May 28, 2025 • 20 mins
Nvidia Corp. Chief Executive Officer Jensen Huang soothed investor fears about a China slowdown by delivering a solid sales forecast, saying that the AI computing market is still poised for “exponential growth.” The company expects revenue of about $45 billion in the second fiscal quarter, which runs through July. New export restrictions will cost Nvidia about $8 billion in Chinese revenue during the period, but the forecast still met analysts’ estimates. We got reaction from Daniel Newman, CEO of the Futurum Group.
Plus - The equity market drifted lower prior to Nvidia's results. We speak to Tim Pagliara, Chairman and Chief Investment Officer, CapWealth.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio News.
Speaker 2 (00:11):
Welcome to the Daybreak Asia podcast. I'm Doug Prisner. Let's
begin with tariffs. Late in the day in the States,
we had the US Trade Court dealing a major blow
to the Trump administration. It found the president's global tariffs
illegal and as a result, the court has blocked these levees. Now,
this ruling, to be fair, can be appealed by the
Trump administration in federal court. Today, a panel of three
(00:34):
judges at the US Court of International Trade in Manhattan
sided with Democratic led States and a group of small businesses.
They successfully argued that the Trump administration had wrongfully invoked
an emergency law to justify these levies. We'll see where
we go from here. Let's move on to the most
important earnings report of the week. After the bell, we
(00:57):
heard from Nvidia, and the company reported data center revenue
for the latest quarter close to estimates. Perhaps more importantly,
the chip maker gave a solid forecast for revenue in
the current quarter despite a slow down in China, and
Vidia is now expecting sales overall of about forty five
billion dollars. That's after subtracting eight billion in lost Chinese
(01:19):
sales because of those export controls. We heard earlier from
Nvidia CEO Jensen Wong speaking on the impact of those
export controls.
Speaker 3 (01:29):
The limitations are quite quite stringent, quite limited, if you will.
H twenty is you know, as far down as we
could take a hopper. We don't know how to make
it even less, and so that's really the limit.
Speaker 4 (01:45):
But there aren't there aren't.
Speaker 3 (01:48):
You know, The limitations are quite stringent, so we have
we have to really think through it. Whatever we make
ultimately has to add value to the market.
Speaker 2 (01:56):
Jensen Wong. They're the CEO of Nvidia. By the way,
you can watch the full conversation with Wog on the
Bloomberg podcast channel. It's on YouTube, shares and invidio. We're
up nearly five percent in late New York trading. Let's
take a closer look at the story on in video
with Daniel Newman. He is the CEO of Futurum Group. Daniel,
thank you for making time to chat with me on this.
(02:18):
What did we really see today that kind of can
move the market in one way or another when it
comes to in video.
Speaker 1 (02:25):
The overall reaction to the Nvidia print was very positive.
Having said that the China woes are still not solved.
In In fact, if anything, Wong gave further doubt and
uncertainty to whether or not the company can really even
participate in that market. But having said that, even with
the multiple billions they couldn't ship this quarter, the write
down which ended up being just a little bit less
(02:46):
dug than what was expected, and the future sales, the
guide and the result this quarter showed that there is
a lot of positive momentum that must be taking place
outside of the region. And one of the really important
point is over the last several quarters, you've heard Long
pivot his conversations towards new markets like physical AI, robotics,
(03:09):
but also he's returned to talking about some of the
core business markets segments like gaming and automotive, and those
segments really outperformed, showing some really strong results, which I
think is important at this particular time, as I think
there's a little bit of fatigue on the data center
conversation and despite we're so early in AI, after eight
(03:29):
or nine continuous quarters of big in Vidia results in
this sort of Nvidia event each quarter, people want to
know how in Vidia is going to keep their growth,
and he showed it's not just data center and China
alone can't stop its momentum.
Speaker 2 (03:41):
Yes, the China market is no doubt very important for Invidio.
I found it interesting today that the Trump administration said
it will restrict the sale of chip design software to China.
This comes to the issue of whether or not a
company like Quahweh, for example, can develop AI chips that
could someday compete with those of Nvidia. Do you think
(04:02):
that's a big stretch.
Speaker 1 (04:04):
So we did hear about new rulings that could limit
the EDA software, some of the design tools, as you suggested,
and companies like Synopsis, which actually reported the same day
here as in Nvidia, took a big hit here. I
think there is a major chip being played unintended when
it comes to Nvidia and its ability to access the
Chinese market. And I think there is a bit of
(04:26):
give and take.
Speaker 4 (04:27):
Now.
Speaker 1 (04:28):
Wong is doing all the right things of the statesmen,
of the representative of A shareholders, and in Vidia wanting
to access this market that is a tam of fifty
billion plus dollars and holds half the world's AI researchers
in it. The US is playing a slightly different game.
We heard today about the possible blockade of certain terrorists.
But the Trump administration does understand that winning the AI race,
(04:51):
diffusing the Western and US based technology to everywhere in
the world is to its advantage. But the question is
does enable China. Does giving China access to any of
Nvidia's leading data center chips or even some of the
older ones like the Hopper chips they especially designed for China,
does that actually slow China down? And this is where
I don't entirely agree with Wong saying if we don't
(05:15):
give them these chips, China will go faster and build
I think Jijingping in the Chinese Party understands the importance
of leading an AI. It understands that it wants to
win because there are multiple decades of global economic leadership
at stake here. I think China's going as fast as
it can anyways. I think it's behind, but given its
ability to build energy and given its ability to brute
(05:38):
force through processes like they've done with Huawei as send,
I think it's a big mistake to rule them out.
So it puts a very tough juxtaposition for the Trump administration,
but it's also tough for in Vidia shareholders to lose
out on that market.
Speaker 2 (05:50):
So what about the adoption of AI technology by an
American company? And I'm going to use Salesforce as an
example because after the bell, Salesforce raised its gods for
revenue on the full year, and that's probably a good
indication that the company's latest AI product, known as agent Force,
is on a path to contribute significantly to increased sales.
(06:14):
Is this something we should see more of companies like
Salesforce adopting AI and beginning to realize the return on investment.
Speaker 1 (06:21):
This is what we want to see as we've watched
this massive infrastructure build out and the arms race that
is building data centers everywhere in the world, empowering them
with these and most advanced chips. The second part and
where the sort of bubble crowd when it comes to
AI comes into places. They're like, Yeah, all these hyperscalers
are putting billions and billions of dollars into capex to build,
(06:42):
But who's using this stuff? So companies like Salesforce, like
service Now, like Workday, these applications company the ones that
are powering businesses, Oracle and SAP seeing their AI offerings
which aren't brand new per se, but have not necessarily
contributed to earnings numbers as materially as investors would like
(07:04):
to see. So if Microsoft spending eighty billion or Google
spending seventy billion on capex, and then they're saying, hey,
we've got a couple billion dollars of revenue from all
of this, investment investors, well, they're still optimistic because you've
seen it in the stock price. They're still kind of
taking pause. Now, these applications, companies rolling out, these agents.
These are the consumption layer, and this is the utilization
(07:25):
of all this compute processing that's being built, these tokens,
these agents, these applications. So seeing Salesforce's result today, seeing
it mention about sixty percent of its deals have meaningful AI,
seeing it stay it wants to hire two thousand sales
reps to sell more of it. A bit ironic but
yet interesting because you'd think maybe the agents could do
(07:45):
the work. But I think that's all part of the
process of getting us to this larger, more meaningful consumption
that will prove to the market that this isn't a bubble,
which I don't think it is.
Speaker 2 (07:54):
So it comes down to winners and losers. I can
throw out names like Alphabet, like Microsoft, like Amazon. Even
are you placing bets on companies that you think have
a competitive advantage as the result of adopting AI right now?
Speaker 1 (08:08):
Well, first of all, the operating leverage of those hyperscaler
and cloud companies and they're so much more right the Amazon,
Microsoft and Google does provide them a huge advantage. Really,
the only companies that are outside of those scale of
the scale of those companies are the likes of an
open Ai, which has so much funding behind it that
(08:29):
it's able to go make six and a half billion
dollar acquisitions of Jony Ives's company, and it's able to
kind of lose billions of dollars a quarter to build
out something that people will buy, consume, and utilize. I
think the metric to watch is, look, we're going to
build this infrastructure future out. It's a race with China.
We are going to try to advance power, which, by
(08:49):
the way, that power is a huge advantage to China
and the US. Trying to deregulate some of what it's
doing in nuclear, for instance, is going to be important,
but it could take years to build up any sort
of nuclear infrastructre sure, But in the end, it is
going to be those applications, the ones that unlock the
mass amounts of data. IBM CEO has told me the
(09:09):
last time I spoke to, ninety nine percent of enterprise
data has not yet touched AI. So while we've seen
the entire Internet be scraped over the last couple of
years to be utilized for these large language models like
chat GPT, the enterprise has actually moved quite slow. Is
in the earliest phase of adoption, and until businesses are
really putting that AI to work at scale, we are
(09:31):
necessarily going to completely provide confidence to the market that
this AI transformation from infrastructure build out the basically the
roads and the pathways, turns into businesses making money and
making more efficient business decisions because of it. But that
is where we are heading.
Speaker 2 (09:49):
Last question before I let you go, Daniel, you mentioned
Johnny Ive and the deal he has with open Ai.
Know now we know I've to be the designer for
many of Apple's device Is the iPhone being one? Do
you think the fact that I've is now partnering with
open ai Sam Altman to come up with some hardware
device that will essentially be designed for artificial intelligence, does
(10:12):
that represent a wake up call for Apple.
Speaker 1 (10:16):
Apple has been shocking with its implementation of AI. I
gave them the grace of several quarters with Apple Intelligence
to say Apple can get there. And here's the crazy thing, Doug,
is that Apple has such a committed and dedicated user
base that I think it can actually continue to fumble
(10:36):
and still be successful. Having said that, there does seem
to be an inroads right now. You see what Google
did at its recent IOW event in terms of some
of the next generation technology that it's launching. Google of
course has Android. They're building technologies right into devices and
into the cloud. We'll see what Microsoft is developing. Apple seems,
for whatever reason, to be so focused on supply chain,
(10:59):
and of course the administrations put a lot of pressure there.
But this isn't a new symptom for the company. This
has been several quarters in a row. Underperforming, doesn't have
an answer for large language models, hasn't had an answer
for really the on device opportunity. I think that Apple.
Speaker 4 (11:14):
Is a little bit at risk.
Speaker 1 (11:16):
I also think Sam Altman's ambitions sometimes scale far beyond
He was going to build seven trillion dollars worth of infrastructure.
He's going to replace social media networks, and he's also
going to take out Google. I think he's got he's
got big ideas. So far, he's executed one of them,
which is the generative AI movement becoming and chat GPT
becoming the Kleenex of large language models. But I also
(11:38):
think trying to get into hardware at scale is going
to prove to be a very different challenge. I'm very
conflicted as to whether that was a good use of
six and a half billion dollars when the company's already
burning cash.
Speaker 2 (11:50):
Daniel will leave it there. It's always your pleasure. Thank
you so much. Daniel Newman there. He is the CEO
at the Futurum Group. Joining us here on the Daybreak
Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm
dok Chrisner. The equity market in the US drifted lower
(12:11):
in front of the results from Nvidia. We had the
S and P down about six tens of one percent.
That after that two percent rally on Tuesday. Joining me
now for a closer look at market action is Tim Pagliara.
He is the chairman also the chief investment officer at
cap Wealth. Tim is on the line from Franklin Tennessee. Tim,
It's always a pleasure to chat with you. There are
(12:32):
so many things that we could talk about. We could
begin with a story on the Nvidia earnings. We could
talk about US fiscal policy and what we're hearing from
the Fed. I'm curious as to where you are focused
right now.
Speaker 5 (12:45):
I mean sped policy and as a wait and see
approach right now, and the most significant thing for all
of us to watch in the markets is whether the
bond market is going to impose the discipline that cast
risk cannot impose through spending cuts and getting the budget
(13:06):
under control. So as the final details of this budget
emerge and it's reconciled with the Senate, then you're going
to see whether or.
Speaker 4 (13:16):
Not rates go higher or they go lower.
Speaker 5 (13:20):
If the perception is that we've made significant progress, for example,
debt annual GDP spending goes from seven percent maybe to
five percent, and the market thinks that that's significant, given
the fact that we have made permanent tax cuts and
(13:41):
we've increased a number of worthy things for working class
people and everything from tax credits for seniors, to increase
child tax credits for families, increase in the standard deduction.
If that whole package satisfies the financial market, specifically the
(14:02):
bond market. Then I think the Trump administration has had
a big victory so far this year.
Speaker 2 (14:08):
So we're looking at a tenure that's under four point
fifty right now in the New York session on Wednesday,
Are you prepared to say that rates are going to
get closer to four percent than they are five percent
on the tenure?
Speaker 5 (14:22):
Now? My belief is, again the victory is if they
stabilize where they are right now. It just all depends
on the perception and the details that come from the
reconciliation of what the House is proposed and what the Senate.
Speaker 4 (14:39):
Will how it will be adjusted.
Speaker 5 (14:41):
So you could see the ten year ago to five percent,
I don't think you see it go going much below,
say four and a quarter.
Speaker 2 (14:50):
Okay, we had the Nvidia earnings after the bill, and
guidance I think was critical for the market. So a
solid forecast from what we can tell, revenue for the
current quarter will be around forty five billion, and amazingly,
that's after subtracting eight billion in lost Chinese sales because
of those export controls. Have you been a buyer of
(15:11):
the AI trade, particularly through names in the chip space
like in Nvidia.
Speaker 5 (15:18):
We've got a more expansive view of the AI trade.
For example, we believe it's the applications that come from
Navidia chips in AI. So we've been long term holders
of Palenteer. Two years ago we made the decision to
buy Palenteer instead of Navidia. We've also really beefed up
(15:42):
our holdings in electric utilities. You know, the AI revolution
is going to cause the country to have to double
electricity output, you know, over the next ten years, and
so we picked up Constellation Energy back during that real
chio period in April at.
Speaker 4 (16:03):
You know, one hundred and eighty five dollars a share.
Now it's over three hundred and five dollars.
Speaker 5 (16:07):
So these these things they kind of flash, the markets
settle down, and you have to be very nimble, and
you have to have a by list of things that
you find attractive that really make up the whole AI trade.
So it's electricity, it's data centers. Another big one is lumen.
(16:30):
There's a cover story and Fortune this week about Kate
Johnson and how she's leading the AI revolution through the
technology infrastructure that has to be created between data centers.
You know, Oracle, for example, has entered into a partnership
with Lumen. They have one hundred data centers right now,
(16:52):
either under construction or operational, and the infrastructure of transferring
data between those centers to increase somatically, and Lumen's right
in the middle of that. They also have agreements with
IBM and Google, and a big agreement that they entered
into with Microsoft.
Speaker 4 (17:10):
So you know, it's not it's not the chip.
Speaker 5 (17:15):
The chip's important, but it's the applications of that chip
in commerce and how it's going to change everybody's lives.
Speaker 2 (17:22):
I'm just wondering whether or not some of the tension
between the US and China has the potential to pretty
dramatically hold back revenue growth for some big American tech players.
Tonight we learned that the Trump administration will restrict sales
of chip design software to China. We're told the Commerce
Department has been sending letters to some leading providers of
(17:43):
electronic design automation. And when you look at this this tension.
We talked about the Nvidia story and the export controls
and the degree to which even Jensen Wong, the CEO
of Nvidia, was saying this is going to be a
hindrance to our growth, the fact that we have these
export controls where the Chinese market is concerned. Broadly speaking,
do you think that some of this trade policy has
(18:06):
the potential to restrain growth for American tech firms.
Speaker 5 (18:10):
Yes, but I think in the near term, you know,
it's a national security issue. That's why you you know,
saw Trump, I believe in the Middle East and Jensen
Wong was shoulder to shoulder with the President, and they're
attempting to give them additional outlets through kind of a
Most Favored Nation status that they have imparted into the
(18:32):
Middle East, you know, for AI development and anything that
decentralizes the Chinese influence in artificial intelligence and moves it
towards our partners, for example in India. And like I said,
the Middle East should benefit companies like Navidia, and they'll
(18:53):
be able to pick up the slack. You know, it's
not a good place for them to be doing business
in the first place. They'll you know, they're notorious for
stealing their you know, proprietary technology, all of that, and
so I think in the long run it'll have no impact.
Speaker 2 (19:12):
Short run, yes, so technology is obviously one part of
the trade story. It's kind of interesting today that Wilburgh Ross,
who of course, as we know, was Commerce Secretary during
the first Trump administration, was saying that he expects the
equity market in the US to sour by the end
of late June if there is not progress on trade talks.
(19:32):
That's a pretty tight timeline. If we don't get agreements
by the end of June. Do you think that there's
a real risk of some sort of upheaval in US equities?
Speaker 5 (19:41):
I think, you know, I would call fall short of
calling it up evil. I think it will go back
to a more heightened focus on valuation, and there's still
issues relative to the valuations of companies and what they
can reasonably deliver in terms of growth.
Speaker 4 (20:00):
So I think they're going to make a lot.
Speaker 5 (20:03):
Of progress by the end of June, or they wouldn't
be advertising that as one of their objectives.
Speaker 2 (20:11):
Tim will leave it there. Thank you so much. It's
always a pleasure. Tim Pagliara there. He is the chairman
also the chief investment officer at cap Wealth. Joining from Franklin,
Tennessee here on the Daybreak Asia podcast. Thanks for listening
to today's episode of the Bloomberg Daybreak Asia edition podcast.
Each weekday, we look at the story shaping markets, finance,
(20:32):
and geopolitics in the Asia Pacific. You can find us
on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
else you listen. Join us again tomorrow for insight on
the market moves from Hong Kong to Singapore and Australia.
I'm Doug Chrisner, and this is Bloomberg
Bloomberg Audio Studios, podcasts, radio News.
Speaker 2 (00:11):
Welcome to the Daybreak Asia podcast. I'm Doug Prisner. Let's
begin with tariffs. Late in the day in the States,
we had the US Trade Court dealing a major blow
to the Trump administration. It found the president's global tariffs
illegal and as a result, the court has blocked these levees. Now,
this ruling, to be fair, can be appealed by the
Trump administration in federal court. Today, a panel of three
(00:34):
judges at the US Court of International Trade in Manhattan
sided with Democratic led States and a group of small businesses.
They successfully argued that the Trump administration had wrongfully invoked
an emergency law to justify these levies. We'll see where
we go from here. Let's move on to the most
important earnings report of the week. After the bell, we
(00:57):
heard from Nvidia, and the company reported data center revenue
for the latest quarter close to estimates. Perhaps more importantly,
the chip maker gave a solid forecast for revenue in
the current quarter despite a slow down in China, and
Vidia is now expecting sales overall of about forty five
billion dollars. That's after subtracting eight billion in lost Chinese
(01:19):
sales because of those export controls. We heard earlier from
Nvidia CEO Jensen Wong speaking on the impact of those
export controls.
Speaker 3 (01:29):
The limitations are quite quite stringent, quite limited, if you will.
H twenty is you know, as far down as we
could take a hopper. We don't know how to make
it even less, and so that's really the limit.
Speaker 4 (01:45):
But there aren't there aren't.
Speaker 3 (01:48):
You know, The limitations are quite stringent, so we have
we have to really think through it. Whatever we make
ultimately has to add value to the market.
Speaker 2 (01:56):
Jensen Wong. They're the CEO of Nvidia. By the way,
you can watch the full conversation with Wog on the
Bloomberg podcast channel. It's on YouTube, shares and invidio. We're
up nearly five percent in late New York trading. Let's
take a closer look at the story on in video
with Daniel Newman. He is the CEO of Futurum Group. Daniel,
thank you for making time to chat with me on this.
(02:18):
What did we really see today that kind of can
move the market in one way or another when it
comes to in video.
Speaker 1 (02:25):
The overall reaction to the Nvidia print was very positive.
Having said that the China woes are still not solved.
In In fact, if anything, Wong gave further doubt and
uncertainty to whether or not the company can really even
participate in that market. But having said that, even with
the multiple billions they couldn't ship this quarter, the write
down which ended up being just a little bit less
(02:46):
dug than what was expected, and the future sales, the
guide and the result this quarter showed that there is
a lot of positive momentum that must be taking place
outside of the region. And one of the really important
point is over the last several quarters, you've heard Long
pivot his conversations towards new markets like physical AI, robotics,
(03:09):
but also he's returned to talking about some of the
core business markets segments like gaming and automotive, and those
segments really outperformed, showing some really strong results, which I
think is important at this particular time, as I think
there's a little bit of fatigue on the data center
conversation and despite we're so early in AI, after eight
(03:29):
or nine continuous quarters of big in Vidia results in
this sort of Nvidia event each quarter, people want to
know how in Vidia is going to keep their growth,
and he showed it's not just data center and China
alone can't stop its momentum.
Speaker 2 (03:41):
Yes, the China market is no doubt very important for Invidio.
I found it interesting today that the Trump administration said
it will restrict the sale of chip design software to China.
This comes to the issue of whether or not a
company like Quahweh, for example, can develop AI chips that
could someday compete with those of Nvidia. Do you think
(04:02):
that's a big stretch.
Speaker 1 (04:04):
So we did hear about new rulings that could limit
the EDA software, some of the design tools, as you suggested,
and companies like Synopsis, which actually reported the same day
here as in Nvidia, took a big hit here. I
think there is a major chip being played unintended when
it comes to Nvidia and its ability to access the
Chinese market. And I think there is a bit of
(04:26):
give and take.
Speaker 4 (04:27):
Now.
Speaker 1 (04:28):
Wong is doing all the right things of the statesmen,
of the representative of A shareholders, and in Vidia wanting
to access this market that is a tam of fifty
billion plus dollars and holds half the world's AI researchers
in it. The US is playing a slightly different game.
We heard today about the possible blockade of certain terrorists.
But the Trump administration does understand that winning the AI race,
(04:51):
diffusing the Western and US based technology to everywhere in
the world is to its advantage. But the question is
does enable China. Does giving China access to any of
Nvidia's leading data center chips or even some of the
older ones like the Hopper chips they especially designed for China,
does that actually slow China down? And this is where
I don't entirely agree with Wong saying if we don't
(05:15):
give them these chips, China will go faster and build
I think Jijingping in the Chinese Party understands the importance
of leading an AI. It understands that it wants to
win because there are multiple decades of global economic leadership
at stake here. I think China's going as fast as
it can anyways. I think it's behind, but given its
ability to build energy and given its ability to brute
(05:38):
force through processes like they've done with Huawei as send,
I think it's a big mistake to rule them out.
So it puts a very tough juxtaposition for the Trump administration,
but it's also tough for in Vidia shareholders to lose
out on that market.
Speaker 2 (05:50):
So what about the adoption of AI technology by an
American company? And I'm going to use Salesforce as an
example because after the bell, Salesforce raised its gods for
revenue on the full year, and that's probably a good
indication that the company's latest AI product, known as agent Force,
is on a path to contribute significantly to increased sales.
(06:14):
Is this something we should see more of companies like
Salesforce adopting AI and beginning to realize the return on investment.
Speaker 1 (06:21):
This is what we want to see as we've watched
this massive infrastructure build out and the arms race that
is building data centers everywhere in the world, empowering them
with these and most advanced chips. The second part and
where the sort of bubble crowd when it comes to
AI comes into places. They're like, Yeah, all these hyperscalers
are putting billions and billions of dollars into capex to build,
(06:42):
But who's using this stuff? So companies like Salesforce, like
service Now, like Workday, these applications company the ones that
are powering businesses, Oracle and SAP seeing their AI offerings
which aren't brand new per se, but have not necessarily
contributed to earnings numbers as materially as investors would like
(07:04):
to see. So if Microsoft spending eighty billion or Google
spending seventy billion on capex, and then they're saying, hey,
we've got a couple billion dollars of revenue from all
of this, investment investors, well, they're still optimistic because you've
seen it in the stock price. They're still kind of
taking pause. Now, these applications, companies rolling out, these agents.
These are the consumption layer, and this is the utilization
(07:25):
of all this compute processing that's being built, these tokens,
these agents, these applications. So seeing Salesforce's result today, seeing
it mention about sixty percent of its deals have meaningful AI,
seeing it stay it wants to hire two thousand sales
reps to sell more of it. A bit ironic but
yet interesting because you'd think maybe the agents could do
(07:45):
the work. But I think that's all part of the
process of getting us to this larger, more meaningful consumption
that will prove to the market that this isn't a bubble,
which I don't think it is.
Speaker 2 (07:54):
So it comes down to winners and losers. I can
throw out names like Alphabet, like Microsoft, like Amazon. Even
are you placing bets on companies that you think have
a competitive advantage as the result of adopting AI right now?
Speaker 1 (08:08):
Well, first of all, the operating leverage of those hyperscaler
and cloud companies and they're so much more right the Amazon,
Microsoft and Google does provide them a huge advantage. Really,
the only companies that are outside of those scale of
the scale of those companies are the likes of an
open Ai, which has so much funding behind it that
(08:29):
it's able to go make six and a half billion
dollar acquisitions of Jony Ives's company, and it's able to
kind of lose billions of dollars a quarter to build
out something that people will buy, consume, and utilize. I
think the metric to watch is, look, we're going to
build this infrastructure future out. It's a race with China.
We are going to try to advance power, which, by
(08:49):
the way, that power is a huge advantage to China
and the US. Trying to deregulate some of what it's
doing in nuclear, for instance, is going to be important,
but it could take years to build up any sort
of nuclear infrastructre sure, But in the end, it is
going to be those applications, the ones that unlock the
mass amounts of data. IBM CEO has told me the
(09:09):
last time I spoke to, ninety nine percent of enterprise
data has not yet touched AI. So while we've seen
the entire Internet be scraped over the last couple of
years to be utilized for these large language models like
chat GPT, the enterprise has actually moved quite slow. Is
in the earliest phase of adoption, and until businesses are
really putting that AI to work at scale, we are
(09:31):
necessarily going to completely provide confidence to the market that
this AI transformation from infrastructure build out the basically the
roads and the pathways, turns into businesses making money and
making more efficient business decisions because of it. But that
is where we are heading.
Speaker 2 (09:49):
Last question before I let you go, Daniel, you mentioned
Johnny Ive and the deal he has with open Ai.
Know now we know I've to be the designer for
many of Apple's device Is the iPhone being one? Do
you think the fact that I've is now partnering with
open ai Sam Altman to come up with some hardware
device that will essentially be designed for artificial intelligence, does
(10:12):
that represent a wake up call for Apple.
Speaker 1 (10:16):
Apple has been shocking with its implementation of AI. I
gave them the grace of several quarters with Apple Intelligence
to say Apple can get there. And here's the crazy thing, Doug,
is that Apple has such a committed and dedicated user
base that I think it can actually continue to fumble
(10:36):
and still be successful. Having said that, there does seem
to be an inroads right now. You see what Google
did at its recent IOW event in terms of some
of the next generation technology that it's launching. Google of
course has Android. They're building technologies right into devices and
into the cloud. We'll see what Microsoft is developing. Apple seems,
for whatever reason, to be so focused on supply chain,
(10:59):
and of course the administrations put a lot of pressure there.
But this isn't a new symptom for the company. This
has been several quarters in a row. Underperforming, doesn't have
an answer for large language models, hasn't had an answer
for really the on device opportunity. I think that Apple.
Speaker 4 (11:14):
Is a little bit at risk.
Speaker 1 (11:16):
I also think Sam Altman's ambitions sometimes scale far beyond
He was going to build seven trillion dollars worth of infrastructure.
He's going to replace social media networks, and he's also
going to take out Google. I think he's got he's
got big ideas. So far, he's executed one of them,
which is the generative AI movement becoming and chat GPT
becoming the Kleenex of large language models. But I also
(11:38):
think trying to get into hardware at scale is going
to prove to be a very different challenge. I'm very
conflicted as to whether that was a good use of
six and a half billion dollars when the company's already
burning cash.
Speaker 2 (11:50):
Daniel will leave it there. It's always your pleasure. Thank
you so much. Daniel Newman there. He is the CEO
at the Futurum Group. Joining us here on the Daybreak
Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm
dok Chrisner. The equity market in the US drifted lower
(12:11):
in front of the results from Nvidia. We had the
S and P down about six tens of one percent.
That after that two percent rally on Tuesday. Joining me
now for a closer look at market action is Tim Pagliara.
He is the chairman also the chief investment officer at
cap Wealth. Tim is on the line from Franklin Tennessee. Tim,
It's always a pleasure to chat with you. There are
(12:32):
so many things that we could talk about. We could
begin with a story on the Nvidia earnings. We could
talk about US fiscal policy and what we're hearing from
the Fed. I'm curious as to where you are focused
right now.
Speaker 5 (12:45):
I mean sped policy and as a wait and see
approach right now, and the most significant thing for all
of us to watch in the markets is whether the
bond market is going to impose the discipline that cast
risk cannot impose through spending cuts and getting the budget
(13:06):
under control. So as the final details of this budget
emerge and it's reconciled with the Senate, then you're going
to see whether or.
Speaker 4 (13:16):
Not rates go higher or they go lower.
Speaker 5 (13:20):
If the perception is that we've made significant progress, for example,
debt annual GDP spending goes from seven percent maybe to
five percent, and the market thinks that that's significant, given
the fact that we have made permanent tax cuts and
(13:41):
we've increased a number of worthy things for working class
people and everything from tax credits for seniors, to increase
child tax credits for families, increase in the standard deduction.
If that whole package satisfies the financial market, specifically the
(14:02):
bond market. Then I think the Trump administration has had
a big victory so far this year.
Speaker 2 (14:08):
So we're looking at a tenure that's under four point
fifty right now in the New York session on Wednesday,
Are you prepared to say that rates are going to
get closer to four percent than they are five percent
on the tenure?
Speaker 5 (14:22):
Now? My belief is, again the victory is if they
stabilize where they are right now. It just all depends
on the perception and the details that come from the
reconciliation of what the House is proposed and what the Senate.
Speaker 4 (14:39):
Will how it will be adjusted.
Speaker 5 (14:41):
So you could see the ten year ago to five percent,
I don't think you see it go going much below,
say four and a quarter.
Speaker 2 (14:50):
Okay, we had the Nvidia earnings after the bill, and
guidance I think was critical for the market. So a
solid forecast from what we can tell, revenue for the
current quarter will be around forty five billion, and amazingly,
that's after subtracting eight billion in lost Chinese sales because
of those export controls. Have you been a buyer of
(15:11):
the AI trade, particularly through names in the chip space
like in Nvidia.
Speaker 5 (15:18):
We've got a more expansive view of the AI trade.
For example, we believe it's the applications that come from
Navidia chips in AI. So we've been long term holders
of Palenteer. Two years ago we made the decision to
buy Palenteer instead of Navidia. We've also really beefed up
(15:42):
our holdings in electric utilities. You know, the AI revolution
is going to cause the country to have to double
electricity output, you know, over the next ten years, and
so we picked up Constellation Energy back during that real
chio period in April at.
Speaker 4 (16:03):
You know, one hundred and eighty five dollars a share.
Now it's over three hundred and five dollars.
Speaker 5 (16:07):
So these these things they kind of flash, the markets
settle down, and you have to be very nimble, and
you have to have a by list of things that
you find attractive that really make up the whole AI trade.
So it's electricity, it's data centers. Another big one is lumen.
(16:30):
There's a cover story and Fortune this week about Kate
Johnson and how she's leading the AI revolution through the
technology infrastructure that has to be created between data centers.
You know, Oracle, for example, has entered into a partnership
with Lumen. They have one hundred data centers right now,
(16:52):
either under construction or operational, and the infrastructure of transferring
data between those centers to increase somatically, and Lumen's right
in the middle of that. They also have agreements with
IBM and Google, and a big agreement that they entered
into with Microsoft.
Speaker 4 (17:10):
So you know, it's not it's not the chip.
Speaker 5 (17:15):
The chip's important, but it's the applications of that chip
in commerce and how it's going to change everybody's lives.
Speaker 2 (17:22):
I'm just wondering whether or not some of the tension
between the US and China has the potential to pretty
dramatically hold back revenue growth for some big American tech players.
Tonight we learned that the Trump administration will restrict sales
of chip design software to China. We're told the Commerce
Department has been sending letters to some leading providers of
(17:43):
electronic design automation. And when you look at this this tension.
We talked about the Nvidia story and the export controls
and the degree to which even Jensen Wong, the CEO
of Nvidia, was saying this is going to be a
hindrance to our growth, the fact that we have these
export controls where the Chinese market is concerned. Broadly speaking,
do you think that some of this trade policy has
(18:06):
the potential to restrain growth for American tech firms.
Speaker 5 (18:10):
Yes, but I think in the near term, you know,
it's a national security issue. That's why you you know,
saw Trump, I believe in the Middle East and Jensen
Wong was shoulder to shoulder with the President, and they're
attempting to give them additional outlets through kind of a
Most Favored Nation status that they have imparted into the
(18:32):
Middle East, you know, for AI development and anything that
decentralizes the Chinese influence in artificial intelligence and moves it
towards our partners, for example in India. And like I said,
the Middle East should benefit companies like Navidia, and they'll
(18:53):
be able to pick up the slack. You know, it's
not a good place for them to be doing business
in the first place. They'll you know, they're notorious for
stealing their you know, proprietary technology, all of that, and
so I think in the long run it'll have no impact.
Speaker 2 (19:12):
Short run, yes, so technology is obviously one part of
the trade story. It's kind of interesting today that Wilburgh Ross,
who of course, as we know, was Commerce Secretary during
the first Trump administration, was saying that he expects the
equity market in the US to sour by the end
of late June if there is not progress on trade talks.
(19:32):
That's a pretty tight timeline. If we don't get agreements
by the end of June. Do you think that there's
a real risk of some sort of upheaval in US equities?
Speaker 5 (19:41):
I think, you know, I would call fall short of
calling it up evil. I think it will go back
to a more heightened focus on valuation, and there's still
issues relative to the valuations of companies and what they
can reasonably deliver in terms of growth.
Speaker 4 (20:00):
So I think they're going to make a lot.
Speaker 5 (20:03):
Of progress by the end of June, or they wouldn't
be advertising that as one of their objectives.
Speaker 2 (20:11):
Tim will leave it there. Thank you so much. It's
always a pleasure. Tim Pagliara there. He is the chairman
also the chief investment officer at cap Wealth. Joining from Franklin,
Tennessee here on the Daybreak Asia podcast. Thanks for listening
to today's episode of the Bloomberg Daybreak Asia edition podcast.
Each weekday, we look at the story shaping markets, finance,
(20:32):
and geopolitics in the Asia Pacific. You can find us
on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
else you listen. Join us again tomorrow for insight on
the market moves from Hong Kong to Singapore and Australia.
I'm Doug Chrisner, and this is Bloomberg
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