AMD Inks Chip Deal With OpenAI That Triggers Explosive Rally

22:49Carol Massar:Right. And it's not changing. Even though we have GPT-5, there's nothing that has changed in terms of compute efficiency. It still requires 10 times more compute than your CPUs that were used for traditional software. So it is an expensive technology. Okay, hold on, though. You said, you know, I don't want to push aside the circular financing thing because this is kind of blowing my mind here. If NVIDIA has a deal with OpenAI that's up to$100 billion, so let's say NVIDIA gets equity in OpenAI as a result of that. Yeah. Then OpenAI then gets equity in AMD as a result of this deal. Would that essentially mean that NVIDIA is an owner of AMD?

23:36Carol Massar:No, I think that's too far. I mean, think of companies having minority stakes. So there are instances where Google has a minority stake in Lyft. You know, there's so many instances. Because Google Ventures was an investor in it early on, and that's Google's venture capital arm. And you can see that within, in the past, within Google's Maps application. It used to suggest, I don't know if it still does, it would suggest Lyft rides. It made sense. Yeah. And so, look, in this case, because the numbers are getting so big, I mean, you need financing from somewhere. Right now, it was the hyperscalers.

24:13Carol Massar:The four hyperscalers were the biggest buyers of AI data center infrastructure capacity. They were the ones who were building it. And now it's like OpenAI is saying, we want to be in the business of building AI data centers because they look at Google and say they are running their data centers a lot more efficiently than we are, even though we have an alliance with Microsoft. So OpenAI's big bet is if I have more compute capacity, one, I can undercut everyone else in terms of offering my model and I'll be more aggressive with pricing. And once I have the customer on board, I can sell him more services, but just being a model provider is not a good business.

24:56Carol Massar:That's what OpenAI is suggesting, that having the best model is not a good mode. Ultimately, everyone will catch up in terms of their model capacity. And then they will go across different models. So they're evolving very quickly. They are. And that's the big bet that they're making is if I have my own infrastructure and I have my own application, I'll be aggressive with pricing. So who needs to be worried then? Do the hyperscalers and their big data center built? Like who needs to be worried here? NVIDIA. NVIDIA. I mean, clearly NVIDIA having 75 % gross margin. They really have the best chip out there.

25:33Carol Massar:They have the best system. But now that OpenAI is saying, I am going to use AMD and I have incentive that AMD does well, who does it hurt? Ultimately, NVIDIA has to lower its pricing. In fact, the$10 billion investment is a way for NVIDIA to lower its prices for OpenAI. They're not doing it directly, but they're giving a$10 billion rebate saying, OK, you buy certain capacity for a one gigawatt data center, we'll give you$10 billion rebate. That's lowering your gross margin. Nvidia shares down about 1 % right now. Still, though, a$4.5 trillion company. But doesn't that Nvidia OpenAI feel a little weird?

26:13Carol Massar:That deal? Why? What do you mean? What do you mean? Well, because it's like they're fueling, right? Like the selling of Nvidia chips and then giving money. It just feels... Here's money. Here's money that you are then going to pay back to us. And look, the biggest constraint right now is power. Creating almost false demand, which makes me a little nervous. No. So I want to concede NVIDIA has by far the best chip when it comes to power constraints that are, I think, the biggest limiting factor when it comes to build out. Like we talk about lead times. Power has the longest lead time out there out of all the supply chains that we have seen.

26:51Carol Massar:It's just not fathomable to, you know, add more gigawatt capacity. It takes time. It's very long lead time. And so from that perspective, NVIDIA chips are the most performant when it comes to the power that's available. That's why everyone buys NVIDIA. And that is a moat. But now what OpenAI is saying is we will help AMD customize their chip to the extent that they can offer us a viable alternative for inferencing, not for training. We'll still train our models using NVIDIA because it's the best chip. But for inferencing, we will help handhold AMD and customize their silicon so that we can use it for inferencing.

27:29Are you done? Because I want to change the subject.

27:31Carol Massar:No, no, but that makes sense. And I want to make sure you're satisfied. But it's just, I am satisfied. But it just makes sense. I think this market is evolving. So Carol asked Mandeep, like, who should be worried. But Tom is yours. And I thought Mandeep was going to say all of us, all of you, everybody. Because I've been seeing what OpenAI is doing with Sora over the last few days. Have you guys seen these videos? So in some cases, you have people who are able to use this making videos of Sam Altman going on ice raids or Sam Altman stealing GPUs from somewhere. Or you have somebody in Hollywood showing the effect that it could have on Hollywood.

28:09And he put like a, you know, a main character from a Netflix show copyrighted, certainly in a video. I think maybe it was with Shrek. I don't even remember. like this the stuff looks not quite it's not quite there it's not quite there but it does look like a friend of mine can jump off a building like superman absolutely or stephen hawking in a famous case now the last few days is in a half half pipe at the x games i mean this

28:34Carol Massar:stuff is pretty incredible yeah i mean the number of creators i think will grow you can become a creator you don't need a camera or you know a professional setup to do that it's scary it is scary. But with that being said, everyone out there is competing for engagement time. That's what all of these companies are doing, whether it's Meta or Alphabet with YouTube. And look for Meta or TikTok. It's all about keeping people on their platform. Now, if Sora is able to generate good content that people are engaging with, suddenly that attention time span shifts from Meta to Sora. Okay, I want to paint a bleak future for us.

29:13Carol Massar:This is what's going through my head, because are we engaging with stuff that we should be engaging with? It's kind of my thing. Let's say it gets to the point where the people are getting so good at creating this stuff without actually doing it with skills. OK, so we're already in a low hire, low fire environment right now. The concern is that AI is just going to decimate some white collar jobs. Who are meta platforms advertisers going to be if none of us have jobs and can afford to spend any money on anything? because AI has just displaced us. Well, I mean, look, I think like with anything else, right now the biggest use case out there for generative AI is coding agent.

29:54Carol Massar:I mean, imagine the developer community has always been highly sought after and they will have to, you know, transform in terms of their jobs changing and how they use these tools. So to my mind, you know, customer service, coding agent, These are the type of profiles that are illustrative of the power of, you know, generative AI in terms of bringing productivity around what is the current workflow. And everyone seems to be adjusting and evolving. And I mean, everyone talks about how productive the developers are there. Every hyperscaler has said their developers are 30 to 35 percent more productive because of generative AI.

30:36I mean, so that's one side of it. he's the optimist he's always the optimist because here you and i are just thinking okay well no one's going to be working and everyone's going to be convinced by deep fakes i know you're concerned about the political implications of something i'm just concerned about you've seen these videos

30:51Carol Massar:they're insane yeah i'm not happy about the political uh videos and i am concerned about a society where we're just glued to our phones watching stupid stuff and i forgive me yeah i don't know if i can say this but i'm gonna go there and i just i wonder at what point is it just too much? Or is that just a small percentage of where all of this is going? And I mean, Tim and I have used Chachi PT for work and we see the productive element of it. So I just I wonder, is all the silly videos just a small portion? So I want to go back to the cost comment that I made earlier. This technology is expensive to generate that type of video.

31:33Carol Massar:You are spending a pretty decent chunk of compute and it's costing you a lot. So now I think at some point... But who's paying for it? Exactly. Right now, OpenAI is subsidizing. Your electric bill. Electric bill, yes. You are paying for that. True power. Absolutely right. And also OpenAI is subsidizing. There will be a point when they will be under pressure to show profitability. And then you have to figure out what are the solid use cases that you want to continue with. Right. And what are the ones That's where you're spending compute for an output that is not even as good as, you know, an average human produced output.

32:09Carol Massar:And so that's where the cost benefit analysis, I think, will weed out a lot of the use cases where you're just throwing compute and the output may not improve or the curve is just too steep. Right. And you just can't keep spending more compute and consuming more power. That is inflating a lot of things that you don't want to see. No, you're absolutely right. That makes a lot of sense. I've already said to my husband, you know why our power bills are high? Blame AI. It's not my fault. It's not because I left lights on. And turn the light off. Which he does say. Mandeep's saying, ah, thank you. We go everywhere with them.

32:43Carol Massar:I know. What? We go everywhere with them. I know. I know. I mean, you're just the best. Thank you, as always. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. or watch us live on YouTube. All right, as you know, obviously talking a lot about finance as we do here regularly at Bloomberg, which also means the intersection of finance, investors, and sports in a big way. Rick Welts has been in the job as Chief Executive Officer of the Dallas Mavericks for a little more than nine months, took over as CEO of the NBA franchise.

33:21Carol Massar:That was on January 1st of this year, following Sint Marshall's nearly seven-year tenure. His career spans nearly 50 years in sports and entertainment. He has held roles as president and CEO of the Golden State Warriors, president of the NBA's Phoenix Suns, the WNBA's Phoenix Mercury, and the NBA's senior vice president, chief marketing officer, and also president of NBA Properties. To say he has seen a lot is not even fair. Let's head to the Bloomberg News Bureau in Dallas. With us is Rick Weld, CEO of the Dallas Mavericks and Bloomberg News Texas Bureau Chief Julie Fine, who watches and reports and talks about this space so much.

33:57Carol Massar:Rick, it's great to have you there in Dallas with Julie. I just want to start with that intersection of business and sports, investors and sports. 20 minutes ago, we were talking with Jim Esposito, president of Citadel Securities. Every day, it seems, or every week, we have a story about Apollo, Aries, different investment firms, the money in sports. You've been in the world for a long time, seen the rise of money in sports and the rise of financial firms in sports. Is this a good thing in your view? Well, it's not only a good thing. I think it's an essential thing. Really, when you look at the valuations of franchises today, there's really a smaller and smaller universe of individuals who would either choose to or have the ability to purchase a major league sports franchise today.

34:46Carol Massar:So private equities involvement is going to be something that's going to be absolutely essential going forward. You know, Rick, when you talk about the future of sports, I do want to get in with you the streaming rights. You know, Dallas Mavericks, they have Mavs television. And you actually are one of the few that also have a local deal, so you can see all the games here as well. But what do you see as the future of how we watch sports? Well, it's unfolding right now. The NBA is entering into a brand new set of broadcast agreements for this season. So we're adding Peacock and NBC. We're adding Amazon Prime.

35:23Carol Massar:And we have to go where our viewers are watching us, right? And especially our younger viewers today who are just accustomed to using streaming as their primary platform in consuming sports. You know, let's talk a little bit about your viewers and your fans. They had quite a shock last year with the trade of Luka Doncic. You start tonight, you kick off your preseason. Do you feel that you've really managed to bridge that gap with them? Well, you know, this is my favorite time of year, right? Because there's optimism. As I checked the standings this morning, we're undefeated. We haven't played a game.

35:57Carol Massar:And every team feels the same way, right? But we had, you know, that trade on February 1st. And then this is such a crazy industry, right? 100 days later on May 12th, with a 1.8 % chance of winning the NBA draft lottery, somehow we came away with the number one pick and with that Cooper flag. And that's what's starting tonight, a new era of Dallas Mavericks basketball. You know, when you talk about the finances of sports, last year you did lose some sponsors and there were some season ticket holders that were, you know, very upset about this trade. But where did you land now? You know, sports is such a wonderful thing because it can change on a dime.

36:38Carol Massar:And it did on May 12th with the drafting of Cooper Flagg, you know, the most decorated 18-year-old player in the history of basketball who plays his first game for the Mavericks tonight. And really, everything changes. The optimism going into this season changed the business environment completely. We're third in the league in new season ticket sales. We'll finish this year ahead in revenue and season ticket sales, which, you know, I wasn't quite sure was going to happen on February 1st. So ahead of the year with season ticket sales now, but on the business question and on the sponsors returning to the organization, can you give us some numbers behind sponsorships or how Flagg has affected the way that companies are interested in partnering with the Mavs?

37:21Carol Massar:Well, your second point is really spot on because the interest around Cooper Flagg and his potential all-star career in the NBA. But here in Dallas, it's combined with the optimism and energy around building a new arena and entertainment district to replace American Airlines Center where we played for the past 25 years. So it's a wonderful combination from a business standpoint because we have the optimism of the team, but also a really exciting prospect about what we're going to be building in Dallas, which will be the future of our franchise. Well, that's where we want to go to in terms of what you are building in terms of a new arena.

37:59Carol Massar:Mavs lease is up in 2031, Rick. You share an arena with the Dallas Stars, but you've made it clear that the next arena that you have will be a basketball venue. you. I think the last time that we all caught up with you at Bloomberg, you said you had narrowed it down to several sites. So what can you tell us? Or feel free to announce where you guys are going to do it. We would love to know. I really, really wish I could do that. We're hoping by the end of the first quarter of 26 that we're going to have identified a site. Listen, our commitment, we've been very clear, we want to be in the city of Dallas.

38:34Carol Massar:And the city has been a great partner to this point in helping us identify sites. Not easy to do because we're looking for a minimum of 50 acres to build the arena and an entertainment district. So not a lot of 50-acre parcels that you can even consider in Dallas. But we have narrowed it down, and we're doing our due diligence on those. Very complicated project. These are very complicated things to get done. But, again, we're hoping by the end of the first quarter next year to be able to announce where we're going to be. Of course, the team owners, the Adelson family, they've made no secret they would like to see casino gambling in Texas.

39:09Carol Massar:You follow the Texas legislature. I follow the Texas legislature. That did not get anywhere this year. Does that affect really the plans and what's going to be next for the stadium? No, as we look forward, we don't think the prospects for that happening in Texas anytime soon are very likely. So the project that we're going to build has no casino component to it. We're talking about hotels. We're talking about retail, we're talking about restaurants, we're talking about big gathering places and an arena. So there's no casino component. Something you don't see that often is a team opening their preseason not in their arena.

39:45Carol Massar:You will be playing tonight in Dickies in Fort Worth, a much smaller arena, and that's really where people will get their first vision of Cooper Flagg. Can you talk about that decision and what you're hoping comes out of the evening? Yeah, well, it was really in COVID when the commitment was made to play this game. the fact that it's going to be Cooper's first game in a Mavericks uniform in our home market. And we think of Dallas-Fort Worth as our home market. I think Fort Worth looks at the Mavericks as their NBA team. So I think it's going to be a super exciting night. It's going to be the first time we'll get to see Cooper.

40:17Carol Massar:And I think there's a big, big, big buzz about that. I think there's people that are interested in seeing Cooper globally. Speaking of global sports, the World Cup will be holding nine matches in Dallas. That's the most in any city in North America. You know, what does that do for this city in terms, this whole area, in terms of being branded really a sports town? I don't think people yet realize the impact this is going to have. This is the whole world is going to be focused on this. And I'm a huge soccer fan, you know, maybe this far behind NBA basketball. I own an ownership interest in a couple soccer clubs.

40:52Carol Massar:So I think what's going to unfold here is really going to put Dallas on the map as a soccer mecca. Hey, I want to ask a little bit. Julie asked about gambling on site and the potential for that. Obviously, that's not going to happen anytime soon. What about those sports gaming and the way that gaming and the ability for people to actually wager on these games has attracted or increased viewership, has attracted or increased engagement? How do you measure that at the Mavs organization? Well, I think we're all tracking it and watching this unfold in real time because the argument, Adam Silver was really the first of the commissioners to come out in favor of it and really talking about the level of engagement that it does provide and how people want to consume our games now.

41:38Carol Massar:So I think it's been nothing but positive at this point. Listen, it's not, the story hasn't been written yet on how this will completely play out. But I think it's been nothing but additive in terms of people's interest in watching games and staying and watching more than they have historically in the past. You mentioned Adam Silver. CBS News reporting last week, as the NBA continues to grow its presence overseas, Rick, Silver outlining a vision, a bold vision for the future that could see teams from other continents playing U.S.-based franchises in the regular season or postseason. What do you think of that?

42:14Carol Massar:I think it's the most exciting time in NBA history, and I think the prospect of that. For me, I was hired in 1982 by David Stern, who was commissioner for the NBA for 30 years. I was the 35th employee of the NBA League office. And he's not with us anymore, but this would really be the culmination of that dream, the path that we went on to really understand. And basketball is the only other sport played worldwide other than soccer. And the NBA is a very unique league where all the best basketball players in the world play in one league. The idea that we could have another league in Europe, what we're doing in Africa today with our league in Africa, I think it's really the most exciting time ever for the globalization of our sport.

42:57Carol Massar:Rick, three seconds. Are you having more fun today or back in 1969 when you began as a ball boy with the Supersonics? I think I have the same level of excitement going into tonight's game as I probably did that first day I walked into a Seattle Supersonics locker room. That's a good place to be. Thank you so much. Really appreciate your time always that you give to Bloomberg. Then, of course, is Rick Weld, CEO of the Dallas Mavericks. And, of course, our thanks as well to Julie Fine. She is Texas Bureau Chief for Bloomberg News. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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45:36Carol Massar:Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. Right now, we want to bring in Leslie Marks. She's joining us. this afternoon. Really appreciate her taking the time. She's CIO for equities at McKenzie Investments. The firm has$228 billion in assets under management. She joins us from Toronto. Leslie, good to have you with us on the program. Thanks for your patience. We're juggling a lot of live interviews all over the country right now. So appreciate it. Look, the story that we've been covering today has to do with everything with regard to AMD, the open AI, OEMD shares up 25 % right now.

46:18The environment with regard to the investments that are being made in private companies and public companies, how are you looking at it with AI?

46:27Carol Massar:Well, exactly. I mean, AI is definitely the dominant thematic that is driving public equity markets today. And I think that people are looking at equities and you're hearing people talk about, you know, and I heard you and Carol both talking about the comparisons between I mean, today and the 1999-2000 era, as well as people inferring that, you know, are we in bubble conditions here based on some of the deals? I don't think so. I mean, I think that the people that talk about us being in a bubble right now are those that maybe aren't long equities or, you know, are underweight equities. And so there's some, you know, speaking their own book.

47:07Carol Massar:You know, I just go back to as an equity person, fundamentals. and the two primary fundamentals that an equity investor needs to focus on are earnings and what do we pay for those earnings. And that really comes, a lot of which comes from, of course, sentiment, which is extremely bullish right now, but also the outlook for interest rates. And I think your listeners have a very good understanding that a lower interest rate environment is generally good for multiples. So let's spend a minute here just to talk about earnings, because earnings has been the big surprise or upside surprise in 2025. When you look at the factors that are driving equities, it's been primarily, of course, price momentum.

47:53Carol Massar:The things that are going higher are what people want, of course. But also earnings momentum has been a top factor. And earnings momentum is a very strong fundamental that we can really anchor ourselves on and say that actually with these companies reporting strong earnings, we can feel comfortable with the higher valuations that they're trading at today. All right. So is that you saying you are comfortable with the valuations that we're seeing today? Yes. And I think when you look at valuations, what people point to mostly when they say that valuations are stretched is the valuations today versus historical.

48:31Carol Massar:But what you have to think about is today, the margin profile of the S &P 500 is much higher than it has been historically. 10 years ago, the net margin for the S &P 500 was about 10%. Today, it's 13 to 14%. So you actually should be paying more for equities today than you have historically. That's so interesting to hear because I think there's a lot of people who are looking around right now saying, this doesn't necessarily feel like a comfortable environment to buy. And you said that, okay, well, people who might feel that way maybe aren't long equities, but what would you say to somebody who does have cash deployed in markets right now?

49:12How do you do it with valuations like this?

49:14Carol Massar:Well, I would say the most important thing for someone looking to get into the market where, you know, I totally understand the bias and the anchoring if you're not there right now, why you would feel uncomfortable investing at these levels. But there are lots of opportunities and you have to be thinking about diversification. You know, when you look at what happened in Japan overnight to see that market up over four and a half percent overnight, that's incredible. And it just highlights that there are opportunities that go beyond the top 10 names in the S &P 500. And that's where investors should be looking.

49:49Carol Massar:They should be looking to diversify their holdings. You mentioned that I'm sitting here in Toronto right now. In Canada, the S &P TSX has been an outperformer when compared with the S &P 500. That might surprise people, but gold has been a big driver of that market. When you think about gold being at record highs, it's been a big driver of the S &P TSX, both on a price basis and earnings growth. So when investors are looking at, you know, where should I invest or should I invest today? we would say to them, look at diversifying your opportunities because there are opportunities globally. I mean, China is going through a very exciting time here around their technology, electric vehicles, robotics.

50:33Carol Massar:You're seeing a lot of interest building in China. Leslie, forgive, forgive, but we've got to run. We've got a closing bell just coming at us, but we really appreciate your input. Leslie Marks over at McKinsey Investment. This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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