 0:04:06.080 the impact that he's had when it comes to DEI, 0:04:06.520 --> 0:04:09.520 But actually exchanging money with these companies is a whole 0:04:09.560 --> 0:04:13.080 new prospect. And it's unclear exactly where this fifteen percent 0:04:13.160 --> 0:04:13.520 would go. 0:04:13.600 --> 0:04:15.640 Will that be used to pay down the debt or 0:04:15.680 --> 0:04:16.400 do something else? 0:04:16.440 --> 0:04:18.240 In terms of national security, we have a lot of 0:04:18.320 --> 0:04:21.000 questions that remain. The President, by the way, is briefing 0:04:21.040 --> 0:04:23.520 reporters right now at the White House talking about crime 0:04:23.839 --> 0:04:27.360 here in the city and his effort to federalize Washington, DC. 0:04:27.480 --> 0:04:29.840 It's a very separate and big story here, but they 0:04:29.880 --> 0:04:32.720 will go to questions and I suspect that these will 0:04:32.720 --> 0:04:33.320 come up today. 0:04:33.640 --> 0:04:36.440 We suspect so too, Bloomberg Balance of Power host Joe Matthew, 0:04:36.480 --> 0:04:39.000 thank you very much. Let's get more in the reaction 0:04:39.160 --> 0:04:41.760 to the Nvidia and AM deal with Riva Goujon. She's 0:04:41.760 --> 0:04:45.440 a director at Rhodium Group, an independent research firm that 0:04:45.520 --> 0:04:50.520 analyzes economic and political issues, including those relating to China. Reva, 0:04:50.680 --> 0:04:54.080 you have more than two decades of experience as a 0:04:54.080 --> 0:04:57.440 geopolitical strategist advising companies and what on earth's happening around 0:04:57.440 --> 0:05:01.000 the world. Have you ever seen the United States impose 0:05:01.200 --> 0:05:04.960 what is essentially an export tax in exchange for those 0:05:05.000 --> 0:05:09.839 companies being able to export technology to a specific market. 0:05:10.080 --> 0:05:13.440 Well, an orthodox is an understatement here, right, And there's 0:05:13.520 --> 0:05:17.040 that whole pesky detail of what about Article one, section 0:05:17.160 --> 0:05:19.800 nine of the Constitution that says no tax or duty 0:05:19.839 --> 0:05:22.880 shall be laid on articles exported from any state, meaning 0:05:22.960 --> 0:05:25.800 any part of the US government, to include the executive branch. 0:05:25.920 --> 0:05:30.360 So yeah, we're in uncharted territory here, but it does 0:05:30.480 --> 0:05:34.880 fit with a highly transactional administration. But as you just 0:05:34.960 --> 0:05:38.719 referenced earlier, what is exactly the line here if the 0:05:38.760 --> 0:05:42.880 administration is driving toward revenue generation, not just in trade 0:05:42.920 --> 0:05:46.479 policy with tariffs, but even in export controls right to 0:05:46.560 --> 0:05:51.120 include high end semiconductors, what's the line on what is 0:05:51.160 --> 0:05:56.120 considered too advanced right as it balances against this revenue 0:05:56.120 --> 0:05:56.880 generation goal. 0:05:57.760 --> 0:06:00.640 Let's just repeat that. Now we've had for video. We 0:06:00.680 --> 0:06:03.200 are hearing from AMD as well saying that in initial 0:06:03.279 --> 0:06:06.719 China licenses have indeed been approved in AMD and confirming 0:06:06.760 --> 0:06:10.599 it received the China AI chip export licenses, and something 0:06:10.600 --> 0:06:13.839 that we quizzed Lisa Su on just last week after 0:06:13.839 --> 0:06:16.200 her earnings, and that's what the market really wanted to 0:06:16.240 --> 0:06:19.280 hear about REVA. But go further a little bit here 0:06:19.320 --> 0:06:24.120 as to ultimately companies looking to sell into China thinking 0:06:24.160 --> 0:06:26.680 longer term whether they'll remain to have access. The response 0:06:26.680 --> 0:06:30.000 from China thus far has been one of concern about 0:06:30.279 --> 0:06:33.279 what the amount of information and so called backdoors they've 0:06:33.279 --> 0:06:35.000 been questioning, particularly with Drens and Wang. 0:06:35.400 --> 0:06:39.279 Well, Tramp has made himself intrinsic to the US China 0:06:39.360 --> 0:06:42.200 chip wars. So now we need to see how far 0:06:42.360 --> 0:06:44.320 this actually goes. Le Bhutana is going to be in 0:06:44.360 --> 0:06:46.880 the White House. Can he pull off at Jensen? That 0:06:47.000 --> 0:06:49.200 still remains to be seen. But Intel has a lot 0:06:49.240 --> 0:06:51.960 of problems attached to it, and there is an American 0:06:52.000 --> 0:06:55.880 imperative to create an American ship champion out of you know, 0:06:55.960 --> 0:06:58.680 Intel's setbacks, and so I think there's a lot more 0:06:58.760 --> 0:07:01.599 deal making to come out of that as well. But 0:07:02.000 --> 0:07:04.880 you know, with this level of transactionalism, there's always a 0:07:04.960 --> 0:07:07.919 degree of uncertainty of how long does this actually last. 0:07:08.080 --> 0:07:12.360 If we are applying a sliding scale to chip sales 0:07:12.400 --> 0:07:17.840 to China, then at what point does that start to retrench? 0:07:18.080 --> 0:07:22.920 As US China AI competition is undoubtedly intensifying, we're still 0:07:22.920 --> 0:07:25.280 in the early stages of AI division. As we start 0:07:25.320 --> 0:07:29.040 to see more of these physical AI applications become more real, 0:07:29.160 --> 0:07:30.920 right as we wrap our heads around that, as we 0:07:30.960 --> 0:07:34.040 wrap our heads around the competitiveness issues around that, the 0:07:34.080 --> 0:07:38.840 critical inputs where China still has intense leverage, will we 0:07:38.920 --> 0:07:41.240 start to see a delayed reaction in the US that 0:07:41.360 --> 0:07:44.240 freak out moment so to speak, where these kinds of 0:07:44.280 --> 0:07:47.840 controls could fall back to a more restrictive nature. 0:07:48.240 --> 0:07:53.440 What a push US forward house the American president decided 0:07:53.480 --> 0:07:58.240 to forego national security concerns for a billion dollars at 0:07:58.280 --> 0:08:00.640 least per quarter coming home from or if our math 0:08:00.720 --> 0:08:03.520 is right, and what fifteen percent earns them, or do 0:08:03.560 --> 0:08:06.600 you think that they can manage to in some way 0:08:06.960 --> 0:08:10.360 location track and understand what really ultimately gets into the 0:08:10.480 --> 0:08:12.800 Chinese tech stack and how it is used. 0:08:14.040 --> 0:08:16.360 Well, there are a couple different issues here, right. H 0:08:16.520 --> 0:08:20.920 twenty's are optimized for inference compute. So the assumption that 0:08:20.960 --> 0:08:24.760 the administration is making here is that inference compute is 0:08:24.800 --> 0:08:27.880 not the chief national security concern. Now that raises a 0:08:27.960 --> 0:08:32.679 question again, if Huawei is able to produce comparable chips 0:08:33.320 --> 0:08:37.559 to Nvidia or AMD, will we see US chip controls 0:08:37.760 --> 0:08:41.480 ease right to allow US technology complete head to head 0:08:41.520 --> 0:08:47.200 with Huawei? So again, where is that line drawn? But still, 0:08:47.240 --> 0:08:50.160 you know, we're in a highly transactional phase here, and 0:08:50.240 --> 0:08:52.880 so we need to see just to what degree is 0:08:52.880 --> 0:08:55.560 the US going to be concerned about those end uses. 0:08:56.200 --> 0:08:59.280 And again the economic competitiveness concerns are still in play here. 0:09:01.040 --> 0:09:04.040 I don't know H twenty can be used for training. 0:09:04.240 --> 0:09:07.440 You know it's had performance engineered out of it, but 0:09:07.520 --> 0:09:10.080 I know talking to a lot of people inside the company, 0:09:10.800 --> 0:09:12.280 there are lots of credit here. You said something a 0:09:12.280 --> 0:09:15.800 minute ago, doing a Jensen or pulling a Jensen. I 0:09:15.840 --> 0:09:19.000 find that so interesting because his principal argument, in line 0:09:19.040 --> 0:09:21.400 with what we've just debated about age twenty, is if 0:09:21.400 --> 0:09:25.000 you don't export American technology, China will use a domestic 0:09:25.080 --> 0:09:28.600 champions technology and then they'll start exporting it to under 0:09:28.640 --> 0:09:32.280 international markets. Forget the revenue side of this for a minute. 0:09:32.679 --> 0:09:35.960 Is this smart by Trump to kind of have the 0:09:36.000 --> 0:09:39.640 pr effect of allowing them to export technology to an 0:09:39.640 --> 0:09:42.880 economic adversary and at the same time doing a deal 0:09:43.160 --> 0:09:46.199 showing that he's got something out of it. 0:09:46.200 --> 0:09:49.520 It's a slippery slope. And as we're seeing the preparation 0:09:49.840 --> 0:09:53.440 for a US China summit between Trump and She, what 0:09:53.600 --> 0:09:56.480 is Beijing thinking at this point? Obviously it wants to 0:09:56.480 --> 0:10:00.600 take advantage of this highly experimental, transactional phase. So what 0:10:00.679 --> 0:10:02.400 is it going to push for. We know they're pushing 0:10:02.400 --> 0:10:05.280 for an easing of the twenty percent ventanyl tears on 0:10:05.320 --> 0:10:07.800 the chip controls front. They're going to want to push 0:10:07.960 --> 0:10:12.319 for an easing of high bandwidth memory chip restrictions. Now 0:10:12.640 --> 0:10:15.760 that's really tricky, right because if you start to say, okay, 0:10:16.440 --> 0:10:21.000 because Chinese memory chip makers are becoming competitive in this domain, 0:10:21.400 --> 0:10:25.439 that the US will allow Micron, for example, Samsung SK 0:10:25.720 --> 0:10:28.720 to export these chips to the US. That doesn't help 0:10:28.720 --> 0:10:32.200 in Vidia because Huawei is getting access to HBM chips 0:10:32.440 --> 0:10:35.120 that are going to improve its production. Right, So you 0:10:35.200 --> 0:10:39.640 see a selective application of that sliding scale approach. And 0:10:39.720 --> 0:10:43.599 the US so far is also not easing semiconductor manufacturing 0:10:43.640 --> 0:10:47.240 equipment controls, right, so the tools to actually make those chips. 0:10:47.640 --> 0:10:51.280 If the US imperative is to throttle Chinese chip production, 0:10:51.400 --> 0:10:54.679 really constrain that so that US companies like Nvidia and 0:10:54.760 --> 0:10:57.959 AMD can flood the zone in the Chinese economy, get 0:10:58.040 --> 0:11:01.160 the Chinese technologists addicted. So to speak to US tech, 0:11:01.920 --> 0:11:06.000 you don't necessarily want to help hualy right in its 0:11:06.000 --> 0:11:06.760 production either. 0:11:07.920 --> 0:11:10.440 How do you anticipate China is going to respond to this? 0:11:11.840 --> 0:11:14.600 Well, China has a ton of leverage at this point 0:11:14.640 --> 0:11:17.200 with the critical raw material, the rare earth licenses, and 0:11:17.280 --> 0:11:21.360 if you look at comments from US tr recently Jamison Greer, 0:11:21.840 --> 0:11:24.800 and what you can see from those tops is that 0:11:24.800 --> 0:11:28.760 that issue of licensing for critical inputs seems to be 0:11:28.840 --> 0:11:32.960 a major theme of the US China bilaterals. So if 0:11:33.040 --> 0:11:38.280 the US raises threats on tariffs or raises technology controls 0:11:38.320 --> 0:11:41.200 in any significant way, China can basically say, look the 0:11:41.280 --> 0:11:44.800 terms of Stockholm or whatever European capital they're off and 0:11:45.000 --> 0:11:47.520 you're not getting your licenses and your production lines are 0:11:47.520 --> 0:11:51.479 going to be paralyzed, and good luck with your manufacturing ambitions. 0:11:51.559 --> 0:11:55.160 Right for this big Ai renaissance, for your manufacturing renaissance, 0:11:55.520 --> 0:11:57.520 we hold the cards. And at least for the duration 0:11:57.600 --> 0:12:00.600 of the Trump term. That is an uncomble troop. 0:12:01.280 --> 0:12:04.480 Riva Boujeon, director at Rolling In Group, fascinating to talk 0:12:04.520 --> 0:12:07.400 to you. Thank you now coming up, Intel CEO lit 0:12:07.400 --> 0:12:10.280 bou Town we just mentioned it. Reportedly going to be 0:12:10.320 --> 0:12:12.960 meeting with President Trump today. That story's next, ed. What 0:12:13.000 --> 0:12:13.560 are you looking at? 0:12:14.600 --> 0:12:16.800 I'm going to take another look at Micron Becauches are 0:12:16.840 --> 0:12:20.080 pushing higher again. They've upped their guidance for the current period, 0:12:20.120 --> 0:12:22.560 saying that just a EPs will be up to two 0:12:22.720 --> 0:12:25.720 dollars ninety two cents. Previous end of their guidance at 0:12:25.760 --> 0:12:28.560 the top range was two point two dollars sixty five cents. 0:12:28.600 --> 0:12:31.760 But it's all about kind of favorable dram pricing because 0:12:31.760 --> 0:12:34.199 margins also looking better as well. Again, this is a 0:12:34.280 --> 0:12:37.319 company that wants in on this great build out in 0:12:37.440 --> 0:12:40.320 data center in particular, but its historic business has been 0:12:40.320 --> 0:12:44.640 so commoditized in cyclical. But investors in this moment really 0:12:44.640 --> 0:12:46.720 liking what they're seeing. Micron up three and a half percent, 0:12:46.880 --> 0:13:02.200 will be right back. This is Bloomberg Tech. Intel CEO 0:13:02.360 --> 0:13:04.920 lit bou Tan is set to visit the White House today. 0:13:05.000 --> 0:13:07.640 This is just days after President Trump called for his 0:13:07.679 --> 0:13:10.520 resignation due to potential conflicts of interest. 0:13:10.800 --> 0:13:12.200 Blue Basie and King joins us. 0:13:12.200 --> 0:13:14.800 You've also kind of gone deep on like where Litboo 0:13:14.880 --> 0:13:17.679 fits in right now with Intel strategy with the White House. 0:13:18.040 --> 0:13:20.880 But what do we understand that he will be discussing 0:13:20.920 --> 0:13:23.760 with President Trump when he's in DC later today. 0:13:23.960 --> 0:13:27.440 Yeah, I mean it's still a TVD obviously, but there's 0:13:27.440 --> 0:13:30.920 an awful lot going on in Washington right now regarding chips. 0:13:30.920 --> 0:13:34.760 But fundamentally, what the Trump administration wants is an affirmation 0:13:34.960 --> 0:13:38.040 that all of these projects, all of this physical building 0:13:38.360 --> 0:13:41.960 of semiconductor plants in the US is going to go ahead. 0:13:42.000 --> 0:13:44.920 They don't want any sense that, oh, maybe we will 0:13:44.960 --> 0:13:47.320 maybe we won't, And that has been the message that 0:13:47.559 --> 0:13:52.359 kind of Intel have delivered recently because from Wall Streets perspective, 0:13:52.520 --> 0:13:54.960 we don't want to build these factories until they can 0:13:55.000 --> 0:13:57.840 actually fill them. So there's kind of a push and 0:13:57.920 --> 0:14:01.360 pull there. Whether they're investors one one thing and frankly 0:14:01.400 --> 0:14:04.680 the White House once another. So the topic has got 0:14:04.720 --> 0:14:07.480 to be how do we get the two sort of 0:14:07.760 --> 0:14:11.679 positions closer together. What kind of language can Intel come 0:14:11.760 --> 0:14:14.280 up with that will keep the White House happy and 0:14:14.320 --> 0:14:15.800 also not scare investors? 0:14:16.440 --> 0:14:20.520 Ultimately, ian what would scare investors a lack of access 0:14:20.520 --> 0:14:25.479 to the chipsacked money, a pullback more broadly from fabrication 0:14:25.600 --> 0:14:27.680 in the US, or is it more worrying that they're 0:14:27.680 --> 0:14:29.280 going to be plowing money in before the. 0:14:29.240 --> 0:14:29.960 Demand is certain? 0:14:30.320 --> 0:14:32.840 Right, Investors really don't care where chips are made. They 0:14:32.920 --> 0:14:35.880 care whether the companies who are making them are making 0:14:35.920 --> 0:14:39.680 money or not. Building plants when you don't have orders 0:14:39.920 --> 0:14:41.440 is not a good way to make money. It's a 0:14:41.440 --> 0:14:43.200 way for your company to go out of business. So 0:14:43.240 --> 0:14:47.080 that would be their position ultimately, though there is a 0:14:47.080 --> 0:14:49.760 lot of realism out there and obviously, as we're discussing, 0:14:49.920 --> 0:14:53.840 the supply chain is becoming more complicated and the geopolitical 0:14:53.880 --> 0:14:57.720 imperatives are becoming stronger and stronger, So there will be 0:14:57.800 --> 0:15:01.120 some understanding that, hey, maybe we do to build out capacity. 0:15:01.160 --> 0:15:03.800 But Intel has a lot of capacity in the US already, 0:15:04.280 --> 0:15:07.000 So why does it need to build these megafactories unless 0:15:07.000 --> 0:15:09.600 it has orders. What they want from Intel more than 0:15:09.640 --> 0:15:12.520 anything else, is hey, we've got some giant customers who 0:15:12.520 --> 0:15:15.760 want to use our factories the moment, Intel cannot say 0:15:15.760 --> 0:15:16.760 that in. 0:15:16.840 --> 0:15:19.640 King always across the reporting, we thank you so much 0:15:19.880 --> 0:15:22.520 for more on Intel and look the broader chips sector. 0:15:22.600 --> 0:15:26.400 Johann Foene's with US and Vice's Capital Management Partner Portfolio manager, Johann, 0:15:26.480 --> 0:15:28.600 what is it that you would like to see lip 0:15:28.640 --> 0:15:32.200 Bhutan managed to navigate today? Is it better that he 0:15:32.360 --> 0:15:36.080 promises more investment into the US, more manufacturing and that 0:15:36.160 --> 0:15:38.920 he has extricated himself from China or ultimately does he 0:15:38.920 --> 0:15:41.320 even need to stand down in some way as CEO. 0:15:42.920 --> 0:15:44.200 It's truly unclear. Caroline. 0:15:44.680 --> 0:15:47.680 Obviously, I think he can defend himself from the concerns 0:15:47.880 --> 0:15:52.240 that he's conflicted, and that's his main mission today. I 0:15:52.280 --> 0:15:54.960 don't know if that means he needs to do more 0:15:55.040 --> 0:15:58.680 to separate from his prior work and investments. I don't 0:15:58.680 --> 0:16:01.040 know how much capacity he has to do that. I 0:16:01.040 --> 0:16:04.800 think Ian is right that the administration wants to be 0:16:04.840 --> 0:16:07.240 able to continue to push the narrative that they are 0:16:07.280 --> 0:16:10.880 doing something to bring more chip manufacturing back to the US, 0:16:10.960 --> 0:16:15.000 and so his announcements of less investment or delayed investment, 0:16:15.120 --> 0:16:17.200 you know, is a concern to the administration. 0:16:17.640 --> 0:16:19.960 But they don't have the customers yet. 0:16:20.440 --> 0:16:22.360 Maybe he can say, hey, we've got these guys on 0:16:22.760 --> 0:16:24.360 the line, we're reeling them in. 0:16:24.760 --> 0:16:26.160 Maybe that would be reassuring. 0:16:26.760 --> 0:16:30.960 But ultimately Intel needs to keep those subsidies, but not 0:16:31.040 --> 0:16:33.080 at the cost of having to spend so much CAPEX 0:16:33.160 --> 0:16:35.040 in the near term when they don't have customers. So 0:16:35.440 --> 0:16:39.120 a very fine line for the CEO to walk. 0:16:39.160 --> 0:16:39.400 Here. 0:16:39.920 --> 0:16:42.640 The stock's up six percent, so the market likes something 0:16:42.640 --> 0:16:44.640 about the idea that lit Bhutan's going to go to 0:16:44.720 --> 0:16:47.720 DC and meet with the president. Present day, you're fund 0:16:47.720 --> 0:16:50.440 manager looking all across tech, but you had a long 0:16:50.480 --> 0:16:54.480 career in semiconductors. Lit Bhutan also has had a very 0:16:54.560 --> 0:16:57.840 long career in semiconductors. A lot of this affiliation with 0:16:58.000 --> 0:17:01.000 China or indirectly has been well known. 0:17:01.080 --> 0:17:03.760 Were you aware of it? Do you understand his history? 0:17:04.119 --> 0:17:07.159 Yeah, I mean, you know, I don't know him that well, 0:17:07.200 --> 0:17:10.320 but I think the public information about his prior work 0:17:10.440 --> 0:17:14.040 is pretty clear. He's obviously very highly respected. He was 0:17:14.080 --> 0:17:17.080 brought in by the board to take Intel in a 0:17:17.119 --> 0:17:20.720 different direction, one that is more measured, less capital spending 0:17:20.800 --> 0:17:26.080 forward than Pat Gelsinger wanted to do. And so it's 0:17:26.280 --> 0:17:30.240 it's just worrisome right that he might, you know, have 0:17:30.320 --> 0:17:34.360 to be removed because of concerns that really. 0:17:34.119 --> 0:17:36.280 Aren't, you well, well founded. 0:17:36.480 --> 0:17:40.320 So he seems like he's a very good person to 0:17:40.400 --> 0:17:42.800 run Intel at this when an Intel desperately needs the 0:17:42.840 --> 0:17:45.159 help they need to take that company in a different, 0:17:45.200 --> 0:17:49.280 more streamlined, more efficient direction while they sport out the 0:17:49.960 --> 0:17:53.320 recipe for designing and manufacturing chips, which was a huge 0:17:53.359 --> 0:17:55.320 stumbling block for them, and that that's why they're in 0:17:55.359 --> 0:17:57.800 the position they are, right, why AMD has taken so 0:17:57.920 --> 0:18:01.320 much care from Intel over the year in server chips 0:18:01.320 --> 0:18:04.520 and elsewhere. So you know, this is something this is 0:18:04.520 --> 0:18:07.320 a company we would avoid. We are avoiding at this point. 0:18:07.320 --> 0:18:09.360 We don't think it's a good place for investor money. 0:18:09.359 --> 0:18:12.160 There are just way too many uncertainties about the potential 0:18:12.200 --> 0:18:13.360 of Intel to make a comeback. 0:18:13.760 --> 0:18:16.760 Meanwhile, the uncertainties loom large about access to China and 0:18:16.800 --> 0:18:18.560 what you have to pay to do that from an 0:18:18.560 --> 0:18:22.320 AMD and an Nvidia. But an uncertainty you're willing to 0:18:22.440 --> 0:18:25.560 swallow if the underlying tailwinds are still so strong. Make 0:18:25.640 --> 0:18:27.800 of it what you will tell us what you thought 0:18:27.800 --> 0:18:29.720 about the AMD and n VideA deals. 0:18:30.520 --> 0:18:34.520 Yeah, so clearly right, the companies need act. The companies 0:18:34.560 --> 0:18:37.080 are better off with access to China than without. Even 0:18:37.080 --> 0:18:39.159 with the fifteen percent export tax. 0:18:40.680 --> 0:18:43.879 The you know, the potential revenue at risk, you know, 0:18:44.000 --> 0:18:46.879 thirty ish billion dollars for Intel, six to ten billion 0:18:46.920 --> 0:18:49.800 for AMD, likely to potentially grow over time, you know, 0:18:49.880 --> 0:18:51.760 So to pay fifteen percent on that, it's going to 0:18:51.760 --> 0:18:54.880 cut into their margins to some degree. They probably get 0:18:54.920 --> 0:18:57.880 a fifty sixty percent gross margin on those sales. 0:18:58.800 --> 0:19:00.879 I think that they're to have to swallow this. 0:19:01.200 --> 0:19:04.000 Right, they're charging what the market will bear right now 0:19:04.040 --> 0:19:06.760 for those chips selling into China and elsewhere. 0:19:07.000 --> 0:19:08.840 I don't think they'll be able to pass on. 0:19:09.119 --> 0:19:12.000 This tariff or this sorry, this export tax to the 0:19:12.080 --> 0:19:14.239 Chinese customers. They're charging them as much as they can 0:19:14.240 --> 0:19:17.320 get away with already, so you know, it's definitely going 0:19:17.359 --> 0:19:19.119 to be a hit to margins on a what is 0:19:19.160 --> 0:19:23.800 a you know, minority part of their businesses. But it's 0:19:23.800 --> 0:19:25.600 better to have access than non And I think the 0:19:25.600 --> 0:19:29.399 stocks are up because maybe this resolves the uncertainty. 0:19:29.440 --> 0:19:32.080 Maybe people will say, Okay, they're. 0:19:31.920 --> 0:19:33.199 Going to have to pay this, but hey, now we 0:19:33.240 --> 0:19:35.880 can rely on the fact that they'll have these export licenses, 0:19:35.920 --> 0:19:39.879 whereas before it was this sort of vague national security concern. No, 0:19:40.000 --> 0:19:43.119 you can't sell ships to China. Now that's gone away, right, 0:19:43.160 --> 0:19:45.520 It's clearly not a national security issue if the government 0:19:45.640 --> 0:19:48.359 is willing to let them pay a fee to gain 0:19:48.359 --> 0:19:49.119 that access. 0:19:49.680 --> 0:19:51.800 AMD put a statement out this morning saying they have 0:19:51.880 --> 0:19:55.080 an initial export license. They didn't address the fifteen percent 0:19:55.119 --> 0:19:58.000 revenue split. Nvidia put out a statement saying they've not 0:19:58.240 --> 0:20:01.800 yet shipped any H twenty to China for months, but 0:20:01.920 --> 0:20:05.280 they hope to. Can you and your desk analysts start 0:20:05.320 --> 0:20:07.880 modeling for some real China revenues in the near term 0:20:07.920 --> 0:20:10.760 from both those companies, Yeah, I think. 0:20:10.760 --> 0:20:13.560 Well, you know, from what we know, Yes, I mean 0:20:13.600 --> 0:20:15.640 it's good that AMV has confirm they have the licenses, 0:20:16.720 --> 0:20:19.080 so I think we can and we would definitely model 0:20:19.119 --> 0:20:22.760 in that fifteen percent hit to revenue. And it's unclear, 0:20:22.880 --> 0:20:26.120 by the way, where this goes legally, right, it's unconstitutional 0:20:26.280 --> 0:20:29.359 to impose an export tax like this, but it's not 0:20:29.440 --> 0:20:31.840 clear who would have legal standing to. 0:20:31.960 --> 0:20:33.760 Object to the tax. 0:20:33.840 --> 0:20:36.320 And clearly Nvidia and a MD aren't going to because 0:20:36.359 --> 0:20:39.280 they don't want to unbalance the apple cart here and 0:20:39.560 --> 0:20:43.480 risk those export licenses. But perhaps you know, one of 0:20:43.520 --> 0:20:47.359 the business associations does. This is unclear whether this shouldn't stand. 0:20:47.840 --> 0:20:50.280 But you know, we're seeing more and more of these 0:20:50.440 --> 0:20:53.679 kinds of pay to play arrangements by the US government 0:20:53.760 --> 0:20:57.080 that could increasingly, you know, put a tax on businesses 0:20:57.119 --> 0:20:59.879 and should be known this is an ex post tax. 0:21:00.160 --> 0:21:00.320 Right. 0:21:00.640 --> 0:21:03.240 This has happened after the fact of the company's having 0:21:03.560 --> 0:21:05.200 designed these ships and begun to sell. 0:21:05.119 --> 0:21:06.080