Speaker 1: Hello everybody, and thank you so much for joining us
Speaker 1: for this special edition of Bloomberg Daybreak. US markets are
Speaker 1: closed for the President's Day holiday. I'm Nathan Hager. Coming
Speaker 1: up this hour. We'll look ahead to a couple of
Speaker 1: major lawsuits on the docket. Elon Musk's battle against Open
Speaker 1: Ai and the Justice Department's case against Live Nation and
Speaker 1: ticket Master. We'll break them down with two of our
Speaker 1: litigation analysts from Bloomberg Intelligence, Matthew Shettenhelm on big tech
Speaker 1: and Jennifer Ree on Big ticket. Plus, we have a
Speaker 1: big earnings report coming up from AI Behemoth and Nvidia
Speaker 1: BI analyst man Deep Singh and Kunjohn Sapani will be
Speaker 1: along to preview those results. Before that, though, we hear
Speaker 1: from the world's biggest big box retailer this week, Walmart,
Speaker 1: reports earnings on Thursday. Here to get a set for
Speaker 1: that report, our Bloomberg Intelligence senior analyst Jennifer Bartashis who
Speaker 1: covers retail staples, and Punam Goyle, who's got things covered
Speaker 1: on the e commerce side. Thanks to both of you
Speaker 1: for being with us, and you know, coming off the
Speaker 1: flat retail sales report for decent number that we saw
Speaker 1: recently Jennifer, I'll start with you, how does that affect
Speaker 1: what we could see from Walmart when it comes to
Speaker 1: the earnings this week.
Speaker 2: You know what's interesting is that for Walmart, it doesn't
Speaker 2: matter so much what the retail sales do just because
Speaker 2: the trends that are in place have really been conducive
Speaker 2: to their growth and their business. People are seeking value,
Speaker 2: People are seeking, you know, ways to streamline their time
Speaker 2: and find convenience, and Walmart just seems to be gaining
Speaker 2: share based on their ability to offer that to their customers. So,
Speaker 2: regardless of the macro environment, Walmart really seems to be
Speaker 2: thriving at the moment.
Speaker 1: And put them to bring you into the conversation, We're
Speaker 1: seeing a lot of consumers seeking out Walmart's business on
Speaker 1: the e commerce side as well. How could that play
Speaker 1: out into these earnings?
Speaker 3: We think Walmart will continue to do well on the
Speaker 3: e commerce side. If Amazon is any reflection on how
Speaker 3: the consumer is shopping online, they had great numbers on
Speaker 3: the retail side, high single digit sales growth in their
Speaker 3: online business. We expect Walmart to be no different. They've
Speaker 3: put a lot of investment behind their e commerce unit
Speaker 3: and they have been very quickly gaining share. Its over
Speaker 3: one hundred billion dollars in GMB today. That's pretty impressive
Speaker 3: given how little time they've gotten there. So we think
Speaker 3: the e commerce handle for them will play out while
Speaker 3: just like it did for Amazon.
Speaker 1: You know, it's interesting, Jen, Walmart is seeing competition from
Speaker 1: Amazon on multiple fronts, not just on the e commerce side,
Speaker 1: but Amazon is kind of altering its footprint in the
Speaker 1: grocery business as well. How do you see Walmart weathering
Speaker 1: that well?
Speaker 2: I think what's interesting is that, you know, when Amazon
Speaker 2: announced that they were closing their Amazon Fresh stores and
Speaker 2: their Amazon Ghost stores, which was more of a convenience
Speaker 2: store format. You know, people kind of set up and
Speaker 2: took notice, but it's important to remember there were way
Speaker 2: under one hundred of those stores altogether, so it's never
Speaker 2: been the majority of Amazon's grocery footprint. Instead, you know,
Speaker 2: they have a lot of sales that are what you
Speaker 2: would consider grocery category sales that happen through Amazon dot
Speaker 2: Com and through their Amazon Fresh and so those are
Speaker 2: your your fresh items, as your paper towels, things like that.
Speaker 2: Walmart is the biggest grocer in the United States. You know,
Speaker 2: they own almost thirty percent of market share, so they're
Speaker 2: very well entrenched and because they've been investing in their capabilities.
Speaker 2: You know, I think there's room for Amazon to grow,
Speaker 2: but we're not expecting any kind of major, you know,
Speaker 2: change in who's the leader in grocery over the next
Speaker 2: couple of years.
Speaker 1: You got to think to put them that Walmart's got
Speaker 1: room to grow overall on e commerce as well. Although
Speaker 1: Amazon being the behemoth it is, what's the challenge for
Speaker 1: Walmart to compete online?
Speaker 3: I don't think it's really a challenge anymore because they're
Speaker 3: making the right investments. They're investing like just they're investing
Speaker 3: in product and expanding their marketplace. You know, a lot
Speaker 3: of times people tend to think that if Walmart wins,
Speaker 3: Amazon loses, that's not the case. I think both of
Speaker 3: them can grow together. There's a lot of share shifts
Speaker 3: that are taking place in retail where shopping is just
Speaker 3: gradually moving online. We have estimated that twenty five percent
Speaker 3: of total retail sales in the US are online today
Speaker 3: and they're going to be growing to thirty three percent
Speaker 3: in the next few years. So there's plenty of opportunity
Speaker 3: for retailers to capture that growing opportunity and among them,
Speaker 3: Walmart and Amazon are still probably best position to do so.
Speaker 1: And when it comes to the overall business, Jen, is
Speaker 1: it all about grocery for Walmart? Is that where the
Speaker 1: basis for Walmart's businesses right now? Or is it seeing
Speaker 1: the potential for growth across its categories of items that
Speaker 1: it sells?
Speaker 2: Now, there's definitely growth across all of the categories. You know,
Speaker 2: grocery categories do you comprise about half of Walmart's total revenue,
Speaker 2: so it is important. But you know, the company does
Speaker 2: a great job of of having that broad assortment be
Speaker 2: tailored to be appealing to customers. And that's in the
Speaker 2: US and that's worldwide. And so you know what we
Speaker 2: see is that, you know, grocery is great because it's
Speaker 2: a frequency category. You buy groceries frequently. It takes you
Speaker 2: to stores, but once you're in the store or once
Speaker 2: you're online, placing that order between either the in store experience,
Speaker 2: the merchandise selection, or the technology that's used from a
Speaker 2: from an interface perspective, it's really helping guide people to
Speaker 2: buy more than just their groceries at Walmart, and so
Speaker 2: you know, they've had strong, much stronger general merchandise sales
Speaker 2: than some of their peers over the last last few
Speaker 2: quarters and.
Speaker 1: Put them how do you see Walmart continuing to grow
Speaker 1: its business on the tech side in terms of developing
Speaker 1: its interfaces integrating artificial intelligence into what it does.
Speaker 3: I think, just like everyone else today, the integration of
Speaker 3: artificial intelligence agentic shopping is key. Walmart's integrated itself into
Speaker 3: chat GBT, so it's clearly opening up avenues to broaden
Speaker 3: its customer base and get a piece of that agentic
Speaker 3: AI shopping driven conversion. We think they're making advancements to
Speaker 3: broaden their customer base beyond you know, when you think
Speaker 3: about the Walmart customers, it is broad and it is
Speaker 3: a customer predominantly that's seeking value. But they're trying to
Speaker 3: expand that and they have to some extent, and Jen
Speaker 3: could talk about this, have really expanded that through the
Speaker 3: Walmart Plus membership. But in using AI and agentic shopping
Speaker 3: and just technology robotics automation, we think they are making
Speaker 3: progress and they will continue to invest in that front
Speaker 3: to move forward in retail because if they don't, quite honestly,
Speaker 3: they won't be able to continue to gain share.
Speaker 1: I'm speaking with Punum Goyle and Jen Bartascius of Bloomberg Intelligence.
Speaker 1: Jen pickop to that point that Punam raised there in
Speaker 1: terms of the Walmart Plus business, there has been this
Speaker 1: push into more subscriber fed business. How is that paying
Speaker 1: off for Walmart?
Speaker 2: Yeah, it's it's a it's a great program for Walmart.
Speaker 2: When you think about what Walmart has been talking about
Speaker 2: and over the past several quarters, they've been bringing in
Speaker 2: more higher income households into their ecosystem. Now, part of
Speaker 2: that is people seeking value, but the Walmart Plus program,
Speaker 2: when they get people engaged with that, that makes people sticky.
Speaker 2: And so historically, when the economy has been weak, Walmart
Speaker 2: gains people, they gain shoppers, but then as the economy
Speaker 2: gets better, some of those customers bleed away. What Walmart
Speaker 2: Plus does is it helps keep all of those customers
Speaker 2: sticky and in the in the Walmart universe, and through
Speaker 2: the offering of convenience of being able to have things
Speaker 2: delivered to your house or even into your house and
Speaker 2: into your refrigerator directly, or being able to pick things
Speaker 2: up at the at the curb side, and all the
Speaker 2: their perks and benefits that they offer via that membership program.
Speaker 2: It really helps keep those customers you know, engaged, and
Speaker 2: it provides a recurring revenue source in terms of membership fee.
Speaker 2: So there's there's lots of levels to the win of
Speaker 2: having a robust program like Walmart Plus.
Speaker 1: And in terms of the value seeking customer getting into
Speaker 1: that engagement as well. Poonam, do you see that trend
Speaker 1: continuing having some of these more higher middle income consumers
Speaker 1: getting driven more into Walmart to seek that value.
Speaker 3: Yeah. I don't think that changes much for the lower
Speaker 3: end customer. I mean, at the end of the day,
Speaker 3: Walmart stands for value, so everyone wants to find things cheaper.
Speaker 3: I don't think a higher income consumer would go out
Speaker 3: and say I'm willing to pay more unless there's a
Speaker 3: service element to it, or there's an aesthetic involved or
Speaker 3: a better brand involved. But I think having a broad
Speaker 3: array of customers which Walmart is now targeting to expand
Speaker 3: that upper end of the funnel, it doesn't hurt them.
Speaker 3: And it's an easy way to do that because when
Speaker 3: you're on an online platform, the experience is similar to
Speaker 3: all versus you know, people would argue in the past
Speaker 3: when you walk into a Walmart store, the experience is
Speaker 3: very different. Than when you were to walk into a
Speaker 3: whole food store, right, But if you're shopping online for
Speaker 3: paper towels, it's wherever you're used to going. And that's
Speaker 3: what Jen talked about the stickiness of it. Right when
Speaker 3: you're a Prime member, you're a Walmart Plus member, because
Speaker 3: you're paying for this membership, you want to utilize it.
Speaker 3: And once you begin to utilize it and see the
Speaker 3: value in it, that's just a natural place that you're
Speaker 3: going to go to next.
Speaker 1: You know, Jen, this is an interesting time in the
Speaker 1: big retail business with a lot of these sort of
Speaker 1: businesses that we think of as catering to the lower
Speaker 1: end consumer, like Dollar Tree, Dollar General moving into some
Speaker 1: of these bigger markets and target continuing to try to
Speaker 1: find a direction. How do you see Walmart sort of
Speaker 1: navigating some of that perhaps increased competition from the lower
Speaker 1: end retailers.
Speaker 2: Yeah, it's it's a it's a very good question. You know,
Speaker 2: when when you look at the customer that the the
Speaker 2: organizations that target the lower end consumers, like your dollar stores,
Speaker 2: you know, in terms of store base, those those companies
Speaker 2: tend to be located in greater proximity to some of
Speaker 2: the you know, to some of those customers. So you know,
Speaker 2: it's about it's about trip frequency. So dollar stores are
Speaker 2: really favored when people are doing kind of quick fill
Speaker 2: in trips in between larger shops. Where Walmart comes into
Speaker 2: place is for that larger shop when people are planning,
Speaker 2: you know, multiple meals in advance. They're planning, you know,
Speaker 2: for a larger event or something like that. And so
Speaker 2: you know, as we've seen you know, some uh some
Speaker 2: some consolidation happening in the in the dollar store industry.
Speaker 2: You know, we saw ninety nine cent stores go out
Speaker 2: of business. You know, we saw a party city collapse.
Speaker 2: That offers opportunity to ev for everybody, and and Walmart
Speaker 2: is included in that mix.
Speaker 1: And Jen, just to close this out, I think this
Speaker 1: is going to be the first earnings report under Walmart's
Speaker 1: new CEO, John Ferner, Right, Uh, what what's the pressure
Speaker 1: on him, uh to keep up the momentum that we've
Speaker 1: seen under Doug McMillan over the years.
Speaker 2: I think that they certainly there's there's going to be
Speaker 2: expectations that he continues with the things that have really
Speaker 2: benefited Walmart in recent years, which is that willingness to
Speaker 2: experiment and and fail. So experiment, adapt what what works,
Speaker 2: you know, roll it up quickly. If something doesn't work,
Speaker 2: walk away. You know, I think that he's you know,
Speaker 2: he's been with Walmart for a while, so you know,
Speaker 2: he certainly has the perspective of what the company has
Speaker 2: been doing. But I think all eyes will be on whether,
Speaker 2: you know, he finds new opportunities to kind of supplement
Speaker 2: the ecosystem that Walmart has been building. That said, we're
Speaker 2: not expecting any major pivots and strategy in the short
Speaker 2: term because the the the this is working quite well
Speaker 2: for Walmart at the moment, and they continue to gain
Speaker 2: share and they continue to put on new customers.
Speaker 1: Really appreciate this as we look ahead to these earnings
Speaker 1: from Walmart on Thursday. That's Jen Bartashis and Punam Goyle,
Speaker 1: retail analysts for Bloomberg Intelligence. And up next, we're going
Speaker 1: to stick with the earnings theme and look at what
Speaker 1: to expect from Chip Giant in Vidia. It's twenty minutes
Speaker 1: past the hour. I'm Nathan Hager, and this is Bloomberg.
Speaker 1: Welcome back to this special edition of Bloomberg Daybreak. US
Speaker 1: markets are closed for the President's holiday. I'm Nathan Hager,
Speaker 1: and we continue our focus on earnings. Nvidia reports its
Speaker 1: latest quarterly numbers next week. From what we can expect
Speaker 1: from the chip behemoth, let's bring in Man Deep Saying,
Speaker 1: global head of tech research for Bloomberg Intelligence, and BI
Speaker 1: senior Semiconductors analyst Kunjohn Sabani. Thanks so much to both
Speaker 1: of you for being with us, and many people start
Speaker 1: with you because it seems like the bar keeps getting
Speaker 1: set higher and higher for Nvidia quarter in and quarter out.
Speaker 1: Do you agree with that and how high is the
Speaker 1: bar this time?
Speaker 4: Well, so, in the last couple of years, what we
Speaker 4: have seen is in Vidia's top line growth actually tracks
Speaker 4: the hyperscale capex changes. And what we have seen here
Speaker 4: today is all these hyperscalers raising their capex expectations for
Speaker 4: twenty twenty six and we're talking about another year of
Speaker 4: a sixty percent increase in total capex. And so if
Speaker 4: that's tracking, you know, in Vidia's top line growth and
Speaker 4: it's a it's a good proxy for that, then we
Speaker 4: can expect something similar and that's where the estimates keep
Speaker 4: getting revised upward. And now you know, consensus is forecasting
Speaker 4: almost a sixty percent increase in in Vidio's top line
Speaker 4: for twenty twenty six.
Speaker 1: My eyebrowser already hurting just thinking about that, Kunjon. To
Speaker 1: that point, six hundred and fifty billion dollars over the
Speaker 1: next year is the number we keep hearing from the
Speaker 1: four hyper scalers in terms of their AI plans. How
Speaker 1: do you think that plays out for Nvidia's results, Well.
Speaker 5: That should be a definite tailwind. Remember sometime in three
Speaker 5: Q calendar three Q last year, Jensen gave out a
Speaker 5: five hundred billion dollar This is Nvidia's revenue, not the
Speaker 5: hyperscale care PACs, but five hundred billion dollar of a
Speaker 5: pipeline of a backlog for both its Blackwell and upcoming
Speaker 5: Rubin which will be in second half twenty six through
Speaker 5: twenty twenty six. Since then, as Mandeep mentioned, the estimates
Speaker 5: for these hyper scalers have gone up in some cases
Speaker 5: like Google and Amazon has gone up close to forty
Speaker 5: fifty percent, So those a significant portion of that increase
Speaker 5: should definitely go in Vida's way. So that should now
Speaker 5: raise the estimates even more. Since off of that three
Speaker 5: QI billion pipeline.
Speaker 1: Number, Mandy, do you see in Vidia keeping up with
Speaker 1: the demand that that kind of spending entails.
Speaker 2: Yeah.
Speaker 4: In fact, I was at CEES this year and then
Speaker 4: at Davos as well, and Jensen said demand is really
Speaker 4: strong at least ten times you know, during those big events.
Speaker 4: So clearly he anticipated this and Nvidia has been preparing
Speaker 4: for this kind of step up and demand. The one
Speaker 4: caveat here is what we are hearing from companies about
Speaker 4: memory prices, and every company that has reported so far
Speaker 4: on the hardware side has called out, you know, memory
Speaker 4: pricing being a challenge. I think Nvidia, given their scale,
Speaker 4: has probably managed it far better than some of the
Speaker 4: smaller companies. But there's no doubt that memory is having
Speaker 4: an impact on the supply chain this quarter and most
Speaker 4: likely for the next couple of quarters at least.
Speaker 1: Now give us your view on that, Coon, John, because
Speaker 1: to man Deep's point, that is something that we've been
Speaker 1: hearing a lot from many companies, even outside the hyperscalers,
Speaker 1: that these memory prices are potential crimp to their margins.
Speaker 5: Yeah, I mean that is true, and as an industry
Speaker 5: they just have to deal with it. But given you know,
Speaker 5: in the terms of stack of priority, look and media
Speaker 5: is of course going to get the first priority. We
Speaker 5: have seen, including Nvidia, but we have seen from the
Speaker 5: memory players that they are reprioritizing key markets, which is
Speaker 5: the data center, which is the latest and greatest servers,
Speaker 5: because that's where they get the most profit and the
Speaker 5: most dollar. And Nvidia also has prioritized and has actually
Speaker 5: announced that they're going to not ship enough gaming GPUs
Speaker 5: because they want to prioritize the memory that goes to
Speaker 5: the server GPUs. So we think Nvidia should be okay.
Speaker 5: The smaller, much more not sophisticated players and players outside
Speaker 5: of the data center will see some impact of taking
Speaker 5: allogation away from them or not getting the key allogation,
Speaker 5: but Nvidia and hyperscalers should mostly be okay.
Speaker 1: Now we know that in Video is an industry leader
Speaker 1: in the GPUs, but we hear all this talk as
Speaker 1: well about TPUs. How could that be playing out in
Speaker 1: the earnings when they report.
Speaker 4: Yeah, I think what we saw from Google is one
Speaker 4: they expect, you know again fifty percent of their deployments
Speaker 4: to go towards their cloud business, and the cloud business
Speaker 4: seems to be accelerating. We saw a quarter with forty
Speaker 4: eight percent cloud growth, which is far better than the
Speaker 4: other hyperscalers and with you know, better margins. So I
Speaker 4: think where the TPUs story is really solid for someone
Speaker 4: like Google is the fact that one it's vertical stack
Speaker 4: integration that gives them a much better you know, token
Speaker 4: per what sort of a metric compared to other hyperscalers.
Speaker 4: And also, I think in terms of kapex efficiency, Google
Speaker 4: probably is the best position when it comes to the hyperscaler.
Speaker 4: So it'll be interesting to see, you know, what Microsoft
Speaker 4: and Meta end up doing, given Amazon has also talked
Speaker 4: about ramping up their Traanium chips their own A six.
Speaker 4: So both Amazon and Google are a tailwind for someone
Speaker 4: like Broadcom, which Kunjin can talk more about. But clearly
Speaker 4: I think Microsoft and Meta are probably more reliant on
Speaker 4: Nvidia at this point than the other hyperscalers.
Speaker 1: We're speaking with Mandeep Saying, Global head of Tech research
Speaker 1: at Bloomberg Intelligence, and BI Senior Semiconductor's analyst Kunjohn Sabani.
Speaker 1: Kenjohn Let's pick up off of Mandeep's point about how
Speaker 1: Nvidia is weathering the competition and from some of these
Speaker 1: other chip players, not just the TPUs but the likes
Speaker 1: of Broadcom, AMD, Micron.
Speaker 5: Yeah, I mean Look, there is no doubt and we
Speaker 5: have a forecast in our latest AI chip Deep Type
Speaker 5: that we are published, But there is no doubt that
Speaker 5: a six R, which is the likes of a TPU
Speaker 5: and a trainium are going to grow fast and to
Speaker 5: some degree definitely take share away from in Media. It's
Speaker 5: GPU competitor, which is from AMD, is also getting ready
Speaker 5: to ship its first server level solution in second half
Speaker 5: twenty six. So look, competition is coming from all angles.
Speaker 5: Having said that, though you know, and Media is also
Speaker 5: not sitting on his heels. They have been trying to
Speaker 5: explore different areas and markets. One example is they have
Speaker 5: announced they are going to start selling their best in
Speaker 5: class ARM based CPU as a stand alone chips, so
Speaker 5: entering into a brand new TAM that they didn't have
Speaker 5: access to it in the past. And we think, you know,
Speaker 5: beyond just server GPUs, they will be making forays into
Speaker 5: a lot more other areas of AI, whether it's automotive,
Speaker 5: whether it's physical AI. So right now the demand is
Speaker 5: so high that despite such high competition that I talked about,
Speaker 5: in Media can still continue growing really handsomely, at least
Speaker 5: for the next two to three years.
Speaker 1: Matthew how do you see Video's growth rejectory at this point,
Speaker 1: not just on the chips, but growing into other markets.
Speaker 1: Does Video even need to grow into other markets? When
Speaker 1: the hyperscalers you're talking about the kind of spending that
Speaker 1: they are.
Speaker 4: Well, you have to think, you know, one or two
Speaker 4: years ahead, because the kind of levels we are seeing
Speaker 4: with capex and you know, as I said, we'll see
Speaker 4: another year of sixty percent growth. We already had two
Speaker 4: years of sixty to seventy percent CAPEX growth. These kind
Speaker 4: of growth levels are not sustainable. I mean, there is
Speaker 4: no doubt that growth in CAPEX will taper off. And
Speaker 4: you know we are already talking about trillion dollars plus
Speaker 4: in CAPEX. So from this point on, you know, six
Speaker 4: hundred and fifty billion, you will see a deceleration in
Speaker 4: capex grud. So the question for Nvidia is if there
Speaker 4: is competition coming, do they want to move up the stack,
Speaker 4: which they've already done with the release of a foundational
Speaker 4: model on the autonomous driving side, the Alpmyle model that
Speaker 4: they've released, And that's where you know, they'll have to
Speaker 4: pick their spots in terms of what are the areas
Speaker 4: where they feel like They've got a lot in terms
Speaker 4: of the adjacent capabilities. They've already have a very sizable
Speaker 4: networking business. Then that Kunjin can talk about. But to me,
Speaker 4: the key is what kind of advantage these foundational models
Speaker 4: that are trained on the latest Blackwell architecture can show
Speaker 4: versus the A six and how big that gap is,
Speaker 4: Because at the end of the day, companies that are
Speaker 4: using the Nvidia clusters want to see, you know, whether
Speaker 4: it's performance in terms of tokens for what, or you know,
Speaker 4: the intelligence layer being better versus some of the other
Speaker 4: foundational models that are not trained on Invidia chips and
Speaker 4: that sort of distinction is very important to keep, you know,
Speaker 4: the gross margins that Nvidia has versus the competition.
Speaker 1: I pick up on that, kin John, how do you
Speaker 1: see in Nvidia sort of growing into some of that story.
Speaker 5: Yeah, I mean, look mentioned about networking, just to just
Speaker 5: give a point of reference, This is not an area
Speaker 5: Nvidia was playing up until even just two years back. Today,
Speaker 5: the revenues from networking are going to run close to
Speaker 5: thirty billion figure for the full year. Nvidia was not
Speaker 5: even doing thirty billion as a whole company up back
Speaker 5: in until twenty twenty three, So that's just to set
Speaker 5: an example of that they have been mentioning into new
Speaker 5: areas moving up the stack, whether it is hardware, whether
Speaker 5: going beyond GPUs into networking and CPUs, or whether going
Speaker 5: into software ecosystem, whether it's through NIMS, through models, through
Speaker 5: their Omniverus software stack. So they've shown a lot of
Speaker 5: success in terms of expanding these businesses from nothing to
Speaker 5: billions of dollars today.
Speaker 1: Mandi Kunjohn mentioned earlier that Jensen Wang talked about the
Speaker 1: Rubin chip getting introduced in the second half of this year.
Speaker 1: Do you expect to hear more clarity from Jensen Wang
Speaker 1: when it comes to that next generationship in the earnings
Speaker 1: next week.
Speaker 4: Yeah, earnings as well as they have their GtC event
Speaker 4: coming up in March, so clearly, you know, there was
Speaker 4: a reason why Jensen pulled forward that announcement of the
Speaker 4: new chip to CES just to set expectations that they're
Speaker 4: really aggressive about pushing out the new architecture and introduce
Speaker 4: that in the second half. And I do expect, you know,
Speaker 4: the performance gains to be a big part of how
Speaker 4: they continue to show that they are ahead of competition,
Speaker 4: including a MD and the A six provider. So, as
Speaker 4: I said, in the end, it comes down to you
Speaker 4: know how, and Vidia's chips are helping address the power
Speaker 4: greed times. For everything that we are dealing with right now,
Speaker 4: power has the longest lead time. And if Nvidia can
Speaker 4: address that power constraint and maximize you know, the throughput
Speaker 4: per unit of power, then they will continue to command
Speaker 4: premium pricing, which has been their page all along.
Speaker 1: And Kun John, what's the most important question that Jensen
Speaker 1: Wong needs to answer in the earnings call next week?
Speaker 5: And it will be two questions. One is everyone's going
Speaker 5: to try and figure out the shape or increase of
Speaker 5: that five hundred billion pipeline that he had mentioned, So
Speaker 5: that's going to be most of the analysts.
Speaker 1: Goal really appreciate this. Thanks to both of you for
Speaker 1: being with us. That's Kun John Sabani and man Deep
Speaker 1: Sing of Bloomberg Intelligence. And up next, the World's Richest
Speaker 1: Man goes After open A, we'll get an update on
Speaker 1: Elon Musk's lawsuit against the maker of chat GPT. It's
Speaker 1: thirty seven minutes past the hour. I'm Nathan Hager and
Speaker 1: this is Bloomberg. Thank you so much for joining us.
Speaker 1: On this special edition of Bloomberg Daybreak. US markets are
Speaker 1: closed for the President's Day holiday. I'm Nathan Hager. We
Speaker 1: turned out to a couple high profile legal cases. The
Speaker 1: world's richest man, Elon Musk, is suing open Ai, a
Speaker 1: company he co founded. That trial set to begin in April.
Speaker 1: For more, We're joined by Bloomberg Intelligence litigation analyst Matthew Shettenhelm. Matt,
Speaker 1: thanks for coming on with us. Remind us first off,
Speaker 1: on the background of this case. Why is Elon Musk
Speaker 1: suing open Ai.
Speaker 6: Yeah, this goes back to Open Eyes founding about ten
Speaker 6: years ago, when Elon Musk was one of the principal
Speaker 6: contributors to the funding of its startup. And the allegation
Speaker 6: that Musk is making in this lawsuit is that when
Speaker 6: when open ai was created, it was under the idea
Speaker 6: that it would remain a non profit and that it
Speaker 6: would be focused on contributing to the good of the world,
Speaker 6: not contributing to private profits. And and so the the
Speaker 6: basic claim that Musk is making now some ten years
Speaker 6: later is that basically he was deceived in contributing what
Speaker 6: adds up to about thirty eight million dollars in startup
Speaker 6: contributions that open ai and Microsoft basically misrepresented how the
Speaker 6: company would operate, and so Musk he threw the whole
Speaker 6: kitchen sink at the companies in his complaint. But it's
Speaker 6: been narrowed down now to two or three claims that
Speaker 6: that basically say one that that that the companies were
Speaker 6: fraudulent in in in pursuing now a shift to a
Speaker 6: for profit model, and they the companies were unjustly enriched,
Speaker 6: and that the companies created a charitable trust and now
Speaker 6: they've reached that charitable trust and we're now on track
Speaker 6: for a trial on those issues.
Speaker 1: Well, Elon Musk is asking for a lot more though
Speaker 1: than just his thirty eight million dollars back, right, I mean,
Speaker 1: he's seeking tens of billions from these companies.
Speaker 6: Yeah, that's That's the really interesting piece here is that
Speaker 6: in January Musk made a filing in the case because
Speaker 6: it hasn't been clear exactly what would be the remedy,
Speaker 6: say Musk wins here it does the court just refocus
Speaker 6: the company back to a charitable purpose or is there
Speaker 6: monetary risk as well? To open ai and Microsoft and
Speaker 6: Must pushed hard on that last piece and made a
Speaker 6: filing that said, I'm not just seeking my thirty eight
Speaker 6: million dollars back here. Open ai was unjustly enriched and
Speaker 6: and owes me in the numbers he put in sixty
Speaker 6: five to one hundred and nine billion dollars from open
Speaker 6: Ai from Microsoft thirteen billion to twenty five billion dollars
Speaker 6: that he's seeking as a remedy here. So that's, you know,
Speaker 6: obviously a number that the companies have to take seriously.
Speaker 6: I think it's a different question whether the court would
Speaker 6: would really consider that as as a realistic remedy or
Speaker 6: if that's more of a play here for leverage and
Speaker 6: potentially shaping some sort of settlements to threaten numbers on
Speaker 6: that scale. Must calculates those through an expert based on
Speaker 6: the valuation of open Ai, not on any actual returns
Speaker 6: for the company that that that have been unjustly received it,
Speaker 6: And I think a court's going to have a real
Speaker 6: concern with calculating any sort of damages on valuation as
Speaker 6: Must does, so I bring a lot of skepticism to
Speaker 6: that number. I think potentially the bigger risk for open
Speaker 6: i and Microsoft might be the changes to its model
Speaker 6: going forward if the court insists that it needs to
Speaker 6: be focused on a charitable purpose. That could be, you know,
Speaker 6: substantial changes to the contracts and the model that the
Speaker 6: companies are pursuing now, and Microsoft's made a substantial investment
Speaker 6: in open Ai. Open Ai might be exploring an IPO.
Speaker 6: Potential disruption there, to me is probably the bigger risk
Speaker 6: than these gigantic numbers that Musk is throwing around.
Speaker 1: So how are you thinking this is going to potentially
Speaker 1: play out?
Speaker 2: Here?
Speaker 1: Is a settlement? What you're thinking is going to be
Speaker 1: the most likely outcome? And what would a settlement potentially
Speaker 1: look like?
Speaker 6: Yeah, so you know, so we're headed towards a trial
Speaker 6: in April twenty seventh. A jury trial and ury ty
Speaker 6: are inherently risky, and you you have potentially big numbers here.
Speaker 6: You know, settlements are are are always a real possibility.
Speaker 6: At the same time, I think open Ai and Microsoft
Speaker 6: think they have pretty strong legal arguments that this case
Speaker 6: never should have even reached this point, that it should
Speaker 6: never even be going to a jury. The judge has
Speaker 6: repeatedly refused to stop the case they reject. She rejected
Speaker 6: the motion for dismissal, the motion for summary judgment. I
Speaker 6: think the companies might want to try you know, to
Speaker 6: appeal this and and to challenge those rulings. But the
Speaker 6: problem for them is they can't do it before this
Speaker 6: goes to the jury. So it's a tough call to
Speaker 6: see how this plays out. There's a chance the companies say, look,
Speaker 6: you know, let's roll the dice with the jury and
Speaker 6: we can always appeal it afterwards, especially if the jury
Speaker 6: isn't asked to go to to remedy, it's just to
Speaker 6: go to to liability.
Speaker 2: So we'll see.
Speaker 6: It's really hard to say what a settlement looks like here.
Speaker 6: Given you the unprecedented nature of this suit, it's hard
Speaker 6: to see a concrete framework. I'm skeptical that those big
Speaker 6: dollar amounts come into play in any sort of settlement.
Speaker 6: But you know, you have big personalities here, obviously with
Speaker 6: Elon Musk and Sam Altman, who don't get along very well,
Speaker 6: and so to try to envision in an exact way
Speaker 6: that they would structure a settlement, it's too early to say.
Speaker 1: Thanks for this, Matt, great having you on with us.
Speaker 1: That's Bloomberg Intelligence litigation analyst Matthew Shettenhelm. Another case in
Speaker 1: the National Spotlight is set for next month. The Justice
Speaker 1: Departments antitrust lawsuit against Live Nation and Ticketmaster. For more
Speaker 1: on this, we're joined by Bloomberg Intelligence senior litigation analyst
Speaker 1: Jennifer ree. Jen give us the background on this one.
Speaker 1: Is this just about how much we're paying for tickets
Speaker 1: to go to concerts and things?
Speaker 7: Well, that's part of it. I mean, the allegations are
Speaker 7: that those fees that get tacked onto tickets for consorts
Speaker 7: that we all know so well are a result of
Speaker 7: Live Nation just essentially having too much dominance in control
Speaker 7: sort of across the entire ecosystem for large concerts. You know,
Speaker 7: it's in promotions, it manages artists, it owns venues, and
Speaker 7: it owns ticket Master, which it acquired in twenty ten.
Speaker 7: And what's been alleged here by the Department of Justice
Speaker 7: and a large group of states, by the way, forty
Speaker 7: of them have joined this case, is that the company
Speaker 7: has kind of engaged in this long laundry list of
Speaker 7: exclusionary conduct intended to maintain its monopoly positions in a
Speaker 7: couple different markets. You know, under anti trust laws, it's
Speaker 7: not really good enough just to have a monopoly position.
Speaker 7: But if you're in a monopoly position, meaning like maybe
Speaker 7: seventy percent or more market share in a market, if
Speaker 7: you engage in conduct intended to exclude your competitors and
Speaker 7: to maintain that position in kind of in an unfair way,
Speaker 7: that's where you get across the anti trust lines. And
Speaker 7: so that's what they're accusing Live Nation of here.
Speaker 1: So based on your analysis, what's the thinking about whether
Speaker 1: that type of behavior has been displayed by Live Nation
Speaker 1: and Ticketmaster.
Speaker 7: Well, based on what I've seen so far, the facts
Speaker 7: that are in the complaint and whatever they've allowed us
Speaker 7: to see publicly because quite a lot is redacted, it
Speaker 7: looks like the Department of Justice has some really good
Speaker 7: evidence and I believe has a strong case here. This
Speaker 7: will go before a jury, and so it would be
Speaker 7: a jury that would decide on liability. A judge would
Speaker 7: decide on remedy, but a jury would look at what
Speaker 7: the evidence the Department of Justice puts in front of it.
Speaker 7: But Nathan, there is some possibility that this case would
Speaker 7: not get there because there is a possibility that the
Speaker 7: company could settle with the Department of Justice before they
Speaker 7: get to that trial.
Speaker 1: Okay, what has you think in that.
Speaker 7: Well, this is mostly coming from news reports and from
Speaker 7: a pattern that we're beginning to see at the Department
Speaker 7: of Justice. You know, it has a division called the
Speaker 7: Antitrust Division, and that is staffed with those people who
Speaker 7: are anti trust experts. They are anti trust lawyers, economists,
Speaker 7: They understand that area and the law, but they are
Speaker 7: overseen by the Attorney General's Office, who aren't necessarily attorneys
Speaker 7: with anti trust experience, but can override the decisions of
Speaker 7: the division. And we have what has been alleged, because
Speaker 7: I have no firsthand knowledge, but what has been reported
Speaker 7: is that some very well connected Republican lobbyists, or I
Speaker 7: should say sort of in the MAGA side of the
Speaker 7: Republican Party lobbyists have successfully been able to go over
Speaker 7: the heads of the Anti trust Division lawyers and procure
Speaker 7: settlements for their clients against the will of the anti
Speaker 7: trust experts at the DOJ. And there is a suggestion
Speaker 7: that Live Nation is trying to that strategy here too,
Speaker 7: that they've hired quite a few people that are very
Speaker 7: influential with the Trump administration. For instance, Kelly an Conway
Speaker 7: is one. They put Richard Grinnell, who is a Trump confidant,
Speaker 7: on the board of and who is running the Kennedy Center,
Speaker 7: they put him on their board, and apparently, according to
Speaker 7: news reports, they have lobbyists roaming the halls of the
Speaker 7: Department of Justice on a pretty consistent basis. So they're
Speaker 7: working hard, I think, to get to a settlement. And
Speaker 7: we have seen this tactic has success in the past,
Speaker 7: namely with respect to Hewlett Packard in its attempt to
Speaker 7: acquire Juniper that was first challenged by the DOJ Anti
Speaker 7: Trust lawyers, and also with respect to a deal between
Speaker 7: Compass and Anywhere Real Estate where the DOJ Anti Trust
Speaker 7: Division was discouraged from opening an in depth investigation and
Speaker 7: the deal was allowed to clear without much of a
Speaker 7: deep look into it.
Speaker 1: Well, do you have a sense of what kind of
Speaker 1: settlement would satisfy the Justice Department?
Speaker 7: So I think you know. Live Nation has been operating
Speaker 7: under a DOJ consent order for years, since twenty ten.
Speaker 7: That basically means an agreement, you know, a legal agreement
Speaker 7: that they'll behave and their business in a certain way.
Speaker 7: They had to enter that order in order to acquire
Speaker 7: ticket Master. That was the agreement, and there have been
Speaker 7: investigations since, analegations and a finding by the DOJ that
Speaker 7: Live Nation did not comply with the terms of that
Speaker 7: consent order, and it had a lot of elements to it,
Speaker 7: but in particular, it wasn't supposed to strong arm venues
Speaker 7: into using Ticketmaster as its ticketing agent, and it was
Speaker 7: in fact doing that, So that consent order was kind
Speaker 7: of bolstered and extended in twenty nineteen during Trump's first administration,
Speaker 7: it just expired. So one of the things obviously that
Speaker 7: the DJ could do is just go back to that
Speaker 7: consent order bolster its terms further, since apparently Live Nation
Speaker 7: hasn't really complied with those terms to begin with, and
Speaker 7: extend that, let's say for another ten years. These would
Speaker 7: be things like you cannot enter long term exclusive agreements
Speaker 7: with venues you don't own. For Ticketmaster to be the
Speaker 7: exclusive agent, you know, you have to allow other ticketing
Speaker 7: agents to come in there and vuy for that for
Speaker 7: that position for certain concerts. That obviously stop strong arming
Speaker 7: venues and artists. And one of the allegations here is
Speaker 7: that artists cannot play in the amphitheaters owned by Live
Speaker 7: Nation unless they agreed to have Live Nation promote their tour.
Speaker 7: So there would be something like, you know, you cannot
Speaker 7: engage in that kind of conduct. You have to let
Speaker 7: artists use your amphitheaters, but be free to pick their
Speaker 7: own promoter. I think terms like that could possibly be
Speaker 7: in a consent order that would allow for a settlement here.
Speaker 1: All right, well we'll see how things go. Understand, this
Speaker 1: is going to be hitting the courts rather quickly. That's
Speaker 1: Jen Bartash is a senior litigation analyst for Bloomberg Intelligence.
Speaker 1: Thanks as well to Bloomberg Intelligence as Matthew schttenhelm Man,
Speaker 1: Deep Singh, Kun, John Sabani, Jen Bartashes, and Hunum Goyle.
Speaker 1: Thanks to you as well for being with us on
Speaker 1: this President Day holiday. I'm Nathan Hager. Stay with us.
Speaker 1: Top stories and global business at lines are coming up
Speaker 1: right now.