1 00:00:00,280 --> 00:00:07,200 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,160 --> 00:00:12,239 Speaker 2: In Nvidia just reported earnings for the third quarter, than 3 00:00:12,280 --> 00:00:15,480 Speaker 2: to say they were highly anticipated would be an understatement. 4 00:00:16,000 --> 00:00:20,119 Speaker 3: Nvidia earnings was said to be the most important day 5 00:00:20,400 --> 00:00:22,040 Speaker 3: of the year for Wall Street. 6 00:00:21,880 --> 00:00:26,520 Speaker 2: Any speculating that these companies' valuations are over inflated, that 7 00:00:26,560 --> 00:00:28,800 Speaker 2: the numbers have just got Wall Street has been worried 8 00:00:28,840 --> 00:00:31,800 Speaker 2: about an AI bubble, and Nvidia, which is now the 9 00:00:31,840 --> 00:00:34,839 Speaker 2: world's largest company by market cap, is seen as a 10 00:00:34,840 --> 00:00:38,360 Speaker 2: bell weather for the entire industry. The biggest names in 11 00:00:38,400 --> 00:00:42,640 Speaker 2: AI run on Nvidia's powerful chips, its graphics processing units 12 00:00:42,720 --> 00:00:45,440 Speaker 2: or GPUs, including its Blackwell model. 13 00:00:46,120 --> 00:00:48,640 Speaker 1: There's been a lot of talk about an AI bubble. 14 00:00:49,200 --> 00:00:52,080 Speaker 1: From our vantage point, we see something very different. 15 00:00:52,440 --> 00:00:55,360 Speaker 2: That's Nvidia CEO Jensen Wong on a call with Wall 16 00:00:55,360 --> 00:00:58,800 Speaker 2: Street analysts after the company reported earnings that roundly beat 17 00:00:58,840 --> 00:01:03,240 Speaker 2: Wall Street's expectations, and the relief among investors was palpable. 18 00:01:03,600 --> 00:01:07,040 Speaker 2: Shares of Nvidia jumped by about five percent in late trading. 19 00:01:07,319 --> 00:01:09,440 Speaker 3: There was a lot more anxiety going into it. 20 00:01:09,959 --> 00:01:12,440 Speaker 2: Ed Ludlow is the co host of Bloomberg Tech. 21 00:01:12,880 --> 00:01:15,759 Speaker 3: If you look on social media, which can be precarious 22 00:01:15,760 --> 00:01:18,319 Speaker 3: thing to do. There were lots of people saying, you know, 23 00:01:18,480 --> 00:01:22,000 Speaker 3: either in Vidia is going to save or crash the 24 00:01:22,040 --> 00:01:25,560 Speaker 3: global economy overnight. The stakes weren't as high as that, 25 00:01:25,720 --> 00:01:28,240 Speaker 3: but it was serious and they certainly delivered. 26 00:01:28,760 --> 00:01:31,920 Speaker 2: In Video says it expects to generate roughly sixty five 27 00:01:32,040 --> 00:01:35,080 Speaker 2: billion dollars in revenue in the coming quarter, and when 28 00:01:35,240 --> 00:01:38,480 Speaker 2: Ed sat down with Jensen Huang on Wednesday, the CEO said, 29 00:01:38,520 --> 00:01:40,320 Speaker 2: in Vidia is well positioned. 30 00:01:40,720 --> 00:01:45,720 Speaker 1: Sales are after charts for Blackwell and in Vidio GPUs 31 00:01:45,760 --> 00:01:48,400 Speaker 1: in the cloud are sold out. We got plenty of 32 00:01:48,480 --> 00:01:49,480 Speaker 1: Blackwells to sell you. 33 00:01:50,040 --> 00:01:52,960 Speaker 3: Things seem to have even more momentum than the most 34 00:01:52,960 --> 00:01:56,080 Speaker 3: bullish people on the street thought that Nvidia had, and 35 00:01:56,120 --> 00:01:59,640 Speaker 3: there is no evidence that at least the most important 36 00:01:59,640 --> 00:02:03,559 Speaker 3: customs that Invidia has are reneging on or pulling back 37 00:02:03,600 --> 00:02:04,800 Speaker 3: on their spending commitment. 38 00:02:07,600 --> 00:02:10,720 Speaker 2: So in Nvidia has allaid some fear AI is a bubble, 39 00:02:11,040 --> 00:02:13,640 Speaker 2: but there are still concern about the circular nature of 40 00:02:13,720 --> 00:02:17,480 Speaker 2: AI megadeals, how quickly high end chips to depreciate, and 41 00:02:17,520 --> 00:02:21,240 Speaker 2: about the stratospheric valuations of many AI companies, which is 42 00:02:21,280 --> 00:02:25,000 Speaker 2: reminding some investors of the late nineteen nineties and says 43 00:02:25,000 --> 00:02:27,079 Speaker 2: he's asked executives if there's a parallel. 44 00:02:27,440 --> 00:02:30,440 Speaker 3: I asked the CEOs, and here's their answer, that the 45 00:02:30,480 --> 00:02:32,680 Speaker 3: balance sheets now are different to what they were in 46 00:02:32,720 --> 00:02:36,440 Speaker 3: the dot com bubble, that they see actually useful software 47 00:02:37,000 --> 00:02:42,639 Speaker 3: being sold generating actual revenues. This is existential for many 48 00:02:42,720 --> 00:02:48,040 Speaker 3: American companies. They are investing wholeheartedly in AI because they 49 00:02:48,080 --> 00:02:51,760 Speaker 3: believe it will define what those companies do going forward. 50 00:02:52,200 --> 00:02:55,680 Speaker 3: The idea that there's a bubble is secondary. It is 51 00:02:55,800 --> 00:02:59,919 Speaker 3: not true. If these companies need to become AI companies, 52 00:03:00,040 --> 00:03:03,800 Speaker 3: you know, it's an absolutely necessary investment. The difference this 53 00:03:03,919 --> 00:03:06,240 Speaker 3: time around they have the cash to support that. 54 00:03:10,000 --> 00:03:11,800 Speaker 2: I'm David Gera and this is the big take from 55 00:03:11,840 --> 00:03:15,600 Speaker 2: Bloomberg News today on the show Relief after in Nvidia's 56 00:03:15,680 --> 00:03:20,000 Speaker 2: latest earnings exceed expectations. How it's eye popping revenue forecast 57 00:03:20,200 --> 00:03:23,640 Speaker 2: has quieted some of the concerns about the potential AI bubble, 58 00:03:24,120 --> 00:03:27,440 Speaker 2: but the company and its backers still face some big challenges, 59 00:03:27,760 --> 00:03:30,240 Speaker 2: as in video races to keep up with global demand 60 00:03:30,320 --> 00:03:40,520 Speaker 2: for GPUs. It's not slowing down ed. You've interviewed Jensen 61 00:03:40,600 --> 00:03:43,680 Speaker 2: Huang a handful of times now, and I'm curious what 62 00:03:43,720 --> 00:03:46,560 Speaker 2: your impressions of him are, what's he like as a leader, 63 00:03:46,600 --> 00:03:47,680 Speaker 2: what's his personality like. 64 00:03:48,480 --> 00:03:51,240 Speaker 3: He's incredibly busy, obviously, you know when we spoke to 65 00:03:51,320 --> 00:03:54,480 Speaker 3: him in that interview, he'd spent the entire day in Washington, 66 00:03:54,560 --> 00:03:57,120 Speaker 3: DC at the US Saudi Investment Forum and then spent 67 00:03:57,200 --> 00:03:59,720 Speaker 3: time with the president and managed to pull off an 68 00:03:59,720 --> 00:04:02,119 Speaker 3: earning school and then an earnings interview in the same day, 69 00:04:02,160 --> 00:04:04,160 Speaker 3: which I'm sure took a lot, but that kind of 70 00:04:04,160 --> 00:04:07,160 Speaker 3: speaks to what he's like, as in videos, kind of 71 00:04:07,200 --> 00:04:11,120 Speaker 3: ballooned and grown and become so big. He's taken that 72 00:04:11,240 --> 00:04:13,240 Speaker 3: in his stride quite a lot. You know, he is 73 00:04:13,280 --> 00:04:16,440 Speaker 3: the focus of attention, but I think the first and foremost, 74 00:04:16,480 --> 00:04:18,320 Speaker 3: you know, he would tell you that without speaking on 75 00:04:18,320 --> 00:04:20,440 Speaker 3: his behalf, that he's an engineer, and so he is 76 00:04:20,480 --> 00:04:22,920 Speaker 3: involved deeply in what's going on in the company. 77 00:04:23,760 --> 00:04:27,040 Speaker 2: So ed In Video released its latest quarterly earnings report 78 00:04:27,160 --> 00:04:30,840 Speaker 2: after the close on Wednesday. I'm curious what stood out 79 00:04:30,880 --> 00:04:31,760 Speaker 2: to you. 80 00:04:31,760 --> 00:04:34,000 Speaker 3: You know, in Vidia beat on the most important segment, 81 00:04:34,040 --> 00:04:37,760 Speaker 3: which is data center revenues and compute, but what they 82 00:04:37,839 --> 00:04:41,560 Speaker 3: said for the fiscal fourth quarter was really interesting, which 83 00:04:41,600 --> 00:04:44,400 Speaker 3: is the quarter ahead the period that we're currently in. 84 00:04:44,480 --> 00:04:45,760 Speaker 2: Yes, I should say, yeah. 85 00:04:45,600 --> 00:04:48,839 Speaker 3: Yeah, sales will be sixty five billion dollars plus or 86 00:04:48,880 --> 00:04:53,240 Speaker 3: minus two percent, and that's pretty significantly beyond consensus. 87 00:04:53,720 --> 00:04:56,920 Speaker 2: In Vidia is poised to start shipping a new GPU 88 00:04:57,000 --> 00:05:00,360 Speaker 2: model next year. It's called the Reubens CPX, and it's 89 00:05:00,400 --> 00:05:04,520 Speaker 2: designed to handle even more demanding tasks like generating video. 90 00:05:04,760 --> 00:05:08,400 Speaker 3: Nvidia does not give guidance. It doesn't give year ahead 91 00:05:08,480 --> 00:05:12,240 Speaker 3: forecasts or very long term forecasts except it did you 92 00:05:12,240 --> 00:05:15,479 Speaker 3: know on stage in Washington, DC? Curiously, you and I 93 00:05:15,560 --> 00:05:18,160 Speaker 3: were both in the city at the same time. Jensen 94 00:05:18,240 --> 00:05:21,359 Speaker 3: was doing his PowerPoint presentation with the clicky thing, and 95 00:05:21,440 --> 00:05:25,000 Speaker 3: this slide appears behind him, and the slide says, over 96 00:05:25,040 --> 00:05:29,720 Speaker 3: the next six fiscal quarters, just from Blackwell Rubin products 97 00:05:29,720 --> 00:05:33,599 Speaker 3: excluding China and Video says it will do five hundred 98 00:05:33,640 --> 00:05:36,160 Speaker 3: billion dollars of sales half a trillion dollars of sales 99 00:05:36,360 --> 00:05:40,640 Speaker 3: over six fiscal quarters. And the street was a bit like, huh, 100 00:05:40,720 --> 00:05:42,720 Speaker 3: that's way beyond what we've modeled. 101 00:05:42,320 --> 00:05:46,239 Speaker 2: For This is a basic question. But why isn't video 102 00:05:46,320 --> 00:05:49,240 Speaker 2: viewed as a bell weather for AI? Why is it 103 00:05:49,240 --> 00:05:51,600 Speaker 2: such an important company for Wall Street to track. 104 00:05:52,160 --> 00:05:57,640 Speaker 3: Really simply, GPUs graphics processing units are chips that can 105 00:05:57,720 --> 00:06:01,840 Speaker 3: handle multiple processes at the same time. They're very good 106 00:06:01,880 --> 00:06:05,400 Speaker 3: for training AI models, and they're very good for running 107 00:06:05,440 --> 00:06:08,640 Speaker 3: the AI models what we call inference. There are many 108 00:06:08,640 --> 00:06:11,599 Speaker 3: more options now today than they were at say a 109 00:06:11,680 --> 00:06:14,600 Speaker 3: year ago or two or three years ago, but Nvidia 110 00:06:14,680 --> 00:06:18,480 Speaker 3: still has a monopoly, a technical monopoly for that market. 111 00:06:18,920 --> 00:06:23,160 Speaker 3: And the vast majority of workloads, be they training workloads 112 00:06:23,240 --> 00:06:26,279 Speaker 3: or inference workloads, are done using in video gear. So 113 00:06:26,520 --> 00:06:29,240 Speaker 3: Nvidia is a bellwether simply because if it's telling us 114 00:06:29,320 --> 00:06:32,440 Speaker 3: this thing is happening, it has the best lens into 115 00:06:32,480 --> 00:06:35,560 Speaker 3: it happening. The slightly different answer than Nvidia would give 116 00:06:35,600 --> 00:06:39,159 Speaker 3: you is that they are, in their mind the only 117 00:06:39,279 --> 00:06:42,600 Speaker 3: technology company in history, in fact, the only company in history, 118 00:06:42,640 --> 00:06:46,040 Speaker 3: irrespective of what field they're in, that will say to everyone, 119 00:06:46,120 --> 00:06:50,800 Speaker 3: their customers, their competitors, their suppliers, the analysts, here's what 120 00:06:50,839 --> 00:06:53,960 Speaker 3: we're doing for the next five years from a technology perspective. 121 00:06:53,960 --> 00:06:56,800 Speaker 3: And to their credit, they've done that. And so their 122 00:06:57,000 --> 00:07:00,279 Speaker 3: argument is that the world that's around them, into apply 123 00:07:00,360 --> 00:07:02,720 Speaker 3: chain and their customers and everything that's being built around 124 00:07:02,839 --> 00:07:05,279 Speaker 3: data center has had a really good heads up of 125 00:07:05,320 --> 00:07:09,159 Speaker 3: what's coming to market, and that's one reason why Wall 126 00:07:09,160 --> 00:07:11,720 Speaker 3: Street at least believes what they have to say. 127 00:07:12,040 --> 00:07:15,560 Speaker 2: And what are the indicators that are leading some investors 128 00:07:15,600 --> 00:07:18,600 Speaker 2: and analysts to say that if we're not in a bubble, 129 00:07:18,600 --> 00:07:20,160 Speaker 2: we're in bubble territory. 130 00:07:20,720 --> 00:07:25,640 Speaker 3: There are two depreciation basically the idea that any generation 131 00:07:26,040 --> 00:07:30,000 Speaker 3: of GPU or AI accelerator has a limited shelf life 132 00:07:30,360 --> 00:07:34,280 Speaker 3: and therefore, because of the depreciation and its value, those 133 00:07:34,320 --> 00:07:37,520 Speaker 3: big customers will have to mark down that value on 134 00:07:37,560 --> 00:07:40,360 Speaker 3: their balance sheet at some point, noting that upfront they 135 00:07:40,400 --> 00:07:44,160 Speaker 3: made massive commitments to spend on this technology. And the 136 00:07:44,200 --> 00:07:47,800 Speaker 3: other is the circular financing thing, which isn't going away. 137 00:07:47,880 --> 00:07:52,200 Speaker 3: The idea that Nvidia is the biggest player in the 138 00:07:52,240 --> 00:07:56,320 Speaker 3: technology and it gives billions of dollars to an AI company, 139 00:07:56,320 --> 00:07:59,680 Speaker 3: a software company, and that software company takes that money 140 00:08:00,080 --> 00:08:03,920 Speaker 3: spends it on VideA technology, and thus the circular financing argument. 141 00:08:04,400 --> 00:08:07,000 Speaker 3: There's a concern that that is not a strong and 142 00:08:07,080 --> 00:08:09,920 Speaker 3: long term underpinning of a market that will keep growing. 143 00:08:10,440 --> 00:08:13,880 Speaker 2: In Vidia says software updates extend the life of its GPUs, 144 00:08:14,360 --> 00:08:19,000 Speaker 2: but those circular deals are giving some investors pause. In September, 145 00:08:19,080 --> 00:08:22,040 Speaker 2: the company announced a one hundred billion dollar investment in 146 00:08:22,200 --> 00:08:25,680 Speaker 2: open Ai to support new data centers and AI infrastructure, 147 00:08:25,840 --> 00:08:29,360 Speaker 2: which will be equipped with in Vidia's advanced chips. Since 148 00:08:29,400 --> 00:08:31,960 Speaker 2: the start of the year, in Vidia also inc deals 149 00:08:32,000 --> 00:08:36,280 Speaker 2: with dozens of other companies, including Microsoft and Nthropic. You 150 00:08:36,320 --> 00:08:39,320 Speaker 2: asked him about the circular nature of these deals as well. 151 00:08:39,600 --> 00:08:42,080 Speaker 2: You had a wonderful way of putting the question to him. 152 00:08:42,120 --> 00:08:44,400 Speaker 2: You asked about all that open ai is committed to buying, 153 00:08:44,440 --> 00:08:46,600 Speaker 2: and you said, effectively, are they good for it? How 154 00:08:46,600 --> 00:08:48,040 Speaker 2: do you know they're good for it? And what was 155 00:08:48,080 --> 00:08:49,440 Speaker 2: his response to that question? 156 00:08:49,920 --> 00:08:51,959 Speaker 3: Yeah? No, I literally said, how do you know that 157 00:08:52,000 --> 00:08:54,680 Speaker 3: they're good for it? The way that Jensen described it 158 00:08:54,679 --> 00:08:57,520 Speaker 3: in the interview is that their partnership with open ai 159 00:08:57,640 --> 00:08:58,960 Speaker 3: is what he called disciplined. 160 00:08:59,320 --> 00:09:04,040 Speaker 1: Well, we're thought, along with open ai, thoughtful in aligning 161 00:09:04,160 --> 00:09:09,720 Speaker 1: on and taking into consideration visibility of demand and their 162 00:09:09,800 --> 00:09:13,560 Speaker 1: financing capabilities. All of that has to be in accordance, 163 00:09:14,000 --> 00:09:17,120 Speaker 1: has to be aligned, has to be coherent before we 164 00:09:17,160 --> 00:09:21,280 Speaker 1: start to build out. And so I think the ambitions large, 165 00:09:21,600 --> 00:09:23,520 Speaker 1: but the execution is disciplined. 166 00:09:24,000 --> 00:09:29,560 Speaker 3: Previously in countenance to the circular financing discussion or debate, 167 00:09:30,360 --> 00:09:34,800 Speaker 3: Jensen has said that nothing is a quid pro quo 168 00:09:35,240 --> 00:09:38,800 Speaker 3: when they make an investment in open Ai, for example, 169 00:09:39,200 --> 00:09:42,520 Speaker 3: there is no mandatory requirement that open Ai takes that 170 00:09:42,600 --> 00:09:45,679 Speaker 3: money and uses it on Nvidia GPUs. They could use 171 00:09:45,720 --> 00:09:48,240 Speaker 3: it to buy someone else's But there are plenty of 172 00:09:48,240 --> 00:09:50,960 Speaker 3: case studies where that just simply isn't true. Right this 173 00:09:51,040 --> 00:09:55,720 Speaker 3: week alone, you saw the Nvidia investment in Anthropic, a 174 00:09:55,720 --> 00:09:58,840 Speaker 3: big rival of open Ai, which also included one of 175 00:09:58,840 --> 00:10:02,440 Speaker 3: the other cloud provider, And in that case, in Vidia 176 00:10:02,559 --> 00:10:06,000 Speaker 3: makes an investment in Fropic, and Fropic gets money, and 177 00:10:06,040 --> 00:10:09,120 Speaker 3: it does use that money to invest back into capacity 178 00:10:09,480 --> 00:10:12,640 Speaker 3: that relies on Nvidia chips. He didn't really answer the 179 00:10:12,679 --> 00:10:15,080 Speaker 3: question as it comes as it relates to open Ai. 180 00:10:15,480 --> 00:10:17,760 Speaker 3: He just said that they're not concerned about it. 181 00:10:19,160 --> 00:10:21,360 Speaker 2: In the run up to the release of these earnings, 182 00:10:21,400 --> 00:10:25,040 Speaker 2: these in video earnings, you saw some big shareholders offload 183 00:10:25,240 --> 00:10:27,320 Speaker 2: a sizeable amount of stock. You saw a SoftBank do that, 184 00:10:27,520 --> 00:10:29,760 Speaker 2: Peter Thiel's hedge funded it. You've seen bets against this 185 00:10:29,800 --> 00:10:32,680 Speaker 2: company as well in the options market. What does that 186 00:10:32,800 --> 00:10:35,439 Speaker 2: tell us those kind of sizeable moves we've seen from 187 00:10:35,440 --> 00:10:36,520 Speaker 2: some pretty key investors. 188 00:10:37,120 --> 00:10:40,880 Speaker 3: What it speaks to probably is where people think the 189 00:10:40,920 --> 00:10:44,640 Speaker 3: next opportunity is in video. Does face increase in competition. 190 00:10:45,080 --> 00:10:48,720 Speaker 3: There are other players that are working on GPU specifically 191 00:10:49,040 --> 00:10:51,560 Speaker 3: for use in AI data center, but we also have 192 00:10:51,679 --> 00:10:55,439 Speaker 3: A six and custom chips like Google's TPU. There are 193 00:10:55,440 --> 00:10:58,800 Speaker 3: more options now, and part of the argument that Jensen 194 00:10:58,840 --> 00:11:01,600 Speaker 3: Wang and the other video executives make is like this 195 00:11:01,760 --> 00:11:04,440 Speaker 3: is broadening out. They love to see it, but it 196 00:11:04,520 --> 00:11:08,160 Speaker 3: also reflects the anxiety that we had going into this Earnings. 197 00:11:09,960 --> 00:11:13,000 Speaker 2: After the break. More from Bloomberg's interview with Nvidia CEO 198 00:11:13,080 --> 00:11:16,720 Speaker 2: Jensen Huang. Now, the company is navigating the ongoing trade 199 00:11:16,760 --> 00:11:28,280 Speaker 2: tensions between the US and China at the two big 200 00:11:28,280 --> 00:11:31,080 Speaker 2: global competitors in the SAI race, or the US and China, 201 00:11:31,120 --> 00:11:34,559 Speaker 2: and Nvidia plays a central role in that competition. In 202 00:11:34,640 --> 00:11:36,960 Speaker 2: Nvidia is now allowed by the US government to sell 203 00:11:36,960 --> 00:11:39,640 Speaker 2: some of its chips to China, but interestingly, China doesn't 204 00:11:39,640 --> 00:11:41,800 Speaker 2: seem to be buying those chips from Nvidia. Here's what 205 00:11:41,840 --> 00:11:44,280 Speaker 2: the CEO of in Vidia, Jensen Huang, told you about that. 206 00:11:44,520 --> 00:11:47,120 Speaker 1: We would love the opportunity to be able to re 207 00:11:47,240 --> 00:11:51,600 Speaker 1: engage the Chinese market with excellent products that we deliver 208 00:11:52,000 --> 00:11:55,480 Speaker 1: and to be able to compete globally. The Chinese market 209 00:11:55,520 --> 00:11:59,000 Speaker 1: is very large this year, my guess is probably about 210 00:11:59,040 --> 00:12:02,840 Speaker 1: fifty billion dollar. It's great for the American people that 211 00:12:02,880 --> 00:12:05,640 Speaker 1: we're able to compete in the Chinese market. It's great 212 00:12:05,640 --> 00:12:07,959 Speaker 1: for the China market that we're able to provide and 213 00:12:08,080 --> 00:12:10,760 Speaker 1: Video's technology to them. It's great for the rest of 214 00:12:10,760 --> 00:12:15,520 Speaker 1: the world, as Chinese software companies and Chinese open source 215 00:12:15,600 --> 00:12:18,880 Speaker 1: models lead China and are used all over the world. 216 00:12:19,080 --> 00:12:21,800 Speaker 1: And so I think it's fantastic that we're able. It 217 00:12:21,840 --> 00:12:24,199 Speaker 1: would be fantastic if we're able to participate in the 218 00:12:24,320 --> 00:12:27,559 Speaker 1: China market, but for now we should just assume and 219 00:12:27,679 --> 00:12:32,319 Speaker 1: Video's forecasts for China market is zero. 220 00:12:32,640 --> 00:12:35,560 Speaker 2: Jensen Huang very focused on the way China is growing 221 00:12:35,559 --> 00:12:39,800 Speaker 2: its AI capacity and capabilities. What is China's approach to 222 00:12:39,840 --> 00:12:43,680 Speaker 2: the buildout and adoption of AI in complement or contrast 223 00:12:43,679 --> 00:12:44,920 Speaker 2: to what's happening in the US. 224 00:12:45,640 --> 00:12:48,520 Speaker 3: China wants to win the AI race as well. That 225 00:12:48,640 --> 00:12:51,640 Speaker 3: much is clear. Let's start with the basics of what 226 00:12:51,760 --> 00:12:55,320 Speaker 3: Jensen reiterating the interview, which is base case scenario right 227 00:12:55,360 --> 00:12:59,280 Speaker 3: now is Nvidia does not derive any revenues from China. 228 00:13:00,120 --> 00:13:03,400 Speaker 3: Was interesting part of your question on the earnings call 229 00:13:03,960 --> 00:13:06,680 Speaker 3: the CFO collect Cress had to address the China issue, 230 00:13:06,760 --> 00:13:08,920 Speaker 3: right because you know, everyone knows that it's going to 231 00:13:08,920 --> 00:13:13,640 Speaker 3: be asked by the analyst anyway. And your interpretation of 232 00:13:14,000 --> 00:13:16,800 Speaker 3: and I mean that with respect the word interpretation of 233 00:13:16,800 --> 00:13:19,480 Speaker 3: what she said was they were allowed to sell H 234 00:13:19,559 --> 00:13:22,360 Speaker 3: twenty in the quarter, but there wasn't any demand for it. 235 00:13:22,840 --> 00:13:26,720 Speaker 3: What they're not allowed to do is sell blackwell the 236 00:13:26,800 --> 00:13:30,360 Speaker 3: kind of current generation architecture, even a deprecated version into China. 237 00:13:30,520 --> 00:13:33,400 Speaker 3: So those distinctions are important. And where we left it 238 00:13:33,400 --> 00:13:35,760 Speaker 3: with Jensen in the interview was they want to be 239 00:13:35,800 --> 00:13:38,040 Speaker 3: able to do that in China and they will work 240 00:13:38,080 --> 00:13:41,040 Speaker 3: with both the United States government and Chinese government to 241 00:13:41,080 --> 00:13:43,840 Speaker 3: find a solution. But base case of zero, there is 242 00:13:43,880 --> 00:13:47,880 Speaker 3: a wider political discussion. Jensen Huang is in very close 243 00:13:47,920 --> 00:13:49,640 Speaker 3: proximity to this administration, right. 244 00:13:49,679 --> 00:13:51,520 Speaker 2: He was interesting when you talked to him, and he 245 00:13:51,559 --> 00:13:53,160 Speaker 2: was in DC when you talked him the time before that. 246 00:13:53,679 --> 00:13:56,000 Speaker 3: And in both of those occasions, the President of the 247 00:13:56,080 --> 00:14:00,000 Speaker 3: United States was part of the newsflow commenting very positive 248 00:14:00,280 --> 00:14:03,800 Speaker 3: about Jensen Wang and what in video is doing, and 249 00:14:03,840 --> 00:14:06,560 Speaker 3: in the context of the day of the interview in 250 00:14:06,600 --> 00:14:10,120 Speaker 3: the US Saudi Investment Forum, the President asked Jensen to 251 00:14:10,160 --> 00:14:14,559 Speaker 3: stand up to a standing ovation. But the reality from 252 00:14:14,679 --> 00:14:17,760 Speaker 3: video is that they right now have no access to 253 00:14:17,800 --> 00:14:21,040 Speaker 3: a market that one time was twenty five percent of 254 00:14:21,080 --> 00:14:25,600 Speaker 3: revenues and is the world's biggest end market for data centers. Probably, 255 00:14:26,160 --> 00:14:30,239 Speaker 3: but more academically speaking, Jensen Wang has been very consistent 256 00:14:30,400 --> 00:14:34,120 Speaker 3: that more than half of the world's AI engineers are 257 00:14:34,320 --> 00:14:38,760 Speaker 3: either in China or they're Chinese national citizens, and so 258 00:14:39,640 --> 00:14:44,040 Speaker 3: Americas should want its leading technology to be the gold standard, 259 00:14:44,120 --> 00:14:48,080 Speaker 3: the default that those engineers use to develop artificial intelligence, 260 00:14:48,440 --> 00:14:53,720 Speaker 3: noting fully that there is of course geopolitical and national 261 00:14:53,760 --> 00:14:55,680 Speaker 3: security considerations that come with that. 262 00:14:56,440 --> 00:14:59,920 Speaker 2: Ed if you talk to our colleagues who cover tech 263 00:15:00,080 --> 00:15:02,640 Speaker 2: in China, do they say that there is as much 264 00:15:02,640 --> 00:15:04,680 Speaker 2: of a fear of there being an AI bubble there 265 00:15:04,800 --> 00:15:06,440 Speaker 2: or the circumstances just entirely different. 266 00:15:07,160 --> 00:15:11,720 Speaker 3: The circumstances are different in so far as there is 267 00:15:11,800 --> 00:15:15,680 Speaker 3: less red tape in China and more direct government support 268 00:15:16,040 --> 00:15:19,680 Speaker 3: or action in favor of something. It's not the same 269 00:15:19,760 --> 00:15:24,080 Speaker 3: level of anxiety in China because they have a different 270 00:15:24,200 --> 00:15:29,040 Speaker 3: system of government input or support. Their domestic industry on 271 00:15:29,080 --> 00:15:30,760 Speaker 3: the infrastructure side is nascent. 272 00:15:32,480 --> 00:15:35,400 Speaker 2: What if Jensen Huang is wrong and we are in 273 00:15:35,440 --> 00:15:39,560 Speaker 2: a bubble and that bubble bursts, are we likely to 274 00:15:39,600 --> 00:15:42,440 Speaker 2: see a crash? Are we likely to see consolidation? As 275 00:15:42,480 --> 00:15:45,360 Speaker 2: you talk to your sources, how do they think about 276 00:15:45,360 --> 00:15:49,600 Speaker 2: the way in which that might play out? Given the 277 00:15:49,760 --> 00:15:53,640 Speaker 2: rapid breakneck growth we've seen the size of these valuations, 278 00:15:53,640 --> 00:15:56,840 Speaker 2: the money that's been poured into this and taken from 279 00:15:56,840 --> 00:15:59,680 Speaker 2: one pocket to another, what would a bubble bursting look 280 00:15:59,760 --> 00:16:00,960 Speaker 2: like when it comes to AI. 281 00:16:01,400 --> 00:16:03,480 Speaker 3: Well, in order to look at what a bubble bursting 282 00:16:03,480 --> 00:16:06,240 Speaker 3: looks like, I guess you have to set the state 283 00:16:06,280 --> 00:16:07,920 Speaker 3: of play and the state of players that you know 284 00:16:08,240 --> 00:16:11,280 Speaker 3: in twenty twenty five and videos up about forty percent, 285 00:16:11,680 --> 00:16:13,800 Speaker 3: and of course in video accounts for eight percent of 286 00:16:13,840 --> 00:16:16,440 Speaker 3: the S and P five hundred anyway, so in equity 287 00:16:16,520 --> 00:16:19,680 Speaker 3: markets there's a lot at stake. The leverage side of 288 00:16:19,720 --> 00:16:23,760 Speaker 3: this is really fascinating as well. Debt Oracle, for example, 289 00:16:23,880 --> 00:16:27,800 Speaker 3: is very, very involved in the AI infrastructure build out 290 00:16:27,840 --> 00:16:30,800 Speaker 3: in the United States, and it has been able to 291 00:16:30,920 --> 00:16:34,320 Speaker 3: raise massive amounts of debt and also get investors to 292 00:16:34,440 --> 00:16:37,520 Speaker 3: raise debt for some of its projects. Where Oracle doesn't 293 00:16:37,560 --> 00:16:39,760 Speaker 3: hold the debt on its balance sheet, it's just able 294 00:16:39,760 --> 00:16:41,720 Speaker 3: to get someone to do it on its behalf. But 295 00:16:41,960 --> 00:16:45,680 Speaker 3: the worrying indicator there is that Oracle swung to negative 296 00:16:45,720 --> 00:16:48,080 Speaker 3: free cash flow for the first time since nineteen ninety 297 00:16:48,080 --> 00:16:52,360 Speaker 3: two this year. And so the confidence that investors had 298 00:16:52,520 --> 00:16:56,080 Speaker 3: was that this is early innings. The AI infrastructure build 299 00:16:56,080 --> 00:16:59,480 Speaker 3: out is early. The figure that is common between say 300 00:16:59,560 --> 00:17:02,920 Speaker 3: Gens and Water and other chip CEOs is there's a 301 00:17:03,000 --> 00:17:07,199 Speaker 3: four trillion dollar addressable market for AI data centers in 302 00:17:07,240 --> 00:17:10,119 Speaker 3: the next say, three to five years, and that is 303 00:17:10,160 --> 00:17:13,960 Speaker 3: all built on capital expenditures of the big hyperscalers, cloud 304 00:17:14,000 --> 00:17:18,119 Speaker 3: computing companies and also like Meta Elon Musk's Xai, et cetera. 305 00:17:18,840 --> 00:17:21,880 Speaker 3: And everyone is working in good faith that those capital 306 00:17:21,880 --> 00:17:25,200 Speaker 3: expenditure commitments that are forecast they go through with them. 307 00:17:25,640 --> 00:17:27,840 Speaker 3: If they don't, you can kind of see the trickle 308 00:17:27,880 --> 00:17:31,120 Speaker 3: down effect that I'm painting here. That's why going into 309 00:17:31,119 --> 00:17:35,000 Speaker 3: this Innverdia earnings print, the anxiety was high. You know, 310 00:17:35,040 --> 00:17:37,760 Speaker 3: if you look at the options market or wherever your 311 00:17:37,800 --> 00:17:41,480 Speaker 3: indicator is, there was potential for this to go either way, 312 00:17:41,880 --> 00:17:43,600 Speaker 3: and at the time you and I are speaking, it 313 00:17:43,640 --> 00:17:45,600 Speaker 3: went positively in the market. 314 00:17:50,280 --> 00:17:53,000 Speaker 2: This is the Big Take from Bloomberg News. I'm David Gerret. 315 00:17:53,040 --> 00:17:55,280 Speaker 2: To get more from The Big Take and unlimited access 316 00:17:55,320 --> 00:17:58,480 Speaker 2: to all of Bloomberg dot com, subscribe today at Bloomberg 317 00:17:58,520 --> 00:18:02,000 Speaker 2: dot com slash podcast to offer. If you liked this episode, 318 00:18:02,119 --> 00:18:04,160 Speaker 2: make sure to follow and review The Big Take wherever 319 00:18:04,160 --> 00:18:06,639 Speaker 2: you listen to podcasts. It helps people find the show. 320 00:18:07,119 --> 00:18:08,960 Speaker 2: Thanks for listening. We'll be back tomorrow.