Nvidia earnings boom to 70% despite tariffs

0:04Hello and welcome to Business Matters. I'm Roger Hearing. Coming up on the programme, one of the world's richest companies, NVIDIA, beats expectations on its earnings despite the tariff wars. But could there be a bigger hit to its profits on the way? Also a bit of a rift in Trump world. Elon Musk isn't happy with the president's big, beautiful finance bill. A German court case sets a precedent for climate change impact to be laid at the door of fossil fuel companies. and fancy a slice of bear. La Slovakia is legalising the selling of meat from the endangered brown bear, but is anyone actually going to eat it?

0:43And I'll be joined throughout the programme by two guests on opposite sides of the world, Michael Malone, journalist and host of the Silicon Insider podcast, who's joining us from Silicon Valley. Michael, good evening and welcome to the programme. Good to be here again. Good to have you there. Across the other side of the world, we're also joined by Zima Islam, Sam, senior reporter for The Daily Star, who's joining us on the line from Dhaka. So, Zama, a very good morning to you. Hi, hi. Good morning, Roger. Are we really going to be talking about best, though? We might towards the end, but I have to tell you there's loads of stuff happening, even as we speak, which I shall bring you up to speed with almost immediately.

1:20But first of all, Zama, just give me a sense of what's going on in Dhaka today. I mean, you know, what are the things that are catching your attention this morning? Oh, Dhaka is bursting with protests every single day. The country seems to be at a standstill. People are trying, they have a lot to demand and they want all of their demands to be met right away. I don't know if you know, but this is an interim government. We had a student that revolution last year. And so this is not a democratically placed government. And so they are really struggling to keep the economy going. They're really struggling to keep political stability.

2:04Things really seem to be spiraling out of, a little spiraling out of control at the moment. Difficult times there, clearly. And yes, we'll talk maybe a little bit later in the program about some of that and the implications. But Michael, let me come to you. Well, I mean, there's a lot happening in your neck of the woods. and we'll talk about obviously what's going on in Trump world in various ways but there's actually been a story breaking over the last hour or so which is that a US federal court has ruled that President Trump overstepped his authority by imposing global tariffs in a significant blow to a key part of his economic policies.

2:38It was the Court of International Trade ruling that an emergency law which the White House used did not in fact provide the unilateral authority to impose tariffs on nearly every country. People may remember that was what Donald Trump called his Liberation Day. And I should say within the last few minutes, we've been told that the White House is in fact going to appeal that. Michael, a lot happening, but a lot to do with tariffs. And interestingly, all this up and down, on and off of tariffs. But there's a funny and rather interesting phrase that's being used at the moment in relation to that, which you know about.

3:14So tell me about that. Yeah, I think I'm going to celebrate by having a taco tonight. Go on, explain, explain. The new term on Wall Street is taco, which is Trump always chickens out, which is considered an investing strategy in which you believe that no matter what Trump says, President Trump says about a particular tariff rate on another country, he will give up on it. he will back off and he will come up with something lower right now he responded he responded today uh in a press conference well indeed let me pause you there because you've actually got a bit of that uh press conference and how he did react to it have a listen mr president wall street analysts have coined a new term called the taco trade they're saying trump always chickens out on your tariff threats and that's why markets are higher this week what's your response to that i kick out Chicken out.

4:13Oh, chicken out. I've never heard that. You mean because I reduced China from 145 percent that I set down to 100 and then down to another number? Well, Mr. Trump did quite a long answer to all that, but he finished his answer with this. I can promise you, and I have great respect for the people at the European Union, they wouldn't be over here today negotiating if I didn't put a 50 percent tariff on. The sad thing is now when I make a deal with them, it's something much more reasonable. They'll say, oh, he was chicken. He was chicken. That's so unbelievable. Well, there we are. Michael, is this going to vastly undermine, do you think, the Trump plan of sort of re-throwing everyone into chaos on tariffs?

4:56If everyone says, well, it doesn't really matter, he'll chicken out in the end. Well, the markets seem to think that he will today. I'm not so sure. I've been around some negotiators in my life. And it's a scary process watching them at work because I've seen fights in the parking lot, then they'll agree on something, you know, shouting at each other like they're going to attack each other and kill each other. And then all of a sudden they hit a number they like. All I can say is I have no idea how this is going to end up. I mean, he's a great negotiator, but great negotiators often fail too. And they don't always get what they want.

5:42In fact, usually they end up in the middle somewhere. So let's see. Okay. Okay. Well, it is an interesting moment. And of course, the tariffs are affecting an awful lot, not least, of course, companies very much in your wheelhouse, Michael, which is tech areas. Now, let's talk about NVIDIA. It's a company that's a huge success in the tech world. The chip maker has been vying with Apple for the position of the world's richest company, in fact. So the latest quarterly earnings which came out today have been weighty with some interest, especially in this period of tariff chaos. In fact, the company beat expectations despite export controls.

6:18$4.5 billion hit, however, from US tariffs, a bit less than feared. NVIDIA said it made a profit of$18.8 billion on revenue of$44.1 billion. and that actually caused the shares to rise nearly 4 % in aftermarket trading. But it does seem the biggest hit is yet to come, as I heard from our New York business correspondent, Michelle Fleury. It confirmed that there is this massive demand for their product and that they are able to meet it for the most part. But one area where they're struggling is the sale of H20 chips to China. These are specially designed to try and meet Biden-era restrictions on chip sales to China.

6:59But within the last few weeks, the Trump administration imposed curbs on that. And so as a result, that has affected both their revenue projections for this quarter and also going forward. And I think that was sort of the area that investors have been very concerned about. And in fact, it was something that Jensen Huang was asked about during the call just now with investors. So was he giving any kind of assurance? assurance? Was he kind of suggesting that there is a way through this? Because the big hit is very big if it does come. They say it's going to hurt revenue by about 8 billion, which is substantial when you think that they're talking about a revenue for the next quarter of around 45 billion.

7:43It's not nothing, but it's not everything either. But here's the thing. Jensen Huang said to investors that the platform that wins China is positioned to win globally, that China's AI moves will carry on with or without US chips. And so he, as the CEO of NVIDIA, is worried about kind of being left behind and worried that foreign competitors will move in. The problem is he's got to deal with Donald Trump, who feels quite strongly on this issue. And so it's unclear whether or not, you know, there will be any change in this policy. And at the same time, NVIDIA is looking in other areas. It's not just China.

8:18The Middle East, it seems to be quite fruitful at the moment for them. As we're talking, this call is going on with investors, And I'm sure there will be questions about how much will some of the losses from the China market be offset by some of the gains you're making in other parts of the world. Obviously, we saw that splashy announcement when he was with the president the other week on that Middle East trip and talking about, you know, the role they're playing in helping the Middle East build their AI infrastructure and AI infrastructure of the future. So those are the positives. The question is kind of the big long term.

8:50And I think that's what Jensen Huang was trying to get at with that comment about being left out of China. Clearly, it's something the company is concerned about, but it's not necessarily within their control. And so at the moment, the key thing we're seeing is they're still doing very well in the markets they have. And importantly, in data centers, that business continues to grow 73 % growth. And that was Michelle Fleury. I also got the view of Dylan Patel, chief analyst at Semi Analysis, a semiconductor research firm in the San Francisco Bay Area. The question was how much of that sold out business was now kneecapped because the new round of China restrictions that have been happening sort of on an annual cadence almost in both the past and current administrations would impact this.

9:34And so there was a lot of fears that it would be really big, right? They wrote down four and a half billion dollars worth of products that they were making for China. And so the fears were, you know, given NVIDIA's margins are so high, hey, that's 15, 20 billion dollars of revenue that could go away over the course of this year. But it's still a pretty big deal, right? Two and a half billion dollar hit this quarter, another eight billion dollars next quarter. Right. That's over 10 billion dollars of revenue hit, but not nearly as bad as sort of the expectations were. Well, yeah, but I mean, the eight billion, the eight billion, you know, isn't obviously massively in advance of what they've just gone through.

10:09I mean, does it keep going like that? Do we see more of that in the next quarter and the next quarter? Is there any way back from this? Yes. I mean, when you think about the natural state of chip sales to China, right, before the tit for tat and this global trade war, China would have been 30 to 40 percent of chip sales. And the U.S. would have been 30 to 40 percent of chip sales. And then the rest of the world is what's left. Even when NVIDIA was making these China-specific chips, they were only getting to the 20 percent range, right, if they had no restrictions, right? So it's kind of regardless, they were already pretty badly hit by prior restrictions.

10:44And now these new restrictions further clamp them down. So how large would the impact be if there were no restrictions? Well, maybe NVIDIA's numbers would be 30 percent higher. And that was Dylan Patel speaking to me earlier. Zima, let me bring you on this because, I mean, you know, we're very close up with this. But this is interesting signal really about how difficult it is in many parts of business, particularly the tech world, in dealing with this tariff war that's going on via Donald Trump. Yeah, I mean, for example, right, just I think five minutes ago, the producer told me that the courts overruled on Donald Trump's Liberation Day tariffs.

11:22And I was internally cheering because Bangladesh was going to be facing more than 50 percent tariffs on its garment sector, which is really the backbone of the country. And I hope that this stays. I hope that, you know, something else doesn't happen that brings these tariffs back on. I mean, things are clearly changing at the rate of things are changing weekly almost. So tariffs in Trump's world might absolutely upend the RMG, the redimit garment sector in Bangladesh. But it might just be a taco, mightn't it? It might be a Trump chicken's out again, I suppose. One can only hope. I will celebrate the tacos if it does.

12:08Well, Michael, let me come to you. I mean, this is very much your area, the whole tech development. Companies like NVIDIA really matter, and they seem, well, they're doing all right, but there is certainly a big, big downside that seems to be coming at them because of all that's happening in the trade wars. yeah well you know 70 growth in a quarter is not something to sneeze at i mean nvidia seems to be kind of getting by all these obstacles without much trouble and part of it is the introduction of that new blackwell chip which is apparently a monster and some of the servers that are being going to be created for ai with those chips are going to be a another quantum leap really so So that's the Blackwell chip is a big thing.

12:55Yeah, the servers are going to build with it, are going to be even closer to natural language and indistinguishable. They'll pass the Turing test. I mean, they will be, you won't know if you're talking to a human being or a machine. That's how powerful these things are. And we're already seeing some of the impact of the latest chips. so can can nvidia get through this without being too seriously impacted by china they're going to be impacted they already are but i think these new products are going to swamp the story of the company's success it's going to do better and better in despite of china well it'll be interesting to see how it does all play and we are just seeing this sort of real-time evidence in a way of the impact.

13:45But yeah, we've been talking about how the news is changing almost as we speak here at the moment through events in the US to do with tariffs. But there's been more happening as well in the area of a certain Mr. Elon Musk. Now, he's the billionaire, of course, and co-founder and CEO of Tesla. And he has been a strong backer of President Donald Trump. In fact, he'd actually been very much involved in the administration, cutting back on government staff and expenditure through his Doge Group, Department of Government Efficiency. Now, several interesting things have happened. I'll bring you the very latest one, which is in within the last hour.

14:21He has suggested on a social media post that his scheduled time as a special government employee is coming to an end. So it's kind of him saying goodbye to his role in the Trump administration. We've had indications of that, but that has now come out on his own social media on X. But also, he has, well, been a little bit critical of the man who will now be his former boss. And it's been something of a surprise because he's been expressing doubts about the president's new finance bill. Now, this includes multi-trillion dollar tax breaks and the pledge to increase defence spending. Elon Musk told CBS News he was disappointed by what the president called his big, beautiful bill.

15:01You know, I was, like, disappointed to see the massive spending bill, frankly, which increases the budget deficit, not just decrease it, and undermines the work that the Doge team is doing. Well, the bill has still to get through the Senate. Earlier, I asked Julia Manchester, national political reporter with The Hill magazine, was Mr. Musk's reaction something of a shock? It is certainly emblematic of a major division we saw not only in the House of Representatives when they were looking to pass this bill. We saw a number of what we would call fiscal conservative hawks who were against the bill originally because they thought, like you said it, like Elon Musk says, I should say, added too much to the deficit.

15:39And now in the Senate, you have a number of Republicans who feel the same way. Senators like Ron Johnson from Wisconsin, Rick Scott from Florida, they are very much pushing back against this. The problem, though, is that you have another group of Republicans and you saw a group of Republicans like this in the House and you see a group of Republicans like this in the Senate who think the bill cut too much from government programs like Medicaid, for example. So I think what you heard Elon Musk saying is a reflection of the division we've seen within the Republican Party. And it's interesting to see how Donald Trump's responded at the moment, saying he plans to negotiate aspects of the bill, like some bits of it doesn't like others, which is a bit of a change of tune, isn't it?

16:23It is a change of tune, but it's something he has to do to sort of get it through Capitol Hill. Remember, we saw the first version of the bill pass through the House of Representatives. Now it has to pass through the Senate. And then an identical piece of legislation needs to pass through the House again before it ends up at Donald Trump's desk. So right now, he and Republican leadership, Speaker Mike Johnson and Majority Leader in the Senate, John Thune, have to walk a very, very fine line between these different factions within their party. This is really interesting that what we'd seen as a pretty united front of the of the GOP, the Republican Party behind Donald Trump now seems to be splitting on some pretty major financial issues.

17:06Absolutely. And I think, you know, part of the reason why we'd seen such a united front the first 100, 150 days of President Trump's presidency so far was because, you know, he was able to get a lot of his agenda through by executive order. He could just do it with the stroke of a pen, his signature. Now comes the hard part with getting that legislation through Capitol Hill. And you are seeing that, you know, even though Trump and Republican leaders have been very good about whipping their members into place when it comes to supporting President Trump and getting behind him politically, when it comes to this legislation, it's difficult.

17:44And I think, you know, a lot of this also plays into next year's midterms. Like I said, you already see Democrats targeting a lot of these vulnerable senators, vulnerable House members on this issue of potential Medicaid cuts. Now, there's part of Trump world in his supporters who are quite keen on taxing the richest, taxing the billionaires. I suppose people like Elon Musk. Is that part of what's going on, a fear that that might be the way this is going, that although he has the support of billionaires, they won't like it if it does move towards taxing them? I think that's part of it. And we've seen from President Trump's language in the past that he would be open to something like that.

18:24But the Republican language you're seeing on the bill and the talking points you saw coming out of the House of Representatives when it was passed last week was, you know, this talking point that this legislation represents a tax cut for Americans across the board. And what they mean by that is the extension of the Trump's 2017 tax cuts. So that's how they're using this to promote this bill. And that language you would think would be palatable to most voters. However, if there ends up being taxes on certain income brackets or higher taxes on certain income brackets, there's going to be some backlash there.

19:02Julia Manchester there of The Hill magazine. So, Michael, I say we've been hearing in just the last half hour or so that Elon Musk is actually on the way out of the Trump administration. But this slight knifing he's given to his boss on the way out, disappointing the bill, I mean, how do you read it? Do you see big splits appearing in the MAGA world? Not yet. I think if you know Elon, you understand that he's a very empirical guy. And if the equation says that something is correct, that's something that he is going to do no matter what. And I think he's been sort of surprised and disappointed.

19:45He called himself being a whipping boy of D.C., of politics, of the wheeling and dealing and the compromise and the negotiating and all of that. I think he thought that that Doge was an efficiency measure and it had every reason to be accepted by everybody. And he's been surprised. And I think when he realized that this the beautiful new bill was going to add to the deficit, he was astonished by that, too. And finally, there's other factors as well. Tesla wants him to get back to, you know, business and put in a 40 hour week. Yeah, because Tesla's in a bit of trouble, isn't it? Yeah. And he's feeling that pressure, too.

20:31I think he'll at a certain point, he's going to be real happy to wash his hands of inside the beltway. Yeah. So you think this but you don't think he disagrees fundamentally with the Trump administration. It's more just not wanting to be in the politics. Yeah, I think he doesn't want to compromise on this stuff. He thinks he's right and he thinks he's doing, you know, God's work on cutting out corruption and spending. And now he's being told, well, we're not going to exactly do that. Yeah, it's the frustration. Zyma, it's an interesting one because it happens in so many societies, you know, politics and business meeting head on, really.

21:11Yeah. In fact, we recently... Yeah, go ahead, Sam. We recently... Yeah, sorry. So Bangladesh recently got Starlink. And this happened... Starlink is, of course, the internet service provided by Elon Musk through little satellites. Exactly, exactly. And then this meeting, as we've learned, had actually taken place in the White House where Bangladeshi government officials met with Elon Musk. So this just does not seem like he was able to keep business and politics out of, you know, each other's business. Yeah, it's interesting. It does seem to be a bit of a conflict of interest, right? Yeah, yeah, yeah.

21:50But Bangladesh has got the Starlink now, has it? Or is it just being promised it? I don't know. We've got Starlink. The deal worked out very, very fast. I think they made that visit a couple of months back. And we've already worked out the deal. We have Starlink. And it will make a difference in Bangladesh? Yes, it will make a huge difference, not only just in speed, but Bangladesh has been completely reliant on submarine cables, which I think Michael will be able to tell us that's technology of the last century. Which means that governments have effectively been able to close the Internet, turn off the Internet, shut it out.

22:29So this is actually an advance of crisis. Yeah, this is an advance of freedom because you can keep it on, at least as long as I suppose Elon Musk wants them to. Anyway, well, we'll leave that subject for the moment. And in the second half of the program, we're going to come back. We're going to probably talk a bit more about what's been going on with tariff legislation. But we'll also be talking about what's going on with efforts to sell bear meat in Slovakia. Stay with us.

23:03Welcome back to Business Matters with me, Roger Hearing, and my guest today, Michael Malone and Zyma Islam. It's been a pretty busy hour or so leading up to the programme. We've got some various breaking developments. Let's pursue one of them, which is the fact that a panel of federal judges in the US have blocked President Trump from imposing some of his Liberation Day tariffs on China and other countries. In fact, the judges said the president had vastly overstepped his powers. Let's get an update on this from our North America correspondent, Jake Kwan, who's in Washington. Jake, thanks for being with us.

23:34First of all, just tell us about this case and what the court decided. So I think we need to go back to April when Mr. Trump revealed this bombastic Liberation Day. He said that, you know, the Americans has been ripped off for decades with this great trade deficit. And this is why he's going to impose taxes on imported goods from around the world, really. That ranges anywhere between 10 to 50 percent, which is an astounding number of taxes to put on imported goods. Now, in the first major legal challenge to this, the Manhattan Court of International Trade have ruled that Mr. Trump really overstepped his authority in putting this tariff on goods around the world.

24:18Because, you know, putting tariffs is really given to it's a power that is given by the Constitution to the U.S. Congress. And what Mr. Trump did was arguing that there is a national emergency of this trade deficit, and he's given this emergency power to put these taxes on goods around the world. So now the court is saying that he has really no authority to do it, and the Liberation Day tariffs needs to be suspended. And, I mean, this is something that he has said he has already suspended. It was going to be in effect in July, but now that is very murky whether that will come back. So they said he can't do it anyway, even if he didn't suspend it, only can't bring it back.

24:58Yes, it's a very complicated situation. So what's the Trump administration said in response to this judgment? So they immediately filed an appeal, and this is very much expected. I mean, this trade deal, the tariffs, these are very cornerstone of Mr. Trump's second term in the office, and he was very much expected to fight tooth and nail. And we also heard from Stephen Miller, who is the deputy chief of staff of the White House and a very key policy advisor to Mr. Trump, tweeting immediately, judicial coup is out of control. So they're really using this as another opportunity to point out that Mr.

25:33Trump's policies are failing, not because they're flawed, but because they're being undermined by these what they call political judges. Yeah. And there are other cases in the in the works, aren't there? This isn't the only one coming through. Exactly. This is actually only one of many. There are cases pending across America in five different courts. And we'll likely see many of these crop up. And this is only first. So this is not done deal, right? These cases have to go up and down. And Mr. Trump is, of course, going to appeal over and over again. His lawyers have been arguing that this case never should even be heard because, you know, we're talking about whether it should be Congress or the White House that should have this authority.

26:15So it should be really the Congress arguing this, not a group of small business owners who brought this case to the court. So Mr. Trump is expected to pull out every stop in arguing against this case. We'll see where it goes. Jake, thank you so much for updating us and all that. Jake Kwon on the line there from Washington. Ah, gosh. Well, Zyma, it does seem very confusing, doesn't it? I mean, as a business, you don't know whether you've got to deal with tariffs. And as a country, you saying Bangladesh was cheering a bit, maybe because these were suspended. Maybe they shouldn't have been there in the first place.