WEBVTT - Nvidia Silences AI Skeptics (For Now)

0:00:00.280 --> 0:00:07.200
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:09.160 --> 0:00:12.239
<v Speaker 2>In Nvidia just reported earnings for the third quarter, than

0:00:12.280 --> 0:00:15.480
<v Speaker 2>to say they were highly anticipated would be an understatement.

0:00:16.000 --> 0:00:20.119
<v Speaker 3>Nvidia earnings was said to be the most important day

0:00:20.400 --> 0:00:22.040
<v Speaker 3>of the year for Wall Street.

0:00:21.880 --> 0:00:26.520
<v Speaker 2>Any speculating that these companies' valuations are over inflated, that

0:00:26.560 --> 0:00:28.800
<v Speaker 2>the numbers have just got Wall Street has been worried

0:00:28.840 --> 0:00:31.800
<v Speaker 2>about an AI bubble, and Nvidia, which is now the

0:00:31.840 --> 0:00:34.839
<v Speaker 2>world's largest company by market cap, is seen as a

0:00:34.840 --> 0:00:38.360
<v Speaker 2>bell weather for the entire industry. The biggest names in

0:00:38.400 --> 0:00:42.640
<v Speaker 2>AI run on Nvidia's powerful chips, its graphics processing units

0:00:42.720 --> 0:00:45.440
<v Speaker 2>or GPUs, including its Blackwell model.

0:00:46.120 --> 0:00:48.640
<v Speaker 1>There's been a lot of talk about an AI bubble.

0:00:49.200 --> 0:00:52.080
<v Speaker 1>From our vantage point, we see something very different.

0:00:52.440 --> 0:00:55.360
<v Speaker 2>That's Nvidia CEO Jensen Wong on a call with Wall

0:00:55.360 --> 0:00:58.800
<v Speaker 2>Street analysts after the company reported earnings that roundly beat

0:00:58.840 --> 0:01:03.240
<v Speaker 2>Wall Street's expectations, and the relief among investors was palpable.

0:01:03.600 --> 0:01:07.040
<v Speaker 2>Shares of Nvidia jumped by about five percent in late trading.

0:01:07.319 --> 0:01:09.440
<v Speaker 3>There was a lot more anxiety going into it.

0:01:09.959 --> 0:01:12.440
<v Speaker 2>Ed Ludlow is the co host of Bloomberg Tech.

0:01:12.880 --> 0:01:15.759
<v Speaker 3>If you look on social media, which can be precarious

0:01:15.760 --> 0:01:18.319
<v Speaker 3>thing to do. There were lots of people saying, you know,

0:01:18.480 --> 0:01:22.000
<v Speaker 3>either in Vidia is going to save or crash the

0:01:22.040 --> 0:01:25.560
<v Speaker 3>global economy overnight. The stakes weren't as high as that,

0:01:25.720 --> 0:01:28.240
<v Speaker 3>but it was serious and they certainly delivered.

0:01:28.760 --> 0:01:31.920
<v Speaker 2>In Video says it expects to generate roughly sixty five

0:01:32.040 --> 0:01:35.080
<v Speaker 2>billion dollars in revenue in the coming quarter, and when

0:01:35.240 --> 0:01:38.480
<v Speaker 2>Ed sat down with Jensen Huang on Wednesday, the CEO said,

0:01:38.520 --> 0:01:40.320
<v Speaker 2>in Vidia is well positioned.

0:01:40.720 --> 0:01:45.720
<v Speaker 1>Sales are after charts for Blackwell and in Vidio GPUs

0:01:45.760 --> 0:01:48.400
<v Speaker 1>in the cloud are sold out. We got plenty of

0:01:48.480 --> 0:01:49.480
<v Speaker 1>Blackwells to sell you.

0:01:50.040 --> 0:01:52.960
<v Speaker 3>Things seem to have even more momentum than the most

0:01:52.960 --> 0:01:56.080
<v Speaker 3>bullish people on the street thought that Nvidia had, and

0:01:56.120 --> 0:01:59.640
<v Speaker 3>there is no evidence that at least the most important

0:01:59.640 --> 0:02:03.559
<v Speaker 3>customs that Invidia has are reneging on or pulling back

0:02:03.600 --> 0:02:04.800
<v Speaker 3>on their spending commitment.

0:02:07.600 --> 0:02:10.720
<v Speaker 2>So in Nvidia has allaid some fear AI is a bubble,

0:02:11.040 --> 0:02:13.640
<v Speaker 2>but there are still concern about the circular nature of

0:02:13.720 --> 0:02:17.480
<v Speaker 2>AI megadeals, how quickly high end chips to depreciate, and

0:02:17.520 --> 0:02:21.240
<v Speaker 2>about the stratospheric valuations of many AI companies, which is

0:02:21.280 --> 0:02:25.000
<v Speaker 2>reminding some investors of the late nineteen nineties and says

0:02:25.000 --> 0:02:27.079
<v Speaker 2>he's asked executives if there's a parallel.

0:02:27.440 --> 0:02:30.440
<v Speaker 3>I asked the CEOs, and here's their answer, that the

0:02:30.480 --> 0:02:32.680
<v Speaker 3>balance sheets now are different to what they were in

0:02:32.720 --> 0:02:36.440
<v Speaker 3>the dot com bubble, that they see actually useful software

0:02:37.000 --> 0:02:42.639
<v Speaker 3>being sold generating actual revenues. This is existential for many

0:02:42.720 --> 0:02:48.040
<v Speaker 3>American companies. They are investing wholeheartedly in AI because they

0:02:48.080 --> 0:02:51.760
<v Speaker 3>believe it will define what those companies do going forward.

0:02:52.200 --> 0:02:55.680
<v Speaker 3>The idea that there's a bubble is secondary. It is

0:02:55.800 --> 0:02:59.919
<v Speaker 3>not true. If these companies need to become AI companies,

0:03:00.040 --> 0:03:03.800
<v Speaker 3>you know, it's an absolutely necessary investment. The difference this

0:03:03.919 --> 0:03:06.240
<v Speaker 3>time around they have the cash to support that.

0:03:10.000 --> 0:03:11.800
<v Speaker 2>I'm David Gera and this is the big take from

0:03:11.840 --> 0:03:15.600
<v Speaker 2>Bloomberg News today on the show Relief after in Nvidia's

0:03:15.680 --> 0:03:20.000
<v Speaker 2>latest earnings exceed expectations. How it's eye popping revenue forecast

0:03:20.200 --> 0:03:23.640
<v Speaker 2>has quieted some of the concerns about the potential AI bubble,

0:03:24.120 --> 0:03:27.440
<v Speaker 2>but the company and its backers still face some big challenges,

0:03:27.760 --> 0:03:30.240
<v Speaker 2>as in video races to keep up with global demand

0:03:30.320 --> 0:03:40.520
<v Speaker 2>for GPUs. It's not slowing down ed. You've interviewed Jensen

0:03:40.600 --> 0:03:43.680
<v Speaker 2>Huang a handful of times now, and I'm curious what

0:03:43.720 --> 0:03:46.560
<v Speaker 2>your impressions of him are, what's he like as a leader,

0:03:46.600 --> 0:03:47.680
<v Speaker 2>what's his personality like.

0:03:48.480 --> 0:03:51.240
<v Speaker 3>He's incredibly busy, obviously, you know when we spoke to

0:03:51.320 --> 0:03:54.480
<v Speaker 3>him in that interview, he'd spent the entire day in Washington,

0:03:54.560 --> 0:03:57.120
<v Speaker 3>DC at the US Saudi Investment Forum and then spent

0:03:57.200 --> 0:03:59.720
<v Speaker 3>time with the president and managed to pull off an

0:03:59.720 --> 0:04:02.119
<v Speaker 3>earning school and then an earnings interview in the same day,

0:04:02.160 --> 0:04:04.160
<v Speaker 3>which I'm sure took a lot, but that kind of

0:04:04.160 --> 0:04:07.160
<v Speaker 3>speaks to what he's like, as in videos, kind of

0:04:07.200 --> 0:04:11.120
<v Speaker 3>ballooned and grown and become so big. He's taken that

0:04:11.240 --> 0:04:13.240
<v Speaker 3>in his stride quite a lot. You know, he is

0:04:13.280 --> 0:04:16.440
<v Speaker 3>the focus of attention, but I think the first and foremost,

0:04:16.480 --> 0:04:18.320
<v Speaker 3>you know, he would tell you that without speaking on

0:04:18.320 --> 0:04:20.440
<v Speaker 3>his behalf, that he's an engineer, and so he is

0:04:20.480 --> 0:04:22.920
<v Speaker 3>involved deeply in what's going on in the company.

0:04:23.760 --> 0:04:27.040
<v Speaker 2>So ed In Video released its latest quarterly earnings report

0:04:27.160 --> 0:04:30.840
<v Speaker 2>after the close on Wednesday. I'm curious what stood out

0:04:30.880 --> 0:04:31.760
<v Speaker 2>to you.

0:04:31.760 --> 0:04:34.000
<v Speaker 3>You know, in Vidia beat on the most important segment,

0:04:34.040 --> 0:04:37.760
<v Speaker 3>which is data center revenues and compute, but what they

0:04:37.839 --> 0:04:41.560
<v Speaker 3>said for the fiscal fourth quarter was really interesting, which

0:04:41.600 --> 0:04:44.400
<v Speaker 3>is the quarter ahead the period that we're currently in.

0:04:44.480 --> 0:04:45.760
<v Speaker 2>Yes, I should say, yeah.

0:04:45.600 --> 0:04:48.839
<v Speaker 3>Yeah, sales will be sixty five billion dollars plus or

0:04:48.880 --> 0:04:53.240
<v Speaker 3>minus two percent, and that's pretty significantly beyond consensus.

0:04:53.720 --> 0:04:56.920
<v Speaker 2>In Vidia is poised to start shipping a new GPU

0:04:57.000 --> 0:05:00.360
<v Speaker 2>model next year. It's called the Reubens CPX, and it's

0:05:00.400 --> 0:05:04.520
<v Speaker 2>designed to handle even more demanding tasks like generating video.

0:05:04.760 --> 0:05:08.400
<v Speaker 3>Nvidia does not give guidance. It doesn't give year ahead

0:05:08.480 --> 0:05:12.240
<v Speaker 3>forecasts or very long term forecasts except it did you

0:05:12.240 --> 0:05:15.479
<v Speaker 3>know on stage in Washington, DC? Curiously, you and I

0:05:15.560 --> 0:05:18.160
<v Speaker 3>were both in the city at the same time. Jensen

0:05:18.240 --> 0:05:21.359
<v Speaker 3>was doing his PowerPoint presentation with the clicky thing, and

0:05:21.440 --> 0:05:25.000
<v Speaker 3>this slide appears behind him, and the slide says, over

0:05:25.040 --> 0:05:29.720
<v Speaker 3>the next six fiscal quarters, just from Blackwell Rubin products

0:05:29.720 --> 0:05:33.599
<v Speaker 3>excluding China and Video says it will do five hundred

0:05:33.640 --> 0:05:36.160
<v Speaker 3>billion dollars of sales half a trillion dollars of sales

0:05:36.360 --> 0:05:40.640
<v Speaker 3>over six fiscal quarters. And the street was a bit like, huh,

0:05:40.720 --> 0:05:42.720
<v Speaker 3>that's way beyond what we've modeled.

0:05:42.320 --> 0:05:46.239
<v Speaker 2>For This is a basic question. But why isn't video

0:05:46.320 --> 0:05:49.240
<v Speaker 2>viewed as a bell weather for AI? Why is it

0:05:49.240 --> 0:05:51.600
<v Speaker 2>such an important company for Wall Street to track.

0:05:52.160 --> 0:05:57.640
<v Speaker 3>Really simply, GPUs graphics processing units are chips that can

0:05:57.720 --> 0:06:01.840
<v Speaker 3>handle multiple processes at the same time. They're very good

0:06:01.880 --> 0:06:05.400
<v Speaker 3>for training AI models, and they're very good for running

0:06:05.440 --> 0:06:08.640
<v Speaker 3>the AI models what we call inference. There are many

0:06:08.640 --> 0:06:11.599
<v Speaker 3>more options now today than they were at say a

0:06:11.680 --> 0:06:14.600
<v Speaker 3>year ago or two or three years ago, but Nvidia

0:06:14.680 --> 0:06:18.480
<v Speaker 3>still has a monopoly, a technical monopoly for that market.

0:06:18.920 --> 0:06:23.160
<v Speaker 3>And the vast majority of workloads, be they training workloads

0:06:23.240 --> 0:06:26.279
<v Speaker 3>or inference workloads, are done using in video gear. So

0:06:26.520 --> 0:06:29.240
<v Speaker 3>Nvidia is a bellwether simply because if it's telling us

0:06:29.320 --> 0:06:32.440
<v Speaker 3>this thing is happening, it has the best lens into

0:06:32.480 --> 0:06:35.560
<v Speaker 3>it happening. The slightly different answer than Nvidia would give

0:06:35.600 --> 0:06:39.159
<v Speaker 3>you is that they are, in their mind the only

0:06:39.279 --> 0:06:42.600
<v Speaker 3>technology company in history, in fact, the only company in history,

0:06:42.640 --> 0:06:46.040
<v Speaker 3>irrespective of what field they're in, that will say to everyone,

0:06:46.120 --> 0:06:50.800
<v Speaker 3>their customers, their competitors, their suppliers, the analysts, here's what

0:06:50.839 --> 0:06:53.960
<v Speaker 3>we're doing for the next five years from a technology perspective.

0:06:53.960 --> 0:06:56.800
<v Speaker 3>And to their credit, they've done that. And so their

0:06:57.000 --> 0:07:00.279
<v Speaker 3>argument is that the world that's around them, into apply

0:07:00.360 --> 0:07:02.720
<v Speaker 3>chain and their customers and everything that's being built around

0:07:02.839 --> 0:07:05.279
<v Speaker 3>data center has had a really good heads up of

0:07:05.320 --> 0:07:09.159
<v Speaker 3>what's coming to market, and that's one reason why Wall

0:07:09.160 --> 0:07:11.720
<v Speaker 3>Street at least believes what they have to say.

0:07:12.040 --> 0:07:15.560
<v Speaker 2>And what are the indicators that are leading some investors

0:07:15.600 --> 0:07:18.600
<v Speaker 2>and analysts to say that if we're not in a bubble,

0:07:18.600 --> 0:07:20.160
<v Speaker 2>we're in bubble territory.

0:07:20.720 --> 0:07:25.640
<v Speaker 3>There are two depreciation basically the idea that any generation

0:07:26.040 --> 0:07:30.000
<v Speaker 3>of GPU or AI accelerator has a limited shelf life

0:07:30.360 --> 0:07:34.280
<v Speaker 3>and therefore, because of the depreciation and its value, those

0:07:34.320 --> 0:07:37.520
<v Speaker 3>big customers will have to mark down that value on

0:07:37.560 --> 0:07:40.360
<v Speaker 3>their balance sheet at some point, noting that upfront they

0:07:40.400 --> 0:07:44.160
<v Speaker 3>made massive commitments to spend on this technology. And the

0:07:44.200 --> 0:07:47.800
<v Speaker 3>other is the circular financing thing, which isn't going away.

0:07:47.880 --> 0:07:52.200
<v Speaker 3>The idea that Nvidia is the biggest player in the

0:07:52.240 --> 0:07:56.320
<v Speaker 3>technology and it gives billions of dollars to an AI company,

0:07:56.320 --> 0:07:59.680
<v Speaker 3>a software company, and that software company takes that money

0:08:00.080 --> 0:08:03.920
<v Speaker 3>spends it on VideA technology, and thus the circular financing argument.

0:08:04.400 --> 0:08:07.000
<v Speaker 3>There's a concern that that is not a strong and

0:08:07.080 --> 0:08:09.920
<v Speaker 3>long term underpinning of a market that will keep growing.

0:08:10.440 --> 0:08:13.880
<v Speaker 2>In Vidia says software updates extend the life of its GPUs,

0:08:14.360 --> 0:08:19.000
<v Speaker 2>but those circular deals are giving some investors pause. In September,

0:08:19.080 --> 0:08:22.040
<v Speaker 2>the company announced a one hundred billion dollar investment in

0:08:22.200 --> 0:08:25.680
<v Speaker 2>open Ai to support new data centers and AI infrastructure,

0:08:25.840 --> 0:08:29.360
<v Speaker 2>which will be equipped with in Vidia's advanced chips. Since

0:08:29.400 --> 0:08:31.960
<v Speaker 2>the start of the year, in Vidia also inc deals

0:08:32.000 --> 0:08:36.280
<v Speaker 2>with dozens of other companies, including Microsoft and Nthropic. You

0:08:36.320 --> 0:08:39.320
<v Speaker 2>asked him about the circular nature of these deals as well.

0:08:39.600 --> 0:08:42.080
<v Speaker 2>You had a wonderful way of putting the question to him.

0:08:42.120 --> 0:08:44.400
<v Speaker 2>You asked about all that open ai is committed to buying,

0:08:44.440 --> 0:08:46.600
<v Speaker 2>and you said, effectively, are they good for it? How

0:08:46.600 --> 0:08:48.040
<v Speaker 2>do you know they're good for it? And what was

0:08:48.080 --> 0:08:49.440
<v Speaker 2>his response to that question?

0:08:49.920 --> 0:08:51.959
<v Speaker 3>Yeah? No, I literally said, how do you know that

0:08:52.000 --> 0:08:54.680
<v Speaker 3>they're good for it? The way that Jensen described it

0:08:54.679 --> 0:08:57.520
<v Speaker 3>in the interview is that their partnership with open ai

0:08:57.640 --> 0:08:58.960
<v Speaker 3>is what he called disciplined.

0:08:59.320 --> 0:09:04.040
<v Speaker 1>Well, we're thought, along with open ai, thoughtful in aligning

0:09:04.160 --> 0:09:09.720
<v Speaker 1>on and taking into consideration visibility of demand and their

0:09:09.800 --> 0:09:13.560
<v Speaker 1>financing capabilities. All of that has to be in accordance,

0:09:14.000 --> 0:09:17.120
<v Speaker 1>has to be aligned, has to be coherent before we

0:09:17.160 --> 0:09:21.280
<v Speaker 1>start to build out. And so I think the ambitions large,

0:09:21.600 --> 0:09:23.520
<v Speaker 1>but the execution is disciplined.

0:09:24.000 --> 0:09:29.560
<v Speaker 3>Previously in countenance to the circular financing discussion or debate,

0:09:30.360 --> 0:09:34.800
<v Speaker 3>Jensen has said that nothing is a quid pro quo

0:09:35.240 --> 0:09:38.800
<v Speaker 3>when they make an investment in open Ai, for example,

0:09:39.200 --> 0:09:42.520
<v Speaker 3>there is no mandatory requirement that open Ai takes that

0:09:42.600 --> 0:09:45.679
<v Speaker 3>money and uses it on Nvidia GPUs. They could use

0:09:45.720 --> 0:09:48.240
<v Speaker 3>it to buy someone else's But there are plenty of

0:09:48.240 --> 0:09:50.960
<v Speaker 3>case studies where that just simply isn't true. Right this

0:09:51.040 --> 0:09:55.720
<v Speaker 3>week alone, you saw the Nvidia investment in Anthropic, a

0:09:55.720 --> 0:09:58.840
<v Speaker 3>big rival of open Ai, which also included one of

0:09:58.840 --> 0:10:02.440
<v Speaker 3>the other cloud provider, And in that case, in Vidia

0:10:02.559 --> 0:10:06.000
<v Speaker 3>makes an investment in Fropic, and Fropic gets money, and

0:10:06.040 --> 0:10:09.120
<v Speaker 3>it does use that money to invest back into capacity

0:10:09.480 --> 0:10:12.640
<v Speaker 3>that relies on Nvidia chips. He didn't really answer the

0:10:12.679 --> 0:10:15.080
<v Speaker 3>question as it comes as it relates to open Ai.

0:10:15.480 --> 0:10:17.760
<v Speaker 3>He just said that they're not concerned about it.

0:10:19.160 --> 0:10:21.360
<v Speaker 2>In the run up to the release of these earnings,

0:10:21.400 --> 0:10:25.040
<v Speaker 2>these in video earnings, you saw some big shareholders offload

0:10:25.240 --> 0:10:27.320
<v Speaker 2>a sizeable amount of stock. You saw a SoftBank do that,

0:10:27.520 --> 0:10:29.760
<v Speaker 2>Peter Thiel's hedge funded it. You've seen bets against this

0:10:29.800 --> 0:10:32.680
<v Speaker 2>company as well in the options market. What does that

0:10:32.800 --> 0:10:35.439
<v Speaker 2>tell us those kind of sizeable moves we've seen from

0:10:35.440 --> 0:10:36.520
<v Speaker 2>some pretty key investors.

0:10:37.120 --> 0:10:40.880
<v Speaker 3>What it speaks to probably is where people think the

0:10:40.920 --> 0:10:44.640
<v Speaker 3>next opportunity is in video. Does face increase in competition.

0:10:45.080 --> 0:10:48.720
<v Speaker 3>There are other players that are working on GPU specifically

0:10:49.040 --> 0:10:51.560
<v Speaker 3>for use in AI data center, but we also have

0:10:51.679 --> 0:10:55.439
<v Speaker 3>A six and custom chips like Google's TPU. There are

0:10:55.440 --> 0:10:58.800
<v Speaker 3>more options now, and part of the argument that Jensen

0:10:58.840 --> 0:11:01.600
<v Speaker 3>Wang and the other video executives make is like this

0:11:01.760 --> 0:11:04.440
<v Speaker 3>is broadening out. They love to see it, but it

0:11:04.520 --> 0:11:08.160
<v Speaker 3>also reflects the anxiety that we had going into this Earnings.

0:11:09.960 --> 0:11:13.000
<v Speaker 2>After the break. More from Bloomberg's interview with Nvidia CEO

0:11:13.080 --> 0:11:16.720
<v Speaker 2>Jensen Huang. Now, the company is navigating the ongoing trade

0:11:16.760 --> 0:11:28.280
<v Speaker 2>tensions between the US and China at the two big

0:11:28.280 --> 0:11:31.080
<v Speaker 2>global competitors in the SAI race, or the US and China,

0:11:31.120 --> 0:11:34.559
<v Speaker 2>and Nvidia plays a central role in that competition. In

0:11:34.640 --> 0:11:36.960
<v Speaker 2>Nvidia is now allowed by the US government to sell

0:11:36.960 --> 0:11:39.640
<v Speaker 2>some of its chips to China, but interestingly, China doesn't

0:11:39.640 --> 0:11:41.800
<v Speaker 2>seem to be buying those chips from Nvidia. Here's what

0:11:41.840 --> 0:11:44.280
<v Speaker 2>the CEO of in Vidia, Jensen Huang, told you about that.

0:11:44.520 --> 0:11:47.120
<v Speaker 1>We would love the opportunity to be able to re

0:11:47.240 --> 0:11:51.600
<v Speaker 1>engage the Chinese market with excellent products that we deliver

0:11:52.000 --> 0:11:55.480
<v Speaker 1>and to be able to compete globally. The Chinese market

0:11:55.520 --> 0:11:59.000
<v Speaker 1>is very large this year, my guess is probably about

0:11:59.040 --> 0:12:02.840
<v Speaker 1>fifty billion dollar. It's great for the American people that

0:12:02.880 --> 0:12:05.640
<v Speaker 1>we're able to compete in the Chinese market. It's great

0:12:05.640 --> 0:12:07.959
<v Speaker 1>for the China market that we're able to provide and

0:12:08.080 --> 0:12:10.760
<v Speaker 1>Video's technology to them. It's great for the rest of

0:12:10.760 --> 0:12:15.520
<v Speaker 1>the world, as Chinese software companies and Chinese open source

0:12:15.600 --> 0:12:18.880
<v Speaker 1>models lead China and are used all over the world.

0:12:19.080 --> 0:12:21.800
<v Speaker 1>And so I think it's fantastic that we're able. It

0:12:21.840 --> 0:12:24.199
<v Speaker 1>would be fantastic if we're able to participate in the

0:12:24.320 --> 0:12:27.559
<v Speaker 1>China market, but for now we should just assume and

0:12:27.679 --> 0:12:32.319
<v Speaker 1>Video's forecasts for China market is zero.

0:12:32.640 --> 0:12:35.560
<v Speaker 2>Jensen Huang very focused on the way China is growing

0:12:35.559 --> 0:12:39.800
<v Speaker 2>its AI capacity and capabilities. What is China's approach to

0:12:39.840 --> 0:12:43.680
<v Speaker 2>the buildout and adoption of AI in complement or contrast

0:12:43.679 --> 0:12:44.920
<v Speaker 2>to what's happening in the US.

0:12:45.640 --> 0:12:48.520
<v Speaker 3>China wants to win the AI race as well. That

0:12:48.640 --> 0:12:51.640
<v Speaker 3>much is clear. Let's start with the basics of what

0:12:51.760 --> 0:12:55.320
<v Speaker 3>Jensen reiterating the interview, which is base case scenario right

0:12:55.360 --> 0:12:59.280
<v Speaker 3>now is Nvidia does not derive any revenues from China.

0:13:00.120 --> 0:13:03.400
<v Speaker 3>Was interesting part of your question on the earnings call

0:13:03.960 --> 0:13:06.680
<v Speaker 3>the CFO collect Cress had to address the China issue,

0:13:06.760 --> 0:13:08.920
<v Speaker 3>right because you know, everyone knows that it's going to

0:13:08.920 --> 0:13:13.640
<v Speaker 3>be asked by the analyst anyway. And your interpretation of

0:13:14.000 --> 0:13:16.800
<v Speaker 3>and I mean that with respect the word interpretation of

0:13:16.800 --> 0:13:19.480
<v Speaker 3>what she said was they were allowed to sell H

0:13:19.559 --> 0:13:22.360
<v Speaker 3>twenty in the quarter, but there wasn't any demand for it.

0:13:22.840 --> 0:13:26.720
<v Speaker 3>What they're not allowed to do is sell blackwell the

0:13:26.800 --> 0:13:30.360
<v Speaker 3>kind of current generation architecture, even a deprecated version into China.

0:13:30.520 --> 0:13:33.400
<v Speaker 3>So those distinctions are important. And where we left it

0:13:33.400 --> 0:13:35.760
<v Speaker 3>with Jensen in the interview was they want to be

0:13:35.800 --> 0:13:38.040
<v Speaker 3>able to do that in China and they will work

0:13:38.080 --> 0:13:41.040
<v Speaker 3>with both the United States government and Chinese government to

0:13:41.080 --> 0:13:43.840
<v Speaker 3>find a solution. But base case of zero, there is

0:13:43.880 --> 0:13:47.880
<v Speaker 3>a wider political discussion. Jensen Huang is in very close

0:13:47.920 --> 0:13:49.640
<v Speaker 3>proximity to this administration, right.

0:13:49.679 --> 0:13:51.520
<v Speaker 2>He was interesting when you talked to him, and he

0:13:51.559 --> 0:13:53.160
<v Speaker 2>was in DC when you talked him the time before that.

0:13:53.679 --> 0:13:56.000
<v Speaker 3>And in both of those occasions, the President of the

0:13:56.080 --> 0:14:00.000
<v Speaker 3>United States was part of the newsflow commenting very positive

0:14:00.280 --> 0:14:03.800
<v Speaker 3>about Jensen Wang and what in video is doing, and

0:14:03.840 --> 0:14:06.560
<v Speaker 3>in the context of the day of the interview in

0:14:06.600 --> 0:14:10.120
<v Speaker 3>the US Saudi Investment Forum, the President asked Jensen to

0:14:10.160 --> 0:14:14.559
<v Speaker 3>stand up to a standing ovation. But the reality from

0:14:14.679 --> 0:14:17.760
<v Speaker 3>video is that they right now have no access to

0:14:17.800 --> 0:14:21.040
<v Speaker 3>a market that one time was twenty five percent of

0:14:21.080 --> 0:14:25.600
<v Speaker 3>revenues and is the world's biggest end market for data centers. Probably,

0:14:26.160 --> 0:14:30.239
<v Speaker 3>but more academically speaking, Jensen Wang has been very consistent

0:14:30.400 --> 0:14:34.120
<v Speaker 3>that more than half of the world's AI engineers are

0:14:34.320 --> 0:14:38.760
<v Speaker 3>either in China or they're Chinese national citizens, and so

0:14:39.640 --> 0:14:44.040
<v Speaker 3>Americas should want its leading technology to be the gold standard,

0:14:44.120 --> 0:14:48.080
<v Speaker 3>the default that those engineers use to develop artificial intelligence,

0:14:48.440 --> 0:14:53.720
<v Speaker 3>noting fully that there is of course geopolitical and national

0:14:53.760 --> 0:14:55.680
<v Speaker 3>security considerations that come with that.

0:14:56.440 --> 0:14:59.920
<v Speaker 2>Ed if you talk to our colleagues who cover tech

0:15:00.080 --> 0:15:02.640
<v Speaker 2>in China, do they say that there is as much

0:15:02.640 --> 0:15:04.680
<v Speaker 2>of a fear of there being an AI bubble there

0:15:04.800 --> 0:15:06.440
<v Speaker 2>or the circumstances just entirely different.

0:15:07.160 --> 0:15:11.720
<v Speaker 3>The circumstances are different in so far as there is

0:15:11.800 --> 0:15:15.680
<v Speaker 3>less red tape in China and more direct government support

0:15:16.040 --> 0:15:19.680
<v Speaker 3>or action in favor of something. It's not the same

0:15:19.760 --> 0:15:24.080
<v Speaker 3>level of anxiety in China because they have a different

0:15:24.200 --> 0:15:29.040
<v Speaker 3>system of government input or support. Their domestic industry on

0:15:29.080 --> 0:15:30.760
<v Speaker 3>the infrastructure side is nascent.

0:15:32.480 --> 0:15:35.400
<v Speaker 2>What if Jensen Huang is wrong and we are in

0:15:35.440 --> 0:15:39.560
<v Speaker 2>a bubble and that bubble bursts, are we likely to

0:15:39.600 --> 0:15:42.440
<v Speaker 2>see a crash? Are we likely to see consolidation? As

0:15:42.480 --> 0:15:45.360
<v Speaker 2>you talk to your sources, how do they think about

0:15:45.360 --> 0:15:49.600
<v Speaker 2>the way in which that might play out? Given the

0:15:49.760 --> 0:15:53.640
<v Speaker 2>rapid breakneck growth we've seen the size of these valuations,

0:15:53.640 --> 0:15:56.840
<v Speaker 2>the money that's been poured into this and taken from

0:15:56.840 --> 0:15:59.680
<v Speaker 2>one pocket to another, what would a bubble bursting look

0:15:59.760 --> 0:16:00.960
<v Speaker 2>like when it comes to AI.

0:16:01.400 --> 0:16:03.480
<v Speaker 3>Well, in order to look at what a bubble bursting

0:16:03.480 --> 0:16:06.240
<v Speaker 3>looks like, I guess you have to set the state

0:16:06.280 --> 0:16:07.920
<v Speaker 3>of play and the state of players that you know

0:16:08.240 --> 0:16:11.280
<v Speaker 3>in twenty twenty five and videos up about forty percent,

0:16:11.680 --> 0:16:13.800
<v Speaker 3>and of course in video accounts for eight percent of

0:16:13.840 --> 0:16:16.440
<v Speaker 3>the S and P five hundred anyway, so in equity

0:16:16.520 --> 0:16:19.680
<v Speaker 3>markets there's a lot at stake. The leverage side of

0:16:19.720 --> 0:16:23.760
<v Speaker 3>this is really fascinating as well. Debt Oracle, for example,

0:16:23.880 --> 0:16:27.800
<v Speaker 3>is very, very involved in the AI infrastructure build out

0:16:27.840 --> 0:16:30.800
<v Speaker 3>in the United States, and it has been able to

0:16:30.920 --> 0:16:34.320
<v Speaker 3>raise massive amounts of debt and also get investors to

0:16:34.440 --> 0:16:37.520
<v Speaker 3>raise debt for some of its projects. Where Oracle doesn't

0:16:37.560 --> 0:16:39.760
<v Speaker 3>hold the debt on its balance sheet, it's just able

0:16:39.760 --> 0:16:41.720
<v Speaker 3>to get someone to do it on its behalf. But

0:16:41.960 --> 0:16:45.680
<v Speaker 3>the worrying indicator there is that Oracle swung to negative

0:16:45.720 --> 0:16:48.080
<v Speaker 3>free cash flow for the first time since nineteen ninety

0:16:48.080 --> 0:16:52.360
<v Speaker 3>two this year. And so the confidence that investors had

0:16:52.520 --> 0:16:56.080
<v Speaker 3>was that this is early innings. The AI infrastructure build

0:16:56.080 --> 0:16:59.480
<v Speaker 3>out is early. The figure that is common between say

0:16:59.560 --> 0:17:02.920
<v Speaker 3>Gens and Water and other chip CEOs is there's a

0:17:03.000 --> 0:17:07.199
<v Speaker 3>four trillion dollar addressable market for AI data centers in

0:17:07.240 --> 0:17:10.119
<v Speaker 3>the next say, three to five years, and that is

0:17:10.160 --> 0:17:13.960
<v Speaker 3>all built on capital expenditures of the big hyperscalers, cloud

0:17:14.000 --> 0:17:18.119
<v Speaker 3>computing companies and also like Meta Elon Musk's Xai, et cetera.

0:17:18.840 --> 0:17:21.880
<v Speaker 3>And everyone is working in good faith that those capital

0:17:21.880 --> 0:17:25.200
<v Speaker 3>expenditure commitments that are forecast they go through with them.

0:17:25.640 --> 0:17:27.840
<v Speaker 3>If they don't, you can kind of see the trickle

0:17:27.880 --> 0:17:31.120
<v Speaker 3>down effect that I'm painting here. That's why going into

0:17:31.119 --> 0:17:35.000
<v Speaker 3>this Innverdia earnings print, the anxiety was high. You know,

0:17:35.040 --> 0:17:37.760
<v Speaker 3>if you look at the options market or wherever your

0:17:37.800 --> 0:17:41.480
<v Speaker 3>indicator is, there was potential for this to go either way,

0:17:41.880 --> 0:17:43.600
<v Speaker 3>and at the time you and I are speaking, it

0:17:43.640 --> 0:17:45.600
<v Speaker 3>went positively in the market.

0:17:50.280 --> 0:17:53.000
<v Speaker 2>This is the Big Take from Bloomberg News. I'm David Gerret.

0:17:53.040 --> 0:17:55.280
<v Speaker 2>To get more from The Big Take and unlimited access

0:17:55.320 --> 0:17:58.480
<v Speaker 2>to all of Bloomberg dot com, subscribe today at Bloomberg

0:17:58.520 --> 0:18:02.000
<v Speaker 2>dot com slash podcast to offer. If you liked this episode,

0:18:02.119 --> 0:18:04.160
<v Speaker 2>make sure to follow and review The Big Take wherever

0:18:04.160 --> 0:18:06.639
<v Speaker 2>you listen to podcasts. It helps people find the show.

0:18:07.119 --> 0:18:08.960
<v Speaker 2>Thanks for listening. We'll be back tomorrow.