Speaker 1: Boo, Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business app. Here's the latest CEO,
Speaker 2: Jensen Fag telling Bloomberg supplies will be plentiful, even as
Speaker 2: in Video's new black wild processor lineup is proving more
Speaker 2: challenging to manufacture. Danaus of Webbursch still bullish, we believe
Speaker 2: in videos surging AI chip demand, black whol delay concerns
Speaker 2: are laid. Robust outlook and a meteoric enterprise pipeline speaks
Speaker 2: to this AI revolution just starting to kick off its
Speaker 2: next phase of growth. Dan drops by the studio for more.
Speaker 2: Thank him, mon, it's here.
Speaker 3: Great to be here.
Speaker 2: Let's start with the production problems. What did he say
Speaker 2: of a night that ALLEXI your concerns.
Speaker 4: There were worries that these Douys were actually going to
Speaker 4: linger into your end, and essentially they put that to rest.
Speaker 4: And I think that's something you talk about billions from Blackwell,
Speaker 4: but ultimately we're talking about what could be tens of billions.
Speaker 4: So if anyone thing was going to spoil this party,
Speaker 4: it was the Blackwell douy is. And I believe even
Speaker 4: though the initial reaction bears came out of hibernation mood
Speaker 4: for a whittle last night, it was good to see him.
Speaker 4: I believe this is a star that should be green today.
Speaker 4: And for broader tech, you heard everything you needed to
Speaker 4: and from a demand perspective from godfather.
Speaker 2: Of Ai Jensen, manufacturing this stuff is incredibly complex. Apart
Speaker 2: from saying it will increase. Was there any real detail
Speaker 2: about manufacturing yield improving somewhat through the quarter. Did you
Speaker 2: get any real detail about what was actually happening at
Speaker 2: these factories?
Speaker 4: He talked about yields improved, and if you look from
Speaker 4: a yield perspective, the biggest thing that could hurt this
Speaker 4: story was significant Blackhall delays, and that's something that that
Speaker 4: checked the box. You look at the demanders in terms
Speaker 4: of the October quarter, Okay, could whisper has been thirty
Speaker 4: three billion or thirty two point five on the margin. Realistically,
Speaker 4: as they executed, this is probably going to be a
Speaker 4: thirty three thirty four billion type of quarter. So then
Speaker 4: you look out further and you're like, okay, you start
Speaker 4: to get these two billion and two billion continued beats.
Speaker 4: You start to look at earnings power that significantly goes
Speaker 4: higher into next year, and relative to Cappax and everything
Speaker 4: we're seeing in tech, this was the most watched earnings.
Speaker 3: I mean, we had watch parties.
Speaker 4: I'm going sure if you were at one of the
Speaker 4: watch parties and it's something where I think they came
Speaker 4: delivered and I think for tech it's going to put
Speaker 4: fuel in that rally.
Speaker 1: Sure's a comment from one of those parties.
Speaker 2: It's fun.
Speaker 5: It's like a cultural thing.
Speaker 1: You don't have to be here to root for a
Speaker 1: winning team. I'm just letting you know very much of
Speaker 1: the popular site.
Speaker 2: Guys.
Speaker 5: I'm very curious.
Speaker 1: Though about what you think with the Blackwell revenues that
Speaker 1: they are projecting out.
Speaker 5: They were very non specific.
Speaker 1: They said, yeah, billions of dollars, and people are looking
Speaker 1: at that and saying, if you really want to convince
Speaker 1: us that this Blackwell delivery delay isn't going to be
Speaker 1: a serious problem, why not provide specifics, especially at a
Speaker 1: time where margins are coming in, especially at a time
Speaker 1: where they're not able to diversify their buyer base.
Speaker 4: Yeah, and we think that's ultimate from all of our
Speaker 4: checks in Asia, tens of billions, not just billions, but
Speaker 4: Jensen a grand wizard, grand master poker player, not going
Speaker 4: to reveal the playbook.
Speaker 3: That's smart. But if you look at Nvidia.
Speaker 4: Here, this is Lebron in high school in terms of
Speaker 4: where this story is ultimately going.
Speaker 3: And the most important thing is.
Speaker 2: The multiplier effect because it is for broader tech.
Speaker 3: It's not just spout in Nvidia. It's not just spent Microsoft.
Speaker 4: For every dollars spent on Nvidia chip, we believe it's
Speaker 4: an eight to ten multiplier cross tech. And I think
Speaker 4: that's something that's probably the most important for investors.
Speaker 1: You know, it's fun and it's fun to talk about
Speaker 1: the Godfather and popcorn and all that. You actually have
Speaker 1: been in Asia a lot, and you've been looking at
Speaker 1: the factories and you've been talking to people who are
Speaker 1: the um buyers of some of these chips and the
Speaker 1: producers to understand exactly how much demand there is.
Speaker 5: What have you seen that gives you such confidence.
Speaker 1: That this really is a takeoff story, even now with
Speaker 1: some questions about how long the magnificent three or four
Speaker 1: US big tech companies can continue to support it.
Speaker 4: Yeah, we'll be going back to Asia next week.
Speaker 3: A trillion dollars of.
Speaker 4: Cap backs is what we see from an AI perspective
Speaker 4: over the next three years. You go back six months ago,
Speaker 4: we thought that was five hudred billion, and every quarter
Speaker 4: if you look at the underlining demand not just some
Speaker 4: hyper scalers, but eventually what's going to be other enterprises.
Speaker 3: It's just starting.
Speaker 4: So all of our checks are showing demands actually continuing
Speaker 4: to accelerate.
Speaker 5: You know, it's far out to yield.
Speaker 4: You're improving from production perspective that they're the only game
Speaker 4: in town. Use cases are coming, so that would pollenteer.
Speaker 4: You see that with service now. Now this Fourth Industrial
Speaker 4: Revolution Roome wasn't built in a day, neither AI revolution.
Speaker 4: It's starting to come together. Anyone that thinks this is hype,
Speaker 4: you listen to commerce calls Nvidia, AMD, Microsoft, Pollunteer and others.
Speaker 4: I mean, I don't know what watch party dudes, Bears are,
Speaker 4: but they're not listening.
Speaker 2: To the calls that I am you Sain, it's the
Speaker 2: Brunet High School. Why isn't it zomb Williamson. Why couldn't
Speaker 2: we end up with a situation when we actually get
Speaker 2: real competition and it just doesn't do that well anymore?
Speaker 2: How big is this mout around this company?
Speaker 1: Yeah?
Speaker 4: And I think it's a great question. Right now, only
Speaker 4: game in town AMD and obviously least as soon others
Speaker 4: are going to benefit. The reason this is the lebron
Speaker 4: in high school is because they are so ahead of
Speaker 4: any other competitor, and right now they're the only game
Speaker 4: in town. The new gold, the new oil, the AMD chips.
Speaker 4: And when you come away from that conference call last night,
Speaker 4: now I get after hours and Bears will come out.
Speaker 4: But there's nothing that makes me think that we don't
Speaker 4: have a year from now or less. You have three
Speaker 4: four trillion dollars. Mark Aps, godfather of AI and Emdia.
Speaker 4: What's happening kuper Tina with the AI supercycle starting off
Speaker 4: on iPhone sixteen and what's happening then Della in Redmond.
Speaker 1: Well, okay, in fairness to the bears, because the bears
Speaker 1: weren't exactly coming out and saying this stock is going
Speaker 1: to tank. They're saying, maybe, you know, just cash in
Speaker 1: a few chips after one thousand percent rallies going back
Speaker 1: to October of twenty twenty two, a real question here
Speaker 1: of how big the addressable market is, and a question
Speaker 1: about whether they can essentially go into some of the
Speaker 1: data centers that their buyer base are trying to fund
Speaker 1: and create. Basically, how much do they become competitors with
Speaker 1: their main customers, And a real question about cannibalization At
Speaker 1: a time where big and bigger companies are increasingly getting
Speaker 1: the scrutiny of regulators, how much are you sort of
Speaker 1: factoring that in as a ceiling for how far this
Speaker 1: godfather of AI can go.
Speaker 4: Yeah, and it's abound even look where Microsoft's going, where
Speaker 4: Google and Clouds and Amazon. So definitely like it's a
Speaker 4: little bit of a coappetition that's happening here. Look from
Speaker 4: a regulatory regulatory is forty miles an hour in the
Speaker 4: right lane in a minivan. The technology is one hundred
Speaker 4: miles an hour in a Ferrari in the left lane,
Speaker 4: and I just think this will be self regulation. You'll
Speaker 4: have a lot of em and look at open AI
Speaker 4: in terms of you know what looks like that next
Speaker 4: round of funding is it's a scarcity value. You will
Speaker 4: start to see those eventually, you know, some more competition
Speaker 4: bill butt heads. But this market it's the first second
Speaker 4: inning of a nine inning game. That sort of our
Speaker 4: view in terms of where you know, where we are
Speaker 4: from an AI.
Speaker 2: Revolution months of this weekend right from the one yes,
Speaker 2: Big Rice is going to say it, Yeah to see it,
Speaker 2: thank you. One question. Let's talk about the politics. Comla
Speaker 2: harrisonton Well sitting down with CNN this afternoon. Top of
Speaker 2: Mind Policy Haidi Creeber Retica of the Council on Foreign Relations,
Speaker 2: saying it's likelier than not that a Harris white House
Speaker 2: would build out foreign policy with a focus on international leadership,
Speaker 2: nurturing ties with allies and partners, including NATO, new minilaterals
Speaker 2: like trilateral with Japan and Korea, and critical minerals partnerships
Speaker 2: and the G seven. Heidi Creeper Retica of the Council
Speaker 2: on Foreign Relations joined us. Now, Heidi, let's build on
Speaker 2: that if we can, and welcome back to the program.
Speaker 2: Can I start with this one. You're incredibly well connected
Speaker 2: in Washington, d C. I'll say that for you. How
Speaker 2: much daylight is there between Harris and Biden?
Speaker 6: Well, I think I think you're likely to see quite
Speaker 6: a bit of continuation in the foreign policy agenda of
Speaker 6: a Harris presidency. And I think probably the most important
Speaker 6: area would be the relationship with allies and partners, because
Speaker 6: Trump has really shown that he's a go tolone president
Speaker 6: and so you know, in this day and age, the
Speaker 6: world is far more complicated than when Trump was president.
Speaker 5: You have an alignment with China, Russia, Iran, and.
Speaker 6: North Korea in a world where America really needs to lead,
Speaker 6: but we have to do it with friends and partners,
Speaker 6: and that includes bolstering supply chains and resilience.
Speaker 5: You can't do that alone.
Speaker 6: So I think, you know, just the in the in
Speaker 6: the broadest sense, you would see a continuation of.
Speaker 5: Many of the features you've seen in Biden Adi.
Speaker 2: When it comes to Chinese specifically and the issues in China.
Speaker 2: Do you think they can make the case that a
Speaker 2: multilateral approach has been more effective in the last few
Speaker 2: years than what we saw under President Trump.
Speaker 6: Absolutely, I mean, I think you know you do have
Speaker 6: you have a more complicated geopolitical backdrop where you have
Speaker 6: China actually helping Russia's war econ it me, where you
Speaker 6: have a much more cooperation across as I mentioned, those
Speaker 6: four those four key countries who are geopolitical rivals right now,
Speaker 6: and so you need to have friends, you need to
Speaker 6: have allies, you need to have doubling down on the
Speaker 6: existing mini laterals, the new minilateral between the US, Japan, Korea,
Speaker 6: building on the quad relationship with Australia, Japan, India, and
Speaker 6: the United States, and also building out the critical minerals
Speaker 6: partnerships and what we're going to need for energy transition
Speaker 6: and for defense. And I think also the traditional forums
Speaker 6: like the G seven take a lot of work, They
Speaker 6: take a lot of nurturing, and we did not see
Speaker 6: that during the Trump administration.
Speaker 1: Hidie, we were just talking about how unusual it is
Speaker 1: that Jake Sullivan went to China and got such a
Speaker 1: high audience at a time where Joe Biden is a
Speaker 1: lame duck press it in and there's a lot of
Speaker 1: questions around who's actually going to be the head of
Speaker 1: this country come early next year. Heidi, Why do you
Speaker 1: think he went now and got such an audience.
Speaker 6: Well, I think I think it's important to make sure
Speaker 6: that there is a channel of communication when there is
Speaker 6: any when there is any change, when there is UH,
Speaker 6: when there is uh uh you know, uncertainty, which is
Speaker 6: you know, pretty you know, running pretty rampant in in
Speaker 6: the global geopolitical uh space right now as well as
Speaker 6: in the global economic space. So knowing directly from the
Speaker 6: National Security Advisor, what is uh, you know, what is
Speaker 6: the the likely Harris agenda, what is coming potentially down
Speaker 6: the pike before before the election or after the election.
Speaker 5: With regard to any rumored.
Speaker 6: Expansion of of export controls, How to manage manage the
Speaker 6: managed competition in a way that sustains sort of strategic
Speaker 6: balance and and and safety. We have had a number
Speaker 6: of run ins with with China in the South China season,
Speaker 6: trying to make sure that we don't have any any
Speaker 6: unintended consequences from some of China's more aggressive military actions
Speaker 6: of late. So I think, you know, just maintaining a
Speaker 6: senior dialogue at this critical juncture is crucial.
Speaker 5: Heidi.
Speaker 1: I think that a lot of people are going to
Speaker 1: be watching tonight when we hear the first televised interview
Speaker 1: with a major media outlet of Kamala Harris and her
Speaker 1: running mate Tim Waltzon. I'm wondering. I'm sure China will
Speaker 1: also be watching to understand exactly what some of these
Speaker 1: policies may be, as well as many other international partners
Speaker 1: of the United States. Heidi, what are you expecting to
Speaker 1: hear tonight or not? Does it matter if we hear
Speaker 1: nothing in terms of policy.
Speaker 6: So I think this is about politics as well as policy.
Speaker 5: You have. You know, we're seventy odd days out. Harris
Speaker 5: is sitting on momentum.
Speaker 6: She said she'd do an interview before the end of
Speaker 6: the month, and I don't expect her to really break
Speaker 6: any new news in this interview, but I think it's
Speaker 6: an important one to watch. And you are absolutely right,
Speaker 6: everybody outside of the US will be watching this to
Speaker 6: see you for any policy insights, and I think she
Speaker 6: you know, this has been a sort of a policy
Speaker 6: light campaign on both sides.
Speaker 7: You have.
Speaker 6: You know, Trump has had this project twenty five you know,
Speaker 6: home Outside Holmes made by others and not himself on
Speaker 6: many many issues. And then you know she's not is
Speaker 6: the first candidate to be light on specifics. I mean
Speaker 6: Bill Clinton was criticized for far too little on specific
Speaker 6: policy issues, and then Secretary Clinton when she ran for president,
Speaker 6: was far too specific.
Speaker 5: And so I think at the.
Speaker 6: Stage in the game we're close, you know, we're really
Speaker 6: close to election day, she has an advantage. Harris has
Speaker 6: an advantage that she did not have to go through
Speaker 6: a primary process. She did not have to define her
Speaker 6: views and take some hot like harder policy positions. So's
Speaker 6: she has an advantage right now, and I think she's
Speaker 6: not going to squander it. So and I think I
Speaker 6: like the fact that she's doing it together with Governor Wallas.
Speaker 5: I think this is going to.
Speaker 6: Be an attempt to really show their personalities, human.
Speaker 5: Side, the way they interact.
Speaker 6: And he also gives her the out of not getting
Speaker 6: cornered by somebody that not pointing fingers but looking at
Speaker 6: an oppressed desperate to figure out specifics.
Speaker 5: She's going to try not to get cornered, and I
Speaker 5: think that's smart.
Speaker 1: Said that a lot of people are watching internationally in
Speaker 1: terms of trying to understand what Harris presidency would look like.
Speaker 5: Do you think it will bother them.
Speaker 1: If they get no specifics.
Speaker 6: I don't. I don't think so. I think, you know,
Speaker 6: she she wants to win. I think that that there's
Speaker 6: been a lot of a lot of criticism of not
Speaker 6: having the not having drilled down on specifics. And I
Speaker 6: don't really think that she's trying to play to an
Speaker 6: international audience in this interview. I think she really this
Speaker 6: is really a chance for her to talk to the
Speaker 6: American people and to voters, and so you might hear
Speaker 6: less on international and maybe more on on domestic and
Speaker 6: what and what she and Governor Waltz would mean for
Speaker 6: for some of her domestic economic agenda.
Speaker 2: Atoms, How do we got to leave it there? Come
Speaker 2: by soon? It's been too long. It's going to catch up.
Speaker 2: HAIDI crew by Redeka, the Council on Farm Relations. Oh,
Speaker 2: Dave Sabina joined us some more on that, Oh Davis
Speaker 2: unequivocally dubvish your view of chairman power last week. It's
Speaker 2: time to go long anywhere on the curve? Oh can
Speaker 2: you build on that? Why anywhere on the curve?
Speaker 7: Because what will experience actually is going to be a
Speaker 7: bull steepener, which means you know you're two years while
Speaker 7: perform your tens and thirties. But it's actually our preference
Speaker 7: to go long tens and thirties because the volatility in
Speaker 7: tens and thirties will be lower. So from a sharp
Speaker 7: racial or a risk adjusted racial, makes more sense to
Speaker 7: go long tens and thirties.
Speaker 3: Despite our steepening by us.
Speaker 2: This time yesterday we caught it with chow Swab Colin Martin.
Speaker 2: He said, the treasury yield plunge more recently makes extending
Speaker 2: duration less attractive. Oh, how do you think about that?
Speaker 2: Just the valuation proposition?
Speaker 7: Yeah, you know what, I fully agree with that statement.
Speaker 7: That's why we're only to call it a five on
Speaker 7: ten long the market. But the thing with this market,
Speaker 7: all the valuations have gotten arguably ahead of themselves for now.
Speaker 3: You never know when the next spike lower will be.
Speaker 7: As I like to say, I've been in the market
Speaker 7: for thirty years, and you know what, if timing was
Speaker 7: my strongest suit, I wouldn't even be on the show
Speaker 7: right now, be on the beach somewhere. But I always
Speaker 7: want to make sure I'm in the position I want
Speaker 7: to be. But we're looking towards four percent, where we
Speaker 7: really add to our longs and go full in long
Speaker 7: in tenure yields.
Speaker 1: You'd be calling us from the beach.
Speaker 5: I know you'd be calling in.
Speaker 2: I wouldn't be here either, all right, Moving on.
Speaker 1: You said something that volatility is less in tens and thirties,
Speaker 1: and that's one argument for going into them.
Speaker 5: Is that true? I mean at a time when a.
Speaker 1: Lot of people are talking about a sort of new
Speaker 1: environment for yields more broadly, but especially duration of more
Speaker 1: volatility there, especially with the election coming up.
Speaker 7: Yeah, you know what, I didn't say there's going to
Speaker 7: be no volatility. There's going to be volatile everywhere. But
Speaker 7: this is why I love being an active manager. This
Speaker 7: is why it's perfect time to be in the shoes
Speaker 7: that we're in. You know, we have our expectations. You know,
Speaker 7: as I said, we do expect yields to go lower,
Speaker 7: but the market we also expected to go higher.
Speaker 3: But that allows us opportunity to get long.
Speaker 7: This is the difference between passive and active and it's
Speaker 7: the perfect time from an active manager perspective to monetize
Speaker 7: that volatility. And our team has been doing that for
Speaker 7: the past two years. You've heard us with the two
Speaker 7: years trade before that was an example of volatility in
Speaker 7: the two years now, we think we'll see it in
Speaker 7: ten years and we can monetize it.
Speaker 1: There is there a contradiction in this foolishness across the
Speaker 1: curve in bond markets. Is there a contradiction with the
Speaker 1: strength of the economy that we're seeing.
Speaker 3: No, there's no contradiction.
Speaker 7: Actually, it's very similar to the weather argument that you
Speaker 7: brought up before in regards to the employment number. I
Speaker 7: would expand that weather argument to the markets. There's so
Speaker 7: many credible, plausible outcomes in this market in regards to rates, higher,
Speaker 7: rates lower. But this is why it's important from our
Speaker 7: perspective as an active manager, don't get caught on where
Speaker 7: do you think rates will go, because you're going to
Speaker 7: miss the volatility and that's where you can monetize. So
Speaker 7: I think all the arguments are credible. Our team we
Speaker 7: have a process where you know what it's been validated
Speaker 7: in regards to outlooks and views, and that's why we
Speaker 7: do see lower rates from here, but it's not going
Speaker 7: to be as straight line lower as we're seeing. It
Speaker 7: would not surprise us if we see four percent ten
Speaker 7: year yields, but we feel that's the level where you
Speaker 7: start backing.
Speaker 3: Up the trump.
Speaker 2: You have made some assumptions about the destination for FED
Speaker 2: funds though, and it stood out for me after the
Speaker 2: Chairman Poal speech of Friday, you said, once easing starts,
Speaker 2: you believe the target is neutral at a minimum. What
Speaker 2: is neutral to you? I guess would be my question.
Speaker 2: What do you think the FED thinks it is? And
Speaker 2: are we talking about twohundred basis points of cuts over
Speaker 2: the next I don't know, twelve months, eighteen months.
Speaker 3: Yeah, you know, it's a good question.
Speaker 7: I would argue that neutral to me doesn't count because
Speaker 7: I'm not the one doing the eases. So I try
Speaker 7: to listen to the FED governor's speak. We heard Hawker
Speaker 7: last week say it's three percent. I would say it's
Speaker 7: somewhere in and around three percent, but says there's two
Speaker 7: hundred basis points of cuts coming over the next couple
Speaker 7: of years, all else equal. The market's only discounting one
Speaker 7: hundred right now. That is why we were and we
Speaker 7: saw the speech as unequivocally dubvish. You know, the path
Speaker 7: and timing to lower rates, that's the uncertain part. But
Speaker 7: we definitely see a move towards neutral The interesting thing
Speaker 7: about this, there's three things we're looking at in the
Speaker 7: market that will add to volatility impact our positioning. One is,
Speaker 7: as we've spoken about the employment rate. We think that's
Speaker 7: very important. The second one is the election and that
Speaker 7: will take on more and more be more amplified as
Speaker 7: we get towards November. And then the third one, this
Speaker 7: is the important one, is those risk off moments that
Speaker 7: could come from idiosyncratic actions. You know, the butterfly wings that.
Speaker 3: Starts a hurricane.
Speaker 7: So it's that third one, you know, neutral three percent,
Speaker 7: but the FED foot is squarely on the table.
Speaker 3: Now.
Speaker 7: We saw talk of possible fifty in the market when
Speaker 7: we had the Japan selloff.
Speaker 3: That hasn't gone away.
Speaker 7: So we like being long, we like seeing rates go
Speaker 7: to neutral, and now we think we have a free
Speaker 7: option on the FED foot which could go way blaw neutral.
Speaker 2: Oh, this was great. Appreciate it, sir, oh Davis there
Speaker 2: of BMO. This is the Bloomberg Surveillance podcast, bringing you
Speaker 2: the best in markets, economics, and geopolitics. You can watch
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