Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hide in New York
Speaker 1: and v Lovelow in San Francisco.
Speaker 2: This is Bloomberg Tech coming up in Vidia's strong revenue forecast.
Speaker 2: SOUTHS investor concerns about an AI bubble. Our exclusive conversation
Speaker 2: with CEO Jensen one plus the.
Speaker 3: CEO of Palo Alto Networks joins us to discuss its
Speaker 3: own results and the latest acquisition to boost its AI offerings.
Speaker 2: An AI pioneer Yan Laccoon, will depart Meta at the
Speaker 2: end of the year to start a new company.
Speaker 4: Details later this hour.
Speaker 3: Now we focus in on the broader markets. We said
Speaker 3: yesterday so in video, so the market, So the market
Speaker 3: follows in Vidia higher, but we're at one point percent.
Speaker 3: Then that's that one hundred a breath of relief when
Speaker 3: it comes to AI anxiety instead, So it's a quelled,
Speaker 3: a bit ed, and not enough even to reshaking off
Speaker 3: some of the anxiety that comes with the jobs report
Speaker 3: that maybe maybe we could see a December rate cut.
Speaker 3: We built up a little bit the bond market pricing
Speaker 3: in now thirty five percent chance of a rate cup
Speaker 3: come December, but really all eyes on this AI trade
Speaker 3: today and all.
Speaker 4: Eyes on in video.
Speaker 2: The stock is up about three percent, had opened up
Speaker 2: about five percent and has paired some of that gain
Speaker 2: in the last half hour or so. Sixty five billion
Speaker 2: dollars of sales in the fiscal fourth quarter. Many see
Speaker 2: that as being healthily above consensus. There was a lot
Speaker 2: of fighting talk on the demand side, on the supply side,
Speaker 2: and how good in videous technology is. We spoke with
Speaker 2: Invidious CEO Jensen Wong in an exclusive interview post earnings.
Speaker 2: Take a listen.
Speaker 5: Sales are after charts for Blackwell and in video GPUs
Speaker 5: in the Cloud are sold out. We got plenty of
Speaker 5: Blackwells to sell you. We have lots of Blackwells coming,
Speaker 5: We're making a lot of Blackwells, and we have a
Speaker 5: bunch of Vera Rubens coming, and so business is very,
Speaker 5: very strong. But we've planned our supply chain incredibly well.
Speaker 5: We have the largest supply chain in the world. But
Speaker 5: we've got a bunch of black Wells to sell.
Speaker 2: Jensen I tried to go through what the CFO collect
Speaker 2: Cress said about China in the quarter gone. It seemed
Speaker 2: like there was not meaning for H twenty sales because
Speaker 2: the demand wasn't there even if you were permitted to
Speaker 2: sell EAH twenty and then in the current period and
Speaker 2: going forward in video, seems committed to working with both
Speaker 2: the United States and China to sell what COLLECT called
Speaker 2: more competitive compute. Where do we stand with that and
Speaker 2: could you just clarify what COLLECT was talking about in
Speaker 2: the current state of play for China.
Speaker 5: The most important thing she said is that we've said
Speaker 5: for time now our forecast for China is zero. All
Speaker 5: of our forecasts, that guidance that we showed zero, we
Speaker 5: should start. That's the most important thing that she said.
Speaker 5: She also said that effectively, China is a very important
Speaker 5: market to us. It's very important to the United States,
Speaker 5: It's very important to China. We would love the opportunity
Speaker 5: to be able to re engage the Chinese market with
Speaker 5: excellent products that we deliver and to be able to
Speaker 5: compete globally.
Speaker 2: During the call, the US Commerce Department issued a statement
Speaker 2: saying that you are now permitted to export up to
Speaker 2: thirty five thousand black Well chips each to both saudiast
Speaker 2: Humane and to the UAE through G forty two. But
Speaker 2: there are some requirements that the US has a view
Speaker 2: in particular around controls of preventing tech transfer to China
Speaker 2: through the Middle East. What can you tell us about
Speaker 2: your understanding of what the US government's asking of you there.
Speaker 5: That element has been around for a long time is
Speaker 5: to prevent diversion. Of course, over the years, people have
Speaker 5: speculated about diversion. We've chased down every single concern and
Speaker 5: we've repeatedly tested and sampled data centers around the world
Speaker 5: and found no diversion. And so this is an area
Speaker 5: that will continue to be rigorous on. And there's a
Speaker 5: lot of different ways to comply, and one of them,
Speaker 5: of course, is to have it be run by American cloud.
Speaker 5: Another way is just to make sure that we have
Speaker 5: measures put in place, whether technology or processes, to ensure
Speaker 5: that no diversion happens.
Speaker 3: In video CEO Jensen Huang speaking to us exclusively last night,
Speaker 3: let's dig in to that last bit from Jensen and
Speaker 3: dressing concerns around selling to them, at least selling into China.
Speaker 3: From Maxcina editor Mike Shepard can break down what is
Speaker 3: currently happening at the White House level. There's a pressure
Speaker 3: on Congress in particular to allow Jensen Wang and Nvidia
Speaker 3: to have greater access to some of these so called adversaries.
Speaker 6: What are you hearing, well, what we're hearing is that
Speaker 6: the White House would like Congress to hold off on
Speaker 6: legislation that would force Nvidia to put American customers first
Speaker 6: ahead of adversarial nations like China. And of course, Nvidia
Speaker 6: is proscribed from selling to China right now by US
Speaker 6: export controls and even by Beijing rejecting those aged twenty
Speaker 6: chips that we've talked about. That of one American authorization
Speaker 6: to be sold inside China, Nvidia has been looking for
Speaker 6: permission to do more, and that includes selling a deprecated
Speaker 6: version of its market leading Blackwell chip to China. Jensen
Speaker 6: Wang sees being able to compete in China as key
Speaker 6: to being able to compete around the world. But this
Speaker 6: measure is seen as really putting the handcuffs on Nvidia
Speaker 6: and on Ada as well, and both companies have moved
Speaker 6: against this.
Speaker 4: The bill is called the Gain Act.
Speaker 6: It would be attached to a piece of legislation that
Speaker 6: must pass. It governs defense policy, and it has bipartisan support.
Speaker 6: But now the White House is weighing in and seeking
Speaker 6: to get it pulled from the legislation, and it's unclear
Speaker 6: what would emerge in its place, because right now, Caro,
Speaker 6: there really is no uniform code governing export controls, especially
Speaker 6: as applied to China. And that's because if we go
Speaker 6: back all the way to the beginning of the year,
Speaker 6: and it seems so long ago, the Biden administration had
Speaker 6: tried to impose this AI diffusion rule, this framework that
Speaker 6: would prevent tech from leaking from allies like Saudi Arabia,
Speaker 6: like the UAE to China, and we don't really have
Speaker 6: anything here yet in place in Washington. So you see
Speaker 6: the China hawks on Capitol Hill and even inside the
Speaker 6: administration grasping for an alternative in this bill, which the
Speaker 6: White House is not trying to head off.
Speaker 4: Is at least an attempt at that.
Speaker 2: Shed last night was a little bit an issue of
Speaker 2: timing in chronology. So during the call the Analyst School,
Speaker 2: the Commerce Department put out a statement confirming that Nvidia
Speaker 2: is now allowed to export blackwell to the Gulf States.
Speaker 2: Is that just kind of rubber stamping something we knew
Speaker 2: was coming.
Speaker 6: We have widely expected this approval to come through, but
Speaker 6: it does take some time to work its way through
Speaker 6: the guts of the bureaucracy, but there is also a
Speaker 6: hurdle to overcome, and that is the concerns as we
Speaker 6: just discussed, that the technology does risk leaking to every
Speaker 6: serial nations, especially China, and that is because both the
Speaker 6: Saudis and the Amortis have had long standing business ties
Speaker 6: with China, and China's Huawei Technologies has a footprint in
Speaker 6: each of those two nations, and the concern is that
Speaker 6: the proximity of Huawei to American technology in a data
Speaker 6: center creates risk of some sort of leakage, either through
Speaker 6: software or something else, and that is something that the
Speaker 6: US government was really trying to seek assurances on. We
Speaker 6: don't have details on what was required of the emordis
Speaker 6: and include also of the companies, and you did your
Speaker 6: best in asking Jensen for specifics on that, but he
Speaker 6: really dug in on the whole broader question of diversion,
Speaker 6: and that is something that the company has been sensitive about.
Speaker 6: They have insisted that they know your customer programs have
Speaker 6: done enough to prevent diversion, and yet that hasn't assuaged
Speaker 6: all the concerns of China hawks here in Washington that
Speaker 6: advanced American technology could eventually leak back to China and
Speaker 6: somehow support its military and intelligence bureaucracies.
Speaker 2: Bloomberg's Mike Shepard, thank you very much. Let's get back
Speaker 2: to the Nvidia in the earning story. Ioko your Showcus
Speaker 2: portfolio consulting director at Wealth Enhancement Group one hundred and
Speaker 2: twenty four point five billion dollars in assets onder management
Speaker 2: and a pretty healthy chunk of Nvidia shares as well.
Speaker 4: I feel like.
Speaker 2: Gensen one was trying to give the trifecta a positive
Speaker 2: picture on demand, positive picture on supply, and even had
Speaker 2: the opportunity to kind of throw a bit of shade
Speaker 2: at A six or Google TPUs, saying that customers looked
Speaker 2: at alternatives and they came back to Nvidia. There was
Speaker 2: a lot there. What is the most important data point
Speaker 2: to you.
Speaker 7: Hied, Good to see you. Perhaps maybe the most important
Speaker 7: one was that Jensen wasn't wearing his signature leather jacket.
Speaker 7: But for the most part, for us, the when you
Speaker 7: look at the financials and when you look at the
Speaker 7: growth rate that Nvidia has posted and really delivering beyond
Speaker 7: expectations for where consensus estimates were, that was the most
Speaker 7: important metrics for us as we listen to the call.
Speaker 2: What I tried to do at the beginning of the
Speaker 2: conversation was get a sense of how supply constrained they
Speaker 2: are and how conservative that five hundred billion dollar forecast
Speaker 2: through the end of next year is.
Speaker 4: Let's start there. Listen to this.
Speaker 5: Sales are off the charts for Blackwell and and video
Speaker 5: GPUs in the cloud are sold out. We got plenty
Speaker 5: of black Walls to sell you. We have lots of
Speaker 5: Blackwells coming, We're making a lot of Blackwells, and we
Speaker 5: have a bunch of Vera Rubens coming, and so business
Speaker 5: is very very strong.
Speaker 2: Is that five hundred billion dollar figure which excludes China
Speaker 2: and is Blackwell Rubin through the end of calendar twenty
Speaker 2: six a bit conservative?
Speaker 7: Well, we heard analysts ask that question, right, and they
Speaker 7: have visibility into that five hundred billion dollar number, and
Speaker 7: so that doesn't include sort of the demand that will
Speaker 7: be coming forward in the next you know, fourteen to
Speaker 7: eighteen months, and so it perhaps is conservative. And I
Speaker 7: think that's the part that's so difficult for all of
Speaker 7: us to really wrap our heads around. These numbers are
Speaker 7: so large and they're growing at such a rate that
Speaker 7: we haven't seen before that it really becomes you know,
Speaker 7: for most of us, we're all skeptical that this is
Speaker 7: going to happen at the rate that it continues to
Speaker 7: happen at.
Speaker 3: What was interesting was the depreciation question was tackled. This
Speaker 3: is what's got Michael Burry and Itzzy. It's got what
Speaker 3: many have been seeing as a little bit of anxiety
Speaker 3: that ultimately the consumersm in video chips have been saying, look,
Speaker 3: these last longer than some had anticipated. But really it
Speaker 3: was made clear that the A one hundreds, the older
Speaker 3: type of chips are still working six years on. Ioka.
Speaker 3: Did that put that anxiety to bed?
Speaker 4: Yeah.
Speaker 7: I think it was a great way for collect to
Speaker 7: sort of clap back at that depreciation argument. You know
Speaker 7: that we are still using these older chips. They are
Speaker 7: still getting consumed simply because the demand is so great.
Speaker 7: So I do think there was a little bit of
Speaker 7: that that was put to rest and a relief I
Speaker 7: think from investors to an extent that they were still
Speaker 7: being utilized.
Speaker 3: To that extent, there's a relief today and we are
Speaker 3: up two percentage point Syoko. But I feel as though
Speaker 3: the entire market is a bit of an anxious boyfriend
Speaker 3: at the moment, trying to have soothing words currently given
Speaker 3: to it from whomever they can class and say, hey,
Speaker 3: I girlfriend in many ways, but what are you thinking
Speaker 3: of in terms of that this will soothe for the
Speaker 3: longer term? Are we're going to need weekly updates that
Speaker 3: we're not in some sort of bubble?
Speaker 7: You know, it is really difficult to sort of wrap
Speaker 7: our heads around. I think on one hand, we do
Speaker 7: see all of the demand continuing to grow at these
Speaker 7: exponential rates, But on the other hand, you see all
Speaker 7: this circularity and financing that I think concerns all of us,
Speaker 7: and then all of us who kind of grew up
Speaker 7: during the sort of tech bubble era. We've kind of
Speaker 7: seen this movie before, and we don't want it to
Speaker 7: end the way that it ended back in two thousand
Speaker 7: and So there's a lot of push and pull and
Speaker 7: a lot of monitoring on a daily, weekly, quarterly basis.
Speaker 7: And I think that's why in Video's earnings calls continue
Speaker 7: to be sort of the super Bowl of you know,
Speaker 7: equity investors sort of you know the calendars.
Speaker 2: What about in Video's valuation specifically, do you feel comfortable
Speaker 2: with that.
Speaker 7: You know, it's trading at twenty times next year's numbers,
Speaker 7: it's growing revenue at sixty percent, it's growing earnings at
Speaker 7: fifty plus percent. You know, it's there are reasonable valuations.
Speaker 7: They are not astronomical at like we saw during the
Speaker 7: tech bubble.
Speaker 8: However, you know.
Speaker 7: It's still relatively expensive. And it all hinges upon the
Speaker 7: duration of this growth rate. You know, does this continue
Speaker 7: at these levels for three five years or is it
Speaker 7: just this sort of near term twelve month growth rate
Speaker 7: that we're seeing. And I think that's this anxious investor
Speaker 7: base that's sort of watching this. When does the growth
Speaker 7: rates start to deteriorate?
Speaker 9: What?
Speaker 3: According to Blomberg analysis, if you're looking at what the
Speaker 3: general consensus is by twenty twenty eight, revenue growth is
Speaker 3: going to have slowed to twenty six percent. Just in
Speaker 3: twenty twenty seven, it will have slowed to forty five percent.
Speaker 3: But it's not just the law of ever greater numbers.
Speaker 3: I mean, we're already almost a five trillion dollar company.
Speaker 3: How can we expect it to keep growing at sixty
Speaker 3: percent out into twenty twenty eight and above?
Speaker 7: And I think that's the thing that's the skepticism that
Speaker 7: really sort of creeps into you know, the investor mindset
Speaker 7: is that how large can this get? And the numbers
Speaker 7: when you start to just grow at sixty percent plus
Speaker 7: year after year, it's just astronomical. And yet you know,
Speaker 7: Jensen's talking about three to four trillion dollars of annual
Speaker 7: spend for data center and AI infrastructure, and you know,
Speaker 7: if all of that or a good portion of that
Speaker 7: goes to Nvidia, the numbers continue to grow, and then
Speaker 7: you know the hyperscalers will grow as well because that
Speaker 7: benefits their cloud revenue. So it's just something that we
Speaker 7: continue to keep monitoring and we'll have to see each
Speaker 7: quarter not just from Nvidio, but from all of the
Speaker 7: tech ecosystem in terms of how large this AI platform
Speaker 7: is going to become.
Speaker 3: Okay, Yeshioka, it's always great to get your analysis from
Speaker 3: Welfare Enhancement Group.
Speaker 10: We thank you.
Speaker 3: Now, coming up AI pioneer Jan Lacun. He's leaving Meta
Speaker 3: to launch his own startup. What's next for him and
Speaker 3: what it says about Meta's own AI plans that's next?
Speaker 3: This is Bloomberg Tech.
Speaker 2: Jan Lukun, one of the so called godfathers of AI,
Speaker 2: is leaving his role at Meta to launch his own startup.
Speaker 2: Rumors of his departure have been swirling from more than
Speaker 2: a week, and it comes as the social media giant
Speaker 2: makes big changes to its AI efforts, including forming a
Speaker 2: new AI app lab earlier this summer and spending billions
Speaker 2: to high.
Speaker 4: New talent Bloom. As Kurt Wagner break the story I see.
Speaker 2: After we published our report, Jan Lkin posted on LinkedIn
Speaker 2: referring to rumors and clarified a few things. But I
Speaker 2: guess let's start with why he's leaving, what he's doing,
Speaker 2: where he's going.
Speaker 11: Yeah, So Jan Lucuhn is an AI researchature in sort
Speaker 11: of every sense of the term. He is looking at
Speaker 11: things on a very long time horizon. And as Meta
Speaker 11: has come into this sort of AI fight that we're
Speaker 11: seeing right now with open Ai and Google and Anthropic,
Speaker 11: they had really started to focus their AI efforts on
Speaker 11: the here and now, right on the chatbots, on the lms,
Speaker 11: the things that consumers are using today, and so Lacuhn's
Speaker 11: work is years of not decades, sort of down the line.
Speaker 11: And what we had heard in our reporting is that
Speaker 11: because of Meta's focus, he was starting to have trouble
Speaker 11: getting the resources that he felt he needed in order
Speaker 11: to do his research. The focus was certainly on things
Speaker 11: that were not what he was paying attention to, and
Speaker 11: ultimately Meta was going in a bit of a different direction,
Speaker 11: I think on AI than what he envisioned. And so,
Speaker 11: as you mentioned ed, this was something that had been
Speaker 11: discussed and sort of talked about really since this summer
Speaker 11: when they started pivoting towards the superintelligence effort, and you know,
Speaker 11: they did try to leave on good terms. Meta is
Speaker 11: going to be sort of involved in some capacity in
Speaker 11: his new startup, but it was time for him to
Speaker 11: move on and do his research elsewhere.
Speaker 3: Yeah, he describes as advanced machine intelligence, more sensory information,
Speaker 3: more physical AI. In many ways, the story articulates how
Speaker 3: the tide moved against him, and he certainly executives moved
Speaker 3: against him because Alexander Wang came in and sort of
Speaker 3: superseded him.
Speaker 4: Yeah.
Speaker 11: Well, lacun is a legend in the AI industry, or
Speaker 11: he's considered a quote godfather of this entire field. And
Speaker 11: yet when Meta decided to build this new lab the
Speaker 11: summer TV deal and go out and Acchoir essentially Alexander
Speaker 11: Wang from Scale Ai.
Speaker 4: He became Jan mccun's boss, right.
Speaker 11: I think he's more than thirty years younger, obviously very
Speaker 11: different type of expert in terms of AI, and so
Speaker 11: there was a feeling sort of in that moment where Okay,
Speaker 11: if they have this legendary AI researcher in the building
Speaker 11: and yet they're still going outside the company to bring
Speaker 11: in people to run their new AI effort, what is
Speaker 11: that signal right for John's future here? And I think
Speaker 11: again this was something that in some ways was a
Speaker 11: long time coming because of the fact that he is
Speaker 11: so forward and future looking with what he does, and
Speaker 11: Meta is fighting sort of for its AI life right
Speaker 11: here and now. But I think that layering of executives
Speaker 11: over the summer was probably another big reason that he's leaving.
Speaker 3: Today, and a big supporter of open sourcing that perhaps
Speaker 3: metas shifted slightly away from as well. Rumos Coo Wagner,
Speaker 3: great breakdown, Thank you very much. Indeed, while coming up,
Speaker 3: we'll talk about the Chinese university shaping the country's AI
Speaker 3: sector and its future startup leaders. This is blom Beg Tech,
Speaker 3: China's Singua University, but it's having an outsized impact on
Speaker 3: the country's AI industry and the school's professors and students.
Speaker 3: They received more patterns each year than MIT, Stanford, Princeton,
Speaker 3: Harvard combined. Let's go out to bluembg's executive tech editor
Speaker 3: Peter Elstrom for more on all this signifies about China's
Speaker 3: AI ambitions. They are wholly focused on making sure that
Speaker 3: they have many, many more experts and potential employees of
Speaker 3: the future.
Speaker 12: Yeah, Qingwa is a very prestigious university. For many years,
Speaker 12: it's educated the best in the brightest, especially in science
Speaker 12: and engineering in China. But what's really changing now is
Speaker 12: you're seeing this momentum in AI in particular. A couple
Speaker 12: things are feeding into that. First of all, Deep Seek.
Speaker 12: The success of Deep Deep Seek in its breakthrough model
Speaker 12: earlier this year really gave a lot of confidence to
Speaker 12: these young students that they too could build businesses that
Speaker 12: would be very, very successful. In addition to that, Chi
Speaker 12: Jinping and the Communist Party have been calling on the
Speaker 12: tech sector in China to be able to build in
Speaker 12: a number of very key areas for them, strategically important
Speaker 12: areas for them, especially AI. So you can get government funding,
Speaker 12: you can get tax subsidies, there's a lot of momentum
Speaker 12: to be able to build businesses, so the students there
Speaker 12: feel like they have a lot more opportunities in front
Speaker 12: of them. Venture capitalists are coming, They're funding a lot
Speaker 12: of these businesses. We're seeing quite impressive AI startups coming
Speaker 12: out of Chinwan the rest of China, Peter.
Speaker 2: As part of this Bloomberg Big Take, you look at
Speaker 2: the alumni that have gone away founded key startups, but
Speaker 2: also that those that have quite senior jobs at China's
Speaker 2: biggest technology companies. What are the best examples we need
Speaker 2: to know about.
Speaker 12: Well, Chinua has put their graduates in a number of
Speaker 12: different places, including leading companies like Ali Babo, which has
Speaker 12: done a lot of impressive work with the Gwen model
Speaker 12: in particular, bte Dance, the parent company of TikTok, and
Speaker 12: they founded startups like Jipu, which is another cutting edge
Speaker 12: company there. And really what you're seeing is this massive students.
Speaker 12: China graduates many more STEM graduates than the United States,
Speaker 12: and they have done that for many years. So you're
Speaker 12: seeing three and a half million students at last count,
Speaker 12: compared to eighty thousand in the United States. So it's
Speaker 12: a big magnitude difference for them in particular, and now
Speaker 12: they're able to get this kind of funding to be
Speaker 12: able to build up their tech sector, and you're seeing
Speaker 12: these impressive startups come out of the country's technology opportunities
Speaker 12: in the university city. Universities like Changhwa are also starting
Speaker 12: up their own incubators where students can get funding. They
Speaker 12: run a short tank like competition to be able to
Speaker 12: give these kids a chance to pitch their stories and
Speaker 12: possiblely get funding for them too.
Speaker 2: Bloomberg's Peter Elstrom, thank you very much on the latest
Speaker 2: big take. Actually, since we come to air on Bloomberg Tech,
Speaker 2: you see Nvidia kind of pairing some of its gains.
Speaker 2: We're up one point seven percent the way off session highs,
Speaker 2: and that's having an impact.
Speaker 4: Of course at the index level.
Speaker 2: I think about the NAZAQ one hundred or the S
Speaker 2: and P five hundred, and from a waiting perspective, in
Speaker 2: Vidia is the top dog, so market's kind of losing
Speaker 2: a bit of steam. We're going to get back to
Speaker 2: that key in Nvidia earnings forecast and help understand why
Speaker 2: some of the enthusiasm around AI and some of the
Speaker 2: concern around the bubble is dissipating a little bit. This
Speaker 2: is Bloomberg Tech. Welcome back to Bloomberg Tech. In market,
Speaker 2: it's in video, it's really off its session high is
Speaker 2: now actually in the last thirty minutes or so, we've
Speaker 2: gone from a gain of around three percent, we're now
Speaker 2: at one point seven percent. But part of the story
Speaker 2: when that Nvidia print hit was some belief that the
Speaker 2: AI investment cycle as and staying power. You saw neo
Speaker 2: clouds like Call, we've really jump in after hours last night,
Speaker 2: still up three percent on core. We've in the session
Speaker 2: that had been much higher at one point. Gensen Wong
Speaker 2: name checked quite a lot of model labs, and you
Speaker 2: know Google was including on that continues to be at
Speaker 2: record at high as Alphabet parent company of Google. Although
Speaker 2: I keep reminding myself that Gemini three, which we went
Speaker 2: over this week was trained on TPUs, and of course,
Speaker 2: as part of that interview and part of the Only School,
Speaker 2: gensle one carrow through a bit of shade some of
Speaker 2: the alternative to in Vidia's GPU offering.
Speaker 3: Saying they keep on coming back even when they're using rivals.
Speaker 13: Let's talk about video a bit more.
Speaker 3: Bloomberg US secuitis reporter come and Ryinikey is here and
Speaker 3: you had a great story really talking about how much
Speaker 3: in video was hinge and on the rest of the
Speaker 3: market mood and it on in video talking about that basically,
Speaker 3: we're anxious about AI spending. It seems as it offered
Speaker 3: some well relief rally, but why are we fighting it?
Speaker 14: Well, I mean we're really seeing like so goes in video,
Speaker 14: so goes the rest of the market. And you're right,
Speaker 14: this report was really overwhelmingly positive. And you know, we
Speaker 14: did see a share spike sort of immediately after popped
Speaker 14: in after hours, it was up this morning. It seemed
Speaker 14: to be broadening out into other AI names. But I
Speaker 14: think what we might be seeing now is just a
Speaker 14: little bit of fatigue. I spoke to at least one
Speaker 14: investor that said they were actually surprised and thought the
Speaker 14: move was quite.
Speaker 13: Muted for how good the report was.
Speaker 14: You know, the revenue guidance was great, and then they
Speaker 14: even sort of doubled down in this five hundred billion
Speaker 14: dollar forecast.
Speaker 13: And so they might do even better than that.
Speaker 14: That's hugely bullish, and you know, shows that spending for
Speaker 14: AI is set to continue. So we could just be
Speaker 14: seeing some fatigue here some shakeout, and video shares are
Speaker 14: still up forty percent this year, and over all the
Speaker 14: Nasdaq has done really well and valuations are high. So
Speaker 14: we could just see a little bit of thrashing here
Speaker 14: because of that.
Speaker 2: On the so goes and Video so goes the market
Speaker 2: point which corners of the technology sector. Did we see
Speaker 2: Mate moves even though it's fading a bit now because
Speaker 2: of Nvidia, and I guess, like I've been looking at
Speaker 2: the neo clouds, but it's broader than that.
Speaker 14: Yeah, it was actually very broad based. So we did
Speaker 14: see the neoclouds move, like you mentioned, you know, core Weave,
Speaker 14: nebuus were up after hours, but we even saw you
Speaker 14: know rival chip makers move. AMD was up, Broadcom was up,
Speaker 14: you know, Marvel was up, Micron, the other hyperscalers, you know,
Speaker 14: the mag seven names, so Meta, Alphabet, Microsoft, although I
Speaker 14: think that's dipped into the red just now, and Alphabet
Speaker 14: you know, closed at another record high yesterday and was
Speaker 14: extending those games as well. So we did see some
Speaker 14: you know, broad based moves that seem to be linked
Speaker 14: to AI optimism in those AI names, and you know,
Speaker 14: just seeing a little bit of a turn there now.
Speaker 3: Micronsat show you off by now five percent. I mean,
Speaker 3: it's had a phenomenal rally this year. Are we going
Speaker 3: to keep needing adrenaline hits to sustain as we as
Speaker 3: we see more broadly, investors tie up their books as
Speaker 3: we go into the market, what are some of the
Speaker 3: narratives that they're going to have to face? The AI
Speaker 3: trade versus the FED, versus rebalancing.
Speaker 14: Will you make such a good point, which that there
Speaker 14: are all these other macro backdrop things happening that are really.
Speaker 13: Important and are also weighing on the market.
Speaker 14: It's not just in Vidia as much as we're focused
Speaker 14: on that. So yes, they're going to need some AI reinvigoration.
Speaker 14: I think everybody's also really watching if we're gonna get
Speaker 14: more cuts from the FED.
Speaker 13: That's going to be really important.
Speaker 14: And I think that maybe optimism is a little dull
Speaker 14: for the end of the year. I've definitely heard people
Speaker 14: say that they're not expecting a Santa Claus rally, which, well,
Speaker 14: you know, we'll see it will be kind of a
Speaker 14: sad Christmas without one. But you know, it might be
Speaker 14: that just valuations are stretched, investors are looking to take
Speaker 14: some of their profits into the end of the year
Speaker 14: and then see what twenty twenty.
Speaker 2: Six, Luoma's Carmen ron Nicky. Great to have you back
Speaker 2: on bloombog Tech. Thank you very much. Let's get some
Speaker 2: more Wall Street reaction to Nvidia's print. Joining us now
Speaker 2: Ruben Roy Steefel apply technology analysts by rating on Nvidia
Speaker 2: maintaining a two hundred and fifty.
Speaker 4: Dollars price target.
Speaker 2: Let's start just with the outlook for the fiscal fourth
Speaker 2: quarter around sixty five billion dollars depending on where you
Speaker 2: stood going into that, that is meaningfully above consensus to
Speaker 2: some how do you react to that data point?
Speaker 8: Yeah, the data.
Speaker 9: Point is that the slope of the spend is continuing
Speaker 9: to move higher, and I think that that was a
Speaker 9: concern going into the print, especially after Jensen sort of
Speaker 9: let the cat out of the bag on how strong
Speaker 9: demand has been going with the five hundred billion dollars
Speaker 9: of backlocks that you talk about at GPC back in October,
Speaker 9: and you know, I think expectations because of that had
Speaker 9: increased going into to expectations for the results for the
Speaker 9: October quarter as well as the guidance and so you know,
Speaker 9: with with the acceleration of revenue in both the October
Speaker 9: quarter versus July, and then further acceleration into the January quarter.
Speaker 9: I think that took away, you know, some of the concerns.
Speaker 9: And then you know, the commentary on the call, which
Speaker 9: I thought was very important, was that they're obviously taking
Speaker 9: more orders. And so I think you just talked about this,
Speaker 9: which is that there could be you know, not could
Speaker 9: be there will be further upside to that five billion
Speaker 9: dollars backflog as we think about twenty six. You know,
Speaker 9: one of the things in addition to the slope increasing
Speaker 9: is that the runway here is increasing. So we get
Speaker 9: a lot of questions from investors around sustainability.
Speaker 8: Of the spend.
Speaker 9: Obviously, the hyperscalers have been increasing capex on a quarterly
Speaker 9: basis for quite a while right now. But you know,
Speaker 9: these types of data points would suggest that the runway
Speaker 9: on the spend and the demand for AI compute continues to.
Speaker 8: Lengthen.
Speaker 9: And so I think I think those are very strong
Speaker 9: data points for the ANI trade from you know, looking forward.
Speaker 2: Reuben, just as you were speaking, and Vidia's gain is
Speaker 2: now just nine tenths of a percent in a session.
Speaker 2: I'm not saying that's your fault. That's just curious time.
Speaker 2: The base case assumption is zero revenues from China. You know,
Speaker 2: Jensen could not have been more clear about that. But
Speaker 2: does that not then give give quite a lot of
Speaker 2: opportunity for some upside if they can get the China
Speaker 2: situation resolved.
Speaker 8: Yeah, I think I think that's right.
Speaker 9: I think, you know, at some point it is likely
Speaker 9: that we'll see you know, companies that can video and
Speaker 9: potentially am D and others figure out ways to work
Speaker 9: with both governments. The company talked about this on the
Speaker 9: call last night. But you know, to your point, even
Speaker 9: without China, and you know this came up on last quarter.
Speaker 9: I mean they had to beat in another raids without
Speaker 9: you know, any h twenty assumptions in the guidance. But
Speaker 9: you know, even with without that, you do have what
Speaker 9: I mentioned, which is the hyperscale CAPEX going up. And
Speaker 9: I think something that is still not fully appreciated is
Speaker 9: the rate at which sovereign governments are spending on AI.
Speaker 8: So you know, we talk about the five.
Speaker 9: Major hyperscalers in the United States and the capex budgets
Speaker 9: that are growing there. But and video is doing you know,
Speaker 9: quite a bit of growth and sovereign nation AI deployments,
Speaker 9: and I think that that's something that's going to continue
Speaker 9: as well. So even without China, obviously there's a big
Speaker 9: demands backdrop here, and like I said, that backdrop is
Speaker 9: extending into sort of a multi year investment cycle.
Speaker 3: Jensen and the company more broadly really spelled out again
Speaker 3: they own ninety percent of the AI accelertor market or
Speaker 3: the data center market. Is that going to change? You
Speaker 3: just reference AMD?
Speaker 9: Yeah, you know, I think you know, at some point
Speaker 9: you will see, you know, just it's for nothing else,
Speaker 9: you know, capacity that am D that's I'm sorry, video
Speaker 9: can bring to the table, you know, could could enable
Speaker 9: others to participate here. The hyperscalers obviously have their own
Speaker 9: AGA platforms that they're trying to bring to the market.
Speaker 9: But I think, you know, the way to think about
Speaker 9: this is that the overall TAM assumptions continue to rise.
Speaker 9: Right So a year ago or so, we were talking
Speaker 9: about multiple hundreds of billions of dollars and potentially I
Speaker 9: compute TAM and now we're talking about trillions of dollars.
Speaker 9: Right so in video's talk about one to three trillion dollars.
Speaker 9: AMD you had an analyst meeting just a few weeks
Speaker 9: ago where they talked about a million dollar I'm sorry,
Speaker 9: a trillion dollar TAM as you get out to the
Speaker 9: end of the decade, and as that TAM increases, even
Speaker 9: if in Video's share comes down, which it likely will.
Speaker 9: I think you know this concept of all boats rise.
Speaker 9: You know, they're going to continue to grow revenue and
Speaker 9: our view, you know, just on the overall TAM assumption increasing.
Speaker 3: Ruben Roy Stephel great to have your analysis on the show.
Speaker 3: Thank you very much. Indeed, this is the market continues
Speaker 3: to fade, but we've got some more earnings for you. Next.
Speaker 3: Parallel So Network CEO joining us to discuss the report.
Speaker 3: The latest acquisition that's next. This is a Bloomberg Tech
Speaker 3: Let's dig into earnings a little bit more now, but
Speaker 3: this time is Palo Alto Networks, a cybersecurity firm reporting
Speaker 3: sixteen percent increase in revenue. That was yesterday, but it
Speaker 3: also announced a three point four billion dollar plan to
Speaker 3: acquire Chronosphere. It's a boost to its AI enabled cybersecurity offerings.
Speaker 3: Palo Alto Network CEO nikosha Urra joins us for more now,
Speaker 3: and look, your stock is lower because many is saying
Speaker 3: it's an M and A well digestion risk that maybe
Speaker 3: is being faced here. You put twenty five billion dollar
Speaker 3: offer into cyber Arc, now another M and A piece.
Speaker 4: Why does it work for you?
Speaker 8: Well, Carol, I'm nice to see you.
Speaker 10: This is our twenty eighth acquisition in about seven and
Speaker 10: a half years, and we've demonstrated to the market that
Speaker 10: we have been able to to establish our business and
Speaker 10: adjacent markets for the last seven years by paying attention
Speaker 10: to the market, looking at where the puck is going,
Speaker 10: understanding what is important for our customers, and I think Coronosphare,
Speaker 10: which is our latest acquisition, fits right.
Speaker 8: Banks make in the middle of where the market's going.
Speaker 8: If you look at what you.
Speaker 10: Guys were talking about before this, you're talking about in
Speaker 10: Vidia AMD. Eventually, all this compute power is going to
Speaker 10: result in people building faster and more and more relevant
Speaker 10: applications the end consumer or enterprises. All those applications have
Speaker 10: to be observed and make sure they don't have problems
Speaker 10: or go down.
Speaker 8: And that's what coronos Fair does.
Speaker 10: It observes applications and infrastructure, make sure you have nine
Speaker 10: nine point nine percent uptime, and then we are going
Speaker 10: to combine that with our agentic capabilities to make sure
Speaker 10: agents will go fix that if they go down. So
Speaker 10: I think it's a phenomenal opportunity going forward. It's fine,
Speaker 10: the stock will recover. I think investors are beginning to
Speaker 10: understand the story's all right.
Speaker 3: I mean, obviously has not performed price target two fifty,
Speaker 3: well above where you are, and they're saying that you're
Speaker 3: a top tist software vendor seeing AI tailwinds as it
Speaker 3: grows ahead of industry pairs. But how does observability take
Speaker 3: you into a whole new ecosystem that you're now fighting
Speaker 3: data dog, diner trace? Why is that the right total
Speaker 3: addressable market for you? As well as security.
Speaker 8: Well, observability is a space.
Speaker 10: As I said, as we get more and more AI deployed,
Speaker 10: we're going to need more and more real time capability,
Speaker 10: real time capability and actions, real time capability and applications.
Speaker 8: Real time capabilities required ninety nine point nine to nine percent.
Speaker 10: Availability, which means you have to make sure your infrastructure
Speaker 10: is always up and running.
Speaker 8: If it has a problem, you should be able to
Speaker 8: fix it right away.
Speaker 10: Sort of similar to security, we also have to watch
Speaker 10: security on a constant basis, make sure something happens, we
Speaker 10: fix it right away.
Speaker 8: So actually, over the last ten to fifteen years, if
Speaker 8: we look.
Speaker 10: There are companies who've tried to play in both spaces,
Speaker 10: and typically that ended up really well in one side
Speaker 10: not the other. We've not made a foray into observability
Speaker 10: because we never thought we could build it organically. We
Speaker 10: don't have the skill set. But we went out looking
Speaker 10: for data pipelining. We found Chronosphare Cronos Fair has some
Speaker 10: of the best engineers in the space. Observably suffers from
Speaker 10: two problems. One is too expensive and two it doesn't
Speaker 10: scale well well. Cruisers solve that problem. It is two
Speaker 10: and a half times cheaper than anybody else on the market,
Speaker 10: and two it could scale to giggle what size in
Speaker 10: terms of what is needed from an AI perspective. So
Speaker 10: we think the time is right, the asset is right,
Speaker 10: and the opportunity is right.
Speaker 2: Taken in aggregate, that is an astonishing amount of M
Speaker 2: and A. Is there any reason why you can't just
Speaker 2: keep going and keep using M and A as the
Speaker 2: tool to position the platform where you want it in
Speaker 2: a kesh.
Speaker 10: Look, in the last seven and a half years, i'd say,
Speaker 10: thirty percent of our opportunity has been created by strategic
Speaker 10: and timely m and a seventy percent of our opportunity
Speaker 10: has been on organic innovation as a company.
Speaker 8: Now that's worked out really well for us.
Speaker 10: Even now we've announced two big deals cyber Arc and Chronosware. Collectively,
Speaker 10: we're going to spend slightly hundred thirty percion dollars. But
Speaker 10: that gave us the confidence to increase our tour gets
Speaker 10: for ARR in five thirty by five billion dollars. If
Speaker 10: I can go spend thirty billion dollars and buy five
Speaker 10: billion dollars of AR five years.
Speaker 8: So now I do that every day.
Speaker 3: Let's go back to the fundamentals of where you are
Speaker 3: already r PO, in particular remaining performance obligation growth. It
Speaker 3: was strong in the court to just announce, but when
Speaker 3: you're pushing out to the fiscal twenty twenty six, our
Speaker 3: own intelligence ana and is just a little bit worried
Speaker 3: about the slowdown in growth.
Speaker 4: Are you worried about it?
Speaker 10: You know when I started seven and a half, he's
Speaker 10: go a two billion dollar company. RPR now has fifteen
Speaker 10: and a half billion dollars, set a target of twenty
Speaker 10: billion dollars in ARR.
Speaker 8: Those are big numbers.
Speaker 10: So I think part of what people fail to understand
Speaker 10: is absolute numbers get bigger and bigger on the margin
Speaker 10: growth rates change. But I think from a pro capability perspective,
Speaker 10: if we start doing twenty billion dollars in ARR, we'll
Speaker 10: be generating ten or fifteen billion.
Speaker 8: Dollars a free cast flow year.
Speaker 10: That's a far cry from where we started at a
Speaker 10: few hundred dollars seven years ago. So I think you
Speaker 10: have to look at it from a slightly multi year perspective.
Speaker 8: From that perspective, we think we're well positioned.
Speaker 10: We think this is going to be the largest cybersecurity
Speaker 10: in company in the world world, and we have aspirations
Speaker 10: to take it and double the triple to where.
Speaker 8: We are.
Speaker 4: Right now.
Speaker 2: Any given technology company might use a dozen several dozen
Speaker 2: different tools across cyber and AI, right and your pitch
Speaker 2: is you just put everything in one place, you know,
Speaker 2: offer a suite of things in one place.
Speaker 4: Is that strategy working to.
Speaker 2: Convince software companies in particular that it's better it's come
Speaker 2: to paramount to networks then do business with a handful
Speaker 2: of different players.
Speaker 10: Yes, of course it is working. We call that platformization APA.
Speaker 10: So we continue to at fifty to seventy five customers
Speaker 10: every quarter and sometimes more in about the fourth quarter.
Speaker 10: But I think more importantly look at the evolution of technology.
Speaker 10: Almost every industry, vertical and technology has started that way.
Speaker 8: From the application.
Speaker 10: Perspective, people had fifteen or twenty different vendors that you
Speaker 10: did the entire solutioning for CRM. Today we see single
Speaker 10: vendors platforms in CRM, same thing in HR. And I
Speaker 10: used to work in programming twenty five years ago. We
Speaker 10: used to have multiple applications that solved the problem. Today
Speaker 10: there's one platform, same thing in ITSM. I think the
Speaker 10: same thing is coming to cybersecurity. Cybersecurity is a twenty
Speaker 10: year old industry. It usually takes thirty thirty five years
Speaker 10: to build that platform capability in industries and make them
Speaker 10: become ubicuous.
Speaker 8: So I think we're the right place right time. We
Speaker 8: are seeing that move towards platformization.
Speaker 10: If you look at what happened most recently a few
Speaker 10: weeks ago, there was an attack using an ALLLM.
Speaker 8: That means the I was used.
Speaker 10: By bad actors to go and attack customers and they
Speaker 10: were able to do it in real time. You have
Speaker 10: to have real time capability on your side to defend yourself.
Speaker 10: The only way to deliver real time capability in your
Speaker 10: side is to not have a mess of forty or
Speaker 10: fifty products. The idea is to have them all be consolidated,
Speaker 10: running on a singular data layer, and building agents that
Speaker 10: go and defend you, just the way bad actors are
Speaker 10: using agents can attack you.
Speaker 2: In case, we just very briefly dropped into negative territory
Speaker 2: and then as that one hundred having been up at
Speaker 2: one point two point four percent.
Speaker 4: And the story this.
Speaker 2: Morning when I woke up was that in Vidia's forecast,
Speaker 2: it's print with soothing fears that we have about an
Speaker 2: AI market bubble. This might be the last chance I
Speaker 2: get for a while, so I'm going to do it.
Speaker 2: Give me the nikeshur nikesh Aurora.
Speaker 4: Cool. Are we or are we not? In an AI bubble?
Speaker 8: Look, we are in an exuberant phase of AI.
Speaker 10: I think it is the fastest technology evolution we've seen
Speaker 10: in our lifetimes, and I don't think it's about to stop.
Speaker 10: You can see huge bets being made by almost everybody.
Speaker 8: I think there's a lot of promise.
Speaker 10: You are seeing the consumer case, I think we underestimate
Speaker 10: how much the entire consumer landscape is changing, and it's
Speaker 10: going to change in the next twenty four months. The
Speaker 10: idea of having applications where we have to go to
Speaker 10: all the work ourselves is going to become our gane.
Speaker 10: You know, you'll have agents that'll go book your Uber,
Speaker 10: we'll go get your food from door dash, we'll book
Speaker 10: your airline ticket. We can all imagine a future like that.
Speaker 10: We all want a future like that. It's going to
Speaker 10: require significant amounts of compute at the end. So I
Speaker 10: think from an infrastructure perspective, in history, if you've never
Speaker 10: had a situation where we built infrastructure, it didn't get
Speaker 10: consumed if we wanted more. So I don't think the
Speaker 10: infrastructure problem is a real problem. Whether the demand comes
Speaker 10: right away or it comes an ear or two later,
Speaker 10: I think that time will tell. But from a demand
Speaker 10: from a technology fit, we're there. From an AI perspective,
Speaker 10: enterprises are slightly lagging that consumer adoption, but I think
Speaker 10: they're actually working hard to get there. You know, every
Speaker 10: time we do some AI experimentation internally, we come back
Speaker 10: and say, Wow, that is cool. I wish we could
Speaker 10: deploy that faster across the entire enterprise. So I think
Speaker 10: the demand's going to come. The timing is up to
Speaker 10: you guys. You guys follow that on a daily basis.
Speaker 8: We don't. We put our heads down and see where
Speaker 8: am I going to be three to five years from now?
Speaker 8: How do I position power out a network in that context?
Speaker 8: And are we going to plot our way there?
Speaker 10: And if we think that AI opportunity is going to
Speaker 10: create explosive opportunity for almost every technology subsector and even cybersecurity.
Speaker 2: Palle alto network see Nikesha raw. It's great to have
Speaker 2: you back on Bloomberg Tech. Thank you very much. Now
Speaker 2: coming up, what more on in video is the company
Speaker 2: is set to get a global boost from Middle East
Speaker 2: steals for AI chips. We're going to get the house
Speaker 2: view from Bloomberg Intelligence.
Speaker 4: Next, this is Bloomberg Tech.
Speaker 2: The US has approved the sale of tens of thousands
Speaker 2: of AI chips to the UAE in Saudi Arabia, a
Speaker 2: move that could further cement in videos global dominance. Bloomberg
Speaker 2: Intelligence senior analyst con Jensavani wrights the US approval of
Speaker 2: Blackwell GPU's four golf stations quote is tangible proof of
Speaker 2: sovereign AI momentum. What we're trying to do con Jan
Speaker 2: is take that five hundred billion dollar figure which takes
Speaker 2: us through Canada twenty six and find some upside and
Speaker 2: you think it's in sovereign AI.
Speaker 4: It is.
Speaker 15: And just for context, as five hundred dollars figure was
Speaker 15: already about five to six percent above consensus said of yesterday,
Speaker 15: this new deals that they announced, the three to four
Speaker 15: new deals mostly on the sovereign could add five around
Speaker 15: billions of dollars on top of that if they were
Speaker 15: able to execute well and the supply keeps coming.
Speaker 3: On and yet shares and now down three tens of
Speaker 3: a percent, we're negative. We were raised all of our
Speaker 3: gains on the day. And then as that follows suit,
Speaker 3: why wasn't this enough to ease concerns? Do you think
Speaker 3: what was there anything left that you needed to hear
Speaker 3: Knjin fundamentally know.
Speaker 15: I mean, this was one of the more bullish quarters
Speaker 15: or earnings we have seen from in media, not just
Speaker 15: in terms of the three Q four Q numbers, which
Speaker 15: by the way, they blew pass the loftiest byside bogies,
Speaker 15: but reaffirming their five hundred billion target. The key point
Speaker 15: that people are missing is holding gross margin to mid
Speaker 15: seventies even when way for HBM packaging costs are all rising.
Speaker 15: If you're able to hold that and execute that, that
Speaker 15: speaks a lot about their pricing power.
Speaker 2: I just want to play your samdbite from Gensuwang about
Speaker 2: Vera rub and listen to.
Speaker 5: This billions of dollars. Yeah, and so for our Ruben system,
Speaker 5: a one gig of our data center is probably something
Speaker 5: along the lines of fifty to fifty five and vidious
Speaker 5: contribution is probably about thirty five of that.
Speaker 2: That's data on some confusion for the cell side content.
Speaker 2: Just to explain your view on it real quick.
Speaker 15: Yeah, when you think about the total cost it takes
Speaker 15: to build a data center, I mean we're talking about
Speaker 15: fifty to sixty percent just going to one company taking
Speaker 15: up a whole That bomb how important that is and
Speaker 15: what that mode speaks to. I don't think the debate
Speaker 15: around a sken GPU is going to go away, but
Speaker 15: this should give some investors key factual data points that
Speaker 15: despite we are going to see a future where companies
Speaker 15: will do risk management and vendor diversity and have a
Speaker 15: six or of second mertue supplier but the dominant share
Speaker 15: will still go to.
Speaker 3: N media contry and Savani. I'm pretty back intelligence me.
Speaker 8: Thank you.
Speaker 3: That does it for this edition of Boomberg Tech ed
Speaker 3: we are in negative territory to end the show.
Speaker 2: Yeah, it's an astonishing turnaround in the first couple of
Speaker 2: hours the session. And as like one hundred now down
Speaker 2: half percentage point and video downholf percentage point. That's worth
Speaker 2: a recap on the pod. You know where to find it.
Speaker 2: From New York and San Francisco. This is Bloomberg Tech