May 28, 2025 • 42 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Nvidia Corp., the world’s most valuable chipmaker, gave an upbeat revenue forecast for the current period, even as a slowdown in China weighed on results.
Sales will be about $45 billion in the second fiscal quarter, which runs through July, the company said on Wednesday. That included the loss of roughly $8 billion in revenue from China because of export controls. The forecast was in line with analysts’ estimates, according to data compiled by Bloomberg.
The outlook shows that Nvidia is ramping up production of Blackwell, its latest semiconductor design. The chipmaker — now the world’s largest by revenue — dominates the market for AI accelerators, the components that help develop and run artificial intelligence models. And an ever-broader lineup of hardware and software is letting Nvidia sell more products to customers.
As part of that push, the company is increasingly offering its chips as part of whole computer systems — a move it says is necessary to speed up the deployment of more complex and powerful technology. Nvidia expects AI infrastructure to eventually transform much of the economy, part of what Chief Executive Officer Jensen Huang refers to as a new industrial revolution.
Today's show features:
- Jay Goldberg, Senior Analyst at Seaport Research Partners on Nvidia earnings
- Bloomberg Businessweek Senior Reporter Max Chafkin
- Bloomberg News Cross-Asset Reporters Emily Graffeo and Vildana Hajric
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:08):
This is Bloomberg business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business finance
and tech news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
I want to go to Nvidio though, because we are
going to see their numbers drop probably any moment now,
and we are seeing the stock up about eight tenths
of a percent here in the after market. Obviously a
big deal, biggest semiconductor company. What they have to say
about the AI trade, and it's not just the hyperscalers
but beyond as we heard from Kunjohn Sabania Bloomberg Intelligence,
(00:53):
So second tier companies are they also biding buying into
and video chips. So we'll have to see what they
have to say say. And Vidia is app folks, let's
get to it. First quarter just to DPS eighty one
cents a share.
Speaker 4 (01:05):
That's a miss. Street was looking.
Speaker 3 (01:07):
For ninety three cents, so twelve cents shy what the
street was expected expecting revenue is expected to be forty
five billion plus or minus two percent. First quarter revenue
forty four point one billion, that was a beat the
street expectations was forty three point twenty nine billion. First
quarter adjusted gross margin that was a miss sixty one
(01:30):
percent versus an estimate of seventy one percent. Company, though
saying that the second.
Speaker 4 (01:35):
Quarter outlook reflects a loss in H twenty revenue of
about eight billion.
Speaker 3 (01:40):
Keep in mind that when that ban came from the
administration and vide did do a write down of about
five and a half billion dollars, and Kunjan said it
was a little noisy because not all of the estimates
on the street had incorporated that full H twenty ban.
Speaker 5 (01:55):
Yeah, shares bouncing around right now of about eight tenths
of one percent in the after hours. They were down earlier.
The company said that global demand for AI infrastructure is
quote incredibly strong, also saying that Blackwell's NVL seventy two
AI supercomputer is in full scale production. The company also
said the second quarter outlook reflects a loss in H
(02:16):
twenty revenue of about eight billion dollars. So I wonder
if that charge, Carol that they took was relatively conservative,
The company also saying it was unable to ship and
add a two point five billion dollars of H twenty
revenue in the first quarter. The company also saying it
will pay a quarterly dividend of one cent per share
that will happen on July third. Shares right now in
(02:37):
the after hours are moving higher, up about two point
five percent.
Speaker 4 (02:41):
Yeah, up about two yeah, exactly.
Speaker 3 (02:43):
The CEO, Jensen Wong, who we're going to hear from
our Ed Ludlow's going to talk with him at six
thirty pm Wall Street time on Bloomberg TV and radio.
The CEO saying the company stands at the center of transformation.
Go back to what he said about global demand for
AI infrastructure, incredibly strong adjectives, and so we're going to
want some more numbers around that. We're getting more on
(03:04):
the first quarter at comput revenue thirty four point sixteen billion,
a little light. Street was looking for thirty five point
forty seven billion. First quarter networking revenue four point ninety
six billion. Street estimate was three point forty five billion,
So that's a bit of a big beat. But again,
the key headlines seem to be what it says about
second quarter revenue forty five billion plus or minus two percent.
(03:26):
The estimate on the street is forty five point five billion,
So we could have some upside.
Speaker 4 (03:31):
Tim from it, or we could see some downside from it.
Speaker 5 (03:34):
We're seeing shares right now hire about about three point
two percent in the after hours. Want to bring in
Jay Goldberg, senior analyst Semiconductors and Electronics at Seaport Research Partners.
Jay joins us from San Francisco. Jay, I want to
get your reaction to earnings in just a minute. I
should note that you are the only analyst listed on
the Bloomberg terminal with a cell rating for Nvidia. Does
(03:55):
today's result keep you at a cell rating?
Speaker 6 (03:59):
So I have to go through numbers first, but I
would say yes.
Speaker 7 (04:02):
I mean, my take is that in video, the most
scrutinized company in the planet, we all have a pretty
good sense of what their numbers should look like this year,
what their capacity is working backwards from that, there's not
a lot of room.
Speaker 6 (04:13):
Left for upside. Right.
Speaker 7 (04:15):
There's a few things here and there, but there's not
much upside possible. But on the downside, there's still a
lot of risks. There are a lot of things that
could go wrong. There's lots of problems with the supply chain,
the fact that they keeper mentioning that Blackwell is ramping.
That was in doubt for a while. There's just a
lot of questions the companies. It's a good company, it's
well run, it's just gotten so big so quickly.
Speaker 6 (04:35):
I don't think they can keep this.
Speaker 7 (04:37):
The level of expectations beating that they've had for the
last three years, that just can't keep going.
Speaker 6 (04:42):
And I think the headwinds are continuing to mount.
Speaker 3 (04:45):
In the earning statement, in video, CEO Jensen Wong saying
global demand for Nvidia's AI infrastructure is incredibly strong. AI
inferenced token generation has surged tenfold in just one year,
and as AI agents become mainstream demand for AI computing,
we'll accelerate. Jay obviously sounds upbeat, but again, you know,
this is where we want to have some numbers around things.
(05:08):
The CFO saying sales of their H twenty products four
point six billion for the first quarter of twenty twenty six.
Speaker 4 (05:17):
It continues to cross.
Speaker 3 (05:19):
You know, is there anything that could kind of make
you say, well, wait a minute, maybe I need to
say it's not a sell maybe there is something interesting here.
Speaker 7 (05:28):
So I think the underlying question is what are we
going to do with AI? Like there's a lot of
excitement around AI, but it's still in very early stages,
you know. I like to think of this as the
Internet in the nineteen seventies. We knew it was something,
but we didn't know what it would become. I think
that's where we are with AI now, and I think
it's going to take a few years for us to
really as an industry figure out what the actual consumer
(05:50):
use cases and applications are. And in that process there's
going to be some fits and starts, and don't I
just don't think we can keep this momentum going forever.
I know demand is good now, but we start to
look in the next year. I think people are starting
to ask good questions about what is the ROI and
these massive GPU investments all the hyperscalers and the enterprises
have made, and I don't think we've seen those yet.
(06:12):
I think what would sort of alter my belief is
if somebody invents some incredible consumer application for AI that
would radically accelerate things.
Speaker 3 (06:21):
Hey, I just want to point out first quarter adjusted
EPs ninety six cents a share. That was three pennies
better than what the street was expecting. I think we
had a number that crossed earlier that was not accurate,
So again they did be in terms of first quarter
adjusted EPs. The second quarter forecast, just to rehash, second
(06:43):
quarter revenue forty five billion plus or minus two percent.
The estimate on the street is forty five point five billion.
Second quarter forecast also reflects eight billion dollars in loss
sales to China, and we know that that ban that
went into effect in April, and just continuing to check
and Video shares right now up about two point nine
percent in the aftermarket.
Speaker 5 (07:01):
There's also another correction crossing right now in video. First
quarter adjusted gross margin coming in at seventy one point
three percent versus estimates of seventy one percent, so I
want to make sure that gets there. In Vidia says
the charge relates to H twenty excess inventory and by
obligations in first quarter auto revenues driven by self driving
(07:21):
platform sales. I want to get back to Jay Goldberg. Jay,
you made an interesting comment that this is like you know,
AI is like the Internet in the nineteen seventies. I
got to tell you playing around with chat GPT and
anthropics Claude, it blows my mind every single day getting
in a way MO blows my mind. I mean, I
mean to me, this feels like, certainly the new frontier.
What's the vision that you have if we're in the
(07:43):
early stages, if we're in the early innings of this game,
like what is the impact going to be? And where
will Nvidia be in that?
Speaker 6 (07:52):
I think those are two separate questions, right.
Speaker 7 (07:54):
I think in terms of where in Vidio is going
to be ultimately will depend on what we end up
using AI for right, And I, like I said, chat
GPT is incredible technological achievement, but in terms of like
changing everybody's day to day life, it's it's not quite
there yet. It's very useful for some people. It's it's
very useful if you're if you're writing web content or
(08:16):
if you're coding, but for sort of average day to
day use. I think of my my my nine year
old father or my twenty five year old niece, they
don't they don't use chat GIPT.
Speaker 5 (08:26):
It's just not that useful for what Really the twenty
five year old is not using chat GPT. No, that's shocking.
Speaker 6 (08:33):
No, I'm basic. I'm using it.
Speaker 5 (08:35):
I'm using it more than I not more than I
use Google. But like I'll go there first.
Speaker 3 (08:40):
I got to say my house, I think all of
a sudden has kind of amped up and you've got
a range of ages and using it for different things
and things like even grock and you know, yeah, it's happening.
Speaker 6 (08:51):
It's I think it is happening. I think we have
a long way to go though. Forward.
Speaker 7 (08:54):
The utility is really really clear, Like if you look
at if you look at search even it's not clear
how that's going to anetize.
Speaker 6 (09:01):
Are we going to start adds there? What impact will
that have when we start seeing ads and jat GPT search.
I'm just making of that example.
Speaker 7 (09:08):
I have no idea they're actually going to do that,
but that's going to I think that will have an impact.
I actually think I'm a big optimist about it. I
think it can be much much more than what it
is today. And I don't think it's really exciting until
we get something along those lines.
Speaker 3 (09:23):
All right, We are talking with Jay Goldberg, Senior analyst
of Semiconductors and Electronics Effort Support Research Partners from San
Francisco and Video earnings. They have crossed, folks, and we
continue to see the stock up about two point nine
percent in the aftermarket. Ian King, with a write through
on the Bloomberg terminal, and Video forecast revenue of about
forty five billion in the fiscal second quarter, despite losing
(09:44):
eight billion in revenue from China due to export controls
imposed by the Trump administration. The company is ramping up
production of its latest semiconductor design, Blackwell, and expect strong
demand for its AI infrastructure, which the company believes will
tran form the economy.
Speaker 4 (10:01):
And Video's growth is driven by its.
Speaker 3 (10:03):
Dominance as you know, in the AI market or in
the market for AI accelerator chips. Companies increasingly offering its
chips as part of whole computer systems to speed up
the deployment of complex technology.
Speaker 5 (10:15):
So Jay got a little bit of an update there
from Carol and from our OWNI and King about the
write through when it comes to Invidia results. Going back
to remind everybody, you're the only analyst listed on the
Bloomberg terminal with accelerating on in Video. What would you
need to see from the company today to have you
reverse course with that decision?
Speaker 7 (10:32):
So I think one of the things sort of stands
out for me is a year ago there was a
line out the door for in video products. Everybody was
buying everything they could, right and if one company couldn't
take its allocation, there was somebody else who was more
than willing to step in. I think the same is
true of this eight twenty product. The company wrote it
down a couple months ago. I kind of wonder why
(10:52):
no one else bought that product. It's different, you know,
there's all kinds of technical things there, but still it's
compute at the right price, it would have been attractive
to somebody.
Speaker 4 (11:03):
Hey what and so yeah, Oh I'm sorry, please continue.
Speaker 6 (11:06):
Yeah.
Speaker 7 (11:07):
So I'm just wondering how much more demand there is
right now. Again, I think AI long term is important.
In the near term, though, I think we're sort of
running out of steam as people are taking a pause
to assess what they want to do with it.
Speaker 3 (11:19):
One thing I want to ask you, is it tough
to have a cell rating Considering the stock Nvidia has
rallied about twenty four percent since you initiated coverage on
April thirtieth.
Speaker 7 (11:31):
Oh, it's fantastic having being the only celerated analyst on
a stock I like being the sober contrarian.
Speaker 3 (11:36):
But even with the stock, you know, rallying as much
as it did, I understand it's a bounce from being
perhaps you know, taking quite a beating like many names did,
courtesy of some of the news coming out of the administration.
But I mean you still kind of conviction you're going
to hold to it.
Speaker 6 (11:51):
Oh, absolutely absolutely.
Speaker 7 (11:53):
I mean I have a good sense of you know,
Jensen is going to get on the call and it
can drive the stock price higher because he's a fabulous,
fabulous marketer. He really knows how to sell this company,
does a great job of that. But I think the
substance there is still I have lots of questions about it,
and I'll I'll say in you know, in the two
three months i've had this celerating out there, I haven't
got a lot push back from the street.
Speaker 6 (12:12):
I haven't had investors and clients telling me that I'm crazy.
I've had a few people say I'm too too soon.
Speaker 7 (12:17):
I've had a few people say I'm too late, but
nobody is sort of questioning my thesis.
Speaker 5 (12:21):
We're getting some additional details about challenges in China and
China restrictions are any in King writing on the live
blog that Nvidia missed out on two and a half
billion dollars of sales in the fiscal first quarter and
will not getting projected eight billion dollars in the fiscal
second quarter. It's an amount per quarter roughly equal to
its nearest rival, AMD's total sales. You mentioned demand of
(12:42):
the H twenty specifically. Is that what you see as
the biggest risk? China and a lack of demand from China, Jay.
Speaker 7 (12:51):
I think China is a big X factor, just because
the US government's China policy is, let's call it dynamic
and rapidly changing day to day.
Speaker 6 (13:01):
I don't think that's the biggest risk. I think the
biggest question.
Speaker 7 (13:04):
I have about in Nvidia is long term demand for AI,
where it's going, what it's going to be like in
the near term. I think when I speak to corporate CIOs,
they've all tested AI pilots, they've all demoed it, and
what they're finding is that they get sort of ten
twenty percent cost reductions around their AI deployments. It helps
them reduce call center costs, things like that, which is good,
(13:27):
but it's not necessarily enough to justify the massive investments
needed to keep in video growing the way it has
been growing.
Speaker 5 (13:33):
Okay, Jay, I want to go to a story I'm
just going through. I was exchanging some texts with some
friends earlier because it doesn't sound like I have a
group of friends and like some of them are very
concerned about AI and about impacts on jobs, and we're
watching this really closely. Dario Amidae, the CEO of Anthropic,
I've interviewed him before. Axios out this morning with a
(13:56):
story that he basically said that AI could wipe out
about half about all entry level white collar jobs I'm
reading from Axios right now, and spike unemployment to ten
to twenty percent in the next one to five years.
He said this in an interview to Axio in San Francisco.
Axios in San Francisco, do you disagree with that? It
(14:16):
sounds like you're not as bullish when it comes to
the actual effect of AI on the workforce.
Speaker 7 (14:24):
I think that again, I'm a techno optimist, if anything,
I think there will be absolutely there will be disruptions
to the labor force, but there will also be new
opportunities over the long term. So you know, I think
certain low level coding jobs, certain low level copy eating jobs,
Those will start to get pretty tough. Anyone who does
(14:45):
image creation, they're going to be challenged for a while
until we find new ways to make use of these tools.
So absolutely, you know, in the nineteen hundreds, all the
buggy whip and you know carriage, you know, carriage makers
and horse trainers, they were very disrupted, and we're going
to see something similar. But the economy will still continue
to grow and hopefully we'll find ways to use those
(15:08):
people to do new things with the tools we get.
Speaker 5 (15:10):
I mean hopefully, or else we're in for a real
reckoning when it comes to the labor force.
Speaker 7 (15:16):
Yeah, and again I think it's I think it's very
premature to talk about these sort of massive, big term
impacts of AI because the things.
Speaker 6 (15:25):
We actually use day to day aren't aren't quite there yet.
Speaker 7 (15:27):
You know, again, a few small categories where there is disruption,
but in a broader sense, we haven't really grasped the
full potential for AI and what it's going to do.
Speaker 6 (15:35):
So then it's ways to.
Speaker 5 (15:36):
Go if okay, So then it raises the question about
other companies than your view that could be beneficiaries of
the way that technology is moving. If in video in
your view has limited upside. Right now, where in your
view should investors be putting their money Broadcom?
Speaker 6 (15:54):
Right?
Speaker 7 (15:54):
I think today, anytime in video loses share, it's to
one of its big customers, the hyperscalers, Intel, micros off Google,
not Intel, So our Google, Microsoft, Amazon, those companies are
all in various stages of designing their own GPU alternatives,
and Broadcom is going to make a lot of money
helping those those chips come to market.
Speaker 5 (16:12):
When do you think those chips will be able to
hold a candle to what Nvidia has developed.
Speaker 6 (16:17):
I think we're already there today.
Speaker 7 (16:18):
I think Google Google has the TPU, their tensor processing unit.
They're on their fifth or sixth generation of those. Those
are incredibly performative. They work very well for Google and
what Google needs to do, and I think other Google's
peers are going to start to see the benefits of
that and move down that path as well.
Speaker 3 (16:34):
All Right, you are listening and watching Bloomberg Business Week
Daily Carol Master along with Tim Stanevik live in our
Bloomberg Interactive Broker Studio. We're talking to Jay Goldberg, Senior
analyst of Sevenconductors and Electronics over at Seaport Research Partners.
As we said, he's the only analyst listed on the
Bloomberg with a cell rating on Nvidia, and yet here
in the after market, we are definitely not seeing investors
(16:54):
sell shares of Nvidia stock is up about three point
three percent.
Speaker 4 (16:59):
This as the company did come out and post.
Speaker 3 (17:02):
Its latest quarterly update as well as outlook, and as
our ian King rights, the company it's the world's largest
semiconductor company, giving an upbeat forecast even as China slowed
down Mars some of the growth slow down in China
weight on results, but sales will be about forty five
billion dollars in the fiscal second quarter that runs through July.
Speaker 4 (17:23):
That included the loss of roughly.
Speaker 3 (17:26):
Eight billion dollars in revenue from China because of export
controls from the United States.
Speaker 4 (17:31):
The forecast was in line with the analyst estimates according
to our data.
Speaker 3 (17:35):
So what's interesting is that even with that loss we're
talking about, sales will be about forty five billion dollars.
And as our ian King rights on our live blog,
how many companies could frontload their earnings release with details
of what they're missing out on and still get a
positive reaction from investors.
Speaker 4 (17:50):
So the stock as we said, still.
Speaker 3 (17:52):
Holding on to about a three and a half percent
gain here in the aftermarket.
Speaker 5 (17:56):
Our colleague Carmen Ryanikey writing on our live blog that
it seems traders are acting to the company's revenue forecast,
which is still basically in line even with an expected
eight billion dollar loss. When it comes to H twenty revenue,
that signals in Vidia is making up for the loss elsewhere. Jay,
I want to bring you back in with the caveat
that you haven't necessarily had the time to comb through
these results. But in your view, where do you think
(18:18):
in Nvidia could be making up for the loss in
H twenty revenue.
Speaker 7 (18:22):
I think there's still a lot of demand from the hyperscalers.
We have a bunch of massive data center buildouts taking place.
We had, you know, big announcements in Salary, Rabia last week,
Stargate earlier this year, UAE, ku Wait, lots of big
Gulf nations are building out data center capacity.
Speaker 6 (18:40):
The hyperscalers.
Speaker 7 (18:41):
You know have you know, building these plans these data
centers takes multiple years and so they've had commitments and
plans in place for a long time now. So those
are going to continue, right I think the question is
next year, can the capex continue to be at these levels?
Speaker 6 (18:56):
What happens there?
Speaker 7 (18:57):
But a lot of what we're seeing today is stuff
that was planned on and committed to months ago.
Speaker 5 (19:03):
So I guess it also raises the question about demand
from these hyperscalers, which you said continues to remain strong.
You also said that it does seem like, especially when
it comes to Google, that they could have some products that,
in your view at this point, hold a candle to
in video in terms of where in Nvidia needs to
go next. Over the last few months, we've talked a
(19:25):
little bit about the way, and we're going to hear
from Jensen Wong six thirty Wall Street Time just in
a little under two hours. Ed Ludlow is going to
have an Nvidia Earning special six thirty pm Wall Street
Time on Bloomberg TV and Radio. But Jay, I'm wondering
about where you think the area of growth is for
in Nvidia right now in terms of products. We've seen
Jensen Wong talk in recent months about humanoid robots, about
(19:49):
self driving cars as areas of potential growth. Where do
you see that the company needs to go.
Speaker 7 (19:55):
I think the two critical areas for them are in inference,
compute and robots. Inference is the stage of AI computing
where it sort of goes into wide adoption when we
built the model and then we.
Speaker 6 (20:05):
Need to use it.
Speaker 7 (20:07):
How that actually gets deployed I mentioned earlier, It depends
a lot on what we're actually doing with it. Inference
is going to be the big battleground. I think in
Vidia has a lock on the training side of the
model building, but the inference question is is looming large.
How we're actually going to deploy this. We as consumers
when we interact with with AI, where are those chips?
(20:27):
Are they in our phones? Is that where the AI
is being done or is it in the data center?
And I think that that's a big open question. Nobody
has a clear answer to that yet, and it's going
to matter a lot too, you know, I guarantee they're
going to talk about on the call. And the other
one is, like you mentioned, is robots. Jensen has talked
a lot about robots. It's a big theme of his
I think I think it's an area where there's there's
you know, dozens of companies building humanoid robots that can
(20:48):
do all kinds of interesting things. And I'm just waiting
for a robot that can help me fold laundry.
Speaker 5 (20:54):
Yeah, and you and me both. Jay, Hey, Jay, appreciate
you joining us. Got to come back soon. Jake Goldberg,
Senior Analyst, semi Conductors and Electronics and Seaport Research Partners,
joining us from San Francisco.
Speaker 2 (21:04):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 5 (21:18):
A lot's happening in the universe of Elon must on
the ground and up in the sky, Up in the sky.
Space Ex's starship suffering a midflight loss, its third consecutive setback,
and it raises questions about the company's progress on the
project Close to Earth.
Speaker 6 (21:31):
Though.
Speaker 5 (21:32):
In an interview to CBS News, Elon Musk expressed dissatisfaction
with President Trump's giant tax bill, saying it undercut his
effort to slash government spending.
Speaker 8 (21:43):
I was like disappointed to see the massive spending bill, frankly,
which increases the budge deps that does decrease it, and
that reminds the work that Podoche team is doing.
Speaker 6 (21:55):
I actually thought that when this big beautiful bill came along.
Speaker 9 (21:58):
I mean, like everything he don On does gets wiped
out in the first year.
Speaker 8 (22:03):
I think it both can be big, board can be beautiful.
Speaker 5 (22:08):
So that's a portion of the CBS interview with Elon
Musk gets set to air fully on CBS Sunday morning
this weekend. We should note that just the last couple
of hours, President Trump did dismiss criticism from Elon Musk
over the cost of his signature to AX bill. He
told reporters on Wednesday that compromises were made to secure
the necessary votes. We got Max Chafkin with us, the
co host of the podcast Everybody's Business and Elon Ink.
(22:31):
He's also senior reporter for Business Week. He joins us
here in the Bloomberg Interactive Brokers studio, You've got a
new story out about Elon and whether or not he
actually is leaving politics.
Speaker 4 (22:41):
I feel like.
Speaker 9 (22:42):
Every time we start to say he looks like he's
leaving politics, there is again making news in politics, and
you know, kind of here we go again, right. We
saw this at the end of last year when there.
Speaker 6 (22:54):
Was talking the budget bill.
Speaker 9 (22:55):
A Republican Congressional Republicans reaching compromise to fund the government
must kind of came out unexpectedly against that. I think
we're seeing something similar, right. He's attempting, I think, to
influence Congress here to at least shape this bill, if
not a torpedo at all together, which of course puts
him at odds in some sense with President Trump. Although,
(23:19):
as you heard from Trump right, Trump is also negotiating
with Congress right now over the exact contents of the bill.
Speaker 5 (23:26):
So you think he actually has a goal with comments
like this, He actually has a goal of shaping policy.
Speaker 6 (23:31):
And look clearly.
Speaker 9 (23:32):
Yeah, I mean, like I don't know why else he
would be saying this. I mean, he seems to be
saying that this bill is insufficiently hawkish on the deficit.
That's a point of view, you know, that's pretty consistent
with Elon Musk. Also, there's a pretty substantial contingent in
the Republican Party that agrees with him. I also think
(23:55):
it might be worth looking at some of the specific
aspects of this bill. You know, this bill has his
implications for the electric vehicle industry. It gets rid of
these tax credits that have been very important to Elon Musk.
And other electric car companies. I don't know to what
extent those are still in play, but we don't know
(24:15):
what the final bill is going to look like. And
you could imagine getting Musk on side would be worth
something to support us this bill. So I suppose we'll see.
Speaker 3 (24:25):
As long as Elon Musk Max is a financial supporter
of Donald Trump and Republicans, he's going to have a
direct line to the president.
Speaker 4 (24:35):
Is that fair to make that assumption?
Speaker 9 (24:36):
Yeah, I think it is fair, And I think even
in Trump's reaction here, you know, people, it's unclear to
me from that clip whether Elon Musk is intending to
criticize congressional Republicans or Donald Trump, although he did sort
of mock the name, you know, Trump's big beautiful bill formulation,
Trump responding to it in a pretty accommodating way, like
(24:57):
he's he's not punching backs, He's taking it like a
criticism from a friend or something like that. Elon Musk
is going to be very is still very important to
Donald Trump and to Republicans as a potential funder in
the midterm elections and as also a very very visible supporter,
(25:18):
right he you know, he's very polarizing now, but he's
still a successful business person, you know, an American industrialist.
You know, his support matters beyond money.
Speaker 5 (25:28):
Carol made an interesting comment, I can't remember if it
was this week or last week, during one of our
editorial calls about the press that Elon Musk has been
doing lately.
Speaker 4 (25:36):
Yeah, it's like the Eras tour.
Speaker 5 (25:39):
I think it's notable for a couple of reasons. One,
when he bought X, it seemed like he was doing
everything directly to his followers and directly to the world
through X. He put his head down and worked a
lot with Doge. There were some Fox interviews over that
period of time. But as he's moved away from the
White House and over the last few weeks, we've we've
heard more and more from him, and especially through like
(26:01):
quote unquote traditional like legacy media.
Speaker 3 (26:04):
That's what kills me because you guys make fun of me,
like my little Sunday morning shows that I watch.
Speaker 4 (26:07):
But it's Sunday morning. It's a very mass wide audience.
Speaker 9 (26:12):
So I think what's going on is Musk is suffering
a lot of blowback from customers.
Speaker 10 (26:18):
Right.
Speaker 9 (26:19):
He talks all the time about you know, the legacy
media and the Democrats and the and his various sort
of political adversaries. But what's happened when you look at
opinion polling is regular people, the people who buy musk stuff,
have turned on him. There was a really interesting poll
published the other day by Harris and Axios. They ask
people to rate how they basically how much they trust
(26:42):
well known companies. And you look at Tesla and SpaceX
over the last five years, and it is stunning. They
went from being some of the companies with the best
reputation to some of the companies in this universe of
one hundred companies with the worst reputation. And I think
what he's trying to do is get both investors and
consumers to focus on the other stuff, the non political stuff.
(27:04):
So we had this rocket launch yesterday, which, as he said,
Tim did not go very well for SpaceX, but there
was a big media role out. He did a bunch
of interviews with various outlets. I assume, although don't know
for sure, that this CBS interview was part of that,
essentially saying like, look at the space stuff, look at
the technology, which I think is smart from a messaging perspective,
(27:28):
because SpaceX is just inherently going to be less political
than you know, attacking various parts of the federal government.
On the other hand, Musk still needs this relationship with
Donald Trump, and SpaceX still needs this relationship with Donald Trump.
So it's going to be a difficult dance. I think
it's going to be very hard for him to undo
some of the damage that was caused with certain consumers,
(27:49):
especially you know, left leaning consumers.
Speaker 3 (27:51):
You know, I always think about money with everything we do,
rightfully so, but there's a story on the Bloomberg about
Elon Musk's Neuralink raising six center million in a deal
that values that company at nine billion. This is coming
from Semaphore siding unidentified people. So people, it sounds like
if this is true, like still committing money to his ventures.
I mean, I wonder, Max, we live in a funny world.
(28:14):
Could it be six months, twelve months, eighteen months where
all of a sudden, like everybody's kind.
Speaker 5 (28:19):
Of back in on Eli because we have brain chips.
Speaker 4 (28:21):
Because we have brainchips.
Speaker 8 (28:22):
Is that what?
Speaker 4 (28:23):
Maybe there is brain chips?
Speaker 3 (28:24):
But you know what I mean, Like, I don't know,
does he do something I don't know.
Speaker 9 (28:29):
I think he's in a very difficult political position. I
think certainly that is what investors are hoping, you know, right.
He made some comments on the earnings call about a
month ago, essentially saying, you know, maybe I'll spend one
to two days a week advising President Trump rather than
you know, full time.
Speaker 5 (28:44):
And I was saying twenty four to seven, he's going
to be on company.
Speaker 4 (28:50):
Sleeping somewhere on the floors.
Speaker 8 (28:51):
Who knows.
Speaker 9 (28:53):
I mean, you know, investors like this. The issue is
he is now closely tied to Donald Trump, and I
don't I don't think short of really like turning critic
and saying, okay, now I support a different political party,
which could happen. I think it's going to be very
hard for him to walk that line because all you know,
politics is very polarized in this country, and it's going
(29:15):
to be hard to avoid, you know, winning back these
people he's alienated without in turn alienating you know, this
kind of new cohort or conservatives who still very much
support Donald Trump.
Speaker 5 (29:27):
Just twenty seconds left on the SpaceX launch that didn't
go exactly as planned? Can can they still spin it
as a win. That's what they're doing.
Speaker 9 (29:34):
You know, all these launches are experiments. That's they're going
to say so, so you shouldn't really focus on the result.
That said, a lot has to go right between now
and next year for them to hit the timeline. And
each time one of these launches does not go right,
it gets harder.
Speaker 5 (29:49):
Max Chafkin, the co host of the podcast Everybody's Business
and Elon Ink, also senior reporter for Bloomberg BusinessWeek. He's
joining us here in the Bloomberg Interactive at Brokers Studio.
Speaker 2 (30:00):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Apple car
Play and the Android Auto with the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station, Just Say Alexa played Bloomberg eleven thirty.
Speaker 5 (30:19):
It is one of the most read stories on the
Bloomberg terminal right now. ETFs have a mass trillions of
dollars by offering investors greater tax efficiency, liquidity, and lower
costs than mutual funds. It's why we've seen inflows that
are so huge into ETFs and not into mutual funds. Now,
a regulatory shift is poised to bring ETFs and mutual
(30:40):
funds closer together, but it also threatens to complicate the
very features that fueled the ETF boom. Done Emi Grafeo
and Wildona Hire right about the dual share class structures
that could be approved as soon as the summer, and
the warnings about what could transpire if the market becomes stressed.
They're both Bloomberg News Crossouts reporters and they join us
here in the Bloomberg Interactive Brokers Studio. Emily, I want
(31:02):
to start with what this looming shift is, this regulatory shift.
Explain what exactly it is and why it's happening.
Speaker 10 (31:10):
Okay, so right now, when you're an investor and you
buy a fund, you buy a mutual fund, or you
buy an ETF, and ETFs have one share class. It's
just an ETF, you get the ticker you buy. If
you buy a mutual fund, depending on what avenue you're
buying it through, you'll be in a different share class.
You could be in the institutional one, the retail one,
(31:32):
the advisor friendly one.
Speaker 1 (31:34):
Sometimes their price differently.
Speaker 5 (31:35):
Yeah, I was going to say, sometimes the share class
has a different expense ratio or I don't know, like
that's the difference, right, Yeah, yetifically exclusively through your private wealth.
Speaker 1 (31:44):
Matter or something exactly.
Speaker 10 (31:45):
So maybe you get like a discount because you're using
it through like your employer or something, but ETFs don't
have that. Twenty over twenty years ago, actually Vanguard made
this patent where they could create a dual share class
fund where they have a mutual fund and an ETF
all in one, so you have multiple mutual fund share
classes and then one share class of that is exchange traded.
(32:08):
The reason why they did this and they patented it
is because it makes the fund in total more tax efficient.
Basically takes all the tax efficiency of the ETF and
puts it onto the mutual fund. So they figured this out.
They were like, great idea, let's patent it, make sure
no one else does it, and they save their clients
billions on taxes over the years.
Speaker 1 (32:30):
The patent expired two years.
Speaker 10 (32:31):
Ago, so now everyone else on Wall Street is trying
to get in on it.
Speaker 4 (32:36):
Can anybody and everybody do it? Goes on it? Well
not yet.
Speaker 11 (32:39):
So we have more than fifty firms that have applied
for the dual share class, but we are still waiting
from regulators to hear from regulators. We are expecting, you know,
the industries, expecting the SEC to greenlight this and to
actually allow it, maybe possibly as soon as this summer.
But you know, right now we're just in in wait
(33:00):
and see mode to see if we can actually get
approval on this.
Speaker 5 (33:03):
Build on what's the concern here? If there is stress
to the market, if there are liquidity issues, like what
are the risks that some of your sources are sharing
with you.
Speaker 11 (33:11):
Well, there's a couple of different concerns, but one of
the main ones is, you know, issues related to what
Emily was just talking about in terms of the tax efficiency.
So if you have a mutual fund and ETF together
and you and the mutual fund has to pay out
capital gains distributions, then in that new structure, the ETF
(33:36):
investors could potentially also be hit. And there is some
historical precedent. There actually is a fund of anguart fund
that back in two thousand and nine had huge outflows
and so the ETF share class investor, you know, the
ETF investors were also hit with a fourteen percent distribution.
Speaker 4 (33:52):
So there is some.
Speaker 11 (33:54):
Precedent and so a lot of market watchers or you know,
people who are maybe looking at this from a critical
angle or thinking ahead and saying that potentially this is
an issue that could come up.
Speaker 4 (34:04):
All right, I'm going to age myself.
Speaker 3 (34:06):
But when I started this career about three decades in accounting,
one of my first things I did was like a
mutual fund show and it was just like it was
kind of everybody was all of a sudden, you know,
getting investment plans at their companies, and it was the
big thing. And I guess and then now we've kind
of seen the ETF rush over what the last decade
or so in counting?
Speaker 4 (34:25):
Do we need both?
Speaker 9 (34:27):
Like?
Speaker 4 (34:28):
Is it just a case?
Speaker 3 (34:28):
Like as I saw this story, I'm like, Okay, here
it goes the mergeover to ETFs. Is this a first
step of eventually everything being converted? Or are there are
advantages to having one pure bread ETF versus one pure.
Speaker 4 (34:41):
Bread mutual fund?
Speaker 10 (34:42):
Yeah? I think when we started out writing this story,
we wanted to understand. There was this report from Seruly
and they posed this question of like, why would you
buy if you're an investor in an ETF, why would
you buy an ETF attached to.
Speaker 1 (34:56):
A mutual fund if you could just buy a standalone one?
Speaker 9 (34:58):
Right?
Speaker 1 (34:58):
Because the sec one of their.
Speaker 10 (35:00):
Concerns that they flagged, and issuers will say that they've
answered them. One of the concerns is is there going
to be this issue of like cross subsidization, one class
subsidized in the other. To answer your question, though, there
are some advantages to mutual funds. A lot of mutual
funds are already in tax exempt accounts, So a lot
(35:21):
of mutual funds in people's four to one k's. That's
probably the four to one k technology. It's not really
suited to hold ETFs. So most of our sources expect
that that that's a pretty big part of the market
that will.
Speaker 1 (35:34):
Stay in mutual funds.
Speaker 10 (35:37):
This structure is more for maybe if you're an investor
that you've been sitting in a mutual.
Speaker 1 (35:42):
Fund in like your brokerage account for years and years,
and you have all.
Speaker 10 (35:46):
Of these embedded capital gains that if you were to
sell you would pay a huge.
Speaker 1 (35:51):
Capital gains tax on.
Speaker 10 (35:52):
You could tax free convert into the ETF with this
and maybe wash out at least some of the taxes.
Speaker 1 (35:58):
That's the idea here.
Speaker 5 (36:00):
Build on our people or firms still launching mutual funds,
are they going all in on atfs?
Speaker 11 (36:06):
I mean, we're atf reporters, so I'm gonna say they're
all going all in on the.
Speaker 10 (36:12):
Coperation vice.
Speaker 5 (36:13):
But it has seemed like even some of the huge
traditional mutual fund companies, like a Capitol Group for example,
I think you spoke to them at Milken Carol.
Speaker 11 (36:25):
MFS is one hundred and one years old and they
launched five ETFs.
Speaker 5 (36:29):
Lash like that's that's a big deal.
Speaker 11 (36:32):
I think all of them are watching where the money
is flowing, and mutual funds as a category are seeing outflows,
and ETFs are seeing record inflows every single year. And
obviously we're seeing like hundreds of new ETFs every single year,
and not all of them are you know, home runs,
(36:52):
but you just need one. If you're a small etf
issuer and you have one hit, that's it.
Speaker 1 (37:00):
Like that, you're you're set.
Speaker 11 (37:02):
Like you know, if you have one strategy that that
you know, maybe a ton of retail investors are attracted to,
or something new, something that truly is innovative, it can.
Speaker 1 (37:12):
Work out really well for you.
Speaker 11 (37:14):
So a lot of people are looking at that and
thinking about.
Speaker 4 (37:16):
Well why not.
Speaker 11 (37:17):
It's pretty cheap actually to file and a lot of
times to launch ETFs. It's a bit obviously, it's very
difficult to attract assets and attention and eyeballs, et cetera.
But if you can do it, you know, you can
get you can get a home run.
Speaker 3 (37:31):
I mean, is there something to learn by what Vanguard
did and kind of where this then maybe ultimately goes Yeah.
Speaker 10 (37:36):
I mean, well, one, using the structure, they were able
to save clients in mutual funds a lot on taxes.
Vanguard gets consistent inflows. So then this this concern about
the capital gains distributions like bleeding into the ETF, it's
really only concern concerning if the mutual fund gets a
(37:57):
ton of outflows and has to like sell shares to
meet a redemption. They've been really successful. But I mean, Carol,
they are Vanguard. That's why get huge flows. They have
a huge audience. I think everyone saw Vanguard's success. I
think most fund managers are realistic and that like, they
don't have the scale the Vanguard has. Fair but if
(38:19):
this is a way to maybe squeeze a little bit
out and get a couple more assets through now having
an ETF, might as well try.
Speaker 11 (38:26):
But if I can add, yeah, you know, market watchers
critics people We've talked to analysts who are anticipating any
of the potential conflicts with this. They say it's not
a panacea for mutual fund managers to stench outflows like
mutual funds still are expected to.
Speaker 4 (38:43):
Keep seeing outflows.
Speaker 11 (38:45):
So even if you get this dual share class structure approved,
it doesn't mean that your outflows are going to You
know that you'll be all set terms of performance is
bad saying exactly, Bill.
Speaker 5 (38:56):
Donnie, you mentioned that if you have a successful ETF,
it can be game changing for a smaller term. What
about if it's Trump Media and Technology, for example, you
wrote about this company recently. It's majority owned by the
President of the United States, and you wrote that they're
laying the groundwork to come out with some ETFs.
Speaker 1 (39:15):
They are.
Speaker 11 (39:16):
It's actually an unusual move to pre announce that you
are planning to launch ETFs. Usually, issuers keep their ideas
close to their what's the saying, to their vest, to
their heart, and close to the vest, and so it's
very unusual to pre announce that you're going to be
doing something. But Trump Media did say that they are
planning on soon filing and launching ETFs, and separately Managed
(39:41):
accounts SMAs with three different themes, oil and gas, made
in America, and cryptocurrencies.
Speaker 4 (39:47):
The catch here is.
Speaker 11 (39:48):
Obviously all of that is tied to the president's various policies,
whether they're terrifilated or cryptocurrency related. Obviously, oil and gas
was a big theme when he was running for re election, right,
But more than sixty oil and gas ETFs already exist,
more than sixty focus. There's even a handful of made
(40:12):
in America ETFs already, and so what a lot of
ETF you know, analysts ETF.
Speaker 1 (40:18):
The industry is looking.
Speaker 11 (40:19):
At this and thinking it's you know, you're adding to
the mix of an already saturated, oversaturated market. But it
does come with potentially the president being able to, you know,
maybe go out and say you can buy my phones
or something along those lines, and that that might you know,
hinder or hurt his competitors, the people who already have
(40:40):
these et al.
Speaker 3 (40:41):
Right, that's a great story that you have on the terminal.
We're gonna give you guys equal love because you guys
did a story together, that was your story, and well
you've got another ETF story. We've just got about forty
seconds left here about State Street looking to kind of
double down on it's a bit to bring private assets
to a broader spectrum of investors. So this is an ETF.
This is an ets the private market world.
Speaker 10 (41:01):
Yeah, this is a private credit ETF. They have one
already and launched in February. The flows have been very lackluster,
especially for Stage Street. They're a big issuer. They've only
seen like five million inflows over a couple of months.
But they are doubling down. This one's going to be
a short duration private acid ETF. The one they have
now it's a little bit longer duration.
Speaker 4 (41:22):
Markets are longer duration.
Speaker 10 (41:24):
Well they said, yeah, they said this one's one to
three years. It's still in the early stages.
Speaker 1 (41:30):
Yeah, I don't know.
Speaker 3 (41:32):
Maybe you guys might you should do.
Speaker 4 (41:35):
I know we have an ATF podcast, but you guys
should do an ETFO.
Speaker 8 (41:40):
Show.
Speaker 3 (41:42):
And La Grafe the Donna Hirich so appreciated both Bloomberg
News crocessset reporters.
Speaker 4 (41:47):
Check them out on the Bloomberg and a Bloomberg dot com.
Speaker 2 (41:50):
This is the Bloomberg Business Week Daily podcast, available on Apple,
Spotify and anywhere else you get your podcasts. Listen live
weekday afternoonunes from two to five pm Eastern, on Bloomberg
dot com, the iHeartRadio app tune In, and the Bloomberg
Business app. You can also watch us live every weekday
on YouTube and always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:08):
This is Bloomberg business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business finance
and tech news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
I want to go to Nvidio though, because we are
going to see their numbers drop probably any moment now,
and we are seeing the stock up about eight tenths
of a percent here in the after market. Obviously a
big deal, biggest semiconductor company. What they have to say
about the AI trade, and it's not just the hyperscalers
but beyond as we heard from Kunjohn Sabania Bloomberg Intelligence,
(00:53):
So second tier companies are they also biding buying into
and video chips. So we'll have to see what they
have to say say. And Vidia is app folks, let's
get to it. First quarter just to DPS eighty one
cents a share.
Speaker 4 (01:05):
That's a miss. Street was looking.
Speaker 3 (01:07):
For ninety three cents, so twelve cents shy what the
street was expected expecting revenue is expected to be forty
five billion plus or minus two percent. First quarter revenue
forty four point one billion, that was a beat the
street expectations was forty three point twenty nine billion. First
quarter adjusted gross margin that was a miss sixty one
(01:30):
percent versus an estimate of seventy one percent. Company, though
saying that the second.
Speaker 4 (01:35):
Quarter outlook reflects a loss in H twenty revenue of
about eight billion.
Speaker 3 (01:40):
Keep in mind that when that ban came from the
administration and vide did do a write down of about
five and a half billion dollars, and Kunjan said it
was a little noisy because not all of the estimates
on the street had incorporated that full H twenty ban.
Speaker 5 (01:55):
Yeah, shares bouncing around right now of about eight tenths
of one percent in the after hours. They were down earlier.
The company said that global demand for AI infrastructure is
quote incredibly strong, also saying that Blackwell's NVL seventy two
AI supercomputer is in full scale production. The company also
said the second quarter outlook reflects a loss in H
(02:16):
twenty revenue of about eight billion dollars. So I wonder
if that charge, Carol that they took was relatively conservative,
The company also saying it was unable to ship and
add a two point five billion dollars of H twenty
revenue in the first quarter. The company also saying it
will pay a quarterly dividend of one cent per share
that will happen on July third. Shares right now in
(02:37):
the after hours are moving higher, up about two point
five percent.
Speaker 4 (02:41):
Yeah, up about two yeah, exactly.
Speaker 3 (02:43):
The CEO, Jensen Wong, who we're going to hear from
our Ed Ludlow's going to talk with him at six
thirty pm Wall Street time on Bloomberg TV and radio.
The CEO saying the company stands at the center of transformation.
Go back to what he said about global demand for
AI infrastructure, incredibly strong adjectives, and so we're going to
want some more numbers around that. We're getting more on
(03:04):
the first quarter at comput revenue thirty four point sixteen billion,
a little light. Street was looking for thirty five point
forty seven billion. First quarter networking revenue four point ninety
six billion. Street estimate was three point forty five billion,
So that's a bit of a big beat. But again,
the key headlines seem to be what it says about
second quarter revenue forty five billion plus or minus two percent.
(03:26):
The estimate on the street is forty five point five billion,
So we could have some upside.
Speaker 4 (03:31):
Tim from it, or we could see some downside from it.
Speaker 5 (03:34):
We're seeing shares right now hire about about three point
two percent in the after hours. Want to bring in
Jay Goldberg, senior analyst Semiconductors and Electronics at Seaport Research Partners.
Jay joins us from San Francisco. Jay, I want to
get your reaction to earnings in just a minute. I
should note that you are the only analyst listed on
the Bloomberg terminal with a cell rating for Nvidia. Does
(03:55):
today's result keep you at a cell rating?
Speaker 6 (03:59):
So I have to go through numbers first, but I
would say yes.
Speaker 7 (04:02):
I mean, my take is that in video, the most
scrutinized company in the planet, we all have a pretty
good sense of what their numbers should look like this year,
what their capacity is working backwards from that, there's not
a lot of room.
Speaker 6 (04:13):
Left for upside. Right.
Speaker 7 (04:15):
There's a few things here and there, but there's not
much upside possible. But on the downside, there's still a
lot of risks. There are a lot of things that
could go wrong. There's lots of problems with the supply chain,
the fact that they keeper mentioning that Blackwell is ramping.
That was in doubt for a while. There's just a
lot of questions the companies. It's a good company, it's
well run, it's just gotten so big so quickly.
Speaker 6 (04:35):
I don't think they can keep this.
Speaker 7 (04:37):
The level of expectations beating that they've had for the
last three years, that just can't keep going.
Speaker 6 (04:42):
And I think the headwinds are continuing to mount.
Speaker 3 (04:45):
In the earning statement, in video, CEO Jensen Wong saying
global demand for Nvidia's AI infrastructure is incredibly strong. AI
inferenced token generation has surged tenfold in just one year,
and as AI agents become mainstream demand for AI computing,
we'll accelerate. Jay obviously sounds upbeat, but again, you know,
this is where we want to have some numbers around things.
(05:08):
The CFO saying sales of their H twenty products four
point six billion for the first quarter of twenty twenty six.
Speaker 4 (05:17):
It continues to cross.
Speaker 3 (05:19):
You know, is there anything that could kind of make
you say, well, wait a minute, maybe I need to
say it's not a sell maybe there is something interesting here.
Speaker 7 (05:28):
So I think the underlying question is what are we
going to do with AI? Like there's a lot of
excitement around AI, but it's still in very early stages,
you know. I like to think of this as the
Internet in the nineteen seventies. We knew it was something,
but we didn't know what it would become. I think
that's where we are with AI now, and I think
it's going to take a few years for us to
really as an industry figure out what the actual consumer
(05:50):
use cases and applications are. And in that process there's
going to be some fits and starts, and don't I
just don't think we can keep this momentum going forever.
I know demand is good now, but we start to
look in the next year. I think people are starting
to ask good questions about what is the ROI and
these massive GPU investments all the hyperscalers and the enterprises
have made, and I don't think we've seen those yet.
(06:12):
I think what would sort of alter my belief is
if somebody invents some incredible consumer application for AI that
would radically accelerate things.
Speaker 3 (06:21):
Hey, I just want to point out first quarter adjusted
EPs ninety six cents a share. That was three pennies
better than what the street was expecting. I think we
had a number that crossed earlier that was not accurate,
So again they did be in terms of first quarter
adjusted EPs. The second quarter forecast, just to rehash, second
(06:43):
quarter revenue forty five billion plus or minus two percent.
The estimate on the street is forty five point five billion.
Second quarter forecast also reflects eight billion dollars in loss
sales to China, and we know that that ban that
went into effect in April, and just continuing to check
and Video shares right now up about two point nine
percent in the aftermarket.
Speaker 5 (07:01):
There's also another correction crossing right now in video. First
quarter adjusted gross margin coming in at seventy one point
three percent versus estimates of seventy one percent, so I
want to make sure that gets there. In Vidia says
the charge relates to H twenty excess inventory and by
obligations in first quarter auto revenues driven by self driving
(07:21):
platform sales. I want to get back to Jay Goldberg. Jay,
you made an interesting comment that this is like you know,
AI is like the Internet in the nineteen seventies. I
got to tell you playing around with chat GPT and
anthropics Claude, it blows my mind every single day getting
in a way MO blows my mind. I mean, I
mean to me, this feels like, certainly the new frontier.
What's the vision that you have if we're in the
(07:43):
early stages, if we're in the early innings of this game,
like what is the impact going to be? And where
will Nvidia be in that?
Speaker 6 (07:52):
I think those are two separate questions, right.
Speaker 7 (07:54):
I think in terms of where in Vidio is going
to be ultimately will depend on what we end up
using AI for right, And I, like I said, chat
GPT is incredible technological achievement, but in terms of like
changing everybody's day to day life, it's it's not quite
there yet. It's very useful for some people. It's it's
very useful if you're if you're writing web content or
(08:16):
if you're coding, but for sort of average day to
day use. I think of my my my nine year
old father or my twenty five year old niece, they
don't they don't use chat GIPT.
Speaker 5 (08:26):
It's just not that useful for what Really the twenty
five year old is not using chat GPT. No, that's shocking.
Speaker 6 (08:33):
No, I'm basic. I'm using it.
Speaker 5 (08:35):
I'm using it more than I not more than I
use Google. But like I'll go there first.
Speaker 3 (08:40):
I got to say my house, I think all of
a sudden has kind of amped up and you've got
a range of ages and using it for different things
and things like even grock and you know, yeah, it's happening.
Speaker 6 (08:51):
It's I think it is happening. I think we have
a long way to go though. Forward.
Speaker 7 (08:54):
The utility is really really clear, Like if you look
at if you look at search even it's not clear
how that's going to anetize.
Speaker 6 (09:01):
Are we going to start adds there? What impact will
that have when we start seeing ads and jat GPT search.
I'm just making of that example.
Speaker 7 (09:08):
I have no idea they're actually going to do that,
but that's going to I think that will have an impact.
I actually think I'm a big optimist about it. I
think it can be much much more than what it
is today. And I don't think it's really exciting until
we get something along those lines.
Speaker 3 (09:23):
All right, We are talking with Jay Goldberg, Senior analyst
of Semiconductors and Electronics Effort Support Research Partners from San
Francisco and Video earnings. They have crossed, folks, and we
continue to see the stock up about two point nine
percent in the aftermarket. Ian King, with a write through
on the Bloomberg terminal, and Video forecast revenue of about
forty five billion in the fiscal second quarter, despite losing
(09:44):
eight billion in revenue from China due to export controls
imposed by the Trump administration. The company is ramping up
production of its latest semiconductor design, Blackwell, and expect strong
demand for its AI infrastructure, which the company believes will
tran form the economy.
Speaker 4 (10:01):
And Video's growth is driven by its.
Speaker 3 (10:03):
Dominance as you know, in the AI market or in
the market for AI accelerator chips. Companies increasingly offering its
chips as part of whole computer systems to speed up
the deployment of complex technology.
Speaker 5 (10:15):
So Jay got a little bit of an update there
from Carol and from our OWNI and King about the
write through when it comes to Invidia results. Going back
to remind everybody, you're the only analyst listed on the
Bloomberg terminal with accelerating on in Video. What would you
need to see from the company today to have you
reverse course with that decision?
Speaker 7 (10:32):
So I think one of the things sort of stands
out for me is a year ago there was a
line out the door for in video products. Everybody was
buying everything they could, right and if one company couldn't
take its allocation, there was somebody else who was more
than willing to step in. I think the same is
true of this eight twenty product. The company wrote it
down a couple months ago. I kind of wonder why
(10:52):
no one else bought that product. It's different, you know,
there's all kinds of technical things there, but still it's
compute at the right price, it would have been attractive
to somebody.
Speaker 4 (11:03):
Hey what and so yeah, Oh I'm sorry, please continue.
Speaker 6 (11:06):
Yeah.
Speaker 7 (11:07):
So I'm just wondering how much more demand there is
right now. Again, I think AI long term is important.
In the near term, though, I think we're sort of
running out of steam as people are taking a pause
to assess what they want to do with it.
Speaker 3 (11:19):
One thing I want to ask you, is it tough
to have a cell rating Considering the stock Nvidia has
rallied about twenty four percent since you initiated coverage on
April thirtieth.
Speaker 7 (11:31):
Oh, it's fantastic having being the only celerated analyst on
a stock I like being the sober contrarian.
Speaker 3 (11:36):
But even with the stock, you know, rallying as much
as it did, I understand it's a bounce from being
perhaps you know, taking quite a beating like many names did,
courtesy of some of the news coming out of the administration.
But I mean you still kind of conviction you're going
to hold to it.
Speaker 6 (11:51):
Oh, absolutely absolutely.
Speaker 7 (11:53):
I mean I have a good sense of you know,
Jensen is going to get on the call and it
can drive the stock price higher because he's a fabulous,
fabulous marketer. He really knows how to sell this company,
does a great job of that. But I think the
substance there is still I have lots of questions about it,
and I'll I'll say in you know, in the two
three months i've had this celerating out there, I haven't
got a lot push back from the street.
Speaker 6 (12:12):
I haven't had investors and clients telling me that I'm crazy.
I've had a few people say I'm too too soon.
Speaker 7 (12:17):
I've had a few people say I'm too late, but
nobody is sort of questioning my thesis.
Speaker 5 (12:21):
We're getting some additional details about challenges in China and
China restrictions are any in King writing on the live
blog that Nvidia missed out on two and a half
billion dollars of sales in the fiscal first quarter and
will not getting projected eight billion dollars in the fiscal
second quarter. It's an amount per quarter roughly equal to
its nearest rival, AMD's total sales. You mentioned demand of
(12:42):
the H twenty specifically. Is that what you see as
the biggest risk? China and a lack of demand from China, Jay.
Speaker 7 (12:51):
I think China is a big X factor, just because
the US government's China policy is, let's call it dynamic
and rapidly changing day to day.
Speaker 6 (13:01):
I don't think that's the biggest risk. I think the
biggest question.
Speaker 7 (13:04):
I have about in Nvidia is long term demand for AI,
where it's going, what it's going to be like in
the near term. I think when I speak to corporate CIOs,
they've all tested AI pilots, they've all demoed it, and
what they're finding is that they get sort of ten
twenty percent cost reductions around their AI deployments. It helps
them reduce call center costs, things like that, which is good,
(13:27):
but it's not necessarily enough to justify the massive investments
needed to keep in video growing the way it has
been growing.
Speaker 5 (13:33):
Okay, Jay, I want to go to a story I'm
just going through. I was exchanging some texts with some
friends earlier because it doesn't sound like I have a
group of friends and like some of them are very
concerned about AI and about impacts on jobs, and we're
watching this really closely. Dario Amidae, the CEO of Anthropic,
I've interviewed him before. Axios out this morning with a
(13:56):
story that he basically said that AI could wipe out
about half about all entry level white collar jobs I'm
reading from Axios right now, and spike unemployment to ten
to twenty percent in the next one to five years.
He said this in an interview to Axio in San Francisco.
Axios in San Francisco, do you disagree with that? It
(14:16):
sounds like you're not as bullish when it comes to
the actual effect of AI on the workforce.
Speaker 7 (14:24):
I think that again, I'm a techno optimist, if anything,
I think there will be absolutely there will be disruptions
to the labor force, but there will also be new
opportunities over the long term. So you know, I think
certain low level coding jobs, certain low level copy eating jobs,
Those will start to get pretty tough. Anyone who does
(14:45):
image creation, they're going to be challenged for a while
until we find new ways to make use of these tools.
So absolutely, you know, in the nineteen hundreds, all the
buggy whip and you know carriage, you know, carriage makers
and horse trainers, they were very disrupted, and we're going
to see something similar. But the economy will still continue
to grow and hopefully we'll find ways to use those
(15:08):
people to do new things with the tools we get.
Speaker 5 (15:10):
I mean hopefully, or else we're in for a real
reckoning when it comes to the labor force.
Speaker 7 (15:16):
Yeah, and again I think it's I think it's very
premature to talk about these sort of massive, big term
impacts of AI because the things.
Speaker 6 (15:25):
We actually use day to day aren't aren't quite there yet.
Speaker 7 (15:27):
You know, again, a few small categories where there is disruption,
but in a broader sense, we haven't really grasped the
full potential for AI and what it's going to do.
Speaker 6 (15:35):
So then it's ways to.
Speaker 5 (15:36):
Go if okay, So then it raises the question about
other companies than your view that could be beneficiaries of
the way that technology is moving. If in video in
your view has limited upside. Right now, where in your
view should investors be putting their money Broadcom?
Speaker 6 (15:54):
Right?
Speaker 7 (15:54):
I think today, anytime in video loses share, it's to
one of its big customers, the hyperscalers, Intel, micros off Google,
not Intel, So our Google, Microsoft, Amazon, those companies are
all in various stages of designing their own GPU alternatives,
and Broadcom is going to make a lot of money
helping those those chips come to market.
Speaker 5 (16:12):
When do you think those chips will be able to
hold a candle to what Nvidia has developed.
Speaker 6 (16:17):
I think we're already there today.
Speaker 7 (16:18):
I think Google Google has the TPU, their tensor processing unit.
They're on their fifth or sixth generation of those. Those
are incredibly performative. They work very well for Google and
what Google needs to do, and I think other Google's
peers are going to start to see the benefits of
that and move down that path as well.
Speaker 3 (16:34):
All Right, you are listening and watching Bloomberg Business Week
Daily Carol Master along with Tim Stanevik live in our
Bloomberg Interactive Broker Studio. We're talking to Jay Goldberg, Senior
analyst of Sevenconductors and Electronics over at Seaport Research Partners.
As we said, he's the only analyst listed on the
Bloomberg with a cell rating on Nvidia, and yet here
in the after market, we are definitely not seeing investors
(16:54):
sell shares of Nvidia stock is up about three point
three percent.
Speaker 4 (16:59):
This as the company did come out and post.
Speaker 3 (17:02):
Its latest quarterly update as well as outlook, and as
our ian King rights, the company it's the world's largest
semiconductor company, giving an upbeat forecast even as China slowed
down Mars some of the growth slow down in China
weight on results, but sales will be about forty five
billion dollars in the fiscal second quarter that runs through July.
Speaker 4 (17:23):
That included the loss of roughly.
Speaker 3 (17:26):
Eight billion dollars in revenue from China because of export
controls from the United States.
Speaker 4 (17:31):
The forecast was in line with the analyst estimates according
to our data.
Speaker 3 (17:35):
So what's interesting is that even with that loss we're
talking about, sales will be about forty five billion dollars.
And as our ian King rights on our live blog,
how many companies could frontload their earnings release with details
of what they're missing out on and still get a
positive reaction from investors.
Speaker 4 (17:50):
So the stock as we said, still.
Speaker 3 (17:52):
Holding on to about a three and a half percent
gain here in the aftermarket.
Speaker 5 (17:56):
Our colleague Carmen Ryanikey writing on our live blog that
it seems traders are acting to the company's revenue forecast,
which is still basically in line even with an expected
eight billion dollar loss. When it comes to H twenty revenue,
that signals in Vidia is making up for the loss elsewhere. Jay,
I want to bring you back in with the caveat
that you haven't necessarily had the time to comb through
these results. But in your view, where do you think
(18:18):
in Nvidia could be making up for the loss in
H twenty revenue.
Speaker 7 (18:22):
I think there's still a lot of demand from the hyperscalers.
We have a bunch of massive data center buildouts taking place.
We had, you know, big announcements in Salary, Rabia last week,
Stargate earlier this year, UAE, ku Wait, lots of big
Gulf nations are building out data center capacity.
Speaker 6 (18:40):
The hyperscalers.
Speaker 7 (18:41):
You know have you know, building these plans these data
centers takes multiple years and so they've had commitments and
plans in place for a long time now. So those
are going to continue, right I think the question is
next year, can the capex continue to be at these levels?
Speaker 6 (18:56):
What happens there?
Speaker 7 (18:57):
But a lot of what we're seeing today is stuff
that was planned on and committed to months ago.
Speaker 5 (19:03):
So I guess it also raises the question about demand
from these hyperscalers, which you said continues to remain strong.
You also said that it does seem like, especially when
it comes to Google, that they could have some products that,
in your view at this point, hold a candle to
in video in terms of where in Nvidia needs to
go next. Over the last few months, we've talked a
(19:25):
little bit about the way, and we're going to hear
from Jensen Wong six thirty Wall Street Time just in
a little under two hours. Ed Ludlow is going to
have an Nvidia Earning special six thirty pm Wall Street
Time on Bloomberg TV and Radio. But Jay, I'm wondering
about where you think the area of growth is for
in Nvidia right now in terms of products. We've seen
Jensen Wong talk in recent months about humanoid robots, about
(19:49):
self driving cars as areas of potential growth. Where do
you see that the company needs to go.
Speaker 7 (19:55):
I think the two critical areas for them are in inference,
compute and robots. Inference is the stage of AI computing
where it sort of goes into wide adoption when we
built the model and then we.
Speaker 6 (20:05):
Need to use it.
Speaker 7 (20:07):
How that actually gets deployed I mentioned earlier, It depends
a lot on what we're actually doing with it. Inference
is going to be the big battleground. I think in
Vidia has a lock on the training side of the
model building, but the inference question is is looming large.
How we're actually going to deploy this. We as consumers
when we interact with with AI, where are those chips?
(20:27):
Are they in our phones? Is that where the AI
is being done or is it in the data center?
And I think that that's a big open question. Nobody
has a clear answer to that yet, and it's going
to matter a lot too, you know, I guarantee they're
going to talk about on the call. And the other
one is, like you mentioned, is robots. Jensen has talked
a lot about robots. It's a big theme of his
I think I think it's an area where there's there's
you know, dozens of companies building humanoid robots that can
(20:48):
do all kinds of interesting things. And I'm just waiting
for a robot that can help me fold laundry.
Speaker 5 (20:54):
Yeah, and you and me both. Jay, Hey, Jay, appreciate
you joining us. Got to come back soon. Jake Goldberg,
Senior Analyst, semi Conductors and Electronics and Seaport Research Partners,
joining us from San Francisco.
Speaker 2 (21:04):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 5 (21:18):
A lot's happening in the universe of Elon must on
the ground and up in the sky, Up in the sky.
Space Ex's starship suffering a midflight loss, its third consecutive setback,
and it raises questions about the company's progress on the
project Close to Earth.
Speaker 6 (21:31):
Though.
Speaker 5 (21:32):
In an interview to CBS News, Elon Musk expressed dissatisfaction
with President Trump's giant tax bill, saying it undercut his
effort to slash government spending.
Speaker 8 (21:43):
I was like disappointed to see the massive spending bill, frankly,
which increases the budge deps that does decrease it, and
that reminds the work that Podoche team is doing.
Speaker 6 (21:55):
I actually thought that when this big beautiful bill came along.
Speaker 9 (21:58):
I mean, like everything he don On does gets wiped
out in the first year.
Speaker 8 (22:03):
I think it both can be big, board can be beautiful.
Speaker 5 (22:08):
So that's a portion of the CBS interview with Elon
Musk gets set to air fully on CBS Sunday morning
this weekend. We should note that just the last couple
of hours, President Trump did dismiss criticism from Elon Musk
over the cost of his signature to AX bill. He
told reporters on Wednesday that compromises were made to secure
the necessary votes. We got Max Chafkin with us, the
co host of the podcast Everybody's Business and Elon Ink.
(22:31):
He's also senior reporter for Business Week. He joins us
here in the Bloomberg Interactive Brokers studio, You've got a
new story out about Elon and whether or not he
actually is leaving politics.
Speaker 4 (22:41):
I feel like.
Speaker 9 (22:42):
Every time we start to say he looks like he's
leaving politics, there is again making news in politics, and
you know, kind of here we go again, right. We
saw this at the end of last year when there.
Speaker 6 (22:54):
Was talking the budget bill.
Speaker 9 (22:55):
A Republican Congressional Republicans reaching compromise to fund the government
must kind of came out unexpectedly against that. I think
we're seeing something similar, right. He's attempting, I think, to
influence Congress here to at least shape this bill, if
not a torpedo at all together, which of course puts
him at odds in some sense with President Trump. Although,
(23:19):
as you heard from Trump right, Trump is also negotiating
with Congress right now over the exact contents of the bill.
Speaker 5 (23:26):
So you think he actually has a goal with comments
like this, He actually has a goal of shaping policy.
Speaker 6 (23:31):
And look clearly.
Speaker 9 (23:32):
Yeah, I mean, like I don't know why else he
would be saying this. I mean, he seems to be
saying that this bill is insufficiently hawkish on the deficit.
That's a point of view, you know, that's pretty consistent
with Elon Musk. Also, there's a pretty substantial contingent in
the Republican Party that agrees with him. I also think
(23:55):
it might be worth looking at some of the specific
aspects of this bill. You know, this bill has his
implications for the electric vehicle industry. It gets rid of
these tax credits that have been very important to Elon Musk.
And other electric car companies. I don't know to what
extent those are still in play, but we don't know
(24:15):
what the final bill is going to look like. And
you could imagine getting Musk on side would be worth
something to support us this bill. So I suppose we'll see.
Speaker 3 (24:25):
As long as Elon Musk Max is a financial supporter
of Donald Trump and Republicans, he's going to have a
direct line to the president.
Speaker 4 (24:35):
Is that fair to make that assumption?
Speaker 9 (24:36):
Yeah, I think it is fair, And I think even
in Trump's reaction here, you know, people, it's unclear to
me from that clip whether Elon Musk is intending to
criticize congressional Republicans or Donald Trump, although he did sort
of mock the name, you know, Trump's big beautiful bill formulation,
Trump responding to it in a pretty accommodating way, like
(24:57):
he's he's not punching backs, He's taking it like a
criticism from a friend or something like that. Elon Musk
is going to be very is still very important to
Donald Trump and to Republicans as a potential funder in
the midterm elections and as also a very very visible supporter,
(25:18):
right he you know, he's very polarizing now, but he's
still a successful business person, you know, an American industrialist.
You know, his support matters beyond money.
Speaker 5 (25:28):
Carol made an interesting comment, I can't remember if it
was this week or last week, during one of our
editorial calls about the press that Elon Musk has been
doing lately.
Speaker 4 (25:36):
Yeah, it's like the Eras tour.
Speaker 5 (25:39):
I think it's notable for a couple of reasons. One,
when he bought X, it seemed like he was doing
everything directly to his followers and directly to the world
through X. He put his head down and worked a
lot with Doge. There were some Fox interviews over that
period of time. But as he's moved away from the
White House and over the last few weeks, we've we've
heard more and more from him, and especially through like
(26:01):
quote unquote traditional like legacy media.
Speaker 3 (26:04):
That's what kills me because you guys make fun of me,
like my little Sunday morning shows that I watch.
Speaker 4 (26:07):
But it's Sunday morning. It's a very mass wide audience.
Speaker 9 (26:12):
So I think what's going on is Musk is suffering
a lot of blowback from customers.
Speaker 10 (26:18):
Right.
Speaker 9 (26:19):
He talks all the time about you know, the legacy
media and the Democrats and the and his various sort
of political adversaries. But what's happened when you look at
opinion polling is regular people, the people who buy musk stuff,
have turned on him. There was a really interesting poll
published the other day by Harris and Axios. They ask
people to rate how they basically how much they trust
(26:42):
well known companies. And you look at Tesla and SpaceX
over the last five years, and it is stunning. They
went from being some of the companies with the best
reputation to some of the companies in this universe of
one hundred companies with the worst reputation. And I think
what he's trying to do is get both investors and
consumers to focus on the other stuff, the non political stuff.
(27:04):
So we had this rocket launch yesterday, which, as he said,
Tim did not go very well for SpaceX, but there
was a big media role out. He did a bunch
of interviews with various outlets. I assume, although don't know
for sure, that this CBS interview was part of that,
essentially saying like, look at the space stuff, look at
the technology, which I think is smart from a messaging perspective,
(27:28):
because SpaceX is just inherently going to be less political
than you know, attacking various parts of the federal government.
On the other hand, Musk still needs this relationship with
Donald Trump, and SpaceX still needs this relationship with Donald Trump.
So it's going to be a difficult dance. I think
it's going to be very hard for him to undo
some of the damage that was caused with certain consumers,
(27:49):
especially you know, left leaning consumers.
Speaker 3 (27:51):
You know, I always think about money with everything we do,
rightfully so, but there's a story on the Bloomberg about
Elon Musk's Neuralink raising six center million in a deal
that values that company at nine billion. This is coming
from Semaphore siding unidentified people. So people, it sounds like
if this is true, like still committing money to his ventures.
I mean, I wonder, Max, we live in a funny world.
(28:14):
Could it be six months, twelve months, eighteen months where
all of a sudden, like everybody's kind.
Speaker 5 (28:19):
Of back in on Eli because we have brain chips.
Speaker 4 (28:21):
Because we have brainchips.
Speaker 8 (28:22):
Is that what?
Speaker 4 (28:23):
Maybe there is brain chips?
Speaker 3 (28:24):
But you know what I mean, Like, I don't know,
does he do something I don't know.
Speaker 9 (28:29):
I think he's in a very difficult political position. I
think certainly that is what investors are hoping, you know, right.
He made some comments on the earnings call about a
month ago, essentially saying, you know, maybe I'll spend one
to two days a week advising President Trump rather than
you know, full time.
Speaker 5 (28:44):
And I was saying twenty four to seven, he's going
to be on company.
Speaker 4 (28:50):
Sleeping somewhere on the floors.
Speaker 8 (28:51):
Who knows.
Speaker 9 (28:53):
I mean, you know, investors like this. The issue is
he is now closely tied to Donald Trump, and I
don't I don't think short of really like turning critic
and saying, okay, now I support a different political party,
which could happen. I think it's going to be very
hard for him to walk that line because all you know,
politics is very polarized in this country, and it's going
(29:15):
to be hard to avoid, you know, winning back these
people he's alienated without in turn alienating you know, this
kind of new cohort or conservatives who still very much
support Donald Trump.
Speaker 5 (29:27):
Just twenty seconds left on the SpaceX launch that didn't
go exactly as planned? Can can they still spin it
as a win. That's what they're doing.
Speaker 9 (29:34):
You know, all these launches are experiments. That's they're going
to say so, so you shouldn't really focus on the result.
That said, a lot has to go right between now
and next year for them to hit the timeline. And
each time one of these launches does not go right,
it gets harder.
Speaker 5 (29:49):
Max Chafkin, the co host of the podcast Everybody's Business
and Elon Ink, also senior reporter for Bloomberg BusinessWeek. He's
joining us here in the Bloomberg Interactive at Brokers Studio.
Speaker 2 (30:00):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Apple car
Play and the Android Auto with the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station, Just Say Alexa played Bloomberg eleven thirty.
Speaker 5 (30:19):
It is one of the most read stories on the
Bloomberg terminal right now. ETFs have a mass trillions of
dollars by offering investors greater tax efficiency, liquidity, and lower
costs than mutual funds. It's why we've seen inflows that
are so huge into ETFs and not into mutual funds. Now,
a regulatory shift is poised to bring ETFs and mutual
(30:40):
funds closer together, but it also threatens to complicate the
very features that fueled the ETF boom. Done Emi Grafeo
and Wildona Hire right about the dual share class structures
that could be approved as soon as the summer, and
the warnings about what could transpire if the market becomes stressed.
They're both Bloomberg News Crossouts reporters and they join us
here in the Bloomberg Interactive Brokers Studio. Emily, I want
(31:02):
to start with what this looming shift is, this regulatory shift.
Explain what exactly it is and why it's happening.
Speaker 10 (31:10):
Okay, so right now, when you're an investor and you
buy a fund, you buy a mutual fund, or you
buy an ETF, and ETFs have one share class. It's
just an ETF, you get the ticker you buy. If
you buy a mutual fund, depending on what avenue you're
buying it through, you'll be in a different share class.
You could be in the institutional one, the retail one,
(31:32):
the advisor friendly one.
Speaker 1 (31:34):
Sometimes their price differently.
Speaker 5 (31:35):
Yeah, I was going to say, sometimes the share class
has a different expense ratio or I don't know, like
that's the difference, right, Yeah, yetifically exclusively through your private wealth.
Speaker 1 (31:44):
Matter or something exactly.
Speaker 10 (31:45):
So maybe you get like a discount because you're using
it through like your employer or something, but ETFs don't
have that. Twenty over twenty years ago, actually Vanguard made
this patent where they could create a dual share class
fund where they have a mutual fund and an ETF
all in one, so you have multiple mutual fund share
classes and then one share class of that is exchange traded.
(32:08):
The reason why they did this and they patented it
is because it makes the fund in total more tax efficient.
Basically takes all the tax efficiency of the ETF and
puts it onto the mutual fund. So they figured this out.
They were like, great idea, let's patent it, make sure
no one else does it, and they save their clients
billions on taxes over the years.
Speaker 1 (32:30):
The patent expired two years.
Speaker 10 (32:31):
Ago, so now everyone else on Wall Street is trying
to get in on it.
Speaker 4 (32:36):
Can anybody and everybody do it? Goes on it? Well
not yet.
Speaker 11 (32:39):
So we have more than fifty firms that have applied
for the dual share class, but we are still waiting
from regulators to hear from regulators. We are expecting, you know,
the industries, expecting the SEC to greenlight this and to
actually allow it, maybe possibly as soon as this summer.
But you know, right now we're just in in wait
(33:00):
and see mode to see if we can actually get
approval on this.
Speaker 5 (33:03):
Build on what's the concern here? If there is stress
to the market, if there are liquidity issues, like what
are the risks that some of your sources are sharing
with you.
Speaker 11 (33:11):
Well, there's a couple of different concerns, but one of
the main ones is, you know, issues related to what
Emily was just talking about in terms of the tax efficiency.
So if you have a mutual fund and ETF together
and you and the mutual fund has to pay out
capital gains distributions, then in that new structure, the ETF
(33:36):
investors could potentially also be hit. And there is some
historical precedent. There actually is a fund of anguart fund
that back in two thousand and nine had huge outflows
and so the ETF share class investor, you know, the
ETF investors were also hit with a fourteen percent distribution.
Speaker 4 (33:52):
So there is some.
Speaker 11 (33:54):
Precedent and so a lot of market watchers or you know,
people who are maybe looking at this from a critical
angle or thinking ahead and saying that potentially this is
an issue that could come up.
Speaker 4 (34:04):
All right, I'm going to age myself.
Speaker 3 (34:06):
But when I started this career about three decades in accounting,
one of my first things I did was like a
mutual fund show and it was just like it was
kind of everybody was all of a sudden, you know,
getting investment plans at their companies, and it was the
big thing. And I guess and then now we've kind
of seen the ETF rush over what the last decade
or so in counting?
Speaker 4 (34:25):
Do we need both?
Speaker 9 (34:27):
Like?
Speaker 4 (34:28):
Is it just a case?
Speaker 3 (34:28):
Like as I saw this story, I'm like, Okay, here
it goes the mergeover to ETFs. Is this a first
step of eventually everything being converted? Or are there are
advantages to having one pure bread ETF versus one pure.
Speaker 4 (34:41):
Bread mutual fund?
Speaker 10 (34:42):
Yeah? I think when we started out writing this story,
we wanted to understand. There was this report from Seruly
and they posed this question of like, why would you
buy if you're an investor in an ETF, why would
you buy an ETF attached to.
Speaker 1 (34:56):
A mutual fund if you could just buy a standalone one?
Speaker 9 (34:58):
Right?
Speaker 1 (34:58):
Because the sec one of their.
Speaker 10 (35:00):
Concerns that they flagged, and issuers will say that they've
answered them. One of the concerns is is there going
to be this issue of like cross subsidization, one class
subsidized in the other. To answer your question, though, there
are some advantages to mutual funds. A lot of mutual
funds are already in tax exempt accounts, So a lot
(35:21):
of mutual funds in people's four to one k's. That's
probably the four to one k technology. It's not really
suited to hold ETFs. So most of our sources expect
that that that's a pretty big part of the market
that will.
Speaker 1 (35:34):
Stay in mutual funds.
Speaker 10 (35:37):
This structure is more for maybe if you're an investor
that you've been sitting in a mutual.
Speaker 1 (35:42):
Fund in like your brokerage account for years and years,
and you have all.
Speaker 10 (35:46):
Of these embedded capital gains that if you were to
sell you would pay a huge.
Speaker 1 (35:51):
Capital gains tax on.
Speaker 10 (35:52):
You could tax free convert into the ETF with this
and maybe wash out at least some of the taxes.
Speaker 1 (35:58):
That's the idea here.
Speaker 5 (36:00):
Build on our people or firms still launching mutual funds,
are they going all in on atfs?
Speaker 11 (36:06):
I mean, we're atf reporters, so I'm gonna say they're
all going all in on the.
Speaker 10 (36:12):
Coperation vice.
Speaker 5 (36:13):
But it has seemed like even some of the huge
traditional mutual fund companies, like a Capitol Group for example,
I think you spoke to them at Milken Carol.
Speaker 11 (36:25):
MFS is one hundred and one years old and they
launched five ETFs.
Speaker 5 (36:29):
Lash like that's that's a big deal.
Speaker 11 (36:32):
I think all of them are watching where the money
is flowing, and mutual funds as a category are seeing outflows,
and ETFs are seeing record inflows every single year. And
obviously we're seeing like hundreds of new ETFs every single year,
and not all of them are you know, home runs,
(36:52):
but you just need one. If you're a small etf
issuer and you have one hit, that's it.
Speaker 1 (37:00):
Like that, you're you're set.
Speaker 11 (37:02):
Like you know, if you have one strategy that that
you know, maybe a ton of retail investors are attracted to,
or something new, something that truly is innovative, it can.
Speaker 1 (37:12):
Work out really well for you.
Speaker 11 (37:14):
So a lot of people are looking at that and
thinking about.
Speaker 4 (37:16):
Well why not.
Speaker 11 (37:17):
It's pretty cheap actually to file and a lot of
times to launch ETFs. It's a bit obviously, it's very
difficult to attract assets and attention and eyeballs, et cetera.
But if you can do it, you know, you can
get you can get a home run.
Speaker 3 (37:31):
I mean, is there something to learn by what Vanguard
did and kind of where this then maybe ultimately goes Yeah.
Speaker 10 (37:36):
I mean, well, one, using the structure, they were able
to save clients in mutual funds a lot on taxes.
Vanguard gets consistent inflows. So then this this concern about
the capital gains distributions like bleeding into the ETF, it's
really only concern concerning if the mutual fund gets a
(37:57):
ton of outflows and has to like sell shares to
meet a redemption. They've been really successful. But I mean, Carol,
they are Vanguard. That's why get huge flows. They have
a huge audience. I think everyone saw Vanguard's success. I
think most fund managers are realistic and that like, they
don't have the scale the Vanguard has. Fair but if
(38:19):
this is a way to maybe squeeze a little bit
out and get a couple more assets through now having
an ETF, might as well try.
Speaker 11 (38:26):
But if I can add, yeah, you know, market watchers
critics people We've talked to analysts who are anticipating any
of the potential conflicts with this. They say it's not
a panacea for mutual fund managers to stench outflows like
mutual funds still are expected to.
Speaker 4 (38:43):
Keep seeing outflows.
Speaker 11 (38:45):
So even if you get this dual share class structure approved,
it doesn't mean that your outflows are going to You
know that you'll be all set terms of performance is
bad saying exactly, Bill.
Speaker 5 (38:56):
Donnie, you mentioned that if you have a successful ETF,
it can be game changing for a smaller term. What
about if it's Trump Media and Technology, for example, you
wrote about this company recently. It's majority owned by the
President of the United States, and you wrote that they're
laying the groundwork to come out with some ETFs.
Speaker 1 (39:15):
They are.
Speaker 11 (39:16):
It's actually an unusual move to pre announce that you
are planning to launch ETFs. Usually, issuers keep their ideas
close to their what's the saying, to their vest, to
their heart, and close to the vest, and so it's
very unusual to pre announce that you're going to be
doing something. But Trump Media did say that they are
planning on soon filing and launching ETFs, and separately Managed
(39:41):
accounts SMAs with three different themes, oil and gas, made
in America, and cryptocurrencies.
Speaker 4 (39:47):
The catch here is.
Speaker 11 (39:48):
Obviously all of that is tied to the president's various policies,
whether they're terrifilated or cryptocurrency related. Obviously, oil and gas
was a big theme when he was running for re election, right,
But more than sixty oil and gas ETFs already exist,
more than sixty focus. There's even a handful of made
(40:12):
in America ETFs already, and so what a lot of
ETF you know, analysts ETF.
Speaker 1 (40:18):
The industry is looking.
Speaker 11 (40:19):
At this and thinking it's you know, you're adding to
the mix of an already saturated, oversaturated market. But it
does come with potentially the president being able to, you know,
maybe go out and say you can buy my phones
or something along those lines, and that that might you know,
hinder or hurt his competitors, the people who already have
(40:40):
these et al.
Speaker 3 (40:41):
Right, that's a great story that you have on the terminal.
We're gonna give you guys equal love because you guys
did a story together, that was your story, and well
you've got another ETF story. We've just got about forty
seconds left here about State Street looking to kind of
double down on it's a bit to bring private assets
to a broader spectrum of investors. So this is an ETF.
This is an ets the private market world.
Speaker 10 (41:01):
Yeah, this is a private credit ETF. They have one
already and launched in February. The flows have been very lackluster,
especially for Stage Street. They're a big issuer. They've only
seen like five million inflows over a couple of months.
But they are doubling down. This one's going to be
a short duration private acid ETF. The one they have
now it's a little bit longer duration.
Speaker 4 (41:22):
Markets are longer duration.
Speaker 10 (41:24):
Well they said, yeah, they said this one's one to
three years. It's still in the early stages.
Speaker 1 (41:30):
Yeah, I don't know.
Speaker 3 (41:32):
Maybe you guys might you should do.
Speaker 4 (41:35):
I know we have an ATF podcast, but you guys
should do an ETFO.
Speaker 8 (41:40):
Show.
Speaker 3 (41:42):
And La Grafe the Donna Hirich so appreciated both Bloomberg
News crocessset reporters.
Speaker 4 (41:47):
Check them out on the Bloomberg and a Bloomberg dot com.
Speaker 2 (41:50):
This is the Bloomberg Business Week Daily podcast, available on Apple,
Spotify and anywhere else you get your podcasts. Listen live
weekday afternoonunes from two to five pm Eastern, on Bloomberg
dot com, the iHeartRadio app tune In, and the Bloomberg
Business app. You can also watch us live every weekday
on YouTube and always on the Bloomberg terminal
Hosts And Creators
Tim Stenovec
Carol Massar
Popular Podcasts
Boysober
Have you ever wondered what life might be like if you stopped worrying about being wanted, and focused on understanding what you actually want? That was the question Hope Woodard asked herself after a string of situationships inspired her to take a break from sex and dating. She went "boysober," a personal concept that sparked a global movement among women looking to prioritize themselves over men. Now, Hope is looking to expand the ways we explore our relationship to relationships. Taking a bold, unfiltered look into modern love, romance, and self-discovery, Boysober will dive into messy stories about dating, sex, love, friendship, and breaking generational patterns—all with humor, vulnerability, and a fresh perspective.
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com