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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Through China reportedly telling its tech companies stop buying Nvidia's

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Speaker 2: AI chips. You know what, even canceled your existing orders

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Speaker 2: here too. Talk about it as Man Deep saying, Bloomberg Intelligence,

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Speaker 2: Global head of Technology Research, joining us here in a

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Speaker 2: New York studio, Mandy, thanks for being here. Just how

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Speaker 2: big a blow is this to in Vidia at this

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Speaker 2: moment in time, given how much of its business is

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Speaker 2: tied to China.

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Speaker 3: Well, if you go back to the guy that Nvidio

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Speaker 3: gave during their second quarter earnings, they sort of anticipated

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Speaker 3: this that a lot of the China revenue may not materialize,

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Speaker 3: even though they said it could be too to five billion,

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Speaker 3: but the guide was almost de risk that they didn't

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Speaker 3: include any of that. So from that perspective, it's not

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Speaker 3: that big of a deal, and I think the stock

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Speaker 3: reaction validates that. With that being said, they also said

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Speaker 3: that the China GPU market is almost fifty billion dollar

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Speaker 3: addressable market and it's growing at almost fifty percent plus

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Speaker 3: growth rate. So when you factor in, you know, the

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Speaker 3: multi year investment cycle we are in, and not being

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Speaker 3: able to sell into China will be a big kind

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Speaker 3: of factor in terms of if it continues, if it continues,

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Speaker 3: and look, I think when I look at the biggest

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Speaker 3: large ANDREID model companies, it's either in the US or

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Speaker 3: in China, and those are the companies that need the

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Speaker 3: Invidia chips for training their models. And so from that perspective,

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Speaker 3: once they move away from Invidia, they're not coming back.

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Speaker 4: Isn't this just a political football? And at some point

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Speaker 4: President Trump and You're going to get together somewhere hashing

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Speaker 4: all this out, including chips and TikTok and all that stuff.

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Speaker 3: It sounds like Nvidia has been caught in that crosshairs

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Speaker 3: when it comes to the US China deal. And clearly

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Speaker 3: there is a lot of sensitivity around the use of

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Speaker 3: their chips when it comes to you know, the data

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Speaker 3: and how important it is for countries in terms of

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Speaker 3: just how they're thinking through their AI strategy. So with

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Speaker 3: that being said, look, I don't think there is an

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Speaker 3: easy resolution here when it comes to the use of

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Speaker 3: Nvidia long term for a country like China where clearly

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Speaker 3: there are tensions, and I don't think even if there

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Speaker 3: is a deal, the sensitivity around the data is kind

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Speaker 3: of going back to where it was, you know, a

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Speaker 3: few years back. That's why we have the TikTok deal

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Speaker 3: and you know, what we are going through in terms

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Speaker 3: of by edance having to give up ownership is because

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Speaker 3: clearly the US doesn't want, you know, the data of

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Speaker 3: the users to be stored in China or be accessible

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Speaker 3: in some ways. So from that perspective, I think the

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Speaker 3: data sensitivity is big, and chips are a big part

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Speaker 3: of that.

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Speaker 2: I'm glad you brought up TikTok, and since we have

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Speaker 2: you here, I wanted to ask you about that. More

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Speaker 2: details are now emerging. It looks like there may be

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Speaker 2: a consortium right including Oracle, Silver Ac and recent Horowitz

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Speaker 2: that may take over the US operations. But might there

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Speaker 2: be a bitting more here in any talk as to

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Speaker 2: how much they're valuing this company.

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Speaker 3: So when we did evaluation a few months back, because

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Speaker 3: this has been in the news, you know, for quite

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Speaker 3: a while, we thought a good benchmark would be companies

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Speaker 3: like Xai, Snapchat, Pinterest, Reddit, and so from that perspective,

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Speaker 3: you know, TikTok Us assets will be valued at somewhere

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Speaker 3: between forty two fifty billion. In fact, xas last valuation

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Speaker 3: before you know Xai and ex merged the Twitter portion

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Speaker 3: of it was valued at around thirty three billion, So

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Speaker 3: from that perspective, it would be somewhere in that vicinity.

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Speaker 3: But with that being said, you know, given the geopolitical

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Speaker 3: aspects involved in this deal, Oracle seems to be the

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Speaker 3: one entity that will likely be involved in buying the

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Speaker 3: assets because it's running the TikTok back in infrastructure right now,

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Speaker 3: So I can't imagine this deal happening without Oracle. The

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Speaker 3: private equity players are silver Lake and Clearly and recent

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Speaker 3: Horowitz and look, I mean, this would be among their

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Speaker 3: biggest deals. Even if you think about that forty to

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Speaker 3: fifty billion sort of transaction value, it will be quite huge.

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Speaker 3: So I do think, you know, it's a valuable asset.

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Speaker 3: But because of the geopolitical nature of this, there may

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Speaker 3: not be a an entity among the Max seven players

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Speaker 3: that would try and bid for.

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Speaker 4: To pick up political football, right ye, yeah, exactly, So,

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Speaker 4: I mean, but part of a deal. If this thing

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Speaker 4: were to be spun out as a separate company, you'd

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Speaker 4: have to ask all these little TikTokers out there to

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Speaker 4: download a new app and all that kind of stuff

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Speaker 4: that perceived to be a potential problem. Or is that not.

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Speaker 3: Actually, if you had asked me that question one year back,

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Speaker 3: I would have said yes. But now with generative AI,

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Speaker 3: a lot of the systems are being rewritten. So when

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Speaker 3: I think about TikTok's algorithm advantage, I feel it's somewhat

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Speaker 3: offset by the fact that we have got all these

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Speaker 3: new generative AI based recommendation tools and new things that

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Speaker 3: are out there that companies that are looking to develop

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Speaker 3: new AI apps are doing that natively using lllms. So

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Speaker 3: if somebody was to rewrite the algorithm, they could do

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Speaker 3: that now with all the LLLM tools that are available.

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Speaker 3: That wasn't the case one or two years back, when

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Speaker 3: TikTok really had an advantage with their algorithm. I think

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Speaker 3: that's been somewhat offset.

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Speaker 2: I'm a little confused. I don't know if you have

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Speaker 2: any clarity on this, But say you're an influencer. Influencer

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Speaker 2: who gets a lot of income from TikTok. Right, a

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Speaker 2: lot of people do. If you have to download the

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Speaker 2: new app, do all of your followers come along too?

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Speaker 2: Is it just basically your your account but on a

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Speaker 2: new app.

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Speaker 3: In essence, that's true, and you get all the social graphs.

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Speaker 3: It's just the recommendation algorithm changes. And guess what. Google

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Speaker 3: Search changes their algorithm so many times in a year.

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Speaker 3: They change their algorithm a lot, So what's the big

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Speaker 3: deal if the algorithm changes, Look, it will impact the

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Speaker 3: creators and how they're used to monetizing it. Wants a

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Speaker 3: recommendation algorithm changes, but meta has changed it. Google Search

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Speaker 3: changes it, So I don't think it will be that

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Speaker 3: big of a deal. And that's why I think they

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Speaker 3: are going in that direction where either they license the

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Speaker 3: algorithm from by Dance or they rewrite their own algorithm,

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Speaker 3: and I think both should be acceptable solutions.

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Speaker 4: All right, here's the one I have to do. Every

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Speaker 4: time I see it, My AI is going to kill Google.

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Speaker 4: I'm not clicking on the links, Dude. If I put

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Speaker 4: in a search query into Google, Google AI serves me

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Speaker 4: up exactly what I want. I don't have to click.

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Speaker 4: How's that changing their model? I'm not clicking.

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Speaker 3: So you're right, the ten blue links has definitely changed.

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Speaker 3: So the relevance of maybe in addition to AI overviews,

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Speaker 3: the top two links has increased. And so because generative

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Speaker 3: AI drives more engagement that you are going to ask

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Speaker 3: a follow up question in addition to your first query.

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Speaker 3: So instead of showing you ten blue links at once,

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Speaker 3: they'll show you two blue links in the first one,

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Speaker 3: two blue links in the follow up query. And even

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Speaker 3: though you are interacting with the Google page a lot

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Speaker 3: more than going to the publisher website, they will show

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Speaker 3: you the top two links and charge more for those

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Speaker 3: links to the advertisers. So clearly the model is changing

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Speaker 3: and the algorithm is changing, but they seem to be adopting.

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Speaker 5: Go stay with us.

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Speaker 4: More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Coarclay and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 4: We're still looking at some earnings, even though it is

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Speaker 4: a FED day. General Mills is one of them. I

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Speaker 4: put out the Bloomberg Intelligence research, which is awesome. Now

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Speaker 4: I'm going down this rabbit hole where you can get

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Speaker 4: the earnings model for all these companies that the Bloomberg

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Speaker 4: Intelligence and also put together right there on the terminal.

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Speaker 4: I'm going down this rabbit hole. I'm changing scenarios and

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Speaker 4: changing margins and all this kind of stuff to see

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Speaker 4: how the earnings are. So let's get back to it though,

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Speaker 4: Jano Roseide opinion. She covers a lot of these consumer

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Speaker 4: stocks for Bloomberg Intelligence. Yan I talked to us about

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Speaker 4: General Mills here. How were their earnings recently?

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Speaker 5: They were mainly in line with expectations.

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Speaker 6: It wasn't that much of a surprise, but still, you know,

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Speaker 6: the stock is a little bit on the south side.

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Speaker 6: People expected better news than what they disclosed.

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Speaker 2: Yeah, I mean North America sales came under pressure. What

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Speaker 2: was the drag there?

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Speaker 6: It was mainly on volume. We expected volume declines but

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Speaker 6: not to the magnitude that they did. It was down

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Speaker 6: four percent on organic on the organic part, so obviously

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Speaker 6: consumers are still trading down. They are mentioning that, you know,

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Speaker 6: about eight eight brands of theirs. It was positive, but

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Speaker 6: it's still it wasn't enough for the whole segment two

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Speaker 6: to pull through what.

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Speaker 4: Are they doing or what are they saying about tariffs

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Speaker 4: and the impact on their costs versus maybe what they're

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Speaker 4: trying to pass along to customers.

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Speaker 6: So they are upsetting some of the costs with cost

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Speaker 6: savings it's usually going to be. They expected to be

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Speaker 6: about one to two percent of cogs this year, which

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Speaker 6: is a little bit lower than and for example, Campbell's

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Speaker 6: expected they expected around four percent.

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Speaker 5: So you know, they're not they're they do not want

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Speaker 5: to raise prices.

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Speaker 6: They want to be competitive because obviously volume growth is

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Speaker 6: not happening.

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Speaker 2: So yeah, I mean, they're getting competition from more folks.

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Speaker 2: I mean, on the one hand, they're they're benefiting from

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Speaker 2: the fact that more people are eating at home, right,

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Speaker 2: but yet when we're going to the supermarket, more people

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Speaker 2: are choosing those private label brands.

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Speaker 5: Correct, So do they do they talk.

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Speaker 2: About that at all on the earnings call, And what's

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Speaker 2: their sort of you know, plan of attack there?

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Speaker 6: Yeah, So they're increasing marketing, They're they're hoping for innovation.

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Speaker 4: Uh.

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Speaker 6: They mentioned that twenty five percent of sales growth will

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Speaker 6: come in North America retail will probably come from innovation

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Speaker 6: this year. And this is what all everybody's trying to

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Speaker 6: get to the problem is. And that was mentioned on

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Speaker 6: the call as well, was that even the price increases

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Speaker 6: are not as significant as it used to be, they're

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Speaker 6: still high. So on a on a in a basket size,

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Speaker 6: you're still paying a lot more than the used to

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Speaker 6: two years ago.

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Speaker 4: Talk to us about store brands versus kind of the

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Speaker 4: the brands we all grew up with. Here, tell us

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Speaker 4: how that's changed over time. Our store brands are becoming

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Speaker 4: a bigger, bigger part of the average cart.

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Speaker 6: Yes, well, retailers are investing more on their private label.

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Speaker 6: It allows them to bring people into the store. Some

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Speaker 6: of the brands.

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Speaker 5: Are have a cult following. I will say, hello, Costco.

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Speaker 6: So exactly, so people are going to the store to

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Speaker 6: buy that particular brand. They're more profitable than national brands,

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Speaker 6: so obviously they're still incentive for retailers to deploy some

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Speaker 6: of that some of their own brand.

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Speaker 2: I think some people think it cheek to buy private label, right, Well,

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Speaker 2: we're at like a badge of Honor's certainly.

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Speaker 4: I was shocked at the price differential.

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Speaker 2: Yeah, because they have that pricing power right These stores

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Speaker 2: to you know, make their products a lot more attractive,

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Speaker 2: really quick, blue Buffalo, it's their food. I was surprised

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Speaker 2: to see that that that was not a leader for them.

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Speaker 6: Yeah, so Wilderness was not is not doing as well

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Speaker 6: as they are hoping. Dog food in general has been

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Speaker 6: ahead wind, not only for them but also for the

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Speaker 6: overall industry. Cat food seems to be the leading indicator here,

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Speaker 6: which is surprising.

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Speaker 2: But cat food is outpacing dog food.

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Speaker 5: Yes, correct, We have seen this for the past year.

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Speaker 3: Going on.

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Speaker 2: John Tucker, how to chime.

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Speaker 4: Food.

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Speaker 6: Well, there seems to be a growth in the cat

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Speaker 6: population more than the dog population.

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Speaker 4: Wow. Interesting?

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Speaker 3: What have we had?

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Speaker 4: A good retail sales number yesterday, better than expected. Are

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Speaker 4: your companies the consumer protus companies? What are they saying

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Speaker 4: about the consumer? Yeah?

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Speaker 6: Like I said, they're looking for value. They're still seeing

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Speaker 6: their budget as a whole rather than the price increase

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Speaker 6: or decrease. They're looking for price cuts wherever they can,

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Speaker 6: and they're willing to trade down for it.

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Speaker 4: Stay with us more from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto

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Speaker 1: with the Bloomberg Business App, listen on demand wherever you

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Speaker 1: get your podcasts, or watch us live on YouTube.

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Speaker 2: More details are emerging now on the US China TikTok deal.

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Speaker 2: We know it is an app that nearly half the

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Speaker 2: country has one hundred and seventy million Americans. What might

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Speaker 2: that deal look like? What are some of the hurdles.

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Speaker 2: Let's bring in Matthew schettenhaulm Bloomberg Intelligence media litigation analyst.

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Speaker 2: He is joining us from Washington, d C. So Matthew

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Speaker 2: just tell us sort of where do things stand right now?

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Speaker 2: We know that there might be this consortium that would

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Speaker 2: take over the US TikTok, but might there be other

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Speaker 2: bidders here?

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Speaker 3: Yeah?

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Speaker 7: So I think we're finally seeing progus here for the

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Speaker 7: first time. As you know that the Congress passed this

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Speaker 7: law last year, the Supreme Court upheld it in January.

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Speaker 7: It was supposed to take effect and effectively ban TikTok

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Speaker 7: on January nineteenth, and President Trump has granted extension after

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Speaker 7: extension to prevent that from happening. I think this is

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Speaker 7: the first sign of real progress. It sounds like there

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Speaker 7: are you know, two or three bidders involved. And the

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Speaker 7: potential framework for a deal that potentially could be announced

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Speaker 7: as early as tomorrow.

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Speaker 4: Well, you know, I think, well, I certainly forgot that

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Speaker 4: TikTok passed the law and says, hey, you either got

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Speaker 4: to divest this thing or shut it down. I mean,

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Speaker 4: Congress is involved here. So whatever deal eventually gets done,

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Speaker 4: it has to kind of a huge of those requirements

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Speaker 4: by Congress, doesn't.

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Speaker 7: Yeah, I mean that's right. This isn't This is not

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Speaker 7: the way the law typically works usually, you know, Congress

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Speaker 7: passes the law, that law is still on the book

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Speaker 7: looks and as of January nineteenth, TikTok is supposed to

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Speaker 7: be banned, and yet it's continued to operate because President

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Speaker 7: Trump's Department of Justice has sent letters basically saying don't

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Speaker 7: worry about it. So that raises the question how much

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Speaker 7: is the law going to matter with respect to this deal?

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Speaker 7: Because Congress specifically addressed what sort of divestiture should happen

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Speaker 7: under this arrangement. One of those terms says that byte

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Speaker 7: dance can't control the new entity. I think they can.

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Speaker 7: They can address that by keeping Byteedance's interest below twenty

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Speaker 7: percent in the new entity. But the second one might

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Speaker 7: be trickier, and that goes to the operation of the algorithm,

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Speaker 7: which is TikTok's secret sauce. The law that Congress passed

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Speaker 7: said that there can be no operational relationship, no cooperation

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Speaker 7: between byte Dance and any new entity. And that's going

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Speaker 7: to be the really interesting thing to watch as these

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Speaker 7: deal terms come out. How are they addressing the algorithm

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Speaker 7: going forward and how will that change TikTok as we

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Speaker 7: know it?

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Speaker 2: And Matthew, one of the stipulations I read is that

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Speaker 2: the US government would have a seat on the company's board.

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Speaker 2: This is not common, right, I mean this usually see

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Speaker 2: this when the government has to come in an emergency situations,

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Speaker 2: maybe there's a sponsored bailout like we saw during the

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Speaker 2: two thousand and eight financial crisis with some of the

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Speaker 2: insurers and the auto companies.

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Speaker 5: Do you think if the US.

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Speaker 2: Gets a seat on the board, it gets a seat

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Speaker 2: on the board, you know, forever. It's not a temporary situation.

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Speaker 7: All of this is is sort of unprecedented, so you know,

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Speaker 7: it's possible that this is sort of just a temporary solution.

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Speaker 7: It's also possible that it lasts longer than that. We're

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Speaker 7: sort of making it up as we go here in

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Speaker 7: terms of the law, and so it's very difficult to

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Speaker 7: say exactly what shape a deal like that takes and

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Speaker 7: how long any of it endures.

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Speaker 4: So what are next steps here, matt from your perspective.

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Speaker 7: Yeah, so yesterday President Trump again issued an extension. The

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Speaker 7: law was set to again take effect and effectively ban TikTok.

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Speaker 7: His extension extends it through the middle of December, and

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Speaker 7: so that gives some breathing room now to make this

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Speaker 7: deal happen. Of course, he could just kick it, kick

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Speaker 7: it down the road again if the deal doesn't happen.

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Speaker 7: So it sounds though, like there are there's real progress

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Speaker 7: on a framework for a deal, and so I think

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Speaker 7: we should learn more details about it tomorrow and the

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Speaker 7: day after and potential for a deal that actually resolves

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Speaker 7: this issue and is a genuine divestiture from byteedance as

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Speaker 7: Congress intended. This may end up actually working out as

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Speaker 7: Congress intended it to work at the end of the day.

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Speaker 2: Matthew, I think you hit it earlier when you were

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Speaker 2: talking about the algorithm being, you know, the special sauce,

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Speaker 2: the most lucrative part of any deal. To be clear,

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Speaker 2: do we know. I mean, the US would not be

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Speaker 2: out right buying this algorithm, may be licensing it at

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Speaker 2: the end of the day, right.

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Speaker 7: Yeah, that's what it sounds like from some of the

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Speaker 7: reporting on the deal. And there's the potential that that

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Speaker 7: would be consistent with what Congress intended. What the law

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Speaker 7: bars is an operational relationship and cooperation with respect to

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Speaker 7: the algorithm. So the work around here may be a

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Speaker 7: licensing of the technology and saying the US entity gets

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Speaker 7: to do all the work on that algorithm. But it's

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Speaker 7: really curious about the details of how that will work

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Speaker 7: as a practical matter, whether that's consistent with the law,

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Speaker 7: and maybe the biggest question of all, whether anyone's going

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Speaker 7: to stand up and insist that the law befollowed.

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Speaker 4: M