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Speaker 3: Under those retailers, I mean Dollar General, the numbers came in,
Speaker 3: blow expectations, guidance, blow expectations, stock well, blow expectations of
Speaker 3: socks down twenty eight percent today, hitting an all time low.
Speaker 3: My question, Emily and will talk to Jen Bartashes, She's
Speaker 3: a Bloomberg Intelligence. My question is is the consumer versus
Speaker 3: Dollar General specific? So Jen Bartash's Bloomberg Intelligence. Thank so
Speaker 3: much for joining us here. I'm trying to get a
Speaker 3: sense Jen of kind of how much of this is
Speaker 3: just the lower end consumer facing economic headwinds versus Dollar
Speaker 3: General just doesn't have it together in terms of good stores,
Speaker 3: good product, good inventory management.
Speaker 4: Help us break it down.
Speaker 5: Yeah, good morning, Paul. So when we look in at
Speaker 5: Dollar General, we do think a lot of their current
Speaker 5: troubles are self inflicted. There's no doubt that the low
Speaker 5: income consumer is under pressure, but this is their core
Speaker 5: consumer that they know better than anybody else. And the
Speaker 5: fact that they're misreading where that consumer is and not
Speaker 5: you know, not ready to serve them in the way
Speaker 5: that they need to be served is a little bit concerning.
Speaker 5: So we're looking for you know, they're saying that they're
Speaker 5: going to increase, you know, spending on promotions, they're going
Speaker 5: to mark down prices, try to get customers back into stores.
Speaker 5: But we'll be really watching them for the rest of
Speaker 5: the year and how they execute against those plans.
Speaker 6: So John Tucker was talking about how Dollar General needed
Speaker 6: to improve their store experience, perhaps take up a get
Speaker 6: a mom, get a mom.
Speaker 4: I'm just like once a week, maybe somebody clean the store.
Speaker 6: How much of this is actually about the products that
Speaker 6: they're offering versus the in store experience. When we talk
Speaker 6: about Dollar General trying to lure customers back in.
Speaker 5: It's a great question. And having clean, safe, well lit
Speaker 5: stores is a basic of retail. And you know, when
Speaker 5: Dollar General says they're executing on a back to basic strategy,
Speaker 5: that should be part of that strategy. We've all seen
Speaker 5: reports of just you know, boxes piled in the aisles
Speaker 5: and unable to navigate and consumers, you know, not having
Speaker 5: a great experience in store. I think that that is improving,
Speaker 5: it's just not yet at the pace where it's consistent
Speaker 5: across their entire chain and where consumers are really responding
Speaker 5: to it.
Speaker 4: Hey, Jen, if.
Speaker 3: Consumer doesn't go to Dollar General, where does that consumer go?
Speaker 5: Well, you know, it's interesting, but we're seeing big market
Speaker 5: share gains at the likes of Walmart also in the
Speaker 5: hard discount grossers like Aldi. So you know, consumers are
Speaker 5: looking for where they're going to get the best deal,
Speaker 5: and whether that's on an everyday low price it's something
Speaker 5: like a Walmart or an Aldi, or are they're doing
Speaker 5: more cherry picking of deals, you know at regular grocery
Speaker 5: stores or other types of of retail stores, buying things
Speaker 5: specifically on promotion in order to save money. So, you know,
Speaker 5: Dollar General talked about not getting enough of the available
Speaker 5: share that's up for grabs, But part of that is
Speaker 5: is that other companies like a Walmart are really executing
Speaker 5: well right now and are capturing more of those consumers.
Speaker 6: Let's talk about the stock because it is down twenty
Speaker 6: eight percent right now, the worst inter day drop on record.
Speaker 6: What do you make of that move? Is that really
Speaker 6: justified today?
Speaker 5: Well? That's a very very steep drop. And I think
Speaker 5: part of the reaction is that in the second quarter,
Speaker 5: the the the kind of sentiment was that the turnaround
Speaker 5: plan was gaining traction, and all of a sudden, the
Speaker 5: bottom sort of fell out of that. And that's the
Speaker 5: response that you're seeing with the stock today. You know,
Speaker 5: is it as bad as you know, as the stock
Speaker 5: price might might be saying. It's hard to say. I mean,
Speaker 5: they still had positive same store sales, they still had
Speaker 5: positive traffic into stores. You know, they seem to have
Speaker 5: a plan for how they're going to build on that
Speaker 5: in the second half. But it really at this point,
Speaker 5: the message is that people want to see execution by
Speaker 5: the management team.
Speaker 4: Hey, Jen, thanks so much for joining us. Really appreciate it.
Speaker 3: Jen Bartashes, she's a senior retail analysts for Bloomberg Intelligence.
Speaker 3: Let me tell you, folks, Jen, we asked Jen Bartashes
Speaker 3: to join us, I don't know, twelve thirteen, fourteen years
Speaker 3: ago Bloomberg Intelligence. She was already a season Bloomberg executive
Speaker 3: and she's like, I'm not a research analyst. We said, no,
Speaker 3: you're really, really smart. We'll teach you how to be
Speaker 3: a rechannel analyst, and sure enough, here we are, and
Speaker 3: she's one of the leading voices on Wall Street. We
Speaker 3: appreciate getting a few minutes of a time. She really
Speaker 3: knows the retail space, helping us break down the dollar
Speaker 3: general stuff.
Speaker 4: So we appreciate that.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: just Say Alexa playing Bloomberg eleven.
Speaker 4: Let's check in with Dan Morgan.
Speaker 3: He's a senior portfolio manager Sonova's trust company. Joining us
Speaker 3: on zoom from Atlanta. Hey, Dan, what did you make
Speaker 3: of the Nvidia.
Speaker 4: Earnings last night? The conference call?
Speaker 7: All event, Well, I have kind of a little bit
Speaker 7: more of a positive bias view towards the stock and
Speaker 7: maybe the rest of the street. Does. You have to
Speaker 7: bear in mind that we added in video to our
Speaker 7: buy list back in about twenty eighteen, twenty nineteen, when
Speaker 7: they were, you know, really gaining a lot of momentum
Speaker 7: in the data center space, kind of gaining market share
Speaker 7: against the likes of AMD and Intel. And up to
Speaker 7: that point, as you know, they were construed as a
Speaker 7: company that produced chips that were going into you know,
Speaker 7: various video games that people played, and you know, they
Speaker 7: had a big spike in their demand during COVID and
Speaker 7: then it kind of pulled back on that, and then
Speaker 7: obviously the whole thing flipped where their data center revenue
Speaker 7: became far greater than the gaming unit. And then the
Speaker 7: AI thing exploded about you know, a couple of years ago.
Speaker 7: It's the rest is history. So you know, overall, to
Speaker 7: be honest with you, I think this is a stellar report.
Speaker 7: I think the street has just gotten a point where
Speaker 7: it becomes so spoiled with these huge, you know, colossal
Speaker 7: beats that Nvidia's put together the last four or five
Speaker 7: quarters that their expectations have just gone off the you know,
Speaker 7: off the ray. I mean, even if you look at
Speaker 7: this number they did on the third quarter, you know,
Speaker 7: they topped the consensus essmate. Obviously there was Whisher numbers
Speaker 7: at thirty three and thirty four billion, but you know,
Speaker 7: let's face reality, it was a strong, strong number thirty
Speaker 7: two point five billion. So I think everything is still
Speaker 7: on track with Nvidia to ship the Blackwell chip. Out
Speaker 7: next year in volume, and I would expect margins to
Speaker 7: continue to rise because the average selling prices on these
Speaker 7: Blackwells are anywhere from twenty five you know, the thirty
Speaker 7: five thousand, far greater than what they're on the hopper
Speaker 7: of the H twenties.
Speaker 6: Talk a little bit about some of the production issues
Speaker 6: that Nvidia is having with the Blackwell chips and what
Speaker 6: did you learn from this earnings report about how quickly
Speaker 6: those can be resolved?
Speaker 7: Emily, that's been one of the big issues, also supply
Speaker 7: constraints that they try to build out this network of
Speaker 7: suppliers to kind of ramp up for Blackwell. I think
Speaker 7: it was kind of expected that this upcoming October quarter
Speaker 7: that there would be some shipments out, but it's not
Speaker 7: going to be in volume. There's still going to be
Speaker 7: relying on the H twenty and the H two hundred
Speaker 7: like they did in this quarter really to really post
Speaker 7: huge gains. I just think it's growing pains. I really
Speaker 7: am not concerned about it. I think they'll work through it.
Speaker 7: They've done a dynamite job back when we're having huge
Speaker 7: supply constraints in the overall chip sector. You all probably remember,
Speaker 7: you know, trying to buy a new automobile and you
Speaker 7: can get a chip to go in a new car.
Speaker 7: I mean, they worked through that and still did very well.
Speaker 7: So I think they'll get through this hurdle and they'll
Speaker 7: start doing volume probably, like I said, first half of
Speaker 7: twenty five. So again, you know, Emily and Paul, you're
Speaker 7: asking the wrong guy, right, because I'm an eternal n
Speaker 7: Vidio bull.
Speaker 3: Hey, Dan, farbe it from me to call you an
Speaker 3: old man, but you've been covering his tech industry for
Speaker 3: a long time.
Speaker 4: Where are the competitors here? That's kind of my question.
Speaker 4: I would think with this we'd see the AMDs of the.
Speaker 3: World and some others, really Intel, even Intel, Maybe why
Speaker 3: does Nvidia have seemingly.
Speaker 4: Such a stranglehold on this part of the market.
Speaker 7: You know, it's interesting, Paul. When I started really you know,
Speaker 7: diving into the stock and covering you very closely, sitting
Speaker 7: in on the developer conferences and all the conference calls,
Speaker 7: they would mention AI. They talk more about omniverse, and
Speaker 7: then of course the AI thing took off, and that,
Speaker 7: by the way, we're seventy percent of the AI market.
Speaker 7: They would mention that in their public release and nobody
Speaker 7: would care. But you're right, you know, everybody else has
Speaker 7: been extremely late getting to the table. You've got AMD
Speaker 7: with their Mi three hundred chips. You've got Intel rolling
Speaker 7: out their Dotty two, Gotty three and their Falcon shores
Speaker 7: next year, but again that's in twenty five. Marvel has
Speaker 7: the pam DSP chip. You probably covered on your show
Speaker 7: about yahweh coming out with their Ascend nine ten C
Speaker 7: chip to compete against the H twenty. But you know,
Speaker 7: Paul and Emily, where the real competition may come in
Speaker 7: is from the hyperscalers, who are their top purchasers, right
Speaker 7: about fifty percent of their revenues coming from them with
Speaker 7: their own internal chips. You know, we know that Meta,
Speaker 7: We know that Google has the TensorFlow chip that they
Speaker 7: developed with Broadcom. They have version six right now. I
Speaker 7: think there's a dual chip coming out called Athena that
Speaker 7: they're working on also. So there's there's a lot with AMD.
Speaker 7: There's a lot of things going on internally where these
Speaker 7: hyperscalers are trying to become rest reliant on Nvidia. But
Speaker 7: quite frankly, guys, the chips are coming out with still
Speaker 7: aren't going to pop the performance they're going to get
Speaker 7: out of blackwell, but I think I'd use it for
Speaker 7: lesser capability, you know, task so to speak, and try
Speaker 7: to save some money from as I mentioned, for the
Speaker 7: average selling prices are very higher on these newer chips.
Speaker 6: So revenue doubled in the quarter, Dan, but yet the
Speaker 6: stock is down this morning. I'm just wondering. I know
Speaker 6: you said that investors might be getting a little spoiled.
Speaker 6: What do we need, like, what does the street want
Speaker 6: to see out of Nvidia then to move this stock
Speaker 6: up higher? If revenue doubling isn't isn't enough?
Speaker 7: Yeah, I mean again, Emily, it's perplexing for me. I
Speaker 7: Like you said, you look at the revenue year over year,
Speaker 7: it was up you know a huge amount, one hundred
Speaker 7: and twenty two percent. You had the data center group,
Speaker 7: which one hundred and fifty four percent. I've got the
Speaker 7: data center group going over one hundred billion dollars in
Speaker 7: revenue for twenty five compared to forty four billion them
Speaker 7: in twenty four. So that's more than a double just
Speaker 7: in that unit. So again, this has become such a
Speaker 7: momentum stock, right, I mean, trades, it's sixty times price
Speaker 7: to book. The Philadelphia Stock Exchange Index trades at six
Speaker 7: times book. You know, it's a trailing seventy five times earnings.
Speaker 7: So you have this massive multiple, this huge momentum, you
Speaker 7: have this situation where you can't make any errors at
Speaker 7: anything that you're reporting, otherwise you're bringing the stock down.
Speaker 7: So again, I just think quite frankly, and Vidia has
Speaker 7: kind of spoiled investors, you know, since that Dynamite quarter
Speaker 7: about two and a half years ago, and people just
Speaker 7: keep raising the bar and raising the bar and they're
Speaker 7: never satisfied, but they're still doing really well.
Speaker 3: Hey, Dan, you know you raise for me what I
Speaker 3: think would be the biggest risk, which is my customers
Speaker 3: are going to develop their own chips.
Speaker 4: Frame that risk out for me, and how do you
Speaker 4: think about that?
Speaker 7: Yeah, I mean that is a risk. Every single hyperscale,
Speaker 7: as I mentioned, has their own chips. Probably the best
Speaker 7: chip out there is going to be coming from Alphabet
Speaker 7: and the Broadcom joint venture with their Tenser version six
Speaker 7: what they're bringing out. So you know, that's the worry.
Speaker 7: Even Apple has their own chips now. So the worry
Speaker 7: is that instead of buying all their chips from the
Speaker 7: video or eighty ninety percent of chips from the video,
Speaker 7: maybe a little bit from AMD, let's say, or Marvel.
Speaker 7: They may start, you know, keeping thirty forty percent in
Speaker 7: house in saving money and using their own chips. So
Speaker 7: that does potentially slow demand down for nvidio chips in
Speaker 7: the data center space. However, if you're a you know,
Speaker 7: probably the man, you know, someone in charge of this
Speaker 7: or a video, you're saying, well, guess what we're We're
Speaker 7: starting to get demand from other sources, right enterprise, We've
Speaker 7: got demand from Tesla. They talk about different governments who
Speaker 7: are now buying data center chips for their own use.
Speaker 7: So you can make a case that yeah, maybe you're
Speaker 7: going to lose a little bit from the homegrown stuff
Speaker 7: coming from the hyperscalal, but then you're going to be
Speaker 7: able to grow it out by the fact that you're
Speaker 7: going to get greater demand from these other markets that
Speaker 7: you're not getting right now. So you know, it's great
Speaker 7: to Yeah, I mean there's a lot of moving parts,
Speaker 7: but I mean I still feel u Paul Emily, that
Speaker 7: we're at the beginning of this this ride out and
Speaker 7: you know, the key to making money and technology and
Speaker 7: all you alluded to the fact that I've been in
Speaker 7: this for a long time. I've been writing, research and
Speaker 7: following and buying tech stock since nineteen ninety. The key
Speaker 7: is to ride a wave, and if you ride away,
Speaker 7: it always goes up and then rides out. And you know,
Speaker 7: in the early nineties you had the big you know,
Speaker 7: move towards the internet, everybody going to a mobile phone.
Speaker 7: If you caught one of those waves at the right stock,
Speaker 7: you did great. So exactly you're on an AI wave
Speaker 7: in the chip space right now with n video.
Speaker 3: Very good, Dan Morgan, thanks so much for that. We
Speaker 3: really appreciate gating a few minutes of your time, Dan Morgan.
Speaker 3: He's a senior portfolio manager Sonova's trust company down there
Speaker 3: in Atlanta. He was early on in video, he was
Speaker 3: right on in video, and it's been a heck of
Speaker 3: a run this stock.
Speaker 4: Just this year, up one hundred and forty two percent year.
Speaker 2: Today, you're listening to the Bloomberg Intelligence Podcast. Catch us
Speaker 2: live weekdays at ten am Eastern on applecar Playing and
Speaker 2: broud Otto with the Bloomberg Business app. Listen on demand
Speaker 2: wherever you get your podcasts, or watch us live on YouTube.
Speaker 3: Like yourfeos sitting in for Alex Steel on Paul Sweeney.
Speaker 3: We're live here in our Bloomberg Interactive Brokers studio. We're
Speaker 3: streaming live on that internet thing that Gene Monster keeps
Speaker 3: talking about. I think you go to YouTube dot com
Speaker 3: and search Bloomberg Podcast, and I think.
Speaker 4: That's where you'll find us. I'm not really sure you'll
Speaker 4: know that.
Speaker 3: One of the topics that Alex Steel and I like
Speaker 3: to talk about Emily.
Speaker 4: Is commercial real estate.
Speaker 3: So it's just fascinating how that industry is adapting to
Speaker 3: a post pandemic world, particularly in the office, but also
Speaker 3: just across the border commercial real estate and what it
Speaker 3: means for the banks and all that kind of stuff. Fortunately,
Speaker 3: we've got a lot of good folks to help us figure.
Speaker 4: Out what going on.
Speaker 3: And Abigail Doolittle, I mean, she covers all the markets
Speaker 3: for Bloombergers, but she's been really helpful in bringing some
Speaker 3: smart commercial real estate people into Bloomberg Radio, and we
Speaker 3: appreciate Abigail. She joins us here in our studio along
Speaker 3: with Scott Kelly. He's a founder and CEO of Ato's
Speaker 3: Capital real Estate. Scott's one of these guys. He's part
Speaker 3: of that Morgan Stanley real Estate mafia. They're everywhere. Anytime
Speaker 3: you see a commercial real estate person come in here
Speaker 3: with some money in their pockets talking to investing. They
Speaker 3: did a stint at Morgan Stanley real Estate and they
Speaker 3: just the best on the street as long as I've
Speaker 3: been on the street.
Speaker 4: Scott, thanks so much for joining us here.
Speaker 3: I guess my question is simply, where do you guys
Speaker 3: see the best value and opportunity in commercial real estate today?
Speaker 3: Are you going to the Lipstick Building or something like
Speaker 3: it on Third Avenue that's dealing with occupants issues.
Speaker 4: Are you looking at other places?
Speaker 8: Well, I would I'd make two points one. People have
Speaker 8: been us included anticipating this stressed wave of real estate
Speaker 8: which has not come as quickly as folks thought. But
Speaker 8: it's also inevitable just because the refinancing rates are totally
Speaker 8: disconnected from the underwriting of a bunch of these properties.
Speaker 8: So the answer is no, We're focused on places we
Speaker 8: can add value. And we've got a new company called
Speaker 8: waiver Tree Property Partners, which we've got development capabilities from
Speaker 8: guys that were with the Fract family for a long time.
Speaker 8: I mean, they're good developers. We think that the combination
Speaker 8: of financial expertise and development. Redevelopment is going to be
Speaker 8: the key to making money going forward.
Speaker 9: So a question that I have, Scott, is that we've
Speaker 9: all been waiting for this crash and commercial real estate,
Speaker 9: and there were some big headlines in twenty twenty three,
Speaker 9: there were some big office buildings that were defaulted on,
Speaker 9: But since then there really hasn't been that much. It
Speaker 9: seems like properties are still not trading maybe a couple
Speaker 9: here there, Is that true? And is there going to
Speaker 9: be a moment where all of a sudden a ton
Speaker 9: of properties are going to flood the market or is
Speaker 9: it just going to take a really long time to
Speaker 9: work this thing out?
Speaker 8: Well, your observation is absolutely true. You know, again, people
Speaker 8: have been waiting for the tidal wave of stuff to happen.
Speaker 8: And there's a where is it there's a billion Well,
Speaker 8: there's a billion dollar loan portfolio on the market right
Speaker 8: now from a foreign bank that's just getting out of everything,
Speaker 8: and some of it's performing, a lot of it's not.
Speaker 8: There are a couple more coming later this year. But interestingly,
Speaker 8: as we discussed previously, so much of this bad debt
Speaker 8: is held in you know, regional and community banks, and
Speaker 8: they're just extend it's extended and pretend you know they
Speaker 8: they're renegotiating the terms, they're they're putting out the maturities.
Speaker 4: They're never going to get repaid.
Speaker 8: Can they do that for Well, I think it's a
Speaker 8: regulatory matter. I think the regulators don't have they don't
Speaker 8: want to cause a banking crisis in an election year.
Speaker 8: So I think the thing that changes is after the
Speaker 8: election the regulators start to and again, this bank that's
Speaker 8: selling a billion dollar portfolio is because there is a
Speaker 8: European bank, and it's because the European regulators are saying,
Speaker 8: get rid of this trash. And so I think that
Speaker 8: doesn't happen until after the election. But after the election,
Speaker 8: I think it really does.
Speaker 9: Interesting, So twenty twenty five could be kind of painful.
Speaker 6: Yes, we've been talking a lot about Nvidia today and
Speaker 6: this hunger for AI and demand. I'm wondering how that
Speaker 6: is impacting commercial real estate. Are you seeing opportunities in
Speaker 6: data centers?
Speaker 8: Well, yes, I mean data centers are one of the
Speaker 8: data centers are one of the big Again, real estate,
Speaker 8: if you want to go by category, office has got issues.
Speaker 8: Retail got issues increasingly apartments due to some extent, but
Speaker 8: data centers have just been on fire, and you know,
Speaker 8: and there continues to be an almost unquenchable demand for
Speaker 8: data center capacity. So yeah, I think, I mean, I
Speaker 8: do think the bigger opportunity with AI and real estate,
Speaker 8: which we're working on with a partner, is to really
Speaker 8: synthesize the information in a way to help you make
Speaker 8: not just good commercial judgments, but informed commercial judgments, data driven.
Speaker 3: Scott, You've been in this business for decades, you and
Speaker 3: your team, everybody knows you, every banker knows every lender
Speaker 3: knows you. When you go out to buy a you know,
Speaker 3: a property today, you're the equity. Can you get a
Speaker 3: loan for your capital structure? Are the banks lending?
Speaker 8: Well, that's I mean, that's that, honestly is the big
Speaker 8: issue that yes, the banks are lending, but at terms
Speaker 8: which are radically different than most of the current owners anticipated.
Speaker 8: So you know, somebody that has borrowed money at three percent,
Speaker 8: all of a sudden they get a term sheet back
Speaker 8: from the bank and it's seven or eight percent at
Speaker 8: the same loan to value ratios. So that's what inevitably
Speaker 8: is going to cause a big turnover in a repricing
Speaker 8: of the industry. It just hasn't happened yet. And the
Speaker 8: subordinated lenders are you know, are in control of all
Speaker 8: these situations when that debt matures. It's just that, you know,
Speaker 8: rather than pull the trigger right now, the banks I think,
Speaker 8: have been encouraged to push it out for a year
Speaker 8: or two so that the problem is profound, it's identifiable.
Speaker 8: It's just going to take a while to come to fruition.
Speaker 9: I'm so interested in what you were saying about the
Speaker 9: regional banks because when you joined US about a year ago,
Speaker 9: you were saying that you thought that there could be
Speaker 9: a crisis once we put this election past. Us has
Speaker 9: enough extend and pretend to happen that twenty twenty five
Speaker 9: might not be awful. Do I mean, do you think
Speaker 9: that there could be a regional banking crisis if the
Speaker 9: regulators wake up?
Speaker 8: Well, I think it's going to take as we talked about,
Speaker 8: you know, I think this is going to be a
Speaker 8: slow burn. I mean, this isn't in RTC type situation
Speaker 8: where they're gonna you know, liquidate the I mean basically
Speaker 8: the government liquidated the whole savings and loan industry. So
Speaker 8: it's a huge opportunity that probably lasted twenty four months.
Speaker 8: This is not going to be that way because this
Speaker 8: debt is all over the place. It's in really you know,
Speaker 8: bad refinancing, you know condition. But it's going to be
Speaker 8: a slow burn as opposed to everything happening at once.
Speaker 8: So I think the answer is there's going to be
Speaker 8: a lot more distress in twenty five, but the opportunity
Speaker 8: is going to last for a while.
Speaker 4: For an investor Scott.
Speaker 3: Here in New York City, there's so many families that
Speaker 3: are just owned so much real estate here in New
Speaker 3: York City hav been so successful over generations. Any of
Speaker 3: them stressed right now, really financially stressed.
Speaker 8: Some that have been more active developing recently. I mean,
Speaker 8: I'm going to tell you who, but yes there are,
Speaker 8: I mean the long term owners who've owned for a
Speaker 8: long period of time. I mean, if you look at
Speaker 8: the New York market, if you own good office properties
Speaker 8: as an example, the one thing that's really happening in
Speaker 8: the office market here is that all these buildings are
Speaker 8: being heavily immendatized. You look at you know, the three
Speaker 8: star restaurants, the gyms, the places for you know, tenants
Speaker 8: to hang out. I mean that's the way that the classic,
Speaker 8: really high quality office buildings have been able to retain
Speaker 8: their tenants, and they're really in pretty good shape. A
Speaker 8: lot of those are owned by roots, which tend to
Speaker 8: be low leverage, and a lot of these families don't
Speaker 8: have a lot of leverage. The people that are stressed
Speaker 8: are the ones that have levered up to do new developments,
Speaker 8: you know recently, particularly in the office space that just
Speaker 8: haven't worked out. But there is going to be the
Speaker 8: winners and losers that if you have you know, class
Speaker 8: B C office buildings, those are going to be really tough,
Speaker 8: where the Class A ones continue to perform pretty well.
Speaker 3: What just thirty seconds, what percentage of in York real
Speaker 3: estate would you characterize this Class A oh ten?
Speaker 4: See that's my point.
Speaker 3: I think this is going to get ugly, and that's
Speaker 3: what I keep waiting for, and we just haven't seen.
Speaker 4: I don't know. I don't know how it's going to plan.
Speaker 4: I don't know.
Speaker 3: But here on Bloomberg Intelligence, we're going to continue to
Speaker 3: cover this commercial real estate business because you think it's
Speaker 3: really interesting. We've got smart people like Scott Kelly, founder
Speaker 3: and CEO of Ato's Capital real Estate, is also waiver
Speaker 3: Tree Property Partners managing. Remember there, and then our good
Speaker 3: friend Abigail Do, a little market supporter for Bloomberg News.
Speaker 3: Abigail's got so many great relationships here and we appreciate
Speaker 3: her sharing them with Bloomberg Radio.
Speaker 4: Here talking about the commercial real estate business. I don't know.
Speaker 6: It's all about gyms and offices.
Speaker 4: I guess. I don't know.
Speaker 3: Back in the day, I came in at nine o'clock,
Speaker 3: We worked like ten or eleven o'clock. We got dinner
Speaker 3: and a car home, and that was That was just plenty.
Speaker 6: Now you need a sawn it, I know.
Speaker 4: Now I need to sign it.
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Speaker 3: Let's switch over to Nvidia here. I mean Stock's down
Speaker 3: two point six percent.
Speaker 4: I don't know.
Speaker 3: I thought the numbers were darn good. I need some
Speaker 3: perspective on this name. I need some perspective on AI
Speaker 3: because to me and I think for a lot of
Speaker 3: listeners a lot of viewers, AI is still something new.
Speaker 3: It's a new technology. I'm not really sure what it is.
Speaker 3: But our next guest has been really helpful and explaining
Speaker 3: what AI is and explaining.
Speaker 4: What the opportunities are. That is Gene Munster.
Speaker 3: He's a managing partner co founder of Loop Adventures, one
Speaker 3: of the leading voices in my opinion on all things technology.
Speaker 4: Hey, Gene, thanks so much for joining us.
Speaker 3: Can you give us your take on what we heard
Speaker 3: from Nvidia last night and how we should think of
Speaker 3: in Nvidia and AI going forward.
Speaker 10: Well, my take starts with what is a misunderstanding related
Speaker 10: to I think the narrative around this quarter and the
Speaker 10: guidance specifically, and the narrative is that the guidance is
Speaker 10: not as exciting as it was in the past. And
Speaker 10: so a few months ago when they reported their April quarter,
Speaker 10: they guided the out quarter of the July quarter up
Speaker 10: by five point two percent. So that's kind of the bogie.
Speaker 10: That's how investors thought about this October guide last night,
Speaker 10: and they only guided October up by two and a
Speaker 10: half percent, and that diminishing return effectively on the upside
Speaker 10: is something that is dominated. I think this view that
Speaker 10: the second derivative is not working in the advantage of Nvidia,
Speaker 10: that's just not the beats are raises are not as exciting.
Speaker 10: But that view misses a critical point. And it is
Speaker 10: very clear, even though they were not clear on the
Speaker 10: call that this Blackwell chip, this next generation chip, was
Speaker 10: delayed by three months, and if you go back and
Speaker 10: listen to their earnings call three months ago, they were
Speaker 10: very clear. They use the word ramp in October. That's
Speaker 10: when the revenue is going to ramp for Blackwell, and
Speaker 10: now they're saying that that is going to ramp in
Speaker 10: the January quarter. So, Paul, if you take that revenue
Speaker 10: and basically bring it back into the October quarter, it's
Speaker 10: about three billion in revenue. They would have actually raised
Speaker 10: revenue by twelve percent, and I think so that's an
Speaker 10: acceleration from the five percent raise that they did three
Speaker 10: months ago. I think that is the reality is that
Speaker 10: this business continues to accelerate nicely.
Speaker 6: Gene. I think intuitively, investors when they see a stock
Speaker 6: that's run up so much so quickly, they get nervous
Speaker 6: that we've hit you know, we've hit euphoria, we've hit
Speaker 6: peak AI. What are you telling you know, those investors
Speaker 6: who are just skeptical of just how quickly this stock
Speaker 6: has moved up higher? What are you telling them? Because
Speaker 6: you are still owning in Nvidia at deep water.
Speaker 10: That's right, we still own this And I would tell them,
Speaker 10: I would just ask a question about just fundamentally, how
Speaker 10: do they see AI plane out over the next several years,
Speaker 10: and if you believe that this is going to be
Speaker 10: truly transformative more than for example, the smartphone or the internet,
Speaker 10: I would tell them that just continue to stay the course.
Speaker 10: This is a rocket ship. You can debate whether you
Speaker 10: have a window seat and that would be akin to
Speaker 10: your entry price to in Nvidia or an aisle seat.
Speaker 10: But either way, this ship is going to continue to
Speaker 10: go up. Because at the end of the day, is
Speaker 10: that in order for AI to come to its full
Speaker 10: capacity of general intelligence and eventually superintelligence, we need to scale.
Speaker 10: And scale requires not only more compute capacity, but more data.
Speaker 10: If you continue to need more compute and data, then
Speaker 10: in video is going to be a beneficiary of that.
Speaker 10: And so we also have a venture investing business. We
Speaker 10: invest in technologies. Some of them compete with what in
Speaker 10: video is doing, and we know from that side how
Speaker 10: difficult it is to close that gap, and so I
Speaker 10: think they will continue the market, will continue to need
Speaker 10: their chips to enable what I think is a very
Speaker 10: robust outlook for AI. And just to put a final
Speaker 10: thought on Emily, is that I think we're in a
Speaker 10: three to five year bowl market still early. I don't
Speaker 10: think we're even close to a peak. I understand why
Speaker 10: people are nervous when you see the movement in video
Speaker 10: of the last couple of years, but I think it's
Speaker 10: an uncomfortable truth about this market is it's going to
Speaker 10: continue to go higher.
Speaker 3: Hey, Gene, a reader just kind of piped up here
Speaker 3: and said, how about some of the competitors, like some
Speaker 3: of their customers might be competitors in terms of these
Speaker 3: chips frame that force.
Speaker 10: So some of the customers make their own chips. Microsoft
Speaker 10: makes its own chips. You also have companies like Google
Speaker 10: has their tensor chip, and so Amazon's working on different chips.
Speaker 10: And so these are the hyperscalers, and these are the
Speaker 10: parts of the business that have been kind of fueling
Speaker 10: a lot of the growth and if you just look
Speaker 10: at think about in total how much of their growth
Speaker 10: has come from the hyperscalers, it's probably about sixty percent
Speaker 10: over the last year. And so it's been really important
Speaker 10: at the end of the day, is that I continue
Speaker 10: to believe that they will the hyperscalers will start to
Speaker 10: add some of their own chips. They still don't have
Speaker 10: the performance. And this is the central point. Just because
Speaker 10: you're creating a chip doesn't mean that it has the
Speaker 10: same performance as Nvidio GPU. And a big part of
Speaker 10: the call last night was Jensen trying to educate investors
Speaker 10: about how the hyperscalers think about the return on investment
Speaker 10: and that there is a return on investment for spending
Speaker 10: these buying these more expensive chips, and so simply football
Speaker 10: is that just because they're working on chips doesn't mean
Speaker 10: that they are comparable to in videos GPUs A.
Speaker 4: Gene, thanks so much again for joining us.
Speaker 3: We really appreciate getting some of your time helping us
Speaker 3: really understand what's going on out there in the world
Speaker 3: of technology and in this.
Speaker 4: New phase of it.
Speaker 3: Including Ai Gene Munster, he's a Mansion partner. He's a
Speaker 3: co founder of Loop Adventures. He's based in Minneapolis. He's
Speaker 3: been covering to tech industry really for decades and gives
Speaker 3: us a good perspective on AI. And as I remember,
Speaker 3: Gen probably told us maybe a year ago, or maybe
Speaker 3: more than a year ago, kind of just how big
Speaker 3: AI is relative to things like, oh, I don't know
Speaker 3: the internet and the electricity, and he puts it in
Speaker 3: that context, and that kind of gives you a good
Speaker 3: frame of reference for perhaps how big this AI can
Speaker 3: be for everyone.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Just say Alexa play Bloomberg eleven thirty.
Speaker 3: Aside from Nvidia Emily, another big tech story out there's ASML.
Speaker 3: The Netherlands plans to limit ASML Holding's ability to repair
Speaker 3: and maintain its semiconductor equipment in China, a potentially painful
Speaker 3: blow to Beijing's efforts to develop a world class chip industry.
Speaker 3: So that tech cold war seems to be pretty hot
Speaker 3: out there these days.
Speaker 4: Let's get some latest on that. We'll do that with
Speaker 4: Sarah Jacob.
Speaker 3: She's an Amsterdam beurea reporter for Bloomberg News, joining us
Speaker 3: from Amsterdam via Zoom Sarah.
Speaker 4: This seems like a pretty big step.
Speaker 3: By the Netherlands government to limit ASML's business with China.
Speaker 4: Give us the background.
Speaker 1: Well, essentially, the Dutch government will likely not renew certain
Speaker 1: ASML licenses to service and provide spare parts for its
Speaker 1: chip equipment when some of those licenses expired the end
Speaker 1: of this year. The move is expected to cover ASML's
Speaker 1: top of the line machine So we're talking to v machines,
Speaker 1: which are deep ultra lithography machines. We know that ASML's
Speaker 1: most advanced ship making equipment are sold with maintenance agreements,
Speaker 1: So a decision to limit ASML's ability to repair and
Speaker 1: maintain those machines could could make at least some of
Speaker 1: those machines inoperable in China as soon as next year.
Speaker 6: And what was the rationale behind this ban?
Speaker 1: Well, the Biden administration has sought to limit China's advances
Speaker 1: in the semiconductor sector for some time now, and it
Speaker 1: has implemented sweeping export controls on China on the sale
Speaker 1: of advanced chip making equipment over citing national security grounds.
Speaker 1: So we have also previously reported that the administration, the
Speaker 1: administration has raised the possibility of opposing the FDPR, which
Speaker 1: is essentially a rule that allows American officials to control
Speaker 1: the flow of foreign products built with even the tiniest
Speaker 1: amount of you know, technology originating from the US. And
Speaker 1: in this context, the US has sort of also been
Speaker 1: urging the Dutch government in many of its allies to
Speaker 1: align their China controls with the US. So that's sort
Speaker 1: of the backdrop for this move.
Speaker 3: You know, what percentage or how big is China for ASML?
Speaker 3: Because I'm looking at the stock. The stock's actually up today.
Speaker 3: I thought it would have been down and down maybe materially.
Speaker 8: Well.
Speaker 1: China, yes, China is you know, accounts for about half
Speaker 1: of a SML sales, So we do expect if this
Speaker 1: were to be announced, it would impact smls sales and
Speaker 1: these new curbs would put a SML and the same
Speaker 1: constraints that US pers such as you know, applied materials
Speaker 1: are is experiencing. But the implications of such a move
Speaker 1: also is for China, right, it's in terms of obtaining
Speaker 1: most spare paths brings and maintaining machines are critical to
Speaker 1: the smooth operation of a chip plant, and China relies
Speaker 1: on a SML's emotion DUV lithography systems to advance its
Speaker 1: ship making technology. So for China it would be a
Speaker 1: blow to in its efforts to develop its SCHIP industry,
Speaker 1: could make it difficult for Huawei and Semiconductor Manufacturing International
Speaker 1: cop to make breakthroughs in their current capability.
Speaker 6: Is this ban expected to then If it's not going
Speaker 6: to be good for the huaweis of the of the world,
Speaker 6: is it better then for US chip companies? Is that
Speaker 6: the idea.
Speaker 1: Here I s it's essentially just part of this broad
Speaker 1: uh broad uh you know or planned by the Biden
Speaker 1: administration and its allies to sort of limit China's advances.
Speaker 1: So that's the real goal over here. And SML being
Speaker 1: you know, one of the largest and in you know
Speaker 1: uh so makes makes this most advanced ship making equipment
Speaker 1: that others don't have in the world, is very critical
Speaker 1: in this whole plan across with the US and the
Speaker 1: Dutch government.
Speaker 3: What extent, Sarah is the feeling within you know, the
Speaker 3: Netherlands that this is a SML just following US policy
Speaker 3: versus maybe acting a little bit more independently.
Speaker 4: How willingly is a SML doing this?
Speaker 5: Well?
Speaker 1: Uh, this is this is coming from the Dutch government.
Speaker 1: So the Dutch government under Prime Minister Mark Rutter, which
Speaker 1: was the previous prime minister, had resisted US pressure to
Speaker 1: add is just new restrictions on servicing, arguing that, you know,
Speaker 1: they needed more time to evaluate how the the the
Speaker 1: export bands had taken effect. But we say with the
Speaker 1: new administration, Dutch Prime Minister Dick Scorefolio this month said
Speaker 1: the government has good negotiations with US in Japan and
Speaker 1: he expects the will end with good results. So we'll
Speaker 1: have to see.
Speaker 3: Sarah Jacob, thank you so much for joining us. Really
Speaker 3: appreciate that. Sarah Jacob. She's at Amsterdam bureau reporter for
Speaker 3: Bloomberg News. How cool is it when you got news
Speaker 3: coming out of Amsterdam. We have a bureau there, and
Speaker 3: we have an expert right there that we can talk to.
Speaker 3: That is the power folks of Bloomberg News. Matt Winkler
Speaker 3: building that with Mike way way back in the day,
Speaker 3: and we can tap into that.
Speaker 4: For Bloomberg Radios's great stuff.
Speaker 3: Sarah Jacob Amsterdam Brewer reported there on ASML.
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