Nvidia Makes $5 Billion Investment into Intel

0:00I don't love the word retirement because I think it has negative baggage. I like the word financial independence. If you were to be financial independent, like how would you spend your time? I think that's a better way to think about the end of life stage versus quote unquote retirement.

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1:33Listen on demand wherever you get your podcasts or watch us live on YouTube. Certainly the news of the day from a company perspective is Intel. We saw early this morning, we saw a pretty cool story. Nvidia deciding to buy or invest$5 billion into Intel vis-a-vis a stock purchase, a straight-up purchase of common stock there. And that's alongside the earlier investment by the U.S. government of a 10 % stake in Intel. And the stock reacting favorably here today. Shares of Intel up about 26 % today. That sets a new 52-week high. Stock's up 57 % year-to-date. This stock was really hurting as recently as six months ago.

2:16But boy, it's gotten a couple big shots in the arm as it relates to their AI outlook. Let's check in with Mandeep Singh. He's a senior tech analyst for Bloomberg Intelligence. Mandeep, how surprised were you and Silicon Valley when we woke up this morning and saw that a competitor was going to make a$5 billion investment? Yeah, I was expecting something to happen in terms of an investment in Intel after the administration took a 10 % stake, but an investment from NVIDIA? That was the last thing that I anticipated. So I was more in the camp that one of the hyperscalers, whether it's, and Amazon did have a partnership with Intel.

2:57It was announced back in 2024. So I thought it would be one of the hyperscalers that would make an investment. So clearly the surprise element was the fact that the partnership or the investment wasn't for Foundry, but it was more chip co-design. And look, that's where NVIDIA has taken share from Intel over the past two years. Intel was a dominant force in data centers with their x86 architecture. NVIDIA, with the shift to AI, really took share from Intel. And so it is a big surprise, the fact that they are investing$5 billion. And the plan is to develop a co-designed chip for PCs as well as data centers.

3:45Alexis Christoforous:And to help them better compete against AMD, which we see a little under pressure today. To my mind, NVIDIA is almost a monopoly in AI chips. So the fact that... Look out antitrust regulators. Yeah. But you know, when I heard about this deal, I just thought, irony, right? This tie-up between two Silicon Valley rivals. But I think it also really underlines the power shift. When you think about it, you would have thought years ago, well, Intel would be the aggressor here, right? But sort of the tables have turned. They have. And look, that's just a function of where Intel is at right now, both in terms of their foundry positioning, as well as, you know, the data center market share that they have lost.

4:26Where they still have a dominant share is in PCs and desktops. And that's where everyone was anticipating a big refresh cycle because of AI. At the end of the day, if AI was to become pervasive, we'll have to upgrade our devices, whether it's PCs or smartphones. And to my mind, Intel does have a good chance of being part of that refresh cycle. So what NVIDIA has done is really kind of put a stake in that refresh cycle where if they can develop a co-design chip for the PCs and laptops, then that's where it could create another line of business similar to gaming. So right now, gaming is about a high single-digit percentage of NVIDIA's revenue.

5:14Well, this could be another line of business that they could add if this partnership was to result in a product or a chip that everyone would want to use. All right, Mandib, I'm going to put my cynical Wall Street hat on. This is simply a political move by Jensen Wang to cozy up to the Trump administration by co-investing alongside the U.S. government in Intel, whether it's a good investment or not. $5 billion is like change for a company like NVIDIA that's almost generating$100 billion in free cash flow every year right now. So the clients you talked to, the investors you talked to, they think there is some soft upside to NVIDIA by investing alongside the government here.

5:53I mean, NVIDIA right now is taking stakes in a lot of companies, CoreWeave and a lot of NeoClouds, because they want to make big bets. With that kind of balance sheet that NVIDIA has, they can afford to do it. And so this is another one of those minority stakes that they took. I don't think they have any high expectations here, but still, it does help them politically. I mean, these are the numbers that blow me away with the tech companies that Mandeep sings and that follows. This year, call it the calendar year 25, fiscal year 26,$100 billion of free cash flow. Next year,$140 billion of free cash flow.

6:30Alexis Christoforous:Free cash flow. This is the stuff, like literally, we don't know what to do with it. So we're either going to give it back to shareholders. Right. We're going to, I don't know, or we're going to make investments in. So there you go. But Paul was talking earlier about how he thinks the pie is big enough, right, for all these players. And that not to worry too much about AMD. Is this tie up a threat to them, do you think? It is if they come up with a product. So if they come up with a chip that can drive a PC refresh cycle, it's going to hurt AMD. But look, these design wins take time to result in a product.

7:06And strategically, yeah, they will develop something. That's why I go back to what Amazon and Intel did a year back. Did anything change after that? No.

7:15Alexis Christoforous:Good point. Is there anybody out there that maybe AMD now should start to cozy up to? Probably one of the hyperscalers. Because the hyperscalers are doing a lot of their custom chips. And if AMD is part of that ecosystem, that certainly will help drive up their order. So I expect them to partner with one of the hyperscalers. Stay with us. More from Bloomberg Intelligence coming up after this. I don't love the word retirement because I think it has negative baggage. I like the word financial independence. If you were to be financial independent, like how would you spend your time? And that's exactly what a lot of my clients talk about.

7:48Alexis Christoforous:And the term they'll use is a work optional lifestyle. I agree. Like the next gen, millennials and below are not thinking about retirement. We're thinking about let's find something that we enjoy, that we can have financial independence. I think that's a better way to think about the end of life stage versus quote unquote retirement.

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10:04Alexis Christoforous:Want to talk supply chain now? And who better to do that with than Gene Sirocco, CEO of the busiest port in the U.S., the Port of Los Angeles. And guess what? He's here on the East Coast, right here in our New York studios. So, Gene, thanks so much for joining us. Great to see you, Alexis. Great to see you. I know the L.A. port handles a lot of international cargo, especially from Asia. I know that trade volumes in August were near all-time records. Here we are, mid-September. Where do things stand now? It's been a roller coaster of a year. When hard trade policy comes out, you see a real slowdown in cargo flows.

10:39Then when that policy is softened and deadlines extended, cargo picks up for that window of opportunity. And that's what we've seen. But July and August combined are busiest two months in the 117-year history of the port. Folks are bringing in inventory before the next policy statement may come out, trying to protect themselves for the all-important year-end holiday season for retailers, and the parts for American factories are keeping a lower but very steady flow. So, Gene, a lot of people are unsure how tariffs work, but the reality is, I believe, they occur, your port, the actual collection of the tariff occurs at on your turf right that's right paul and a cargo container cannot leave the port without that tariff being paid by the importer of record to u.s customs so there's a customs office at your port and what they do is collect whatever tariffs may be on any particular good and that's how that happens all the time i guess that's exactly right and la is the largest customs district in the nation director africa bell runs that shop for U.S.

11:39Customs, and her rank and file members are working around the clock, just trying to keep up with what the tariffs are, how to apply them to the shipments, and keep the commerce moving.

11:48Alexis Christoforous:It's got to be really confusing for them because I just feel like the needle moves constantly. How many companies, though, are really able to pull forward their inventory? Are you still seeing that in a big way as we move closer to the holiday shopping season? Yeah, Alexis, here's the interesting fact. You've got about 125 ,000 companies that call Los Angeles home to import their goods over the course of a year. No one company has more than a 5 % share. So we're made up mainly of small to middle-sized businesses, some of whom are telling me now they're dipping into savings to pay these tariffs.

12:22So is our customs office, are they in fact keeping up with the collection of tariffs on all these additional goods? I mean, do they have the manpower to do it all? Do they have the facilities to do it, the technology to do it all? They truly have risen to the occasion, Paul, and doing a great job. I look at those vital statistics of the port through the Port Optimizer every morning, a 90-second flash report. Our numbers on velocity are better than they were before COVID. Wow.

12:49Alexis Christoforous:You know, I was, I think we also, those dramatic photos of the cargo falling off in Long Beach, not your report, but at the port of Long Beach, I think it, you know, it highlights also what a dangerous job this can be for those workers. But I'm just curious, did that have any impact, knockoff effect on your report. That's right, Alexis. You know, the first thing is, thank goodness no one got hurt. The men and women of the International Longshore and Warehouse Union are on the ground moving all this cargo. And thankfully, no one was in harm's way. The investigation will continue. I was talking to some folks last night at a big industry event back in Long Beach, and they haven't been able to get their cargo out yet.

13:26So the U.S. Coast Guard, National Transportation Safety Board are going to take a deep look at this, see what the causals are and how we can make sure it doesn't get repeated again. But effectively, that particular terminal in the Port of Long Beach is an investigation site. So shipping lines are having a maneuver around that as best they can, but no real slowdowns because of it. Amazing. So the economic data seem to suggest that in terms of tariffs, the question is who pays for it. We know that it gets collected at your port by the U.S. Customs Office. And then it's a question from that perspective, how much gets passed along down the line to the wholesaler, to the distributor, to the retailer, and then ultimately to the consumer.

14:05What's from your view at the port? Do you have any understanding how that's happening, how that's playing out? Yeah, Paul, three real areas that importers have been focusing on. Can I go back to my manufacturer and negotiate a little bit on the price and see if we can mitigate? Some mixed effect there. Do I just absorb it and try to find efficiencies in my own company? We've seen the results from the big auto companies in Detroit. That hasn't gone well either. Mary Barra announcing big, big tariff hits on cost. Same thing with Jim Farley over at Ford. And then others are saying that they're trying to pass on to their customers if they're in the factory business, manufacturing, or to consumers.

14:41And we have seen that as well. So it's just kind of a spread across those three categories. And I think we'll start seeing even more of that hit towards the fourth quarter of this year.

14:51Alexis Christoforous:I know that in just a few weeks, if it holds, we're supposed to be collecting tariffs on Chinese ships that call it ports. at U.S. ports. I know that President Trump's going to be speaking with Xi Jinping in a phone call Friday, tomorrow. So, you know, how do you how do you guys at the port sort of prepare for something like this? This is another cost that probably will be passed on as well, according to the shipping lines, to their importers. So right now, early days, the the new penalty fee goes into place on October 14th. It'll be phased up. But right now, we are estimating that it could be anywhere from about$125 to over$300 per container.

15:33The shipping line will pass that to the importer of record on these fees. About 30 % of all vessels that call Los Angeles today are built or managed from China. There's going to have to be some movement around this. Some companies may try to absorb, others will shift different vessels into the rotation to avoid this penalty as a whole. Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions, buying the dip, manually sweeping idle cash, putting on a hedge.

16:10On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English, like if the VIX hits 25, buy a put option on the S &P 500. Or if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less.

16:51That's public.com slash market. Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., member FINRA, and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. Amazon Health AI presents Painful Thoughts. Why did I search the internet for answers to my cold sore problem? Now I'm stuck down a rabbit hole filled with images of alarmingly graphic sores in various stages of ooze. I can clear my search history, but I can never unsee that. Don't go down the rabbit hole. Amazon Health AI gets you the right care fast.

17:36Health care just got less painful. Ask yourself, what are your best people spending their time on right now? Expense reports, receipt chasing, month-end close that takes weeks. You become what you spend on, and that's not what you're building toward. Brex is the intelligent finance platform that eliminates that work before it starts. AI agents that handle the manual stuff automatically, so your team can spend their time on what actually compounds. It's time to get Brex AF. Learn more at brex.com slash AF. you're listening to the bloomberg intelligence podcast catch us live weekdays at 10 a.m eastern on apple car play and android auto with the bloomberg business app listen on demand wherever you get your podcasts or watch us live on youtube it's been a busy day for the restaurant companies reporting uh earnings we had crackerbauer we had darden earnings we check in with our expert on the restaurant business because not only is it a view just kind of what's happening out there in restaurant business, but I always view the restaurant companies as a pretty good gauge of how people are feeling, consumers are feeling, and how they're spending their money.

18:43Michael Halen joins us, senior restaurant and food service analyst for Bloomberg Intelligence. Hey, Mike, let's start with maybe some good stuff. Darden, what's going on with our friends at Darden? Yeah, you know, Darden, it was an interesting quarter. Sales were fantastic, but slightly below, you know, very high expectations. And the most interesting part of their report was that their margins contracted, largely due to beef costs and Uber fees, because they did this 1 million free delivery promotions supported by Uber Eats marketing dollars. And so it actually made up 5 % of sales. And that's very impressive for something that's been instituted within a year.

19:28So yeah, the margins, this company has best in class margins. They've always protected their margins. And so seeing a same store sales gain that, you know, a very strong same store sales gain without the margin expansion, I think shocked some investors today.

19:45Alexis Christoforous:So what are they planning to do to widen those margins? I heard the portions might not be as big. Are they looking at possibly raising prices on the menu? Well, they're going to raise prices, but not too aggressively. So they're very careful about increasing their prices. A big reason why we think they're outperforming is that they've increased their prices a lot less than competitors since the pandemic, right? And so they don't want to lose that advantage. So they are going to raise prices this year, but it's going to be modest and less than peers. You know, you mentioned the smaller entrees.

20:25That's really a move to boost traffic. So what they're doing is they're taking seven of their popular entrees. They're making an additional lighter menu with those seven items. They're shrinking the portion and they're lowering the price. And they're hoping that actually brings in greater traffic with low-income consumers. So shrinking the size of the entrees isn't isn't a major plan in terms of of saving the margins with the margins. It's going to be, you know, executing. Right. That's that's what they're known for. You know, consistently becoming more productive in their restaurants. That's how they're going to try to fund this.

21:03You know, there will be some slight price increases. And they mentioned they could be a little bit more aggressive if, you know, the higher beef prices remain stubborn. All right, let's move on to my favorite, Cracker Barrel. They're still paying the price for some of that rebranding issues. What's going on there? Yeah, that one. Oh, man, it's the timing of everything that happened to them is such a shame because they recorded a great quarter. You know, same-store sales were up 5.4 % in the restaurants, a couple hundred basis points ahead of the street. But, you know, sales have decelerated pretty significantly here, you know, since August 19th and the logo controversy.

21:49So, you know, the stock is down a little bit today. It opened much lower. You know, we think Paul was a good one. I thought Julie Messino did a great job in the call. I don't think there was any panic in her voice. You know, I think she's running a steady ship right now. And, you know, they're focusing on the things that they've been focused on from the beginning, which is providing better service and higher quality food at a good price point. I would say it seems like they may have sandbag guidance as well. I think that's a big part of the reason why the stock's not down more, right, is that they basically are extrapolating current traffic trends throughout the rest of the quarter.

22:33you know, when second measure data that Bloomberg owns that we follow is showing that traffic may be stabilizing here over the last over last week. So I guess we'll see.

22:46Alexis Christoforous:I mean, the latest CPI report showed that food away from home. So at restaurants actually outpaced what we're paying for food at the supermarket. But I mean, if you look at these two reports from Cracker Barrel and Darden restaurants, are people eating out less or is that really not holding true when you look at the numbers. They both reported five, you know, Olive Garden was over 5%, Longhorn's over 5%, Cracker Barrel's over 5%. You know, a lot of these stories about the death of the consumer, I think are overstated. You know, we've been saying it all year, restaurant sales are going to continue to be better than they were last year.