AI’s Global Capital Race Accelerates

26:46Now coming up is Nvidia reports earnings this week it's also facing pressure from new competitors with some of the details in the AI chip race coming up next. Again the stock under pressure down for a seventh straight session. Worst run of decline since 2022. This is what markets look like broadly. Nasdaq's down it is chip stocks that are leading us lower. Bitcoin at almost $80 ,000 a token. We've got more on that soon. Halftime, this is Bloomberg Tech.

27:19Okay, welcome back to Bloomberg Tech. Markets are treading water a little bit, but we're seeing some severe declines in the chip makers that are leading us lower overall. There was that Bloomberg report over the weekend that some of the server makers have told NVIDIA customers to expect price hikes into the new year. We also have some breaking news that I believe is crossing the Bloomberg terminal. The U.S. is set to impose a 7.5 % tariff on Chinese goods over allegations of excess manufacturing capacity. That's before a planned summit between Xi Jinping and Donald Trump next month, according to sources.

27:56The move would restore Trump's second-term duties on China to around 20%, a level Beijing's previously said is consistent with its trade truce with Washington. Those come on top of other levies imposed during Trump's first term and then extended during the Biden administration. I'm looking for some market reaction. If we get any, we'll bring it to you. NVIDIA's earnings on Wednesday are likely to serve as a reminder of the company's commanding position in the AI chip sector. But it's facing pressure from new competitors, startups and big tech alike, including some of its own customers. Bloomberg's AI infrastructure reporter, Dina Bass, is with us.

28:32Just a fascinating read. And you open with the case study of Amazon, right? And this boast almost that Amazon has now regularly that it's becoming one of the biggest chip makers. NVIDIA's world's changing. Bring us the reporting. Sure. Look, NVIDIA is still by far the dominant player in the AI chip market. But there's a few things that are going on here. One, no customer can get enough NVIDIA GPUs, so they're looking for any viable alternatives that they can find. Two, the market in terms of AI workloads is increasingly shifting to inference workloads, the running of the models rather than the training of the models.

29:06That's an area where NVIDIA has less of a lock and where it's useful to have different types of inference chips that are better at different tasks. And you're also actually seeing a resurgence around agentic AI workloads of the CPU, which, you know, was basically for a long time ill favored for AI tasks. And so those are some of the things that are changing. Apart from Amazon, Google, we're seeing a surge in fundings of AI chip startups. Last week, we saw Etched announce that they've quadrupled their valuation since December. Bloomberg reported a company out of the UK called Fractile is raising now also an evaluation that's five or six fold where they were raising, you know, just half a year ago.

29:51And the Frontier Labs are looking at their own silicon. You had a report on Friday that Anthropic has brought in a veteran of the industry to kind of oversee its own push into hardware. Who are we talking about? What do we need to know? Sure. Anthropic confirmed to us on Friday that they've hired Amir Salak. who was a founder of the TPU program at Google, also ran the TPU program for a number of years before leaving Google a couple years ago for a private equity firm. One of the clearest signs that a company is looking at doing its own custom silicon is watching the hiring. And order chips are expensive.

30:28They require a lot of patience and a lot of expertise. And when you see a company start to staff up on people that have done this before, it's an indication that they are getting serious. And Santhropic has, because of these job listings over the last few weeks, finally confirmed that they are looking at this, that they are doing this. OpenAI is already further along, you know, having unveiled their jalapeno chip, which they will talk about more tomorrow at the Hot Chips conference. Bloomberg's Dina Bass, thank you so much. Let's stick with NVIDIA. City Index Financial Markets Senior Address Fiona Sincoto joins us.

31:03And, you know, it's a week where in Wednesday we have NVIDIA's quarterly earnings. and on Friday we have Jackson Hole. And lots of people in markets would debate which is the bigger event. Let's say it's NVIDIA. Which is bigger for you? Do you know what? I think NVIDIA is going to be extremely important. I mean, it does feel like the AI trade has sort of been a little bit on the back burner recently. It hasn't been front and central. And I think NVIDIA earnings will bring this very much back to a clear firm focus for the markets. But obviously, as we know, you know, this not only affects NVIDIA, these earnings affect risk sentiment more broadly and impact sort of, you know, the wider indices, the S &P 500, the Nasdaq.

31:47So I think as far as that's concerned, it is going to be really key. Obviously, expectations are high. The bar is high. But we've got, as you mentioned, Jackson Hole. I think we may be disappointed by Jackson Hole, given that Fed Chair Walsh tends to be a little or has been less in favor of giving out forward guidance. So I think we might find the actual amount of information we get from him may be too limited. The expectation on Wall Street is NVIDIA will have sales$92 to$95 billion. They will double adjusted earnings from the same period a year ago. But those are just numbers. What is it NVIDIA has to say to keep the market believing in this story?

32:28Yeah, you know, the numbers are expected to be good. The bar is high. Even forward guidance is going to be very key, expecting to exceed 100 billion for the first time. And I think what's actually going to be key here is the level of AI demand. You know, we want to see that data center spending by these sort of AI hyperscalers is continuing to grow at a level that is supportive of valuation. So, I mean, we know that the share price has come off the record high slightly, but it's still up a good 18 % across the year, well ahead of the S &P 500. So, you know, we're going to need to see that the demand is accelerating at a level that is supportive of that share price.

33:14How worried are you and your clients about the issue of circular financing? It's definitely a worry that sort of looms in the background. I think, you know, what we see is when we get some solid results, that often tends to just push those concerns away a little bit. And when the deals start coming through, that raises more, puts more focus back onto that circular financing story, then that can just raise those concerns over the bubble story. But I think at the end of the day that, you know, we know that the AI narrative is very strong. We real world use. And therefore, this isn't necessarily a bubble in the terms that we've seen it previously.

34:02But I do also think that these earnings are going to be watched very closely in order to make sure that that can sort of smooth over any of those concerns. We're just showing a chart that NVIDIA heads into the print with a pretty low multiple. And I'll just remind the audience that the stock's down for a seventh straight session, worst run of declines or matching the run of declines it saw in September 2022. too. Where's the potential upside for NVIDIA? What can Jensen Wong say that gets everyone euthoric again? I think it's just that idea that the demand is growing fast enough to value, to justify valuation.

34:38That is what the market is going to be very, very focused on, because you need to be able to decide that forward earnings are going to be growing at a level that suits the share price. And that's what the market will want to see. How interested are you in Bitcoin at the moment? We're tracking data on ETF flows, biggest in about 10 months. Anyone in your world really looking at it? It's definitely showing signs of revival. I mean, it's been a very slow few months as far as our clients are concerned and as Bitcoin is concerned. But I think we are starting to see potential for the stars aligning.

35:21As you mentioned, ETF flows are returning. We've seen the strongest ETF week last week of inflows since October. You've seen this idea of potential of improving liquidity expectations due to comments from the US Treasury Department and their support of the bond market. And then you've also got this idea of potentially lower regulatory risk premium, which is also supportive. So it does feel that there are several factors which are lining up now to support Bitcoin. We obviously saw that short squeeze last week. What's going to be really key now is to see whether we can see this actually extend gains on buying rather than the short squeeze.

36:02I think that's going to come down to core PCE. It's also going to come down to what we get from Federal Reserve Chair Walsh on Friday, if anything. Fiona Sincoto, Citi Index Financial Markets, senior analyst setting us up for the week. Thank you very much. Indeed. Let's take a look at Trade.xyz, a little known market built on top of crypto exchange Hyperliquid, which allows speculators to buy and sell blockchain based oil derivatives continuously, even when traditional markets are closed. The platform has generated some 500 billion dollars in trading volume since launching in October. Bloomberg's Muyao Shen is here to tell us more about it.

36:43Really interesting story. Let's start with the basics, the concept of perps, hyperliquid, and everything else that we need to understand. Yeah, sure. So perp-purchase swap are a type of features contract that do not expire. And hyperliquid is a trading platform with its namesake blockchain where it allows traders to trade such products. There is a push to bring hyperliquid to the U.S. Like if you look at the headline, 24-7 markets of great interest to all kinds of parts of the Bloomberg audience. Explain that push. So basically what's happening is that because the traditional markets are usually closed over the weekends, where most people cannot really look at or have an idea where the market is going to be at during the weekends, especially when there's like breaking news.

37:30So places like Hyperliquid provide a platform where people can get an idea where market is going to be when it opens on Monday. I think the idea is that you don't want that kind of market remains offshore outside the U.S., right? Because currently Hyperliquid or TradeXYZ are not open in the U.S. So I think bringing this type of markets onshore to the U.S. is very important, especially Wall Street is based here in the States. Part of your reporting is that TradeXYZ is out there lobbying regulators. What's the argument that they're making? I think the main argument is that I think they want to show how important it is.

38:09Especially, I think you have a platform where you can trade futures contracts tied to stocks or things like pre-IPO. These all happen in the U.S., but these platforms that are only allowed outside the U.S., I think logically speaking for these people, it just don't make a lot of sense. So I think a lot of them are pushing regulators, I think, to be more innovative and to allow these kind of markets to be legally offered here in the States. Bloomberg's Mugyal Shem with the story. Thank you very much. Now, coming up, a South Korean AI startup aims to create K-pop robot idols backed by industry veterans like G-Dragon.

38:47We've got the details next. This is Bloomberg Tech.

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41:40Kicking the afternoon slump or rallying for the weekend. Try one of the many new drinks like the Red Bull Dragonberry Energizer, also available with Red Bull Zero, now at McDonald's. The AI boom is roiling not only South Korea's markets, but its cultural industries. Here's a look at one entertainment startup that is not only embracing AI, but betting robot idols are the future of K-pop. Bloomberg Asia Entertainment Reporter Sohi Kim reports from Seoul. As much as Samsung and SK Hynix have thrust South Korean markets into the spotlight this year, the worldwide popularity of groups like BTS and BLACKPINK, shows like Squeaking, and beloved romantic dramas have been an economic boon long before the meteoric rise of large language models.

42:26Music, films, video games, and other Korean cultural industries generated over$113 billion in revenue last year and more than$15 billion in exports. They employ about 690 ,000 workers, more than double the combined number at the membership giants. South Korea's entertainment sector has grown more experimental and ambitious as competition intensifies. One startup looking to disrupt K-pop's traditional idol system is Galaxy Corporation. It's looking to blend AI characters and life-size robot idols to create content without the limitations of human performers. CEO Chaeyoung-ho says they are not looking to replace people but create new IP.

43:08Robots can learn everything at once and immediately perform it for people, whereas it might take a person a month or two to learn the same material. The time savings are enormous, and it all happens simultaneously. Once the training is complete, there's no need to do it again, so we can immediately have a robot trainee debut in New York. It doesn't require the 3, 5, or 10 years of preparation that humans need. That's how AI is changing everything. Galaxy was founded in 2019 and started as the TV production studio behind the Netflix hit Physical 100. Its current roster includes K-pop superstar G-Dragon, actor Song Kang-ho from the film Parasite, and San Francisco giant's right fielder Lee Jung-hoo.

43:47Galaxy has now opened a 16 ,500 square meter robot park in Seoul, where visitors can interact with around 50 different types of robots. CHOI plans to open new robot-themed parks in other major cities including Dubai and run a robot idol tour from next year. Among its partners is Unitree, China's first publicly-traded humanoid maker. Even if the hardware, the robot, is made in China, combining it with software made in Korea and joining forces to go global holds great significance. Above all, I believe these robots will become part of people's lives as new editions are released, including special editions of their favorite celebrities that they can collect.

44:25While Galaxy is showcasing one of the first real-world use cases for these robots, Choi says discussions on global guidelines need to take place. AI is already part of our lives. What's somewhat disappointing, though, is that we don't yet have global guidelines that match its development. Whether that means global laws, systems to protect against risks, or security frameworks, the same wave is now coming with physical AI, and we must not make the same mistakes again. We need to establish global guidelines to ensure that robots do not harm our lives. Galaxy is now preparing for what could be the first major overseas listings by a K-pop agency, with the goal to file for an IPO in New York and Seoul by late next year.

45:06But the company has raised about$150 million so far and is targeting an overseas pre-IP around this year. Galaxy's planned debut will be a test of whether the next generation of entertainment companies creates next stars or codes them. Sohee Kim, Bloomberg News, Seoul. Something else AI is rewriting. Applicants' resumes. In the face of picture-perfect AI-generated or edited CVs, recruiters are turning traditional techniques to sift through candidates. Bloomberg's finance editor in London, Tom Metcalf, joins us with the story. Well, that's a problem. Every single resume on a recruiter's desk being perfect.

45:45How do they work out what's legit and what's not? Yes. Effectively, they're going back to the old ways, I suppose. There's a great quote in this story about how, frankly, if you don't know someone, an actual person at the company you're applying for, in many cases, it's almost not worth applying for. This goes back to those skills that generation to generation, we've always said, are the most key, like networking, making sure you actually produce those results. What's interesting really is just the sheer quantity of basically, as you say, pitch perfect applications that are coming through. And it's that paradox as well, right?

46:23Every company these days wants people with AI skills, but the irony is those who are deploying them in their applications, that's actually in some way almost punishing applicants because no one can distinguish or discern them. Right. In the AI era, there are some telltale signs like AI slop video generated from AI. and in text if you're confronted with a cv that's that's the result of ai how do you know well yeah a few kind of keywords which you know i think we can all probably recognize like trusted right hand you know it's that slight sense of the uncanny which i'm sure we've all had you know on emails it's almost like too perfect right um and that's really that's sort of i guess the crux of the problem is you know one of the most traditionally useful ways people you know companies could you know distinguish between people is now effectively redundant in finance something like 84 % of all applications now are run through AI.

47:15So effectively, there's that huge kind of baseline. And, you know, the applicants who can kind of succeed that are basically the ones with the human skills and the ones who kind of really, really craft kind of an individual CV rather than one, you know, through a machine. Is there some kind of great employer clamp down to push back against this or at least try and discern, you know, the real person behind a CV? Yeah, I mean, it's a reliance on those sort of tests, those assessments. Yeah, so effectively everything's probably becoming more involved. And, you know, the other thing they do, which is a really interesting debate there, is like, you know, they're looking for any signs that has been AI generated, which might cut out a whole bunch of applicants.

47:58And yeah, if 84 % of the people are kind of relying on AI, you know, they've got to all think of ways, you know, that they don't get cut in the first cull just because, you know, quite intelligently they're using the tools available to them. Bloomberg's Tom Metcalf in London. Thank you so much for joining us. Now, coming up, we're going to get back to NVIDIA as investors prepare for the Super Bowl of earnings season. Stock down 2%, down for a seventh straight day. We'll have the details. This is Bloomberg Tech.

48:34Let's get back to the stock. Everyone will be watching this week. NVIDIA, Shares right now down 2 % on track for a seventh straight day of declines. Earnings print Wednesday after the market closed. Bloomberg Equities reporter Ryan Vestelica is with us. This is it. Treading water is probably not the right phrase, but all focus this week will be on NVIDIA. Yeah, this is going to be a very important test for people to really gauge the temperature of the AI trade as it stands right now. I don't know how much people are really expecting NVIDIA to really turn around the whole market and really lift sentiment here.

49:08But certainly it is sort of the major company in the industry. Everyone's going to be watching it. Everyone wants to know what is it seeing as far as its outlook? What is it going to say about demand, about pricing, about all the components that are out there that build up this AI infrastructure? We got some pretty positive reads from the hyperscalers in terms of their commitment to spending. But now we really want to see the main supplier of AI chips. What do they have to say about where things are going from here? Let's get stock specific. NVIDIA is up 13 % year to date, slightly outperforming the S &P 500.

49:40It's down for a seven straight session. So going into the print, we're looking at a pretty low multiple ahead of the results. Where does the stock sit right now? Oh, yeah, you said seven straight days in the negative. I believe that's the longest since 2022. So this is certainly an interesting kind of setup for the stock right here. Now, when I talk to people about what they're expecting, They do say the multiple does look low. They say that we're expected to have growth something around 90 % this year. That's supposed to slow and then keep slowing going forward. So this is a company that's on sort of a path of growth deceleration.

50:14But people still view it as a very high-quality company, especially within AI and chips. It's certainly a lot cheaper than names like Intel or AMD. So there's certainly a lot of people who continue to be very positive on it. But the fact that we're seeing some air come out of it ahead of the report, it just shows you that maybe sentiment is just not what it was certainly a couple of years ago when NVIDIA was just the absolute hottest name around. And we led the show on the report from Bloomberg over the weekend that server makers have been telling NVIDIA customers price hikes are coming on the latest generation servers.

50:48Bloomberg's Ryan Veselica with the equities view. Thank you very much. That does it for this edition of Bloomberg Tech. Look, the story this week will be NVIDIA and NVIDIA's earnings, which are Wednesday after the market close. There has been a lot happening in AI infrastructure, and that Bloomberg report is a must read. Recap that conversation and all the reporting on the podcast. You know where to find it on all the Bloomberg platforms and on iHeart, Spotify and Apple. Stay with us through the week. It is a big week, and there is a lot more to come. From San Francisco, this is Bloomberg Tech.

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