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Speaker 1: Boo, Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business app. Here's the latest CEO,

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Speaker 2: Jensen Fag telling Bloomberg supplies will be plentiful, even as

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Speaker 2: in Video's new black wild processor lineup is proving more

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Speaker 2: challenging to manufacture. Danaus of Webbursch still bullish, we believe

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Speaker 2: in videos surging AI chip demand, black whol delay concerns

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Speaker 2: are laid. Robust outlook and a meteoric enterprise pipeline speaks

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Speaker 2: to this AI revolution just starting to kick off its

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Speaker 2: next phase of growth. Dan drops by the studio for more.

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Speaker 2: Thank him, mon, it's here.

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Speaker 3: Great to be here.

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Speaker 2: Let's start with the production problems. What did he say

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Speaker 2: of a night that ALLEXI your concerns.

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Speaker 4: There were worries that these Douys were actually going to

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Speaker 4: linger into your end, and essentially they put that to rest.

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Speaker 4: And I think that's something you talk about billions from Blackwell,

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Speaker 4: but ultimately we're talking about what could be tens of billions.

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Speaker 4: So if anyone thing was going to spoil this party,

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Speaker 4: it was the Blackwell douy is. And I believe even

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Speaker 4: though the initial reaction bears came out of hibernation mood

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Speaker 4: for a whittle last night, it was good to see him.

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Speaker 4: I believe this is a star that should be green today.

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Speaker 4: And for broader tech, you heard everything you needed to

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Speaker 4: and from a demand perspective from godfather.

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Speaker 2: Of Ai Jensen, manufacturing this stuff is incredibly complex. Apart

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Speaker 2: from saying it will increase. Was there any real detail

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Speaker 2: about manufacturing yield improving somewhat through the quarter. Did you

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Speaker 2: get any real detail about what was actually happening at

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Speaker 2: these factories?

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Speaker 4: He talked about yields improved, and if you look from

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Speaker 4: a yield perspective, the biggest thing that could hurt this

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Speaker 4: story was significant Blackhall delays, and that's something that that

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Speaker 4: checked the box. You look at the demanders in terms

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Speaker 4: of the October quarter, Okay, could whisper has been thirty

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Speaker 4: three billion or thirty two point five on the margin. Realistically,

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Speaker 4: as they executed, this is probably going to be a

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Speaker 4: thirty three thirty four billion type of quarter. So then

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Speaker 4: you look out further and you're like, okay, you start

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Speaker 4: to get these two billion and two billion continued beats.

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Speaker 4: You start to look at earnings power that significantly goes

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Speaker 4: higher into next year, and relative to Cappax and everything

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Speaker 4: we're seeing in tech, this was the most watched earnings.

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Speaker 3: I mean, we had watch parties.

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Speaker 4: I'm going sure if you were at one of the

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Speaker 4: watch parties and it's something where I think they came

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Speaker 4: delivered and I think for tech it's going to put

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Speaker 4: fuel in that rally.

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Speaker 1: Sure's a comment from one of those parties.

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Speaker 2: It's fun.

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Speaker 5: It's like a cultural thing.

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Speaker 1: You don't have to be here to root for a

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Speaker 1: winning team. I'm just letting you know very much of

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Speaker 1: the popular site.

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Speaker 2: Guys.

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Speaker 5: I'm very curious.

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Speaker 1: Though about what you think with the Blackwell revenues that

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Speaker 1: they are projecting out.

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Speaker 5: They were very non specific.

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Speaker 1: They said, yeah, billions of dollars, and people are looking

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Speaker 1: at that and saying, if you really want to convince

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Speaker 1: us that this Blackwell delivery delay isn't going to be

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Speaker 1: a serious problem, why not provide specifics, especially at a

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Speaker 1: time where margins are coming in, especially at a time

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Speaker 1: where they're not able to diversify their buyer base.

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Speaker 4: Yeah, and we think that's ultimate from all of our

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Speaker 4: checks in Asia, tens of billions, not just billions, but

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Speaker 4: Jensen a grand wizard, grand master poker player, not going

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Speaker 4: to reveal the playbook.

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Speaker 3: That's smart. But if you look at Nvidia.

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Speaker 4: Here, this is Lebron in high school in terms of

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Speaker 4: where this story is ultimately going.

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Speaker 3: And the most important thing is.

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Speaker 2: The multiplier effect because it is for broader tech.

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Speaker 3: It's not just spout in Nvidia. It's not just spent Microsoft.

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Speaker 4: For every dollars spent on Nvidia chip, we believe it's

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Speaker 4: an eight to ten multiplier cross tech. And I think

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Speaker 4: that's something that's probably the most important for investors.

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Speaker 1: You know, it's fun and it's fun to talk about

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Speaker 1: the Godfather and popcorn and all that. You actually have

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Speaker 1: been in Asia a lot, and you've been looking at

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Speaker 1: the factories and you've been talking to people who are

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Speaker 1: the um buyers of some of these chips and the

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Speaker 1: producers to understand exactly how much demand there is.

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Speaker 5: What have you seen that gives you such confidence.

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Speaker 1: That this really is a takeoff story, even now with

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Speaker 1: some questions about how long the magnificent three or four

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Speaker 1: US big tech companies can continue to support it.

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Speaker 4: Yeah, we'll be going back to Asia next week.

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Speaker 3: A trillion dollars of.

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Speaker 4: Cap backs is what we see from an AI perspective

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Speaker 4: over the next three years. You go back six months ago,

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Speaker 4: we thought that was five hudred billion, and every quarter

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Speaker 4: if you look at the underlining demand not just some

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Speaker 4: hyper scalers, but eventually what's going to be other enterprises.

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Speaker 3: It's just starting.

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Speaker 4: So all of our checks are showing demands actually continuing

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Speaker 4: to accelerate.

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Speaker 5: You know, it's far out to yield.

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Speaker 4: You're improving from production perspective that they're the only game

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Speaker 4: in town. Use cases are coming, so that would pollenteer.

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Speaker 4: You see that with service now. Now this Fourth Industrial

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Speaker 4: Revolution Roome wasn't built in a day, neither AI revolution.

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Speaker 4: It's starting to come together. Anyone that thinks this is hype,

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Speaker 4: you listen to commerce calls Nvidia, AMD, Microsoft, Pollunteer and others.

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Speaker 4: I mean, I don't know what watch party dudes, Bears are,

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Speaker 4: but they're not listening.

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Speaker 2: To the calls that I am you Sain, it's the

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Speaker 2: Brunet High School. Why isn't it zomb Williamson. Why couldn't

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Speaker 2: we end up with a situation when we actually get

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Speaker 2: real competition and it just doesn't do that well anymore?

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Speaker 2: How big is this mout around this company?

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Speaker 1: Yeah?

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Speaker 4: And I think it's a great question. Right now, only

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Speaker 4: game in town AMD and obviously least as soon others

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Speaker 4: are going to benefit. The reason this is the lebron

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Speaker 4: in high school is because they are so ahead of

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Speaker 4: any other competitor, and right now they're the only game

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Speaker 4: in town. The new gold, the new oil, the AMD chips.

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Speaker 4: And when you come away from that conference call last night,

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Speaker 4: now I get after hours and Bears will come out.

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Speaker 4: But there's nothing that makes me think that we don't

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Speaker 4: have a year from now or less. You have three

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Speaker 4: four trillion dollars. Mark Aps, godfather of AI and Emdia.

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Speaker 4: What's happening kuper Tina with the AI supercycle starting off

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Speaker 4: on iPhone sixteen and what's happening then Della in Redmond.

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Speaker 1: Well, okay, in fairness to the bears, because the bears

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Speaker 1: weren't exactly coming out and saying this stock is going

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Speaker 1: to tank. They're saying, maybe, you know, just cash in

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Speaker 1: a few chips after one thousand percent rallies going back

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Speaker 1: to October of twenty twenty two, a real question here

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Speaker 1: of how big the addressable market is, and a question

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Speaker 1: about whether they can essentially go into some of the

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Speaker 1: data centers that their buyer base are trying to fund

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Speaker 1: and create. Basically, how much do they become competitors with

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Speaker 1: their main customers, And a real question about cannibalization At

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Speaker 1: a time where big and bigger companies are increasingly getting

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Speaker 1: the scrutiny of regulators, how much are you sort of

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Speaker 1: factoring that in as a ceiling for how far this

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Speaker 1: godfather of AI can go.

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Speaker 4: Yeah, and it's abound even look where Microsoft's going, where

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Speaker 4: Google and Clouds and Amazon. So definitely like it's a

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Speaker 4: little bit of a coappetition that's happening here. Look from

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Speaker 4: a regulatory regulatory is forty miles an hour in the

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Speaker 4: right lane in a minivan. The technology is one hundred

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Speaker 4: miles an hour in a Ferrari in the left lane,

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Speaker 4: and I just think this will be self regulation. You'll

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Speaker 4: have a lot of em and look at open AI

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Speaker 4: in terms of you know what looks like that next

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Speaker 4: round of funding is it's a scarcity value. You will

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Speaker 4: start to see those eventually, you know, some more competition

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Speaker 4: bill butt heads. But this market it's the first second

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Speaker 4: inning of a nine inning game. That sort of our

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Speaker 4: view in terms of where you know, where we are

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Speaker 4: from an AI.

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Speaker 2: Revolution months of this weekend right from the one yes,

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Speaker 2: Big Rice is going to say it, Yeah to see it,

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Speaker 2: thank you. One question. Let's talk about the politics. Comla

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Speaker 2: harrisonton Well sitting down with CNN this afternoon. Top of

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Speaker 2: Mind Policy Haidi Creeber Retica of the Council on Foreign Relations,

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Speaker 2: saying it's likelier than not that a Harris white House

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Speaker 2: would build out foreign policy with a focus on international leadership,

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Speaker 2: nurturing ties with allies and partners, including NATO, new minilaterals

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Speaker 2: like trilateral with Japan and Korea, and critical minerals partnerships

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Speaker 2: and the G seven. Heidi Creeper Retica of the Council

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Speaker 2: on Foreign Relations joined us. Now, Heidi, let's build on

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Speaker 2: that if we can, and welcome back to the program.

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Speaker 2: Can I start with this one. You're incredibly well connected

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Speaker 2: in Washington, d C. I'll say that for you. How

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Speaker 2: much daylight is there between Harris and Biden?

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Speaker 6: Well, I think I think you're likely to see quite

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Speaker 6: a bit of continuation in the foreign policy agenda of

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Speaker 6: a Harris presidency. And I think probably the most important

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Speaker 6: area would be the relationship with allies and partners, because

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Speaker 6: Trump has really shown that he's a go tolone president

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Speaker 6: and so you know, in this day and age, the

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Speaker 6: world is far more complicated than when Trump was president.

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Speaker 5: You have an alignment with China, Russia, Iran, and.

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Speaker 6: North Korea in a world where America really needs to lead,

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Speaker 6: but we have to do it with friends and partners,

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Speaker 6: and that includes bolstering supply chains and resilience.

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Speaker 5: You can't do that alone.

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Speaker 6: So I think, you know, just the in the in

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Speaker 6: the broadest sense, you would see a continuation of.

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Speaker 5: Many of the features you've seen in Biden Adi.

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Speaker 2: When it comes to Chinese specifically and the issues in China.

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Speaker 2: Do you think they can make the case that a

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Speaker 2: multilateral approach has been more effective in the last few

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Speaker 2: years than what we saw under President Trump.

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Speaker 6: Absolutely, I mean, I think you know you do have

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Speaker 6: you have a more complicated geopolitical backdrop where you have

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Speaker 6: China actually helping Russia's war econ it me, where you

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Speaker 6: have a much more cooperation across as I mentioned, those

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Speaker 6: four those four key countries who are geopolitical rivals right now,

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Speaker 6: and so you need to have friends, you need to

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Speaker 6: have allies, you need to have doubling down on the

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Speaker 6: existing mini laterals, the new minilateral between the US, Japan, Korea,

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Speaker 6: building on the quad relationship with Australia, Japan, India, and

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Speaker 6: the United States, and also building out the critical minerals

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Speaker 6: partnerships and what we're going to need for energy transition

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Speaker 6: and for defense. And I think also the traditional forums

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Speaker 6: like the G seven take a lot of work, They

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Speaker 6: take a lot of nurturing, and we did not see

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Speaker 6: that during the Trump administration.

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Speaker 1: Hidie, we were just talking about how unusual it is

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Speaker 1: that Jake Sullivan went to China and got such a

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Speaker 1: high audience at a time where Joe Biden is a

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Speaker 1: lame duck press it in and there's a lot of

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Speaker 1: questions around who's actually going to be the head of

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Speaker 1: this country come early next year. Heidi, Why do you

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Speaker 1: think he went now and got such an audience.

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Speaker 6: Well, I think I think it's important to make sure

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Speaker 6: that there is a channel of communication when there is

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Speaker 6: any when there is any change, when there is UH,

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Speaker 6: when there is uh uh you know, uncertainty, which is

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Speaker 6: you know, pretty you know, running pretty rampant in in

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Speaker 6: the global geopolitical uh space right now as well as

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Speaker 6: in the global economic space. So knowing directly from the

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Speaker 6: National Security Advisor, what is uh, you know, what is

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Speaker 6: the the likely Harris agenda, what is coming potentially down

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Speaker 6: the pike before before the election or after the election.

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Speaker 5: With regard to any rumored.

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Speaker 6: Expansion of of export controls, How to manage manage the

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Speaker 6: managed competition in a way that sustains sort of strategic

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Speaker 6: balance and and and safety. We have had a number

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Speaker 6: of run ins with with China in the South China season,

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Speaker 6: trying to make sure that we don't have any any

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Speaker 6: unintended consequences from some of China's more aggressive military actions

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Speaker 6: of late. So I think, you know, just maintaining a

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Speaker 6: senior dialogue at this critical juncture is crucial.

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Speaker 5: Heidi.

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Speaker 1: I think that a lot of people are going to

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Speaker 1: be watching tonight when we hear the first televised interview

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Speaker 1: with a major media outlet of Kamala Harris and her

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Speaker 1: running mate Tim Waltzon. I'm wondering. I'm sure China will

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Speaker 1: also be watching to understand exactly what some of these

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Speaker 1: policies may be, as well as many other international partners

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Speaker 1: of the United States. Heidi, what are you expecting to

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Speaker 1: hear tonight or not? Does it matter if we hear

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Speaker 1: nothing in terms of policy.

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Speaker 6: So I think this is about politics as well as policy.

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Speaker 5: You have. You know, we're seventy odd days out. Harris

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Speaker 5: is sitting on momentum.

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Speaker 6: She said she'd do an interview before the end of

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Speaker 6: the month, and I don't expect her to really break

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Speaker 6: any new news in this interview, but I think it's

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Speaker 6: an important one to watch. And you are absolutely right,

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Speaker 6: everybody outside of the US will be watching this to

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Speaker 6: see you for any policy insights, and I think she

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Speaker 6: you know, this has been a sort of a policy

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Speaker 6: light campaign on both sides.

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Speaker 7: You have.

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Speaker 6: You know, Trump has had this project twenty five you know,

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Speaker 6: home Outside Holmes made by others and not himself on

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Speaker 6: many many issues. And then you know she's not is

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Speaker 6: the first candidate to be light on specifics. I mean

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Speaker 6: Bill Clinton was criticized for far too little on specific

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Speaker 6: policy issues, and then Secretary Clinton when she ran for president,

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Speaker 6: was far too specific.

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Speaker 5: And so I think at the.

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Speaker 6: Stage in the game we're close, you know, we're really

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Speaker 6: close to election day, she has an advantage. Harris has

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Speaker 6: an advantage that she did not have to go through

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Speaker 6: a primary process. She did not have to define her

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Speaker 6: views and take some hot like harder policy positions. So's

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Speaker 6: she has an advantage right now, and I think she's

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Speaker 6: not going to squander it. So and I think I

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Speaker 6: like the fact that she's doing it together with Governor Wallas.

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Speaker 5: I think this is going to.

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Speaker 6: Be an attempt to really show their personalities, human.

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Speaker 5: Side, the way they interact.

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Speaker 6: And he also gives her the out of not getting

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Speaker 6: cornered by somebody that not pointing fingers but looking at

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Speaker 6: an oppressed desperate to figure out specifics.

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Speaker 5: She's going to try not to get cornered, and I

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Speaker 5: think that's smart.

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Speaker 1: Said that a lot of people are watching internationally in

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Speaker 1: terms of trying to understand what Harris presidency would look like.

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Speaker 5: Do you think it will bother them.

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Speaker 1: If they get no specifics.

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Speaker 6: I don't. I don't think so. I think, you know,

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Speaker 6: she she wants to win. I think that that there's

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Speaker 6: been a lot of a lot of criticism of not

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Speaker 6: having the not having drilled down on specifics. And I

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Speaker 6: don't really think that she's trying to play to an

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Speaker 6: international audience in this interview. I think she really this

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Speaker 6: is really a chance for her to talk to the

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Speaker 6: American people and to voters, and so you might hear

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Speaker 6: less on international and maybe more on on domestic and

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Speaker 6: what and what she and Governor Waltz would mean for

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Speaker 6: for some of her domestic economic agenda.

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Speaker 2: Atoms, How do we got to leave it there? Come

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Speaker 2: by soon? It's been too long. It's going to catch up.

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Speaker 2: HAIDI crew by Redeka, the Council on Farm Relations. Oh,

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Speaker 2: Dave Sabina joined us some more on that, Oh Davis

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Speaker 2: unequivocally dubvish your view of chairman power last week. It's

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Speaker 2: time to go long anywhere on the curve? Oh can

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Speaker 2: you build on that? Why anywhere on the curve?

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Speaker 7: Because what will experience actually is going to be a

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Speaker 7: bull steepener, which means you know you're two years while

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Speaker 7: perform your tens and thirties. But it's actually our preference

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Speaker 7: to go long tens and thirties because the volatility in

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Speaker 7: tens and thirties will be lower. So from a sharp

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Speaker 7: racial or a risk adjusted racial, makes more sense to

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Speaker 7: go long tens and thirties.

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Speaker 3: Despite our steepening by us.

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Speaker 2: This time yesterday we caught it with chow Swab Colin Martin.

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Speaker 2: He said, the treasury yield plunge more recently makes extending

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Speaker 2: duration less attractive. Oh, how do you think about that?

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Speaker 2: Just the valuation proposition?

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Speaker 7: Yeah, you know what, I fully agree with that statement.

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Speaker 7: That's why we're only to call it a five on

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Speaker 7: ten long the market. But the thing with this market,

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Speaker 7: all the valuations have gotten arguably ahead of themselves for now.

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Speaker 3: You never know when the next spike lower will be.

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Speaker 7: As I like to say, I've been in the market

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Speaker 7: for thirty years, and you know what, if timing was

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Speaker 7: my strongest suit, I wouldn't even be on the show

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Speaker 7: right now, be on the beach somewhere. But I always

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Speaker 7: want to make sure I'm in the position I want

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Speaker 7: to be. But we're looking towards four percent, where we

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Speaker 7: really add to our longs and go full in long

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Speaker 7: in tenure yields.

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Speaker 1: You'd be calling us from the beach.

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Speaker 5: I know you'd be calling in.

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Speaker 2: I wouldn't be here either, all right, Moving on.

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Speaker 1: You said something that volatility is less in tens and thirties,

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Speaker 1: and that's one argument for going into them.

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Speaker 5: Is that true? I mean at a time when a.

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Speaker 1: Lot of people are talking about a sort of new

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Speaker 1: environment for yields more broadly, but especially duration of more

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Speaker 1: volatility there, especially with the election coming up.

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Speaker 7: Yeah, you know what, I didn't say there's going to

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Speaker 7: be no volatility. There's going to be volatile everywhere. But

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Speaker 7: this is why I love being an active manager. This

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Speaker 7: is why it's perfect time to be in the shoes

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Speaker 7: that we're in. You know, we have our expectations. You know,

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Speaker 7: as I said, we do expect yields to go lower,

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Speaker 7: but the market we also expected to go higher.

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Speaker 3: But that allows us opportunity to get long.

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Speaker 7: This is the difference between passive and active and it's

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Speaker 7: the perfect time from an active manager perspective to monetize

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Speaker 7: that volatility. And our team has been doing that for

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Speaker 7: the past two years. You've heard us with the two

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Speaker 7: years trade before that was an example of volatility in

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Speaker 7: the two years now, we think we'll see it in

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Speaker 7: ten years and we can monetize it.

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Speaker 1: There is there a contradiction in this foolishness across the

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Speaker 1: curve in bond markets. Is there a contradiction with the

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Speaker 1: strength of the economy that we're seeing.

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Speaker 3: No, there's no contradiction.

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Speaker 7: Actually, it's very similar to the weather argument that you

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Speaker 7: brought up before in regards to the employment number. I

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Speaker 7: would expand that weather argument to the markets. There's so

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Speaker 7: many credible, plausible outcomes in this market in regards to rates, higher,

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Speaker 7: rates lower. But this is why it's important from our

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Speaker 7: perspective as an active manager, don't get caught on where

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Speaker 7: do you think rates will go, because you're going to

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Speaker 7: miss the volatility and that's where you can monetize. So

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Speaker 7: I think all the arguments are credible. Our team we

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Speaker 7: have a process where you know what it's been validated

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Speaker 7: in regards to outlooks and views, and that's why we

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Speaker 7: do see lower rates from here, but it's not going

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Speaker 7: to be as straight line lower as we're seeing. It

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Speaker 7: would not surprise us if we see four percent ten

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Speaker 7: year yields, but we feel that's the level where you

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Speaker 7: start backing.

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Speaker 3: Up the trump.

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Speaker 2: You have made some assumptions about the destination for FED

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Speaker 2: funds though, and it stood out for me after the

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Speaker 2: Chairman Poal speech of Friday, you said, once easing starts,

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Speaker 2: you believe the target is neutral at a minimum. What

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Speaker 2: is neutral to you? I guess would be my question.

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Speaker 2: What do you think the FED thinks it is? And

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Speaker 2: are we talking about twohundred basis points of cuts over

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Speaker 2: the next I don't know, twelve months, eighteen months.

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Speaker 3: Yeah, you know, it's a good question.

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Speaker 7: I would argue that neutral to me doesn't count because

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Speaker 7: I'm not the one doing the eases. So I try

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Speaker 7: to listen to the FED governor's speak. We heard Hawker

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Speaker 7: last week say it's three percent. I would say it's

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Speaker 7: somewhere in and around three percent, but says there's two

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Speaker 7: hundred basis points of cuts coming over the next couple

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Speaker 7: of years, all else equal. The market's only discounting one

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Speaker 7: hundred right now. That is why we were and we

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Speaker 7: saw the speech as unequivocally dubvish. You know, the path

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Speaker 7: and timing to lower rates, that's the uncertain part. But

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Speaker 7: we definitely see a move towards neutral The interesting thing

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Speaker 7: about this, there's three things we're looking at in the

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Speaker 7: market that will add to volatility impact our positioning. One is,

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Speaker 7: as we've spoken about the employment rate. We think that's

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Speaker 7: very important. The second one is the election and that

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Speaker 7: will take on more and more be more amplified as

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Speaker 7: we get towards November. And then the third one, this

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Speaker 7: is the important one, is those risk off moments that

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Speaker 7: could come from idiosyncratic actions. You know, the butterfly wings that.

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Speaker 3: Starts a hurricane.

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Speaker 7: So it's that third one, you know, neutral three percent,

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Speaker 7: but the FED foot is squarely on the table.

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Speaker 3: Now.

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Speaker 7: We saw talk of possible fifty in the market when

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Speaker 7: we had the Japan selloff.

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Speaker 3: That hasn't gone away.

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Speaker 7: So we like being long, we like seeing rates go

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Speaker 7: to neutral, and now we think we have a free

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Speaker 7: option on the FED foot which could go way blaw neutral.

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Speaker 2: Oh, this was great. Appreciate it, sir, oh Davis there

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Speaker 2: of BMO. This is the Bloomberg Surveillance podcast, bringing you

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