Bessent Says Nvidia, AMD Deals Could Be a “Model”

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2:20This is Bloomberg Tech. Coming up, Treasury Secretary Scott Besant says the US is open to discussing the use of NVIDIA chips with China. Plus, China's Tencent shows fast growth across its gaming and ad businesses and plans for smart AI spending. And our conversation with the CEO of CoreWeave after its earnings, we discuss how the company plans to scale to meet AI demand. But first, we check in on these markets that are very close, if not at record highs. Once again, Ed, we drive higher and it's more about Federal Reserve policy. Will we get a mega cut coming later in the year? NASDAQ 100 clings to gains, but we are near a record or at a record high.

2:58So too, for Bitcoin, up 0.7%. Ether's higher too. We now have$4 trillion market cap for the entirety of the crypto market. Just about the same size as, say, Nvidia. What are you looking at? Yeah, I'm looking at Nvidia and AMD. Now I'm going to be really clear here. It's really hard to see the catalyst, a causal link for why Nvidia is down a percentage point and AMD is up 4.5%. Social media volumes for AMD have quadrupled in the last hour. People are talking about it. There's a reason why they're talking about it. It's because this is what Treasury Secretary Scott Besson told Bloomberg's Anne-Marie Horden earlier today.

3:36We would not sell any of the advanced chips. So the H20s, I don't know whether you'd say there are four, five, six levels down the chip stack. What we do not want here, Anne-Marie, is for Huawei to have a digital belt and road. So we do not want the standard to become Chinese across the world or even in China. Let's understand this administration's policies for chipmakers and speak to Bloomberg surveillance co-host Anne-Marie Horden, who just conducted that interview. The underlying assumptions changed actually this week, whether or not China even wants America's reduced power chips. But what I found so interesting about the content of what Besant was telling you is that they feel that it's not really even a national security concern.

4:25They're very clear that these are lower performance chips and they want American tech to be present there. Give us the digest of what else he said. Yeah, that was really his answer to my question of what do you say to critics that basically think this administration is putting revenue in front of national security concerns, that export licenses now look to be seemingly for sale. He said that the H20 chip, and I guess similar to AMD, the MI308, is four, five, six stacks down from that higher level chip. And they're never going to allow China to get to the higher level chip. He almost sounded a little bit like someone you speak to often, Ed, when it comes to Jensen Wang, about what it means to make sure that NVIDIA or AMD have a footprint in China because they don't want Huawei to get control of that.

5:15And the big question mark is now is that what is the appetite in Beijing for these chips, given the fact that there's been this new urgency since the administration is allowing these export licenses once again from the CCP to send out these letters to firms telling them to snub these chips and go for some of their own national champions. And this is something the Treasury Secretary told me and Jonathan that he is going to bring up with his Chinese counterpart. Anne-Marie, what's also interesting is he also told you and Jonathan that maybe this could be replicated. At the moment it's unique, he mentioned, but maybe it applies to other chip makers, other industries?

5:53He said it's a unique model, something that the president likes to do, try different things. But yeah, that's something that caught me off guard as well, or something that we've been also just exploring every day with guests, whether or not this is new rules of engagement and rules of the road for corporate America. Can other companies potentially strike these types of deals with the United States or maybe the other way around? Could the Oval Office and the president tell other companies, if you want to gain access to a market, we're going to have to get part of that profit. Because what's going on right now, and this has been a really long saga, we should note, for the H20 chips.

6:32Remember in April, there was an export ban on these chips. Then this was reversed. In the meantime, we had U.S. and Chinese counterparts to having trade negotiations. And a lot of people glean into this. And the Treasury Secretary told me in a previous interview this, H20 was a chip part of the mosaic of these trade negotiations because the U.S. needed rare earths. And now that the U.S. has lifted the export control, instead of just allowing the export licenses to come back, It seems the president struck this deal one-on-one with Jensen Wang in the Oval Office, reported the president threw out 20 percent, and then Jensen Wang said, well, how about 15 percent?

7:11And then what does this mean is a big question for other companies and corporate America down the road. The very quick question is what happens next, right? Because Treasury Secretary Besant, on top of what the president said earlier in the week, says that they'll discuss the idea of unenhanced blackwell chips, essentially, with China. He leads talks just very quick. What does happen next? Well, I think it depends on the leverage in these negotiations and what the U.S. wants to get out of China. We also had the president the other day talk about the purchasing agreement he struck in his first administration when it comes to things like soybeans.

7:47There is now a 90-day extension, which brings us to November, for these trade talks between these two counterparts. And in my previous interviews with the Treasury Secretary in July, he talked about how now there'll be more of a frequent cadence between him and his Chinese counterpart to have these discussions. All of this likely will lead up potentially to a meeting between Chairman Xi and President Trump, either on the sidelines of the APEC summit or even maybe the president going to China. Bloomberg Surveillance co-host Anne-Marie Hildon, it was a brilliant interview. Thanks for breaking it down for us.

8:20Let's delve more into the corporate implications. China, US, the AI competition. Nature is with us. Alliance Bernstein joining us now. And I'm really interested as to how Alliance Bernstein thinks about pricing this in, if at all. How are you looking at the opportunity to access the Chinese market going forward? Well, I think China has always remained one of the most strategic markets and will remain so. And particularly in the AI world. If you think about AI, how we think about the scale benefit, right, the ecosystem. U.S. has always been, for a big part, the origination of innovations, particularly technology innovations.

9:04But China has done a phenomenal job in terms of using it and then using it at a very large scale. When you think about in the AI context, having an ecosystem globally is this very important strategic advantage long term. The more data you have, the better the model becomes. And that's not just for China alone, but think about globally. Who wants to be the dominant standard? Having the operating system, that layer, is very, very strategic for most companies longer term. So that's why we're thinking, that's what Jensen said, that's what Lisa Su at AMD said. And I think that's how we're thinking about it, which is who will be the dominant AI standard?

9:46We want to have a one global ecosystem or are we going to have different forks into the future? But these so-called dumbed down, I mean, President Trump even called them obsolete chips being allowed into China. Does that ensure that they remain part of the tech stack? Well, it's too early to tell for the most part. I think necessity usually drives innovation. So when we don't export anything, then it probably is a greater incentive for China to develop its own domestic ecosystem that's completely separate. So this is a bridge. I think in my mind that we can bridge that big, drastic action that we've seen early on this year.

10:29I think China does have advantages to some extent, and it has a more newly developed power infrastructure system. It has a vast amount of data, and it's developed a lot of these open source models that they are really rapidly pushing. So it remains to be seen, but I think it's quite important and quite strategic for the U.S. companies to think about the global standard. Think about iPhone, for instance, right? Yes, iPhone or Tesla, the data resides in China. We respect that. But that said, there's still lessons that we learned from adoption. At this point, if you think about a lot of AI models, we've trained a lot of data already.

11:12But going forward, the use of AI, the use of applications, that's new sets of data that's constantly being generated. And we don't want to not have access to that. Lei, the Treasury Secretary indicated to us that this pay to play or quid pro quo of a revenue share in exchange for access to the Chinese market could be expanded. What I want to know from you is if that were to be the case with high bandwidth memory or telematics or other parts of the server design, would you then upgrade your overall outlook for, in megawatt terms or gigawatt terms, the amount of installed capacity we could see around the world?

11:55I think it's too early to tell. I think as you've seen from a policy standpoint, there has been quite a bit of fluidity in terms of the changes back and forth. But I think it's certainly promising that, you know, some of the really drastic assumptions that we had in April, some of it's being discounted today. So it remains to be seen. And I would say it's very early. And I would refrain from making any assumptions whether too aggressive or I would say it is definitely an improvement from the worst case scenario. Lechu of Alliance Bernstein, thank you very much. The people who seem to get more done than everyone else, they're not working longer hours or running on more caffeine.

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15:36like yeah thanks for having me and it's pretty interesting because when you look at their capex budgets for the quarter they spent about 19 billion RMB in a quarter so that has been you would say a fraction of what US tech giants have been spending and on the call they mentioned that they will be spending on AI chips that's a priority they also be recruiting talents however they will adopt this more prudent approach so it does seem that they're not in a rush to spend as much as they can. They say that they have enough AI chips for now. They say that their stockpile is enough for training and for inferences, and that's probably why.

16:16There is some skepticism from the analyst community in the same way that they look at the American companies on how CapEx translates to top-line growth anyway, specific AI growth. But in the quarter gone, there are just parts of the business that are doing well. Where is Tencent strong, Henry? Yeah, I would say they're firing on all cylinders for this quarter. So the games has been a standout. International games grew by about 35 % in a quarter. They launched some new games, including one called Dune Awakening in international markets. But domestically, it's about their evergreen games. So we're talking about the Peacekeeper Elite, which is a six-year-old game.

16:55The company said that it's gaining traction because of a new game model. that game saw a 30 % increase in user volume for the quarter. That's about games. But on ad revenue side, it's growing very strong as well, 20 % increase for the quarter. The company said it's benefiting from AI tools being adopted over there as well. So it's basically strength across the board. Bloomberg's Henry Wren, thank you very much. Let's get more and bring in Jacob Cook, co-founder and CEO of WPIC Marketing and Technologies in e-commerce and technology consultancy focused on the Asian region. Somebody asked me a question earlier today that fits into the Tencent story so well, which is we've been so focused on the movement of chips across borders or a lack of, we haven't really talked about the movement of software, right?

17:42And when I think about Tencent and the gaming portfolio in particular, are there Chinese domestic companies that are getting international foothold across e-commerce, gaming and other digital businesses? Yeah, definitely. I mean, even Tencent is one of those with their big investments into Shopee really kind of being a top leading player in Southeast Asia in terms of e-commerce. But, yeah, I mean, Tencent is there taking a lot of the advertising dollars, you know, that are coming from that big e-commerce boom inside China as well, too. They're not so much of a player as, say, Alibaba, you know, in terms of the B2B software that they have a whole suite of.

18:16But, you know, in terms of the advertising, becoming a bigger and bigger player in that part, we saw that revenue also up by 5 % this quarter. You know, the theme from Meta's earnings, if there was some softness in advertising, it was a pullback of Chinese advertisers in the European region in particular, perhaps in the United States, because of the geopolitical environment. I'm trying to read through what's going on with Tencent, and I just don't see that macro-level headwind. Do you? No, and I think that really what you're seeing, though, is because a lot of that advertising is still based in China, that we're coming out of a year of pretty big stimulus in terms of the government and e-commerce spending.

18:55So we should naturally see that trickle down come into about now, Q3 and Q4 as well, being pretty strong in terms of the advertising dollars that they're coming in. No, they never really had that major post-COVID stimulus in China, and they waited a little while. So we're seeing good numbers now, and we would expect that they would hold because low inflation numbers in China as well. It also bodes really well for the consumers. So we're pretty excited about Tencent's earnings, and we think that probably you're going to see some pretty more good news from the e-commerce providers in China in the coming weeks as well.

19:25Yeah, we brace ourselves for Alibaba later in the week, for example, Jacob. I want to hear how much access they're having to GPUs, how much AI and generative AI might be held back by ultimately the infrastructure they need. It sounded as though, once again, Tencent trying to say, we've got all the chips we need for inference. We're not worried about it. They wouldn't go into the nitty-gritty about NVIDIA access, for example. But, Jacob, is it a worry? Well, I mean, we've all been saying this, but we've now seen, you know, three successive, like the QN model exactly from Alibaba that's now leading.

19:58Not leading, but certainly up there in terms of its ability to code. And they're going down a little bit different path at Alibaba and DeepSeq as well. I mean, all of those models are competing internationally despite the chip ban. So if Tencent comes and says that, you know, they have all the chips they need, there's no reason not to believe that. More broadly, the geopolitical context. It doesn't seem to be knocking the wind out of owning these Chinese companies' sales. I mean, they've all recovered significantly from their lows. Yeah, I think that one of the things, you know, for us that are boots on the ground in China, you know, there is the really high-level government that, you know, where the relations are not great and we see the headlines.

20:36But, you know, for boots on the ground and for the local level, it's actually been very, very strong. You know, people-to-people connection is still very good over there. And there's still a lot of businesses that are setting records, international business that are setting sales records in China. So, you know, there's the headlines, but actually on the ground, I think people have been doing business over there for quite a long time. Relationships have been built up over decades. So we're kind of expecting this to blow over, just like it kind of did with the first Trump administration, and people will get back to business.

21:05You still have a president that in a press conference is talking about a pay-to-play arrangement where the CEO of the biggest company in the world, NVIDIA, has gone to him and agreed to a revenue share, right, to get access to the Chinese market. In a tariff or a trade dispute in China, does the same thing happen? Do you have the leaders of these biggest technology companies talking about and acknowledging their government's policies in the same way and vice versa? Well, no, you don't, certainly. But, I mean, there's almost the exact opposite approach. I mean, there's been an export tax credit out of China for a long time, too.

21:44So it's almost like they're going the other way and trying to reduce prices for international consumers as opposed to the strategy of essentially taxing exports. So, no, through all these things, like we said, no one's really had a problem getting access to what they needed to get access to. and pricing seems to be okay in the Chinese market. So, yes, there's going to be some headwinds. Q1 was particularly tumultuous in the US-China business cycle, but we've been through this before, and we're probably going to get through it again. And the numbers, I think, are starting to say that we're probably getting over the hump here.

22:19We'll see how the rest of the earnings come through for these Chinese giants. Jacob Cook, it's always great to check in with you, the CEO of WPIC Marketing and Technologies.

22:33Crypto company Bullish raised more than a billion dollars in an IPO pricing its shares above the marketed range and the digital asset exchange operator and also the owner of media outlet Coindesk saw 30 million shares yesterday for$37 each. Bloomberg's Anthony Hughes joins us as we await the company to actually start trading on the NYSE. They're indicated to open$65 to$70 each, that not quite double but it's another big pop for another hot retail eIPO it feels like. Yes, we've had a number of strong IPOs recently, obviously Circle in June and then Figma a few weeks ago so this is really directionally a very similar story and we've seen very strong demand and we reported earlier today that there was north of 20 times over subscription levels for this IPO and that a lot of institutional investors got got no shares in this offering and from all accounts there's been a lot of action amongst the retail brokers who got a little bit of the stock as well.

23:26So, yes. NT, I don't know too much about bullish, but I was interested to read that across co-founders and board members, they're taking a big chunk of the shares or have a big chunk. Yes. From what we heard, when the shares are allocated here, that people who had a relationship with management did receive some of the shares. And that's not completely unusual. But often with these hot IPOs, you get management having a big say in the allocations because they want to place the shares with, I guess, people who they think will be long-term supporters of the shares or long-term supporters of the company, or they may have other reasons for giving them the stock.

24:03But certainly in this case, that seems to be something that's quite a major aspect of the way in which the shares are allocated here. Brendan Blumer, BlockOne CEO, co-founder. He's going to be the biggest holder, about 30%. ARK gets a cut, so does BlackRock. What's interesting though is to think about how Tom Farley became the CEO. Originally it was because he was leading a SPAC, a special acquisition company, that was going to buy and merge back in the day for$9 billion. This is a strong IPO but it's not 9 billion valuation. It's interesting we saw Circle have to do the same there. SPAC unwound back in a few years ago.