August 27, 2025 • 42 mins
Watch Bloomberg Businessweek Daily LIVE every day on YouTube: http://bit.ly/3vTiACF.
Nvidia Corp., the world’s most valuable publicly traded company, gave a tepid revenue forecast for the current period, fueling concerns that a massive run-up in artificial intelligence spending is slowing.
Sales will be roughly $54 billion in the fiscal third quarter, which runs through October, the company said in a statement Wednesday. Though that was in line with the average Wall Street estimate, some analysts had projected more than $60 billion. The forecast excluded data center revenue from China, a market where it has struggled with US export restrictions and opposing pressure from Beijing.
The company’s tepid outlook adds to concern that pace of investment in artificial intelligence systems is unsustainable. Difficulties in China also have clouded Nvidia’s business. Though the Trump administration recently eased restrictions on exports of some AI chips to that country, the reprieve hasn’t yet translated into a rebound in revenue.
Today's show features:
- Jay Goldberg, Senior Analyst, Semiconductors & Electronics with Seaport Research Partners, and Bloomberg Intelligence Global Head of Technology Research Mandeep Singh break down Nvidia’s latest earnings report
- Natasha Sarin, Professor of Law at Yale Law School, and Co-Founder and President of the Yale Budget Lab, on US monetary and trade policy issues
- Dana Telsey, Founder, CEO and Chief Research Officer of Telsey Advisory Group, on key trends within the latest wave of retail earnings and the outlook for the US consumer
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business
Weekdaily 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
(00:23):
as it happens. The Bloomberg Business Weekdaily Podcast with Carol
Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:33):
I want to bring in Jay Goldberg, you senior analyst
Semiconductors and Electronics with Seaport Research Partners. Jay is the
only analyst that is tracked by Bloomberg that is a
celerating on Nvidia on the Bloomberg terminal. If the price
target is one hundred dollars, reminder shares trading right now
at about one hundred and eighty two dollars. Jay, Good
to talk with you. As always, is today the day
(00:53):
you are going to be proven?
Speaker 3 (00:54):
Right?
Speaker 4 (00:57):
My guess is no, But I don't think I'll be
in highly proven wrong right. My thesis is that in
Nvidia is good company, good products. They have this Blackwell
ramp coming now, but I think it's it's just getting
harder for them. They've gotten so big so quickly. I
think it's getting harder and harder for them to outperform
the sector, and I think we'll see signs of that today.
Speaker 5 (01:17):
Mandeep, what are you going to be focusing on? Is
it China sales? Is it Blackwell H twenty's what will
be the thing that will swing this or move the
needle of this report?
Speaker 6 (01:28):
I mean China I think is such a wild card
that even Jensen, like I don't think he has a
lot of visibility into what the administration wants to do.
So what is in their control is how Blackwell ramps up.
And we know the ramp up of Hopper in the
last twelve months, so clearly from a unit shipment's perspective,
(01:52):
he can give a lot more visibility around how the
customers are ramping up on Blackwell and what it means
for growth. Smart's more importantly because they have guided to
gross margins going back to mid seventy percent, So that
is something that consensus has in their numbers, and you
want to see that visibility from the Blackwell ramp up.
Speaker 2 (02:13):
That voice you're hearing from a man who needs no introduction.
He's Bloomberg Intelligence, a global head of technology research, man
deep saying he's snuck in the studio after he was
done with his TV hits, So we appreciate that, man,
Deep Jay, I want to bring you back in here
into the conversation. In terms of numbers, the revenue consensus
for fiscal QT revenue is fifty three point four to
six billion. There's a much wider range than usual going
(02:36):
into that average. Where do you fall.
Speaker 4 (02:39):
I'm at the high end. I'm at fifty two billion.
Why quarter seven? For next quarter? Like I said, this
is the sort of the prime of the Blackwell ramp.
This is the first quarter where we've really seen it
in deployment across the web, and we're starting to see customers.
People have been waiting for us for a year and
there was a fair amount of anticipation when are we
(03:00):
going to get them. Now that they have the systems,
will actually start to customers art to see what they
can do with them, which will determine how much more
they're going to buy going through the year.
Speaker 2 (03:09):
And on the China side, Jay, what is the Are
you expecting any clarity on the situation in China? Because
I know it's confused a lot of investors in analysts.
Speaker 4 (03:20):
I think when it comes to China, in particular in
geopolitics in general. I've come to stop expecting clarity on anything, ever,
so I think we'll get some indication. The company has
indicated that they're going to get a waiver for their
Blackwell product to ship to China. That's a new product,
a variant of black Wealth that they're going to ship,
So I expect they're going to talk about that. I'll
(03:41):
be listening very clear closely to see though, if they've
actually gotten the approval to ship it. I think that's
still pending, but that'll be a big update if they've
gotten the waiver to do that.
Speaker 5 (03:52):
Mendy, can you imagine a world in which Nvidia does
not have a presence in China. I'm just trying to
imagine how hard it will be for Nvidia to balance
having a presence in the US and in China as well.
Speaker 6 (04:03):
I mean, the good thing is they have de risked
the numbers, so when they guide it for two Q
they said eight billion of the H twenties revenue is
going to be written off. So from that perspective, you know,
when people are looking at the print, they know there
is zero China expectations. So but to your broader point,
(04:23):
about you know, them not being able to sell chips
to Chinese LLLM companies. I mean like when you compare
the LLLM landscape, the top four or five companies are
here in the US, and then they are there in China.
No one else when it comes to sovereigns or anyone
else has developed their own large anglage models. They talk
about building infrastructure, but I think it's mostly for inferencing.
(04:47):
So from a training perspective, the large anguage company model
companies are either in the US or China, So not
being able to sell to China is a big deal
in my opinion.
Speaker 2 (04:58):
Okay, here the numbers are crossing, Man Deep, you are
timed perfectly. Second quarter revenue did beat estimates. Second quarter
adjusted earnings per share coming in at one dollar and
five cent, second quarter revenue coming in at forty six
point seven billion dollars. The estimates for forty six point
two to three billion dollars second quarter adjusted gross margin
(05:18):
seventy two point seven percent. Second quarter data center revenue.
This is the big one. Forty one point one billion
dollars estimates were for forty one point twenty nine billion
second quarter gaming revenue four point three billion that did
at beat estimates as far as the outlook goes. In
vidia c second third quarter revenue coming in at fifty
four billion dollars plus or minus two percent. The estimate
(05:42):
is for fifty three point four to six billion dollars.
Another one worth repeating that data center revenue for the
second quarter forty one point one billion dollars. The estimate
was forty one point twenty nine billion dollars. In video
shares in the after hours, they're sinking down about eight
point six percent nine percent as we speak. Mandy, come
(06:02):
on back in here. You're looking at this on the
Bloomberg terminal on your phone. Why the downside reaction?
Speaker 3 (06:06):
I mean, just the.
Speaker 6 (06:07):
Guide the three que expectations were fifty four to fifty
five billion, and to my mind, this print is not
something to be excited about.
Speaker 2 (06:19):
What about this an additional sixty billion dollar share buyback?
That just crossing a sixty billion dollars share buyback when
the stock is close to a record. What does that mean?
Speaker 6 (06:29):
Well, I mean, this company is printing almost one hundred
billion dollars in free cash flow, so it doesn't surprise
me that they are using some of that free cash
flow for buybacks. But if the top line is decelerating
and we still have to wait for the call to
see why they didn't have that big off a bet
and raise given the Blackwell ramp, then the multiple will compress.
Speaker 2 (06:51):
When that headline crossed about the share buyback, we did
see shares give back some of those losses now down
three point eight percent. Some other headlines crossing the Bloomberg
terminal with regard to in Vidia, the company approves an
additional sixty billion dollars share buybacks, one hundred and eighty
million dollar release of previously reserved H twenty inventory, and
(07:12):
video says no H twenty sales to China based customers
in the second.
Speaker 3 (07:15):
Quarter of the year.
Speaker 2 (07:17):
I do want to bring in, bring back in Jay
Goldberg of Seaport. He joins US from San Francisco. So
Jay shares down about four percent in the after hours.
Certainly a disappointment when it came to that guide as
man deep set. But then there's that sixty billion dollars
share buyback. What's your instant reaction.
Speaker 4 (07:36):
I think this is what I was talking about, is
just getting harder and harder for them to beat the
way they have been right. I think we've all gotten
customed to the having these massive blowouts quarter after quarter,
and it just couldn't continue.
Speaker 3 (07:47):
Right.
Speaker 4 (07:48):
This is by you know, any normal company, this would
be an okay quarter, right, but it's in Vidio. We
all have heightened expectations and it was just, I think,
very difficult for them to live up to it.
Speaker 5 (07:59):
I feel like it's the outlae for sales of fifty
four billion plus or minus two percent that is fuzzy
against estimates around fifty three point forty six billion. But
in both cases, remember the wide range of analysts forecasts
due to the unknowns of China, and I feel like
this is what we've talked about tim, how there's such
a broad range and it's hard to predict now, especially
with China. But the all important forecast revenue fifty four
(08:20):
billion dollars looks good compared with consensus.
Speaker 4 (08:25):
I think it's okay. I think that the China factor
is interesting because like a year ago, if somebody or
some country or even some company wasn't able to take
allocation of their chips for whatever reason, there would be
a line out the door of other customers waiting to
take those chips. And it doesn't seem to be that
the line is that long anymore. Right, there's still demand there,
(08:45):
but it's not this sort of triple over subscribed demand
that they enjoyed a year ago.
Speaker 2 (08:50):
We're speaking of right now with Jay Goldberg, you senior
analysts for Semiconductors and Electronics with Seaport Research Partners. Also
with us is Mandy saying he is he is global
what global head of technology research? At this point, he
joins us here in the studio, Mandy, you're glued to
your Bloomberg terminal right now, I'm glued to the live
(09:12):
blog listening to what you and j are saying. Looking
at headlines here, Investors will want to know what's going
on with Blackwell. The company said that Blackwell Architecture revenue
grew seventeen percent sequentially.
Speaker 3 (09:24):
What are you watching?
Speaker 6 (09:25):
Yeah, and look, I think that's where the gross margins
are actually trending in the right direction. So they did
say they expect to exit the year with mid seventy
percent gross margins, So that's a positive. The Blackwell ramp
seems to be going well. It's just you know, when
it comes to the aggregate number, it just is not
(09:47):
that big of a beat. And raise, and that's why
you're seeing a stock reaction. But there isn't anything related
to China that I can see in the print, which
is what I was hoping. They gave some color around
expectations for China for the remainder of the year.
Speaker 5 (10:04):
Also in the live blog, we have Ed Lodlow. He's
the co host of Bloomberg Technology.
Speaker 3 (10:07):
Supposed to be on tation.
Speaker 5 (10:09):
He's probably just tuned in for this, he says, curiously.
The company says it benefited from one hundred eighty million
dollar release of previously reserved H twenty inventory from approximately
six hundred and fifty million and unrestricted H twenty sales
to a customer outside of China. What does that mean, Mandy.
Speaker 6 (10:28):
Well, I mean they basically wrote off that inventory and
now they're able to sell some of those H twenty sales.
Remember H twenty is a deprecated version of Blackwell, so
they're able to find a customer outside of China, and
really I think it's points to some sales related to that.
(10:49):
But I mean, one eighty million is not going to
make a dent, you know, when we are talking a
company that is expected to do fifty four billion in
revenue next quarter.
Speaker 2 (11:00):
Jake, come on in on this. On the China question,
the same thing that Isabelle asked man Deep with regard
to what China is looking like in Mandeep mentioning that
he's not seeing any outlook in the commentary related to China.
Do you have more questions right now about China than answers.
Speaker 4 (11:17):
As per usual. Yes, there's a lot of questions around this,
I think. I mean, I know from my conversations with
people in the industry there is a lot of demand
for Blackwell in China. There's no one knows if they'll
be able to get any or when they'll be able
to get any. The company did say a quarter ago
at Computext that they had a variant of Blackwell. It
(11:38):
sounds like it's ready to go. They just need approval
to send it. It doesn't sound like they've gotten that
yet because there's no These explicitly say there's no China
sales in their outlook. In regards to the H twenty sales,
that's interesting because H twenty is just a variant of
the H one hundred. It's a really simple operation to
convert an one hundred and twenty. It's you know, twenty
cents apart or something to make that change. The company
(12:01):
had said that they couldn't ship any to anyone else,
only China wanted it. So it is a little bit
encouraging to see them sell some of that, but not
entirely surprising. I also want to point out H twenty
margins are not quite as good as H one hundred margins,
so there's a little bit on margin headwind there. But
to one deep point one hundred and eighty million dollars
for sort of China related China tangential sales is just nothing,
(12:25):
nothing really to write about.
Speaker 2 (12:27):
So our Onian King, who covers semiconductors for Bloomberg News,
is out with his write up. The headline and video
gives lackluster forecasts, stoking fears of AI slow down. Big
company giving a tepid revenue forecast for the current period.
It feels concerns that a massive run up in AI
spending is slowing. Is that a concern of yours?
Speaker 3 (12:49):
Mandeep?
Speaker 6 (12:50):
I mean, I look at you know their last eight quarters.
They increase the revenue sequentially by four to five billion.
This is the first time when the data center sequential
growth of forty one point one billion is up five
percent from the prior quarter, which is the slowest growth.
So to my mind, you know there's going to any
(13:12):
time there is a deceleration. The fact that they were
growing sequentially double digits and now it's mid single digit.
Even with the numbers that they put up, I mean,
these are fantastic numbers, but there is a deceleration. And
you know when they're talking about new architectures, Blackwell and
the margins, as I said, is heading in the right direction.
(13:33):
But that sequential deceleration in data center growth, to me,
that is why you are seeing such a stock reaction.
Speaker 2 (13:40):
So Jay, I'll ask you the question, now that the
numbers are out, were you proven right this quarter that
you're the only analyst tracked by Bloomberg that has accelerating
on the terminal.
Speaker 4 (13:49):
I'll take I'll take the win. I'll take I'll take
a lowercase w INT's case.
Speaker 2 (13:52):
I mean, it's not trading out one hundred dollars yet.
Speaker 4 (13:56):
No, But like I said, my thesis is all along
been that it's just getting harder for them to beat expectations.
And I think this is exactly what happened to here.
Right to men Deep's point, there's there's not much growth
in data center. You know, you read all the other headlines.
It seems like AI is taking over the world, But
in reality, I think there's just it's we're going to
(14:17):
need some time to digest the AI we already have,
and I think it's natural that things slow down here
for in video who's been leading for so long.
Speaker 2 (14:25):
Is it a red flag to you in any way, Jay,
that the company's authorizing this share buyback. Do growth companies
do that or is that more of a sign of
mature companies.
Speaker 4 (14:35):
It's a little bit of a red sign. I want
to see how they talk about it. I mean, it
would seem to me that there's there's so much opportunity
out there in AI, why why not spend that sixty
billion dollars and furthering their growth? I mean, as a shareholder,
I would appreciate it, but as an outside observer, I
have to wonder couldn't they find other ways to deploy that?
Speaker 6 (14:54):
And the other big thing here is the capex increases
from the hyperscaler. So we know Meta plans to increase
their capex by over thirty percent for twenty twenty six,
but for other hyperscalers, we don't know if they're going
to grow by thirty percent or twenty percent or fifteen percent,
and that will trickle down in terms of what it
means for in Vidia's data center growth. So Google clearly
(15:18):
is the one that relies mostly on their own chips.
And you know, when you think about the incremental buyers
for Invidia's chips among the hyperscalers, yes there's Oracle and Coreviv,
but you know, if you take out China, sovereigns aren't
going to make up for that incremental buyer. And if
another hyperscaler develops their own chips, then that growth rate
(15:40):
will come down.
Speaker 3 (15:41):
Again.
Speaker 6 (15:41):
It's a question of whether they grow sequentially five percent,
ten percent, and that will have a bearing on the multiple.
Speaker 5 (15:49):
So in oh, go ahead, Jay.
Speaker 4 (15:52):
I'm just gonna say, and sort of going further with
what Madeep said is if you look at the other hyperscalers,
especially Microsoft and Amazon, they have some pretty big plans
next year for their internal silicon. Right, These are going
to be big ramp years for their internal silicon, and
I have to wonder if that's sort of chipping away
at the edges of demand for in video.
Speaker 2 (16:13):
That's Jay Goldberg, jaystick with us Jay as Senior Analyst
Semiconductors and Electronics with Seaport Research Partners. We're also joined
by Bloomberg Intelligence Global Head of Technology Research, man Deep Singh,
who's here in our studio.
Speaker 5 (16:25):
So you both make the point that it's just hard
to grow from here on out. How much of diversification
is hinged on that? We know that forty percent of
the revenue is from Microsoft, Meta, Amazon, and I'm missing one.
I can't, I'm blanking on that name. But Vida now
offers computers, networking gear, software services. Can we account on that?
(16:46):
Maybe you can go first?
Speaker 6 (16:48):
Yeah, I mean, look, everyone knows this is a multi
year investment cycle and data centers spend when it comes
to AI would be around trillion dollars. It's just a
growth rate. Right when you are underwriting forty times earnings
on stock, there is expectations embedded in terms of the
company compounding at you know, thirty forty percent. So if
(17:11):
that growth rate were to taper, then the multiple comes down.
It's still a fantastic growth rate for Nvidio. It's just
the multiple compresses and that's what I think is the
risk here.
Speaker 5 (17:22):
Do you share the same view.
Speaker 4 (17:23):
Jay, yeah, I think heaps them it up pretty well, right,
I think there's there's just it's it's good company, good products.
But like this kind of exuberance seems to be getting
ahead of reality of the market. And I mean, I
have to wonder, you have all the hyperscalers spending these
immense amounts of money half a trillion dollars among the
(17:43):
six or seven of these companies. It's it's hard to
see them getting a return on that anytime soon, right,
you sort of look through it. I don't think they
have a clear plan. They're building for something that's important,
and AI is coming, but in terms of sort of
hard dollars and cents the ROI on that massive investment,
it's not clear how they generate that. And so I
(18:04):
think we're starting were to start asking more of those
kinds of questions, what are we actually going to use
all this AI for?
Speaker 2 (18:10):
Well, maybe Snowflake can answer the question. I want to
bring Man deep Saying back in here because he covers
Snowflake shares a Snowflake up now about eleven percent. In
the after hours, the company gave a sales outlook for
the fiscal year that top.
Speaker 3 (18:23):
To analyst estimates.
Speaker 2 (18:24):
Overcoming anxiety that software vendors will be hurt as the
economy slows and new AI companies takeaway business. The show
has jumped in extended trading. The narrative has been that
software companies have been beat up for a couple of reasons.
One AI firms are able to do this, and two
a lot of the spending has gone to hardware into
expanding AI capabilities.
Speaker 3 (18:44):
What is Snowflake runings telling us?
Speaker 6 (18:45):
And actually Snowflake earnings points to probably something that is
incrementally negative for someone like Nvidia, because so far all
the development in large angrid models was I put all
the open Internet data into an LLM, and LLLM becomes
smarter and smarter. But now what companies are doing with
(19:06):
AI agencies, they are training on their own enterprise data.
That's where someone likes Snowflake or Mango dB benefits because
your training is getting a lot more specialized depending on
the use case. And it's not just about the compute
cluster anymore, but also about the data. And I think
that points to why Snowflake is doing well.
Speaker 2 (19:26):
Mandy saying you got to run. We appreciate you spending
so much time with us. This afternoon. That's Bloomberg Intelligence
Global Head of Technology Research, Jay Goldberg. He is a
senior analyst for semiconductors and Electronics with Seaport Research Partners.
Reminder everybody, he's the only analyst that's tracked by Bloomberg
who's got a cell rating on Nvidio.
Speaker 3 (19:44):
Stay with us.
Speaker 2 (19:45):
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (19:52):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eastering Listen
Apple Karplay and Android Otto with the Bloomberg Business app,
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Speaker 2 (20:08):
Well from more on the economy, everything from tariff's labor productivity,
and yes, the question of FED independence. I want to
bring in Natasha Sirynn. She's the co founder and president
of the Yale Budget Lab. She's also professor of law
at Yale Law School. She's got an appointment in the
Yale School of Management's Finance department too. She worked at
the Treasury Department as counselor to Treasury Secretary Janet Yellen.
(20:29):
She joins us from New Haven. Natasha, good to see you.
I want to start with a referencing an opinion piece
from Bill Dudley on the Bloomberg earlier today. He's former
president of the Federal Reserve Bank of New York. He's
out with a column today that says, up to now,
he wasn't worried about the threat that President Trump poses
to the Fed's independence. Now, he writes, he's much more worried,
(20:49):
and he thinks the.
Speaker 3 (20:50):
Markets should be two.
Speaker 2 (20:52):
Does the president's attack on the FED risk?
Speaker 3 (20:54):
Does?
Speaker 2 (20:55):
I mean, should we be worried about the president's attack
on the FED?
Speaker 7 (21:00):
Should be?
Speaker 8 (21:00):
And I agree moreheartedly with Bill. I think you're in
such unchartered territory at the moment, because remember this is
coming on the heels of many months of the administration
arguing that the Federal Reserve should be cutting interest rates
and accord with the political whims of the Trump administration,
rather than based on its very particular dual mandate, which
(21:23):
is about inflation and it's about the labor market, and
the fact that we have a central bank that's independent,
that cares about those two things, and those two things
alone is a really significant.
Speaker 7 (21:34):
Source of our economic security.
Speaker 8 (21:36):
The way I know that is because we have experimented
in the United States, as of other countries with federal
reserves that become politicized. In this country, in the Nixon administration,
we had Arthur Burns who was pushing for interest rates
to help President Nixon get elected, and the result of
that was runaway inflation that increased from three to thirteen percent.
Speaker 7 (21:56):
Over a two year period.
Speaker 8 (21:57):
So we do not want a central bank that functions
based on short term political whims, and I'm really worried
we're moving in exactly that direction.
Speaker 5 (22:06):
The FED said they will abide by what the court
the sides, and President Trump yesterday also said he will
abide by the same. But if the court decides that
Lisa Cook can stay, are we pass a red line?
Is the damage already done when it comes to the
credibility of the FED?
Speaker 7 (22:21):
I hope that the answer to that question is no.
And I really hope that. What's important to note in.
Speaker 8 (22:28):
The context of the legal discussion here is that the
Supreme Court has really gone out of its way in
a case of that removal that had nothing to do
with the Federal.
Speaker 7 (22:36):
Reserve to signal that the Federal.
Speaker 8 (22:39):
Reserve is special and that these types of positions, because
it's a quasi private institution with a particularly important role
in our economy.
Speaker 7 (22:48):
These types of positions.
Speaker 8 (22:49):
Are really only four cause removal positions, and frankly, four
cause rises to a level and legal nomenclature that it's
pretty hard to meet in the text of malfeasance. And
so I think that the Court has already signaled directionally
that they really think protecting this institution and protecting its
independence is immensely important, and I hope that that's what
(23:12):
they continue to say, is this particular legal case plays
out in the courts.
Speaker 7 (23:16):
But the thing that I'm worried.
Speaker 8 (23:17):
About is the sort of institutional credibility and the view
by the markets and by the public and by other
countries and other investors that our central bank is independent
from any type of politicization. That's kind of a genie
that you can't put back in the bottle. It's something
that's taken decades and generations to build, and I worry
(23:38):
that it evaporates pretty quickly as a result of some
of the types of attacks that we're seeing.
Speaker 7 (23:43):
So I'm hopeful that the.
Speaker 8 (23:45):
Judiciary is going to step in appropriately here, but I
am still really disheartened to see the types of attacks
that you've been seed leveled at the Federal Reserve of
resin So let's.
Speaker 2 (23:55):
Keep your law professor had on for a moment, Natasha,
and talk a little bit about the definition of four
cause in this context. You touched on it. But I'm
curious if, let's say, the allegations about mortgage fraud end
up and we haven't seen the evidence here that we
don't have that yet, but when it happened, if it
happened matters, I'm my understanding is intent matters as well.
(24:19):
So from a perspective, from a legal perspective, why don't
you think this would qualify as a four cause reason?
Speaker 3 (24:27):
I'm barred from.
Speaker 8 (24:29):
An expert, I am four cause removal. Nor have I
looked at the specifics of this particular.
Speaker 7 (24:34):
Case, and nor frankly could we have at this point.
Speaker 8 (24:37):
Because Lisa Cook hasn't been charged with any crime or anything.
This is a set of allegations that have been leveled
at her by the President and by the administration. What
I can say is that in the particular context of
removal with respect to the Federal Reserve, the Court has.
Speaker 7 (24:57):
Been pretty explicit that it thinks.
Speaker 8 (24:59):
It's important and you sought in the statement that the
Federal Reserve put out yesterday.
Speaker 7 (25:03):
These are Senate.
Speaker 8 (25:04):
Confirmed positions with very long terms that run cross administrations,
precisely to try and insulate this institution from exactly the
kind of political pressure that we're seeing levied against it.
And this isn't just about mortgages, nor what has it
been about the renovation of the Federal Reserve building, which
has taken a lot of airtime over the course of
(25:25):
the last many months. It's very clear that what's happening
here is really frustration with the direction of monetary policy,
and that's really no place for the administration to be acting.
In fact, it's frankly counterproductive to their goals of seeing
interest rates come down and seeing economic strength be very
significant in this country.
Speaker 2 (25:45):
We're speaking with Natasha Serin. She's the co founder and
president of the Budget Lab. She's a professor of law
Law School and has an appointment too in the Ale
School of Management's finance department. I promised we'd go all over,
So we're going to move from the Central Bank to
really what I think a lot of the market is
kind of moving past. Then that's tariffs, because earlier this
(26:06):
month our team reported that the average US tariff rate
will rise to fifteen point two percent if rates are
implemented as announced. This is according to Bloomberg Economics. It's
up from thirteen point three percent earlier and significantly higher
than the two point three percent in twenty twenty four
before President Trump took office. Just today the latest the
President opposed of fifty percent tariff on Indian goods to
(26:28):
punish the country for buying Russian oil. That's the highest
tariff in Asia. I'm wondering how you're looking at the
fraying relationship between the US and India and what's at
stake more broadly when it comes to this tariff.
Speaker 8 (26:42):
Importantly, what we should understand and my colleagues the Budget
lab are hard at work, by the way, updating our
estimates with respect to what happens to the effective terariff
rate and what happens to the type of revenue that
we're going to see coming into this country. But roughly speaking,
you've seen about an eight fold increase in the app
effect of teriff right over the course of the last
(27:03):
eight months of this administration, bringing in about three trillion
dollars of revenue into the country over the course of
the next decade. Importantly, and this goes a bit to
your point, Tim, it's never been super clear.
Speaker 7 (27:14):
To me what exactly the.
Speaker 8 (27:16):
Objective is of this type of trade policy and where
exactly it is that the administration is hoping to land,
because part of what you've seen articulated is that this
is really about sort of China and national security and
being sure that our adversaries are held at bay. In
that environment, you really are quite worried about the idea
(27:37):
of alienating allies, and being particular with respect to not
just India, but if you think about Canada and Mexico
and other countries where traditionally they've been very strong allies
in the United States, and in fact we've been encouraging
of more manufacturing to shift, particularly to India and Vietnam.
Speaker 7 (27:55):
Exactly because it shifts away from.
Speaker 8 (27:57):
China, and so a little bit it feels like this
policy has been kind of in cohetent all over the place,
and it's hard to analyze exactly why.
Speaker 7 (28:06):
It is we're doing what it.
Speaker 8 (28:07):
Is that we're doing in order to be able to
try and judge any success. What I can say is,
as a result of the tariffs so far, prices are
going up and going to go up Further, the economy
is going to be smaller, and it doesn't seem like
a win from the perspective of the American consumer or
from American businesses.
Speaker 5 (28:27):
I'm glad you brought that up, because I'm curious if
you think this will undo all the years of goodwill
that the US and India have built.
Speaker 1 (28:35):
Well.
Speaker 8 (28:36):
I think that I'm worried about, frankly, is that you
are in a situation where we are very exposed to
particular relationships that it's taken to And this actually relates
to our conversation about the Federal Reserve in that a
lot of the sort of goodwill that you're describing our
things that it's taken decades across administrations to try and
(28:57):
build the types of working relationships with our allies that
have made us this global hedgemon and have made us
a real marker of stability in the economy, a place
that other countries want to invest in. Other investors both
domestically and internationally, are key to spend time.
Speaker 7 (29:12):
In and around. And so what you worry about in.
Speaker 8 (29:15):
Some sense is not just are you alienating one particular
ally or are you moving us sending some other countries
closer into the arms of China.
Speaker 7 (29:25):
Of course you're worried about all of that, but also
I think what you're worried about.
Speaker 8 (29:29):
Is the general sort of chaos of not exactly knowing
where these tariffs are going to land, not knowing if
it makes sense to try and shift part of your
manufacturing supply chain into India, because if India's effective terribreate
is fifty percent, it's no longer the type of place
where you're going to want to be pursuing a lot
of that.
Speaker 7 (29:48):
Type of business. So I think it makes decision.
Speaker 8 (29:50):
Making really complicated for the United States and for the
businesses that are in this country. And it also runs
real risks geopolitically that are pretty concerning.
Speaker 2 (30:01):
I promise we'd go everywhere. We have a few minutes left,
and I want to talk a little bit about the
labor market and productivity and the context of record low
birth rates in the United States, immigration that has come
down quite a bit during this administration, and what it
means for a workforce moving forward. How do you weigh
(30:21):
those two things.
Speaker 8 (30:23):
It's so interesting because I was actually talking to some
colleagues at the or some friends who work at the Congressional.
Speaker 9 (30:31):
Budget Office who have said that one of the reasons
why you have productivity growth over the course of the
next decade, that their estimates are going to average.
Speaker 8 (30:42):
In the one point eight two percent range, sorry, GDP
growth in the one point eight two percent range over
the course of the next ten years, is precisely because
it's on the back of an increase in labor supply
that comes from immigration. And the reason why that's so
important is because, as you're Describington, we have an aging
population in this country, so a big chunk of people
are going to age out of the labor force.
Speaker 7 (31:04):
It's really important that you have that supply coming in
in a world that when you don't.
Speaker 8 (31:09):
Have that supply coming in meaningfully and you kind of
shut down pathways to immigration, as you've seen policy wise
over the course of the last many months, you start
to lose a very significant driver of labor force growth,
and then you start to lose a very significant driver
of productivity and broader economic growth. The thing that's interesting
is it's happening at the same time as you're seeing
(31:30):
potentially this productivity revolution that's coming from artificial intelligence. So
in some sense it's hard to know exactly how to
disentangle those two effects as we watched the direction the
economy is going over the course of the next many years.
But restricting labor supply is going to have a pretty
meaningful impact, particularly on sectors of the economy like construction
(31:50):
and manufacturing.
Speaker 5 (31:52):
But with a investment booming, do you think that AI
will be able to offset the lack of workers, whether
to immigration the supply of workers that we have are
we facing right now?
Speaker 8 (32:05):
It's kind of hard to answer that question right now
in some sense, because it's hard to know exactly what
to make of the very significant capital expenditure investments we're
seeing in AI, and hard to know what to make
about the role that AI is having in the labor
force thus far. There's a great new paper by Eric
Roln Austin and co authors where they look at the
(32:26):
extent to which you're actually starting to see displacement in
the labor force that has to do with artificial intelligence
and it's growth and usage across different sectors of the economy,
and they do find that you're starting to see, particularly
for younger workers who are in the most exposed industries,
you're starting to see actual impacts with respect to their
(32:48):
possibilities of labor force entry, and so I do think
that there is going to be an effect here that's meaningful.
It's just really kind of early innings with respect to
this type of productivity change and shift, and early innings
with respect to knowing whether AI is really a compliment
or a substitute for other aspects.
Speaker 7 (33:07):
Of the labor pool.
Speaker 3 (33:07):
Yeah.
Speaker 2 (33:08):
Natasha Sarin, co founder and president of the Yale Budget Lab,
professor at Yale Law School and the Yale School of Management,
Thanks so much for joining us.
Speaker 3 (33:15):
This is Bloomberg. Stay with us.
Speaker 2 (33:18):
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (33:26):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Applecarflay, and
Android Auto with the Bloomberg Business App. You can also
listen live on Amazon Alexa from our flagship New York
station Just say Alexa play Bloomberg eleven thirty.
Speaker 2 (33:45):
Certainly a lot of focus on Nvidia today, but do
not forget there are other companies reporting today and tomorrow.
In retail, specifically, Cole shares surged after the company offered
a more optimistic full year outlook. Abercrombie and Fit shares well.
They've been all over the place. Is high three point
three percent, as low as down ten percent. Investors are
trying to decipher a mostly and modestly better than expected
(34:06):
quarterly performance back with us, Tutak, retail and more. Dana
Telsea is here. She's the founder and CEO and chief
Research officer of Telsey Advisory Group. She joins us here
in the Bloomberg BusinessWeek Studio. So, Dana, we still have
to hear from Victoria's Secret, Dick Sporting Goods, Dollar General, Best,
by the Gap, Macy's. We've heard from a lot of
the big ones, Target, Walmart and the like. It's not
(34:29):
a monolith by any means. But how are retailers doing?
Speaker 10 (34:33):
First of all, thank you for having me. I think
retailers are doing okay. They're navigating this environment very well,
navigating it because sales strength exiting the second quarter is continuing.
You're seeing the fact that consumers may be buying a
little bit earlier to avoid any of the price increases
given the goods in the second quarter warrant as high
tariff as what you may have. And you know what
(34:55):
else they're doing marketing spend is increasing, product innovation, is
driving version and den and jeans are working. You're saying
across the board, whether it's coals, whether it's any of
the other retailers, wide leg baggie is hot these days.
Speaker 3 (35:10):
Like I'm in seventh grade all over again. That's what
it is.
Speaker 10 (35:14):
Keep repeating seventh grade what we wore. It's ay, yeah,
that's that's what's happening again. And the tariffs, Yes, there
definitely are an uptick, and you're hearing that. Consumers overall,
we don't know what they're going to react to these
higher prices. Is they're first expected to come late Q
three and into Q four. But the retailers are managing, frankly,
(35:35):
a little better than what I would have expected.
Speaker 5 (35:37):
So you mentioned sales strengthening. Do you view this as
a sign of durable consumer strength or more like pre
tire if buying, or because of great promise we're seeing.
How do you assess the health of the consumer.
Speaker 10 (35:47):
I think the health of the consumer is pretty much okay.
I think consumers are spending deliberately. I think the high
end is traded down. We've consistently heard of Walmart getting
the biggest growth from some of their higher income customers.
You're seeing the Ralph lawns or the Tapestry drive. Average
unit retail selling price increases with product innovation, and frankly,
(36:08):
look today, Hollister delivered a double digit same store sales increase,
which was impressive. And you look at Cohal's basically improve
their proprietary brands because that value customer wants to see
newness and proprietary brands. And let's not forget we're going
to get the last off price to tomorrow. But TJX
and Ross we're also solid. Consumers are buying ahead of
(36:29):
price increases. Retailers are delivering product newness. It's back to
school season and everyone's still being discerning.
Speaker 5 (36:37):
Another thing I'm looking at is retailers are still investing
in store openings and remodels. So how much is that
translating into traffic and conversion versus just being more defensive.
I personally shop online and I don't go to stores anymore,
but it seems like people still do they do.
Speaker 10 (36:53):
When you think about store openings in retail real estate,
there is more demand than there is supply. There's not
a lot of new develop any of the closures that
you've had. Companies and retailers are taking them. The growth
of whether it's A five below, a TJX, A Raw
Stores or Burlington is hundreds of stores that can open.
You've seen the landlords overall pivot basically grocery anchored shopping
(37:17):
centers can be lifestyle also and vice versa. Wherever the
consumer is located in near it's more focus on where
can I get the goods? And yes, online is still there,
but it's not either or it's both.
Speaker 2 (37:29):
We got to talk about these India tariffs fifty percent
on the country. It's upending ties with Mody and with
a long time and an ally that wants to even
become closer to the United States. Exporters of clothing, footwear,
and small manufactured goods like toys are bracing for falling
orders and possible job cuts. What's going to happen as
a result of these tariffs.
Speaker 10 (37:49):
I mean, we've saw when it was just so high
on China too. Retailers work to do three things. They
diversify their sourcing as fast as they can. They share
the expenses with this supplier and manufacturers. They raise prices
to the end consumer. Hard to do this so quickly,
and it's an obstacle.
Speaker 2 (38:06):
There's a great chart in the piece that comes from
data from the White House, and it shows that India
tariffs are the highest of any Asian nation fifty percent,
but other countries Laos, Me and mar forty percent, China
thirty percent. You've got Tri Lanka at twenty percent, Taiwan, Vietnam, Cambodia, Indonesia.
I mean these places I'm mentioning all export to the
(38:27):
United States, many of them are areas that have been
diversified to away from China. So you can only diversify
so much if everybody has tariffs.
Speaker 10 (38:37):
Exactly, and you can't come back to the United States
for all intents and purposes, given it's you don't have
the labor, and it's prohibitively expensive. What we've seen happen
is we've even heard of some retailers who were diversified
away from China. They went back to China because the
tariff was became a little bit lower than some of
these other places. It is moving pieces all together, and
(39:01):
it's not staying stable.
Speaker 2 (39:02):
When do we see it hit the actual price of
these goods because up to now, as you mentioned, retailers
are eating some of this.
Speaker 3 (39:10):
But how long can that go on.
Speaker 10 (39:11):
Since April sixteenth, we've had a price tracker of eighty items.
We price it every single week. We've seen some increases,
but not across the board. Footwear is where we've seen
the increases. Expecting that by the end of the third
quarter into this fourth quarter we're going to see more
expansive price increases, and we're still not seeing it holistically
across the board.
Speaker 5 (39:31):
We also have to talk about interest rates and with
the potential to lower interest rates, how much support could
that provide the shoppers for discretionary spending when it comes
to holiday and then the lead up to twenty twenty six.
Speaker 10 (39:44):
Just the fact that we'll have lower interest rates is
a positive for discretionary spending. It's something that takes months
in order to really put in action, but the feel
good factor of it will lead to a more productive spend.
At the same time, when you're looking at the labor mark,
we watch it carefully because we can't see that labor
market weekend because that will ultimately impact holiday season sales.
(40:06):
The strength of back to school is a good pathway
to holiday.
Speaker 5 (40:09):
It seems like broadly you sound really bullish. What could
be ahead wind then what could really buckle all of
this development to the downside?
Speaker 10 (40:17):
Labor weakening, price increases coming, and not really in the
consumer pulling back. That's why I always say our theme
is everything's good butt, but we'll consumers slow down, but
we'll retail US have the inventory second quarter so far though,
coming in better than expected.
Speaker 3 (40:34):
How's ultra luxury doing? Slowed? Ultra luxury slowed?
Speaker 10 (40:38):
I think that you're not getting as many international tourists
here to the US. You're seeing the Chinese not spend
as much as they had been, and you're seeing prices
for some of the luxury brands. Did they just get
too high interest?
Speaker 3 (40:50):
So what are they doing to?
Speaker 7 (40:52):
Well?
Speaker 10 (40:52):
Look what the newest thing that just happened.
Speaker 7 (40:54):
Earlier this week.
Speaker 10 (40:55):
Louis Vaton introduced a beauty line for Louis Vauton.
Speaker 3 (41:00):
Usually this is sixty dollars lipstick.
Speaker 10 (41:02):
It is lipstick, but that is the newest thing they've introduced,
and so they're diversifying the categories that they can.
Speaker 3 (41:09):
It's not going to work.
Speaker 10 (41:10):
Everyone wants a little bit of luxury. One hundred and
sixty dollars compared to Ermez, which is eighty dollars compared
to Chanel, which is fifty dollars or under. Let's see
what happens. But you know what one of the things
is for all different types of luxury, consumers will pay
up if there's exclusivity and a desire along with authenticity.
Speaker 5 (41:28):
So it seems like consumers are trading down and we
don't see a lot of trading up. Is that what
you're saying.
Speaker 10 (41:33):
We're not seeing the trade up like it had been before.
If you look at the Walmart numbers, you look at
the TJX, they're searching for value to maintain their pocketbooks.
Speaker 5 (41:41):
Maybe the lipstick will change it him one hundred and
sixty dollars.
Speaker 3 (41:44):
Yeah, you can do it.
Speaker 2 (41:45):
I heard that there's like a really nice case that
it comes into and that's like a big part of
the And.
Speaker 10 (41:49):
Then the refails don't cost one hundred and sixty dollars.
Speaker 6 (41:52):
Great.
Speaker 2 (41:52):
Great, it's a real final. Hey data always great. When
do you join us on Blueberg.
Speaker 3 (41:56):
Business Thank you so much.
Speaker 1 (41:58):
This is the Bloomberg Business Weekdaily podcast, available on Apple,
Spotify and anywhere else you get your podcasts. Listen live
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(42:18):
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(00:23):
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Speaker 2 (00:33):
I want to bring in Jay Goldberg, you senior analyst
Semiconductors and Electronics with Seaport Research Partners. Jay is the
only analyst that is tracked by Bloomberg that is a
celerating on Nvidia on the Bloomberg terminal. If the price
target is one hundred dollars, reminder shares trading right now
at about one hundred and eighty two dollars. Jay, Good
to talk with you. As always, is today the day
(00:53):
you are going to be proven?
Speaker 3 (00:54):
Right?
Speaker 4 (00:57):
My guess is no, But I don't think I'll be
in highly proven wrong right. My thesis is that in
Nvidia is good company, good products. They have this Blackwell
ramp coming now, but I think it's it's just getting
harder for them. They've gotten so big so quickly. I
think it's getting harder and harder for them to outperform
the sector, and I think we'll see signs of that today.
Speaker 5 (01:17):
Mandeep, what are you going to be focusing on? Is
it China sales? Is it Blackwell H twenty's what will
be the thing that will swing this or move the
needle of this report?
Speaker 6 (01:28):
I mean China I think is such a wild card
that even Jensen, like I don't think he has a
lot of visibility into what the administration wants to do.
So what is in their control is how Blackwell ramps up.
And we know the ramp up of Hopper in the
last twelve months, so clearly from a unit shipment's perspective,
(01:52):
he can give a lot more visibility around how the
customers are ramping up on Blackwell and what it means
for growth. Smart's more importantly because they have guided to
gross margins going back to mid seventy percent, So that
is something that consensus has in their numbers, and you
want to see that visibility from the Blackwell ramp up.
Speaker 2 (02:13):
That voice you're hearing from a man who needs no introduction.
He's Bloomberg Intelligence, a global head of technology research, man
deep saying he's snuck in the studio after he was
done with his TV hits, So we appreciate that, man,
Deep Jay, I want to bring you back in here
into the conversation. In terms of numbers, the revenue consensus
for fiscal QT revenue is fifty three point four to
six billion. There's a much wider range than usual going
(02:36):
into that average. Where do you fall.
Speaker 4 (02:39):
I'm at the high end. I'm at fifty two billion.
Why quarter seven? For next quarter? Like I said, this
is the sort of the prime of the Blackwell ramp.
This is the first quarter where we've really seen it
in deployment across the web, and we're starting to see customers.
People have been waiting for us for a year and
there was a fair amount of anticipation when are we
(03:00):
going to get them. Now that they have the systems,
will actually start to customers art to see what they
can do with them, which will determine how much more
they're going to buy going through the year.
Speaker 2 (03:09):
And on the China side, Jay, what is the Are
you expecting any clarity on the situation in China? Because
I know it's confused a lot of investors in analysts.
Speaker 4 (03:20):
I think when it comes to China, in particular in
geopolitics in general. I've come to stop expecting clarity on anything, ever,
so I think we'll get some indication. The company has
indicated that they're going to get a waiver for their
Blackwell product to ship to China. That's a new product,
a variant of black Wealth that they're going to ship,
So I expect they're going to talk about that. I'll
(03:41):
be listening very clear closely to see though, if they've
actually gotten the approval to ship it. I think that's
still pending, but that'll be a big update if they've
gotten the waiver to do that.
Speaker 5 (03:52):
Mendy, can you imagine a world in which Nvidia does
not have a presence in China. I'm just trying to
imagine how hard it will be for Nvidia to balance
having a presence in the US and in China as well.
Speaker 6 (04:03):
I mean, the good thing is they have de risked
the numbers, so when they guide it for two Q
they said eight billion of the H twenties revenue is
going to be written off. So from that perspective, you know,
when people are looking at the print, they know there
is zero China expectations. So but to your broader point,
(04:23):
about you know, them not being able to sell chips
to Chinese LLLM companies. I mean like when you compare
the LLLM landscape, the top four or five companies are
here in the US, and then they are there in China.
No one else when it comes to sovereigns or anyone
else has developed their own large anglage models. They talk
about building infrastructure, but I think it's mostly for inferencing.
(04:47):
So from a training perspective, the large anguage company model
companies are either in the US or China, So not
being able to sell to China is a big deal
in my opinion.
Speaker 2 (04:58):
Okay, here the numbers are crossing, Man Deep, you are
timed perfectly. Second quarter revenue did beat estimates. Second quarter
adjusted earnings per share coming in at one dollar and
five cent, second quarter revenue coming in at forty six
point seven billion dollars. The estimates for forty six point
two to three billion dollars second quarter adjusted gross margin
(05:18):
seventy two point seven percent. Second quarter data center revenue.
This is the big one. Forty one point one billion
dollars estimates were for forty one point twenty nine billion
second quarter gaming revenue four point three billion that did
at beat estimates as far as the outlook goes. In
vidia c second third quarter revenue coming in at fifty
four billion dollars plus or minus two percent. The estimate
(05:42):
is for fifty three point four to six billion dollars.
Another one worth repeating that data center revenue for the
second quarter forty one point one billion dollars. The estimate
was forty one point twenty nine billion dollars. In video
shares in the after hours, they're sinking down about eight
point six percent nine percent as we speak. Mandy, come
(06:02):
on back in here. You're looking at this on the
Bloomberg terminal on your phone. Why the downside reaction?
Speaker 3 (06:06):
I mean, just the.
Speaker 6 (06:07):
Guide the three que expectations were fifty four to fifty
five billion, and to my mind, this print is not
something to be excited about.
Speaker 2 (06:19):
What about this an additional sixty billion dollar share buyback?
That just crossing a sixty billion dollars share buyback when
the stock is close to a record. What does that mean?
Speaker 6 (06:29):
Well, I mean, this company is printing almost one hundred
billion dollars in free cash flow, so it doesn't surprise
me that they are using some of that free cash
flow for buybacks. But if the top line is decelerating
and we still have to wait for the call to
see why they didn't have that big off a bet
and raise given the Blackwell ramp, then the multiple will compress.
Speaker 2 (06:51):
When that headline crossed about the share buyback, we did
see shares give back some of those losses now down
three point eight percent. Some other headlines crossing the Bloomberg
terminal with regard to in Vidia, the company approves an
additional sixty billion dollars share buybacks, one hundred and eighty
million dollar release of previously reserved H twenty inventory, and
(07:12):
video says no H twenty sales to China based customers
in the second.
Speaker 3 (07:15):
Quarter of the year.
Speaker 2 (07:17):
I do want to bring in, bring back in Jay
Goldberg of Seaport. He joins US from San Francisco. So
Jay shares down about four percent in the after hours.
Certainly a disappointment when it came to that guide as
man deep set. But then there's that sixty billion dollars
share buyback. What's your instant reaction.
Speaker 4 (07:36):
I think this is what I was talking about, is
just getting harder and harder for them to beat the
way they have been right. I think we've all gotten
customed to the having these massive blowouts quarter after quarter,
and it just couldn't continue.
Speaker 3 (07:47):
Right.
Speaker 4 (07:48):
This is by you know, any normal company, this would
be an okay quarter, right, but it's in Vidio. We
all have heightened expectations and it was just, I think,
very difficult for them to live up to it.
Speaker 5 (07:59):
I feel like it's the outlae for sales of fifty
four billion plus or minus two percent that is fuzzy
against estimates around fifty three point forty six billion. But
in both cases, remember the wide range of analysts forecasts
due to the unknowns of China, and I feel like
this is what we've talked about tim, how there's such
a broad range and it's hard to predict now, especially
with China. But the all important forecast revenue fifty four
(08:20):
billion dollars looks good compared with consensus.
Speaker 4 (08:25):
I think it's okay. I think that the China factor
is interesting because like a year ago, if somebody or
some country or even some company wasn't able to take
allocation of their chips for whatever reason, there would be
a line out the door of other customers waiting to
take those chips. And it doesn't seem to be that
the line is that long anymore. Right, there's still demand there,
(08:45):
but it's not this sort of triple over subscribed demand
that they enjoyed a year ago.
Speaker 2 (08:50):
We're speaking of right now with Jay Goldberg, you senior
analysts for Semiconductors and Electronics with Seaport Research Partners. Also
with us is Mandy saying he is he is global
what global head of technology research? At this point, he
joins us here in the studio, Mandy, you're glued to
your Bloomberg terminal right now, I'm glued to the live
(09:12):
blog listening to what you and j are saying. Looking
at headlines here, Investors will want to know what's going
on with Blackwell. The company said that Blackwell Architecture revenue
grew seventeen percent sequentially.
Speaker 3 (09:24):
What are you watching?
Speaker 6 (09:25):
Yeah, and look, I think that's where the gross margins
are actually trending in the right direction. So they did
say they expect to exit the year with mid seventy
percent gross margins, So that's a positive. The Blackwell ramp
seems to be going well. It's just you know, when
it comes to the aggregate number, it just is not
(09:47):
that big of a beat. And raise, and that's why
you're seeing a stock reaction. But there isn't anything related
to China that I can see in the print, which
is what I was hoping. They gave some color around
expectations for China for the remainder of the year.
Speaker 5 (10:04):
Also in the live blog, we have Ed Lodlow. He's
the co host of Bloomberg Technology.
Speaker 3 (10:07):
Supposed to be on tation.
Speaker 5 (10:09):
He's probably just tuned in for this, he says, curiously.
The company says it benefited from one hundred eighty million
dollar release of previously reserved H twenty inventory from approximately
six hundred and fifty million and unrestricted H twenty sales
to a customer outside of China. What does that mean, Mandy.
Speaker 6 (10:28):
Well, I mean they basically wrote off that inventory and
now they're able to sell some of those H twenty sales.
Remember H twenty is a deprecated version of Blackwell, so
they're able to find a customer outside of China, and
really I think it's points to some sales related to that.
(10:49):
But I mean, one eighty million is not going to
make a dent, you know, when we are talking a
company that is expected to do fifty four billion in
revenue next quarter.
Speaker 2 (11:00):
Jake, come on in on this. On the China question,
the same thing that Isabelle asked man Deep with regard
to what China is looking like in Mandeep mentioning that
he's not seeing any outlook in the commentary related to China.
Do you have more questions right now about China than answers.
Speaker 4 (11:17):
As per usual. Yes, there's a lot of questions around this,
I think. I mean, I know from my conversations with
people in the industry there is a lot of demand
for Blackwell in China. There's no one knows if they'll
be able to get any or when they'll be able
to get any. The company did say a quarter ago
at Computext that they had a variant of Blackwell. It
(11:38):
sounds like it's ready to go. They just need approval
to send it. It doesn't sound like they've gotten that
yet because there's no These explicitly say there's no China
sales in their outlook. In regards to the H twenty sales,
that's interesting because H twenty is just a variant of
the H one hundred. It's a really simple operation to
convert an one hundred and twenty. It's you know, twenty
cents apart or something to make that change. The company
(12:01):
had said that they couldn't ship any to anyone else,
only China wanted it. So it is a little bit
encouraging to see them sell some of that, but not
entirely surprising. I also want to point out H twenty
margins are not quite as good as H one hundred margins,
so there's a little bit on margin headwind there. But
to one deep point one hundred and eighty million dollars
for sort of China related China tangential sales is just nothing,
(12:25):
nothing really to write about.
Speaker 2 (12:27):
So our Onian King, who covers semiconductors for Bloomberg News,
is out with his write up. The headline and video
gives lackluster forecasts, stoking fears of AI slow down. Big
company giving a tepid revenue forecast for the current period.
It feels concerns that a massive run up in AI
spending is slowing. Is that a concern of yours?
Speaker 3 (12:49):
Mandeep?
Speaker 6 (12:50):
I mean, I look at you know their last eight quarters.
They increase the revenue sequentially by four to five billion.
This is the first time when the data center sequential
growth of forty one point one billion is up five
percent from the prior quarter, which is the slowest growth.
So to my mind, you know there's going to any
(13:12):
time there is a deceleration. The fact that they were
growing sequentially double digits and now it's mid single digit.
Even with the numbers that they put up, I mean,
these are fantastic numbers, but there is a deceleration. And
you know when they're talking about new architectures, Blackwell and
the margins, as I said, is heading in the right direction.
(13:33):
But that sequential deceleration in data center growth, to me,
that is why you are seeing such a stock reaction.
Speaker 2 (13:40):
So Jay, I'll ask you the question, now that the
numbers are out, were you proven right this quarter that
you're the only analyst tracked by Bloomberg that has accelerating
on the terminal.
Speaker 4 (13:49):
I'll take I'll take the win. I'll take I'll take
a lowercase w INT's case.
Speaker 2 (13:52):
I mean, it's not trading out one hundred dollars yet.
Speaker 4 (13:56):
No, But like I said, my thesis is all along
been that it's just getting harder for them to beat expectations.
And I think this is exactly what happened to here.
Right to men Deep's point, there's there's not much growth
in data center. You know, you read all the other headlines.
It seems like AI is taking over the world, But
in reality, I think there's just it's we're going to
(14:17):
need some time to digest the AI we already have,
and I think it's natural that things slow down here
for in video who's been leading for so long.
Speaker 2 (14:25):
Is it a red flag to you in any way, Jay,
that the company's authorizing this share buyback. Do growth companies
do that or is that more of a sign of
mature companies.
Speaker 4 (14:35):
It's a little bit of a red sign. I want
to see how they talk about it. I mean, it
would seem to me that there's there's so much opportunity
out there in AI, why why not spend that sixty
billion dollars and furthering their growth? I mean, as a shareholder,
I would appreciate it, but as an outside observer, I
have to wonder couldn't they find other ways to deploy that?
Speaker 6 (14:54):
And the other big thing here is the capex increases
from the hyperscaler. So we know Meta plans to increase
their capex by over thirty percent for twenty twenty six,
but for other hyperscalers, we don't know if they're going
to grow by thirty percent or twenty percent or fifteen percent,
and that will trickle down in terms of what it
means for in Vidia's data center growth. So Google clearly
(15:18):
is the one that relies mostly on their own chips.
And you know, when you think about the incremental buyers
for Invidia's chips among the hyperscalers, yes there's Oracle and Coreviv,
but you know, if you take out China, sovereigns aren't
going to make up for that incremental buyer. And if
another hyperscaler develops their own chips, then that growth rate
(15:40):
will come down.
Speaker 3 (15:41):
Again.
Speaker 6 (15:41):
It's a question of whether they grow sequentially five percent,
ten percent, and that will have a bearing on the multiple.
Speaker 5 (15:49):
So in oh, go ahead, Jay.
Speaker 4 (15:52):
I'm just gonna say, and sort of going further with
what Madeep said is if you look at the other hyperscalers,
especially Microsoft and Amazon, they have some pretty big plans
next year for their internal silicon. Right, These are going
to be big ramp years for their internal silicon, and
I have to wonder if that's sort of chipping away
at the edges of demand for in video.
Speaker 2 (16:13):
That's Jay Goldberg, jaystick with us Jay as Senior Analyst
Semiconductors and Electronics with Seaport Research Partners. We're also joined
by Bloomberg Intelligence Global Head of Technology Research, man Deep Singh,
who's here in our studio.
Speaker 5 (16:25):
So you both make the point that it's just hard
to grow from here on out. How much of diversification
is hinged on that? We know that forty percent of
the revenue is from Microsoft, Meta, Amazon, and I'm missing one.
I can't, I'm blanking on that name. But Vida now
offers computers, networking gear, software services. Can we account on that?
(16:46):
Maybe you can go first?
Speaker 6 (16:48):
Yeah, I mean, look, everyone knows this is a multi
year investment cycle and data centers spend when it comes
to AI would be around trillion dollars. It's just a
growth rate. Right when you are underwriting forty times earnings
on stock, there is expectations embedded in terms of the
company compounding at you know, thirty forty percent. So if
(17:11):
that growth rate were to taper, then the multiple comes down.
It's still a fantastic growth rate for Nvidio. It's just
the multiple compresses and that's what I think is the
risk here.
Speaker 5 (17:22):
Do you share the same view.
Speaker 4 (17:23):
Jay, yeah, I think heaps them it up pretty well, right,
I think there's there's just it's it's good company, good products.
But like this kind of exuberance seems to be getting
ahead of reality of the market. And I mean, I
have to wonder, you have all the hyperscalers spending these
immense amounts of money half a trillion dollars among the
(17:43):
six or seven of these companies. It's it's hard to
see them getting a return on that anytime soon, right,
you sort of look through it. I don't think they
have a clear plan. They're building for something that's important,
and AI is coming, but in terms of sort of
hard dollars and cents the ROI on that massive investment,
it's not clear how they generate that. And so I
(18:04):
think we're starting were to start asking more of those
kinds of questions, what are we actually going to use
all this AI for?
Speaker 2 (18:10):
Well, maybe Snowflake can answer the question. I want to
bring Man deep Saying back in here because he covers
Snowflake shares a Snowflake up now about eleven percent. In
the after hours, the company gave a sales outlook for
the fiscal year that top.
Speaker 3 (18:23):
To analyst estimates.
Speaker 2 (18:24):
Overcoming anxiety that software vendors will be hurt as the
economy slows and new AI companies takeaway business. The show
has jumped in extended trading. The narrative has been that
software companies have been beat up for a couple of reasons.
One AI firms are able to do this, and two
a lot of the spending has gone to hardware into
expanding AI capabilities.
Speaker 3 (18:44):
What is Snowflake runings telling us?
Speaker 6 (18:45):
And actually Snowflake earnings points to probably something that is
incrementally negative for someone like Nvidia, because so far all
the development in large angrid models was I put all
the open Internet data into an LLM, and LLLM becomes
smarter and smarter. But now what companies are doing with
(19:06):
AI agencies, they are training on their own enterprise data.
That's where someone likes Snowflake or Mango dB benefits because
your training is getting a lot more specialized depending on
the use case. And it's not just about the compute
cluster anymore, but also about the data. And I think
that points to why Snowflake is doing well.
Speaker 2 (19:26):
Mandy saying you got to run. We appreciate you spending
so much time with us. This afternoon. That's Bloomberg Intelligence
Global Head of Technology Research, Jay Goldberg. He is a
senior analyst for semiconductors and Electronics with Seaport Research Partners.
Reminder everybody, he's the only analyst that's tracked by Bloomberg
who's got a cell rating on Nvidio.
Speaker 3 (19:44):
Stay with us.
Speaker 2 (19:45):
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (19:52):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eastering Listen
Apple Karplay and Android Otto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (20:08):
Well from more on the economy, everything from tariff's labor productivity,
and yes, the question of FED independence. I want to
bring in Natasha Sirynn. She's the co founder and president
of the Yale Budget Lab. She's also professor of law
at Yale Law School. She's got an appointment in the
Yale School of Management's Finance department too. She worked at
the Treasury Department as counselor to Treasury Secretary Janet Yellen.
(20:29):
She joins us from New Haven. Natasha, good to see you.
I want to start with a referencing an opinion piece
from Bill Dudley on the Bloomberg earlier today. He's former
president of the Federal Reserve Bank of New York. He's
out with a column today that says, up to now,
he wasn't worried about the threat that President Trump poses
to the Fed's independence. Now, he writes, he's much more worried,
(20:49):
and he thinks the.
Speaker 3 (20:50):
Markets should be two.
Speaker 2 (20:52):
Does the president's attack on the FED risk?
Speaker 3 (20:54):
Does?
Speaker 2 (20:55):
I mean, should we be worried about the president's attack
on the FED?
Speaker 7 (21:00):
Should be?
Speaker 8 (21:00):
And I agree moreheartedly with Bill. I think you're in
such unchartered territory at the moment, because remember this is
coming on the heels of many months of the administration
arguing that the Federal Reserve should be cutting interest rates
and accord with the political whims of the Trump administration,
rather than based on its very particular dual mandate, which
(21:23):
is about inflation and it's about the labor market, and
the fact that we have a central bank that's independent,
that cares about those two things, and those two things
alone is a really significant.
Speaker 7 (21:34):
Source of our economic security.
Speaker 8 (21:36):
The way I know that is because we have experimented
in the United States, as of other countries with federal
reserves that become politicized. In this country, in the Nixon administration,
we had Arthur Burns who was pushing for interest rates
to help President Nixon get elected, and the result of
that was runaway inflation that increased from three to thirteen percent.
Speaker 7 (21:56):
Over a two year period.
Speaker 8 (21:57):
So we do not want a central bank that functions
based on short term political whims, and I'm really worried
we're moving in exactly that direction.
Speaker 5 (22:06):
The FED said they will abide by what the court
the sides, and President Trump yesterday also said he will
abide by the same. But if the court decides that
Lisa Cook can stay, are we pass a red line?
Is the damage already done when it comes to the
credibility of the FED?
Speaker 7 (22:21):
I hope that the answer to that question is no.
And I really hope that. What's important to note in.
Speaker 8 (22:28):
The context of the legal discussion here is that the
Supreme Court has really gone out of its way in
a case of that removal that had nothing to do
with the Federal.
Speaker 7 (22:36):
Reserve to signal that the Federal.
Speaker 8 (22:39):
Reserve is special and that these types of positions, because
it's a quasi private institution with a particularly important role
in our economy.
Speaker 7 (22:48):
These types of positions.
Speaker 8 (22:49):
Are really only four cause removal positions, and frankly, four
cause rises to a level and legal nomenclature that it's
pretty hard to meet in the text of malfeasance. And
so I think that the Court has already signaled directionally
that they really think protecting this institution and protecting its
independence is immensely important, and I hope that that's what
(23:12):
they continue to say, is this particular legal case plays
out in the courts.
Speaker 7 (23:16):
But the thing that I'm worried.
Speaker 8 (23:17):
About is the sort of institutional credibility and the view
by the markets and by the public and by other
countries and other investors that our central bank is independent
from any type of politicization. That's kind of a genie
that you can't put back in the bottle. It's something
that's taken decades and generations to build, and I worry
(23:38):
that it evaporates pretty quickly as a result of some
of the types of attacks that we're seeing.
Speaker 7 (23:43):
So I'm hopeful that the.
Speaker 8 (23:45):
Judiciary is going to step in appropriately here, but I
am still really disheartened to see the types of attacks
that you've been seed leveled at the Federal Reserve of
resin So let's.
Speaker 2 (23:55):
Keep your law professor had on for a moment, Natasha,
and talk a little bit about the definition of four
cause in this context. You touched on it. But I'm
curious if, let's say, the allegations about mortgage fraud end
up and we haven't seen the evidence here that we
don't have that yet, but when it happened, if it
happened matters, I'm my understanding is intent matters as well.
(24:19):
So from a perspective, from a legal perspective, why don't
you think this would qualify as a four cause reason?
Speaker 3 (24:27):
I'm barred from.
Speaker 8 (24:29):
An expert, I am four cause removal. Nor have I
looked at the specifics of this particular.
Speaker 7 (24:34):
Case, and nor frankly could we have at this point.
Speaker 8 (24:37):
Because Lisa Cook hasn't been charged with any crime or anything.
This is a set of allegations that have been leveled
at her by the President and by the administration. What
I can say is that in the particular context of
removal with respect to the Federal Reserve, the Court has.
Speaker 7 (24:57):
Been pretty explicit that it thinks.
Speaker 8 (24:59):
It's important and you sought in the statement that the
Federal Reserve put out yesterday.
Speaker 7 (25:03):
These are Senate.
Speaker 8 (25:04):
Confirmed positions with very long terms that run cross administrations,
precisely to try and insulate this institution from exactly the
kind of political pressure that we're seeing levied against it.
And this isn't just about mortgages, nor what has it
been about the renovation of the Federal Reserve building, which
has taken a lot of airtime over the course of
(25:25):
the last many months. It's very clear that what's happening
here is really frustration with the direction of monetary policy,
and that's really no place for the administration to be acting.
In fact, it's frankly counterproductive to their goals of seeing
interest rates come down and seeing economic strength be very
significant in this country.
Speaker 2 (25:45):
We're speaking with Natasha Serin. She's the co founder and
president of the Budget Lab. She's a professor of law
Law School and has an appointment too in the Ale
School of Management's finance department. I promised we'd go all over,
So we're going to move from the Central Bank to
really what I think a lot of the market is
kind of moving past. Then that's tariffs, because earlier this
(26:06):
month our team reported that the average US tariff rate
will rise to fifteen point two percent if rates are
implemented as announced. This is according to Bloomberg Economics. It's
up from thirteen point three percent earlier and significantly higher
than the two point three percent in twenty twenty four
before President Trump took office. Just today the latest the
President opposed of fifty percent tariff on Indian goods to
(26:28):
punish the country for buying Russian oil. That's the highest
tariff in Asia. I'm wondering how you're looking at the
fraying relationship between the US and India and what's at
stake more broadly when it comes to this tariff.
Speaker 8 (26:42):
Importantly, what we should understand and my colleagues the Budget
lab are hard at work, by the way, updating our
estimates with respect to what happens to the effective terariff
rate and what happens to the type of revenue that
we're going to see coming into this country. But roughly speaking,
you've seen about an eight fold increase in the app
effect of teriff right over the course of the last
(27:03):
eight months of this administration, bringing in about three trillion
dollars of revenue into the country over the course of
the next decade. Importantly, and this goes a bit to
your point, Tim, it's never been super clear.
Speaker 7 (27:14):
To me what exactly the.
Speaker 8 (27:16):
Objective is of this type of trade policy and where
exactly it is that the administration is hoping to land,
because part of what you've seen articulated is that this
is really about sort of China and national security and
being sure that our adversaries are held at bay. In
that environment, you really are quite worried about the idea
(27:37):
of alienating allies, and being particular with respect to not
just India, but if you think about Canada and Mexico
and other countries where traditionally they've been very strong allies
in the United States, and in fact we've been encouraging
of more manufacturing to shift, particularly to India and Vietnam.
Speaker 7 (27:55):
Exactly because it shifts away from.
Speaker 8 (27:57):
China, and so a little bit it feels like this
policy has been kind of in cohetent all over the place,
and it's hard to analyze exactly why.
Speaker 7 (28:06):
It is we're doing what it.
Speaker 8 (28:07):
Is that we're doing in order to be able to
try and judge any success. What I can say is,
as a result of the tariffs so far, prices are
going up and going to go up Further, the economy
is going to be smaller, and it doesn't seem like
a win from the perspective of the American consumer or
from American businesses.
Speaker 5 (28:27):
I'm glad you brought that up, because I'm curious if
you think this will undo all the years of goodwill
that the US and India have built.
Speaker 1 (28:35):
Well.
Speaker 8 (28:36):
I think that I'm worried about, frankly, is that you
are in a situation where we are very exposed to
particular relationships that it's taken to And this actually relates
to our conversation about the Federal Reserve in that a
lot of the sort of goodwill that you're describing our
things that it's taken decades across administrations to try and
(28:57):
build the types of working relationships with our allies that
have made us this global hedgemon and have made us
a real marker of stability in the economy, a place
that other countries want to invest in. Other investors both
domestically and internationally, are key to spend time.
Speaker 7 (29:12):
In and around. And so what you worry about in.
Speaker 8 (29:15):
Some sense is not just are you alienating one particular
ally or are you moving us sending some other countries
closer into the arms of China.
Speaker 7 (29:25):
Of course you're worried about all of that, but also
I think what you're worried about.
Speaker 8 (29:29):
Is the general sort of chaos of not exactly knowing
where these tariffs are going to land, not knowing if
it makes sense to try and shift part of your
manufacturing supply chain into India, because if India's effective terribreate
is fifty percent, it's no longer the type of place
where you're going to want to be pursuing a lot
of that.
Speaker 7 (29:48):
Type of business. So I think it makes decision.
Speaker 8 (29:50):
Making really complicated for the United States and for the
businesses that are in this country. And it also runs
real risks geopolitically that are pretty concerning.
Speaker 2 (30:01):
I promise we'd go everywhere. We have a few minutes left,
and I want to talk a little bit about the
labor market and productivity and the context of record low
birth rates in the United States, immigration that has come
down quite a bit during this administration, and what it
means for a workforce moving forward. How do you weigh
(30:21):
those two things.
Speaker 8 (30:23):
It's so interesting because I was actually talking to some
colleagues at the or some friends who work at the Congressional.
Speaker 9 (30:31):
Budget Office who have said that one of the reasons
why you have productivity growth over the course of the
next decade, that their estimates are going to average.
Speaker 8 (30:42):
In the one point eight two percent range, sorry, GDP
growth in the one point eight two percent range over
the course of the next ten years, is precisely because
it's on the back of an increase in labor supply
that comes from immigration. And the reason why that's so
important is because, as you're Describington, we have an aging
population in this country, so a big chunk of people
are going to age out of the labor force.
Speaker 7 (31:04):
It's really important that you have that supply coming in
in a world that when you don't.
Speaker 8 (31:09):
Have that supply coming in meaningfully and you kind of
shut down pathways to immigration, as you've seen policy wise
over the course of the last many months, you start
to lose a very significant driver of labor force growth,
and then you start to lose a very significant driver
of productivity and broader economic growth. The thing that's interesting
is it's happening at the same time as you're seeing
(31:30):
potentially this productivity revolution that's coming from artificial intelligence. So
in some sense it's hard to know exactly how to
disentangle those two effects as we watched the direction the
economy is going over the course of the next many years.
But restricting labor supply is going to have a pretty
meaningful impact, particularly on sectors of the economy like construction
(31:50):
and manufacturing.
Speaker 5 (31:52):
But with a investment booming, do you think that AI
will be able to offset the lack of workers, whether
to immigration the supply of workers that we have are
we facing right now?
Speaker 8 (32:05):
It's kind of hard to answer that question right now
in some sense, because it's hard to know exactly what
to make of the very significant capital expenditure investments we're
seeing in AI, and hard to know what to make
about the role that AI is having in the labor
force thus far. There's a great new paper by Eric
Roln Austin and co authors where they look at the
(32:26):
extent to which you're actually starting to see displacement in
the labor force that has to do with artificial intelligence
and it's growth and usage across different sectors of the economy,
and they do find that you're starting to see, particularly
for younger workers who are in the most exposed industries,
you're starting to see actual impacts with respect to their
(32:48):
possibilities of labor force entry, and so I do think
that there is going to be an effect here that's meaningful.
It's just really kind of early innings with respect to
this type of productivity change and shift, and early innings
with respect to knowing whether AI is really a compliment
or a substitute for other aspects.
Speaker 7 (33:07):
Of the labor pool.
Speaker 3 (33:07):
Yeah.
Speaker 2 (33:08):
Natasha Sarin, co founder and president of the Yale Budget Lab,
professor at Yale Law School and the Yale School of Management,
Thanks so much for joining us.
Speaker 3 (33:15):
This is Bloomberg. Stay with us.
Speaker 2 (33:18):
More from Bloomberg Business Week Daily coming up after this.
Speaker 1 (33:26):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Applecarflay, and
Android Auto with the Bloomberg Business App. You can also
listen live on Amazon Alexa from our flagship New York
station Just say Alexa play Bloomberg eleven thirty.
Speaker 2 (33:45):
Certainly a lot of focus on Nvidia today, but do
not forget there are other companies reporting today and tomorrow.
In retail, specifically, Cole shares surged after the company offered
a more optimistic full year outlook. Abercrombie and Fit shares well.
They've been all over the place. Is high three point
three percent, as low as down ten percent. Investors are
trying to decipher a mostly and modestly better than expected
(34:06):
quarterly performance back with us, Tutak, retail and more. Dana
Telsea is here. She's the founder and CEO and chief
Research officer of Telsey Advisory Group. She joins us here
in the Bloomberg BusinessWeek Studio. So, Dana, we still have
to hear from Victoria's Secret, Dick Sporting Goods, Dollar General, Best,
by the Gap, Macy's. We've heard from a lot of
the big ones, Target, Walmart and the like. It's not
(34:29):
a monolith by any means. But how are retailers doing?
Speaker 10 (34:33):
First of all, thank you for having me. I think
retailers are doing okay. They're navigating this environment very well,
navigating it because sales strength exiting the second quarter is continuing.
You're seeing the fact that consumers may be buying a
little bit earlier to avoid any of the price increases
given the goods in the second quarter warrant as high
tariff as what you may have. And you know what
(34:55):
else they're doing marketing spend is increasing, product innovation, is
driving version and den and jeans are working. You're saying
across the board, whether it's coals, whether it's any of
the other retailers, wide leg baggie is hot these days.
Speaker 3 (35:10):
Like I'm in seventh grade all over again. That's what
it is.
Speaker 10 (35:14):
Keep repeating seventh grade what we wore. It's ay, yeah,
that's that's what's happening again. And the tariffs, Yes, there
definitely are an uptick, and you're hearing that. Consumers overall,
we don't know what they're going to react to these
higher prices. Is they're first expected to come late Q
three and into Q four. But the retailers are managing, frankly,
(35:35):
a little better than what I would have expected.
Speaker 5 (35:37):
So you mentioned sales strengthening. Do you view this as
a sign of durable consumer strength or more like pre
tire if buying, or because of great promise we're seeing.
How do you assess the health of the consumer.
Speaker 10 (35:47):
I think the health of the consumer is pretty much okay.
I think consumers are spending deliberately. I think the high
end is traded down. We've consistently heard of Walmart getting
the biggest growth from some of their higher income customers.
You're seeing the Ralph lawns or the Tapestry drive. Average
unit retail selling price increases with product innovation, and frankly,
(36:08):
look today, Hollister delivered a double digit same store sales increase,
which was impressive. And you look at Cohal's basically improve
their proprietary brands because that value customer wants to see
newness and proprietary brands. And let's not forget we're going
to get the last off price to tomorrow. But TJX
and Ross we're also solid. Consumers are buying ahead of
(36:29):
price increases. Retailers are delivering product newness. It's back to
school season and everyone's still being discerning.
Speaker 5 (36:37):
Another thing I'm looking at is retailers are still investing
in store openings and remodels. So how much is that
translating into traffic and conversion versus just being more defensive.
I personally shop online and I don't go to stores anymore,
but it seems like people still do they do.
Speaker 10 (36:53):
When you think about store openings in retail real estate,
there is more demand than there is supply. There's not
a lot of new develop any of the closures that
you've had. Companies and retailers are taking them. The growth
of whether it's A five below, a TJX, A Raw
Stores or Burlington is hundreds of stores that can open.
You've seen the landlords overall pivot basically grocery anchored shopping
(37:17):
centers can be lifestyle also and vice versa. Wherever the
consumer is located in near it's more focus on where
can I get the goods? And yes, online is still there,
but it's not either or it's both.
Speaker 2 (37:29):
We got to talk about these India tariffs fifty percent
on the country. It's upending ties with Mody and with
a long time and an ally that wants to even
become closer to the United States. Exporters of clothing, footwear,
and small manufactured goods like toys are bracing for falling
orders and possible job cuts. What's going to happen as
a result of these tariffs.
Speaker 10 (37:49):
I mean, we've saw when it was just so high
on China too. Retailers work to do three things. They
diversify their sourcing as fast as they can. They share
the expenses with this supplier and manufacturers. They raise prices
to the end consumer. Hard to do this so quickly,
and it's an obstacle.
Speaker 2 (38:06):
There's a great chart in the piece that comes from
data from the White House, and it shows that India
tariffs are the highest of any Asian nation fifty percent,
but other countries Laos, Me and mar forty percent, China
thirty percent. You've got Tri Lanka at twenty percent, Taiwan, Vietnam, Cambodia, Indonesia.
I mean these places I'm mentioning all export to the
(38:27):
United States, many of them are areas that have been
diversified to away from China. So you can only diversify
so much if everybody has tariffs.
Speaker 10 (38:37):
Exactly, and you can't come back to the United States
for all intents and purposes, given it's you don't have
the labor, and it's prohibitively expensive. What we've seen happen
is we've even heard of some retailers who were diversified
away from China. They went back to China because the
tariff was became a little bit lower than some of
these other places. It is moving pieces all together, and
(39:01):
it's not staying stable.
Speaker 2 (39:02):
When do we see it hit the actual price of
these goods because up to now, as you mentioned, retailers
are eating some of this.
Speaker 3 (39:10):
But how long can that go on.
Speaker 10 (39:11):
Since April sixteenth, we've had a price tracker of eighty items.
We price it every single week. We've seen some increases,
but not across the board. Footwear is where we've seen
the increases. Expecting that by the end of the third
quarter into this fourth quarter we're going to see more
expansive price increases, and we're still not seeing it holistically
across the board.
Speaker 5 (39:31):
We also have to talk about interest rates and with
the potential to lower interest rates, how much support could
that provide the shoppers for discretionary spending when it comes
to holiday and then the lead up to twenty twenty six.
Speaker 10 (39:44):
Just the fact that we'll have lower interest rates is
a positive for discretionary spending. It's something that takes months
in order to really put in action, but the feel
good factor of it will lead to a more productive spend.
At the same time, when you're looking at the labor mark,
we watch it carefully because we can't see that labor
market weekend because that will ultimately impact holiday season sales.
(40:06):
The strength of back to school is a good pathway
to holiday.
Speaker 5 (40:09):
It seems like broadly you sound really bullish. What could
be ahead wind then what could really buckle all of
this development to the downside?
Speaker 10 (40:17):
Labor weakening, price increases coming, and not really in the
consumer pulling back. That's why I always say our theme
is everything's good butt, but we'll consumers slow down, but
we'll retail US have the inventory second quarter so far though,
coming in better than expected.
Speaker 3 (40:34):
How's ultra luxury doing? Slowed? Ultra luxury slowed?
Speaker 10 (40:38):
I think that you're not getting as many international tourists
here to the US. You're seeing the Chinese not spend
as much as they had been, and you're seeing prices
for some of the luxury brands. Did they just get
too high interest?
Speaker 3 (40:50):
So what are they doing to?
Speaker 7 (40:52):
Well?
Speaker 10 (40:52):
Look what the newest thing that just happened.
Speaker 7 (40:54):
Earlier this week.
Speaker 10 (40:55):
Louis Vaton introduced a beauty line for Louis Vauton.
Speaker 3 (41:00):
Usually this is sixty dollars lipstick.
Speaker 10 (41:02):
It is lipstick, but that is the newest thing they've introduced,
and so they're diversifying the categories that they can.
Speaker 3 (41:09):
It's not going to work.
Speaker 10 (41:10):
Everyone wants a little bit of luxury. One hundred and
sixty dollars compared to Ermez, which is eighty dollars compared
to Chanel, which is fifty dollars or under. Let's see
what happens. But you know what one of the things
is for all different types of luxury, consumers will pay
up if there's exclusivity and a desire along with authenticity.
Speaker 5 (41:28):
So it seems like consumers are trading down and we
don't see a lot of trading up. Is that what
you're saying.
Speaker 10 (41:33):
We're not seeing the trade up like it had been before.
If you look at the Walmart numbers, you look at
the TJX, they're searching for value to maintain their pocketbooks.
Speaker 5 (41:41):
Maybe the lipstick will change it him one hundred and
sixty dollars.
Speaker 3 (41:44):
Yeah, you can do it.
Speaker 2 (41:45):
I heard that there's like a really nice case that
it comes into and that's like a big part of
the And.
Speaker 10 (41:49):
Then the refails don't cost one hundred and sixty dollars.
Speaker 6 (41:52):
Great.
Speaker 2 (41:52):
Great, it's a real final. Hey data always great. When
do you join us on Blueberg.
Speaker 3 (41:56):
Business Thank you so much.
Speaker 1 (41:58):
This is the Bloomberg Business Weekdaily podcast, available on Apple,
Spotify and anywhere else you get your podcasts. Listen live
weekday afternoons 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
(42:18):
on YouTube and always on the Bloomberg terminal
Hosts And Creators
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Carol Massar
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