Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: In Nvidia just reported earnings for the third quarter, than
Speaker 2: to say they were highly anticipated would be an understatement.
Speaker 3: Nvidia earnings was said to be the most important day
Speaker 3: of the year for Wall Street.
Speaker 2: Any speculating that these companies' valuations are over inflated, that
Speaker 2: the numbers have just got Wall Street has been worried
Speaker 2: about an AI bubble, and Nvidia, which is now the
Speaker 2: world's largest company by market cap, is seen as a
Speaker 2: bell weather for the entire industry. The biggest names in
Speaker 2: AI run on Nvidia's powerful chips, its graphics processing units
Speaker 2: or GPUs, including its Blackwell model.
Speaker 1: There's been a lot of talk about an AI bubble.
Speaker 1: From our vantage point, we see something very different.
Speaker 2: That's Nvidia CEO Jensen Wong on a call with Wall
Speaker 2: Street analysts after the company reported earnings that roundly beat
Speaker 2: Wall Street's expectations, and the relief among investors was palpable.
Speaker 2: Shares of Nvidia jumped by about five percent in late trading.
Speaker 3: There was a lot more anxiety going into it.
Speaker 2: Ed Ludlow is the co host of Bloomberg Tech.
Speaker 3: If you look on social media, which can be precarious
Speaker 3: thing to do. There were lots of people saying, you know,
Speaker 3: either in Vidia is going to save or crash the
Speaker 3: global economy overnight. The stakes weren't as high as that,
Speaker 3: but it was serious and they certainly delivered.
Speaker 2: In Video says it expects to generate roughly sixty five
Speaker 2: billion dollars in revenue in the coming quarter, and when
Speaker 2: Ed sat down with Jensen Huang on Wednesday, the CEO said,
Speaker 2: in Vidia is well positioned.
Speaker 1: Sales are after charts for Blackwell and in Vidio GPUs
Speaker 1: in the cloud are sold out. We got plenty of
Speaker 1: Blackwells to sell you.
Speaker 3: Things seem to have even more momentum than the most
Speaker 3: bullish people on the street thought that Nvidia had, and
Speaker 3: there is no evidence that at least the most important
Speaker 3: customs that Invidia has are reneging on or pulling back
Speaker 3: on their spending commitment.
Speaker 2: So in Nvidia has allaid some fear AI is a bubble,
Speaker 2: but there are still concern about the circular nature of
Speaker 2: AI megadeals, how quickly high end chips to depreciate, and
Speaker 2: about the stratospheric valuations of many AI companies, which is
Speaker 2: reminding some investors of the late nineteen nineties and says
Speaker 2: he's asked executives if there's a parallel.
Speaker 3: I asked the CEOs, and here's their answer, that the
Speaker 3: balance sheets now are different to what they were in
Speaker 3: the dot com bubble, that they see actually useful software
Speaker 3: being sold generating actual revenues. This is existential for many
Speaker 3: American companies. They are investing wholeheartedly in AI because they
Speaker 3: believe it will define what those companies do going forward.
Speaker 3: The idea that there's a bubble is secondary. It is
Speaker 3: not true. If these companies need to become AI companies,
Speaker 3: you know, it's an absolutely necessary investment. The difference this
Speaker 3: time around they have the cash to support that.
Speaker 2: I'm David Gera and this is the big take from
Speaker 2: Bloomberg News today on the show Relief after in Nvidia's
Speaker 2: latest earnings exceed expectations. How it's eye popping revenue forecast
Speaker 2: has quieted some of the concerns about the potential AI bubble,
Speaker 2: but the company and its backers still face some big challenges,
Speaker 2: as in video races to keep up with global demand
Speaker 2: for GPUs. It's not slowing down ed. You've interviewed Jensen
Speaker 2: Huang a handful of times now, and I'm curious what
Speaker 2: your impressions of him are, what's he like as a leader,
Speaker 2: what's his personality like.
Speaker 3: He's incredibly busy, obviously, you know when we spoke to
Speaker 3: him in that interview, he'd spent the entire day in Washington,
Speaker 3: DC at the US Saudi Investment Forum and then spent
Speaker 3: time with the president and managed to pull off an
Speaker 3: earning school and then an earnings interview in the same day,
Speaker 3: which I'm sure took a lot, but that kind of
Speaker 3: speaks to what he's like, as in videos, kind of
Speaker 3: ballooned and grown and become so big. He's taken that
Speaker 3: in his stride quite a lot. You know, he is
Speaker 3: the focus of attention, but I think the first and foremost,
Speaker 3: you know, he would tell you that without speaking on
Speaker 3: his behalf, that he's an engineer, and so he is
Speaker 3: involved deeply in what's going on in the company.
Speaker 2: So ed In Video released its latest quarterly earnings report
Speaker 2: after the close on Wednesday. I'm curious what stood out
Speaker 2: to you.
Speaker 3: You know, in Vidia beat on the most important segment,
Speaker 3: which is data center revenues and compute, but what they
Speaker 3: said for the fiscal fourth quarter was really interesting, which
Speaker 3: is the quarter ahead the period that we're currently in.
Speaker 2: Yes, I should say, yeah.
Speaker 3: Yeah, sales will be sixty five billion dollars plus or
Speaker 3: minus two percent, and that's pretty significantly beyond consensus.
Speaker 2: In Vidia is poised to start shipping a new GPU
Speaker 2: model next year. It's called the Reubens CPX, and it's
Speaker 2: designed to handle even more demanding tasks like generating video.
Speaker 3: Nvidia does not give guidance. It doesn't give year ahead
Speaker 3: forecasts or very long term forecasts except it did you
Speaker 3: know on stage in Washington, DC? Curiously, you and I
Speaker 3: were both in the city at the same time. Jensen
Speaker 3: was doing his PowerPoint presentation with the clicky thing, and
Speaker 3: this slide appears behind him, and the slide says, over
Speaker 3: the next six fiscal quarters, just from Blackwell Rubin products
Speaker 3: excluding China and Video says it will do five hundred
Speaker 3: billion dollars of sales half a trillion dollars of sales
Speaker 3: over six fiscal quarters. And the street was a bit like, huh,
Speaker 3: that's way beyond what we've modeled.
Speaker 2: For This is a basic question. But why isn't video
Speaker 2: viewed as a bell weather for AI? Why is it
Speaker 2: such an important company for Wall Street to track.
Speaker 3: Really simply, GPUs graphics processing units are chips that can
Speaker 3: handle multiple processes at the same time. They're very good
Speaker 3: for training AI models, and they're very good for running
Speaker 3: the AI models what we call inference. There are many
Speaker 3: more options now today than they were at say a
Speaker 3: year ago or two or three years ago, but Nvidia
Speaker 3: still has a monopoly, a technical monopoly for that market.
Speaker 3: And the vast majority of workloads, be they training workloads
Speaker 3: or inference workloads, are done using in video gear. So
Speaker 3: Nvidia is a bellwether simply because if it's telling us
Speaker 3: this thing is happening, it has the best lens into
Speaker 3: it happening. The slightly different answer than Nvidia would give
Speaker 3: you is that they are, in their mind the only
Speaker 3: technology company in history, in fact, the only company in history,
Speaker 3: irrespective of what field they're in, that will say to everyone,
Speaker 3: their customers, their competitors, their suppliers, the analysts, here's what
Speaker 3: we're doing for the next five years from a technology perspective.
Speaker 3: And to their credit, they've done that. And so their
Speaker 3: argument is that the world that's around them, into apply
Speaker 3: chain and their customers and everything that's being built around
Speaker 3: data center has had a really good heads up of
Speaker 3: what's coming to market, and that's one reason why Wall
Speaker 3: Street at least believes what they have to say.
Speaker 2: And what are the indicators that are leading some investors
Speaker 2: and analysts to say that if we're not in a bubble,
Speaker 2: we're in bubble territory.
Speaker 3: There are two depreciation basically the idea that any generation
Speaker 3: of GPU or AI accelerator has a limited shelf life
Speaker 3: and therefore, because of the depreciation and its value, those
Speaker 3: big customers will have to mark down that value on
Speaker 3: their balance sheet at some point, noting that upfront they
Speaker 3: made massive commitments to spend on this technology. And the
Speaker 3: other is the circular financing thing, which isn't going away.
Speaker 3: The idea that Nvidia is the biggest player in the
Speaker 3: technology and it gives billions of dollars to an AI company,
Speaker 3: a software company, and that software company takes that money
Speaker 3: spends it on VideA technology, and thus the circular financing argument.
Speaker 3: There's a concern that that is not a strong and
Speaker 3: long term underpinning of a market that will keep growing.
Speaker 2: In Vidia says software updates extend the life of its GPUs,
Speaker 2: but those circular deals are giving some investors pause. In September,
Speaker 2: the company announced a one hundred billion dollar investment in
Speaker 2: open Ai to support new data centers and AI infrastructure,
Speaker 2: which will be equipped with in Vidia's advanced chips. Since
Speaker 2: the start of the year, in Vidia also inc deals
Speaker 2: with dozens of other companies, including Microsoft and Nthropic. You
Speaker 2: asked him about the circular nature of these deals as well.
Speaker 2: You had a wonderful way of putting the question to him.
Speaker 2: You asked about all that open ai is committed to buying,
Speaker 2: and you said, effectively, are they good for it? How
Speaker 2: do you know they're good for it? And what was
Speaker 2: his response to that question?
Speaker 3: Yeah? No, I literally said, how do you know that
Speaker 3: they're good for it? The way that Jensen described it
Speaker 3: in the interview is that their partnership with open ai
Speaker 3: is what he called disciplined.
Speaker 1: Well, we're thought, along with open ai, thoughtful in aligning
Speaker 1: on and taking into consideration visibility of demand and their
Speaker 1: financing capabilities. All of that has to be in accordance,
Speaker 1: has to be aligned, has to be coherent before we
Speaker 1: start to build out. And so I think the ambitions large,
Speaker 1: but the execution is disciplined.
Speaker 3: Previously in countenance to the circular financing discussion or debate,
Speaker 3: Jensen has said that nothing is a quid pro quo
Speaker 3: when they make an investment in open Ai, for example,
Speaker 3: there is no mandatory requirement that open Ai takes that
Speaker 3: money and uses it on Nvidia GPUs. They could use
Speaker 3: it to buy someone else's But there are plenty of
Speaker 3: case studies where that just simply isn't true. Right this
Speaker 3: week alone, you saw the Nvidia investment in Anthropic, a
Speaker 3: big rival of open Ai, which also included one of
Speaker 3: the other cloud provider, And in that case, in Vidia
Speaker 3: makes an investment in Fropic, and Fropic gets money, and
Speaker 3: it does use that money to invest back into capacity
Speaker 3: that relies on Nvidia chips. He didn't really answer the
Speaker 3: question as it comes as it relates to open Ai.
Speaker 3: He just said that they're not concerned about it.
Speaker 2: In the run up to the release of these earnings,
Speaker 2: these in video earnings, you saw some big shareholders offload
Speaker 2: a sizeable amount of stock. You saw a SoftBank do that,
Speaker 2: Peter Thiel's hedge funded it. You've seen bets against this
Speaker 2: company as well in the options market. What does that
Speaker 2: tell us those kind of sizeable moves we've seen from
Speaker 2: some pretty key investors.
Speaker 3: What it speaks to probably is where people think the
Speaker 3: next opportunity is in video. Does face increase in competition.
Speaker 3: There are other players that are working on GPU specifically
Speaker 3: for use in AI data center, but we also have
Speaker 3: A six and custom chips like Google's TPU. There are
Speaker 3: more options now, and part of the argument that Jensen
Speaker 3: Wang and the other video executives make is like this
Speaker 3: is broadening out. They love to see it, but it
Speaker 3: also reflects the anxiety that we had going into this Earnings.
Speaker 2: After the break. More from Bloomberg's interview with Nvidia CEO
Speaker 2: Jensen Huang. Now, the company is navigating the ongoing trade
Speaker 2: tensions between the US and China at the two big
Speaker 2: global competitors in the SAI race, or the US and China,
Speaker 2: and Nvidia plays a central role in that competition. In
Speaker 2: Nvidia is now allowed by the US government to sell
Speaker 2: some of its chips to China, but interestingly, China doesn't
Speaker 2: seem to be buying those chips from Nvidia. Here's what
Speaker 2: the CEO of in Vidia, Jensen Huang, told you about that.
Speaker 1: We would love the opportunity to be able to re
Speaker 1: engage the Chinese market with excellent products that we deliver
Speaker 1: and to be able to compete globally. The Chinese market
Speaker 1: is very large this year, my guess is probably about
Speaker 1: fifty billion dollar. It's great for the American people that
Speaker 1: we're able to compete in the Chinese market. It's great
Speaker 1: for the China market that we're able to provide and
Speaker 1: Video's technology to them. It's great for the rest of
Speaker 1: the world, as Chinese software companies and Chinese open source
Speaker 1: models lead China and are used all over the world.
Speaker 1: And so I think it's fantastic that we're able. It
Speaker 1: would be fantastic if we're able to participate in the
Speaker 1: China market, but for now we should just assume and
Speaker 1: Video's forecasts for China market is zero.
Speaker 2: Jensen Huang very focused on the way China is growing
Speaker 2: its AI capacity and capabilities. What is China's approach to
Speaker 2: the buildout and adoption of AI in complement or contrast
Speaker 2: to what's happening in the US.
Speaker 3: China wants to win the AI race as well. That
Speaker 3: much is clear. Let's start with the basics of what
Speaker 3: Jensen reiterating the interview, which is base case scenario right
Speaker 3: now is Nvidia does not derive any revenues from China.
Speaker 3: Was interesting part of your question on the earnings call
Speaker 3: the CFO collect Cress had to address the China issue,
Speaker 3: right because you know, everyone knows that it's going to
Speaker 3: be asked by the analyst anyway. And your interpretation of
Speaker 3: and I mean that with respect the word interpretation of
Speaker 3: what she said was they were allowed to sell H
Speaker 3: twenty in the quarter, but there wasn't any demand for it.
Speaker 3: What they're not allowed to do is sell blackwell the
Speaker 3: kind of current generation architecture, even a deprecated version into China.
Speaker 3: So those distinctions are important. And where we left it
Speaker 3: with Jensen in the interview was they want to be
Speaker 3: able to do that in China and they will work
Speaker 3: with both the United States government and Chinese government to
Speaker 3: find a solution. But base case of zero, there is
Speaker 3: a wider political discussion. Jensen Huang is in very close
Speaker 3: proximity to this administration, right.
Speaker 2: He was interesting when you talked to him, and he
Speaker 2: was in DC when you talked him the time before that.
Speaker 3: And in both of those occasions, the President of the
Speaker 3: United States was part of the newsflow commenting very positive
Speaker 3: about Jensen Wang and what in video is doing, and
Speaker 3: in the context of the day of the interview in
Speaker 3: the US Saudi Investment Forum, the President asked Jensen to
Speaker 3: stand up to a standing ovation. But the reality from
Speaker 3: video is that they right now have no access to
Speaker 3: a market that one time was twenty five percent of
Speaker 3: revenues and is the world's biggest end market for data centers. Probably,
Speaker 3: but more academically speaking, Jensen Wang has been very consistent
Speaker 3: that more than half of the world's AI engineers are
Speaker 3: either in China or they're Chinese national citizens, and so
Speaker 3: Americas should want its leading technology to be the gold standard,
Speaker 3: the default that those engineers use to develop artificial intelligence,
Speaker 3: noting fully that there is of course geopolitical and national
Speaker 3: security considerations that come with that.
Speaker 2: Ed if you talk to our colleagues who cover tech
Speaker 2: in China, do they say that there is as much
Speaker 2: of a fear of there being an AI bubble there
Speaker 2: or the circumstances just entirely different.
Speaker 3: The circumstances are different in so far as there is
Speaker 3: less red tape in China and more direct government support
Speaker 3: or action in favor of something. It's not the same
Speaker 3: level of anxiety in China because they have a different
Speaker 3: system of government input or support. Their domestic industry on
Speaker 3: the infrastructure side is nascent.
Speaker 2: What if Jensen Huang is wrong and we are in
Speaker 2: a bubble and that bubble bursts, are we likely to
Speaker 2: see a crash? Are we likely to see consolidation? As
Speaker 2: you talk to your sources, how do they think about
Speaker 2: the way in which that might play out? Given the
Speaker 2: rapid breakneck growth we've seen the size of these valuations,
Speaker 2: the money that's been poured into this and taken from
Speaker 2: one pocket to another, what would a bubble bursting look
Speaker 2: like when it comes to AI.
Speaker 3: Well, in order to look at what a bubble bursting
Speaker 3: looks like, I guess you have to set the state
Speaker 3: of play and the state of players that you know
Speaker 3: in twenty twenty five and videos up about forty percent,
Speaker 3: and of course in video accounts for eight percent of
Speaker 3: the S and P five hundred anyway, so in equity
Speaker 3: markets there's a lot at stake. The leverage side of
Speaker 3: this is really fascinating as well. Debt Oracle, for example,
Speaker 3: is very, very involved in the AI infrastructure build out
Speaker 3: in the United States, and it has been able to
Speaker 3: raise massive amounts of debt and also get investors to
Speaker 3: raise debt for some of its projects. Where Oracle doesn't
Speaker 3: hold the debt on its balance sheet, it's just able
Speaker 3: to get someone to do it on its behalf. But
Speaker 3: the worrying indicator there is that Oracle swung to negative
Speaker 3: free cash flow for the first time since nineteen ninety
Speaker 3: two this year. And so the confidence that investors had
Speaker 3: was that this is early innings. The AI infrastructure build
Speaker 3: out is early. The figure that is common between say
Speaker 3: Gens and Water and other chip CEOs is there's a
Speaker 3: four trillion dollar addressable market for AI data centers in
Speaker 3: the next say, three to five years, and that is
Speaker 3: all built on capital expenditures of the big hyperscalers, cloud
Speaker 3: computing companies and also like Meta Elon Musk's Xai, et cetera.
Speaker 3: And everyone is working in good faith that those capital
Speaker 3: expenditure commitments that are forecast they go through with them.
Speaker 3: If they don't, you can kind of see the trickle
Speaker 3: down effect that I'm painting here. That's why going into
Speaker 3: this Innverdia earnings print, the anxiety was high. You know,
Speaker 3: if you look at the options market or wherever your
Speaker 3: indicator is, there was potential for this to go either way,
Speaker 3: and at the time you and I are speaking, it
Speaker 3: went positively in the market.
Speaker 2: This is the Big Take from Bloomberg News. I'm David Gerret.
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