Nvidia Forecasts Decelerating Growth After Two-Year AI Boom

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1:14And with their 360-degree guarantee, you can be 4imprint certain your order will show up just right, right on time. Explore more at 4imprint.com. 4imprint. 4certain. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts. Or watch us live on YouTube. The stock story of the day is NVIDIA. Always highly anticipated the reported numbers in line, guidance in line. But it wasn't a beat and raise like a lot of investors had become accustomed to.

2:03A lot of fuzziness in the numbers and the estimates out there, whether to include China revenue, not to include China revenue. Are you giving the U.S. government its 15 % cut? I think the numbers are kind of squishy out there, at least in the near term. That's a CFA term, squishy. Kujan Sabani, it's his job to kind of make sense of it. He's a senior analyst covering semiconductors for Bloomberg Intelligence. He's based out there in San Francisco. Kujan, love to get your informed opinion about what you saw from the good folks at NVIDIA last night. Yeah, like you said, it was once again a solid sprint and guide.

2:37It checked all the fundamental key boxes. But as has been the case with this name, you know, the expectations always run higher. and maybe not all the numbers were able to clear that high hurdle of expectations. Specifically, the data center compute numbers in 2Q, we would have liked to seen that come in a little bit high, but there were still a lot of strong positive underlines. One, the networking was a significant beat, which shows the strength and the attachment that they're getting from their networking switches and chips in the Blackwell ramp. Second, like you mentioned, the 3Q consensus had China included and they still beat their 3Q guide without China.

3:17If you add in the China guide of two to five billion, they would have handsomely beaten the 3Q numbers. So that noisy sort of consensus shadowed the goodness that is coming out of the guide of NVIDIA. All right, so what's the company telling us now about China? Because quite frankly, I'm reading the press. I don't know whether they're going to be able to sell stuff into China or when or whether they're going to have to give a 15 % cut to the US government. How's that going to play out? Yeah, so China still remains, you know, after learning sort of that overhang in terms of uncertainty, the company did guide to a two to five billion revenues from the H20 in China next quarter, which is positive.

3:57That means they feel confident that they'll be at least be able to ship some and get some of the revenues back. But yes, you know, the spark here for the China story will not appear until we have a clarity. And we believe until they have a Blackwell version of a China chip, which they get approval from the government. That will really open up a massive amount of revenues coming from China. And there's a lot of hurdles you need to clear, right? There's the government, which has nothing to do with NVIDIA. The U.S.-China relationship needs to get sorted out because now even China can put in a roadblock from NVIDIA selling or allowing the companies in China from buying NVIDIA chips.

4:37So there is work to be done. As you mentioned, the 15 percent cut is not ironed out in terms of laws. There is we have heard news stories about potential lawsuits. So those two government and geopolitical angle needs to be cleared before we can start seeing billions of dollars of data center China revenue coming in. Kujan, what's the competitive landscape here for these chip companies vis-a-vis NVIDIA and just kind of positioning for AI? I assume NVIDIA's position A, who's kind of B and C? Yeah, so, you know, the space is divided into two categories. One is the merchant GPUs, which is what NVIDIA sells and dominates that landscape.

5:21This sort of second competitor there, or the B, is AMD, which is a very far distant, you know, NVIDIA today has about over 90 % in terms of revenue share. And the remaining is going to a very small to AMD. But there's another piece, which is what we call ASICs, which is what these big hyperscalers and cloud providers like Amazon and Google design their own chips. So that's sort of the other competitive landscape where there's a risk of the ASICs taking sort of share away from merchant GPUs, even though they don't compete directly for the same socket, they could take away the wallet share. And so does that mean companies like NVIDIA have to pour money into R &D for that next chip to stay on front?

6:05Because I know in your business, technology changes quickly. yeah definitely i mean look nvidia has been even before the ai event happened nvidia has been the biggest r &d spender uh they have continued and this is what really got them to this stage of being ahead of everyone else and they have to continue spending outspending everyone else to sort of keep that lead uh their roadmap for the next two and a half years does suggest that they should be able to keep this lead handsomely and for that it will definitely require high r &d spending So this name to me, who I'm used to stocks trading in much lower multiples in my world, but this seems like a stock that can actually earn its way, and we have seen it, earn its way into its multiple.

6:50I mean, you can make an argument, this is not an expensive stock. You're right. I mean, if you look at from a historical perspective, it's actually the multiple is much more lower than what we have seen in media trade in the past two years. So given that fact, and also when we look at the relative comparison, when you think about a company growing at 50 % and making revenue in the hundreds of billions, that is unprecedented, especially growing with gross margins of 70, mid or low 70%. I mean, you're talking about a financial profile for software company, not a semiconductor company here. So definitely when you take those two things into account, it does seem that it might not be really highly valued.

7:34Stay with us. More from Bloomberg Intelligence coming up after this.

8:09This is the Bloomberg Tech Minute, brought to you by ChachiPT. Now with ChachiPT work. I'm Carol Masser. Globetrotters hunting for airfare bargains are in for a rude awakening, as the days of stumbling across a cheap seat on a popular flight could soon disappear. Bloomberg's Juan Ha reports that airlines from Delta to Virgin Atlantic are adopting artificial intelligence to change seat prices more quickly by weighing dozens of variables in real time, helping capture more revenue while shrinking pricing gaps that once allowed travelers to find bargain fares. Machine learning models can more accurately forecast demand by analyzing historical booking patterns, seed inventory, and seasonal trends, while also continuously tracking competitors' fares and capacity changes to update prices in near real time.

8:56The technology could lead to higher fares on busy routes as airlines pack flights closer to capacity, but may also result in lower fares on off-peak and lower-demand routes. That's the Bloomberg Tech Minute brought to you by ChachiPT. Put ChachiPT to work on your most ambitious ideas and projects. Get started at ChachiPT.com today by selecting Work Mode, available on Plus and Pro Plans.

9:24Wise is the smart way to manage the currencies you need around the globe. If you've ever sent money internationally using a traditional bank, there's a good chance you've paid more than you realized. Hidden fees, exchange rate markups, and extra charges can quietly add up before your money even arrives. There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google, helping you avoid the unwelcome surprises that often come with international transfers. Whether you're sending money to family overseas, spending while on your holiday abroad, or paying bills across borders, Wise makes moving money simple, transparent, and straightforward.

10:27You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Dollar General, the stocks pretty much, they reported numbers, lifted their guidance. Stock's flat today, but boy, it's up 47 % year to date. So the street definitely likes what's going on at DG. Let's talk to an expert on this, Jen Bartasch. She covers all the retail stuff for Bloomberg Intelligence. Jen, what did you take away from Dollar General's results?

11:01Yeah. Hi, Paul. Overall, the results were pretty encouraging. And we're looking at the consumer who is willing to spend selectively. And the value proposition for people who are in that discount space is really resonating. And so the tactics that the company's put in place to really improve store operations and things like that seem to be gaining traction and drawing more people into the stores. Drawing more people into the stores and drawing people from different income strata as well, more higher income customers are coming in. So that being the case, Jen, does it need to broaden its selection of products available to customers?

11:39Well, I don't know that they need to broaden the selection, but they need to be thoughtful about the selection that's in the stores. I mean, these are small boxes, so you have very limited space. And in order to retain those higher income consumers from middle income, high income that are coming into Dollar General, part of it is going to be making sure that there are things that are fresh and interesting, but still at very good value. And I think one of the interesting points is that Dollar General has been able to maintain a selection of things at a$1 price point. And when you think about it, their biggest rival in the dollar space, Dollar Tree, moved to$125 as their baseline price.

12:16So there's definitely some opportunity there to appeal to that value seeker and give them something to be excited about. So if I look on the back of or on a tag for most of those items, I'm going to see made in China or something like that. How are they dealing with tariffs? How much are they passing along to consumers versus maybe taking in their margin? I think one of the advantages Dollar General has is that they have a lot less exposure to imports than most other retailers in the discount space. And that's really because over 80 % of their sales are consumables, which is more food and household items.

12:52And the discretionary parts, which would be the decorations, the apparel, that sort of stuff is a much smaller part of their business. So they're able to mitigate some of the costs. They did talk about passing through prices when absolutely necessary. But I think that's part of the solution for Dollar General is that that product mix is playing in their favor right now. Right. So they're like a smaller scale Walmart in many respects rather than a smaller scale five below, for instance. So given all of that, Jen, you had mentioned Dollar Tree being one of the biggest competitors to Dollar General.

13:27That company reports September 3rd. How much can we take away from Dollar General and apply it to Dollar Tree? Well, I think Dollar Tree is in a bit of a unique position because they've shed off the family dollar operations, which means that they can really now focus on getting Dollar Tree to function at the best that it possibly can. I think that you have customers who are going into Dollar Tree. They have a multi-price point program that they've been rolling out that's been doing pretty well. That should help support some of the top line growth. It's really going to be a question about margin for Dollar Tree and how much tariffs are impacting them already.

14:05Although from what we've seen from other retailers, that that impact may still be delayed into further in the second half of this year, just because they already had things in inventory that they're currently selling. So, Jen, in any town, USA, do these four dollars stores, Dollar Tree, Dollarama, all that, are they all in the same town together or is it more regionally carved out? Well, Dollar General by far has the greatest penetration into what you would call rural America. And so you find them in very small communities, sometimes as one of the key retailers in very small towns. When you look at like Family Dollar, it tends to skew a little bit more urban.

14:45There is some rural presence, but not nearly as much. And they're in the process of closing a lot of stores. For the other dollar and low price providers like a five below, they're still in the growth stage. So they don't have nearly the number of stores. You have to remember Dollar General has over 20 ,000 store locations in just the United States. So it is pervasive through a lot of smaller communities. That's amazing. I didn't know that. That is pretty remarkable. Now that Dollar Tree is shedding family dollar, what kind of opportunities does that provide for Dollar General? Well, it certainly gives an opportunity to look, especially where stores are closing in terms of gaining market share.

15:27But it's also about reasserting value position and capturing customers that have been dissatisfied or who may be looking for another alternative. We also saw Party City close last year and into the beginning of this year. And so there are strategic opportunities where they can go after, you know, some of those types of occasions that historically people might not have gone to Dollar General for. Stay with us. More from Bloomberg Intelligence coming up after this. This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. Globetrotters hunting for airfare bargains are in for a rude awakening, as the days of stumbling across a cheap seat on a popular flight could soon disappear.

16:14Bloomberg's Juan Ha reports that airlines from Delta to Virgin Atlantic are adopting artificial intelligence to change seat prices more quickly by weighing dozens of variables in real time, helping capture more revenue while shrinking pricing gaps that once allowed travelers to find bargain fares. Machine learning models can more accurately forecast demand by analyzing historical booking patterns, seed inventory, and seasonal trends, while also continuously tracking competitors' fares and capacity changes to update prices in near real time. The technology could lead to higher fares on busy routes as airlines pack flights closer to capacity, but may also result in lower fares on off-peak and lower-demand routes.

16:56That's the Bloomberg Tech Minute, brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChachiPT.com today by selecting Work Mode, available on Plus and Pro plans.

17:13Wise is the smart way to manage the currencies you need around the globe. If you've ever sent money internationally using a traditional bank, there's a good chance you've paid more than you realized. Hidden fees, exchange rate markups, and extra charges can quietly add up before your money even arrives. There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google, helping you avoid the unwelcome surprises that often come with international transfers. Whether you're sending money to family overseas, spending while on your holiday abroad, or paying bills across borders, Wise makes moving money simple, transparent, and straightforward.

17:49Wise offers 24-7 customer service and runs over 7 million daily checks to spot and stop fraud. And most transfers happen in under 20 seconds. which means your money arrives in less time than you've been listening to me. Join millions, saving billions. Be smart. Get wise. Visit wise.com or download the wise app today. T's and C's apply.

18:14Let's talk about health care for a second. It doesn't always work the way people expect it to. If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling. The system should just work better for everyone. That's exactly what the people at Optum are trying to do every day. They're a healthcare company linking patient care and pharmacy services and using data and technology to drive the whole system so care is connected, not complicated, for patients and providers. Things like making it easier to get care that looks at the whole person, from primary care doctors to mental health support and even in-home care, and then using technology to make sure they all work together.

18:52technology designed to help doctors spend less time on busy work and more time with their patients. And those prescriptions? Optum is working to bring costs down, save patients money, and make it easier to get refills. Little by little, Optum is helping make healthcare work as one for everyone. Head to business.optum.com to see how. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. One of the ones I always like is Dick's Sporting Goods, give a sense of how the sporting goods business is doing.

19:35And they reported some numbers, stock trading off a little bit here. Lindsay Dutch joins us, Consumer Hardline's Senior Analyst for Bloomberg Intelligence. Lindsay, talk to us about Dick's Sporting Goods. What did they report most recently? Hi, Paul. Thanks for having me. Yes, Dick's Sporting Goods had another strong quarter, 5%, same-store growth. That's an acceleration sequentially. And year over year, they're seeing strength across apparel, footwear, team sports, and golf. So a strong quarter. But the stock is trading off. And I think a lot of that is sort of a conservative outlook for the second half with some uncertainty.

20:13And a lot of investors are still worried about the incorporation of Foot Locker with that deal to close in September. Talk just about the Foot Locker deal. What's the upside there? Yeah, so the Foot Locker deal is a little bit different for Dick's in terms of, you know, it leans a little bit more towards lifestyle rather than sport. It is it is a big acquisition. You're talking about adding about eight billion dollars in revenue. you. It also, Foot Locker skews to a lower income consumer and they have mall-based stores. So it's a little bit of a different animal for Dix. You know, Dix has proven their own turnaround over the past couple of years, and they really have strong demand with their assortment, but they're going to have to show that they can do that again with Foot Locker.

21:00Is there a carefully articulated strategy about integrating Foot Locker into Dix or I know they said that they're going to run it as separate business units. So I'm wondering what's the point of buying Foot Locker then? So you're right, correct. They're going to keep the Foot Locker banners. They're going to keep the stores. As a customer, you might not even know that Dix has made this purchase. I think the big thing for Dix is expanding their customer reach and therefore the longer term opportunity for the company as a whole. So like I said, you know, Dick's already caters to more of a sports type focused customer, you know, a higher income consumer.

21:44Foot Locker is bringing a whole nother consumer set to Dick's. And they're going to really try to lean into their expertise on assortment, bring newness to footwear, bring a little bit more apparel into those Foot Locker stores. And they're going to try to gain market share, you know, with this broader reach. Lindsay, what are the the the the Dix of the world, the Foot Lockers? What are they saying about tariffs and how much they're going to take in the margin, how much they're going to pass along the consumers? What's the because I think a lot of sneakers come from China. Yes. So Dix noted that they have seen, you know, some price increases.

22:24They sound more sporadic in nature. That's relatively consistent with the other coverage in my retail universe. We're seeing very few retailers need to take every single item up by a certain amount. So the price increases are coming in more selectively. They're most easily passed through to the consumer when it's a new product, something that people are willing to pay up for anyway. So, you know, they have seen, you know, new things coming from, say, a Nike, for example. You may be able to get that customer to just take on that price increase. In terms of margin, when I think about Dix, you know, they're still expecting expansion, both on the gross basis and on an operating basis this year.

23:15You know, they are trying to manage costs as well. But this company is also investing. They're opening new stores. and so that is adding additional cost pressure, not just on the product side. So, Lindsay, I've got to ask you about Best Buy as well. The stock is down more than 6 % in early trading. Even though the second quarter did beat analyst estimates and the company ended 14 straight quarters of quarterly sales declines, what has investors disappointed? I think the real worry bead for Best Buy is demand for second half. So even this year, you know, just for the first eight months of the year has been a little bit of a wild ride for Best Buy.

23:57You know, we came into the year with positive demand momentum. Things were looking good. You know, then we got tariff announcements. We had to roll back guidance. You know, there was a lot more uncertainty. And now we're flipping back with these results to more on the positive side. So I think there's concern entering the second half of the year about, you know, where demand is going to shake out. We did see strength, you know, in gaming, particularly with the Nintendo Switch 2 for the second quarter. We are seeing momentum continue in computing and phones for the third quarter. All of that is positive.

24:36But home theater and appliances have sort of remained weak for Best Buy. And that home theater entertainment category, that's a really big one for the fourth quarter. Stay with us. More from Bloomberg Intelligence coming up after this. This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. Globetrotters hunting for airfare bargains are in for a rude awakening as the days of stumbling across a cheap seat on a popular flight could soon disappear. Bloomberg's Juan Ha reports that airlines from Delta to Virgin Atlantic are adopting artificial intelligence to change seat prices more quickly by weighing dozens of variables in real time, helping capture more revenue while shrinking pricing gaps that once allowed travelers to find bargain fares.

25:23Machine learning models can more accurately forecast demand by analyzing historical booking patterns, seat inventory, and seasonal trends, while also continuously tracking competitors' fares and capacity changes to update prices in near real time. The technology could lead to higher fares on busy routes as airlines pack flights closer to capacity, but may also result in lower fares on off-peak and lower-demand routes. That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode, available on Plus and Pro Plans.

26:33We'll be right back. spending while on your holiday abroad or paying bills across borders wise makes moving money simple transparent and straightforward wise offers 24 7 customer service and runs over 7 million daily checks to spot and stop fraud and most transfers happen in under 20 seconds which means your money arrives in less time than you've been listening to me join millions saving billions be smart get wise visit wise.com or download the wise app today t's and c's apply