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Speaker 3: Videos app folks, let's get to it right now. We've
Speaker 3: got in studio our Mandi seeing Bloomberg Intelligence senior tech
Speaker 3: industry analysts. Mande, tell us what you like what's interesting
Speaker 3: in this report?
Speaker 4: I mean, had it not been for the China right down,
Speaker 4: this company would have posted revenue which was five percent
Speaker 4: higher than the forty four billion dollar number, and the
Speaker 4: guide would have been almost fifteen to twenty percent higher.
Speaker 4: So we're talking about eight billion in lost revenue. So clearly,
Speaker 4: whatever they're doing, they are able to make up that
Speaker 4: revenue lost in China with some other customers because it's
Speaker 4: in line.
Speaker 1: With consensus where they making up for it.
Speaker 5: Well, I mean there are other customers.
Speaker 4: We saw the deals in I think there's demand from
Speaker 4: other enterprise customers. And the one anecdote they provided was
Speaker 4: token generation was up ten times.
Speaker 5: To explain what that is.
Speaker 4: Yeah, So the way these AI models work is if
Speaker 4: you type in a query on chat GPT, it's going
Speaker 4: to generate you know, hundreds of tokens from that it's
Speaker 4: going to be passed with the model and the output
Speaker 4: is also you know, hundreds of tokens. So Google said
Speaker 4: at their io event their token generation was up almost
Speaker 4: fifty x.
Speaker 5: Same thing from Microsoft.
Speaker 4: Yes, and so we are getting those type of numbers
Speaker 4: from pretty much anyone who's exposed to demand for large
Speaker 4: anngreage models, and in this case, Nvidia is exposed through
Speaker 4: chat GPT because all the weekly active users that are
Speaker 4: going on chat gpt and using the product for let's
Speaker 4: say twenty minutes, that's what's resulting in the tenex increase
Speaker 4: in tokens. And I'm not surprised that everyone needs additional
Speaker 4: compute because if chatgpt needs to serve more users, they
Speaker 4: need additional compute. The traditional CPU compute is just not
Speaker 4: good enough. And that's where I think they are finding
Speaker 4: that additional demand.
Speaker 3: Ian King our live blog says how many companies could
Speaker 3: frontload their earnings released with details of what they're missing
Speaker 3: out on and still get a positive reaction from investors.
Speaker 3: So it's pretty impressive. Okay, you know, we just had
Speaker 3: a guest on, Jay Goldberg over at Seaport.
Speaker 5: He's got the.
Speaker 3: Only sell on the company, and he's got some questions
Speaker 3: about kind of like maybe all the good stuff is
Speaker 3: already factored in, I think questions about the AI and
Speaker 3: the build going to take longer. What do you say
Speaker 3: to some of that.
Speaker 4: I mean, look, everyone acknowledges that, you know, semiconductors is cyclical.
Speaker 5: You will see.
Speaker 4: An air pocket or some sort of digestion and these
Speaker 4: kind of these kind of growth growth rates are too
Speaker 4: hard to sustain, you know, so you are not going
Speaker 4: to see sixty seventy percent growth when your revenue base
Speaker 4: is two hundred billion dollars run rate annually. I mean,
Speaker 4: from that perspective, there will be a tapering of growth.
Speaker 4: But look at all the hyperscalers. Nvidia is still growing
Speaker 4: top line way above everyone else, including Microsoft and you
Speaker 4: know Meta that are growing at a very healthy high
Speaker 4: teen strate. So from that perspective, there is still a
Speaker 4: lot of runway when it comes to Nvidia's growth.
Speaker 1: China and the China specific story here the age twenty,
Speaker 1: the restrictions, what do you see as the long term
Speaker 1: effect of what the Trump administration has recently said, but
Speaker 1: also export restrictions on some of Nvidia's products, specifically with
Speaker 1: regard to China, I.
Speaker 4: Mean, that is the most plausible bare case against Nvidia
Speaker 4: because look, right now, China used to be about twenty
Speaker 4: percent of Invidio's revenue. It's very hard to fill that
Speaker 4: hole with all the additional demand. Even though Chat, GPT
Speaker 4: and other llms need more compute and they can take
Speaker 4: whatever Nvidia is making. But in the long term, if
Speaker 4: you're looking five years out without China, I mean, that's
Speaker 4: where all the secondary LLLM companies are besides you know, Chat, GPT,
Speaker 4: Anthropic and Google, and so you are missing out on
Speaker 4: a lot of potential customers that would have used your chips.
Speaker 3: What did we say about DeepC before that they had
Speaker 3: an update and like we're trying to understand, So if
Speaker 3: this is all real with what they upgraded.
Speaker 1: The R one AI model that helped propel it to
Speaker 1: global prominence earlier this year, now we don't.
Speaker 3: Still know exactly how they're doing all of this, but
Speaker 3: if they are doing it with less advanced chips, I mean,
Speaker 3: does that make the Nvidia story not as exciting?
Speaker 4: No, because in videos to get this is all speculations. Yeah, yeah,
Speaker 4: and look there could be some pull forward in China.
Speaker 4: You know with Deep Seek using in videos chips because
Speaker 4: they anticipated these kind of restrictions, right, But in other
Speaker 4: regions everyone realizes and Vidia has the best ship. The
Speaker 4: only reason why you are going to look for an
Speaker 4: alternative is a hyperscaler looking to really kind of reduce
Speaker 4: their dependency. So Google doesn't use in video chips because
Speaker 4: they have their in house chip and they serve traffic
Speaker 4: that's pretty much the seven most frequently used apps on
Speaker 4: the Internet.
Speaker 5: So if they were to rely.
Speaker 4: On in video, I mean, in Video's revenue could actually
Speaker 4: grow fifty percent just by serving Google.
Speaker 1: But does Google then create those send those chips. Would
Speaker 1: Google sell those chips outside?
Speaker 4: They don't, so they don't use the chips outside of
Speaker 4: their family of apps. They just use it for Google Search, YouTube,
Speaker 4: and their family of apps.
Speaker 1: Why wouldn't they sell it because.
Speaker 4: It's not a chip that is generic in nature that
Speaker 4: it can serve everyone else's traffic. It's customized for their data.
Speaker 1: Do we see Amazon then doing that too?
Speaker 4: I think that's the bare case that everyone is thinking,
Speaker 4: But so far it hasn't happened, and everyone is trying.
Speaker 1: Would you disagree with j Goldberg who just told us
Speaker 1: that he thinks that Broadcom is the closest competitor right now,
Speaker 1: or not necessarily closest competitor. Excuse me, And I know
Speaker 1: you can't make calls Andy, but he's the only one
Speaker 1: who has a cell rating on Nvidia, and he argues
Speaker 1: right now that investors should be putting their money toward Broadcom.
Speaker 4: I mean, look, we are in an AI infrastructure super cycle,
Speaker 4: and this is a tie that will lift all the boats.
Speaker 4: Broadcom Wild benefit other chip makers for benefits. So it's
Speaker 4: very hard to say only Broadcom wild benefit with AI
Speaker 4: infrastructure demand. And I think that's where you're too early
Speaker 4: to put a cell rating on a stock like Nvidia.
Speaker 3: All right, so stock is at four percent and certainly
Speaker 3: investors buying in the aftermarket. There is a you know,
Speaker 3: a headline that crossed about ten minutes ago that in
Speaker 3: video saying maybe unable to create a competitive product for China,
Speaker 3: would have to foreclose from competing in China market. China
Speaker 3: market foreclosure would materially hit the business. Export controls Apple
Speaker 3: to China are complex. Help me make some sense out
Speaker 3: of these headlines.
Speaker 4: I mean, look, if you want to see multiple expansion
Speaker 4: in a stock like Nvidia, you got to convince the
Speaker 4: investors that you can keep growing twenty twenty five percent.
Speaker 4: And the way you do that is by showing pockets
Speaker 4: of demand, you know, geographic diversification. If you lose out
Speaker 4: China revenue, suddenly everything is like, okay, you're two dependent
Speaker 4: on hyperscalers. What if Amazon actually develops a chip and
Speaker 4: reduces their dependency altogether on in media and so that
Speaker 4: is the big bear case, the concentration of customers, and
Speaker 4: that's at losing China revenue is a rep.
Speaker 3: So Mandy Business is saying, here, we're laying it out
Speaker 3: for you just to understand.
Speaker 5: Yeah, in terms of the China, is.
Speaker 3: That pressure on the Trump administration?
Speaker 4: Not really because they keep eating their numbers like this,
Speaker 4: I mean really administration. You see the numbers and you're like,
Speaker 4: that's these guys get managed without China revenue.
Speaker 5: But if they're.
Speaker 3: Warning of that impact in terms of China, is that
Speaker 3: kind of a little bit of a subtle considering he
Speaker 3: just traveled with him to the Middle East, you know
Speaker 3: a little bit of a like settle message reminder.
Speaker 5: That's a fair characterization. I would agree with that.
Speaker 1: Okay, I want to bring in Joe Kaiser CEO and
Speaker 1: managing director at Mercado Partners. It's a grow stage investment firm.
Speaker 1: It's got over a billion dollars in assets under management
Speaker 1: Mercado Partners. He joins us from Salt Lake City. Joe,
Speaker 1: You've had a chance to sit back and look at
Speaker 1: some of these results over the last thirty minutes or so.
Speaker 1: First quarter data, revenue coming in close to estimates, second
Speaker 1: quarter forecast solid despite an eight billion dollar eight billion
Speaker 1: dollars in expected lost China sales. The company stock up
Speaker 1: about four percent in the after hours. What's your view.
Speaker 6: I think this growth and the profitable growth that we're
Speaker 6: seeing is really unprecedented in the venture community. We still
Speaker 6: use the term called rule of forty, so it's combining
Speaker 6: the top line growth rate coupled with EBITDAM margin. And
Speaker 6: I haven't seen the EBITDN number, but if we use
Speaker 6: the prior quarters EBITDN number, like they're approaching two hundred
Speaker 6: from a rule of forty standpoint. And to give you
Speaker 6: some historic precedent, when Micro sorry, when Microsoft and Apple
Speaker 6: were at the same stages from a revenue size standpoint,
Speaker 6: those companies were at ninety and sixty, respect respect respectively.
Speaker 6: So This is truly unprecedented performance and at the end
Speaker 6: of the day, like what we're seeing is probably the
Speaker 6: greatest invention in the history of mankind and the company
Speaker 6: that singularly powers that and that's the performance that we're
Speaker 6: seeing before us.
Speaker 1: Now, are you bullish that there is more upside, Joe
Speaker 1: to this company? Jake Goldberg is not.
Speaker 5: Well.
Speaker 6: I think it pays to be provocative at some occasions,
Speaker 6: but yes, I think there is a lot of upside.
Speaker 6: I think, you know, when we think about the deployment
Speaker 6: of AI, particularly in enterprise applications, both in the United
Speaker 6: States and abroad, we are very early innings and that
Speaker 6: and that and that deployment. You know, they've talked about
Speaker 6: the data iner deployment around the world across the GCC
Speaker 6: countries as well as domestically. Lots and lots of runway
Speaker 6: in that regard. So there is a long road ahead
Speaker 6: for Nvidia.
Speaker 3: Joe, I know you're well versed on the power side
Speaker 3: of AI, but I want to bring man deep in
Speaker 3: on that. Man Deep, is there a point you know,
Speaker 3: I think about you know, doing like basic charts anywhere,
Speaker 3: like the ramp up and AI and the power demands
Speaker 3: we talk about it all the time. Is there a
Speaker 3: point where AI deployment and usage might be limited because
Speaker 3: we just don't have the power?
Speaker 4: Yeah, and that's where actually in Vidia's architecture excels because
Speaker 4: they give you performance per power what that your likes
Speaker 4: of AMD and Intel aren't able to give. It's not
Speaker 4: as if AMD doesn't have an offering GPU that can
Speaker 4: compete with Nvidia, But in Vidio's GPUs just give you
Speaker 4: better performance per power what And that is the constraint
Speaker 4: right now, everyone acknowledges yea the power constraints.
Speaker 5: So from that perspective, also in Vidia does have an advantage.
Speaker 1: See you nodding. This is certainly your wheelhouse given the
Speaker 1: history of what you've done and at the firm and
Speaker 1: outside of the firm too, How is in Vidia doing
Speaker 1: this and how solid and how big is their mode well?
Speaker 6: That is one of the big developments with the Blackwell
Speaker 6: chip is the reduction and power consumption from black from
Speaker 6: Hopper to Blackwell, and and that that is one of
Speaker 6: the key breakthroughs. You know, I A lot of people,
Speaker 6: including in Vidia, including the hyperscalers, talk about the lack
Speaker 6: of power as the headwind here. The reality is we
Speaker 6: as a nation. We have the resources, we have the technologies.
Speaker 6: You know, I invested in a company called Taurus, which
Speaker 6: has solved the storage challenge we have from a long
Speaker 6: term standpoint, I think a guest earlier today talked about
Speaker 6: small modular reactors and the technology of foot a small
Speaker 6: footprint nuclear. That technology exists, right.
Speaker 3: But SMRs are taken a while. Yeah, we're still talking
Speaker 3: quite everybody talks about it and SMRs are the way
Speaker 3: to go, but it's going to be several years before
Speaker 3: we really see that build up.
Speaker 6: Very true, Carol, But I think the challenges we have
Speaker 6: plenty of natural gas as a country as well. And
Speaker 6: the talk is, well, it takes a decade to build
Speaker 6: a power plant, but the reality is the long pole
Speaker 6: in the tent from building a power plant is the
Speaker 6: permitting process and the process of getting the right to
Speaker 6: turn on and use the power out of that power plant.
Speaker 6: So if we streamline that process, and I know both
Speaker 6: the federal government as well as states like Utah are
Speaker 6: in the early inning right streamlining, but that is the
Speaker 6: long pole in the tent.
Speaker 4: All right.
Speaker 3: We're talking with two guests. We've got Joe Keiser, he's
Speaker 3: CEO of managing director at Mercado Partners out there in Utah.
Speaker 3: Mandy Singh, Senior Tech Industry Alice Bloomberg Intelligence right here
Speaker 3: in our Bloomberg Interactive Broker studio and Vidia out tim
Speaker 3: stock is now up about four and a half percent
Speaker 3: here in the aftermark.
Speaker 1: Yeah, first quarter data center revenue coming in close to estimate.
Speaker 1: Second quarter forecast solid despite that eight billion dollars an
Speaker 1: expected loss to China sales. In Vidia shares rising and
Speaker 1: extended trading. It's providing a boost to other chip stocks
Speaker 1: as well. We're seeing shares of Micron also higher in
Speaker 1: the after hours by about one point four percent. Mandy,
Speaker 1: you've been glued to the terminal looking through these numbers.
Speaker 1: You got to go in a minute, what's the last
Speaker 1: thought you want to leave us with ahead of this call?
Speaker 4: I mean, sovereign AI is a big opportunity. Sovereign Sovereign AI,
Speaker 4: which is where you would put you know, revenue from
Speaker 4: the likes of UAE, Saudi Arabia, the deals they just signed.
Speaker 4: I just want to get a sense of how big
Speaker 4: this could get, because so far this was like low
Speaker 4: double digit revenue in terms of the revenue exposure that
Speaker 4: Nvidia had and look they are losing China revenue. So
Speaker 4: what makes up how many types of entity? Sovereign entities
Speaker 4: want to build their own large anguid model infrastructure like
Speaker 4: the UAE and the Saudi Arabia, And that would determine,
Speaker 4: you know, the pace of growth when it comes to
Speaker 4: the non hyper scale piece of and Video's growth.
Speaker 3: The Middle East trip like makes so much more sense, right.
Speaker 5: Maybe they should be doing more trips the administration?
Speaker 4: Well where else can they go?
Speaker 3: Anywhere?
Speaker 4: Right?
Speaker 5: Anywhere?
Speaker 4: I mean, look, you you've got so many pockets where
Speaker 4: there's so much sensitivity around AI in terms of you know,
Speaker 4: developing your own AI, serving it with your own infrastructure.
Speaker 5: That that's the real bull case when it comes to
Speaker 5: sovereign AI. What can I ask one last question?
Speaker 3: Cash, cash equivalents, marketable securities fifty three point seven billion,
Speaker 3: up from thirty one point four billion a year ago
Speaker 3: and forty three point two billion a quarter ago. What
Speaker 3: do they need to do? They tried to buy armed,
Speaker 3: couldn't do it right? Do they need to do bigger dividends?
Speaker 3: Do they need to do buybacks or what do you think?
Speaker 5: I mean stock buybacks?
Speaker 4: This company is generating as much free cash flow as Apple.
Speaker 4: Now you're close to one hundred billion dollars in free
Speaker 4: cash flow. So Apple does have a playbook when it
Speaker 4: comes to returning cash to shareholders. I think N Video
Speaker 4: should probably follow them. H