Bloomberg Daybreak Weekend: Nvidia Earnings Preview

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1:20Bloomberg Audio Studios. Podcasts, radio, news. This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world. Straight ahead on the program, a look ahead to earnings from chip giant NVIDIA and some of America's biggest retailers. I'm Nathan Hager in Washington. I'm Caroline Hepker here in London where we're looking ahead to the European Business Summit. I'm Doug Krizner looking at an expected pivot in Japan's economic growth. That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App.

2:20Good day to you. I'm Nathan Hager. We begin today's program with earnings. Third quarter reporting season's coming close to an end, but before it does, we are about to hear from some heavyweights, including the most valuable company of all. AI chip giant NVIDIA wraps up results from the Magnificent Seven after the close of trade this Wednesday. For more on what we can expect, we're joined by Kunjan Sabani, Senior Semiconductor Analyst for Bloomberg Intelligence. Kunjan, it's great to have you with us on the weekend program, and it seems like every quarter the expectation is for NVIDIA. to more than beat expectations.

2:58How high is the bar this time around? Yeah, so just to add some context, the last two quarters were the only quarters in which they did not beat and raise significantly after having beating and raising for almost eight to 20 quarters before that consistently in a row. The key factors last two quarters were the headwind from the China revenues. Also, not all the street estimates had China removed. So the consensus was not really clean. However, looking into fiscal 3Q, we now believe Street has most of the China revenues removed. So that's out of the way. And now we believe NVIDIA's latest Blackwell 300 is ramping stronger.

3:39So they could return to their normal raise cadence of single, mid-single digit beats and raises. And anything above that or a low double digit would be a significant upside that could really help the sentiment. Another point to add here is most of the hyperscalers and cloud providers did raise their second half 2025 capex projections by about a total of 20 billion and their 2026 projections by about 100 billion. So that combined with the 500 billion pipeline that Genshin shared during GTC last month for their Blackwell and Rubin ramps significantly sets it up for a massive upside in 26. To the point of getting some of that China revenue off the books, we have seen the CEO Jensen Wang making moves like improving ties with Taiwan.

4:28He was just there doing the relationship with Taiwan Semiconductor. How do you see Jensen Wang building these relationships and how could that play into the results? I mean, Taiwan is a key manufacturing hub, not just for NVIDIA, but for most of the stable semiconductor semis. NVIDIA is also leading TSMC's move of onshoring and building its products into the U.S. in the Arizona plant. So that's going to be significantly critical. On the China point, it doesn't seem like there is enough clearance yet. Of course, they're going to try because there's the second largest market for them outside of the U.S.

5:08And they would really like to capture that market. So far, we don't believe this quarter will see any material revenues, though. Are those barriers in China a continued headwind beyond this quarter for NVIDIA? They will. But on the good side, most of the investors in the street now have sort of baked that in that they are not adding this back anytime soon. Also, since the headwind has come up, China right now is about$50 billion accelerator market, right? There have been other larger and other large markets that have appeared in terms of sovereign AI spendings. One is the Middle East region, other is Japan, and more and more countries like, for example, in Europe are coming in, which could easily offset that TAM that China had been took out of NVIDIA.

6:01I wonder what you're expecting to hear from the CEO himself after we heard in recent days from the CEO of NVIDIA's maybe closest competitor, Advanced Micro Devices, talking about a big revenue outlook for AMD over the next three to five years. What does Jensen Wang need to say in terms of NVIDIA's outlook? Yeah, in his normal way, I think definitely he's going to give more updates of how strong the demand is, how strong the use case and performance benchmarks of the new Blackwell Ramp is. What we would like to ask, as key investors should know, is going to be more clarity on that$500 billion pipeline that could really set up the models and the estimates to go up.

6:49Another key point is getting clarity on the gross margin trajectory as these new products ramp and if they will be staying close to in 26 to the mid-70s percent gross margin range. In terms of those newer products, what are you expecting on the pipeline beyond Blackwell? Yeah, I mean, they have clearly laid out their roadmaps of the next product, Rubin. And we don't think they'll announce much details for this 3Q, but we will get more clarity in the GTC early part of next year. That's when we'll get a lot more specs. But again, what we have seen from our channel checks is the Blackwell Ultra, the GB300, seems to have gotten much stronger traction than we had anticipated.

7:34And so unless we don't run into any transition pains going to Rubin, we expect a similar, stronger traction. Of course, one of the issues that has long been an issue for NVIDIA, something it's tried to meet the challenge of, is just keeping up with this robust demand for chips and AI centers. Do you see NVIDIA keeping up? They have been incrementally increasing supply every quarter, but we still think demand continues to stay ahead of supply, and we don't think supply will exceed demand anytime soon, not at least until the 2026 end. All right, Kunjan Sabani, thank you for this. That's Bloomberg Intelligence Senior Semiconductor Analyst Kunjan Sabani.

8:19Again, we get those NVIDIA results after the close of trading on Wednesday. Now let's get to earnings from some of America's biggest retailers. Target opens up its third quarter books before the opening bell on Wednesday. Then about 24 hours after that, we hear from Walmart. Let's hear now from Jen Bartaschus. She's a senior analyst for retail staples and packaged foods. at Bloomberg Intelligence. It's great to have you with us on the program, Jen. And of course, we look to both these companies for a read on the consumer. Of course, a look ahead to the holidays. What's the setup as we await these results from Target and Walmart?

8:56It's a very interesting time for these retailers because we hear about the disparity in consumer shopping behavior. On one hand, Walmart is pulling more higher income households into its ecosphere than ever before. And on the other hand, we have Target that's going through a huge reset as it's trying to reconnect with its core customer base. And so it's a very dynamic time for these companies and it's the back to school season is what's really in this quarter. So it's a good read on how people are going to be entering into the holiday shopping period. Okay. So let's start off with Target. Of course, in your latest note, one of your latest notes, you make note of their goal to add$15 billion in revenue over the next five years.

9:44Could this be a quarter where we start to see them on their way there? Well, I think it's going to be a little bit of a mixed quarter for Target. And that's really because they're still trying to find their footing and what's going to resonate with customers. Target is its best when people are willing to buy apparel and buy discretionary items. And that willingness is still a little bit dampened. They've done some good things this quarter to kind of help reset their business. If you remember, they announced job cuts of almost 1 ,800 positions that they were cutting. That's the beginning of what should be a turnaround for Target.

10:25And it's interesting. We just heard some reports earlier this week that Target is implementing a new greeting policy for those workers who are still on the job, basically telling them to smile more for the customers who come in. What's the balancing act for Target as it tries to navigate this turnaround? Yeah, I think it's a balance between not losing sight of your own poor values that is what makes your customer base love you and trying to chase other retailers. So they keep doing price cuts. They want to stay price competitive. But at the same time, Target has never been about being the low price leader.

11:05So there's a balance there between having the selection and the fun type of offerings that they have while still offering value so that people feel like they're getting their money's worth. And that's where Target's really trying to focus on regaining its footing. Yeah, on the point of the price cuts, we just recently heard that Target's cut the prices on 3 ,000 essential items. Is that the kind of thing that could eat into its margins? It could. It depends on what items they are. For the most part, these are going to be more of your day-to-day household items. And those items don't carry a whole lot of margin on them anyway.

11:43So when you cut the prices on those, you become a little bit more competitive. The goal always is that you prompt people to buy greater volume. And that makes up for any kind of discrepancy you might have from lowering your prices. But we'll see if that actually takes hold or not. And so the higher margin areas of the store are things like apparel. It's things like beauty. It's things like home decor. And those are the areas that just aren't selling as well right now. And of course, Walmart getting ready to report their earnings as well. They've made their name on low prices. Is Target potentially eating in to what we could get from Walmart this quarter?

12:27I would say that usually on a price basis, Walmart is a clear winner and a clear leader. And for people who shop based only on price, I don't think you'll see a whole lot of shifting between Walmart and Target in terms of customer visits. It's really more about the overall perception and value perception of what you have. You know, so for Walmart, underpins a lot of their success is the size of their grocery business, because more than 50 percent of their revenue in the U.S. comes from grocery type items. And so they when they keep prices low there, they bring people in, but then they're shopping the rest of the store.

13:12And so I think that's one of the tactics that we'll see. And it's it's part of what's bringing higher income households into Walmart as well. because if you're going to buy a box of Cheerios, you know, why wouldn't you buy that at the lowest price? Because it's the same box of Cheerios no matter what retailer you go to. Well, there's certainly a lot to keep an eye on as we get ready for those big box retail earnings later this week. Thank you so much for this, Jen. Really great having you on with us. That's Jen Bartaschus, Bloomberg Intelligence Senior Analyst for Retail Staples and Packaged Food.

13:44And coming up on Bloomberg Daybreak Weekend, we'll look ahead to the European Business Summit. I'm Nathan Hager, and this is Bloomberg.

14:19Institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at Vanguard.com slash audio. That's Vanguard.com slash audio. All investing is subject to risk, Vanguard Marketing Corporation Distributor.

15:16Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break. So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube or wherever you get your podcasts.

15:51This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. Up later in our program, we look ahead to some key economic data in Japan. But first, the challenges facing Europe are unprecedented but clear. A belligerent Russia, frictions with China and ongoing trade spats with the U.S., even if the impact from Trump tariffs faded faster than expected. The task is building Europe's resilience and competitiveness. That's the backdrop to the European Business Summit, which gathers Brussels top bureaucrats and policymakers every year.

16:26Let's get more from Bloomberg Daybreak Europe anchor Caroline Hepker in London. Nathan, the European Business Summit in the next few days in Brussels will play host to captains of European industry, Nobel Prize winning economists and top bureaucrats, including the EU Commission President Ursula von der Leyen. It comes as European firms grapple with high debt costs, energy reliance, strained relations with China and the US and criticism ongoing of its regulatory environment. The EU's Justice Commissioner Michael McGrath says that Brussels needs more power to enforce consumer protection standards amid investigations into illegal products being sold by Chinese e-commerce platform Shein.

17:11He says that relations with China can be challenging. We have a trading relationship at the moment that is quite unbalanced in favour of China. So that's why issues like market access barriers for European companies within the Chinese market is a key issue for us. China is a partner, but also a systemic rival and indeed a competitor of the European Union. That was Michael McGrath, EU Commissioner for Democracy, Justice and the Rule of Law, as well as Consumer Protection, speaking there to Bloomberg Radio. Well, joining us now is Bloomberg's Brussels Bureau Chief, Suzanne Lynch. Suzanne, great to speak to just give us a sense of this gathering and what business and policymakers are focused on right now in Brussels.

18:02Yeah look this is a significant moment for business representatives to come into close contact if you like with some of the big hitting EU policymakers in Brussels. The reality is the EU everyone thinks politics it in fact you know is one of the world's biggest regulators does have impact on business and I think this year in particular people will be very interested to hear what's coming out of the European Commission because there is such a focus particularly I'd say over the last year or so on the challenges facing the European economy and the whole issue of EU competitiveness. Yeah indeed and this summit talks about what choices Europe must make today to remain resilient and globally competitive tomorrow.

18:43I think that kind of neatly sums up the issues for Europe. It's well over a year since Mario Draghi's report which exposed Europe's need for greater competitiveness, the discussion around high energy costs and reliance on bank loans and the regulatory burden and so many other of the recommendations. But more than a year since that report and even his own upsum that was quite negative about the progress that Europe had made, where are we? Absolutely. Mario Draghi was speaking himself recently on the anniversary of this landmark report and made the point that there has been very little progress.

19:20Now, one reason is because the EU is this very unique institution, it includes 27 countries, it's not a sovereign body that can make decisions. It means that decision making is very laborious. You have to have people on board. You can't just plough through on different issues. And what the European Commission, which is the main executive arm of the EU, what you're hearing a bit from them is, look, we want to, for example, advance more cross-border mergers. We want to develop the Banking Union but when it comes to it and the negotiation starts EU member states EU countries sometimes just don't want to play play the game they are worried about their own national industries their own national companies and they're reluctant to you know take that step forward for more integration so this has always been a bind for the EU how do you advance how do you integrate more when you've got all these different countries with different priorities but I do think there is a real awareness that the Draghi report is something that did impact, that did break through.

20:18I think a lot of the listeners may have been at Davos this year. I remember myself being there and hearing it, this report by a former ECB president had everyone talking and realising that now something needs to be done. The reality is that Europe has been diverging from the United States since the great financial crisis. You can see that in the banking sector. You can see that in terms of innovation. You can see that in the number of startups and in fact the real problem which is scaling up European businesses that is really an issue and it does look like it's continuing to lag behind on that.

20:51Do you get any sense that things are speeding up when there are so many pressures namely let's look to China first managing that relationship supply chains and rare earths which is from years and years of movement by Beijing has suddenly become so essential everywhere else. Yeah, I mean, I think the issue facing Europe now is that on the one hand, you've got this increasingly isolationist United States and on the other hand, you've got an increasingly belligerent, some would say, China. And the EU is belatedly waking up to the fact that not only has it built up a dependency on the United States, particularly in terms of the defence sector, but it also has built up a dependency on China, particularly for the rare earth material.

21:37Now, this isn't just a Europe-wide problem, but you now can see the European Commission realising this. So a couple of weeks ago at the Berlin Global Dialogue, we were there for Bloomberg and European Commission President Ursula von der Leyen gave a very strong speech where she directly addressed this issue about coming from Beijing, about the rare earths. And she said that the EU has got options. But the reality is, how much leverage does the EU have here? it really has more than 90 % of these magnets that are going into everything from electric vehicles to defence are coming from China. It's now scrambling elsewhere to try and find like-minded partners, but so is the United States and everyone else.

22:17So will the EU have that urgency? Like the EU does not move quick as an institution, that's for sure. So, you know, will it be able to garner its resources and make sure it's there at the table when countries across the world are trying to negotiate and trying to look at different alliances and different relationships? That's one of the key challenges. Yeah, indeed. And we know the kind of lack of minds that there are actually in Europe for those rare earths in and of itself. And it takes years to kind of to deliver those sorts of minds. And then they're also quite polluting as well. So it's a very, very difficult challenge.

22:52Yeah, and I mean, we saw in the last few weeks that, you know, German, particularly German factories, you know, were slowing down their production because they had these supply chain issues. But really what's worrying, I think, for the EU, we were reporting last week that there were some Chinese officials in Brussels for negotiations. But really, the EU wasn't making that much progress, it seems. Now, let's see how this works out in the next few weeks. But with the big focus being on Trump and Xi, where does the EU sit? It's kind of difficult for it to make its own voice heard. Yeah, indeed. and it's not just China, obviously, the European businesses have to keep an eye on.

23:25It's also the White House's stance towards Europe. And there too, there are lots of challenges. I mean, you mentioned Ursula von der Leyen and her strong speech a couple of weeks ago, but it was that meeting, wasn't it, between Trump and von der Leyen. I mean, forgive me, I just remember the flowers that were between Trump and von der Leyen that seemed to speak volumes of the kind of gap between the two of them. Maybe the fact that they didn't want von der Leyen and Trump to be right next to each other. And it was also a moment where there was some criticism for von der Leyen and how she handled it.

23:57There certainly was. I myself actually was at Turnberry for that event during the summer, yes, because it happened very quickly. You know, we forget this with international diplomacy that no one really expected this meeting to happen. And then it did. And even the optics of Ursula von der Leyen flying to Donald Trump's golf course in Scotland, not in the EU, and making that trip over especially to see him. So, yes, the EU came under a lot of criticism from EU countries in particular, saying it could have got a better deal. It locked in a 15 % tariff rate. It also, not everything, but it also got some exemptions.

24:32For example, there were lots of worries about the pharmaceutical sector, a lot of exporters in Germany, Ireland, etc., Denmark. How would they be affected? They did get a deal on that. But again, this is where the different bits of the EU kind of blame each other. von der Leyen and the Commission were saying privately really well hang on you know we did these negotiations with the backing of the EU countries and if they had had an issue they could have shouted stop but I do think there is a kind of a wider statement to be made about this and that is the fact that the EU has always prided itself on being you know this global trading power that the single market that market of 450 million people that integrated market is its big power that it's a big calling card.

25:14And yet when it came to it, it didn't have a strong hand with Trump. It felt like it had to really compromise there. And I think that's been a real worry for the EU. Already, as we know, there's been so much inward looking about the lack of strategic autonomy, as the phrase goes, when it comes to defence spending. Your trade was something they thought, this is what the EU does well. And yet it still had to kind of, some people would say capitulate, others would say be pragmatic, but negotiate with Trump where it did end up with extra tariffs. And so where do you think that leaves the regulatory environment?

25:48Because that, as you say, is what businesses are also focused on. Is there a watering down? Is there adjustment that is being made in the face of some quite pointed demands from the US? Yes. So I think there has been a change here, actually. I mean, it's one of the ironies of Brexit. Britain was always one of the strongest voices criticising over EU regulation. and in fact that really did feed into the Brexit debate in London in the UK. But actually since they've left, since Britain has left the EU actually in the last year or two there has been an awareness and acceptance by the EU that it does need to do something about regulation.

26:25They're calling it better regulation or simplification but really what it means is changing some of the rules, watering down some of these regulations to be more business friendly. So the second von der Leyen commission, she put this simplification at the top of her agenda. So we had, again, Brussels is a great place for acronyms, but these omnibus bills that were brought in earlier in the year. Now, these things take time to go through the EU system. They have to go through the Parliament. There are changes and tweaks, but really they are about making sure that some of the reporting requirements are less onerous.

27:00So we are going to see some kind of watering down of these, but it still has to be really negotiated, the fine tuning. and we are getting pushback from some of the more left-leaning groups in the European Parliament and MEPs who, for example, feel strongly about climate change and they're saying, hang on, we can't water down too much. So I think we are going to see this simplification agenda coming through. Thank you so much, Suzanne Lynch, for being with us. I'm Caroline Hepker here in London. You can catch us every weekday morning for Bloomberg Daybreak here beginning at 6am in London. That's 1am on Wall Street.