No AI Bubble Says Nvidia, Bumper Bank Earnings, Speedy Trading Showdown

Your morning briefing, the business news you need in just 15 minutes.

On today's podcast:

(1) Nvidia Chief Executive Officer Jensen Huang announced a flurry of new partnerships and dismissed concerns about an AI bubble, saying the company’s latest chips are on track to generate half a trillion dollars in revenue.

(2) Donald Trump said he expects to lower tariffs the US has imposed on Chinese goods over the fentanyl crisis and speak with China’s Xi Jinping about Nvidia Corp.’s flagship Blackwell artificial intelligence chip, as leaders of the world’s biggest economies seek to ease tensions in a meeting on Thursday.

 
(3) UBS Group profit beat expectations in the third quarter as investment banking revenue and lower-than-forecast legal costs boosted performance.

 
(4) Deutsche Bank AG exceeded analyst estimates for fixed-income trading, and Banco Santander posted third-quarter results that beat analysts’ estimates in its sixth consecutive quarterly record.

(5) Hurricane Melissa is expected to make landfall in Cuba just hours after it became the strongest recorded storm to strike Jamaica, where it left hundreds of thousands without power and forced hospitals to evacuate.

(6) Prime Minister Benjamin Netanyahu ordered “forceful strikes” against Hamas in response to attacks on Israeli soldiers in Gaza, jeopardizing a US-brokered ceasefire that’s held for just over two weeks.

High Frequency Trading Triggers a Showdown Over a London Rooftop: For years, a drab building located just one mile past the skyscrapers of London’s Canary Wharf neighborhood has been the site of one of the fiercest battles in the world of high-frequency trading.

 
Podcast Conversation: Bone-In Fried Chicken Is Making KFC ‘Irrelevant’ and ‘Invisible’

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak ero A podcast. Good morning, It's Wednesday, the twenty
ninth of October. I'm Stephen Carolyn London. Coming up today.
In Vidia's CEO dismisses talk of an AI bubble as
he makes the case for tech firms sky high valuations.

(00:25):
Ubs delivers results that smash expectations on a big day
for European bank earnings. Plus why high frequency trading is
about to get even faster as a canary wharf rooftop
becomes the new battleground for those seeking an edge. Let's
start with a roundup of our top stories. The boss
of the world's most valuable company, in Vidia, has dismissed

(00:46):
concerns of an artificial intelligence bubble, saying the company's latest
chips are on track to generate half a trillion dollars
in revenue. Speaking to Bloomberg at an Nvidia event in Washington,
CEO Jensen Wong said the four point nine trillion dollar
cup company is partnering with firms like Nokia, Uber and
Palanteer to keep its technology at the center of the

(01:07):
AI boom.

Speaker 2 (01:08):
I don't believe we're inn AI bubble, and the reason
for that is we're going through a natural transition from
an old computing model based on general purpose computing to
accelerated computing. We also know that AI has now become
good enough because of reasoning capability, research capabilities, its ability
to think, it's now generating tokens, in now generating intelligence

(01:29):
that's worth paying for.

Speaker 1 (01:31):
Quong's comments came as the world's most valuable startup, open Ai,
unveiled a sweeping restructuring that gives longtime backer Microsoft a
twenty seven percent stake, valued at about one hundred and
thirty five billion dollars. Together, the announcements highlight the unprecedented
waves of investment and speculation fueling valuations across the sector well.

(01:55):
Justin Wang also warned that maintaining America's edge and AI
will require an approach that keeps China reliant on US technology.
The VITA CEO also said that President Trump's vowed to
win the global AI race is exactly what's needed.

Speaker 2 (02:09):
We're currently assuming China is going to be zero percent
of our business, and if it comes back, if President
Trump was able to negotiate, or if China would like
us to come back to China. It's going to be
a huge.

Speaker 1 (02:20):
Bonus for US wants. Comments come as the US President
prepares to meet his Chinese counterpart, cheating pay to finalize
a series of trade agreements, saying that rolling back tariff's
fees and exports restrictions. Speaking to reporters on Air Force one,
Trump said he will raise the issue of invidious chips
during the meeting.

Speaker 3 (02:38):
We'll be speaking about Blackwell's the super duper GYP.

Speaker 1 (02:42):
Blackwell's amazing Navidio makes it.

Speaker 4 (02:45):
We're about ten years ahead of anybody else in gips,
in the highly sophisticated chips.

Speaker 3 (02:52):
I think we may be talking about that with President.

Speaker 1 (02:56):
That was President Trump speaking, also saying that he hopes
to lower tariffs and change for Chinese commitments on soybeans
and fentanel to some of the European banks. Reporting this morning,
UBS has seen profits more than a billion dollars higher
than expected in the third quarter. Net income came in
at almost two point five billion dollars unless it expected

(03:17):
one point four billion. The result was aided by lower
than expected legal costs over the settlement of a tax
evasion case in France and a legacy Credit Suisse issue.
The Swiss lenders investment banks saw pre tax profits that
was double what was estimated at nine hundred million dollars.
Inflows that the key wealth management units came in ahead
of estimates at thirty eight billion dollars, though pre tax

(03:37):
profit there was below estimates. Staying with bank earnings, Santander's
profits also came in above expectations at three point five
billion euros for the quarter. Net interest income at the
Spanish lender miss estimates, but loan loss provisions were lower
than had been expected. While in Germany, Deutsche Bank has
reported pre tax profits that also beat expectations, coming in

(04:00):
at two point four five billion euros. That was boosted
by better than expected revenue from its fixed income and
currency sales and trading division that came in at two
point four eight billion euros. To other news, Hurricane Melissa
has made landfall as the strongest storm ever recorded in Jamaica,
with sustained winds of one hundred and eighty five miles

(04:22):
per hour. The storm has brought days of torrential rain,
putting residents and an estimated twenty five thousand tourists at risk.
To make his Education Minister Dana Dixon says the conditions
are the worst the island has ever experienced.

Speaker 5 (04:35):
It is important that we get everyone all to get
people to save areas.

Speaker 6 (04:40):
It's not just the wind, it's also the rain.

Speaker 1 (04:43):
The rainfall will be record levels. Education Minister Dana Dixon
speaking there. Melissa now dengraded to a Category four storm
is expected to reach Cuba and the Bahamas in the
next few hours. At least twenty people are reported to
have been killed in Gaza after Israel's Prime Minister benjaminette
and Yahoo ordered what he called force full strikes against Hamas.

(05:07):
Israeli military officials said the action was in response to
Hamas militants attacking their soldiers in the territory. Jen Gavito,
a senior advisor at the Coen Group, says there's still
a long way to go before the ceasefire can truly hold.

Speaker 5 (05:20):
I do think that, you know, if you put this
agreement in the context of broader normalization potential between Arab
states and Israel, you know, everybody has incentive to this
to make this work long term. But there is an
awful lot of work to be done, not least of
which you know, the very very basic humanitarian requirements as

(05:41):
a starting point and then reducing the violence in the
West Bank as well.

Speaker 1 (05:45):
Jen Gevito speaking, there is the renewed military Action tested,
an agreement whose key terms called for both Hamas and
Israeli forces to halt their attacks over Speaking in the
past few hours, the US President Donald Trump said that
nothing is going to jeopardize the ceasefire heat brokeers just
over two weeks ago, adding that Hamas is only a
very small part of peace in the Middle East, and

(06:09):
Federal Reserve policymakers are expected to lower interest rates by
a quarter percentage point later today. That comes despite a
lack of available data due to the ongoing US government shutdown.
FED Charge your Own Power signaled earlier this month that
rate setters remain focused on threats to the labor market,
but former Kansas City FED President Esther George says the
Central Bank should not lose sight of its goal to

(06:30):
keep inflation on target.

Speaker 6 (06:32):
This is a tough environment when you have cross currents
of major policies in play of judging what that outlook
is going to be. That, of course, is why they're
paying particular attention to the labor market. I think that's
right to keep an eye on that by the same token,
their most direct impact does come through their inflation and

(06:54):
reduction ability.

Speaker 1 (06:57):
There was former Kansas City Fed President s George. They're
speaking as we will have live coverage and analysis of
the Center Bank's rate decision on Bloomberg Radio at six
pm London time, with Jerome Pal's full press conference thirty
minutes later. Well, those are our top stories. I've been

(07:18):
on the markets this morning. We're looking at the MSCIS
Pacific Index up by four tenths of one percent, the
Nika and Tokyo two point one percent high, the Cospian
Soul one point seven percent higher. European stop futures a
little lower, down two tenths of one percent for eurostocks fifty,
although NAZAC futures on Wall Street are up four tenths
of one percent. As we're thinking about the movement in
tech shares today, the tenure Treasury yield to have of
that Fed decision holding steady a three point nine eight percent.

(07:41):
The Bloomberg Dollar Spot Index is a tenth of one
percent stronger. Now in a moment, more on the latest
bumper projections for AI chip sales, plus why a battleover
proximity is changing the game for high frequency traders in London.
But another story that I've been reading this morning, younger
customers have a bone to pay with KFC. Apparently Bone

(08:02):
in Fried Chicken is making the brand irrelevant and invisible.
That's according to its US president Catherine Tang Gillespie is
speaking to our colleague Red Brown about this. He's been
writing about how there's a boom in popularity for fried
chicken at American restaurants, but surprisingly that's not helping KFC,
which is actually the only one of the big chains
that focuses on this area to see it sales full.

(08:25):
Last year, Catherine Tang Gillespie from KFC told Red that
KFC used to be an American icon, but somewhere along
the way they stopped acting like one. And apparently this
is due to the increased popularity of boneless chicken products,
which KFC sells some of but doesn't focus on as well.
So the numbers from industry monitors have seen the sales
of boneless chicken go up by more than eleven percent,

(08:47):
while Bone in Chicken has fallen by four percent. In
case you're looking for data on your chicken consumption at
this hour of the morning. So this is something that
KFC is now trying to push back on with new products,
cut prices, and also viral marketing campaigns as well. Red
points out, though that KS actually tried out buckets of
bonus chickens in twenty thirteen, but it didn't last. Maybe

(09:09):
they were just ahead of their time. You can read
his full piece at Bloomberg dot com and we'll put
a link to it on our podcast show notes back
to the text story in videos, Jensen Wong just missing
concerns about an AI bubble as he predicted another surgeon
sales for its chips next year. There was also a
similar message from one of Nvidia's top suppliers, South Korea's
sk Heinex, as it reported an over sixty percent jump

(09:31):
in profit. Our technology editor Mayomi Neghihi joins me now
for more, May you be great to have you with us?
Are Jensen Wong's comments then, camming fears in the markets
that the AI rally's gone too far, too fast.

Speaker 4 (09:45):
No, I don't think so. But he's definitely giving people
the confidence that other people will believe the party will
go on for a while. Yet, I would say in video,
supplier shares of advest test chairs search more than twenty percent.
Esk Heinecks shares a up. Jensen Wang saying that Blackwell
and will bring in half a trillion dollars in revenue

(10:07):
is just it just mind boggling numbers here, and it's
clear that orders are coming into and video supplier. I
think the underlying concerns remain. As a consumer, I have
yet to come across an AI service I can't do without,
and it's still a struggle to justify this level of
spending in these types of valuations that really are kind

(10:28):
of in part being fueled by the same companies investing
in one another and buying products from each other. But
that said, bubbles to a certain point are necessary for innovation.
It just gets more and more costly to develop, like
really life changing technology and infrastructure. So I think that's
what we're seeing in action, and the hope is that

(10:50):
when we emerge on the other side, we will have
as a society built something that has improved our lives
so that we can all quickly dust ourselves off when
the party does end.

Speaker 1 (11:01):
Well indeed, but I mean no sign of the party ending.
If you look at esk Heinex's earnings today. What did
we learn from them, Well.

Speaker 4 (11:09):
That this competition between tech companies and countries to sort
of build AI has hit fever. Pitch sk Heinex says
that they sold out on all their entire memory chip
lineup for all of next year. I mean that everything
has been spoken for, So we're talking you know, not

(11:33):
just the cutting edge AI chips, but you know, more
conventional chips that you use in server storage devices and switches.
So that's real equipment and real companies putting a lot
of money down to reserve this kind of infrastructure because
the competition is just so fierce and everyone is afraid

(11:54):
of falling behind.

Speaker 1 (11:56):
This is interesting to think about.

Speaker 4 (11:57):
Two.

Speaker 1 (11:58):
Given Donald Trump's trip to Asia, Jensen Wang saying that
he'll be seeing Donald Trump at the APEX summit as well,
how vulnerable is in video or this sector in general
to the US President's policies.

Speaker 4 (12:11):
I think it's extremely important. I mean, this meeting will
be pivotal. This may be one of the few chances
left for in video to pry open the China market
for in video chips. Again. Right now, the lead, the
technological lead in video has over Huawei is so formidable
that China might still be tempted to not go cold

(12:32):
Turkey on in video chips just yet and put its
sort of long term objectives of building tech resilience and
independence aside. But that said, I mean, all this on
again off again curbs on chip technology has really spooked
China and underlines the importance of developing its own chip

(12:56):
supply chain and chip ecosystem. So right now and Video's
lead is so vast that Chinese companies are sort of
compensating by bundling lots of Huawei chips together to try
to imagine video performance. And you know that just means
you need more power. But the longer China is sort

(13:19):
of forced to try to build its own chip supply
chain and ecosystem, the longer Chinese developers will you come
to rely on their own homegrown software, and the more
difficult it will be for in video to come back in.
So it really hurts in video to be shut out
of this huge renaissance that's occurring right now in AI
and robotics in China.

Speaker 1 (13:41):
Yeah, a fascinating one to watch as well. Miaomi Negishi,
our technology ezer, thank you very much for bringing us
the latest on that story. Stay with us more from
Bloomberg Daybreak Europe coming up after this. Now, high frequency
trading is about to get even faster in London after
a little known technology firm took on the London Stock
Exchange Group in order to get access to a building's

(14:01):
rooftop for its radio devices. If follows an investigation by
the UK's Financial Conduct Authority in our private market support
and Meg Shorts, Meg Shors joins us now for more. Meg,
good morning, great to see you. What is this investigation about?

Speaker 3 (14:13):
So it's really over a rooftop in East London and
who can access it? LSEG, the data center for their
exchange sits in the building and previously before the investigation
it was only them who could access it. So McKay brothers,
the little known company, they had to and other providers
had to put their radio technology on different rooftops and

(14:37):
they were ultimately further away from the exchange. And that's
quite important because their radio technology is connecting high frequency
traders to the exchange and it's all about speed. So
we're talking like a billionth of a second, but that
can be the difference of millions of dollars really, So yeah,
that's that's what it's about the access to the rooftop.

Speaker 1 (14:59):
So why are these radio signals so important then for
high frequency trading.

Speaker 3 (15:03):
Because it's it's basically this new kind of technology. So
previously high frequency trading at start there that involves these
really complex algorithms that kind of churn and analyze data
and then they execute the trades upon that. It used
to all be about fiber cables and how to make
them the straightest so that they could be the quickest,

(15:24):
but now it's about this like microwave technology. McKay Brothers
was actually one of the first to kind of come
up with this specific technology high frequency traders. You're thinking
of firms like Virtue and Jane Street. They used to
be it's not really a new thing anymore, but it
kind of was a bit vilified if you think of
like Flashboys Michael Lewis's book as kind of front running

(15:48):
investors getting ahead of normal trading. But it's not that
new anymore, so it's a little bit different.

Speaker 1 (15:56):
This is Bloomberg Daybreak Europe, your morning brief on the
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Speaker 1 (16:23):
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