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13:55
PDT

U.S. needs to regulate compute access to maintain AI lead over China.

NVIDIA Chris McGuire Mandip Singh Data Bank Digital Bridge Texas New York Pennsylvania Biden administration Southeast Asia Malaysia Thailand USDCNH PRIVATE

– NVIDIA's revenue from China has decreased to less than 10% of total revenue.

– Southeast Asia is becoming a key player in chip imports, potentially smuggling to China.

– Capital expenditures in tech are expected to rise significantly.

– Moratoriums on power sourcing in the U.S. could impact data center expansions.

U.S.-China tech rivalryAI compute regulationCapEx growth in tech

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Their best nodes or seven-meter nodes, which were first introduced in about 2018, have very significant advantages on the hardware stack. Now, I agree that we really want the U.S. stack to dominate, and we want to make sure that our models are as good as their models or better, as far ahead of their models as possible. But the best way to do that is to regulate the amount of compute that they have. It's actually the only lever that we have over China. If we don't do that, I think there's nothing that would stop China from making their models better than the U.S. models. I think the only reason that we have the lead that we have right now is actually due to the differential in compute between the U.S. and China. And if we want to expand that lead, the lever that we have, the only lever that we have, is controlling the amount of compute that China has. And that means closing loopholes and controls. All right, Chris, I really appreciate you joining us. Chris McGuire is now at the Council on Foreign Relations and was formerly a member of the National Security Council team under the Biden administration that helped to craft a lot of the export control rules. Mandip Singh is still with us here, who runs our technology coverage for Bloomberg, as we await that conference call from Jensen Huang and his CFO in about five minutes. We've gone through the numbers, Mandip. The question now really becomes, is the market going to buy it? And I guess for you, as an analyst, are you buying it? I think so. I mean, look, all these companies have signaled to us that they plan to raise their CapEx. In fact, when I look back to the sort of the year, expectations have gone up almost four.

Analysis

The discussion highlighted the strategic importance of controlling compute resources to maintain the U.S. lead over China in AI technology. The sentiment is that without tighter regulations on compute access for China, the gap in technological advancement could narrow significantly.

Smart money should note that the demand for NVIDIA chips remains robust, with a significant portion of revenue now coming from Southeast Asia, indicating potential loopholes in export controls. This could lead to increased scrutiny and regulatory actions that may impact supply chains and market dynamics in the tech sector.

13:53
PDT

NVIDIA's revenue from China is now only 1% of total revenue.

NVIDIA Kevin Oully China Southeast Asia Malaysia Thailand Singapore U.S.Biden administration AI United States So China NVDA USDCNH

– Southeast Asia is becoming a major hub for chip imports.

– Chips are likely being smuggled into China from neighboring countries.

– Robust demand for NVIDIA chips highlights vulnerabilities in export controls.

– Tightening controls may backfire by accelerating China's tech development.

export controlsgeopolitical risksAI technology demand

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of that chip-making equipment? 100%. It's both on the equipment. I'm actually even more concerned about the chips themselves. Nvidia just noted, as you said, that only about 1% of their data center revenue this quarter came from China, which is actually up from the previous quarter. But nonetheless, an enormous percentage came from Southeast Asia, from Malaysia, Thailand, and Singapore. Those might be the three biggest importers of chips outside the United States. And these are countries that don't have big robust AI industries. Obviously, what's happening is these chips are being smuggled into China, or there's data centers that are being built in these countries, and then they're being remotely accessed from China. So China is accessing U.S. compute and NVIDIA chips at very, very significant levels, and the controls do have weaknesses and loopholes. And these are things that should be filled. I think the lesson that we're seeing from the really robust demand, both on the lab side, where they're projecting these historic revenue numbers, and also on NVIDIA's side, where their actual earnings are so high, is that there is such robust demand for these chips that if we cut down on that, it would really mean there'd be more capacity for America and our allies and less for China. But this gets to the idea, and I know you know this, the tech community and Silicon Valley and NVIDIA itself have actually said that this could all sort of backfire. The idea that if this is a national security issue, the idea of keeping this technology outside the hands of China, and by restricting that, China's not just gonna sit by, they're gonna find a way to sort of create their own technology or find it outside of the U.S., the problem now...

Analysis

NVIDIA's data center revenue from China has significantly decreased, now accounting for only about 1% of total revenue, while Southeast Asia emerges as a key player in chip imports. The robust demand for NVIDIA chips indicates potential vulnerabilities in export controls, as chips are reportedly being smuggled into China from neighboring countries.

Smart money should note that the geopolitical landscape is shifting, with Southeast Asian countries becoming critical intermediaries for U.S. technology. The ongoing demand for AI chips suggests that tightening export controls could inadvertently strengthen China's technological capabilities as they seek alternatives.

13:50
PDT

Nvidia continues to outperform earnings expectations.

Nvidia Biden administration China U.S.Chris AI White House NVDA USDCNH

– High global demand for Nvidia chips indicates strong market position.

– Tighter controls on chip sales to China are being advocated.

– Strategic importance of compute resources for AI is emphasized.

– Sales to China are viewed as detrimental to U.S. strategic interests.

geopolitical riskAI demandchip sales regulation

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There's been a lot of hay made about those rules, rules that to a certain extent have been softened just a touch since the Biden administration left office. But as they stand right now, do you see a material case to maybe why they should be a little bit looser than what they are right now? Or are you more in favor of a more restrictive approach? I don't see a case for making them looser. In fact, I think the very robust demand for Nvidia chips that we're seeing in their consistent beating of earnings, including in this blockbuster report, shows that the demand globally is really, really high. And actually, every chip being sold to China is not one not being sold to America and to our allies. I think we're also seeing globally the kind of advent of very powerful AI systems that we in the White House in the previous administration thought were coming. They're now here. And this really underpins the logic of the controls. It's like, given that compute is the most important resource in the world, it is strategically critical to deploying the AI systems that are critical for technological advancement, military capabilities, and economic competitiveness. We want to make sure that America and our allies have as much of it as possible. And every good of compute that we sell to China is something that both hurts us on the strategic front and also takes away from what we have. So I think that we should be tightening them. I think that right now there actually is such large demand that that wouldn't even necessarily move the needle for the companies. But when it comes to the strategic front, Chris, I'm sure you know this.

Analysis

The demand for Nvidia chips remains robust, with the company consistently beating earnings expectations, indicating high global demand. The strategic importance of compute resources for AI systems underscores the need for tighter controls on chip sales to China, as every sale to China detracts from U.S. and allied capabilities.

Smart money should note that the current demand for Nvidia's chips is so strong that tightening controls may not significantly impact the company's performance. However, the geopolitical implications of chip sales to China could affect long-term strategic positioning and competitive advantages for the U.S. and its allies.

13:48
PDT

Nvidia's growth and margins are under pressure.

Nvidia Jensen Huang Goldman Sachs Kevin Oully Data Bank Digital Bridge China Hong Kong CFO CEO NVDA USDCNH GC=F DXY

– Concerns about inflated AI projections and sustainability of Nvidia's business model.

– Revenue from China has decreased to less than 10% of total revenue.

– Capital expenditures in data centers are significant, with costs heavily tied to chip prices.

– Power availability is a critical constraint for data center operations.

AI investment riskdata center constraintsChina market dynamics

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I mean, you see from your vantage point, given all that you operate there, you kind of see what's real and what's not. And I am just curious about the actual enterprise deployment that's going on right now. And what the gap is now between that and these CapEx numbers that everybody is so focused on, which could, at least by Goldman's estimates, reach a trillion dollars this year alone. Yeah, I think when you think about when we build a data center, it's typically 50 million a megawatt or 50 billion a gigawatt. And what that is is our costs are somewhere between 12 and 15 million. So about 70 percent of the costs are the chips and everything that are going into that. So the capital is being deployed. And these are 18 to 36 month cycles. So there's a lot of pre-leasing. A lot of capital was being deployed and geared toward that with a lot of power coming online in 27. And so what you're hearing about with moratoriums and trying to plug this gap. There's really people looking to solve 28, 29 and 30 and beyond. All right, Kevin, I really appreciate you joining us. Kevin Oully there. He's the current CFO, incoming CEO over at Data Bank, of course backed by a digital bridge. Now, going through those NVIDIA results, one line item worth mentioning is the company's revenue from China, or maybe the lack thereof. Revenue attributed to customers' headquarters in China, including Hong Kong, was about $7.9 billion for the second quarter. That's less than 10% of total revenue. Now remember three years ago, that revenue share from China was around 25.

Analysis

Nvidia faces potential pressure on growth and margins, raising concerns about its long-term investment viability despite being a well-run company. The discussion highlights skepticism around inflated projections in the AI sector, particularly regarding the sustainability of Nvidia's business model amidst evolving alternatives in AI delivery.

The significant drop in Nvidia's revenue share from China, now less than 10%, signals a critical shift in market dynamics that could impact future growth. Investors should be cautious about the reliance on AI narratives that may not align with realistic deployment timelines and capital expenditures.

13:46
PDT

NVIDIA faces growth and margin pressures.

NVIDIA Jensen Huang DataBank Kevin Oully Texas New York Pennsylvania NFL AI

– Power sourcing is a significant constraint for data centers.

– Unrealistic market projections could lead to investor disappointment.

– Data center operations are increasingly complex due to regulatory moratoriums.

– Major metro areas are prioritized for data center locations.

supply chain riskdata center expansionAI infrastructure

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And they're trying to time their ramp and their installations with our developments such that when they receive them, they can turn them on and execute. So I believe that it'd be more of the queue just based on our conversations with our customers. Secondly, I think that, you know, there's kind of two different markets in this. There's the large, NeoCloud frontier training models that are out there that are, you know, less geographic specific. Those are very large deployments where we operate tend to be around major metro areas, think NFL cities, trying to be within a 45-mile radius. A little smaller footprints could be a cloud availability zone, could be an AI inference play for an enterprise, whether it's a healthcare or financial services company, and typically deliver those low-latent applications that are required for many of the non-training workloads. Yeah, I mean, look, when it comes to sourcing power, it sounds like that's the real constraint here in the U.S. So do you think it will become easier given all the constraints we are dealing with and the moratoriums that we keep hearing about? That's a good question. I mean, you mentioned moratoriums. We've seen New York, Pennsylvania, even my home state here in Texas all announced something. And it's a hot button for this political election that's coming up. I think we've been operating for 20 years. We have over 20 data centers in the Texas market just to pick on Texas for a while. I think anything.

Analysis

NVIDIA's growth and margins are under pressure as the company navigates supply constraints and the evolving landscape of AI infrastructure. The CEO of DataBank highlights the critical challenge of sourcing power for data centers, which could impact future expansions and operations.

Smart money should note that while NVIDIA is a well-run company, unrealistic market projections, such as the $30 trillion total addressable market, could lead to investor disappointment. The ongoing power sourcing challenges in the U.S. may hinder the scalability of data center operations, particularly in key markets like Texas and New York.

13:44
PDT

NVIDIA's data center revenue reached $89 billion.

NVIDIA Kevin Oully Data Bank CEO CFO And Kevin NVDA

– Power availability and land access are critical for data center operations.

– The incoming CEO of Data Bank highlighted complexities in connecting to power grids.

– Data center providers face challenges in securing permitted land.

– Infrastructure bottlenecks could hinder growth in the tech sector.

data center growthinfrastructure challenges

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NVIDIA reported $89 billion specifically in data center revenue. Our next guest operates more than 70 data centers in more than 25 markets. Kevin Oully joins us right now. He's going to be the incoming CEO of the company, Data Bank, now the CFO, but he'll be taking over as CEO at the start of the year. And Kevin, I do want to start there with this idea of how power is kind of really the bugaboo that we've seen in this data center build-out. We know NVIDIA can produce the chips. We know you can get these GPUs and CPUs created. But where do we stand right now in making sure that the data centers that you're running and leasing out are actually going to be powered and reliably? Good afternoon. It's good to be on with you. You're absolutely right. And it's more than just power availability; it's powered land. So we need to have access to the grids as well as zoned, entitled, and permitted land, which has become increasingly complex. We operate in 70 data centers, as you mentioned, across 26 U.S. markets. So the largest geographic footprint of any data center provider in the U.S. And that gives us a lot of looks at a lot of different communities and a lot of opportunities, but also challenges as we try to navigate connecting to the grid in areas.

Analysis

NVIDIA reported $89 billion in data center revenue, highlighting the importance of power availability and land access for data center operations. The incoming CEO of Data Bank emphasized the complexities of connecting to power grids and securing permitted land for their 70 data centers across the U.S.

Smart money should note that while NVIDIA can produce chips, the real bottleneck lies in the infrastructure needed to support data center growth. The challenges in securing reliable power and land could impact the scalability of data center operations, affecting overall market dynamics in the tech sector.

13:41
PDT

Nvidia's financing strategy for customers is viewed as risky.

Nvidia Jensen Huang Anthropic DeepMind Wathamotorin NYU Stern School of Business Cisco Oracle AI NYU Stern School NVDA

– Concerns exist over the sustainability of Nvidia's AI ecosystem.

– Unrealistic market projections could lead to investor disappointment.

– Growth and margins for Nvidia may face pressure in the future.

– The AI landscape is evolving, with potential for alternative delivery methods.

AI ecosystem riskmarket valuation scrutiny

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Model the ecosystem that Nvidia seems to be creating with their balance sheet now by supporting these neo-clouds and inference clouds? Do you think that will be a durable line of business, even if hyperscalers end up going on their own over time? I mean, the reality is you would not do it unless you had to, unless you're trying to sustain something else, because these are expensive ways of keeping your business going. I think what Nvidia is trying to do, and I don't blame them for doing it, is to make this a faker company, that you need to build AI around those expensive chips with expensive data centers, and you do it before alternate ways of delivering AI products and services come through. You remember the DeepMind moment? It was a moment, but it was a moment which said, hey, maybe all of this architecture is not necessary for the bulk of AI products and services, but Nvidia wants to make the clock run faster so that people say, okay, this is the way it's going to be. We're going to work with what they've created. So I can see what Nvidia is doing, but it's a risky strategy because if an alternative way of delivering AI comes about, that is a better way of doing it, all of this architecture that has to be written off. And no matter how much you try in terms of creating the circular relationships to keep it going, it's not going to sustain it. Professor, really appreciate you joining us. Haslott, the motor and professor of finance over at the NYU Stern School of Business, and just to reiterate those numbers, a beat on the...

Analysis

Nvidia's strategy of financing its customers to create a robust AI ecosystem is seen as risky, as it may not be sustainable if alternative AI delivery methods emerge. The professor warns that while Nvidia is a strong company, unrealistic market projections could lead to investor disappointment as growth and margins come under pressure.

Smart money should note that Nvidia's current approach may be a double-edged sword; while it aims to solidify its market position, it risks obsolescence if competitors develop more efficient AI solutions. The emphasis on maintaining high valuations amidst speculative projections could lead to volatility in investor sentiment.

13:39
PDT

Nvidia's growth and margins are expected to come under pressure.

Nvidia Jensen Huang Anthropic SpaceX Oracle Jack Ablin Wathamotorin NYU Stern School of Business AI NVDA

– Inflated market size estimates raise skepticism about future projections.

– Investors are shifting towards demanding realistic numbers.

– Nvidia is well-managed but may not be a good investment at current valuations.

– The AI ecosystem is evolving, but challenges remain.

AI market projectionsNvidia growth concerns

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But I think the reality is in the long term, the tension is such that margins will decrease. Growth has to come down. You can't keep making the factory bigger if you don't tell me what you're going to make with it. So as you look across time, you're going to see more disappointment than excitement with Nvidia. It's a great company. Jensen Huang is one of the great CEOs of all time. But amazing companies can also be pretty bad investments. At this point in time, Nvidia is, I think, on the edge of that moment when growth and margins come under pressure. Growth and margins under pressure. I am curious, though, and no one doubts that this is a well-run company. No one doubts the bona fides when it comes to what they've generated in terms of cash, revenue, and profitability. But when you throw out that $30 trillion number, you didn't throw it out. But when other people throw that $30 trillion number, which is bonkers, SpaceX threw out a similar number. It raises a lot of questions because these are to a certain extent certainly with Anthropic one of their end users. So if some of their numbers are fantasy, what am I to make of some of the projections for Nvidia itself? I mean, you know what that's what puzzles me about this. If you're gonna sell the AI story, sell it with realistic numbers and a storyline that actually makes sense. Don't tell me fairy tales. So it's almost like they're asking for markets to take another look at them because when you make up fantasy, you're right, I've got to stop and ask if the rest of the story is also made out. I mean, I know right now people.

Analysis

Nvidia is facing potential pressure on growth and margins, with concerns that unrealistic market projections could lead to disappointment. Despite being a well-run company, the inflated $30 trillion market size estimates raise questions about the sustainability of Nvidia's growth story.

Smart money should note that while Nvidia is currently a strong player in the AI space, the reliance on speculative numbers could undermine investor confidence. The market may start demanding more tangible evidence of progress, which could impact valuations across the sector.

13:37
PDT

Anthropic's IPO valuation could reach $2 trillion, requiring significant revenue generation.

Anthropic NVIDIA Jack Ablin Wathamotorin Oracle AI NYU Stern School of Business Cisco IPO

– The AI market is experiencing a shift towards demanding tangible results from companies.

– Inflated total addressable market estimates could lead to investor disappointment.

– NVIDIA is facing potential margin compression despite strong demand.

– The AI ecosystem is becoming more concentrated, with NVIDIA financing its customers.

AI valuation scrutinymarket expectationsrevenue growth challenges

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Open AI SpaceX moment, and that's why I call it a bar mitzvah moment. We just don't know, so we don't know, but I think a lot of people are trying to game the system. Do you have sort of a calculation out there, your math, where you sort of look at the ecosystem out there where it starts to make a little bit more sense? Not so much as to what the aggregate numbers will be, but what that dispersion of some of those numbers will be? I think one way to do it is to take whatever market pricing you get and reverse engineer from it what you would need in revenue. Given what I have, a profit margin to assume for these companies, with Anthropic, my back of the envelope calculation is they go with a two trillion pricing, which is the rumored number for the IPO. They will need about 1.5 to two trillion in revenue. Of course, I saw the number thrown around today that their total addressable market is 30 trillion, which is plain bonkers. This isn't even up for debate, and any person who throws a number out like that deserves to be pushed out of the valuation. You're just making up stuff at this point. But two trillion is reachable, but it's a big reach. You need people buying products and services in mass quantities and paying premium prices. So you're setting yourself up for potential disappointment. So professor, I mean, this is a company that has a line of business which is growing triple digits at a $350 billion plus run rate. Do you think there will be like a cliff at some point of time, or it will be a slow deceleration when it comes to that?

Analysis

The AI landscape is evolving, with companies like Anthropic potentially reaching a $2 trillion valuation, but this hinges on achieving substantial revenue growth. Investors are becoming more discerning, demanding tangible progress rather than speculative promises, marking a significant shift in the market's expectations for AI companies.

The mention of a 'bar mitzvah moment' suggests that the AI sector is at a critical juncture where inflated valuations may face scrutiny. This could lead to a reevaluation of growth prospects, especially for companies with lofty market expectations that may not be sustainable.

13:35
PDT

NVIDIA's revenue growth is slowing, with an 18% sequential increase compared to a previous trend of 20%.

NVIDIA AMD Google OpenAI Anthropic Jay Goldberg Mandeep Singh Bloomberg Intelligence Jack Ablin Cresed Oracle Wathamotorin

– Margin compression is anticipated, potentially dropping from mid-70s to low-70s percentage points.

– Demand for NVIDIA's chips remains high, with customers willing to pay premium prices due to capacity constraints.

– The AI landscape is evolving, with investors now seeking tangible evidence of progress rather than just promises.

– Oracle is highlighted as a leading indicator for the industry, suggesting broader market implications.

AI competitionmargin pressureinvestor sentiment

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Cash flows come down a lot. We've seen buybacks come down as well. But now, of course, debt placements are going up to the tune of a trillion a quarter or something like that, rivaling the Treasury. Nonetheless, I mean, these are profitable. A profit this we're starting on a profitable foundation. I think that's better. I'm not sure that valuations are as out of whack as they were in the Cisco days. But I will say Oracle is another one. You talked earlier about that canary in the coal mine. I would watch Oracle as kind of a leading indicator on the industry. All right, Jack. Great stuff. Really appreciate you joining us. Jack Ablin, founding partner, chief investment strategist over at Cresed. And we do want to talk a little bit more right now about some of those valuations out there because our next guest is warning. He actually warned ahead of these results that the AI story overall, at least in his view, is still clearly further advanced than it was a year ago, but it is still early and he says that there will be changes and challenges that face all of the players in this space and the investors for those players. He calls it AI's bar mitzvah moment. Investors are no longer willing to just price on promise and start now demanding tangible evidence of progress. As Wathamotorin joins us right now, professor of finance at NYU Stern School of Business and professor that is my question here. I mean you were talking about this being AI's bar mitzvah.

Analysis

NVIDIA faces increasing competition from AMD, Google, and OpenAI, with new chips expected to ship in volume next year, potentially impacting its market share. Despite strong demand and a sequential revenue increase, concerns about margin compression are emerging as memory prices rise and pricing power is tested.

13:32
PDT

Nvidia's revenue growth remains strong, but margins may compress due to rising memory costs.

Nvidia Jensen Huang AMD Google OpenAI Anthropic Cisco Peter Lynch AI NVDA

– The company is financing customers, which could lead to risks similar to past tech cycles.

– Competition in the AI chip market is increasing with new entrants like AMD and Google.

– Nvidia's current stock performance is under pressure despite high expectations.

– The AI ecosystem is evolving, with a focus on hardware transitioning to platforms.

AI competitionmargin pressurecustomer financinghardware evolution

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Some slippage there. But even there, I think we're talking about a couple of percentage points. So they're still going to be in the 70s. And we think that will likely be temporary and will likely trend upward as more and more of their customers want to be involved with these more efficient chips. So going forward, what becomes sort of the broader story for you? And I mean in the AI trade, not just with Nvidia itself as an investment, but this is a pretty broad ecosystem now. An ecosystem though that also has a lot of concentration because, you know, Nvidia has gone from not just being a seller, but also a financier, or at least an arranger of financing for a lot of its customers as well. Does that sit well with you? Does that work to Nvidia's advantage or does it maybe come back to bite them? Sure. I think it probably doesn't sit very well. They're financing their customers. We've seen this before. I think this was, we rewind back to the Internet age. We've seen that circular financing. But I think one of the things from an investment point of view, we sort of take the Peter Lynch approach. We just want to own them all. We know that AI will continue. And we know that as you, as we look at what we call the evolution of innovation, it starts with the hardware. This is sort of the Cisco equivalent of AI right now. It will then transition to the platforms like...

Analysis

Nvidia's stock faces pressure despite impressive revenue growth, with concerns about margin compression and increasing competition in the AI chip market. The company is financing its customers, which may pose risks reminiscent of past tech bubbles, yet the overall AI ecosystem remains robust and evolving.

Smart money should note that while Nvidia is currently sold out, the introduction of competitive chips from AMD, Google, and others could impact pricing and margins. The shift towards financing customers indicates a deeper integration into the AI landscape, but it also raises questions about sustainability and risk exposure.

13:30
PDT

NVIDIA's revenue for the last quarter was $96.2 billion, exceeding expectations.

NVIDIA Jensen Huang AMD Google OpenAI Anthropic Jay Goldberg Mandeep Singh BTEC Seaport Research Bloomberg Intelligence AI NVDA

– The company forecasts third-quarter revenue of $108 billion, indicating strong demand.

– Despite impressive numbers, NVIDIA struggles to meet high market expectations.

– AI landscape remains healthy, with decreasing costs spurring more compute.

– Potential margin compression could impact future profitability.

AI landscapemarket expectationssupply constraintscomputing costs

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Today, but quite frankly over the last few weeks, Jack, are you a buyer in this environment based on what you know? Well, you know this is a stock everyone already owns, so no, we're not doubling down in the name. Generally, what we're looking for is a read on the macro landscape, on the AI landscape, on the data center, and so forth. In many respects, when it comes to NVIDIA, perfection is the new consensus. So there's very little, I think Jay mentioned, there's very little this company can do to beat these remarkably high expectations. And so in many respects, here's a company pretty much selling everything they're making, and they're trying to broaden their client base. But this is a company that's sitting at the North Pole. Any step they take is going to be a step south. And so from that perspective on the individual stock, I would say, you know, that's a difficult place to be. Just they can't snap their fingers and create instantly more capacity. But I will say, you know, what we're inferring is that the AI landscape is remarkably healthy. We think it's still a great environment. We love the fact that computing costs are coming down, token prices are coming down, and what it's doing is spurring more compute, which is something that we've been.

Analysis

NVIDIA's stock faces pressure as high expectations create a challenging environment for the company to impress investors, despite strong sales and demand. The AI landscape remains robust, with decreasing computing costs and token prices potentially driving further compute growth.

13:28
PDT

NVIDIA's gross margins may decline from mid-70s to low-70s percentage points.

NVIDIA Jensen Huang Anthropic neoclouds hyperscalers NVDA PRIVATE

– Memory price increases are contributing to margin pressure despite NVIDIA's price hikes.

– NVIDIA is incentivizing neoclouds to maximize capacity, indicating strong demand.

– Competition from hyperscalers and neoclouds is increasing, impacting pricing power.

– The trend of renting chips at premium prices reflects capacity constraints in the market.

margin compressionchip rental marketcompetitive dynamics

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The frontier labs like Anthropic are looking to rent these chips at a premium price because they are capacity constrained. Let's get back to the pricing power issue and also protecting the margins because this isn't just a revenue story for NVIDIA; it's a growth story for investors. It was also about the margins, and we have a great live blog for Bloomberg clients on the Bloomberg terminal right now. They're talking about that right now, how we are starting to see maybe slight margin compression. We're basically talking about going from the mid-70s to maybe the low 70s percentage points. Does this become a bigger story for this company? Not so much that they can't sell enough product, but they're not going to be able to sell it with the same fat margins that they've been used to. I mean, some of the margin pressure is tied to memory, right? We know memory prices have gone up even though NVIDIA has increased its prices, and it didn't show up in this quarter's gross margin, but I would be surprised if gross margins come down a bit. Look, NVIDIA has been offering all sorts of sweeteners to the neoclouds to make sure they are able to buy as much as they can because they want to ensure that all these neoclouds, corevives, nebias, and end scale are right up there when you compare them to the hyperscalers in terms of ramping up capacity, and that's good for NVIDIA's ecosystem. So to my mind, the real kind of trend here is what are the hyperscalers doing versus what are the neoclouds doing in terms of renting out capacity.

Analysis

NVIDIA is facing potential margin compression as memory prices rise, which could impact their historically high gross margins. While they continue to sell out their products, the ability to maintain fat margins may be challenged as they offer incentives to neoclouds to secure maximum capacity.

Smart money should note that the competition from hyperscalers and neoclouds is intensifying, which may lead to pricing pressures and affect NVIDIA's profitability. The shift in dynamics between these entities could reshape the landscape for chip demand and pricing strategies moving forward.

13:26
PDT

Nvidia reported $96.2 billion in revenue, above estimates.

Nvidia AMD Google OpenAI Jalapeno Anthropic Mandeep Singh Jay Goldberg Seaport Research Bloomberg Intelligence TPU GOOGL NVDA PRIVATE GC=F DXY

– Sequential revenue growth was 18%, slightly below the previous trend of 20%.

– Increased competition from AMD, Google, and OpenAI is emerging.

– Nvidia's guidance for the next quarter is $108 billion, indicating strong demand.

– Concerns about pricing pressures as new chips enter the market.

competitive landscapesupply chain riskpricing pressure

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AMD has on paper a comparable chip in its Instinct series that's going to be shipping in volume next year. We have Google with TPU, and now OpenAI with Jalapeno. Anthropic with its chip will probably be out next year. So we're starting to see actual competition. I think it's safe to say that Nvidia is still going to have the lion's share of the market, but there's a lot of detail and a lot of pricing questions that'll start to come into play as those new chips really get into volume next year. Jay Goldberg joining us right now here, which over at Seaport Research, the shares of NVIDIA are under pressure. Mandeep Singh leads our technology coverage for Bloomberg Intelligence and is still with us. I do just want to point out, Mandeep, another red headline, this on the company's commitment saying that they increased the $279 billion from $119 billion quarter to quarter. So basically more than a hundred billion dollar bump. What was your initial reaction here when you saw some of these numbers? Yeah, look, I mean, when I see the quarterly sequential increase in revenue, they've had a trend of 20%. This quarter was 18%. So you could say sequentially it didn't kind of stay on that 20% mark. But other than that, I mean, I think everything in the print suggests they're sold out. There is definitely a lot more demand than what they can supply.

Analysis

Nvidia's recent earnings report showed a sequential revenue increase to $96.2 billion, exceeding expectations, but the stock remains under pressure due to heightened competition from AMD, Google, and OpenAI. Despite impressive growth, Nvidia's guidance for the upcoming quarter suggests challenges in meeting market expectations, particularly as new competitors enter the space with their own chips.

Smart money should note that while Nvidia maintains a dominant market share, the introduction of competitive chips could lead to pricing pressures and impact future revenue growth. The company's commitment to increasing its revenue guidance by over $100 billion indicates strong demand, but the inability to meet that demand could signal potential supply chain constraints ahead.

13:23
PDT

NVIDIA's revenue of $96.2 billion surpassed estimates.

NVIDIA Jensen Huang Claude Chat GPT Salesforce Okta CrowdStrike HP, Inc.OpenAI AI Vera Rubin

– Guidance for Q3 revenue is set at $108 billion, indicating strong demand.

– Jensen Huang's comments on AI and production capabilities are critical for market sentiment.

– Investor skepticism remains high despite strong financial performance.

– Supply constraints may limit NVIDIA's growth potential in the near term.

AI inflection pointNVIDIA growth potentialTech sector dynamics

▸ Full transcript

Yeah, not impressive enough, I guess. Yeah, I mean not impressive enough, but it gets to this idea. And I think I asked this question of a lot of our guests leading up to this: what can Jensen Huang and company actually say that does impress this market? It's not in the earnings release, but maybe it comes on the conference call. Jensen is a master orator. He typically can get a few points up after hours just through sheer magnetism. His track record on that hasn't been so great the last couple of quarters, but he's a very good public speaker. He can be very persuasive. And so I think people know that. And so we're going to be reading second and third derivatives of every word he says and interpreting his tone and his bearing to see what his real mood is, see if we can infer what his real mood is. But I think, you know, as much as I'm sort of negative on the stock, I'm sympathetic to them. They're putting up impressive numbers and it's just very hard for the stock to get ahead. And I think that speaks to a lot of things you've just been talking about for the last few minutes. They're sold out, and where do you get upside when you're sold out? That's not going to change this year. And so for the time being, it's going to be very hard for them to impress anybody enough to really move the stock. Well, I mean some of the language in here in the release from Jensen Huang, this idea about an inflection point when it comes to AI and what he says that compute is now revenue. He also says that Vera Rubin is now in full production. So I understand maybe some of the disappointment for basically doubling revenue and profit year over year.

Analysis

NVIDIA reported $96.2 billion in revenue, exceeding expectations, but the market remains skeptical about future growth potential despite impressive year-over-year gains. Jensen Huang's comments on AI reaching an inflection point and the full production of Vera Rubin may not be enough to sway investor sentiment positively given the current stock dynamics.

The market is closely watching Huang's tone and insights during the conference call, as his ability to communicate effectively could influence short-term stock movements. However, with NVIDIA's current supply constraints and the competitive landscape evolving, the path to sustained upside appears challenging.

13:21
PDT

Nvidia's revenue surpassed expectations at $96.2 billion.

Nvidia Jensen Huang AI data center BTEC EPS Vera Rubin Ed Lullo NVDA

– The company forecasts $108 billion in revenue for the next quarter.

– Data center revenue was a significant contributor at $89 billion.

– Nvidia claims AI has reached an inflection point.

– Competition in AI chip development is intensifying.

AI growthtech sector performance

▸ Full transcript

Because power is not that big of a constraint, what Jensen has highlighted time and again is if your power is fixed, you want the most throughput. That's where Nvidia chips and the upgrades they have had, from Hopper to Blackwell to now Vera Rubin, allow you to maximize the tokens per unit of power. So that's the reason why I think everyone is upgrading because they want to use the chips that maximize that throughput. Mandate, you're going to be sticking with us. So we'll say goodbye to Ed Lullo over at BTEC. We'll catch up with him later. I'm sure the number is four in video now crossing the wire in the most recent quarter. The company did say it reported $96.2 billion in revenue. The street was looking for $92.3 billion. Gross margin at 75%, adjusted EPS at $2.22. Here's the forecast: the company says that for the third quarter, it sees revenue of $108 billion plus or minus 2%, so hitting that $100 billion threshold that a lot of people were looking for going forward. The company also saying that AI has reached its quote, inflection point. We'll dive a little bit deeper into what that means, but overall here, it does look like the numbers for the most recent quarter coming above estimates, $96.22 billion, adjusted gross margin at 75%, data center revenue at $89 of that $96 billion. That's also above estimates, but more importantly, that guidance for the current quarter that we're in, that third quarter, the revenue.

Analysis

Nvidia reported $96.2 billion in revenue for the recent quarter, exceeding street expectations of $92.3 billion, with a forecast of $108 billion for the upcoming quarter. The company emphasized that AI has reached an inflection point, indicating a significant shift in its business trajectory.

Smart money should note that Nvidia's data center revenue accounted for $89 billion of the total, highlighting the growing importance of AI infrastructure. The guidance for the next quarter suggests strong demand, but the competitive landscape is evolving as other companies ramp up their own AI chip capabilities.

13:19
PDT

NVIDIA's revenue is projected to exceed $100 billion in the upcoming quarter.

NVIDIA OpenAI Jensen Huang Mandeep Singh Blackwell Farah Rubin ASIC AI Frontier Labs NVDA

– Competition in AI chips is increasing, with OpenAI testing its own chip.

– NVIDIA has traditionally dominated AI training but faces challenges in inferencing.

– Market expectations are high, and any guidance below consensus could trigger sell-offs.

– The supply chain environment remains challenging for NVIDIA and its competitors.

AI competitionchip developmentmarket guidance

▸ Full transcript

In revenue through the next five quarters. So they're not going to miss. It's more about the durability of this growth given every other hyperscaler has their own chips. I mean, we heard this week about OpenAI actually testing their own chip out as well. So it feels like every ASIC provider right now wants to ramp up their efforts when it comes to AI inferencing. And traditionally, NVIDIA has made all its revenue with training. That's where they had literally a monopoly. When it comes to inferencing, TPUs have done really well and that's what you want to hear how they are faring on the inferencing side. Well, I am curious about that. And I know you were speaking to an executive the other day at OpenAI and you held up that chip that I guess at some point might actually be at scale, a more formidable competitor to NVIDIA. I mean, how far away are they from actually scaling that up? Yeah, I mean, that OpenAI jalapeno chip was benchmarked against Blackwell, not Farah Rubin. And so a lot of critics would say that those custom chips that the Frontier Labs are working on are generations behind NVIDIA. But what Mandeep said about the longer-term growth outlook and whether it accelerates or decelerates, factoring in competition from other computing platforms is a part of it. Bearing in mind now that also NVIDIA is operating in a much more difficult environment where it and its customers and their rivals are trying to source the same supply chain.

Analysis

NVIDIA is expected to report strong revenue growth, with projections suggesting quarterly revenue could exceed $100 billion, driven by demand for AI training. However, competition is intensifying as other companies, including OpenAI, are developing their own chips, which could challenge NVIDIA's dominance in the market.

Smart money should note that while NVIDIA's current growth trajectory appears robust, the long-term sustainability of this growth is uncertain due to emerging competitors and the evolving landscape of AI inferencing. The market's focus on NVIDIA's guidance will be critical, as even slightly lower expectations could lead to significant volatility.

13:17
PDT

Salesforce, Okta, and CrowdStrike see significant post-earnings gains.

Steve Case Revolution AOL Nvidia Salesforce Okta CrowdStrike HP, Inc.Mandeep Singh Bloomberg Intelligence Lodlo Bloomberg Tech NVDA PRIVATE DXY

– HP, Inc. reports strong revenue and EPS guidance.

– Nvidia's revenue expectations are set above $100 billion.

– Market expectations for Nvidia's guidance are extremely high.

– Tech sector shows resilience and investor confidence.

tech earningsmarket expectationssemiconductor performance

▸ Full transcript

We really appreciate it. Steve Case, the CEO of Revolution, Rise of the Rest, and of course one of the co-founders and CEOs over at AOL. We continue our coverage here as we await those results out of Nvidia. We should point out that in the post-market trade, a lot of tech stocks are getting a strong bid. Salesforce is up about 12% on the back of its earnings. Okta is up about 15% on the back of its. CrowdStrike is also up about 10%. And we're just now getting HP, Inc. Those numbers also look pretty good, with their revenue coming in above target and their guidance for EPS also coming in above target. Joining us right now to count us down to those Nvidia earnings are Mandeep Singh, the global head of technology research over at Bloomberg Intelligence, and Lodlo, the co-host over at Bloomberg Tech. Let's start off with you, Ed, out there in San Francisco. Obviously, the big focus today will be on the revenue and the EPS numbers, but we already know they're going to be great. I mean, what can Jensen Huang and his team actually say today that might surprise folks? They're going to be great. You know, double what they were a year ago in revenue and double adjusted EPS from a year ago. The high bar is set against the revenue guide for this current fiscal third quarter, where buy-side expectations are very high. Consensus on Wall Street is one hundred and five billion dollars, so great. Nvidia becomes another company to book one hundred billion dollars or more in quarterly revenue. But if the buy-side got 108, 109, or 110 billion in the guide, it still wouldn't be good enough because they're after for the quarters to come.

Analysis

Tech stocks are experiencing a strong bid in post-market trading, with Salesforce up 12%, Okta up 15%, and CrowdStrike up 10% following their earnings reports. HP, Inc. also reported revenue and EPS guidance above targets, indicating robust performance in the tech sector.

Nvidia's upcoming earnings are highly anticipated, with expectations for revenue to exceed $100 billion for the quarter. However, the bar is set high, and even a guidance of $108 to $110 billion may not satisfy market expectations, highlighting the pressure on Nvidia to deliver exceptional results.

13:14
PDT

Hospitality is focusing on personal experiences despite technological advancements.

Waldorf Astoria Costa Rica Punta Casica Claude ChatGPT Steve Case Revolution AI New York Bay Area

– AI is being used to enhance customer service but not replace human interaction.

– Consumers are experiencing decision fatigue from too many options online.

– There is a growing trend of entrepreneurship fueled by lower tech entry costs.

– Real estate and hospitality investments are gaining traction as durable assets.

hospitality investmentAI integrationentrepreneurship growth

▸ Full transcript

People are looking for ways to use technology sometimes to eliminate jobs in ways that are counterproductive in terms of the relationship people will have in terms of the consumer relationship. We see this in hospitality. We just opened last year a Waldorf Astoria hotel in Costa Rica as part of our Punta Casica development there. We use technology, including AI, to better serve our customers. But ultimately, hospitality is about a personal experience, and you want to connect with people, have them feel that it's been a special moment, and they really want to return, whether it be to Costa Rica or some other place. We've seen that also with exclusive resorts. People are able to book online, but there's a decision fatigue that kicks in. There's too many options. People don't really know when they're trying to pick a hotel or pick a home, which one would make the most sense. So they're trusting real people to help be their guide. Using technology as part of the equation, but not trying to use technology as the entire equation, I think, is a big opportunity in a lot of sectors, including what we're seeing now in hospitality. That gets to the idea, and you've obviously had a particular revolution, a big focus on entrepreneurship, particularly outside of the traditional sort of coastal hubs like New York and the Bay Area. There's been a lot of talk about how these LLMs and all of the technology around it, to a certain extent, might actually be accelerating entrepreneurship as it's lowered the cost of entry for a lot of folks who would have had to go out and try to hire some really high-priced tech talent, and now that in some cases they can rely on Claude and ChatGPT and some of these other models.

Analysis

The hospitality sector is increasingly leveraging technology, including AI, to enhance personal customer experiences, as seen with the recent opening of a Waldorf Astoria hotel in Costa Rica. However, there is a growing consumer preference for human interaction over purely digital solutions, indicating a potential shift in how technology is integrated into service industries.

Smart investors should note that while technology can streamline operations, the demand for authentic human connections in hospitality suggests that companies prioritizing personal experiences may outperform those relying solely on automation. This trend could lead to a reevaluation of investment strategies in sectors where customer relationships are paramount.

13:12
PDT

Legitimate fears about AI's impact on jobs and communities are rising.

Steve Case Bill Gates Goldman Sachs Bernardo Arnaud AOL Revolution Places Revolution AI

– A balanced regulatory approach is necessary to mitigate backlash against AI.

– Investors are increasingly focusing on durable assets like real estate and hospitality.

– The shift towards physical experiences reflects a growing consumer preference for in-person interactions.

– AI's rapid adoption may face resistance if public concerns are not addressed.

AI regulationreal estate investmentconsumer experience trends

▸ Full transcript

On the vertical side, the idea of what AI can do for more traditional industries outside the normal world of tech is being discussed. However, the complaints focus on data centers, power demands, water demands, and fears of job loss. Are these legitimate fears, or is it just that the AI folks don't have the best marketing teams? Some fears are legitimate; people are concerned about what AI will do to their communities and families, including job loss. This fear is driving a lot of current dynamics. I've argued for the past couple of years that the technology industry, including AI leaders, should present a framework that strikes the right balance. By advocating for no regulation instead of a light touch, they risk significant regulation and backlash, as seen in several states and potentially countries. I'm excited about the technology and optimistic about its potential, as I've seen its impact on my life and the companies we've backed at Revolution. However, I'm not naive; many people view it negatively and are cautious, nervous, or fearful. As an industry, we need to address these concerns; otherwise, people won't embrace AI to the extent we expect. This also relates to the potential winners and losers in the AI space.

Analysis

Concerns about AI's impact on jobs and communities are growing, with calls for a balanced regulatory approach from industry leaders. The technology sector risks significant backlash if it fails to address public fears, which could hinder adoption and investment in AI.

Investors should note the shift towards physical experiences and real estate as a response to the perceived ephemeral nature of digital assets. This trend indicates a potential reallocation of capital towards sectors that offer durability and community engagement, as highlighted by recent investments in hospitality and real estate.

13:10
PDT

NVIDIA's gross margin at 75% indicates strong operational efficiency.

NVIDIA Steve Case Goldman Sachs Bernardo Arnaud Salesforce Octa CrowdStrike Revolution Places AOL Bill Gates

– Revenue expectations for NVIDIA could surpass $100 billion this quarter.

– The stock has seen a 350% increase over three years but is currently lagging.

– Investors are increasingly valuing real estate and hospitality investments.

– Concerns about AI's impact on business models are driving shifts in investment focus.

AI disruptionreal estate investmenttech sector volatilitydurable assets

▸ Full transcript

We're done with our rise to rest investment strategy around regional.

Analysis

NVIDIA's adjusted gross margin reached an impressive 75%, with expectations to exceed $100 billion in revenue for the current quarter, reflecting a significant stock performance increase of 350% over the past three years. Despite this, the stock has been a relative laggard recently, with a high number of buy ratings but a declining multiple, indicating increasing market expectations and potential volatility ahead.

Investors are shifting focus towards real estate and hospitality as a hedge against potential disruptions from AI, as highlighted by Steve Case's insights on the growing value of physical experiences over digital ones. This trend suggests a strategic pivot in investment strategies, favoring durable assets amidst concerns of ephemeral business models in an AI-driven landscape.

13:08
PDT

Steve Case emphasizes the value of physical experiences over digital ones.

Steve Case AOL Bill Gates Goldman Sachs Revolution Places Bernardo Arnaud AI Costa Rica

– There is a growing investment trend towards real estate and hospitality.

– AI is seen as a disruptive force, prompting a search for durable assets.

– Investors are increasingly focused on community and real-world interactions.

– The demand for physical presence may reshape investment strategies.

real estate investmentAI disruptionconsumer preferencesdurable assets

▸ Full transcript

Is that just sort of a fantasy or is that something that you've ever thought about? Well, I do think that technology is getting better and better and it will be able to do a lot of things, including some things we can't imagine. And there are some complicated dynamics around that, even with what Bill Gates wrote. It's trying to strike the right balance between being optimistic about what the technology can do, but also recognize there are some unintended consequences that we need to think about. But my experience over now 40 years, even though, again, I spent a lot of time online, of course, I am proud of the work that AOL and so many other companies played in getting the world online. And the internet has been transformative, just as AI is now transforming things. No, I don't believe that being a purely digital experience is the same as an in-person physical experience. And I personally and my family, we like being together physically, not just digitally. We like being in places physically, not digitally. We like experiencing things like a country like Costa Rica, seeing what's possible, meeting the people there. A real community is increasingly important. So of course, I always celebrate what can be done digitally. But I've seen in my own life and the arc of technology, the arc of business that there's a growing hunger, really a thirst for this real-world aspect. I think it's going to create tremendous opportunities, including for our investors. That's what we're trying to do with our Revolution Places group here.

Analysis

The conversation highlights the growing importance of physical experiences over digital interactions, as emphasized by Steve Case. He notes a significant shift in investment towards real estate and hospitality, driven by a desire for tangible community connections amidst the rise of AI technology.

Smart money should recognize that as AI disrupts traditional business models, there is a parallel trend towards investing in durable assets that provide lasting value, such as real estate and hospitality. This shift indicates a potential reallocation of capital towards sectors that prioritize human connection and physical presence.

13:05
PDT

Increased investment in real estate and hospitality sectors.

Goldman Sachs Bernardo Arnaud Perry Diller Revolution Places Hawaii Costa Rica Exclusive Collective AI Even Goldman Sachs PRIVATE GC=F

– Shift from digital to physical community building.

– Concerns over AI disrupting traditional business models.

– Investors are seeking durable assets.

– High-profile investors are entering the hospitality space.

real estate investmenthospitality sector growthAI disruptiondurable assets

▸ Full transcript

I think we're seeing more and more evidence that people are really thirsting for real relationships with real people in real places, which is driving a lot of investment in real estate and hospitality, including what we're doing with Revolution Places. So in some ways it comes full circle; we're still building communities, but now doing instead of digital communities, more physical communities in places like Hawaii and Costa Rica and some of the work we're doing through the Exclusive Collective. Well, I mean, you talk about that in your Bloomberg piece and where a lot of the money is moving, the idea of a focus on land, the idea that you have someone like Bernardo Arnaud, who's most famous for selling handbags and champagne, focusing a lot more on hotels and experiences. And we've had a whole host of CEOs on this program, including in the AI space, actually talking much more about how those experiences are going to become much more valuable maybe than some of these LLMs themselves. Is there anything analogous out there that you see to draw upon or is this just completely uncharted waters? Well, I think it's been building up for some amount of time. Even Goldman Sachs earlier this year came out with a report called the Halo report, which talked about heavy assets, low obsolescence. Some of this is people are worried that in an AI world, a lot of industries, a lot of business models are going to be disrupted and they're going to become more ephemeral, which creates a search from an investor standpoint for things that do have more durability to it, do have more of a lasting ability to it. And things around real estate and hospitality are examples, which is why I know and Perry Diller and other people have started making investments in this space.

Analysis

Investment is shifting towards real estate and hospitality as people seek genuine connections in physical spaces, moving away from digital communities. This trend is driven by concerns over the durability of business models in an AI-dominated world, prompting investors to favor heavy assets with low obsolescence.

13:03
PDT

Bill Gates warns of AI's rapid adoption and its potential to disrupt human connection.

Bill Gates Steve Case AOL Atari Pizza Hut AI PC America Online And Steve PRIVATE

– AI technology adapts to users, unlike previous tech that required user adaptation.

– Steve Case highlights that technology changes societal values in unpredictable ways.

– Investors should be cautious about AI's implications on market dynamics.

– The integration of AI could lead to shifts in demand and valuation across sectors.

AI adoptiontechnological disruption

▸ Full transcript

A young brand manager for Pizza Hut named Steve Case was hired by a tech company to help with a service that let owners of the Atari 2600 download video games over their phone lines. That company would eventually morph into America Online, which turned the cold technological infrastructure of dial-up modems into something very human: connection. The internet boom born out of that has now given way to an AI boom that some folks say is fraying that connection. Just yesterday, Bill Gates, whose Windows operating system arguably did just as much to connect us all as AOL, published an essay outlining his fears and solutions to where this technology is taking us. Calling AI analogies to the internet boom insufficient, he said we have no experience with the technology that can be adopted quickly or that can think and move like a human. When the PC came along, he said it took 20 years to significantly change how we worked because the software had to be developed, the price had to come down, and people had to learn how to use the tools and incorporate them into their processes. AI, on the other hand, runs on the devices we already have and it uses natural language. In his words, we don't have to adapt to it because it can adapt to us. That was written just a day after Steve Case himself published an op-ed for Bloomberg opinion saying, quote, technology changes what we value, often in ways that we don't see coming. Please to say that Steve Case joins us right now to talk a little bit more about that. And Steve, I do want to talk about.

Analysis

Bill Gates expressed concerns about the rapid adoption of AI technology, highlighting its potential to disrupt human connection in ways that the internet boom did not. He emphasized that unlike previous technological advancements, AI can adapt to users without requiring them to change their processes, which poses unique challenges and opportunities for businesses.

Steve Case echoed these sentiments, suggesting that technology reshapes our values in unforeseen ways. This insight indicates that investors should be cautious about the implications of AI on market dynamics and consumer behavior, as the rapid integration of AI could lead to shifts in demand and valuation across sectors.

13:01
PDT

Nvidia's adjusted gross margin at 75%.

Nvidia Jensen Huang Salesforce Octa CrowdStrike S&P 500 Dow NASDAQ Composite NASDAQ 100 Russell 2000 Gabelli Funds New York NVDA S&P NASDAQ 100

– Expectations for current quarter revenue to exceed $100 billion.

– Stock has risen 350% over the last three years.

– 79 buy ratings, 2 holds, and 1 sell rating on Nvidia.

– Nvidia remains a relative laggard despite strong performance.

earnings expectationsmarket sentimentpricing poweranalyst ratings

▸ Full transcript

Adjusted gross margin 75%, which is just a bonkers number. And of course, the expectation is that for the guidance for the current quarter, we could top $100 billion on top line for the current quarter. And this is a stock, as a reminder, that is up 350% over the last three years alone. The bar is just getting higher, I would say, but the bar is getting higher. They continue to beat, but it's still been a relative laggard in the market. Last few weeks haven't seen a record high in a while; there are 79 buys on this stock, there are two holds, and one person has a sell rating on this. I don't know; we actually asked them to come on the program, but we haven't heard back yet. But certainly a brave soul to get the closing bells here in New York. Our full coverage of those earnings out of Nvidia is about to start in just a second. All of most of the major indices are in the red, with the Dow down two-tenths of a percent. The S&P is going to finish the day flat. The NASDAQ Composite is down a tenth of a percent. The NASDAQ 100 is up about a tenth of a percent. The Russell 2000 is closing out the day down by about two-tenths of one percent. All right. We are going to say goodbye to Emily Grafeo as our coverage awaits those earnings out of Nvidia. Don't forget we're expected to get earnings as well out of other companies, probably going to be overshadowed, but that includes names like Salesforce, probably the most consequential one that we are expected to get here in the after-hours trade. We're also going to hear from Octa and CrowdStrike, also not.

Analysis

Nvidia's adjusted gross margin is reported at an impressive 75%, with expectations for the current quarter's top line to exceed $100 billion. Despite a 350% increase in stock value over the last three years, the market's expectations continue to rise, indicating a challenging environment for future performance.

The stock has a high analyst rating with 79 buys, yet it remains a relative laggard in the market. Smart money should note the potential for Nvidia to maintain pricing power due to its leading-edge performance, despite the increasing scrutiny on its growth trajectory and valuation multiples.

12:59
PDT

NVIDIA's pricing power is intact despite component cost increases.

NVIDIA Jensen Huang Satya Nadella Microsoft Vera Rubin Now Rubin NVDA MSFT DXY

– Vera Rubin system revenue ramp is expected later, not immediate.

– Market demand for NVIDIA processors remains high due to performance.

– Long-term growth outlook for NVIDIA is positive.

– Investors should monitor pricing strategies and performance metrics.

pricing powerhigh-performance computingrevenue growth

▸ Full transcript

I think that's the issue. In terms of these new price increases that have been reported on, I think the question there is what exactly are the specs with those products and specifically what are they doing with some of the memory specs in those products given what's happened to component costs there. Yeah, it's kind of interesting too. I mean you look at how old some of these things are and the idea that they still have pretty strong pricing power on that. What about the new stuff? I mean you go back to August 21st when Satya Nadella and Microsoft tweeted out how they had finally received that first big Vera Rubin system here. When we talk about the guidance that everyone's going to be looking for out of Jensen Huang, how much is Vera Rubin already sort of in the guidance that we already have and how much more room, top line room does he have to sort of bump that up? Yeah, I think specifically on Rubin and sort of the cadence of revenues over the next couple of quarters. Now Rubin is starting to ship in the October quarter, but the real ramp will happen later this year and into next year. So I don't think this is the big Rubin quarter where that starts to show through. In terms of pricing power on Rubin to the earlier part of your question, I just think this is going to continue to be a market where the players at the frontier, the willingness to pay for something like an NVIDIA processor is enormous. And so I think they will, as long as they are at the leading edge in terms of performance, performance per watt, performance per dollar, they will.

Analysis

NVIDIA's pricing power remains strong despite rising component costs, with expectations for revenue growth driven by the upcoming Vera Rubin system. The market's willingness to pay for NVIDIA's leading-edge processors suggests continued demand as they maintain performance superiority.

Smart money should note that while Vera Rubin's revenue impact may not be immediate, the long-term outlook remains bullish as NVIDIA capitalizes on its technological edge. The focus on pricing power and performance metrics indicates a robust competitive position in the high-performance computing market.

12:56
PDT

NVIDIA's stock is down 1.4% ahead of earnings.

NVIDIA John Gabelli Funds NVDA

– Options market implies a 5% one-day move for NVIDIA.

– Focus on NVIDIA's circular financing strategy and developer guarantees.

– NVIDIA's guarantees are strategic investments, not direct lending.

– Expect strong revenue and margin commentary in the earnings report.

circular financingtech investment strategy

▸ Full transcript

Could present sort of a new upside vector for numbers. So I think that's gonna be interesting. And then everything they're doing around networking and sort of fast inference accelerators as well. Okay, so John, I have to admit, I focus on credit. And I am curious kind of how you're thinking about what it means for the equity, the stock price of NVIDIA, if they are to come out and talk about even more circular financing deals that they're doing and even more backstops than they've already announced. Well, I think to take a step back, what are they doing here? They're providing guarantees to developers, to developers who are building infrastructure to run NVIDIA product. And these guarantees mean NVIDIA is going to take down any unleashed capacity, which they're going to use themselves in their own model development program. So I think that's a little bit different than directly lending their own balance sheet. That is not what they're doing. And I think that makes a lot of sense. I think, first of all, they do have a model development program or strategy, this Nemotron family of models, which is really successful and it's actually building a lot of traction and it's very impressive in its own right. So I think it makes a lot of sense to do what they're doing because the fallback is effectively an investment in their own model development. And the upside is, you know, they're accelerating the build out of.

Analysis

NVIDIA's stock is under pressure, down 1.4% ahead of its earnings release, with the options market indicating an implied one-day move of only 5%. The focus is on NVIDIA's strategy around circular financing and guarantees to developers, which could impact its equity valuation positively if executed well.

Smart money should note that NVIDIA's guarantees to developers are not direct lending but rather a strategic investment in their own model development, which could accelerate infrastructure build-out and enhance long-term growth prospects. This nuanced approach may provide a competitive edge in the market, especially as they ramp up their Blackwell product and networking capabilities.

12:54
PDT

NVIDIA's Blackwell product ramp is underway, with expectations for strong revenue growth.

NVIDIA Blackwell neocloud

– The neocloud opportunity is generating optimism, but financing concerns persist.

– Qualitative commentary from management will be crucial for investor confidence.

– NVIDIA's stock has been volatile but performed in line with the market this year.

– Investors are looking for reassurances about product architecture superiority.

product rampfinancing strategymarket confidence

▸ Full transcript

And what's the thing that you look for out of this report and the conference call that justifies not only the valuation, but really this being sort of a long-term growth story? Well, you still do want strong revenues. And I think we will get that. We're going to hear them talk about this Blackwell product ramp that started shipping a couple of weeks ago, ramps into this quarter and more sharply into the January quarter. We're going to hear them talk about, I think this neocloud opportunity, which there's been a lot of things happening behind the scenes over the last few months. They seem pretty optimistic or bullish on that, but they're going to have to also defend that strategy because with that comes a lot of these circular financing dynamics that the market has become concerned about. So I'm more focused on the qualitative commentary on a lot of these big picture items, assuming that the fundamentals, the revenues, the gross margins are going to be strong, which I think at this point is a pretty safe bet. So what would that qualitative commentary look like for you to get maybe more bullish on the stock? Well, I am pretty bullish on the stock to be clear. And to take a step back, there's not really anything wrong with this stock. It was up 40% last year. It's been a little volatile, but still roughly performing in line with the market this year. But anyways, in terms of these big picture questions, I want to hear them talk about Blackwell, them defend that architecture, talk about how they feel it's superior to these competing offers.

Analysis

NVIDIA is expected to report strong revenues driven by the ramp-up of its Blackwell product and optimism surrounding the neocloud opportunity. However, the company must address concerns regarding its financing strategy amidst these developments.

Smart money should note that while NVIDIA's stock has performed well, the market is cautious about its long-term growth narrative, particularly regarding the competitive landscape and the need for qualitative reassurances from management about its product architecture.

12:52
PDT

S&P 500 up 0.1%, Nvidia down 1.4%.

Nvidia Gabelli Funds S&P 500 Federal Reserve PC One Belt Portfolio Manager Managing Director Growth Portfolios S&P 500 NVDA FEDFUNDS DXY

– Short-end yields rising, impacting trader expectations.

– Nvidia's earnings expected to double, but predictability may hinder stock performance.

– Options market implies only a 5% move for Nvidia.

– Market sentiment appears cautious ahead of earnings.

earnings expectationsinterest ratesmarket volatility

▸ Full transcript

1.5% heading into the earnings release on the index level, not that much movement. A little bit in the green S&P 500 up about one tenth of 1%. The story of the day, at least before Nvidia, is really on yields here. That's been a focus not only today, but really for the whole month as those long-end yields were moving higher. But we're actually seeing more movement right now in the shorter end of the curve, the two-year yield moving up here on a soft but benign PC print, but one that did up traders' expectations for when we'll get that Fed rate hike, that's also moving the dollar up as well. Alright, Nvidia under pressure right now down about 1.4% into the print. The expectations and the options market for tomorrow's cash session is an implied one-day move up or down of only 5%. Hmm. Yeah, things have changed. One Belt and joins us right now, Portfolio Manager and Managing Director for Growth Portfolios at Gabelli Funds. And I do kind of want to start there. I mean, we've talked about this. Earnings expected to double. Revenue expected to double. Margins expected to be fat. I remember I think it was last time we had you on ahead of an NVIDIA print and we talked about this idea of the results being predictably strong. And I'm wondering if that word predictability might actually be working against this stock right now. Yeah, thanks for a man. I mean, it's interesting that 5% implied move by the options market. I don't think you can check me on this, but I don't think NVIDIA has had a 5%.

Analysis

The S&P 500 is slightly up by 0.1% as traders focus on rising yields, particularly in the shorter end of the curve, with the two-year yield increasing due to expectations of a Fed rate hike. Nvidia is under pressure, down 1.4% ahead of its earnings release, with the options market indicating an implied one-day move of only 5%.

The predictability of Nvidia's earnings, expected to double in revenue and margins, may be working against the stock as the market anticipates strong results. This could lead to a muted reaction despite strong fundamentals, suggesting that investor sentiment may be overly cautious or complacent ahead of the earnings print.

12:50
PDT

Meta settles for $17 billion over teen social media harm.

Meta Olivia Carville Bloomberg Wall Street Week PRIVATE TSLA

– Settlement size is relatively small compared to Meta's market cap.

– Significant product changes aimed at teen users announced.

– Teen access to platforms restricted during nighttime.

– Daily usage limits imposed for teenagers.

regulatory scrutinyuser engagementsocial media impact

▸ Full transcript

Come into the store, and you're generally a bit surprised by the breadth of what we offer. Often, if you're going online, you may be looking for something particular, but when you come into the store, you see the market square, all these pillows, and decorative accents. What we're seeing is that in-store, we do really well in some categories that online are less of a percentage of the total. How does technology help in making it seamless online to store? I think the biggest thing is for the customer on the front end; she can be in the store, shop here, and then go back home to complete that purchase. If you look at these price tags, they're all digital tags because they're the exact same prices as online. So, you're not going to be surprised that you saw something in the store and then decided to purchase it online, and it's somehow different. The offering is actually very consistent. When she's here, she can have her app open, and everything she does here can be very similar to what she's doing at home. I think that consistency is quite important. When news breaks, this is going to be a complicated report. Bloomberg has you covered. SpaceX's second-quarter revenue was $7.8 billion. For all the context and clarity you need, there's a lot of speculation about what could happen with Tesla. Join me each week on Wall Street Week for stories of capitalism from business, markets, economics, tech, and climate. More than what you need to know.

Analysis

Meta's shares are moving after the company agreed to a $17 billion settlement related to a landmark case concerning teen social media harm. This settlement, while significant, may not substantially impact Meta's financials given its market cap of over $1.4 trillion and recent quarterly revenues exceeding $60 billion.

The more critical aspect for investors is the product changes Meta is implementing, which include restricting access for teenagers during nighttime and limiting daily usage. These adjustments could reshape user engagement and retention, potentially influencing long-term revenue streams despite the immediate financial implications of the settlement.

12:47
PDT

NVIDIA earnings announcement is imminent.

NVIDIA Blue Road Green Bloomberg News NVDA PRIVATE

– Hyperscalers could represent a quarter of the U.S. debt market.

– Over $220 billion issued by hyperscalers without market crowding.

– Tight spreads indicate strong demand for these securities.

– Potential for increased dispersion at the security level.

debt market dynamicshyperscaler investment

▸ Full transcript

The countdown to earnings from NVIDIA is upon us. That conversation and more coming up after the break right here on Bloomberg. In case you missed it, on Blue Road Green. These hyperscalers could account for anywhere upwards of one quarter of the U.S. debt market in terms of investment grade. We are seeing this being a dominant technical in the market. Despite hyperscalers coming to market with more than $220 billion of issuance, that's not actually crowding up the market. We're seeing tight spreads across the space. We suspect this is going to lend itself to more dispersion at the security level. Don't miss Bloomberg News, live every weekday. Where are we right now? What are these things? Right now, this is the solvent yard. So it's not a very exciting part of the whole park. But we are kind of moving up to the fermentation facilities. And you can smell the fermentation? Yes. And you know, it's funny because people always think fermentation is...

Analysis

NVIDIA is set to announce its earnings, with hyperscalers potentially accounting for a significant portion of the U.S. debt market. Despite over $220 billion in issuance from hyperscalers, the market remains stable with tight spreads, indicating a healthy demand for these securities.

Smart money should note that the current issuance levels are not crowding the market, which could lead to increased dispersion at the security level. This suggests opportunities for selective investment in high-quality issuers within the hyperscaler space as the market adjusts to these dynamics.

12:45
PDT

Meta's $17 billion settlement is minor relative to its $1.4 trillion market cap.

Meta Olivia Carville META DXY

– Significant product changes target teen usage patterns on Meta platforms.

– New restrictions may alter user engagement and attract regulatory attention.

– Investors should assess the long-term implications of these changes on Meta's growth.

– The settlement reflects ongoing challenges in managing social media's impact on youth.

social media regulationteen safetyuser engagement

▸ Full transcript

To 17 billion, and I think the most significant thing here is actually the product changes, and I imagine that's something that we'll be discussing in this segment. What about the significance of that size, 17 billion? Is it really going to make a dent for Meta? I mean, another great question. You have to look at the size of Meta. They have a market cap of over 1.4 trillion right now. In the last quarter, they had over 60 billion in revenue. So you kind of weigh it up and say, hold on a minute, you know, 17, 18 billion dollar settlement, is it really going to move the needle? But the bigger question here is really around those product changes. That's where everyone is turning to, looking towards. This is the first time the company has made such significant changes to how teens are going to be using its product. Olivia, walk us through what those changes are, please. Sure. There are a raft of safety changes that have been announced. One of the most significant that I think will really change how teenagers use Meta's platforms is they're going to be turned off; they're going to go dark during nighttime. So from midnight to 6 a.m., teenagers will not be able to access Facebook and Instagram. There is a two-hour limit on teenagers using these products on a daily basis. You're also going to see notifications switched off during school hours. All of these changes are trying to give teenagers back their own autonomy over their time rather than being glued to a screen kind of non-stop watching.

Analysis

Meta has agreed to a $17 billion settlement related to a landmark case concerning teen social media harm, prompting significant product changes aimed at improving user safety. These changes include restricting access to Facebook and Instagram for teenagers during nighttime and limiting daily usage, which could reshape user engagement on these platforms.

The settlement, while substantial, represents a small fraction of Meta's market cap and revenue, suggesting that the financial impact may be limited. However, the focus on product changes indicates a shift in strategy that could influence user behavior and regulatory scrutiny, making it essential for investors to monitor how these adjustments affect Meta's long-term growth prospects.

12:43
PDT

Meta agreed to a $17 billion settlement over teen social media harm.

Meta Bloomberg David Ratham Lisa Mateo Christina Rafini Olivia Carville ELF CFO Wall Street Week Bloomberg Deals Bloomberg This Weekend Bloomberg Television PRIVATE

– The settlement indicates heightened regulatory scrutiny on tech companies.

– Potential for increased financial liabilities in the tech sector.

– Companies may need to reassess their legal risk management strategies.

– The case could set a precedent for future regulatory actions.

regulatory scrutinytech sector liabilities

▸ Full transcript

This is Wall Street Week. Welcome to Balance of Power. You're watching Bloomberg Deals. Welcome to Bloomberg This Weekend. This is Bloomberg Television. Today's CFOs are reshaping the C-suite. Bloomberg's Chief Future Officer shines a spotlight on these dynamic leaders. ELF disrupted the beauty category with a strategy built on value, inclusivity, and fun. Now, CFO Mandy Fields has the company gearing up for its next phase of growth. What we've built over the last seven years is not going to be the same things that get us over the next seven years. What's Chief Future Officer Thursday on Bloomberg? What's at Bloomberg this weekend? I'm David Ratham. I'm Lisa Mateo. And I'm Christina Rafini. We're tracking breaking news today from Wall Street to Washington. Let's start over. Bloomberg This Weekend, bringing a little Bloomberg into your weekend routine. Watch, listen, stream. Our stock of the hour is Meta. The shares on the move after the company agreed to a $17 billion settlement in that landmark case brought by multiple U.S. states surrounding teen social media harm. Olivia Carville is a Bloomberg news reporter who's reporting on this story. Is featured in the Emmy Award-winning Can't Look Away, the case against social media documentary. Were you surprised, Olivia, that Meta decided to settle this before we got deeper into this trial?

Analysis

Meta's shares are moving after the company agreed to a $17 billion settlement related to a landmark case concerning teen social media harm. This settlement reflects growing regulatory scrutiny and potential financial liabilities for tech companies involved in social media.

12:41
PDT

Germany's peak electricity demand is projected at 80 gigawatts.

Germany EON AI Gisec Global Middle East

– Experts believe only 20 gigawatts of this demand is realistically achievable.

– Regulatory changes are needed to address genuine customer needs.

– Infrastructure for electricity must double in the coming years.

– Many connection requests are speculative, risking resource misallocation.

energy infrastructureregulatory changesdata center demand

▸ Full transcript

A new digital order isn't defined by technology alone. As sovereign AI reshapes digital independence, as agentic AI transforms decisions, as quantum unlocks new possibilities, every breakthrough demands a cyber-first mindset. That's why the future meets at Gisec Global, the Middle East and Africa's largest cybersecurity event. We shape policy and power innovation. We protect the digital order. There's a connection request only as EON of 80 gigawatts. 80 gigawatts is the total demand of Germany in peak times. It's outright impossible that we will be able to connect such a number. We need to change the rules here so that we can actually satisfy the needs of the customers that really have a need and are not just speculating on a grid connection. You say you don't have the rules at the moment to determine that. Do you have a sense of what that number looks like? So I would disregard maybe 60 gigawatts out of that 80 gigawatts. 20 gigawatts would mean that we add 25 percent to the German system, which is still very significant, and that's only data centers. We have to double the infrastructure on the electricity side in the next years even if most of the connection requests are speculated. Let's miss the opening trade live every weekday. You know how the market day started. Find out how it finishes. Public markets to private markets.

Analysis

The demand for electricity in Germany is projected to peak at 80 gigawatts, but experts suggest that only 20 gigawatts may be realistically achievable due to current infrastructure limitations. This discrepancy highlights the urgent need for regulatory changes to accommodate genuine demand rather than speculative requests for grid connections.

Smart money should note that the anticipated doubling of infrastructure on the electricity side is significant, especially as it pertains to data centers. The current speculative nature of many connection requests could lead to a misallocation of resources if not addressed promptly, impacting future energy investments and policy decisions.

12:38
PDT

Bill Gates calls for a democratic approach to technology regulation.

Bill Gates Meta Silicon Valley Taming Silicon Valley MSFT META

– Meta's recent settlement underscores the risks of unregulated tech practices.

– There is a growing concern about the societal impact of technology.

– Public involvement in tech governance is becoming increasingly necessary.

– The conversation around regulation may lead to significant policy changes.

technology regulationpublic governance

▸ Full transcript

To get your thoughts a little bit more on kind of where just technology has taken us overall. I'm sure you had a chance to read the message by Bill Gates, the founder of Microsoft, talking about what he sees as a need to have a more serious conversation about how we approach this technology and maybe some of the guardrails we start to put up to protect society. There was just a big settlement earlier today with Meta and its approach to social media and teens. Do you have confidence that where this technology lives in our lives now and where it may be in the future is actually going to be additive and constructive or is there something darker? No, I'm very worried about that. Why? Gates' letter today is actually a lot like a book I wrote a couple of years ago called Taming Silicon Valley, which I started by pointing to Meta and saying they said moving and connecting to the future, move fast and break things is kind of like the Meta way of life and that finally caught up to them a little bit today in the settlement that they made. But as I argued in that book and as Gates argued today, we don't really have a plan here. I tried to lay out the best that I could in Taming Silicon Valley. I think nine different ideas around regulation that we should consider and so forth. I think Gates made a lot of good points. One of them is we need to deal with this democratically. It can't just be the companies. It can't just be the government. We have to have a public voice in it. And we have to ask that question every single day. Is this stuff on balance going to be a net positive for society or a net negative for societies? Obviously advantages.

Analysis

Bill Gates emphasizes the need for a serious conversation about technology's societal impact, echoing concerns raised in a previous book about the lack of regulatory frameworks. The recent settlement with Meta highlights the consequences of unchecked technological advancement, suggesting a growing urgency for public involvement in tech governance.

Smart money should note that the dialogue around technology regulation is intensifying, indicating potential shifts in policy that could affect tech valuations. The mention of public voice in regulation suggests that companies may face increased scrutiny, impacting their operational strategies and market positions.

12:36
PDT

Oracle and OpenAI are seen as vulnerable to market corrections.

Oracle CoreWeave OpenAI NVIDIA Gary Times AI IPO With Open NVDA

– High debt levels in the tech sector are raising concerns.

– NVIDIA may be less susceptible to a downturn compared to Oracle and CoreWeave.

– The inflated total addressable market figures for AI companies are questionable.

– Market expectations may not align with actual revenue capabilities.

tech sector vulnerabilitydebt levelsAI market valuation

▸ Full transcript

With OpenAI, eventually people realize that it is not a good reason to make Oracle worth $320 or whatever, and you have to actually take it in context of how much debt is out there and how likely OpenAI is to actually make the payments that it allegedly would make. There was a Times op-ed today that said all of this debt is bonkers. That's the word the Times used, and I remember it. To me, it seems bonkers; I just don't see how it's all going to cash out. I'm glad you brought up Oracle because you go back to September of last year, we saw that, what was it, like a 44% jump in the stock, and it's pretty much roundtripped since then. It gets to this idea as to who should we be looking to, Gary, in terms of companies for that proverbial canary in the coal mine? If it's not NVIDIA, is it a company like Oracle? Is it the neoclouds? I mean, who might be best representative of that excess if and when we finally do reach that bubble pop? I think in that sense, the two companies I'm looking at or three companies I'm looking at are Oracle, CoreWeave, and OpenAI. I think that they're in some ways the most vulnerable. I don't think NVIDIA is quite as vulnerable as those, but we might see Oracle take a big hit. We might see OpenAI; I don't think it would go out of business, but I think that we might start to see it as the WeWork of AI, like kind of overvalued, maybe doesn't actually get to its IPO. Same thing with CoreWeave. To me, it's difficult to understand what's going on.

Analysis

Concerns are rising about the sustainability of high valuations in the tech sector, particularly regarding companies like Oracle and OpenAI, as debt levels and market expectations come into question. Analysts are wary that the current financial environment may be masking underlying vulnerabilities, with Oracle and CoreWeave identified as potential indicators of a market correction.

The notion that AI companies, particularly OpenAI, could be overvalued raises alarms about the broader tech landscape. Smart money should consider the implications of inflated total addressable markets and the potential for a bubble, especially as companies like NVIDIA may not be as vulnerable as their peers.

12:34
PDT

NVIDIA's reliance on OpenAI raises concerns about market stability.

NVIDIA OpenAI Anthropic Apple Google Broadcom Bloomberg AI TAM NVDA AAPL GOOGL PRIVATE DXY

– Circular financing may distort true AI demand and revenue figures.

– The $30 trillion TAM for AI is viewed as unrealistic by some analysts.

– Potential fire sale of OpenAI could significantly impact NVIDIA and the broader market.

– Financial partnerships are generating massive figures, but their sustainability is questionable.

AI market valuationcircular financingtech sector volatility

▸ Full transcript

Value that, but I think we have to look at all the circular financing that's going on and we have to look at the fact that they're connected to companies like Anthropic that are making these wild projections that don't seem particularly plausible. I'd also be worried about NVIDIA's dependence on OpenAI. OpenAI, I think, is weaker than Anthropic. I think they're burning money faster. I don't think they're as well managed. Suppose that OpenAI has to sell in a fire sale and one of the big companies, NVIDIA or Apple or Google or something like that, buys them for 20 cents on the dollar. How is that going to affect the rest of that market if that happens? I mean, I want to stay on the circular financing here because do you think that it's making the AI demand actually look stronger than where the actual underlying economics are right now? Well, I think that's everybody's worry. And for the most part, we're not actually party to the contract. So we don't know what's been pledged and how it really works and so forth. We sort of get the top line. But I think the concern a lot of people in the financial industry at this point is, is the revenue in some sense not really telling the full story because of the way that it's being booked through these circular deals? I mean, so we have a $30 trillion TAM. We have NVIDIA and multiple financial partners talking about a $500 billion partnership. We had Bloomberg reporting just a week ago, Broadcom potentially eyeing a $100 billion debt sale. These are huge numbers, professor. Any worry here that it's just the sign of the top.

Analysis

Concerns are rising about NVIDIA's dependence on OpenAI and the potential impact of a fire sale on the market. The financial industry is wary that circular financing may be inflating AI demand figures, masking the true economic situation beneath the surface.

The $30 trillion total addressable market (TAM) projection for AI seems overly ambitious, raising questions about the sustainability of such valuations. Analysts should be cautious of inflated revenue figures stemming from complex financial arrangements that may not reflect genuine market strength.

12:32
PDT

Anthropic's $30 trillion market opportunity claim is viewed as exaggerated.

Anthropic NVIDIA Gary NYU GDP AI TAM US And Gary United States NVDA DXY

– Skepticism exists regarding the actual market size for AI applications.

– The comparison to the US GDP highlights the implausibility of the figure.

– Market expectations may be inflated as companies float ambitious projections.

– Investors should be cautious about overly optimistic revenue forecasts.

AI market potentialinflated revenue projections

▸ Full transcript

To tell investors its potential revenue opportunities are more than $30 trillion. Mark is calling that number a fantasy. The NYU professor joins us right now to talk a little bit more about this emeritus professor over at NYU. And Gary, I do kind of want to start there. I mean, we know these companies throughout these, these, you know, these tabs, these total addressable markets. We saw a gigantic one with SpaceX, I guess, NVIDIA, excuse me, Anthropic decides it needs to one-up them. But do we have any sense here that when they start to talk about this, whether any of that materially can actually be captured? I mean, it seems to me like a crazy number. It's about the size of the GDP of the United States. And it's true that AI is affecting lots of parts of life. Lots of people are using it for lots of things, but not everybody is using it. Not everybody is satisfied with it. Of course, a TAM is supposed to be the market opportunity, but they're saying the market opportunity is the size of the US economy. To me, that just seems a little bit crazy. If they took away a factor of 10 and said $3 trillion, sure, maybe even $6 trillion, but $30 trillion is pretty hard to fathom. Now, this is just a rumor. We haven't seen the S1. Maybe they're floating to see what they can get away with, but it's just sort of a mind-boggling expectation that they think that their market is that big. Well, one reason why that number jumped out at me is because, I mean, if you know, basically Anthropic is a big end consumer of NVIDIA stuff.

Analysis

Anthropic claims potential revenue opportunities exceeding $30 trillion, a figure that is being labeled as unrealistic by experts. The skepticism arises from the comparison of this number to the entire GDP of the United States, raising questions about the feasibility of capturing such a vast market.

12:29
PDT

Nike's stock is down due to negative sentiment from Dick's Sporting Goods earnings.

Nike Dick's Sporting Goods Under Armour TJX Jeffries Estee Lauder Walmart Urban Outfitters Abercrombie & Fitch Dana Telsey Telsey Advisory Group Kohl's PRIVATE

– Abercrombie & Fitch's shares surged over 30%, indicating strong consumer interest.

– Kohl's and Bath and Body Works are showing signs of recovery in sales.

– Walmart's growth is at its slowest in six years despite raising guidance.

– Retail earnings are mixed, reflecting a divergence in brand performance.

retail earningsconsumer preferencesdiscretionary spending

▸ Full transcript

Retirement, saving for emergency, saving for college. But if you start early and save often, you can do it. We're talking about the drama of 100,000 to NYU Wellesley. What's the average cost in America? So, average private school today, they say is 65,000. 65,000. That's assuming somebody's getting me. But here's the thing, you don't need to save 100%. Don't miss Bloomberg Money every Friday. Only on the English. Now some people have written that your bank, Revolute, is worth $75 billion. Have you ever thought of taking your organization public? The way I think about it, we kind of will be ready probably in two years' time. But then again, depends on how good the market is. Since you don't have an IPO, how do people who work for you make some money? Do you make a market for people to sell their shares internally? Yes, we do secondaries every one or two years when people can sell some portion of their stocks to excellent investors. So you've done secondary sales for your employees, so employees can then get some liquidity. Do you expect before you go public you'll do any more of those or you just want to wait to go public before you liquefy any more stock? Yeah, I think so. We might do secondaries as well before we do IPO because we do it every one or two years, so we might do secondaries as well. All right, well if anybody wants to sell their...

Analysis

Nike's stock is under pressure following disappointing earnings from Dick's Sporting Goods, which has raised concerns about the broader retail sector. Meanwhile, Abercrombie & Fitch has seen a significant stock surge, indicating a potential shift in consumer preferences towards brands that are successfully capturing new customer bases.

The mixed retail earnings suggest a bifurcation in the market, where some brands are thriving while others struggle. Notably, Kohl's and Bath and Body Works are showing signs of improvement, hinting at a possible recovery in discretionary spending despite headwinds faced by major players like Nike.

12:26
PDT

Abercrombie and Fitch reported strong earnings, up over 30%.

Abercrombie and Fitch Nike Dick's Sporting Goods Steve Madden Kohl's Urban Outfitters Bed Bath and Beyond Dana Telsey Telsey Advisory Group Emily CEO Bed Bath NVDA

– Nike's stock is under pressure due to disappointing results from Dick's Sporting Goods.

– Kohl's shows signs of improvement with better traffic and sales metrics.

– Fashion footwear brands like Steve Madden are performing well despite challenges in the sector.

– Urban Outfitters is expected to report positive results, influenced by trends seen in other retailers.

retail earningsconsumer discretionarymarketing effectivenessturnaround stories

▸ Full transcript

Response and what's happening at Anthropology and their newly business has shown double-digit increases. The read across should be positive for Urban when they report after the close. So if it's positive when they report after the close, it gets to this idea, Dana, is what's been sort of the storyline that you've seen through this earning season amongst other retailers and consumer product companies. Is there a narrative or is this just all sort of idiosyncratic stories? I think overall discretionary spending is coming back. We've seen the promotional headwind active, obviously look at Nike impacting footwear, yet you have fashion footwear companies like Steve Madden outperforming. So fashion and newness are really big being recognized, and the marketing investments that are being made are helping to drive expanding customer bases. That's the story to me, and if anything, the back half of the year, given the noise in the numbers, I want to see those organic sales growth rates. Dana, always a pleasure, always smart. Dana Telsey, the CEO and chief research officer over at the Telsey Advisory Group. Look at Kohl's, look at Urban Outfitters, Bed Bath and Beyond. And of course, Emily, that phenomenal day that Abercrombie and Fitch is having. Preppy is back, I'm told. Preppy's back, the moose is back. The moose is back. Actually, the moose is quite small now on their clothes, but you know. All right. Well, we're gonna move back from retail and back into the world of tech, taking a close look at NVIDIA. The shares lower as we head into that earnings print after the bell tonight.

Analysis

Retail earnings show a mixed bag, with Abercrombie and Fitch outperforming expectations, while Nike faces headwinds from disappointing results at Dick's Sporting Goods. The narrative suggests a potential rebound in discretionary spending, driven by effective marketing and new product offerings, particularly in fashion footwear.

Smart money should note that while some retailers are struggling, others are capturing new customer bases and improving sales metrics, indicating a possible shift in consumer preferences. The performance of companies like Abercrombie and the resilience of Kohl's suggest that targeted marketing and product innovation are key to navigating current market challenges.

12:24
PDT

Abercrombie & Fitch stock up over 30% after strong earnings.

Abercrombie & Fitch Kohl's Bath & Body Works Dana Telsey NFL AUR Body Works AMZN

– Kohl's shows improvement with better traffic and sales metrics.

– Retail sector is seeing a mix of strong performers and turnaround stories.

– Increased customer engagement noted at Kohl's and Bath & Body Works.

– Partnerships and product extensions are key to capturing new customers.

retail performanceconsumer spendingturnaround stories

▸ Full transcript

Along with partnerships like the NFL, you're basically also seeing AUR increases, clean inventory, the balance sheet solid, and yet a beaten raise. In retail today, having a beaten raise is valued, but more importantly, they're capturing new customers. So capturing a new customer base with new partnerships and product extensions only sets up for bigger sales and earnings going forward, and that's encouraging. And it's a cheap multiple to begin with. Yeah, maybe that's why you're seeing the stock up more than 30%. Kohl's not actually having a bad day either, up a couple of percentage points. This was also a turnaround story, and it looks like the turnaround seems to be going. Dana, what's your take? Yes, I think there is some improvement in Kohl's. When you think about the merchandise categories, all the major categories improved. They're not as reliant on Sephora as they had been in the past. Home was solid. The first time they saw traffic only slightly down since 2019, so it's their best traffic number since 2019. And you're also seeing the fact that their credit card customers are coming more frequently and it's moving higher. So good to see the beginnings of improvement. And I'd say the same things about Bath and Body Works are reported. They had the first quarter of increased sales in the direct channel since 2021. So the sequential improvement in body care, the stronger average retail selling price. And now you're being sold both on Amazon and...

Analysis

Abercrombie & Fitch reported a strong earnings beat, with significant increases in average unit retail (AUR) and clean inventory, driving the stock up over 30%. Kohl's also showed improvement, with better traffic numbers and less reliance on Sephora, indicating a potential turnaround in their business.

The market is responding positively to retail earnings, particularly for companies capturing new customer bases through partnerships and product extensions. This trend suggests that consumer spending may be shifting towards brands that are innovating and improving their offerings, which could lead to sustained growth in sales and earnings for these retailers.

12:22
PDT

Nike shares down 2% after Dick's Sporting Goods earnings.

Nike Dick's Sporting Goods Under Armour TJX Jeffries TJ Maxx Abercrombie & Fitch Estee Lauder Walmart Dana Telsey Telsey Advisory Group TJ

– TJX downgraded to hold with a price target of $145.

– Estee Lauder reported strong earnings, contrasting with Walmart's slow growth.

– Abercrombie & Fitch shares surged 42% after strong results.

– Retail sector shows mixed performance with significant variances.

retail earningsconsumer demandmarket volatility

▸ Full transcript

The firm is now saying that it's incrementally cautious on Nike after those disappointing earnings out of Dick's Sporting Goods. Remember, a lot of people were trying to read between the lines regarding some of the softness that we saw in Dick's in the most recent quarter, and a lot of the fingers are pointing back to some of its vendors like Nike and Under Armour. Those shares are down 2% for a third straight day, reaching their lowest levels since 2014. Finally, TJX has been downgraded by Jeffries, citing a material slowdown at the TJ Maxx parent, cutting the stock to hold from buy, with the price target going down to $145. The analysts are warning that the slowdown in the Mar-Max business, which includes TJ Maxx and home goods, looks more significant than a typical miss. Those shares are down for a second day now, reaching their lowest level since August of 2025. It's been a really mixed bag, Emily, when it comes to the retail earnings this quarter. You had some real standouts, like Estee Lauder, which surprised to the upside, and then you had some disappointments, like Walmart, which raised its guidance but still had some of the slowest year-over-year growth that we've seen in that company in about six years. We're going to get Urban Outfitters later tonight, and we got a few earlier this morning. Abercrombie is absolutely pulling it out of the water, with those shares up as much as 42%. Well, let's talk about Abercrombie and Fitch, bringing in Dana Telsey over at Telsey Advisory Group.

Analysis

Nike shares are under pressure following disappointing earnings from Dick's Sporting Goods, which has raised concerns about demand for athletic apparel. TJX has also been downgraded due to a significant slowdown in its TJ Maxx business, with analysts warning that the decline is more severe than typical misses.

The mixed retail earnings report highlights a divergence in performance, with standout results from Estee Lauder contrasting sharply with Walmart's slow growth despite raised guidance. Abercrombie & Fitch's impressive performance, with shares soaring 42%, suggests that certain brands are still resonating well with consumers, indicating potential pockets of strength in the retail sector.

12:18
PDT

Inflationary pressures are expected to persist in the short term due to increased capital intensity.

JP Morgan Asset Management Kevin Warsh Mira Pandit Abercrombie and Fitch Bath & Body Works Kohl's Bloomberg JP Alright Mira Morgan Asset Management Jackson Hole Eastern Time FEDFUNDS PRIVATE

– Bond market fatigue is evident as oversubscription rates for issuances decline.

– Productivity benefits may not offset inflationary trends immediately.

– Consumer prices could be affected by rising memory prices and utility costs.

– The Fed's upcoming communications from Jackson Hole may not provide clear guidance.

inflationary pressuresbond market fatigueconsumer price impactFed policy

▸ Full transcript

The term premium around things that are going on in other markets, like Japan for example, is important to consider. I don't know that the issuance is necessarily pushing up the long end of the curve, but it is important to think about when you have a capital-light industry that has become very capital-intensive. In materials and commodities, you see it certainly with things like memory prices and how that will translate to consumer electronics. It's not just a producer prices issue; it does become a consumer issue, especially when you think about things like utilities as well. So we have to be mindful that while long-term, as Warsh would like to lean on the productivity benefits, it should help be disinflationary, but in the short term, it's probably going to be more inflationary. It probably will over time create some fatigue in the bond market, like you're seeing in the equity market, because there is just that level of supply. You're seeing it in terms of the shift in how much some of this issuance has been oversubscribed three or four times among the hyperscalers earlier in the year to maybe something like one and a half times more recently. Alright Mira, always wonderful to have you. Mira Pandit there, she's executive director and global market strategist at JP Morgan Asset Management. Just a reminder, Kevin Warsh, the Fed's here, is scheduled to speak from Jackson Hole, Wyoming at 10 a.m. Eastern Time. We'll have full coverage of that right here on Bloomberg Television. When we come back, we're going to take a closer look at the retail set. We got some interesting earnings this morning out of Abercrombie and Fitch, Bath & Body Works, and Kohl's. We're going to catch up with Dana Telsey when we come back after the break right here on the clothes.

Analysis

The discussion highlighted concerns about inflationary pressures stemming from increased capital intensity in industries like materials and commodities, which could impact consumer prices. Additionally, the oversubscription rates for bond issuances among hyperscalers have decreased, indicating potential fatigue in the bond market amidst rising supply.

Smart money should note that while productivity gains may eventually lead to disinflation, the current environment is likely to remain inflationary in the short term. This dynamic could create challenges for the bond market, similar to those seen in equities, as supply continues to outpace demand.

12:16
PDT

Fed's Jackson Hole meeting may lack substantive guidance.

Federal Reserve Jackson Hole Mira Panda JP Morgan American people FEDFUNDS

– Internal committee dynamics could hinder decisive rate hikes.

– Inflation remains a concern, but aggressive action is unlikely.

– Market expectations for hikes may not align with Fed's actions.

– A cautious Fed approach could prolong market uncertainty.

Fed policyinflation concerns

▸ Full transcript

That's a challenge there. I think that unfortunately from Jackson Hole, we probably won't get what we're looking for here. We know we're not gonna get forward guidance. We know that we're probably not gonna get a clear reaction function from the Fed, either in terms of how they're thinking about this fall. There may be some nod to the task forces and the work underway, but he's not gonna wanna front run that work either. So it's really tricky to think about what we're actually going to get there that is substantive. So I'm thinking about some of the clues. If you get a little bit more around affordability and some of the challenges to the American people, maybe that gives some sort of easing inclination or on hold type of inclination. If you have more of that resolution, we have commitment to our 2% target. Maybe that signals a little bit more of the hiking. But again, it will really be reading the tea leaves that he's not trying to give us. So I don't know that the market is gonna get what it wants from Jackson Hole. And again, when we think about what the Fed might do this year, the market is pricing in hikes, but ultimately, do they have enough votes among the committee? It might come down to something as technical as the fact that, yes, you have three descents, and yet, if you're not bringing more people on side quickly, it's gonna be hard to actually get that hike. Maybe you get a hike, but the one and done is probably not going to solve a persistent overshoot if that's truly the committee's concern. So you get kind of six dozen half another, as opposed to truly working towards bringing inflation down or acknowledging that inflation.

Analysis

The Fed's upcoming Jackson Hole meeting is unlikely to provide the clarity markets are seeking regarding future rate hikes, as forward guidance and a clear reaction function are not expected. The market's anticipation of hikes may be complicated by the committee's internal dynamics, making decisive action challenging.

Smart money should note that while inflation remains above target, the Fed's hesitance to commit to aggressive hikes could signal a prolonged period of uncertainty. The potential for a 'one and done' hike may not adequately address persistent inflation concerns, indicating a cautious approach from the Fed moving forward.

12:13
PDT

Personal consumption expenditures are advancing, offering the Fed some breathing room.

Mira Panda JP Morgan Asset Management Federal Reserve JP Jennifer Zappasaja Lesotho Highland Morgan Asset Management PRIVATE FEDFUNDS

– Inflation remains above the target, influencing Fed policy decisions.

– Wage growth is at its slowest pace in five years, impacting services inflation.

– Rental vacancies are at a 10-year high, which may help ease rent inflation.

– The path to 2% inflation may be longer than anticipated.

Fed policyinflation trends

▸ Full transcript

Bringing you up to the minute geopolitical news whenever and wherever it happens. I'm Jennifer Zappasaja in the Lesotho Highland, and this is Bloomberg. An advance in personal consumption expenditures last month may be giving the Fed some breathing room on rates. Our next guest says the risk of a Fed hike will depend on how impatient Committee members become with inflation hovering above that target. Mira Panda joins us right now. She's an executive director and global market strategist at JP Morgan Asset Management, and we should say hovering; it's been hovering there for more than five years now. But it gets to this idea as to exactly what you think the Fed will pay most attention to. I mean, 3.3 on a core, not 2%, but it's not exactly, you know, 6, 8, 9% where we were just a few years ago. The longer we stay there, though, the worse it feels. And I think the challenge here is that there are many signs that inflation could come down to 2% perhaps next year, or probably not this year. If we think about what could get us to 2%, we are seeing that wages overall have been muted on a year-over-year basis, probably the slowest pace of increase in five years. So that should help things like services inflation. We've seen a lower average level of tariff rates this year versus last year that could also take some gas out of core goods. And then you look at shelter and rental vacancies have actually been at a 10-year high. So that could help ease rents.

Analysis

The recent advance in personal consumption expenditures may provide the Federal Reserve with some leeway regarding interest rates. However, inflation remains above the target, and the Fed's response will depend on their patience with persistent inflationary pressures.

Despite signs that inflation could potentially decrease to 2% next year, the current economic indicators suggest a slow path to recovery. Wage growth is muted, and rental vacancies are at a decade high, which could ease inflation in the housing sector, but the overall economic environment remains challenging.

12:09
PDT

NVIDIA is considering financing to expand compute capacity.

NVIDIA Kimi hyperscalers

– Demand from hyperscalers remains strong with significant backlogs.

– The company aims to enhance its ecosystem beyond current customers.

– Concerns about revenue driven by financing versus pure demand.

– Tight supply environment persists in the compute market.

supply chain riskdemand dynamicsfinancing strategies

▸ Full transcript

They're going to backstop maybe 25% of the deal, and it's a case-by-case basis. But some more specifics around the structure: do they guarantee a price for a rental price of the product that they put out there in these deals, or is it a hard number in terms of capital at risk? Either way, I think that it plays to their strengths. It plays to the strengths in terms of enabling their ecosystem to proliferate beyond just their typical set of customers today and the hyperscalers that are buying so much. And also in terms of, if they have to take on capacity, what do they do with it? And what I mean by that is, do they train their internal open-source models, which increasingly are becoming more competitive with the likes of Kimi and the other open-source models that are out there? But does that raise any questions? I mean, we talk about this idea of how much of its revenue is actually being driven by pure demand and how much now might be driven by more of its financing or at least its involvement in that financing? Does that matter to you? It does, but what evidence is there out there that we are in an excess demand environment? I think you go through every hyperscaler earnings this past quarter, and what you see is an enormous growth in their backlogs, and the continued message is that they simply just cannot supply enough. And so to me, I think that this move to arrange third-party capital to expand compute capacity out there is a reflection of just the environment that compute remains tight. And it just takes a while to bring capacity online.

Analysis

NVIDIA is exploring financing options to expand compute capacity, indicating a tight supply environment despite strong demand from hyperscalers. This move reflects the company's strategy to leverage third-party capital to enhance its ecosystem and maintain competitiveness against emerging open-source models.

Smart money should note that while NVIDIA's revenue growth may be partially driven by financing, the underlying demand remains robust, as evidenced by hyperscalers reporting significant backlogs. This suggests that NVIDIA's market position could strengthen further as it navigates supply constraints and capitalizes on its ecosystem expansion.

12:07
PDT

NVIDIA's growth projected at over 50% year-on-year.

NVIDIA Jensen Huang Bloomberg PCE U.S. Treasury U.S. Dollar AI NVDA

– Market share losses occur within a rapidly growing industry.

– Stock reaction post-earnings remains a concern despite beating expectations.

– Future guidance is limited, focusing only on quarterly projections.

– Investor sentiment may hinge on insights into long-term fundamentals.

supply chain risksemiconductor market dynamicslong-term guidance

▸ Full transcript

In that slippage, the entire market is growing pretty significantly, and NVIDIA's growth next year could be well north of 50% year on year. So yes, they might be losing a little bit of market share, but it's in the context of a very rapidly growing industry pie. It's difficult to see continued multiple compression forever when you also see upward revisions to estimates; those things don't typically correlate with one another. What about the stock reaction? We've seen over the last few reports that NVIDIA has beaten expectations, but the stock has fallen after the results. How high is the bar right now? I don't necessarily think the bar is really all that more elevated than it was in prior quarters. At the same time, I don't think that there's enough growth in the supply chain for them to report just a blowout number that really gets investors excited and restores that multiple. The question is, how much insight do they give to their fundamentals in calendar year 2027 and 2028? They've been pretty hesitant to guide that much into the future. They typically guide just a quarter at a time. Maybe that is kind of the unlock in terms of multiple support, as they talk about the amount of product that they have already pre-sold in terms of looking ahead into 2027 and beyond.

Analysis

NVIDIA's growth next year could exceed 50% year on year, despite potential market share losses, as the overall industry continues to expand significantly. The key insight is that while NVIDIA's stock has historically fallen post-earnings despite beating expectations, the lack of guidance for 2027 and beyond may be a critical factor in maintaining multiple support.

12:05
PDT

NVIDIA's revenue expectations for Q2 are around $94 billion.

NVIDIA Romain semiconductor industry NVDA

– Guidance for the next quarter is at least $107 billion.

– NVIDIA is trading at a discount compared to the semiconductor industry.

– Investor frustration is growing over valuation compression.

– Supply chain constraints continue to impact NVIDIA's growth.

supply chain riskvaluation dynamics

▸ Full transcript

Primarily in the context of what it would actually take to see, I guess maybe that multiple come up if that would be a good thing in your view. Well, good afternoon, Romain. Look, I mean, I think this is going to be another quarter for NVIDIA where their growth is simply a continuation of the growth of their supply chain. They remain somewhat supply constrained, which has kind of been the case the last few years. And so the volatility around the fundamental report that we've seen the last two to three years really is just a reflection of how much capacity they've been able to expand. In terms of my own expectations, in terms of top line for the second quarter around 94 billion, guiding to at least 107 looking out to the next quarter. So a B2 consensus and a B2 guidance in terms of where the sell side is. I think the main question is, this has been a lot of frustration for the part of investors that that multiple has compressed. There's a lot of head scratching going on about why that's taking place because it's somewhat unique to NVIDIA. Looking at the rest of the semiconductor space, NVIDIA trades at a discount to the rest of the industry. You can have your own view on the sustainability of spending in this space. What's interesting to me is that you look at their product leadership; is that eroding or not? I don't think that we know enough yet to make that call that they should deserve to trade a discount to the industry.

Analysis

NVIDIA's growth continues to be constrained by supply chain limitations, with expectations for second-quarter revenue around $94 billion and guidance of at least $107 billion for the next quarter. Investors are frustrated by NVIDIA's valuation compression, as it trades at a discount compared to the broader semiconductor industry despite its product leadership.

The ongoing supply constraints and competitive pressures suggest that NVIDIA's ability to maintain its market position is under scrutiny. Smart money should note that the company's valuation dynamics may not align with its growth potential, indicating a potential mispricing in the market.

12:02
PDT

PCE report aligns with inflation expectations, influencing Fed rate hike speculation.

NVIDIA U.S. Treasury Bloomberg Federal Reserve PCE US AI FEDFUNDS DXY NVDA PRIVATE

– Core price index remains above 3% for seven consecutive months.

– NVIDIA's earnings expected to double, but focus on off-balance sheet activities.

– Valuation concerns are rising as NVIDIA's market cap erodes.

– Dollar strengthens, impacting equity market sentiment.

inflation dataFed policyNVIDIA earningsAI investment

▸ Full transcript

In just the last two weeks, the inflation data we received, particularly the PCE, was in line but did not move markets significantly. It has traders pricing in a potential Fed rate hike for February, which brought yields up and also strengthened the dollar, with the Bloomberg US Dollar spot index rising the most since July. The bookends to this trading day couldn't have been more consequential. We started off with that PCE report, which showed speed on the spending side and persistence on the inflation side, with the core price index at 3.3 percent—a growth rate that has been consistently above 3 percent for seven straight months now, with no signs of deceleration. This curbed the two-day drop in U.S. Treasury yields, put upward pressure on the dollar, and left equity investors largely on the sidelines until at least tonight. NVIDIA is set to report earnings just a little more than an hour from now. It's not solely about revenue and earnings, both of which are projected to have doubled from a year earlier, but most of the attention will be on NVIDIA's off-balance sheet activity and the intermingled relationship with its chip buyers as it evolves into an AI finance house. However, as the company evolves, competition increases, and scrutiny over the AI build-out intensifies, valuation questions abound. Even with a market cap of $5 trillion, NVIDIA's valuation has been eroding steadily, currently at roughly 20 times its projected earnings over the next 12 months.

Analysis

Recent inflation data, particularly the PCE report, has led traders to price in a potential Fed rate hike for February, resulting in rising yields and a stronger dollar. The core price index remains persistently above 3%, indicating ongoing inflationary pressures that have left equity investors cautious ahead of NVIDIA's earnings report.

Smart money should note that while NVIDIA's revenue and earnings are expected to double year-over-year, the focus will be on its off-balance sheet activities and the evolving relationship with chip buyers as it transitions into an AI finance house. Valuation concerns are mounting, with NVIDIA's market cap eroding despite its significant size, suggesting that investors may be underestimating the risks associated with increased competition and scrutiny in the AI sector.

12:00
PDT

Meta's settlement could lead to increased regulatory scrutiny in social media.

Meta Platforms Denise Asecova Bloomberg NVIDIA JP Morgan LAM Research Ed Ludlow Tim Archer Steve Rami Safra Kunjan Sabani RTVM TV M PRIVATE AAPL META DXY

– The biotech company's new treatment shows improved survival rates but at a high cost.

– Investors are sensitive to treatment pricing and efficacy in the biotech sector.

– The market reaction to Meta's news was muted despite the significant settlement amount.

– The biotech company has seen a valuation increase since April.

regulatory scrutinybiotech pricingtreatment efficacy

▸ Full transcript

I feel there has been a lot of advancements in that, and investors were kind of expecting it. The ticker is RTVM. The stock is getting just a small boost today, but if you look at the chart up to date, the company is valued at more than $46 billion and it has more than doubled since April. This is the reaction we were expecting. We've spoken about this drug in the past. It's going to have a list price of more than $475,000 a year. That's very expensive. Here's what's notable to me, though: the current standard of treatment allows patients to live for 6.7 months, while those who received this drug survived for more than 13 months. So it still is such a short period of time when you're diagnosed with this. Yes, but they doubled it. They doubled it, exactly. No, it's a very complicated case because, from what I understand, this is often diagnosed very late compared to other cancers. Also, these treatments allow people to stay at home and be with their families compared to other treatments. So it's still a great relief and great progress going forward. Denise Asecova with today's stock movers. For more conversations like this, check out stock movers on Apple, Spotify, or anywhere you get your podcasts. That is going to do it for our hour on TV. If you're sticking with us on radio, we got more coverage of Meta Platforms. Next, this is Bloomberg. Bringing you the latest business news, wherever and whenever it happens. I'm Scarlett Foo reporting from America's biggest military shipyard. This is Bloomberg. The countdown is on. Everything you need to get the edge.

Analysis

Meta Platforms agreed to pay up to $18 billion in settlements related to allegations of encouraging compulsive use among younger users, which could signal increased regulatory scrutiny in the social media sector. Meanwhile, the stock of a biotech company is experiencing a slight boost as it prepares to launch a new treatment priced at over $475,000 annually, despite the treatment's limited survival benefit compared to existing options.

Investors should note the potential for broader regulatory impacts on Meta, as this case may set a precedent for future actions against social media companies. Additionally, the biotech sector's pricing strategies and treatment efficacy will be critical as they navigate market expectations and patient outcomes, particularly in late-stage cancer diagnoses.

11:58
PDT

NVIDIA's stock down 1% ahead of earnings.

NVIDIA Tim Archer LAM Research Ed Ludlow JP Morgan Bloomberg Meta AI NVDA

– Projected revenue nearly doubles year-over-year.

– Investors concerned about rising costs and future demand.

– AI chip prices expected to surge over 15%.

– Market sensitivity to capital spending metrics.

AI tradesemiconductor pricinginvestor sentiment

▸ Full transcript

Seen more and more governments talk about this. A lot of European countries are talking more and more about regulating social media for younger users. So who knows if this case is just the start of a broader debate. But I think it's kind of interesting that the initial reaction faded so fast. I guess the price stack of the actual low yield was much higher. So investors felt some relief. But it's really surprising to me. And how about Nvidia? Of course, we've been talking about it all day right now, waiting for those results to come in ahead of it? Well, they're down about 1% just about. So what other details do you have for us? Everyone is waiting for NVIDIA's earnings. Obviously, it's not about one company. It's about the AI trade. It's about the economy. It's about everything. It's about that. So indeed the stock is down about 1%. The results we're expecting is another quarter of strong results unless project the revenue to nearly double from a year ago. Similar in number for income, the revenue number is the fastest pace in two years. But nevertheless, this can still be a big disappointment for investors, even if they reach those numbers. Investors, they're looking for capital spending. They're looking for future demand. We've been talking a lot about rising costs. People say that AI chips will rise more than 15% in some cases, surging memory costs. So I feel so investors may be quite sensitive about those metrics, even if earnings come just as expected, even if it's another amazing, that said, the company is up about 13%, which compared to previous years is not such a strong rally. So definitely investors.

Analysis

NVIDIA's stock is down about 1% as investors await earnings results, which are projected to show revenue nearly doubling year-over-year. Despite strong expectations, concerns about rising costs and future demand for AI chips may lead to disappointment among investors even if earnings meet projections.

The market is increasingly sensitive to capital spending and memory costs, with AI chip prices expected to surge by over 15%. This indicates that while current performance may impress, the sustainability of growth hinges on managing rising costs and future demand dynamics.

11:56
PDT

Meta to pay up to $18 billion in settlements.

Meta U.S. states Facebook Instagram Carol Master Rami Safra Bloomberg Tech Kunjan Sabani Bloomberg Intelligence Tim Stenevec Lisa Mateo Bloomberg News PRIVATE META

– Settlement addresses compulsive use design for younger users.

– Increased regulatory scrutiny on tech companies.

– Potential precedent for future social media regulations.

– Financial impact may affect Meta's innovation strategies.

regulatory scrutinyuser engagement practices

▸ Full transcript

Send them to us. All you got to do is go to bloomberg.com. Ask radio. That's bloomberg.com. Ask radio there for Bloomberg subscribers and subscribers of the Bloomberg terminal. You can ask questions to our guests and really be part of the conversation. I hear we're starting to get some. Yeah, we're getting some good ones already. Okay, good. Sometimes you know I say I say send all complaints to Carol Master. Send all questions to me. Okay, that's how it works. And she does get the complaints. So I thank you for sending those to her and not to me. Rami Safra, Serafa is going to be joining us to see over at Cordoba. We're going to have a blood low of Bloomberg Tech as well. Kunjan Sabani, Bloomberg Intelligence senior semiconductor analyst is going to be joining us as well in the four o'clock hour. Before we get there though, we got stocks on the move today. I'm Tim Stenevec along with Lisa Mateo. Let's take a look at some stocks on the move. We are joined by Bloomberg News cross-asset reporter, Danica Seikova. Hey, Danica. Hi there. Let's talk about Meta. Meta agreed to pay up to 18 billion in landmark settlements to multiple U.S. states saying that the company deliberately designed Facebook and Instagram to encourage compulsive use among younger users. This is just an incredible case. Through its start, until now, everyone has been following it. It's very interesting that if this case was resolved and it posed such enormous risk for Meta, the company itself estimated that it's.

Analysis

Meta agreed to pay up to $18 billion in landmark settlements to multiple U.S. states, acknowledging that it designed Facebook and Instagram to promote compulsive use among younger users. This case highlights the increasing regulatory scrutiny tech companies face regarding user engagement practices and their implications for future business models.

The resolution of this case could set a precedent for how social media platforms are regulated, potentially impacting user engagement strategies across the industry. Investors should note that the financial burden of such settlements may influence Meta's future investments in innovation and user experience enhancements.

11:53
PDT

LAM Research is investing $600 million in its Tuolaton campus.

LAM Research Tim Archer Ed Ludlow Bloomberg Oregon Portland Haslinda Anand Wall Street Bloomberg This Weekend PRIVATE DXY

– The company reported an 18% surge in shares following strong Q4 results.

– AI-driven demand is reshaping the semiconductor industry.

– Advanced packaging and 3D chip architectures are key growth areas.

– LAM Research is well-positioned to capitalize on these trends.

semiconductor demandAI innovationadvanced packaging

▸ Full transcript

The day it ends, the day before it ends, you're one of the best in the world. Great, the next day you wake up, that's gone. What are you great at? And the truth is nothing, right? I'm not great at anything else. I talk about it all the time, Steve, is this whole idea of it's not from penthouse to penthouse. And what I mean by that is you played for 15, 20 years and you're in the penthouse. That doesn't mean that you come to the business world and you're gonna be in the penthouse. Now, you don't start on the third floor or the lobby. You actually have to start in the basement. Investors, top executives, global innovators. Join me for in-depth conversations with the biggest newsmakers on the day's top stories. The economy has been doing well. That does not tell you what the future is going to be. We are taking a step-by-step approach, a very systematic approach with India. This is a time to put a little more defense into your portfolio. Insight with Haslinda Anand only on Bloomberg. Breaking news today from Wall Street to Washington. Earning the seasons underway, we're gonna get some key reports. Everything you need to know before the markets open on Monday. Bloomberg This Weekend, bringing a little Bloomberg into your weekend routine. Guys, buckle up. It's a multi-trillion dollar industry. We'll show you what's happening in E.T.

Analysis

LAM Research announced a $600 million expansion of its Tuolaton campus, part of a broader $3 billion investment in global labs, driven by accelerating demand for semiconductors, particularly due to AI. The CEO highlighted that the shift towards advanced packaging and three-dimensional chip architectures is significantly increasing demand for their manufacturing equipment, indicating a robust growth trajectory in the semiconductor sector.

Smart investors should note that the rapid pace of innovation in AI is reshaping the semiconductor landscape, necessitating continuous advancements in manufacturing technology. This trend suggests that companies like LAM Research, which are positioned to meet these evolving demands, could see sustained growth and profitability in the coming years.

11:49
PDT

LAM Research is experiencing increased demand due to AI-driven advancements in semiconductor technology.

LAM Research Tim Archer NVIDIA AI DRAM NAND HBM LAM Hey Tim

– The transition to three-dimensional chip architectures is a key growth driver for LAM's equipment.

– High bandwidth memory and advanced packaging are critical areas of focus for LAM.

– The company's $3 billion investment in global labs highlights its commitment to innovation.

– AI is fundamentally changing the semiconductor manufacturing landscape.

semiconductor demandAI technologyadvanced packaging

▸ Full transcript

But it is the demand for lead edge chips across logic and memory, HBM, that is the story out in the world. How much of that growth in demand directly reads through to LAM? And how do you respond to it? Yeah, if you look at advanced chips today, one of the trends that just is, it's been around for a few years and AI has really put it into hyperdrive, is the three-dimensional scaling of every device. And so, of course, that's been true in foundry logic with technologies like gate all around, introduction of gate all around, which is a three-dimensional transistor structure. But really, it comes to bear when you think about what high bandwidth memory is. High bandwidth memory is the stacking of multiple DRAM chips on top of each other to create higher bandwidth performance for AI. And so, clearly, a three-dimensional architecture that requires a lot of etching deposition equipment and a lot of innovation for us to be able to support the manufacture of those structures. NAND has been 3D, has had a 3D architecture since more than 10 years and LAM has been a very strong player. In fact, it has traditionally been our strongest market because of that 3D architecture and what we're seeing now is as other devices go 3D it just drives a lot more demand for our specific types of equipment. Hey Tim, we only have 20 seconds left, but you mentioned this is part of a $3 billion effort to expand your global lab.

Analysis

Demand for advanced chips, particularly in AI applications, is driving significant growth for LAM Research as they support the transition to three-dimensional chip architectures. The shift towards high bandwidth memory and advanced packaging is creating a surge in demand for LAM's etching and deposition equipment, indicating a robust market environment for semiconductor manufacturing.

Smart money should note that the AI-driven demand is not just a temporary spike; it reflects a fundamental shift in semiconductor design and manufacturing processes. LAM's $3 billion investment in global labs underscores their commitment to innovation, positioning them favorably in a rapidly evolving market landscape.

11:47
PDT

LAM Research announces a $3 billion investment in global labs.

LAM Research AI semiconductors LAM

– AI is accelerating the pace of innovation in semiconductor manufacturing.

– Demand for advanced packaging is increasing, changing chip design dynamics.

– Continuous innovation is essential to meet the needs of AI-driven applications.

– LAM Research's machines are critical for producing advanced chips.

semiconductor innovationAI impactadvanced packaging

▸ Full transcript

About this lab here is part of a much bigger investment that we announced. It's $3 billion across that global lab network. And why now? The pace of innovation. AI has fundamentally changed the rate at which we have to be innovating. I've looked back just a few years ago and when the markets were driven by things like smartphones and PCs, that cycle was operating kind of on every one to three years you needed to really innovate something new. AI has changed that requirement such that with new AI models coming every few months and each of those demanding more computational power, even better high bandwidth memory, even more storage, you know, LAM is looking to meet those needs. We are a manufacturer of machines that make each and every one of those types of devices. And so there's a lot of demand for us to continue to come out with the next great innovation and process and manufacturing technology to keep up. We've also seen a tremendous boom in what's called advanced packaging. It used to be that in most cases you built a single chip and it had a certain function. And you increased the performance of that chip by making it smaller and introducing new materials. Advanced packaging changes the game because now it is about putting many different types of chips together to create system-level performance and putting all of these chips together and stacking them into a three-dimensional architecture.

Analysis

LAM Research is investing $3 billion in a global lab network to accelerate innovation in semiconductor manufacturing, driven by the rapid advancements in AI. The demand for advanced packaging and high-performance chips is reshaping the industry, necessitating continuous innovation to keep pace with AI developments.

Smart money should note that the shift towards advanced packaging signifies a fundamental change in chip design, moving from single-chip solutions to complex, multi-chip systems. This evolution presents significant opportunities for companies like LAM Research that are positioned to meet the growing demand for sophisticated manufacturing technologies.

11:44
PDT

LAM Research is expanding its Tuolaton campus with a $600 million investment.

LAM Research Tim Archer Ed Ludd Oregon Portland AI CEO LAM Bloomberg Tech San Francisco PRIVATE

– The company reported an 18% surge in shares following strong fourth-quarter results.

– AI-driven demand is reshaping the semiconductor industry positively for LAM.

– Record revenue and operating margins highlight LAM's strong market position.

– The semiconductor sector is experiencing accelerating demand.

semiconductor demandAI technology growth

▸ Full transcript

News this afternoon that it's breaking ground on a more than $600 million expansion of its Tuolaton campus in Oregon. It's just south of Portland, part of a more than $3 billion planned investment in its labs around the world. We've got with us the CEO of LAM Research, Tim Archer, who joins us alongside Ed Ludd, the host of Bloomberg Tech. Ed's out there in San Francisco. Tim is out there in Tuolaton, Oregon. Tim, I want to get to this project. We'll get to it. But before we do, shares of LAM Research just surged at the end of last month. This was just after you reported results closing higher by close to 18%. You reported fourth-quarter results and an outlook for adjusted earnings that beat expectations. You said in a statement at the time that record revenue, operating margin, and earnings per share were at a record as AI-driven demand continues to reshape the semiconductor industry. Can you give us some color on what you've seen day to day over the past four weeks that shows what you're seeing with demand right now? Well, thanks very much for having me today. Look, I think those results just indicate we're in an accelerating demand environment for semiconductors. And what LAM does, I think most people realize, but we make the machines that help make all of those chips. And especially, our strengths are in some of the most advanced manufacturing processes for chip making. So we're seeing tremendous demand with the AI buildout and all the chips required to support AI. And I think that just.

Analysis

LAM Research announced a $600 million expansion of its Tuolaton campus in Oregon, part of a broader $3 billion investment in labs globally. The company's recent fourth-quarter results showed an 18% surge in shares, driven by record revenue and AI-driven demand in the semiconductor industry.

The accelerating demand for semiconductors, particularly for AI applications, indicates a robust growth trajectory for LAM Research. Investors should note the strategic positioning of LAM in advanced chip manufacturing processes, which could yield significant returns as AI technologies continue to proliferate.

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