Speaker 1: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.
Speaker 1: After the bell, in Vidia forecast revenue for the current
Speaker 1: quarter below the most lofty expectations. Fiscal fourth quarter sales
Speaker 1: will be about thirty seven and a half billion dollars.
Speaker 1: Here's the thing. The range of analyst estimates was as
Speaker 1: high as forty one billion. Let's take a closer look
Speaker 1: now at the Nvidia story with Angelo Zeno. He is
Speaker 1: vice president of equity research at CFR. Angelo, what did
Speaker 1: you make of what you heard today from in video?
Speaker 2: Yeah, so thanks for having me.
Speaker 3: I think overall the results were pretty good and you know,
Speaker 3: nothing that I'm concerned about here. To your point, they
Speaker 3: provide guidance that I think was you know, it's about
Speaker 3: a billion and a half or so below maybe where
Speaker 3: the whisper numbers were looking for, but definitely above our expectations.
Speaker 3: We were actually looking for about thirty seven billion in
Speaker 3: the January quarter, and I think all us equal and
Speaker 3: you kind of look at the beat that they had
Speaker 3: in the October quarter, which was about two billion out there,
Speaker 3: definitely shows that their demand remains very strong for their offerings.
Speaker 3: I mean in the October quarter was largely driven by
Speaker 3: their hopper architecture.
Speaker 2: As we kind of look.
Speaker 3: Ahead here in the January quarter, it was all about
Speaker 3: the cadence and trajectory of the Blackwell ramp here. And
Speaker 3: at least, you know, from the initial kind of view here,
Speaker 3: it seems like in video is being somewhat conservative in
Speaker 3: terms of that initial ramp with kind of a stronger
Speaker 3: ramp kind of going into the April and July quarters.
Speaker 1: Are you concerned at all that maybe maybe just a
Speaker 1: bit the excitement that we have seen over artificial intelligence
Speaker 1: maybe getting a little ahead of reality.
Speaker 3: Well, I guess what I would say is, you know,
Speaker 3: at some point in time, investors you know, almost kind
Speaker 3: of become numb to the stuff. And you know, from
Speaker 3: that perspective, we could potentially be you know, entering a
Speaker 3: point in time here where investors might kind of be
Speaker 3: willing to look elsewhere, at least over kind of the
Speaker 3: next six to nine month period, especially with kind of
Speaker 3: a new Trump administration entering, and that kind of you know,
Speaker 3: typically kind of helping well, maybe some of the higher data,
Speaker 3: more cyclical type names that maybe have underperformed, So maybe
Speaker 3: from a sentiment perspective, we can kind of see a
Speaker 3: period where some of these AI oriented.
Speaker 2: Names take a step back.
Speaker 3: But that said, when we start looking at the fundamentals
Speaker 3: the major drivers for these AI semi stocks as well
Speaker 3: as mag seven names here over the next three to
Speaker 3: five years, we still remain extremely optimistic about the fundamentals
Speaker 3: of these companies and believe that they will continue to
Speaker 3: be primary drivers of growth for the broader markets here
Speaker 3: in the coming years.
Speaker 1: So, as we both know, Nvidia is restrained by the
Speaker 1: policies of the Biden administration from allowing China to have
Speaker 1: some of these most advanced and sophisticated graphics processors. You
Speaker 1: mentioned the Trump administration and perhaps a little bit of
Speaker 1: change in economic policy. Do you think that Trump administration
Speaker 1: will continue of the Biden administration's hardline on chips where
Speaker 1: China is concerned.
Speaker 2: Well, I think that's a great question.
Speaker 3: I think we have to wait and see, But I
Speaker 3: will say this, we do think kind of inn Vidia
Speaker 3: may be more of a beneficiary under kind of what
Speaker 3: we would call a transactional based approach under a Trump administration.
Speaker 3: So when you kind of think about the Biden Harris approach,
Speaker 3: it really has been a kind of limit China to
Speaker 3: certain advanced chips and equipment like GPUs. EUVS is another
Speaker 3: great example made by the likes of ASML. But according
Speaker 3: to our Washington Analysis team, Trump we think might be
Speaker 3: willing to offer more advanced AI chips to other nations,
Speaker 3: even China, if the price is right, while kind of
Speaker 3: maintaining a certain technology lead. So China is held maybe
Speaker 3: a generation or two behind. So this could drive we
Speaker 3: think higher related and video revenue in regions like China
Speaker 3: where the company could potentially be able to sell let's
Speaker 3: say it's a one hundred.
Speaker 2: Versus more, maybe more of a performance laid in h two.
Speaker 3: So we see the potential for Nvidia to potentially actually
Speaker 3: be better positioned under a Trump administration relative to a
Speaker 3: Biden Harris administration.
Speaker 1: I think we can agree that the centerpiece of the
Speaker 1: Trump policy with respect to China on the economic side tariffs.
Speaker 1: What do you think the fallout will be as the
Speaker 1: result of tariffs that may approach at least sixty percent
Speaker 1: and maybe even more than that.
Speaker 3: Yeah, I mean, listen, on the surface, if they were
Speaker 3: to go through the way they.
Speaker 2: Are intended to come through.
Speaker 3: If we're looking at sixty percent tariffs in China or
Speaker 3: in north of twenty percent.
Speaker 2: Let's say in.
Speaker 3: Mexico for instance, you know clearly would have a negative
Speaker 3: impact i'd say in a broader tech sector. And a
Speaker 3: big reason for that if you think about about a
Speaker 3: third of all electronic goods within the tech industry is
Speaker 3: actually manufactured out in China, and when you think about
Speaker 3: how important Mexico is for.
Speaker 2: Industries like.
Speaker 3: The automotive space, the number of industrial markets out there,
Speaker 3: were a lot of semiconductors goods are kind of important
Speaker 3: from there, not to mention you know, the number of
Speaker 3: PC vendors like the Dells of the world. So there,
Speaker 3: you know, definitely kind of implications. It will have a
Speaker 3: negative impact and inflationary pressures, i'd say, to the overall
Speaker 3: tech space as well as broader markets. So it's not
Speaker 3: necessarily something we want to see. But in the same respect,
Speaker 3: we think the Trump administration will kind of be a
Speaker 3: little bit more.
Speaker 2: Tactical out there.
Speaker 3: So all in all, it's probably going to be messy
Speaker 3: here for a little while, and I think investors just
Speaker 3: have to be kind of willing to kind of go
Speaker 3: for the roller coaster ride.
Speaker 2: Angelo.
Speaker 1: I'm not hearing a lot of concern from your perspective
Speaker 1: about further decoupling of the trade relationship between the US
Speaker 1: and China.
Speaker 3: Is that the case again, I mean, listen, I think
Speaker 3: it's it's something that we have to, you know, just
Speaker 3: kind of wait and see how this all plays out.
Speaker 3: I think kind of initially, the way we would kind
Speaker 3: of look at it is I don't know if there
Speaker 3: would necessarily be kind of more of a decoupling to
Speaker 3: kind of be seen. But again, it's something that we
Speaker 3: kind of have to wait and see.
Speaker 1: A lot of what we've been focused on are the
Speaker 1: nominees for various cabinet positions. We still don't have a
Speaker 1: nominee for Treasury Secretary. We do know that Howard Lutnik
Speaker 1: will be at Commerce and part of his portfolio will
Speaker 1: include the Office of US Trade rep. Generally speaking, when
Speaker 1: you assess the appointments that have been named so far,
Speaker 1: what is the takeaway from your point of view on
Speaker 1: how the Trump administration will proceed with governing.
Speaker 3: No, I mean, that's listen, that's a good question. I mean,
Speaker 3: when we kind of think about, at least initially, what
Speaker 3: you know, what.
Speaker 2: The impact is going to be to the broader tech space.
Speaker 2: You know, I'd say right now.
Speaker 3: It's one where you know, hopefully we kind of see
Speaker 3: the ability for greater M and A potential within the
Speaker 3: tech space, and I would say that would kind of
Speaker 3: cause us to lean a little bit more in favor
Speaker 3: of the software space relative to the semiconductor industry. I
Speaker 3: think there are a lot more uncertainties as far as
Speaker 3: this semiconductor industry is concerned, whether it's to your point
Speaker 3: about tariffs, whether it be the unknowns about Taiwan, but
Speaker 3: also as far as the M and A environment is concerned,
Speaker 3: semiconductor names still do a lot of business overseas and
Speaker 3: need to get approval in areas like China, which would
Speaker 3: be would still be hard pressed to see, whereas kind
Speaker 3: of in the software spectrum, you're in a much better
Speaker 3: position out there.
Speaker 2: M and A probably is.
Speaker 3: More kind of fluid, and we think regulatory approval would
Speaker 3: kind of be met more willingly under this new administration.
Speaker 3: So I think there are different ways to kind of
Speaker 3: play the tech space. Under this new administration.
Speaker 1: You don't see regulatory risk and the possibility that some
Speaker 1: companies like let's say alphabet would be confronted with the
Speaker 1: possibility of having to maybe divest I certain assets I'm
Speaker 1: thinking of the story that we had the other day
Speaker 1: about maybe Google being forced to sell off the Chrome browser.
Speaker 3: So possibilities absolutely, But you know that said, you know,
Speaker 3: with the same respect, I think there's also a possibility
Speaker 3: for a company like Alpha Bit to be able to
Speaker 3: kind of go back into the deal making spectrum under
Speaker 3: an administration, a Trump administration. So think about rumors earlier
Speaker 3: this year of them potentially looking at a company like
Speaker 3: a Hubstop or even on the cybersecurity side of.
Speaker 2: Things with a company like Whiz.
Speaker 3: I think all of that stuff now become possibilities for
Speaker 3: a company like Alpha Bit, which is actually flushed with
Speaker 3: a ton of cash and you know, potentially could further diversify,
Speaker 3: let's say, their business away from search.
Speaker 1: Angelo, I'm curious as to whether or not when you
Speaker 1: are having conversations with your clients that there is one
Speaker 1: issue that they are expressing a little bit of concern over.
Speaker 3: You know, I think as far as you know where
Speaker 3: clients are at right now, I mean, I would say
Speaker 3: kind of the top of the list right now for
Speaker 3: our clients we guest asked a lot about from a
Speaker 3: concerned perspective, is on the valuation side of things, We've
Speaker 3: had a hell of a run when it comes to
Speaker 3: the markets here of last two years, especially on the
Speaker 3: tech side of things. When you start looking at some
Speaker 3: of the multiple expansion we've seen, I think there is
Speaker 3: definitely fear out there from some investors that you know,
Speaker 3: maybe some of those gains that have been pulled in
Speaker 3: quite a bit kind of going into twenty twenty five.
Speaker 3: And typically as you kind of go into year three
Speaker 3: of a bull market, if you kind of view the
Speaker 3: October twenty twenty two lows as kind of the lows,
Speaker 3: then you know, the year three kind of period typically
Speaker 3: tends to be one where you see lower gains relative
Speaker 3: to those first two years, and especially kind of you know,
Speaker 3: any environment where policy will kind of be a you know,
Speaker 3: take kind of center stage here, there's definitely more risk
Speaker 3: out there than what we've seen we think over the
Speaker 3: last kind of twelve to eighteen months.
Speaker 1: Angelo will leave it there. Thanks for making time to
Speaker 1: chat with us. Angelo Zeno is the vice president of
Speaker 1: Equity Research at CFRA, joining us here from New York
Speaker 1: City on the Daybreak podcast. Welcome back to the Bloomberg
Speaker 1: Daybreak Asia podcast. I'm Doug Chrisner. As we continue to
Speaker 1: unpack the results from Nvidia. We also want to take
Speaker 1: a broader look at what's happening in the Asia Pacific
Speaker 1: and joining us for that is Stephanie holtza Jen. She
Speaker 1: is the CIO for the APEC at Deutsche Bank Private Bank,
Speaker 1: joining from our studios in Singapore. I know you're not
Speaker 1: allowed to talk about specific stocks, but I have to
Speaker 1: ask you about the Nvidia story. When you listen to
Speaker 1: the narrative that the market's received from the company, what
Speaker 1: conclusion do you come to.
Speaker 4: The conclusion has to be that right now we're in
Speaker 4: a setup in regards to companies related to artificial intelligence
Speaker 4: theme that there has very lofty expectations out there. It's
Speaker 4: also coming at a time where we had quite a
Speaker 4: good market rally, where lots of investors are kind of
Speaker 4: asking the right question, is that here to stay? And
Speaker 4: of course you know these type of results are getting
Speaker 4: scrutinized under the magnifying class and if there's any reason
Speaker 4: to look for short term correction, then you know this
Speaker 4: is being taken as such. However, it does not derail
Speaker 4: I think the long term, medium term investment theme that
Speaker 4: we've been going with on the back of the technological
Speaker 4: advance you see with the help of companies like Invidia,
Speaker 4: So you know, these are opportunities to get in at
Speaker 4: better levels, but it doesn't derail the investment thesis.
Speaker 1: So when you imagine the applications of artificial intelligence, is
Speaker 1: there an industry that you would think really could benefit
Speaker 1: most under these circumstances.
Speaker 4: Well, we look at everything upstream, downstream around the technology
Speaker 4: and the broader IT sector, and we have these as
Speaker 4: our sector pigs for a long time already.
Speaker 1: Let's talk a little bit about the leadership change that
Speaker 1: we've been dealing with in Washington. I think for a
Speaker 1: lot of people it means a new global paradigm where
Speaker 1: trade is concerned. President Electroump has said that he loves tariffs.
Speaker 1: He also loves to make deals too, And let's talk
Speaker 1: a little bit about the dynamic that's playing out between
Speaker 1: Washington and Beijing or will after the inauguration in January.
Speaker 1: Do you think that the US and China can reach
Speaker 1: some sort of grand bargain when it comes to trade
Speaker 1: and avoid the application of a lot of these tariffs.
Speaker 4: Well, I think there's a lot of speculation around and
Speaker 4: I will not join the bandwagon of those because we're
Speaker 4: not yet there. We can only look at what the
Speaker 4: history is giving us to try to imply in the future.
Speaker 4: I think more importantly is what is it that the
Speaker 4: market is really concerned with at the moment. And there
Speaker 4: is next to trade and tariffs which could have an
Speaker 4: inflationary outcome. There's also the understanding that there will be
Speaker 4: no austerity, that there's a fiscal imbalance and what's been
Speaker 4: proposed and how it will be financed. Tariffs can only
Speaker 4: make up for some part of the spend that's been proposed.
Speaker 4: So you've seen the market has been reprising to that narrative,
Speaker 4: looking at potentially less of a FED Central Bank reaction
Speaker 4: function to that new environment being you know, looking at
Speaker 4: less cuts as we do as well. We see street
Speaker 4: cuts from the Fed coming towards us until the end
Speaker 4: of next year only. So I think that is that
Speaker 4: is the biggest topic right now, and that is also
Speaker 4: informing how you structure portfolios.
Speaker 1: I'm very curious about the way that you're viewing China
Speaker 1: right now, in light of the lot of stimulus that
Speaker 1: we have seen unleashed on the part of authorities in Beijing.
Speaker 1: Does that leave you to be optimistic that there is
Speaker 1: some sort of recovery happening in China right now, or
Speaker 1: maybe what has been proposed will will fail to stimulate
Speaker 1: in the way in which markets have been promised.
Speaker 4: Yeah, I'm in the camp that I believe that the
Speaker 4: probability for this stimulus to succeed has definitely picked up
Speaker 4: and risen quite remarkably. And let me just quickly go
Speaker 4: back and put this in context, because when we talk stimulus,
Speaker 4: lots of people only remember the fiscal stimulus one and
Speaker 4: a half weeks ago. I would want to put it
Speaker 4: in context of the three different arrows. Let's let's let's
Speaker 4: lose the analogy of ebinomics, the three arrows of genomics
Speaker 4: that have been launched. We started out the structural reform
Speaker 4: package during the third Planum in July. It was followed
Speaker 4: up in September with the monetary policy stimulus package, which
Speaker 4: came at the heels of the big, the big fat
Speaker 4: cut that we saw. So I would I would put
Speaker 4: the picture out that was when the wind was blowing
Speaker 4: in China sales, so that was a very timely measure.
Speaker 4: It was also very large and it had very important
Speaker 4: components like stock stabilization program. Now the third arrow to
Speaker 4: this is the fiscal stimulus which everybody been waiting for,
Speaker 4: which has been finally launched in its first step, focusing
Speaker 4: really on the local government, you know, re capitalization, recapitalization
Speaker 4: exactly so right now if you look at it in
Speaker 4: its entirety and the way it's been delivered timely, and
Speaker 4: the two elements we hadn't in the past, which is
Speaker 4: forward guidance that there can be more if there is
Speaker 4: need be. And also I think there's quite a good
Speaker 4: communication with the market at this moment in time, so
Speaker 4: there's definitely listening to what the market is expecting and
Speaker 4: trying not to underdeliver. Again, it leads me to conclude
Speaker 4: that the probabilities have gone up that China has been
Speaker 4: able to create its own kind of revival story without
Speaker 4: having to necessarily react to you know, the concerns that
Speaker 4: you mentioned earlier that come their way, and that are
Speaker 4: of course concerns around tariffs.
Speaker 1: So you talk about three arrows very similar to ebonomics. Obviously,
Speaker 1: Japan had to fight deflation for three decades. China seems
Speaker 1: to be struggling with that still, even though we've seen
Speaker 1: evidence that retail sales are picking up, industrial production is
Speaker 1: picking up. We just talked about how local governments may
Speaker 1: be able to respond to the property market, but is
Speaker 1: China's still confronted with a major deflationary problem that may
Speaker 1: be persistent for a while.
Speaker 4: At this moment, it still is. So I just came
Speaker 4: back from Shanghai as well confirming this. So I do
Speaker 4: not want to paint a different picture. But I think
Speaker 4: it's also a little early to use activity data from
Speaker 4: today or that are backward looking that are being released
Speaker 4: in the market as we speak to kind of draw
Speaker 4: a conclusion on whether these three errors have been successful
Speaker 4: or art. So you look at a realistic pathway to
Speaker 4: find out. The jury is out obviously whether all of
Speaker 4: this works. I think we have to look into next year.
Speaker 4: Most probably the first and the second quarter will be
Speaker 4: there to stabilize the market, and then the third quarter
Speaker 4: I will also see a pickup an activity data that
Speaker 4: most probably will help to convince the last naser to
Speaker 4: join the bandwagon also start broadening out investments into China again.
Speaker 1: So how does everything that you're describing kind of inform
Speaker 1: an investment strategy? What does it translate into.
Speaker 4: It translates into not a negative view on China so
Speaker 4: we are out there highlighting the medium and long term opportunity. Still,
Speaker 4: you have heard me saying that before. We have now
Speaker 4: seen that China is able to make a you to
Speaker 4: date results that are resembling others in the region. So
Speaker 4: as we're building a base, these are opportunities to build out. Well,
Speaker 4: it's not just China. We also like Japan's middle and
Speaker 4: long term story. Then of course this will be a
Speaker 4: sideways market that also likewise gives opportunities to invest. But
Speaker 4: having said that, we still prefer the US and equities
Speaker 4: as to express our views that are fairly constructive.
Speaker 1: Are there themes that you like right now? I'm sorry
Speaker 1: to interrupt, but I'm curious about the themes that you
Speaker 1: may be pursuing. And I know that when we were
Speaker 1: talking earlier about artificial intelligence, there is a certain herd
Speaker 1: mentality when it comes to technology. Maybe you can tell
Speaker 1: me some of the contrary positions that you're taking kind
Speaker 1: of avoiding. You know, what the mainstream is is trying
Speaker 1: to accomplish.
Speaker 4: Well, but you look at the playbook that we have
Speaker 4: going into the elections, there is according to the different agendas,
Speaker 4: some of the sectors were definitely experiencing tailwinds, and of
Speaker 4: course we have been also riding these. You know, you
Speaker 4: look at the energy sector, you look at financials that
Speaker 4: will be benefiting from a more of a deregulatory angle.
Speaker 4: So it's not necessarily necessary to go against the market
Speaker 4: when these themes are playing out. Right now, you're looking
Speaker 4: at long term investment themes as well that look also
Speaker 4: like short term investment. Seems like the artificial intelligence. I
Speaker 4: think you can also be joined joined in some of
Speaker 4: these themes that then become long I think there's health
Speaker 4: tech that is interesting, there's agritech that is interesting that
Speaker 4: we keep on highlighting industrials. But the main drivers right now,
Speaker 4: as we've seen and most probably will continue to see,
Speaker 4: is writing on the current themes of deregulation benefiting financials, etc.
Speaker 1: We were talking at the beginning of the conversation about
Speaker 1: the inflationary impact of a tariff policy. Do you believe
Speaker 1: there's opportunities still in fixed income right now? I hear
Speaker 1: a lot of what you're describing more on the equity side,
Speaker 1: but I'm wondering whether or not you want to be
Speaker 1: maybe balanced in a way that would allow you to
Speaker 1: place a bed in the fixed income markets.
Speaker 4: Absolutely, and a balanced portfolio is also shown to be
Speaker 4: working better again in signs of stress. So fixed income
Speaker 4: is a very important part to our portfolios. And as
Speaker 4: I said, we have never been in the camp of
Speaker 4: looking for too many cuts from the FED down, never
Speaker 4: joined the bandwagon when the market was going gung ho
Speaker 4: and nine, so we didn't have to completely change our
Speaker 4: views with the new administration coming in. So this higher
Speaker 4: for longer relatively or relative attractiveness of US assets it's
Speaker 4: been with us before. So you look at it from
Speaker 4: a bond perspective, it still argues to have a large
Speaker 4: fixed income allocations. We still prefer investment grade to express
Speaker 4: that view, just to be on the higher quality side
Speaker 4: of the spectrum. And yeah, most probably will also see
Speaker 4: a lot of this in the short term, given that
Speaker 4: we will see the Fed not being able to react
Speaker 4: as swiftly and as pronounced as most probably the market
Speaker 4: had been pricing in before.
Speaker 1: We'll leave it there. Stephanie, thank you so much for
Speaker 1: joining us. Stephanie holtze Jen, she is the CIO for
Speaker 1: the APAC at Deutsche Bank Private Bank, joining from our
Speaker 1: studios in Singapore. Thanks for listening to today's episode of
Speaker 1: Bloomberg Daybreak Asia Edition. Each weekday, we look at stories
Speaker 1: shaping markets, finance, and geopolitics in the Asia Pacific. You
Speaker 1: can find us on Apple, Spotify, and the Bloomberg Podcast
Speaker 1: YouTube channel, or anywhere else you listen. Join us again
Speaker 1: tomorrow for insight on market moves from Hong Kong to
Speaker 1: Singapore and Australia. I'm Doug Prisoner and this is Bloomberg