November 19, 2025 • 43 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Nvidia Corp., the world’s most valuable company, gave a strong revenue forecast for the current period, helping counter concern that a global surge in AI spending is poised to fizzle.
Sales will be about $65 billion in the fiscal fourth quarter, which runs through January, the chipmaker said in a statement Wednesday. Analysts had estimated $62 billion on average, with some predictions ranging as high as $75 billion.
The outlook signals that demand remains strong for Nvidia’s artificial intelligence accelerators, the pricey and powerful chips used to develop AI models. Nvidia has faced growing fears that the runaway spending on such equipment isn’t sustainable.
Huang has repeatedly downplayed concerns about an AI bubble, saying last month that the company has more than $500 billion of revenue coming over the next few quarters. Owners of large data centers will continue to spend on new gear because AI has begun to pay off, he said.
Today's show features:
- Jay Goldberg, Senior Analyst, Semiconductors & Electronics with Seaport Research Partners, breaks down Nvidia’s latest earnings report
- Bloomberg Tech Co-Host Ed Ludlow reacts to Nvidia’s results and previews his upcoming conversation with CEO Jensen Huang
- Bloomberg News Big Tech Team Leader Sarah Frier on the impact of Nvidia’s results on the broader outlook for AI spending
- Samuel Sahn, Managing Partner, Portfolio Manager at Hazelview Investments, on his firm’s new white paper detailing is how AI is reshaping asset values, operational models, and investment strategies
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
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 Week Daily Podcast with
Carol Masser and Tim Stenebeck on Bloomberg Radio and Video
is out Everybody.
Speaker 2 (00:34):
Fourth quarter revenue forecast did beat estimates. The company SE's
fourth quarter revenue sixty five billion dollars plus or minus
two percent. Third quarter data center revenue coming in above
estimates at fifty two fifty one point two billion dollars.
The estimus for forty nine point three four billion dollars.
Third quarter adjusted EPs at one dollar and thirty cents.
(00:54):
Third quarter revenue fifty seven point zero one billion dollars.
Once again, the company ceas fourth quarter revenue of sixty
three point seven billion to sixty six point three billion.
The estimate was for sixty one point nine eight billion dollars.
Third quarter data center revenue coming in as a beat
fifty one point two billion dollars. Carol stock moving higher
in the after hours, up about.
Speaker 3 (01:15):
Two point seven percent and gaining in the after hours.
What's a big number, of folks, is that data center number,
because that definitely is a decent beat. Third quarter data
center revenue fifty one point two billion, the estimate on
the street was forty nine point thirty four billion, and
then revenue overall. The outlook for the fourth quarter revenue
(01:37):
sixty five billion dollars plus or minus two percent. The
estimate on the street is sixty two billion. When we
talked to Angelo Zeno, he said, listen, we got a
look on the guide. It's got to be at least
sixty one to sixty two billion dollars while they are
looking above that, and Vidias Jensen Wong in the commentary
saying cloud GPUs are sold out, also talking a little
(01:59):
bit about expenses operating expenses. As for the fourth quarter
adjusted operating expenses of five billion dollars, that's a little
bit above the street estimate tim of four point fifty nine.
Investors don't seem to care, folks, because these numbers look
to be pretty strong.
Speaker 1 (02:15):
Here.
Speaker 3 (02:16):
Gross margin seventy three point six percent. Street was looking
for seventy three point seven percent, so essentially in line.
But the stock off it ties but still up about
four percent. Here in the aftermarket.
Speaker 2 (02:29):
I want to bring in Jay Goldberg, senior analysts Semiconductors
and Electronics with Seaport Research Partners. Jay currently has a
sell rating on in Vidia a target price of one
hundred and forty dollars per share. He's the only analyst
tracked by Bloomberg that has a cell rating on in Nvidia.
He joins us from the Bay Area. Jay, I ask
you each and every quarter, and I'm gonna ask you again,
(02:52):
is this print enough to get you to change your
rating on the company?
Speaker 4 (02:58):
Uh?
Speaker 5 (02:58):
No?
Speaker 4 (02:59):
Short? Or no?
Speaker 3 (03:01):
Okay? Why not?
Speaker 4 (03:03):
I mean it was an okay quarter, a quarter Eastern
Guide you know, I I they you know at GtC
d C. Two weeks ago they put out that big,
big revenue number, fifty five hundred million dollars over five
quarters in revenue, which shocked everybody.
Speaker 5 (03:21):
Uh.
Speaker 4 (03:22):
I think what happened is they got more allocation from
TSMC than they're expecting. So that's upside. That was more
than I was expecting. And and but that's floating in
the numbers now right and you start listing all the
all the things that could go wrong within video that's
a longer list than the things that could go right.
So I still think, I still think they're challenges. I
think I still think this is you know, but I'll
(03:43):
give them credit. This is this is a good quarter.
I had actually raised my estimates last week because I
I my check for telling telling me they'd be doing
pretty good. It's okay, I'll give them that. But one
quarter it's it's there. It's more than one quarter. Game here.
Speaker 2 (03:58):
The street would seem to agree that it's a good
quarter right now. Shares jump five percent after that fourth
quarter revenue outlook, top estimates in video, giving that strong
forecast that's countering fears of an AI bubble. We're also
seeing Carol shares of Core. We even Nebus gained four
percent after in video earnings.
Speaker 3 (04:16):
Yeah, and Video saying Blackwell Ultras now are leading Architecture
also talked about H two O sales and significant in
the third quarter gaming revenue up on continued demand for Blackwell. Hey, Jay,
what do I want to ask you? At least according
to Bloomberg Data, you have had this cell rating on
in Vidia since at least April, And forgive me if
it's a little bit longer, but the stock shares of
Nvidia up seventy one percent in that time. Why do
(04:40):
you hold on too that conviction, because because if anybody
followed you, it wouldn't have been such a great call.
Speaker 4 (04:47):
So I've told my clients all along, I've never told
any of my clients to short in video. What I've
said is this is that in video is going to
underperform my sector, right, and I think that has actually
played out if you get since I launched in April.
H if you look at chairs of AMD, which I
had a buy on for a long time, in arm
(05:07):
and broad coom and video has generally underperformed the AI trade, right.
And then and then you start looking at some of
the other stocks like sand Disk and Micron and companies
like that, who really really overperformed in the AI because
of AI this year, in video is sort of the
laggard in that in that AI trade, right, And I
(05:29):
think the head the headwinds here just keep mounting.
Speaker 3 (05:32):
So this is, yeah, this is against looking at others
in the sector. Is basically where you're saying, I'm pulling
up the socks. I mean, it's up about fifty seven percent,
but that's you know, throwing in all the names together,
and you're right. If I look at AMD, it definitely
is more than one hundred percent since that late April
call that you made. So yeah, there is some outperformance,
(05:53):
but it is doing better than the overall sector.
Speaker 4 (05:57):
Yeah, I mean, the the market has gone up, all
of these all these stocks have gone up a lot, right,
And you know that part I'm not right about, but
I do. You know, I've maintained all along that in
Video has gotten so large. There's it's just harder and
harder for them to keep these keep delivering these outside
beats that they were giving a year or two ago.
(06:19):
And you know, in that context, this quarter is is good,
but it's not. It's not a massive blow up. Part
of the problem in Video has is the most scrutinized
stock on the planet right now. People have all kinds
of checks into the entire supply chain, and so we
have a pretty good idea of what they can do
and how they get, how they surprise us, how they
deliver more than what's already baked into the numbers is
pretty challenging.
Speaker 2 (06:42):
Any anything in here about China that you could see it,
and whether or not they're getting any clarity about what
they could do in China.
Speaker 4 (06:51):
So I don't have the press release yet, so I
haven't read through it, but I know from talking to
people in the sector is no they've they've made They've
gotten nowhere with with US government. Jensen has obviously been
very vocal about that in the press lately, or he
wasn't until a few weeks ago. He's kind of stopped
making comments about it because it wasn't helping him. And
I think China is going to remain a problem for them.
(07:13):
It's there in Nvidia is stuck having to walk this
very fine line, right. They don't want to antagonize the
US government, they don't want to antagonize the Chinese government,
and on some days that's just not possible to walk
that line. So it's it's gonna be very tough for them.
They really really need to get back into China. I
think it's it is become a major, uh sort of
(07:34):
weakening in their in their moat, and the problem is
just going to grow the longer it goes on. So
that's that's to me, is a big concern. It's just
one that's very hard to handicap because it's it's political
in nature.
Speaker 3 (07:45):
If they were back in China. Would that change your
take on this company? And maybe you're rating.
Speaker 4 (07:52):
I don't think that alone would change my rating, but
it's certainly top of my list of things that could
go wrong here.
Speaker 3 (08:00):
And I do want to point out, just to rehash here, folks,
because we are talking with Jay Goldberg, senior analyst Semiconductors
and Electronics at Seaport Research Partners, he does have a
cell rating on Nvidia, the only such rating for the
stock listed on the Bloomberg terminal. And Video shares which
are up about three or four percent, just up about
two and a half percent. Tim, They're definitely off their
(08:20):
highs of the session, and this as the company gives
a strong forecast. Are one and King Reporting app giving
a strong revenue forecast for the current period, with sales
expected to be about sixty five billion dollars in the
fiscal fourth quarter. The outlook Ian reports signals that demand
remains strong for Nvidia's AI accelerators, despite growing fears that
(08:41):
the spending on such equipment isn't sustainable. And as he said,
and Vidia shares at their top in the aftermarket, we're
up about four percent, they're still up, but Tim just
up about two point six percent.
Speaker 2 (08:52):
And looking at commentary from Jensen Wong before we hear
from him later on the call and then ed Ludlow's
exclusive interview with him at six thirty pm Wall Street
Time today. Jensen Wog and the press release saying quote,
Blackwell sales are off the charts, Cloud GPUs are sold out.
He also said compute demand keeps accelerating and compounding across
(09:12):
training and inference, each growing exponentially. We've entered the virtuous
cycle of AI. The AI ecosystem is scaling fast, with
more new foundation model makers, more AI startups, across more
industries and in more countries. AI is going everywhere, doing
everything all at once.
Speaker 3 (09:28):
Hey, let's also bring into the conversation. We're going to
keep Jay Goldberg over at Seaport Research partners with us,
but let's bring in Bloomberg Tech b Tech co host
ed Ludlow, who will be speaking exclusively with Nvidia CEO
Jenson Wong. That's coming your way at six thirty pm
Wall Street time right here on Bloomberg TV and radio. Hey, Ed,
investors seem to be pretty happy. It's up about two
(09:51):
percent here, what's your immediate takeaway from these results.
Speaker 6 (09:56):
Yeah, in the fiscal third quarter that they just reported,
you know, it's a beat and a good one, and
this was a high bar going into it. And in
the outlook for the fourth quarter, you know, it's it's
a good three billion dollars above consensus sixty five billion
dollars plus or minus two percent. Remember this is always
the case. There were some very bullish forecasts on the street.
(10:19):
I think some analysts were saying that in Vidio could
even surprise us with a seventy five billion dollar figure
for that fourth quarter. But the great unknown is the
numbers that they've just posted, how do they relate to
the five hundred billion dollar or half a trillion dollar
figure that Jensen Jog outlined at GtC in the last
(10:40):
week of October. He basically said, over the next six
fistal quarters, just for Blackwell Reuben Systems, they see five
hundred billion dollars of demand. But in video doesn't give
formal guidance like that. It was just a slide over
his shoulder on stage. So there is going to be
some mathing based on what he says on the call
and hopefully in the conversation that we have to explain
(11:01):
how in aggregate, their forecast has changed for the longer ten.
Speaker 2 (11:05):
Okay, So, Jensen, if you're watching just a little preview
of the line of questioning that you may get from
Ed Ludlow at six point thirty Wall Street Time Bloomberg
Television and Radio for that exclusive conversation and in video.
Shares off about as of today's close, roughly ten percent
from those all time highs back at the end of October.
That was just around the GtC event in Washington, DC,
where I know you spoke with Jensen and Justin Hotard
(11:26):
of Nokia as well. I'm wondering really about the narrative
that's emerged since then about cracks starting to form or
punctures in the quote unquote AI bubble and the decline
in some of the high flying stocks that we've seen
of late. Does this assuasion investor concerns that not all
(11:49):
is okay when it comes to the infrastructure spend.
Speaker 6 (11:51):
Yeah, you know, in Vidia is down sharply since since
the all time high it hit four weeks ago, but
it's also a stock that as of today's close was
up almost forty percent year to date, double the performance
that we see of the Nasdaq one hundred or the
S and P five hundred. This again was a very
(12:12):
high expectations quarter where there is also high skepticism to
meet it. And two of the data points that we
will inevitably hear asked of Jensen is the circular financing issue,
because a lot of the news flow in that period
of time has been about in Nvidia investing in some
form in the frontier model labs or end users of
(12:34):
their chips.
Speaker 2 (12:35):
Yeah, look at the anthropic news yesterday.
Speaker 6 (12:38):
This week, right, you know, and in that specific case,
it's very hard to argue it is not circular financing
because historically, what Jensen Wang's argument has been is when
they put an investment into an AI company, they don't
require the AI company to use that capital or financing
to buy in video chips. They can go away and
(12:59):
use in vide his money to buy someone else's chips.
But in the mechanics of that anthropic deal, you know,
it is a flow of capital from Nvideo interanthropic and
then enfropic buying capacity that does use Nvideo chips. The
other data point is depreciation, which is a real fixation
of this market at the moment.
Speaker 3 (13:20):
So you know, one of the things we were talking
about with Jay Goldberg, and we're going to get back
to him in just a moment.
Speaker 2 (13:26):
We're we're leting him read the pressure, so we're letting
him actually look at the numbers right now.
Speaker 3 (13:30):
But he talked about China remaining effectively online. How much
of that is a problem. And I think we also
heard from was it this being kind of the first
clean numbers that we're kind of getting, was that Queen
Jo think we talked about, you know, without kind of
I guess China impact or China concerns, but and how
(13:50):
important is China going forward to the n Video story.
Speaker 6 (13:55):
So you know, China is potentially the biggest end market
in the world for data center and right now in
Video assumes zero China. You know, that five hundred billion
dollars or half a trillion dollar figure that I mentioned
a moment ago that was given on October twenty eighth
excluded China completely. I've just put in the blog and
(14:15):
I'm just making an observation that if you go back
to August when in Video gave their forecast for the
third quarter that they've just released, they were very clear
in explaining that this did not assume any h twenty
sales to China. It's interesting, but there is no mention
of the word China at all in today's press release,
(14:38):
and so now it's kind of all stripped out. But
as Jensen Wong has said repeatedly, it's a really critical market.
A lot of activity is there, and you know, in
Video would like to be able to sell its technology
into that market.
Speaker 3 (14:54):
Jay, I want to just bring you back in and
we do see and Video shares climbing once again back
up near that four percent mark that we saw in
the aftermarket. It's up about three point six three point
seven percent. Jay, As you are going through the press release,
anything that's jumping out that you think the Bloomberg audience
needs to know about.
Speaker 4 (15:13):
So far nothing, I came to the same conclusion. There's nothing.
There's no mention of China in here at all, which
is good for now, but also concerning it looks like
their networking business, the networking side of their data center
business did a little better than expected, which is great
because it's high margin, high margin business. It's very they
(15:33):
have a really solid position there. I mean, overall, it's
a pretty clean quarter. I haven't gotten all the way
through it, but I do. I am curious to hear
what Jensen's going to say about circular financing and those
sorts of questions. Jensen is probably the most persuasive, charismatic
CEO in semiconductors right now, so listening to him on
the quarter is always going to be interesting. I want
(15:56):
to see how much energy he brings and how he's
going to address some of those sort of stickier quests.
Speaker 3 (16:02):
Hey, Ed Lodo, come on in on this as you
listen to Jay. Love to bring you into the conversation
with Jay.
Speaker 6 (16:08):
Yeah, I think you know, the circular financing question is
one that I've received in advance, you know, of speaking
to Jensen in a couple of hours time. The other
one for me is the depreciation issue.
Speaker 5 (16:20):
Right.
Speaker 6 (16:21):
You know, Nvidia commits to this annual cadence of a
new generation of GPU, and I think there are a
lot of people out there who would would really appreciate
Jensen explaining that the useful life cycle of any generation
of GPU and how they manage that, how they convince
the big spenders in a CAPEX context to upgrade. Is
(16:42):
that a concern for you? Is it something that you
feel is unanswered?
Speaker 4 (16:47):
Well? I think there is this dynamic taking place where
in Video is trying very hard to prop up the
neo clouds as alternatives to the traditional hyperscalers. You'd much
rather have one hundred small customers than three large ones.
The problem is that will eventually conflict with that annual cadence. Right,
this whole issue about depreciation of how long a server lasts.
(17:07):
I think people look a lot at sort of the
physical life of the server, but the more important question
is the economic life of the server. And if you
have a new GPU coming out every year, the old
ones become less valuable, and so that leads to some
pretty pretty punishing price curves for the neo clouds. And
so Jensen and Nvidio want to constantly be coming out
(17:28):
with new products to stay competitive and push their own
sales up. But that makes it hard for these big
for these customers, the small ones who have to also
stay on that treadmill. And at some point, at some point,
it can't go on forever, right, The neoclouds will eventually
run out of money. And so that's sort of this
big long term picture outlook. And I mean, that's one
(17:51):
of these things that keeps me, would keep me up
at night if I didn't have a cell rating on it.
Speaker 2 (17:56):
Well, okay, So I want you to kind of go
back to Jay on this because I know you've talked
to Core, we've CEO quite a bit of time, quite
a bit in recent months. We said that Core we've
was hire in sympathy after these Nvidia results and in
addition to another neocloud company that's out there right now.
The demand is there for these neocloud companies. I mean
(18:18):
even Core we've said just very recently it's been able
to diversify away from its biggest customers.
Speaker 5 (18:24):
Yeah.
Speaker 6 (18:25):
In the conversations that we've had with Microntrata that they
there is demand for the older generation technology. One sort
of data point or statistic that those who are more
calm about the depreciation issue, you would point to his utilization.
(18:45):
So they would say, right now the Hopper generation of
accelerators with GPUs is running at one hundred percent utilization
in terms of workloads. It can't be used any more
than it already is. As a very bullish signal that
these these kind of obsolute sims of funny thing to say,
but these older generation GPUs are not idle. Comparing contrast
(19:08):
with some of the secondary secondary market data which we
have limited visibility into. We don't know how strong that is,
and nor do do we know how close attention in
video plays to the secondary market for older generations of chip.
But forty percent of revenue is the hyperscalers and depreciation
(19:29):
is an accounting issue that they need to mark against
their balance sheets.
Speaker 4 (19:33):
And we haven't seen it yet.
Speaker 6 (19:34):
So it's kind of interesting because at some point, and
I ain't an accountant, but you know, basic financial journalism,
it will come up.
Speaker 3 (19:47):
Hold on for a second, Jay, last question, final thoughts
on this. I mean, I'm looking at the Philadelphia Semiconductor
Index up almost two percent in the aftermarket, A name
like Broadcom is also up about two percent, and again
and video still up about three point two percent here
after it's earnings. Final thoughts J from you when it
comes to Nvidia.
Speaker 4 (20:07):
So I want to respond. I want to close in
responding to Ed's comment about utilization. I've certainly heard data
points that utilization are high in the neoclouds, at least
some of them anecdotally. But if utilization is so high,
why do A and D and Nvidia make it a
practice to backstop capacity at the neoclouds as part of
(20:28):
these deals. If you look across the sales process for
GPS right now, you'll see a lot of these big
neoclouds have contractual terms which allow them which basically put
am D in Nvidia in the position of backstopping or
buying up excess capacity. And it seems like a little
bit of disconnect to me that you'd need those backstops
if utilization were so high. So I think there is
(20:51):
definitely signs of froth in the neocloud sector, not necessarily
Corewave or nebutus. I don't want to pick on them,
but there are rolling signs of friction in that in
that corner of the AI trade. It makes me cautious
about the broader spectrum of.
Speaker 3 (21:05):
Things, And to be fair, I just want to bring
you in on that if you have any thoughts for Jay, you.
Speaker 6 (21:09):
Know only that those that share some skepticism and want
to ask difficult questions of Jensen would also point out that,
you know, core Weave is one of Nvidia's biggest equity
positions to equity investments. It's also one of its biggest
customers technically, and they are in a position where care
Weaves under pressure from its customers to have access to
(21:31):
the latest technology. There is a disconnect there. At some
point they can't be running both the old GPUs. But again,
you know, I think asking the basic question of depreciation
and how Jensen Wong sees it, that that's something that
we will put to him for sure.
Speaker 3 (21:45):
Yeah, it definitely has to be addressed. Jake Obberg, thank
you as always, you give us so much time. We
so appreciate it, Senior analyst Semiconductors and Electronics over at
Seaport Research Partners. As we've said, currently as a cell
rating on Nvidia, they're only such rating for the stocklisted
in the terminal. Sticking to his conviction because conviction shares
of en Video, by the way, still up about three
point six percent. But Ed's still with.
Speaker 2 (22:06):
Us, still with us, and once again Jay, not just
the only celerating but that price target at one forty
uh and shares you know close today what you know,
one sixty something?
Speaker 5 (22:15):
Yeah, yeah, oh eighty six. Thank you go ahead, No, Ed.
Speaker 3 (22:20):
As you think about, you know, your conversation Jensen. You've
had many conversations with him at you know, different venues,
different events. I don't know what are you what is
really you think the most important thing to hear from
We talked about depreciation and some other things, but I'm
just curious what's top of mind for you here and
what you really want to hear from him.
Speaker 6 (22:39):
Electricity. It's fair to say I've had more terminal client ibs,
more messages on social media, more people in the user
and come up to me and just say, like, you know,
we we should probably talk about electricity and energy because
you know, we don't really have a good line of
sights to whether if they can build all these data centers,
(23:00):
and Jensen one does have a good line of sight
on that. When the data center is built, finish, ready
to turn the lights on, is the electricity there? You know?
And the answer is no. There's loads of deals out there,
right You guys would have done the red headline on
the show today about the US or the DOE taking
government ownership of nuclear reactors. But these are all deals
(23:21):
on paper. They don't exist in the real world. I
think that's really critical. The other thing is the press
release says they're sold out of GPUs. I just asked him,
what do you mean by sold out? Because they're ramping output,
you know, their supply constrained demand is greater at any
given moment than their ability to supply. But to say
that something is sold out is a bit confusing, to
(23:43):
be honest, and so you know, ask for some clarity
on that.
Speaker 2 (23:47):
Hey, yea before we let you go. Last question, Ian King,
writing in an inventory took a jump in the quarter
normally at chip makers, and just remind everybody, Ian King
has covered chip makers for more than twenty years. That's
a worrying sign, meaning the amount of unused product is
going up. The company said it's to quote. Ordering to
secure long lead time components, meet the demand for blackwell
and support future architecture road maps is a little different
(24:08):
than what it's traditionally done.
Speaker 3 (24:10):
I thought they don't can't me demand?
Speaker 1 (24:12):
Yeah.
Speaker 6 (24:13):
Inventory is typically bad, depending on the type of chip,
because it signals that you you know, no one's building
up there, the customers aren't building inventory. By the way,
Ian's covered semiconductors since nineteen ninety eight at Bloomberg, so
so longer than twenty years. But you know, in Vidia's
argument has always been we keep telling our customers, our suppliers,
and our partners what we're doing for the next five years.
(24:35):
That includes the memory chip makers and telematics, data center
server design builders so that everyone can keep pace. And
the argument that they're making is that when they want
to ship Blackwell accelerating computer systems at scale, the GPU,
it can't just be the GPU that's ready to go.
(24:57):
You need all the other components to go with it.
And you know, with the stockhout whatever, it is now
an after hours full percent, so I don't think anyone's
worried about that inventory nomber.
Speaker 3 (25:06):
Yep days All right, all right, good stuff. Hey, listen, Kitto,
we will be watching, all of us will be watching
co host of b Tech Ed Ludlow, as you know,
catch him at eleven am Wall Street time every Monday
through Friday. But he will be speaking exclusively this evening
with Nvidia CEO Jensen Wank. That's at six thirty pm
Wall Street Time, and you can catch that on both
(25:27):
Bloomberg Television and Bloomberg Radio, so be sure to check
that one out. It is an exclusive, so he's got
the conversation.
Speaker 2 (25:35):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (25:43):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons. From two to five yes. During
this listen on Apple Karplay and Android Auto with the
Bloomberg Business app, or watch us live on YouTube.
Speaker 2 (25:57):
Totline Video gave a strong revenue forecast for the current peerrid,
with sales expected to be about sixty five billion dollars
in the fiscal fourth quarter. I want to bring in
Bloomberg News Big Tech team leader Sarah Fryer. She's also
the author of No Filter, the inside story of Instagram.
She joins us from Bloomberg's San Francisco bureau. So going
into this, Sarah, there was this narrative emerging that there
(26:17):
was concern that the AI bubble, you know, if we're
calling it that maybe losing a little bit of air
if we're going to stay with that metaphor concerned about
the hyperscalers capex. We saw what happened with meta platforms
a few weeks ago. Is that concern gone after reports
such as this is everything all fine and dandy?
Speaker 3 (26:35):
Now?
Speaker 7 (26:37):
I don't think the concern is gone, because I do
think there are still some trends that are are you know,
is noted in my colleague in King Stories, but somewhat
worrisome right the fact that Nvidia is investing in a
lot of the entities that are buying its chips, right,
so is there a way that they are indirectly ending
(26:59):
demand for their product. There is the concern about China sales.
We still don't have any forecasts of sales to China
despite some of the loosening of the most restrictive restrictive
policies from the Trump administration. And and then there's also
the question of everyone trying to come up with Nvidia
(27:20):
alternatives for their chips, and some some of the rivals
starting to gain a little bit attraction we saw a
little bit from Ambi. And then furthermore, just the idea
that you know, so much of the some of the
the spending on chips, on data centers depends on having
this physical infrastructure to really put them to work, and
(27:44):
especially the energy making sure that there is power to
make all these data centers come to life within Nvidia's chips.
So I think there, you know, although this is this
is a company on a tear, this is we are
in the you know, the Nvidia economy. It is really
popping up the stock market right now. It has it
(28:05):
has altered the financial future of a lot of the
companies my team covers. But you know, can it last longer? Probably,
and that's what this report is showing. But is it
inevitable that it will? You know, are all the fears
in our past and we're not thinking about that anymore,
certainly not. We're going to keep looking at all those
(28:27):
trends and making sure that we can explain to people
what what is what is putting pressure on the future.
Speaker 3 (28:34):
So one thing I want to bring out, Sarah, and you're,
you know, there on the west coast San Francisco, you know,
the tech community front and center, so you hear things
in and around, not just in the newsroom, but just
in the area. And I'm you know, I'm looking at,
you know, the concerns about Like you said, maybe this
doesn't put concerns to rest, but I'm looking at you know,
in videos, certainly up in the aftermarket. I'm looking at
(28:56):
NASDAQ one hundred mini futures. They're up about one and
a half percent. S and P five hundred futures are
up about nine tens of a percent. I think it's big,
it's big.
Speaker 2 (29:05):
I look at the Socks effect.
Speaker 3 (29:07):
The socks is up almost two percent. There's a bunch
of other names in the space. So it's I think
there was just so much fear that what if they
missed those numbers and they you know, met on the
data center revenue number for the third quarter and fourth
quarter revenue was upbeating the outlook, Right, So I think,
does it feel like, I mean, I don't know, you know,
this community just a little bit of a sigh of
relief that Okay, they hit these numbers, they actually did
(29:31):
better than what the street was expecting, and maybe that
puts some some of the concerns, I don't know under
wraps for a little bit.
Speaker 7 (29:39):
I think here, you know, you're asking about the perspective
here in the valley. Here in the valley, AI doesn't
sound like anything that there's a sense that we're just
at the beginning of this grand movement that will change
the world. Right, Maybe it's not even the LLM that
will be the model that secure the future with AI,
(30:00):
and so we're just now starting to see the applications
of AI. The you know, the payback really for all
of this investment, we haven't quite solved that, you know,
where where is all this this revenue the actual sales
to companies that are going to pay for all of
the chips that Nvidia makes. We haven't really solved that
(30:22):
problem to the tune of the billions that have been spent.
But I think that here you're asking right here in
the valley, it is very much, you know, all systems
go on AI.
Speaker 6 (30:33):
There.
Speaker 7 (30:33):
There is not as much of a concern about whether
this is the bubble. People are seeing these these big
numbers and they're thinking, you know the world is about
to change even further. How so, people are thinking about
how their jobs are going to change. They're using AI
very very much in their jobs, in their personal lives,
(30:55):
like you know, relying on on AI to help them
make decisions for themselves and their faiamilies. And I think
people are are eager to create products that are going
to take advantage of the of this as a new resource.
Whether that is going to dramatically lead to efficiency, more
(31:16):
more profits for the companies given all the investment so far,
it's sort of yet to be seen.
Speaker 3 (31:26):
Yeah, it's it's just kind of interesting, right. I mean,
here we are, what almost three years in to this
AI story, and most people say it's just early innings
on all of this, but it's hard for it, right,
all of us who've covered you know, booms and busts
and crises, and I'm not saying that this is any
of that, but it's hard not to be a little
bit skeptical when you see, you know, sour the spend
(31:47):
over and over and again, the conversations around the circular financing,
and you know, it's hard. You're the logical side of
your brain says, well, we wait a minute, it does
this ultimately make sense?
Speaker 7 (31:58):
Two things can be true, right, it's not necessarily either
or there can be a dramatic revolution in technology that
will change our lives, and there can be irresponsible spending
at the same time. Right, we saw in the dot
com boom, for instance, that there were a lot of
companies that had very, very dire circumstances at the end
(32:23):
when that bubble burst and they had to shut down.
And but hey, we still use the internet via the
net is still a thing.
Speaker 3 (32:29):
So so I think.
Speaker 7 (32:32):
So, I think, I think we might We're not necessary Yeah, no,
we're not necessarily talking about, you know, a bubble burst.
And that means that AI wasn't a thing, and we
shouldn't have we shouldn't have thought that it was going
to be so big it could be that you know,
there there is still potential for a large financial correction
(32:53):
down the road, but AI remains a force that changes
how we do business and how we live our life.
So I think to put it in that stock of
a either or is missing the larger trend.
Speaker 3 (33:08):
This is why we come to you.
Speaker 2 (33:11):
Because it's really he's the big picture.
Speaker 3 (33:13):
Yeah, and it's very balanced and thoughtful. Sarah, thanks so much.
I really appreciate Bloomberg News Big Tech team leader Sarah Friar.
She's also the author of No Filter, the inside story
of Instagram, and she is of course there from our
Bloomberg San Francisco bureau.
Speaker 2 (33:28):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (33:36):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five East during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us Live on YouTube.
Speaker 2 (33:50):
The US government plans to buy a own as many
as ten new large nuclear reactors that could be paid
for using Japan's five hundred and fifty billion dollar funding pledge.
It's part of a push to meet surging demand for
electricity Carol our BNF team independent analysts who provide perspectives
on global commodity markets and the tech driving the energy transition,
(34:11):
writing recently that the surge of AI is turning data
centers into giant energy users.
Speaker 3 (34:17):
Center Oman Deep Sing when we talked about demand and
what's really constraining things in terms of the bill, that
is the access to power and energy. Electricity demand here's
some background for you from AI training and Services is
set to quadruple within a decade, making data centers one
of the fastest growing electricity users on the planet. Like listen,
this is something we've been drumming big time, I feel
(34:38):
like over the last year or so.
Speaker 2 (34:39):
Tim, Well, let's bring in Sam Song. He's managing partner
and portfolio manager at hazel View Investments. It's a real
estate firm with more than eleven billion dollars in assets
under management. He joins us here in the Bloomberg Interactive
Brookers Studio. Sam, welcome you and the team out with
the new white paper on how AI is changing real
estate investment in the US globally. We're going to get
to that, but first just explain the asset breakdown of
(35:00):
the eleven billion dollars, and really where you guys play
in the industry.
Speaker 5 (35:04):
We play across the board.
Speaker 8 (35:05):
We play in private credit, we play in private equity
and publicly traded real estate securities.
Speaker 2 (35:10):
Okay, so in terms of the public traded real estate securities,
what type of real.
Speaker 8 (35:14):
Estate it's again, it's it's across the runs the gamut.
Speaker 5 (35:17):
It runs agamus.
Speaker 8 (35:18):
So with different property types like data centers that we're
going to talk about today. We're in cell towers, so
another piece of the technology continuum. We're in traditional property
types like hotels, office, retail apartments, as well as other
niche oriented sectors like single family rentals as well as
I would say senior housing.
Speaker 2 (35:39):
So in the data center, Oh sorry, Carol, on the
data center side of things, like in recent years, how
much has that grown in terms of your real estate portfolio, Like,
how much has that become a priority significantly?
Speaker 5 (35:50):
It's doubled. It's doubled over the last three years.
Speaker 8 (35:52):
We started looking at data centers twenty years ago. The
asset class was very different then than it is now.
But over the last two three years, the magnitude of
data center exposure our portfolio has gone from mid single
digits to more than double digits.
Speaker 3 (36:10):
So meaning what's almost twenty percent?
Speaker 8 (36:11):
I would say probably low double digits, ten to fifteen
percent overall.
Speaker 3 (36:15):
So your overall exposure now is ten to fifteen percent
as data centers. Are you looking to increase that?
Speaker 8 (36:20):
We have increased it significantly already already.
Speaker 3 (36:23):
Do you want to do it more?
Speaker 5 (36:24):
I think we're happy with where it is today.
Speaker 8 (36:26):
When you look at the stocks here to date, they've
actually been laggered this year relative to other property types.
And given what's going on with the amount of CAPEX
investing in AI, we think it's actually a good place
for investors to think about allocating capital.
Speaker 3 (36:40):
But is it getting to be a little bit of
a glut, especially with maybe not having the access to
necessary power.
Speaker 8 (36:46):
So, like you said earlier, power is a challenge, right,
and power is what is that stumbling block for a
lot of the developers that are going to go out
and build new hyperscale facilities that meta Google, Amazon and
Microsoft want to populate. You know, what we're seeing is,
you know, companies are entertaining new partnerships to bring energy
(37:10):
to data centers until they could get on the grid.
So that is one of the solutions people are looking.
Speaker 3 (37:15):
For who are your data centers for?
Speaker 8 (37:18):
So our data centers run the gamut from enterprise users
to those cloud service providers that I just mentioned hyperscalers.
Speaker 2 (37:25):
Yes, how do you make sure that when you make
a data center investment you know that that data center
will be one that will have access to power?
Speaker 5 (37:34):
It's a good question.
Speaker 2 (37:34):
The reason I bring it up is just a couple
of weeks ago around John Gidtlson and Michelle ma have
this story about data centers in Santa Clara, California, in
Videa's hometown that have been there for a while and
they're standing empty right now because they do not have
hookups to the grid.
Speaker 5 (37:48):
Yeah.
Speaker 8 (37:49):
So there's a lot of due diligence and work that
happens behind the scenes to be able to get that
power from the grid to this center. You know, So
when the companies that we invest in, like a Digital
Realty Trust that is a ten billion dollar pipeline around
the world, you know they're generating eleven to twelve percent
(38:11):
on leverage returns on that capital. They are spending a
lot of time with the municipalities to ensure that the
data center is going to be powered with the grid,
with the with the necessities they need to be able
to make it function.
Speaker 2 (38:28):
I just want to do a little sort of callback
to an earlier story that we did. Carol Stack Infrastructure
was acquired earlier this year by Blue Owl Capital has
a forty eight megawatt project close to the Santa Clara,
California area that is also vacant. Still.
Speaker 3 (38:46):
Yeah, And I think was it the journal who did
a whole thing about Blue Owl and what they're doing.
You know, they're it's exposed, right the data centers. Well,
so I'm looking at digital realty and you say, you know,
you guys have exposure stock or the read I should
say data center reate is down about ten percent this year,
but it's definitely moved off its lows.
Speaker 5 (39:04):
Yep.
Speaker 3 (39:05):
Why is it? Because what's going on?
Speaker 8 (39:07):
I think it's more emblematic of the read industry than
it is Digital Realty Trust as a company because of
rates or what I think part of it is when
you look at the component of the broad equity market
that's worked really well this year, it's been AI, it's
been tech.
Speaker 5 (39:22):
It hasn't been real estate.
Speaker 8 (39:24):
So part of what swept digit Realty and other tech
oriented real estate investments to experience some softness and pricing
has been just overall fun flows out of the asset class,
not necessarily the health of the business, because the business
is performing really well.
Speaker 3 (39:38):
Because it was up thirty four twenty twenty three, it
was up almost thirty two percent last year, So it's
been on quite a run.
Speaker 5 (39:44):
Correct, along with that.
Speaker 3 (39:45):
Big AI story that we've talked about NonStop.
Speaker 8 (39:48):
Correct and if you kind of rerun the clock when
COVID happened, there was a lot of investments that took
place into the IT architecture of companies around the world
to be able to get at them into the cloud.
Speaker 5 (40:01):
And then you fast forward to the end.
Speaker 8 (40:03):
To twenty two beginning of twenty twenty three, before really
Navidia came onto the scene. That's when a lot of
the companies, like a Digital Realty Trust was sowing the
seeds for AI data centers, and that's when we significantly
increase our investment into that component of the market.
Speaker 2 (40:20):
As far as the data center effects on the rest
or the investment in data centers, those effects in AI's
effects on the rest of the real estate world. I
want to sort of branch out a little bit and
hear from you about efficiencies when it comes to hiring practices,
and if that is actually leading to less of a
need for office space for workers, it's.
Speaker 5 (40:39):
A good question.
Speaker 8 (40:40):
It's a question that a lot of folks are asking.
We're not seeing that today in terms of the AI
component impacting jobs and that's having less demand in office space.
In fact, we're seeing the opposite. What we're seeing is
companies are wanting to upgrade their space. They want to
ensure that they have the best quality space in a
market to attract the talent that they need to be
(41:01):
able to deliver on their investment objectives.
Speaker 3 (41:04):
So this white paper that you did, the impact of
A on public real estate, we've obviously just drilled you
on data centers. Is it just the data center story
or is it much more than that.
Speaker 5 (41:13):
It is more than that.
Speaker 8 (41:14):
So, like we mentioned in the white paper, cell towers
as a tangent to what's happening with the data center space.
If you think about mobile data consumption that's growing at
high teens, low twenties per year over the next five years,
there's mobile AI apps that are being downloaded at significantly
high rates over time. As more of those apps use
(41:38):
gener of AI, more of the data is going to
be pushed to the edge. Cell towers are right in
the fulk rum of what's happening on the edge, and
we think five G becomes a very big source of investments.
Speaker 5 (41:50):
So what's the play there.
Speaker 8 (41:51):
American Tower, There's American Tower, There's Crown Castle, there's SBAC Communications.
Speaker 5 (41:57):
So there's a number of data.
Speaker 8 (41:59):
Cell tower reads that investors can participate in in the
growth of five G.
Speaker 3 (42:04):
There's also starlink.
Speaker 8 (42:06):
There is starlink, so it's not publicly traded, so we created.
Speaker 3 (42:10):
Saying that as a competition to these.
Speaker 8 (42:13):
So that created a lot of news two months ago.
What I would say is what we've found.
Speaker 3 (42:18):
Just have about thirty thirty five seconds. Sorry.
Speaker 8 (42:20):
What we found is there's a lot of use for
satellites in rural areas, but in dense markets, in tier
one markets like we are today in New York City,
satellites are not as functional as it is in terms
of the latency that's needed for a lot of these applications.
So we don't think it's as applicable today as it
is in sort of tier three areas.
Speaker 3 (42:42):
All right, good stuff, come back soon. This was really fun.
Speaker 5 (42:44):
Thank you for having me.
Speaker 3 (42:45):
Samson he's a managing director, managing partner excuse me, portfolio
manager at Hazelbew Investments. As we said, real estate firm
with more than eleven billion in assets under management, joining
us right here in studio.
Speaker 1 (42:57):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
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You can also watch us live every weekday on YouTube
(43:18):
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Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
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(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Stenebeck on Bloomberg Radio and Video
is out Everybody.
Speaker 2 (00:34):
Fourth quarter revenue forecast did beat estimates. The company SE's
fourth quarter revenue sixty five billion dollars plus or minus
two percent. Third quarter data center revenue coming in above
estimates at fifty two fifty one point two billion dollars.
The estimus for forty nine point three four billion dollars.
Third quarter adjusted EPs at one dollar and thirty cents.
(00:54):
Third quarter revenue fifty seven point zero one billion dollars.
Once again, the company ceas fourth quarter revenue of sixty
three point seven billion to sixty six point three billion.
The estimate was for sixty one point nine eight billion dollars.
Third quarter data center revenue coming in as a beat
fifty one point two billion dollars. Carol stock moving higher
in the after hours, up about.
Speaker 3 (01:15):
Two point seven percent and gaining in the after hours.
What's a big number, of folks, is that data center number,
because that definitely is a decent beat. Third quarter data
center revenue fifty one point two billion, the estimate on
the street was forty nine point thirty four billion, and
then revenue overall. The outlook for the fourth quarter revenue
(01:37):
sixty five billion dollars plus or minus two percent. The
estimate on the street is sixty two billion. When we
talked to Angelo Zeno, he said, listen, we got a
look on the guide. It's got to be at least
sixty one to sixty two billion dollars while they are
looking above that, and Vidias Jensen Wong in the commentary
saying cloud GPUs are sold out, also talking a little
(01:59):
bit about expenses operating expenses. As for the fourth quarter
adjusted operating expenses of five billion dollars, that's a little
bit above the street estimate tim of four point fifty nine.
Investors don't seem to care, folks, because these numbers look
to be pretty strong.
Speaker 1 (02:15):
Here.
Speaker 3 (02:16):
Gross margin seventy three point six percent. Street was looking
for seventy three point seven percent, so essentially in line.
But the stock off it ties but still up about
four percent. Here in the aftermarket.
Speaker 2 (02:29):
I want to bring in Jay Goldberg, senior analysts Semiconductors
and Electronics with Seaport Research Partners. Jay currently has a
sell rating on in Vidia a target price of one
hundred and forty dollars per share. He's the only analyst
tracked by Bloomberg that has a cell rating on in Nvidia.
He joins us from the Bay Area. Jay, I ask
you each and every quarter, and I'm gonna ask you again,
(02:52):
is this print enough to get you to change your
rating on the company?
Speaker 4 (02:58):
Uh?
Speaker 5 (02:58):
No?
Speaker 4 (02:59):
Short? Or no?
Speaker 3 (03:01):
Okay? Why not?
Speaker 4 (03:03):
I mean it was an okay quarter, a quarter Eastern
Guide you know, I I they you know at GtC
d C. Two weeks ago they put out that big,
big revenue number, fifty five hundred million dollars over five
quarters in revenue, which shocked everybody.
Speaker 5 (03:21):
Uh.
Speaker 4 (03:22):
I think what happened is they got more allocation from
TSMC than they're expecting. So that's upside. That was more
than I was expecting. And and but that's floating in
the numbers now right and you start listing all the
all the things that could go wrong within video that's
a longer list than the things that could go right.
So I still think, I still think they're challenges. I
think I still think this is you know, but I'll
(03:43):
give them credit. This is this is a good quarter.
I had actually raised my estimates last week because I
I my check for telling telling me they'd be doing
pretty good. It's okay, I'll give them that. But one
quarter it's it's there. It's more than one quarter. Game here.
Speaker 2 (03:58):
The street would seem to agree that it's a good
quarter right now. Shares jump five percent after that fourth
quarter revenue outlook, top estimates in video, giving that strong
forecast that's countering fears of an AI bubble. We're also
seeing Carol shares of Core. We even Nebus gained four
percent after in video earnings.
Speaker 3 (04:16):
Yeah, and Video saying Blackwell Ultras now are leading Architecture
also talked about H two O sales and significant in
the third quarter gaming revenue up on continued demand for Blackwell. Hey, Jay,
what do I want to ask you? At least according
to Bloomberg Data, you have had this cell rating on
in Vidia since at least April, And forgive me if
it's a little bit longer, but the stock shares of
Nvidia up seventy one percent in that time. Why do
(04:40):
you hold on too that conviction, because because if anybody
followed you, it wouldn't have been such a great call.
Speaker 4 (04:47):
So I've told my clients all along, I've never told
any of my clients to short in video. What I've
said is this is that in video is going to
underperform my sector, right, and I think that has actually
played out if you get since I launched in April.
H if you look at chairs of AMD, which I
had a buy on for a long time, in arm
(05:07):
and broad coom and video has generally underperformed the AI trade, right.
And then and then you start looking at some of
the other stocks like sand Disk and Micron and companies
like that, who really really overperformed in the AI because
of AI this year, in video is sort of the
laggard in that in that AI trade, right, And I
(05:29):
think the head the headwinds here just keep mounting.
Speaker 3 (05:32):
So this is, yeah, this is against looking at others
in the sector. Is basically where you're saying, I'm pulling
up the socks. I mean, it's up about fifty seven percent,
but that's you know, throwing in all the names together,
and you're right. If I look at AMD, it definitely
is more than one hundred percent since that late April
call that you made. So yeah, there is some outperformance,
(05:53):
but it is doing better than the overall sector.
Speaker 4 (05:57):
Yeah, I mean, the the market has gone up, all
of these all these stocks have gone up a lot, right,
And you know that part I'm not right about, but
I do. You know, I've maintained all along that in
Video has gotten so large. There's it's just harder and
harder for them to keep these keep delivering these outside
beats that they were giving a year or two ago.
(06:19):
And you know, in that context, this quarter is is good,
but it's not. It's not a massive blow up. Part
of the problem in Video has is the most scrutinized
stock on the planet right now. People have all kinds
of checks into the entire supply chain, and so we
have a pretty good idea of what they can do
and how they get, how they surprise us, how they
deliver more than what's already baked into the numbers is
pretty challenging.
Speaker 2 (06:42):
Any anything in here about China that you could see it,
and whether or not they're getting any clarity about what
they could do in China.
Speaker 4 (06:51):
So I don't have the press release yet, so I
haven't read through it, but I know from talking to
people in the sector is no they've they've made They've
gotten nowhere with with US government. Jensen has obviously been
very vocal about that in the press lately, or he
wasn't until a few weeks ago. He's kind of stopped
making comments about it because it wasn't helping him. And
I think China is going to remain a problem for them.
(07:13):
It's there in Nvidia is stuck having to walk this
very fine line, right. They don't want to antagonize the
US government, they don't want to antagonize the Chinese government,
and on some days that's just not possible to walk
that line. So it's it's gonna be very tough for them.
They really really need to get back into China. I
think it's it is become a major, uh sort of
(07:34):
weakening in their in their moat, and the problem is
just going to grow the longer it goes on. So
that's that's to me, is a big concern. It's just
one that's very hard to handicap because it's it's political
in nature.
Speaker 3 (07:45):
If they were back in China. Would that change your
take on this company? And maybe you're rating.
Speaker 4 (07:52):
I don't think that alone would change my rating, but
it's certainly top of my list of things that could
go wrong here.
Speaker 3 (08:00):
And I do want to point out, just to rehash here, folks,
because we are talking with Jay Goldberg, senior analyst Semiconductors
and Electronics at Seaport Research Partners, he does have a
cell rating on Nvidia, the only such rating for the
stock listed on the Bloomberg terminal. And Video shares which
are up about three or four percent, just up about
two and a half percent. Tim, They're definitely off their
(08:20):
highs of the session, and this as the company gives
a strong forecast. Are one and King Reporting app giving
a strong revenue forecast for the current period, with sales
expected to be about sixty five billion dollars in the
fiscal fourth quarter. The outlook Ian reports signals that demand
remains strong for Nvidia's AI accelerators, despite growing fears that
(08:41):
the spending on such equipment isn't sustainable. And as he said,
and Vidia shares at their top in the aftermarket, we're
up about four percent, they're still up, but Tim just
up about two point six percent.
Speaker 2 (08:52):
And looking at commentary from Jensen Wong before we hear
from him later on the call and then ed Ludlow's
exclusive interview with him at six thirty pm Wall Street
Time today. Jensen Wog and the press release saying quote,
Blackwell sales are off the charts, Cloud GPUs are sold out.
He also said compute demand keeps accelerating and compounding across
(09:12):
training and inference, each growing exponentially. We've entered the virtuous
cycle of AI. The AI ecosystem is scaling fast, with
more new foundation model makers, more AI startups, across more
industries and in more countries. AI is going everywhere, doing
everything all at once.
Speaker 3 (09:28):
Hey, let's also bring into the conversation. We're going to
keep Jay Goldberg over at Seaport Research partners with us,
but let's bring in Bloomberg Tech b Tech co host
ed Ludlow, who will be speaking exclusively with Nvidia CEO
Jenson Wong. That's coming your way at six thirty pm
Wall Street time right here on Bloomberg TV and radio. Hey, Ed,
investors seem to be pretty happy. It's up about two
(09:51):
percent here, what's your immediate takeaway from these results.
Speaker 6 (09:56):
Yeah, in the fiscal third quarter that they just reported,
you know, it's a beat and a good one, and
this was a high bar going into it. And in
the outlook for the fourth quarter, you know, it's it's
a good three billion dollars above consensus sixty five billion
dollars plus or minus two percent. Remember this is always
the case. There were some very bullish forecasts on the street.
(10:19):
I think some analysts were saying that in Vidio could
even surprise us with a seventy five billion dollar figure
for that fourth quarter. But the great unknown is the
numbers that they've just posted, how do they relate to
the five hundred billion dollar or half a trillion dollar
figure that Jensen Jog outlined at GtC in the last
(10:40):
week of October. He basically said, over the next six
fistal quarters, just for Blackwell Reuben Systems, they see five
hundred billion dollars of demand. But in video doesn't give
formal guidance like that. It was just a slide over
his shoulder on stage. So there is going to be
some mathing based on what he says on the call
and hopefully in the conversation that we have to explain
(11:01):
how in aggregate, their forecast has changed for the longer ten.
Speaker 2 (11:05):
Okay, So, Jensen, if you're watching just a little preview
of the line of questioning that you may get from
Ed Ludlow at six point thirty Wall Street Time Bloomberg
Television and Radio for that exclusive conversation and in video.
Shares off about as of today's close, roughly ten percent
from those all time highs back at the end of October.
That was just around the GtC event in Washington, DC,
where I know you spoke with Jensen and Justin Hotard
(11:26):
of Nokia as well. I'm wondering really about the narrative
that's emerged since then about cracks starting to form or
punctures in the quote unquote AI bubble and the decline
in some of the high flying stocks that we've seen
of late. Does this assuasion investor concerns that not all
(11:49):
is okay when it comes to the infrastructure spend.
Speaker 6 (11:51):
Yeah, you know, in Vidia is down sharply since since
the all time high it hit four weeks ago, but
it's also a stock that as of today's close was
up almost forty percent year to date, double the performance
that we see of the Nasdaq one hundred or the
S and P five hundred. This again was a very
(12:12):
high expectations quarter where there is also high skepticism to
meet it. And two of the data points that we
will inevitably hear asked of Jensen is the circular financing issue,
because a lot of the news flow in that period
of time has been about in Nvidia investing in some
form in the frontier model labs or end users of
(12:34):
their chips.
Speaker 2 (12:35):
Yeah, look at the anthropic news yesterday.
Speaker 6 (12:38):
This week, right, you know, and in that specific case,
it's very hard to argue it is not circular financing
because historically, what Jensen Wang's argument has been is when
they put an investment into an AI company, they don't
require the AI company to use that capital or financing
to buy in video chips. They can go away and
(12:59):
use in vide his money to buy someone else's chips.
But in the mechanics of that anthropic deal, you know,
it is a flow of capital from Nvideo interanthropic and
then enfropic buying capacity that does use Nvideo chips. The
other data point is depreciation, which is a real fixation
of this market at the moment.
Speaker 3 (13:20):
So you know, one of the things we were talking
about with Jay Goldberg, and we're going to get back
to him in just a moment.
Speaker 2 (13:26):
We're we're leting him read the pressure, so we're letting
him actually look at the numbers right now.
Speaker 3 (13:30):
But he talked about China remaining effectively online. How much
of that is a problem. And I think we also
heard from was it this being kind of the first
clean numbers that we're kind of getting, was that Queen
Jo think we talked about, you know, without kind of
I guess China impact or China concerns, but and how
(13:50):
important is China going forward to the n Video story.
Speaker 6 (13:55):
So you know, China is potentially the biggest end market
in the world for data center and right now in
Video assumes zero China. You know, that five hundred billion
dollars or half a trillion dollar figure that I mentioned
a moment ago that was given on October twenty eighth
excluded China completely. I've just put in the blog and
(14:15):
I'm just making an observation that if you go back
to August when in Video gave their forecast for the
third quarter that they've just released, they were very clear
in explaining that this did not assume any h twenty
sales to China. It's interesting, but there is no mention
of the word China at all in today's press release,
(14:38):
and so now it's kind of all stripped out. But
as Jensen Wong has said repeatedly, it's a really critical market.
A lot of activity is there, and you know, in
Video would like to be able to sell its technology
into that market.
Speaker 3 (14:54):
Jay, I want to just bring you back in and
we do see and Video shares climbing once again back
up near that four percent mark that we saw in
the aftermarket. It's up about three point six three point
seven percent. Jay, As you are going through the press release,
anything that's jumping out that you think the Bloomberg audience
needs to know about.
Speaker 4 (15:13):
So far nothing, I came to the same conclusion. There's nothing.
There's no mention of China in here at all, which
is good for now, but also concerning it looks like
their networking business, the networking side of their data center
business did a little better than expected, which is great
because it's high margin, high margin business. It's very they
(15:33):
have a really solid position there. I mean, overall, it's
a pretty clean quarter. I haven't gotten all the way
through it, but I do. I am curious to hear
what Jensen's going to say about circular financing and those
sorts of questions. Jensen is probably the most persuasive, charismatic
CEO in semiconductors right now, so listening to him on
the quarter is always going to be interesting. I want
(15:56):
to see how much energy he brings and how he's
going to address some of those sort of stickier quests.
Speaker 3 (16:02):
Hey, Ed Lodo, come on in on this as you
listen to Jay. Love to bring you into the conversation
with Jay.
Speaker 6 (16:08):
Yeah, I think you know, the circular financing question is
one that I've received in advance, you know, of speaking
to Jensen in a couple of hours time. The other
one for me is the depreciation issue.
Speaker 5 (16:20):
Right.
Speaker 6 (16:21):
You know, Nvidia commits to this annual cadence of a
new generation of GPU, and I think there are a
lot of people out there who would would really appreciate
Jensen explaining that the useful life cycle of any generation
of GPU and how they manage that, how they convince
the big spenders in a CAPEX context to upgrade. Is
(16:42):
that a concern for you? Is it something that you
feel is unanswered?
Speaker 4 (16:47):
Well? I think there is this dynamic taking place where
in Video is trying very hard to prop up the
neo clouds as alternatives to the traditional hyperscalers. You'd much
rather have one hundred small customers than three large ones.
The problem is that will eventually conflict with that annual cadence. Right,
this whole issue about depreciation of how long a server lasts.
(17:07):
I think people look a lot at sort of the
physical life of the server, but the more important question
is the economic life of the server. And if you
have a new GPU coming out every year, the old
ones become less valuable, and so that leads to some
pretty pretty punishing price curves for the neo clouds. And
so Jensen and Nvidio want to constantly be coming out
(17:28):
with new products to stay competitive and push their own
sales up. But that makes it hard for these big
for these customers, the small ones who have to also
stay on that treadmill. And at some point, at some point,
it can't go on forever, right, The neoclouds will eventually
run out of money. And so that's sort of this
big long term picture outlook. And I mean, that's one
(17:51):
of these things that keeps me, would keep me up
at night if I didn't have a cell rating on it.
Speaker 2 (17:56):
Well, okay, So I want you to kind of go
back to Jay on this because I know you've talked
to Core, we've CEO quite a bit of time, quite
a bit in recent months. We said that Core we've
was hire in sympathy after these Nvidia results and in
addition to another neocloud company that's out there right now.
The demand is there for these neocloud companies. I mean
(18:18):
even Core we've said just very recently it's been able
to diversify away from its biggest customers.
Speaker 5 (18:24):
Yeah.
Speaker 6 (18:25):
In the conversations that we've had with Microntrata that they
there is demand for the older generation technology. One sort
of data point or statistic that those who are more
calm about the depreciation issue, you would point to his utilization.
(18:45):
So they would say, right now the Hopper generation of
accelerators with GPUs is running at one hundred percent utilization
in terms of workloads. It can't be used any more
than it already is. As a very bullish signal that
these these kind of obsolute sims of funny thing to say,
but these older generation GPUs are not idle. Comparing contrast
(19:08):
with some of the secondary secondary market data which we
have limited visibility into. We don't know how strong that is,
and nor do do we know how close attention in
video plays to the secondary market for older generations of chip.
But forty percent of revenue is the hyperscalers and depreciation
(19:29):
is an accounting issue that they need to mark against
their balance sheets.
Speaker 4 (19:33):
And we haven't seen it yet.
Speaker 6 (19:34):
So it's kind of interesting because at some point, and
I ain't an accountant, but you know, basic financial journalism,
it will come up.
Speaker 3 (19:47):
Hold on for a second, Jay, last question, final thoughts
on this. I mean, I'm looking at the Philadelphia Semiconductor
Index up almost two percent in the aftermarket, A name
like Broadcom is also up about two percent, and again
and video still up about three point two percent here
after it's earnings. Final thoughts J from you when it
comes to Nvidia.
Speaker 4 (20:07):
So I want to respond. I want to close in
responding to Ed's comment about utilization. I've certainly heard data
points that utilization are high in the neoclouds, at least
some of them anecdotally. But if utilization is so high,
why do A and D and Nvidia make it a
practice to backstop capacity at the neoclouds as part of
(20:28):
these deals. If you look across the sales process for
GPS right now, you'll see a lot of these big
neoclouds have contractual terms which allow them which basically put
am D in Nvidia in the position of backstopping or
buying up excess capacity. And it seems like a little
bit of disconnect to me that you'd need those backstops
if utilization were so high. So I think there is
(20:51):
definitely signs of froth in the neocloud sector, not necessarily
Corewave or nebutus. I don't want to pick on them,
but there are rolling signs of friction in that in
that corner of the AI trade. It makes me cautious
about the broader spectrum of.
Speaker 3 (21:05):
Things, And to be fair, I just want to bring
you in on that if you have any thoughts for Jay, you.
Speaker 6 (21:09):
Know only that those that share some skepticism and want
to ask difficult questions of Jensen would also point out that,
you know, core Weave is one of Nvidia's biggest equity
positions to equity investments. It's also one of its biggest
customers technically, and they are in a position where care
Weaves under pressure from its customers to have access to
(21:31):
the latest technology. There is a disconnect there. At some
point they can't be running both the old GPUs. But again,
you know, I think asking the basic question of depreciation
and how Jensen Wong sees it, that that's something that
we will put to him for sure.
Speaker 3 (21:45):
Yeah, it definitely has to be addressed. Jake Obberg, thank
you as always, you give us so much time. We
so appreciate it, Senior analyst Semiconductors and Electronics over at
Seaport Research Partners. As we've said, currently as a cell
rating on Nvidia, they're only such rating for the stocklisted
in the terminal. Sticking to his conviction because conviction shares
of en Video, by the way, still up about three
point six percent. But Ed's still with.
Speaker 2 (22:06):
Us, still with us, and once again Jay, not just
the only celerating but that price target at one forty
uh and shares you know close today what you know,
one sixty something?
Speaker 5 (22:15):
Yeah, yeah, oh eighty six. Thank you go ahead, No, Ed.
Speaker 3 (22:20):
As you think about, you know, your conversation Jensen. You've
had many conversations with him at you know, different venues,
different events. I don't know what are you what is
really you think the most important thing to hear from
We talked about depreciation and some other things, but I'm
just curious what's top of mind for you here and
what you really want to hear from him.
Speaker 6 (22:39):
Electricity. It's fair to say I've had more terminal client ibs,
more messages on social media, more people in the user
and come up to me and just say, like, you know,
we we should probably talk about electricity and energy because
you know, we don't really have a good line of
sights to whether if they can build all these data centers,
(23:00):
and Jensen one does have a good line of sight
on that. When the data center is built, finish, ready
to turn the lights on, is the electricity there? You know?
And the answer is no. There's loads of deals out there,
right You guys would have done the red headline on
the show today about the US or the DOE taking
government ownership of nuclear reactors. But these are all deals
(23:21):
on paper. They don't exist in the real world. I
think that's really critical. The other thing is the press
release says they're sold out of GPUs. I just asked him,
what do you mean by sold out? Because they're ramping output,
you know, their supply constrained demand is greater at any
given moment than their ability to supply. But to say
that something is sold out is a bit confusing, to
(23:43):
be honest, and so you know, ask for some clarity
on that.
Speaker 2 (23:47):
Hey, yea before we let you go. Last question, Ian King,
writing in an inventory took a jump in the quarter
normally at chip makers, and just remind everybody, Ian King
has covered chip makers for more than twenty years. That's
a worrying sign, meaning the amount of unused product is
going up. The company said it's to quote. Ordering to
secure long lead time components, meet the demand for blackwell
and support future architecture road maps is a little different
(24:08):
than what it's traditionally done.
Speaker 3 (24:10):
I thought they don't can't me demand?
Speaker 1 (24:12):
Yeah.
Speaker 6 (24:13):
Inventory is typically bad, depending on the type of chip,
because it signals that you you know, no one's building
up there, the customers aren't building inventory. By the way,
Ian's covered semiconductors since nineteen ninety eight at Bloomberg, so
so longer than twenty years. But you know, in Vidia's
argument has always been we keep telling our customers, our suppliers,
and our partners what we're doing for the next five years.
(24:35):
That includes the memory chip makers and telematics, data center
server design builders so that everyone can keep pace. And
the argument that they're making is that when they want
to ship Blackwell accelerating computer systems at scale, the GPU,
it can't just be the GPU that's ready to go.
(24:57):
You need all the other components to go with it.
And you know, with the stockhout whatever, it is now
an after hours full percent, so I don't think anyone's
worried about that inventory nomber.
Speaker 3 (25:06):
Yep days All right, all right, good stuff. Hey, listen, Kitto,
we will be watching, all of us will be watching
co host of b Tech Ed Ludlow, as you know,
catch him at eleven am Wall Street time every Monday
through Friday. But he will be speaking exclusively this evening
with Nvidia CEO Jensen Wank. That's at six thirty pm
Wall Street Time, and you can catch that on both
(25:27):
Bloomberg Television and Bloomberg Radio, so be sure to check
that one out. It is an exclusive, so he's got
the conversation.
Speaker 2 (25:35):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (25:43):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons. From two to five yes. During
this listen on Apple Karplay and Android Auto with the
Bloomberg Business app, or watch us live on YouTube.
Speaker 2 (25:57):
Totline Video gave a strong revenue forecast for the current peerrid,
with sales expected to be about sixty five billion dollars
in the fiscal fourth quarter. I want to bring in
Bloomberg News Big Tech team leader Sarah Fryer. She's also
the author of No Filter, the inside story of Instagram.
She joins us from Bloomberg's San Francisco bureau. So going
into this, Sarah, there was this narrative emerging that there
(26:17):
was concern that the AI bubble, you know, if we're
calling it that maybe losing a little bit of air
if we're going to stay with that metaphor concerned about
the hyperscalers capex. We saw what happened with meta platforms
a few weeks ago. Is that concern gone after reports
such as this is everything all fine and dandy?
Speaker 3 (26:35):
Now?
Speaker 7 (26:37):
I don't think the concern is gone, because I do
think there are still some trends that are are you know,
is noted in my colleague in King Stories, but somewhat
worrisome right the fact that Nvidia is investing in a
lot of the entities that are buying its chips, right,
so is there a way that they are indirectly ending
(26:59):
demand for their product. There is the concern about China sales.
We still don't have any forecasts of sales to China
despite some of the loosening of the most restrictive restrictive
policies from the Trump administration. And and then there's also
the question of everyone trying to come up with Nvidia
(27:20):
alternatives for their chips, and some some of the rivals
starting to gain a little bit attraction we saw a
little bit from Ambi. And then furthermore, just the idea
that you know, so much of the some of the
the spending on chips, on data centers depends on having
this physical infrastructure to really put them to work, and
(27:44):
especially the energy making sure that there is power to
make all these data centers come to life within Nvidia's chips.
So I think there, you know, although this is this
is a company on a tear, this is we are
in the you know, the Nvidia economy. It is really
popping up the stock market right now. It has it
(28:05):
has altered the financial future of a lot of the
companies my team covers. But you know, can it last longer? Probably,
and that's what this report is showing. But is it
inevitable that it will? You know, are all the fears
in our past and we're not thinking about that anymore,
certainly not. We're going to keep looking at all those
(28:27):
trends and making sure that we can explain to people
what what is what is putting pressure on the future.
Speaker 3 (28:34):
So one thing I want to bring out, Sarah, and you're,
you know, there on the west coast San Francisco, you know,
the tech community front and center, so you hear things
in and around, not just in the newsroom, but just
in the area. And I'm you know, I'm looking at,
you know, the concerns about Like you said, maybe this
doesn't put concerns to rest, but I'm looking at you know,
in videos, certainly up in the aftermarket. I'm looking at
(28:56):
NASDAQ one hundred mini futures. They're up about one and
a half percent. S and P five hundred futures are
up about nine tens of a percent. I think it's big,
it's big.
Speaker 2 (29:05):
I look at the Socks effect.
Speaker 3 (29:07):
The socks is up almost two percent. There's a bunch
of other names in the space. So it's I think
there was just so much fear that what if they
missed those numbers and they you know, met on the
data center revenue number for the third quarter and fourth
quarter revenue was upbeating the outlook, Right, So I think,
does it feel like, I mean, I don't know, you know,
this community just a little bit of a sigh of
relief that Okay, they hit these numbers, they actually did
(29:31):
better than what the street was expecting, and maybe that
puts some some of the concerns, I don't know under
wraps for a little bit.
Speaker 7 (29:39):
I think here, you know, you're asking about the perspective
here in the valley. Here in the valley, AI doesn't
sound like anything that there's a sense that we're just
at the beginning of this grand movement that will change
the world. Right, Maybe it's not even the LLM that
will be the model that secure the future with AI,
(30:00):
and so we're just now starting to see the applications
of AI. The you know, the payback really for all
of this investment, we haven't quite solved that, you know,
where where is all this this revenue the actual sales
to companies that are going to pay for all of
the chips that Nvidia makes. We haven't really solved that
(30:22):
problem to the tune of the billions that have been spent.
But I think that here you're asking right here in
the valley, it is very much, you know, all systems
go on AI.
Speaker 6 (30:33):
There.
Speaker 7 (30:33):
There is not as much of a concern about whether
this is the bubble. People are seeing these these big
numbers and they're thinking, you know the world is about
to change even further. How so, people are thinking about
how their jobs are going to change. They're using AI
very very much in their jobs, in their personal lives,
(30:55):
like you know, relying on on AI to help them
make decisions for themselves and their faiamilies. And I think
people are are eager to create products that are going
to take advantage of the of this as a new resource.
Whether that is going to dramatically lead to efficiency, more
(31:16):
more profits for the companies given all the investment so far,
it's sort of yet to be seen.
Speaker 3 (31:26):
Yeah, it's it's just kind of interesting, right. I mean,
here we are, what almost three years in to this
AI story, and most people say it's just early innings
on all of this, but it's hard for it, right,
all of us who've covered you know, booms and busts
and crises, and I'm not saying that this is any
of that, but it's hard not to be a little
bit skeptical when you see, you know, sour the spend
(31:47):
over and over and again, the conversations around the circular financing,
and you know, it's hard. You're the logical side of
your brain says, well, we wait a minute, it does
this ultimately make sense?
Speaker 7 (31:58):
Two things can be true, right, it's not necessarily either
or there can be a dramatic revolution in technology that
will change our lives, and there can be irresponsible spending
at the same time. Right, we saw in the dot
com boom, for instance, that there were a lot of
companies that had very, very dire circumstances at the end
(32:23):
when that bubble burst and they had to shut down.
And but hey, we still use the internet via the
net is still a thing.
Speaker 3 (32:29):
So so I think.
Speaker 7 (32:32):
So, I think, I think we might We're not necessary Yeah, no,
we're not necessarily talking about, you know, a bubble burst.
And that means that AI wasn't a thing, and we
shouldn't have we shouldn't have thought that it was going
to be so big it could be that you know,
there there is still potential for a large financial correction
(32:53):
down the road, but AI remains a force that changes
how we do business and how we live our life.
So I think to put it in that stock of
a either or is missing the larger trend.
Speaker 3 (33:08):
This is why we come to you.
Speaker 2 (33:11):
Because it's really he's the big picture.
Speaker 3 (33:13):
Yeah, and it's very balanced and thoughtful. Sarah, thanks so much.
I really appreciate Bloomberg News Big Tech team leader Sarah Friar.
She's also the author of No Filter, the inside story
of Instagram, and she is of course there from our
Bloomberg San Francisco bureau.
Speaker 2 (33:28):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (33:36):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five East during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us Live on YouTube.
Speaker 2 (33:50):
The US government plans to buy a own as many
as ten new large nuclear reactors that could be paid
for using Japan's five hundred and fifty billion dollar funding pledge.
It's part of a push to meet surging demand for
electricity Carol our BNF team independent analysts who provide perspectives
on global commodity markets and the tech driving the energy transition,
(34:11):
writing recently that the surge of AI is turning data
centers into giant energy users.
Speaker 3 (34:17):
Center Oman Deep Sing when we talked about demand and
what's really constraining things in terms of the bill, that
is the access to power and energy. Electricity demand here's
some background for you from AI training and Services is
set to quadruple within a decade, making data centers one
of the fastest growing electricity users on the planet. Like listen,
this is something we've been drumming big time, I feel
(34:38):
like over the last year or so.
Speaker 2 (34:39):
Tim, Well, let's bring in Sam Song. He's managing partner
and portfolio manager at hazel View Investments. It's a real
estate firm with more than eleven billion dollars in assets
under management. He joins us here in the Bloomberg Interactive
Brookers Studio. Sam, welcome you and the team out with
the new white paper on how AI is changing real
estate investment in the US globally. We're going to get
to that, but first just explain the asset breakdown of
(35:00):
the eleven billion dollars, and really where you guys play
in the industry.
Speaker 5 (35:04):
We play across the board.
Speaker 8 (35:05):
We play in private credit, we play in private equity
and publicly traded real estate securities.
Speaker 2 (35:10):
Okay, so in terms of the public traded real estate securities,
what type of real.
Speaker 8 (35:14):
Estate it's again, it's it's across the runs the gamut.
Speaker 5 (35:17):
It runs agamus.
Speaker 8 (35:18):
So with different property types like data centers that we're
going to talk about today. We're in cell towers, so
another piece of the technology continuum. We're in traditional property
types like hotels, office, retail apartments, as well as other
niche oriented sectors like single family rentals as well as
I would say senior housing.
Speaker 2 (35:39):
So in the data center, Oh sorry, Carol, on the
data center side of things, like in recent years, how
much has that grown in terms of your real estate portfolio, Like,
how much has that become a priority significantly?
Speaker 5 (35:50):
It's doubled. It's doubled over the last three years.
Speaker 8 (35:52):
We started looking at data centers twenty years ago. The
asset class was very different then than it is now.
But over the last two three years, the magnitude of
data center exposure our portfolio has gone from mid single
digits to more than double digits.
Speaker 3 (36:10):
So meaning what's almost twenty percent?
Speaker 8 (36:11):
I would say probably low double digits, ten to fifteen
percent overall.
Speaker 3 (36:15):
So your overall exposure now is ten to fifteen percent
as data centers. Are you looking to increase that?
Speaker 8 (36:20):
We have increased it significantly already already.
Speaker 3 (36:23):
Do you want to do it more?
Speaker 5 (36:24):
I think we're happy with where it is today.
Speaker 8 (36:26):
When you look at the stocks here to date, they've
actually been laggered this year relative to other property types.
And given what's going on with the amount of CAPEX
investing in AI, we think it's actually a good place
for investors to think about allocating capital.
Speaker 3 (36:40):
But is it getting to be a little bit of
a glut, especially with maybe not having the access to
necessary power.
Speaker 8 (36:46):
So, like you said earlier, power is a challenge, right,
and power is what is that stumbling block for a
lot of the developers that are going to go out
and build new hyperscale facilities that meta Google, Amazon and
Microsoft want to populate. You know, what we're seeing is,
you know, companies are entertaining new partnerships to bring energy
(37:10):
to data centers until they could get on the grid.
So that is one of the solutions people are looking.
Speaker 3 (37:15):
For who are your data centers for?
Speaker 8 (37:18):
So our data centers run the gamut from enterprise users
to those cloud service providers that I just mentioned hyperscalers.
Speaker 2 (37:25):
Yes, how do you make sure that when you make
a data center investment you know that that data center
will be one that will have access to power?
Speaker 5 (37:34):
It's a good question.
Speaker 2 (37:34):
The reason I bring it up is just a couple
of weeks ago around John Gidtlson and Michelle ma have
this story about data centers in Santa Clara, California, in
Videa's hometown that have been there for a while and
they're standing empty right now because they do not have
hookups to the grid.
Speaker 5 (37:48):
Yeah.
Speaker 8 (37:49):
So there's a lot of due diligence and work that
happens behind the scenes to be able to get that
power from the grid to this center. You know, So
when the companies that we invest in, like a Digital
Realty Trust that is a ten billion dollar pipeline around
the world, you know they're generating eleven to twelve percent
(38:11):
on leverage returns on that capital. They are spending a
lot of time with the municipalities to ensure that the
data center is going to be powered with the grid,
with the with the necessities they need to be able
to make it function.
Speaker 2 (38:28):
I just want to do a little sort of callback
to an earlier story that we did. Carol Stack Infrastructure
was acquired earlier this year by Blue Owl Capital has
a forty eight megawatt project close to the Santa Clara,
California area that is also vacant. Still.
Speaker 3 (38:46):
Yeah, And I think was it the journal who did
a whole thing about Blue Owl and what they're doing.
You know, they're it's exposed, right the data centers. Well,
so I'm looking at digital realty and you say, you know,
you guys have exposure stock or the read I should
say data center reate is down about ten percent this year,
but it's definitely moved off its lows.
Speaker 5 (39:04):
Yep.
Speaker 3 (39:05):
Why is it? Because what's going on?
Speaker 8 (39:07):
I think it's more emblematic of the read industry than
it is Digital Realty Trust as a company because of
rates or what I think part of it is when
you look at the component of the broad equity market
that's worked really well this year, it's been AI, it's
been tech.
Speaker 5 (39:22):
It hasn't been real estate.
Speaker 8 (39:24):
So part of what swept digit Realty and other tech
oriented real estate investments to experience some softness and pricing
has been just overall fun flows out of the asset class,
not necessarily the health of the business, because the business
is performing really well.
Speaker 3 (39:38):
Because it was up thirty four twenty twenty three, it
was up almost thirty two percent last year, So it's
been on quite a run.
Speaker 5 (39:44):
Correct, along with that.
Speaker 3 (39:45):
Big AI story that we've talked about NonStop.
Speaker 8 (39:48):
Correct and if you kind of rerun the clock when
COVID happened, there was a lot of investments that took
place into the IT architecture of companies around the world
to be able to get at them into the cloud.
Speaker 5 (40:01):
And then you fast forward to the end.
Speaker 8 (40:03):
To twenty two beginning of twenty twenty three, before really
Navidia came onto the scene. That's when a lot of
the companies, like a Digital Realty Trust was sowing the
seeds for AI data centers, and that's when we significantly
increase our investment into that component of the market.
Speaker 2 (40:20):
As far as the data center effects on the rest
or the investment in data centers, those effects in AI's
effects on the rest of the real estate world. I
want to sort of branch out a little bit and
hear from you about efficiencies when it comes to hiring practices,
and if that is actually leading to less of a
need for office space for workers, it's.
Speaker 5 (40:39):
A good question.
Speaker 8 (40:40):
It's a question that a lot of folks are asking.
We're not seeing that today in terms of the AI
component impacting jobs and that's having less demand in office space.
In fact, we're seeing the opposite. What we're seeing is
companies are wanting to upgrade their space. They want to
ensure that they have the best quality space in a
market to attract the talent that they need to be
(41:01):
able to deliver on their investment objectives.
Speaker 3 (41:04):
So this white paper that you did, the impact of
A on public real estate, we've obviously just drilled you
on data centers. Is it just the data center story
or is it much more than that.
Speaker 5 (41:13):
It is more than that.
Speaker 8 (41:14):
So, like we mentioned in the white paper, cell towers
as a tangent to what's happening with the data center space.
If you think about mobile data consumption that's growing at
high teens, low twenties per year over the next five years,
there's mobile AI apps that are being downloaded at significantly
high rates over time. As more of those apps use
(41:38):
gener of AI, more of the data is going to
be pushed to the edge. Cell towers are right in
the fulk rum of what's happening on the edge, and
we think five G becomes a very big source of investments.
Speaker 5 (41:50):
So what's the play there.
Speaker 8 (41:51):
American Tower, There's American Tower, There's Crown Castle, there's SBAC Communications.
Speaker 5 (41:57):
So there's a number of data.
Speaker 8 (41:59):
Cell tower reads that investors can participate in in the
growth of five G.
Speaker 3 (42:04):
There's also starlink.
Speaker 8 (42:06):
There is starlink, so it's not publicly traded, so we created.
Speaker 3 (42:10):
Saying that as a competition to these.
Speaker 8 (42:13):
So that created a lot of news two months ago.
What I would say is what we've found.
Speaker 3 (42:18):
Just have about thirty thirty five seconds. Sorry.
Speaker 8 (42:20):
What we found is there's a lot of use for
satellites in rural areas, but in dense markets, in tier
one markets like we are today in New York City,
satellites are not as functional as it is in terms
of the latency that's needed for a lot of these applications.
So we don't think it's as applicable today as it
is in sort of tier three areas.
Speaker 3 (42:42):
All right, good stuff, come back soon. This was really fun.
Speaker 5 (42:44):
Thank you for having me.
Speaker 3 (42:45):
Samson he's a managing director, managing partner excuse me, portfolio
manager at Hazelbew Investments. As we said, real estate firm
with more than eleven billion in assets under management, joining
us right here in studio.
Speaker 1 (42:57):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
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afternoons from two to five pm Eastern on Bloomberg dot com,
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(43:18):
and always on the Bloomberg terminal
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