Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.
Speaker 2: Tomorrow after the Bell in Video will deliver its highly
Speaker 2: anticipated fourth quarter results. This is the world's most valuable
Speaker 2: company and without a doubt, it's been the biggest beneficiary
Speaker 2: of that big surge that we have seen in spending
Speaker 2: on artificial intelligence over the past two years. Still there
Speaker 2: are questions about whether data center operators will ease their
Speaker 2: expenditures on artificial intelligence. Joining me now for a closer
Speaker 2: look as Daniel Newman. He is the CEO of Futurum Group. Daniel,
Speaker 2: it's always a pleasure. Thank you for joining us. You
Speaker 2: have called in Vidia's earnings kind of a national holiday
Speaker 2: in its own way. Make that case for me.
Speaker 3: Well, we've seen over the last eight quarters it's become
Speaker 3: the pivotal moment in the market, and over the last
Speaker 3: two or three quarters you basically see the entire reflection
Speaker 3: of what's happened with the other mag six companies kind
Speaker 3: of culminate with this last report that comes out of
Speaker 3: in Vidia, and unlike a lot of the other big earnings, Doug,
Speaker 3: you'll see media folks like US analysts talking about this,
Speaker 3: not just for days leading.
Speaker 4: Up, it's weeks.
Speaker 3: Of talk about what is going to happen and is
Speaker 3: in Vidia the bell weather of the future of AI
Speaker 3: in trade?
Speaker 2: So the stock was down today about two point eight percent.
Speaker 2: Over the last five trading days, I think we're off
Speaker 2: about nine percent, and today and Video broke below that
Speaker 2: two hundred day moving average. I know you're not a technician,
Speaker 2: but is that a troubling sign.
Speaker 3: I think this is the most pessimistic view I've seen
Speaker 3: from the broader equities markets. Communities insist in video, though
Speaker 3: it is every tech company. If you were a fast
Speaker 3: growth liar like a Palenteer, you didn't see nine percent pullback,
Speaker 3: you saw thirty percent pullback. In Vidia has accelerated and
Speaker 3: pulled back, And of course it's felt like almost every
Speaker 3: Sunday there's some piece of news. It's out to take
Speaker 3: down the markets, it's taken down crypto, it's deep seek,
Speaker 3: and so all these things are happening right now, and
Speaker 3: it's kind of left in Video just right around where
Speaker 3: it was six months ago. It's kind of just bouncing around.
Speaker 4: But I'm not worried.
Speaker 3: I think the trades very much intact very early ray So.
Speaker 2: You mentioned deep seek there. I'm curious to get your
Speaker 2: take as to whether or not the development of that
Speaker 2: R one chatbot really kind of forces the market to
Speaker 2: recalibrate this notion of how much spend is necessary to
Speaker 2: get some of the most advanced AI without committing a
Speaker 2: great deal to you know, some of these advanced chips.
Speaker 3: I think you think it did the opposite. I think
Speaker 3: upon initial reflection of what we read and what we
Speaker 3: saw come out of that team and out of China,
Speaker 3: it did look that way. But what we've found is
Speaker 3: that through all of these sort of we've found the cheaper,
Speaker 3: dirtier way to do AI moments, it actually turns out
Speaker 3: that we need more compute, and it's going to happen
Speaker 3: for a couple of different reasons. We will certainly see
Speaker 3: techniques put into place that will enable more efficient compute
Speaker 3: out of existing llms, that will develop and create more utilization.
Speaker 3: But in the end that additional utilization is going to
Speaker 3: scale exponentially. And so you've heard Sati Nadell and others
Speaker 3: talk about Jevan's paradox. But we are at you know,
Speaker 3: we are aggressively building out the infrastructure of the future.
Speaker 3: But in terms of consumption, and this is why a
Speaker 3: lot of people call AI a bubble, we are very
Speaker 3: early in consumption. You know, Microsoft spending eighty five billion
Speaker 3: on infrastructure build out in data centers and they are
Speaker 3: able to show around thirteen billion in revenue. That model
Speaker 3: doesn't work over a long period of time. So when
Speaker 3: does that turn a corner where that eighty five billion
Speaker 3: is going to re turn more than eighty five billion
Speaker 3: in a short period of time, like the period of
Speaker 3: time in which this technology stays relevant.
Speaker 2: So I'm glad you're mentioning Microsoft there, because on Monday
Speaker 2: we had a report from TD Cowen indicating that Microsoft
Speaker 2: has canceled some leases for US data center capacity. And
Speaker 2: with this news a lot of concern over whether or
Speaker 2: not this company is securing more AI compute in terms
Speaker 2: of capacity than it needs in the long term. I mean,
Speaker 2: that seems to be a real question.
Speaker 3: Yeah, this is another one that I think got a
Speaker 3: little overblown. And let me tell you why the channel
Speaker 3: checks not wrong. There is some cancelations going on in
Speaker 3: the market, but what was not appropriately calculated in that
Speaker 3: report was Microsoft's overbuying. And so a number of analysts
Speaker 3: out there, and I've read some of these reports that
Speaker 3: looked at these channel checks actually determined that if Microsoft
Speaker 3: had not pulled back a little bit on some of
Speaker 3: its build out, it would have been well above the
Speaker 3: capex commitments that analysts have. So the capax is very
Speaker 3: much attach. And actually Microsoft came out and said that
Speaker 3: now these are you know, decade plus long buildouts that
Speaker 3: are taking place. And while I do expect some EBB
Speaker 3: and flow, and I do expect at some point these
Speaker 3: returns have to come from all of this infrastructure investment,
Speaker 3: I think the trade still intact. And one of the
Speaker 3: thing that's worth noting about Microsoft is there is a
Speaker 3: little bit of this movement with Stargate and the role
Speaker 3: of open Ai, and then of course Microsoft's relationship with
Speaker 3: open ai is pivoting. As open ai is looking at
Speaker 3: its own chips, it's looking at more of its own infrastructure.
Speaker 3: And so these kind of projects that are going on
Speaker 3: in tandem are also going to impact Microsoft's builds a
Speaker 3: little bit because Microsoft was such a provider to open
Speaker 3: ai in its early era.
Speaker 2: I'd like to get your view on what we heard
Speaker 2: yesterday in terms of Apple's commitment to invest over five
Speaker 2: hundred billion for new AI projects, particularly in Texas. A
Speaker 2: lot of this is focused on the construction of data
Speaker 2: center tech technology. Is this a bet that you would
Speaker 2: want to be behind? In terms of what Apple is
Speaker 2: doing right now?
Speaker 3: It's really in vogue to build in the US and
Speaker 3: President Trump that's a big focus of his. Tim Cook
Speaker 3: and Trump. President Trump have been meeting. Clearly they've made progress.
Speaker 3: I think there's a lot to be excited about the investment.
Speaker 3: I'm a Texan. I love seeing companies come and build
Speaker 3: in Texas. Having said that, I have a lot of
Speaker 3: questions about Apple, It's AI strategy, its ability to execute.
Speaker 3: It has made commitments in the past to build large
Speaker 3: factories and production facilities in Wisconsin and other places that
Speaker 3: haven't quite come to fruition. It's great when they announce,
Speaker 3: it's better when they build, and it's even better when
Speaker 3: they start to produce higher and create economic value through
Speaker 3: these commitments. But it's a positive in its sentiment.
Speaker 2: We had news here in the US late in the
Speaker 2: day Monday on the Trump administration sketching out tougher versions
Speaker 2: of those export curbs for semiconductors to China. This was
Speaker 2: something that was initiated by the Biden administration. It seems
Speaker 2: like the Trump administration wants to get tougher when you
Speaker 2: look at US China and this war that may exist
Speaker 2: in terms of the development and the adoption of certain
Speaker 2: AI platforms. Is this something that the US is going
Speaker 2: to win hands down or is there a real risk
Speaker 2: in terms of what China is doing that we have
Speaker 2: to be from the Western perspective on GUARD I would.
Speaker 3: Characterize any underestimation of China and it's resolved to lead
Speaker 3: the world in anything it does, as a mistake. I
Speaker 3: believe that China will push the boundaries, including obtaining GPUs
Speaker 3: potentially through gray markets, and we know there's some question
Speaker 3: around that with deep seek. Having said that, I think
Speaker 3: the West has found a largely an agreement, whether that's
Speaker 3: the Dutch with ASML, whether that's Japan and Korea, whether
Speaker 3: that's Taiwan, the US to have limited access to the
Speaker 3: most advanced semiconductors as well as the machinery and some
Speaker 3: of the materials required to build them. I mean, economic
Speaker 3: prosperity for the next multiple decades is going to be
Speaker 3: based on the parts of the world that are leading
Speaker 3: in AI, and that's not to say other parts of
Speaker 3: the world can't succeed. But I genuinely believe that President
Speaker 3: Trump understands that winning an AI is critical to his presidency.
Speaker 3: It's critical to the national security of the United States
Speaker 3: and the West, and I do think that him and
Speaker 3: his team are going to be steadfast to make sure
Speaker 3: that the US does not lose its AI advantage under
Speaker 3: his watch.
Speaker 2: So we were talking about the AI startup and Thropic
Speaker 2: finalizing of funding round worth about three and a half billion,
Speaker 2: and we were told when we discover that news that
Speaker 2: it would give Anthropic, this is the company behind the
Speaker 2: chatbot claude evaluation of around sixty one and a half billion.
Speaker 2: Does that seem about right to you? Are these numbers
Speaker 2: a little inflated?
Speaker 4: Do you think so?
Speaker 3: It's hard to believe when you do the comps of
Speaker 3: the well established companies that do not have sixty billion.
Speaker 3: I mean, you know that Intel's floating around one hundred
Speaker 3: and guess it has its problems, but it has a
Speaker 3: fifty plus billion dollar products business and fabs all over
Speaker 3: the world. And this company's like open AI and Anthropic
Speaker 3: do it, you know, sub five billion dollars of revenue
Speaker 3: and they lose money, so it is difficult at times
Speaker 3: to understand. But I think any of us yourself myself included,
Speaker 3: who've been around long enough, No, there's a difference between
Speaker 3: kind of disruptive secular trendsetters and how those companies are
Speaker 3: valuated and sort of long established enterprises. But having said
Speaker 3: all that, I think the llms are rapidly being commoditized.
Speaker 4: I think open.
Speaker 3: Ai has real threats in some of the big incumbents,
Speaker 3: including Google and open source like a meta And I
Speaker 3: do think these valuations are quite frothy and without a
Speaker 3: large IPO for a real uh you know, uh current
Speaker 3: to take it to take it out to these valuations
Speaker 3: in terms of revenue and profitability, I do think it's
Speaker 3: risky for investors that are coming in these late rounds.
Speaker 2: Dan, we'll leave it there. Thank you so much for
Speaker 2: joining us and helping us look ahead to the earnings
Speaker 2: Wednesday after the bell from Nvidia. Daniel Newman is the
Speaker 2: CEO of Futureum Group, joining us here on the Daybreak
Speaker 2: Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm
Speaker 2: Deek Chrisner. Stocks and Asia are moving lower. This is
Speaker 2: after a disappointing print on us consumer confidence, and this
Speaker 2: in turn is fueling concern about the health of the
Speaker 2: American economy, the world's largest. We heard from Daniel Lamb,
Speaker 2: he is head of equity strategy at Standard Chartered Wealth Solutions.
Speaker 2: He spoke earlier with Bloomberg scherry On and Heidi Stroud Watts.
Speaker 1: We're seeing in Nvidia sort of at the cheapest levels
Speaker 1: going into earnings in about a year. Given the importance
Speaker 1: of this software the broader market, could it really salvage
Speaker 1: this equity rally that we've seen in the US, especially
Speaker 1: after the Magnificent seven fell into correction territory Now.
Speaker 5: Well, there are new factors at play nowadays in the markets.
Speaker 5: So the DEEPSEK is a big factor. If you look
Speaker 5: at the gap between Chinese equities and the mascor country
Speaker 5: world equities, the Chinese equities are still trained at forty
Speaker 5: five per cent discount, which is more than month standard
Speaker 5: deviation away from the ten year average. So basically what
Speaker 5: we're seeing is that there has been rotation of funds
Speaker 5: from US equities.
Speaker 4: Into Chinese ones.
Speaker 5: So that's what's been happening in terms of the variation
Speaker 5: that highlighted, and also the possibilities that China tech had
Speaker 5: to offer. So before people were seeing that the US
Speaker 5: tech is the only game in town.
Speaker 4: Now things are a little bit different.
Speaker 1: This is what the broader markets think. But Daniel, when
Speaker 1: I look at your notes, you're actually pretty neutral on
Speaker 1: Chinese equities and you still prefer the US.
Speaker 4: Why.
Speaker 5: Okay, So there are few things so Chinese equities overall
Speaker 5: we're neutral, but within Chinese equities we are favorable on
Speaker 5: the technology stocks. So it is a story of high
Speaker 5: end versus lower end. So previously US technology the only
Speaker 5: game in towne but now things need to be differentiated
Speaker 5: because the Chinese deep seek shows that they're capable of
Speaker 5: entering that tech space applied at the lower end level,
Speaker 5: and basically people have to take account of that. In
Speaker 5: the longer term, what we see is that the US
Speaker 5: is still going to be dominating in the high end.
Speaker 4: Of the tech space, right They're gonna take.
Speaker 5: That and keep that. But then the Chinese, you know,
Speaker 5: they do have a share of that. Okay, So right now,
Speaker 5: because of the expensive valuation in the US tech, you
Speaker 5: probably will see a little bit more rotation to come
Speaker 5: in the near term, but in the long term we're favorable.
Speaker 6: I wanted to ask a bit more about what you
Speaker 6: say is sort of opportunistic moments in China, right, what
Speaker 6: are you looking for the part at this point?
Speaker 5: Well, at this moment in time, we've seen a big
Speaker 5: rally in the Handsing index right from just below nineteen
Speaker 5: thousand to above twenty three thousands, So that's pretty fast
Speaker 5: and furious. So in the near term there could be
Speaker 5: some correction, especially with the chip restriction news coming to
Speaker 5: the US.
Speaker 4: But then our point is.
Speaker 5: That if you know they can make something like deep Seak,
Speaker 5: then the box been opened, right. There are the possibilities
Speaker 5: available for different Chinese technology sectors, So that's what will
Speaker 5: be keeping the market going about China tech. Probably there
Speaker 5: will be you know, some correction, but then hangs in
Speaker 5: to about twenty one thousand and six to twenty two
Speaker 5: thousand is good level of entry for the longer term investors.
Speaker 6: For a longer term investor, taking a look at Indian
Speaker 6: stocks and fifty to fifty is trading near the lowest
Speaker 6: level since about June house the sort of sentiment there,
Speaker 6: do you think that now kind of presents a good
Speaker 6: value point to re.
Speaker 5: Enter well in terms of variations back to five year
Speaker 5: average for Indian equities right now.
Speaker 4: I believe that the long term opportunities still exist. The
Speaker 4: government's budget has.
Speaker 5: Been stimulatory in various areas, so that's encouraging.
Speaker 4: The earnings is still reasonable. But then at this moment
Speaker 4: in time, I think.
Speaker 5: People are just more focused on the China story right
Speaker 5: now because it's been very quiet for a long long
Speaker 5: time in China, so people are focusing on that. But
Speaker 5: Indian equality, we do believe that on the twelve on
Speaker 5: horizon there's upside from here.
Speaker 1: On the other hand, it's been pretty noisy when it
Speaker 1: comes to Japanese equity markets, just because of the interest
Speaker 1: that we've seen from global investors. What will a stronger
Speaker 1: Japanese yen mean for the equity markets here and that
Speaker 1: rally that we saw last year, can it continue into
Speaker 1: twenty twenty five.
Speaker 4: I think Japanese.
Speaker 5: Equities you've got to be more differentiative, right, So we
Speaker 5: have a neutral overall, but in terms of the sectors,
Speaker 5: areas that we like will be the financials because we
Speaker 5: do see that the Bank of Japan is going to
Speaker 5: be pretty much the only central bank that will be
Speaker 5: tightening this year and stronger and STPU curve is favorable for.
Speaker 1: The financials Daniel Lam, head of Equity Strategy Stander Chartered
Speaker 1: Whilst Solutions.
Speaker 2: There Thanks for listening to today's episode of the Bloomberg
Speaker 2: day Break Asia Edition podcast. Each weekday, we look at
Speaker 2: the story shaping markets, finance, and geopolitics in the Asia Pacific.
Speaker 2: You can find us on Apple, Spotify, the Bloomberg Podcast
Speaker 2: YouTube channel, or anywhere else you listen. Join us again
Speaker 2: tomorrow for insight on the market moves from Hong Kong
Speaker 2: to Singapore and Australia. I'm Doug Prisoner and this is
Speaker 2: Bloomberg