Trump Nvidia Deal Reshapes US’s China Strategy

0:01Bloomberg Audio Studios Podcast 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. President Trump has now opened the door to NVIDIA selling some of its high end chips to China. Yeah, I'm not sure. I kind of can't follow the policies. Some days the door's open, some days it's closed. Yeah, and it could always move in the other direction. That's the other risk, right? Let's bring in Bloomberg Tech co-host, Caroline Hyde, to tell us a little bit more.

0:42So on B-Tech, I'm sure you're going to be talking all about this. But Caroline, what does it mean that NVIDIA can now sell these H200 chips to China? Because that is not the most advanced chips, is it? It's not. It's based on Grace Hopper architecture, which isn't the Blackwell that we're currently in. It isn't the Vera Rubin that we're looking towards. It's the previous year's iterations. It is 10x superior to the H20s that, remember, cast your mind back, had also been deemed okay to ship from the United States to China if a 15 % cut was given to the US government. But that was never signed into law.

1:15They were never able to execute on that. And most importantly, China doesn't want them. And I think this is the key. The Financial Times is reporting that basically already China's looking at putting curbs, licenses, basically limiting the ability for certain companies to access the H200s, even if NVIDIA is allowed to ship them. And I think this is what everyone's got to currently digest. I'm hearing time and time again from some of the most powerful people in the technology space that we are underestimating how sophisticated China is at using the NVIDIA chips, the small amount they already have, and some of those homegrown ones.

1:47typically how is this trade policy negotiated who typically says u.s tech company you can sell this into china or to other markets and or you can't is because it just seems like it's now at the whim of the president and his in his x account or truth social account setting trade policies that how is it typically done well isn't it interesting that just last week jensen huang was meeting with the president but was meeting with some of the leaders over in congress most crucially he was with the Senate Banking Committee, because it's the banking committee, oddly, that tends to be in charge of export restrictions.

2:20And so it was that group of leaders, but many are frustrated. And I was just at the Reagan Defense Forum, National Defense Forum this weekend. And there is handling going on from Congress that they're being cut out of a lot of these discussions. Really, they should have ownership of how much trade should be allowed. But at the moment, these are coming through executive orders. And we know that the president likes to cut a deal. NVIDIA Jensen Wang likes to cut a deal. They have a very personal relationship. And most broadly, NVIDIA and Jensen want access to China. They think there's something like a$50 billion total addressable market they're being forced to have to put down at the moment.

2:54He has 0 % revenue coming from that country. But you've got this tussle at the top of the China hawks who are worried from a national security perspective if you allow technology to go from the US into China. But on the flip side, Jensen Wang would say, they're just going to build it themselves and we're forcing them to speed up. that by limiting my technology. Let our stack own that of China's big, large language model development. So you had mentioned that China didn't want to buy the H20 chips. Does China want to buy the H200 chips? I think if you asked, what the reporting shows is that if you turn to an Alibaba or a Tencent or a Baidu, they are limited by the amount of GPUs they have access to.

3:31So I think more is more from their perspective. And yes, the H200s build on the H20s, But longer term, the government wants to focus on domestic supply here. That's why you're seeing Canberra Con do so well, why you're seeing Huawei do well, why you're hearing Baidu wants to spin off its chip manufacturing, why we just had that superb entrance to the market, just of the Moors technology company that has shot up more than 400%. They do want to make it homegrown. Great story on the Bloomberg terminal today. Apple shares have soared 35 % since the end of June, as the market scrutiny of AI development spending has made the company's lack of an AI strategy a strength.

4:08So do nothing and benefit? I don't know. But I mean, Apple, we always say about Apple, they don't have to be first. And typically they are not first, but when they do come into the market, they do it really well. It's a thought out approach. And that people, you know, the Apple bullsman saying, don't worry, don't worry, don't worry. They're going to be fine. There's 2 billion Apple devices out there. They'll be fine. I don't know. Yeah. And meanwhile, goodbye to the guy who was in charge of AI policy over at Apple because of that botched Apple intelligence rollout. People have been frustrated that Apple seems to be a slow player to adoption.

4:40But longer term, most in the generative AI space are thinking that we are going to be using this from a consumer perspective, from our edge devices. Therefore, computers are going to change in the way in which you know it. Your models are going to change in the way in which you know it. And eventually, we will be running our ChatGPT or our Gemini or whatever model you like on your device. Eventually, that means you'll need an Android or an Apple. or maybe some future AI device that hasn't yet been created and is probably being developed in the minds of the great leaders right now. But we'll have to see how Apple continues to basically do the benefit of not having got a load of debt and not having spent an awful lot of money on the build-out.

5:18Because at the moment, I think investors are just still grappling with the sheer scale of capital expenditure that's going into this and wondering whether there's going to be a real upside. Can Apple get the upside without making the infrastructure investment? Stay with us. More from Bloomberg Intelligence coming up after this.

5:37You'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. Our next guest, one of the most highly respected media analysts on Wall Street for a long time. And I think the value that I really find from her research consistently over the years is she is not afraid to be out of consensus here. And I think she's got, again, a non-consensus call here that even if you don't agree with it, it makes you think. And that's the value of a good analyst.

6:11Laura Martin joins a senior analyst at Needham Company. Laura, as it relates to Netflix, do you think they should even pursue this deal here? Yeah, so we published a note this morning saying no, that the big cultural, Warner Brothers would create cultural problems at Netflix. Netflix has about 14 ,000 employees and Warner Brothers is about 35 ,000, some of which they wouldn't be buying. But it would be about twice as many employees from, let's call it the old world, the 50-year-old studio, who really is averse to taking risks. And they really do things the old-fashioned way and siloed, competitive, internally fighting culture.

6:53And that isn't Netflix. Netflix is sort of single-purpose disruptor, everybody on the same page, move fast and break things, iterate if you get it wrong. And I just feel like the culture that Warner Brothers is an anchor, would be an anchor to Netflix at a time when generative AI technology risks are collapsing timeframes into weeks with the changes. So we think the next disruption created by generative AI requires really fast reaction times, which Netflix has the fastest in media, and it would really slow their reaction times if they suddenly brought on twice as many employees that were stuck in the 50-year-old business model of the Hollywood studio.

7:34And you quantified the drag that this would have on Netflix. What does that look like? um so i mean i think what we're saying is that um the 83 billion dollar purchase price that they would pay to buy warner brothers would add another ink that that cash would be at risk of not returning its capital because um they would bring all these cultural problems and envelop the entire consolidated 400 billion dollar entity laura so as it relates to gen ai is that a friend or a foe to Hollywood, to the media companies? Yeah, so to date, Paul, what isn't different about Gen.AI is it's being used as tools by humans, in which case it's not different than the web.

8:24It's not different than our smartphones, our Apple phones, our flashlights and communication devices, and map, they replace Thomas guides. So they're utility. So, so far, Gen.ai technology has been a tool or a utility for human beings. I think the vision of Sam Altman at OpenAI, Elon Musk, Mark Zuckerberg over at Meta, is to have, and certainly, of course, of NVIDIA, is to achieve what's called super intelligence, where machines train machines, in which case it replaces people at some level. It does better thinking faster, it's less emotional. So if that comes true, and they're saying that's 10 years out, that's super intelligent, it would actually replace humans.

9:11But near term, it's just like the other three technological disruptions you have and I've seen where it makes our life better. It's a tool for humans to do faster, better, safer work. So Laura, you make the case that Netflix doesn't need to buy Warner Brothers Discovery, it would be adding an anchor, and it would drag it down because it's this disruptor. What about Paramount Skydance? Doesn't that argument also apply or does it not? It does. But the distinction I would make is Netflix is large enough to go it alone. And with generative AI collapsing timeframes, their culture is really well suited to the technological, you know, the future of the next five years.

9:52Peace Guy is subscale. It probably can't survive without bulking up. And it doesn't really have time to build in a generative world because it's just too small and change is happening too fast. So it needs to bulk up and buying something. We think they could get it closed in six months because we think the senior Ellison is good friends with Donald Trump and he would have sail through regulatory. So it would happen faster, there'd be less uncertainty, and it would allow Peace Sky to survive. So I think they have to take the technological risk because they must have scale or they're going to die.

10:32So they might die because I'm right about the culture problem and the anchor problem, but they're going to die if they don't buy something anyway. So it gives them a better chance to survive, I think, to buy Warner. And Laura, you've followed Netflix since its inception here. This is a company and a management team and a board that's been pretty adamant, they'd rather build from within than buy. What do you think has changed here? Because this is a huge turnaround for this company, strategic-wise. You know, Paul, I really wanted to write a note that says dogma is bad. I mean, they said they'd never do advertising.

11:05Yeah, they do advertising. They said, we'll never do live sports. And now they broadcast NFL games on Christmas Day. And then they said, well, we don't like the Hollywood. We don't like the theatrical window. And we don't want to release any films in the theatrical window unless talent like directors force us because they want Academy Award consideration, which is a term, which is a requirement to get an Academy Award. You have to have been released in theaters. So that is really hurting them in this. In this, those words are really hurting them with the talent community. So when they say we will never do something, please take that with a grain of salt because they often reverse themselves completely 180 degrees.

11:46And it's really those words about the theatrical window are really hurting their, hurting the feedback loops with talent, like big talent, like Jim Cameron and Scorsese, like all these people that really are big talent. They all want a theatrical window. And Netflix, they're scared to death that if Netflix bought Warner's, the theatrical window over five years would go to zero. Stay with us. More from Bloomberg Intelligence coming up after this.

12:15you'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 all right let's move on here and talk a little bit about home depot home depot of course did come out with earnings a while ago but they are giving of a bigger long-term outlook here for its business. It's an investor day kind of outlook. And for that, we have Matthew Griffin. He's a Bloomberg Stocks reporter to just talk us through some of the issues that Home Depot has faced.

12:49Because at the last earnings report, Home Depot made clear that the expected rebound in demand that it was looking for had not yet materialized. Is the tone changing here from Home Depot? Well, Scarlett, I would say the tone really hasn't changed in a meaningful way. Everyone's trying to make sense of the economic moment that we're in. I mean, you were just talking about economic data that we got this morning that had some puts and takes in it when you look at job openings versus layoffs. And I would say that like pretty much any economically sensitive company right now, Home Depot is facing some puts and takes as well.

13:27So they gave an outlook for comparable sales next year. Their preliminary view is they'll be flat to up 2%. That's lower than what Wall Street was looking for. But then they also gave this market recovery scenario where there's a bit more of a rebound in the US housing market, more demand for home improvement. And in that scenario, comparable sales would beat estimates at up 4 % to 5%. You zoom out and you've got a picture where mortgage rates have come down, but consumers are still under pressure. Housing prices are still high, and so are rates historically. And so you've got the consumer trying to muddle through, companies trying to make sense of it, and investors trying to make sense of it.

14:15You've got the stock down a little bit pre-market and now just about flat on the day. Okay. 470 ,000 employees at Home Depot. That is amazing. But I don't think I could get a job there. It's like, I really don't know a hammer from a screwdriver. Okay. So back up a little bit because Paul's goal is to become a greeter at Walmart down the road. Like that's what he, that's his dream job. That's the final career path. Final destination for Paul Sweeney. So what are they saying about just the consumer behavior these days? I mean, interest rates are still high. Are people still working on their homes?

14:46You know, the professional versus the private? What's going on with their core customer? Yes. So we can actually look back to a few weeks ago when they reported earnings and actually cut their profit outlook for this year. What we saw then was a continuation of trends at the company, which is you have flagging demand for some of the bigger ticket home remodels. Again, And because there's pressure on consumers, people are not taking on big projects, projects that require financing. At the same time, they are shifting maybe into projects like gardening, smaller projects. So it's not that people don't want to do anything.

15:28It's that people are maybe doing the home remodeling equivalent of trading down here, which is a trend that we've seen in other corners of the economy. For example, Walmart's business holding up. If you want that greeter job, it might be open for you because consumers are trading down. That's good for Walmart's business. It's good for a segment of Home Depot's business, but not enough to support the overall outlook so far. And if you look at the slides from their analyst day today, they see pressures continuing, including high home prices. And that's weighing on consumers here. Yeah, the affordability crisis strikes again.

16:09So, Matthew, I'm looking at Lowe's shares, which are, of course, a competitor to Home Depot down at the moment as Home Depot is basically unchanged. Do we presume that these same headwinds that are dogging Home Depot are the same that kind of are clouding the outlook for Lowe's? Or does Lowe's have a different approach? Interestingly, you know, they both serve similar corners of the market, home improvement. So far, it does seem like Lowe's has fared a little bit better this year, at least with how investors have viewed the way they've been managing through. Their shares currently down about 2 % on the year compared to down 10 % for Home Depot.

16:49If you look at that reaction today, it's possible investors are thinking there could be some of the same headwinds in their future. But again, it does seem like they've gotten a little bit more of a pass so far. How about tariffs here? What are the companies saying about tariffs and their ability to deal with them? So, so far, the companies in their commentary have really focused on the state of the consumer rather than directly talking or at least talking constantly about tariffs. I would say, though, that Home Depot did call out high building material costs as a reason that consumers are deferring home improvement projects.

17:33So, you know, you do think about tariffs on lumber, things like that. That doesn't help that side of the equation. Stay with us. More from Bloomberg Intelligence coming up after this.

17:47You'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. We want to talk about Campbell's. The company came out with its fiscal first quarter earnings. Both the top line and the bottom line beat analyst estimates, but the direction of travel for revenue and profit is still lower. Let's bring in Diana Rosera-Pena. She's Bloomberg Intelligence Consumer Staples Analyst on the latest on Campbell's and of course the packaged foods industry overall.

18:21So Campbell's has two businesses, the snacks business and the meals and beverages portfolio. How are the two businesses doing, Diana? Well, they are puts and takes on both of them. You know, for meals and beverages, there's some headwinds on ready to serve soup, whereas broth and condensed soup, which is usually used in cooking, is improving. You know, you have V8, which is not really, it's a brand that is not really doing that well. I love V8. You do? To me, that's like my healthy eating for the day. When I drink a little one in the morning. So when you're on a plane, you'll get a V8 and you're like, I'm good.

18:58I'm good. I'm good. No need to work out. No need to go to the gym. I'm good. Exactly. But it's still facing some headwinds for snacks. It's kind of, I found it odd because there seems to be a bifurcation of the consumer trends here. You have salty snacks being, you know, a challenge by people trying to eat healthier, reducing their sodium. But then you have cookies outperforming. So I guess it's the salad with the fries. All right. Which I love, by the way. Yeah, absolutely. Campbell's agreed to take a 49 % stake in La Regina. What is La Regina? What's Campbell's trying to do here? Yeah, so that is the supplier for Rayos, which they bought it a year or so ago.

19:45And that makes it kind of like have a little bit more control on the supply side. There has been some headwinds on this brand because tomatoes are being exported or imported to the United States. So they have to face some tariffs. So, you know, with this, they're trying to not only upset Tyrus, but have a little bit more on the supply chain, have a little bit more control on that. Here's my Rao story. I mean, for people who aren't in New York City, it's a very famous restaurant in New York. It's very difficult to get a table there to get a reservation. On my 30 years of Wall Street, I've asked people to take me, who I know go there, to take me.

20:23I haven't gone once. Really? Yeah. I mean, it is impossible. Like, I never ask people to take me out on their great golf course. I just wait for the invite to come. But for Rayo's, I've actively tried to get struck out. So anyone who has an invite into Rayo's, let Paul Sweeney know. You know, I did actually get to eat there. We ordered takeout during the pandemic when they were doing takeout. Yeah, so that was my one time I got to eat Rayo's. Very good. But Diana, I want to ask you about, of course, the controversy that surrounded Campbell's just last month. There was an executive. He was a vice president of the IT department who talked about how the company's products are being made for poor people.

20:59and had some disparaging remarks about some of the employees, the Indian employees. Is that something that's going to cast a pall over Campbell's? I mean, do you see any long-term effects from that? Well, usually they did not address that during the call. But I think it might be a short-term headwind if there's any boycott happening. I don't necessarily think that there's going to be one. It's just one executive. And the company went ahead and kind of tried to put on record that they're not necessarily agreeing with what he said. So I don't necessarily see that as a significant headwind for the company.

21:41Packaged goods companies, I kind of think of them kind of a GDP top line growth story at best. What's the 2026 outlook for your companies? What are investors looking for? So for 2026, they're hoping that there's some light at the end of the tunnel in terms of volume growth. Again, it might be a second half of the year story because comps get a lot easier going forward. But, you know, profitability seems to be a little bit more difficult because they have tariffs. They have to contend costs still a little bit higher, specifically on the employee side. And there's also marketing that they have to do because they want to spur growth and pricing is not necessarily the only lever that they have to.

22:30But, you know, I think about Campbell's and other packaged food companies and how much competition they must face from private label products. I go to the supermarket and I'm going to get the chicken broth that's cheapest. And it's usually the one sold by the supermarket and not Campbell's or anyone else's. So that's I mean, and for a private label, you don't need to do any marketing. Exactly. So what is their how do they counter that? Well, more marketing. They're trying to work with the with the retailers to position themselves in the best part of the shelf to be able to move their product. it.

23:02Yeah. Well, obviously, retailers have to contend with increasing their private label penetration and at the same time have a good relationship with this national brand. So they're not necessarily want them to go against, you know, this product. So they're trying to there's some negotiations happening. And usually, you know, when I speak to retailers, because I do cover Canadian retailers, they mentioned that they tried to expand their private label into white spaces, not necessarily served by national brands. So while you might see some condensed soup private label, it's not as intricate or as better quality than probably Campbell's.

23:44This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern, on Bloomberg.com, the iHeartRadio app. Tune in and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.