Musk’s xAI In Talks to Lease Saudi Data Center Capacity

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1:53Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco. This is Bloomberg Tech. Coming up, NVIDIA's CEO says he anticipates getting the first batch of U.S. licenses to export H20 AI chips to China very soon. Plus more from Crypto Week on the Hill after Trump says the House will pass the Genius Act stable corn bill today. And Elon Musk's XAI is in discussions to lease data center capacity in Saudi Arabia. We bring you the Bloomberg exclusive. Good morning. Let's get right to markets. And we are very focused right now on the chip sector. ASML, these are the Dutch shares trading in Amsterdam of the world's leading chip equipment maker or chip making equipment maker, the story is really clear.

2:47The vision they've given us for 2026, they are not holding to that in terms of growth or a year of growth. But what really spooked the markets was a comment from the CFO about how right now chip makers and customers are very worried about tariffs. We'll go deeper later in the hour. Then you have NVIDIA. So actually NVIDIA was kind of not doing much this morning. We know that Jensen Wang is in China talking up the success of being able to sell in a limited way, some AI chips back into that market. Over the course of three days, we had a big gain yesterday, pushing the market cap well beyond$4 trillion.

3:20We're giving some of that back this morning. The anxiety in this Wednesday session is slightly linked to, let's say, the jitters from ASML. Anyway, Jensen Wang's been talking up a storm. Listen to this. Some of the things that we wrote off might be harder to recover, but most of the things that we put on reserve will not be scrapped permanently, was not scrapped permanently. So we'll compare what customers would like to buy now versus the inventory that we have, and then we can figure that out. It's probably not 100%, but it's not 0 % either. Let's get more on NVIDIA and the relaxation of some of those chip cards.

4:03Bloomberg's Mike Shepard joins us out of D.C., And Jensen Wong has appeared a number of times, actually, in the last 12 to 24 hours in Beijing, in China. And let's say he's basking a little bit in what is a big win for him and a big win for the company. Well, that's fair to say, because this really was a big turnabout by the Trump administration in basically lifting these export curbs on the H20 that it had imposed just back in April. And much to NVIDIA's chagrin, it prompted the company to take a$4.5 billion write-down in the previous quarter, and it had been looking at losses of perhaps as much as$8 billion in sales for the current quarter.

4:45So this is a potentially big gain, and Jensen Wang is saying that he is expecting those licenses very soon, although he didn't give an exact timeline. And there's still some unanswered questions about that, too, the scope of it. We don't know exactly what this backlog of orders that Jensen is saying are still on the books that they can fulfill very quickly once they get the licenses. And it's also not clear whether the permission that the U.S. government now is signaling that it will start giving extends beyond the inventory that Jensen was talking about that had been held up by the restrictions that were imposed.

5:18Likewise, we don't know if this will be a rubber stamp process by the U.S. In other words, will it be quick, as Jensen is suggesting, or will there be some bureaucratic tangles here? So there are some questions about how far this goes and whether this might extend to future chips that NVIDIA may try to sell there. Bureaucratic tangles. There's also the political entanglement as well. There's been a lot of headlines, I think, in the last 24 hours with Jensen Huang in the center of them because he is in China. And there's a timing question because he met with the president of the United States last week.

5:51Do we use NVIDIA as any kind of sign that the relationship between the two countries, the United States and China, is evolving or changing in real time as well? You know, it really does fit into the broader picture of how U.S.-China relations are really evolving fairly quickly. since Liberation Day when Donald Trump imposed these eye-watering terrorists on the world's second largest economy, really prompting a reckoning between Washington and Beijing and forcing negotiators from both sides to sit down and really hash it out over trade. They didn't get too far into the weeds, but they did address some of the key issues, and they included export controls.

6:34The U.S. has been concerned that China has been holding back on sales of rare earth elements to American customers. And likewise, Beijing have been complaining about export controls, like the ones that we are talking about applying to the H20 chip, but also to chip design software and other elements. So we got a sense that there has been a little bit of a quid pro quo, something that Treasury Secretary Scott Besson acknowledged during his interview with our colleague Anne-Marie Hordern yesterday morning, and something that we are seeing fitting into this broader pattern of perhaps a little bit more rapprochement.

7:09Secretary of State Marco Rubio has been meeting with his Chinese counterparts to try to set the stage for a summit between President Donald Trump and his counterpart, Chinese President Xi Jinping, sometime before the end of the year. And likewise, Trump has also been signaling a softer tone. He's saying that he will fight China in a friendly fashion. And likewise, according to reporting from our colleagues, Jenny Leonard and Mackenzie Hawkins inside the room, inside those meetings at the White House. Trump is one of the least hawkish voices when it comes to China. This is Mike Shepard in Washington, D.C.

7:42Thank you very much. Let's stick with the semiconductor space broadly. This is shares of ASML, right, the world's most important leading edge maker of lithography machines, EUV lithography. They're used to manufacture chips. And what has happened this morning is the company's walked back its forecast for next year, 2026. Let's get out to London and Bloomberg's Henry Wren. That is a part of the story, right? So in that European session, the stock's off lows but down more than 10%, Henry. The other part was the CFO saying, our customers are really worried about tariffs right now. Give us the summary.

8:17Yes, yes, indeed. So usually every quarter when ASBell trades, it trades about its orders intake number. This quarter, the order intake number is satisfactory. It beat estimates. However, one line in this press release really caught traders' attention and that CEO saying that although the company is still preparing for growth for 2026, the company really couldn't confirm that at this stage. Because that contrasted with the company's messaging about three months ago saying that based on its client conversations, at that time, 2026 was still expected to be a year of growth. So this really dampens the sentiment, as you mentioned.

8:55We see sell-downs in some other chip equipment companies today as well, including Applied Materials, KLA in the US, as well as ASMI, B Semiconductor as well in the Netherlands. What about the Corsagon? Is there any sense of how the health of the business is right now? Yes, so let's focus on the EUV first, because that's the most important growth factor for the company. and according to the order intake that we've been seeing in the past quarter, it does seem that TSMC has been putting into more orders, which is ASML's most important customer. However, for many other customers, the uncertainty level is on the rise.

9:37We talked about, you know, the Trump administration is backtracking many of its eye-watering tariffs. However, based on the conversations ASML has with many of its clients, it does seem that the uncertainty level is on the rise rather than on the decline. Esmail explained that it's because of two reasons. On the direct side, you still have this Section 232 investigation going on on the U.S., which means the tariffs imposed to chips and chip-making equipment is still unknown. And on the other hand, you have this tariffs impact on the economy, which many chip-makers are more concerned about. So on the direct and indirect side, the company is getting more cautious.

10:16Its customers are getting more cautious. So that's probably why you see the company walking back its guidance a bit today. Bloomberg's Henry Ren out of London. Thank you very much. Let's get to the chip and AI sectors in greater depth with an investor, Jay Hatfield, CEO, CIO of Infrastructure Capital Advisors. It's hard to know whether to start on trade and policy or the politics of the day between America and China or the idiosyncratic that Henry was going through. But right now, tariffs seems to connect all of those things. What are you seeing across the technology sector in how investors are responding to tariffs, but also how the companies themselves are communicating the impact?

10:58Thanks, Ed. It's great to be back on. Well, the way we look at tariffs is they're actually very positive for the US and very negative for the rest of the world, and you're seeing that today with ASML. But U.S. companies are mostly, except maybe Apple, mostly unaffected by the tariffs. A lot of them have local manufacturing. So you continue to see tech stocks lead the market. But what I think most people are missing is the revenue benefit to the U.S. So we're forecasting$300 billion of revenue from tariffs, which is really the run rate right now. And we're also forecasting that the budget deficit declines next year to$1.4 trillion only.

11:42That's only 4.5 % of GDP. So nobody else is really looking at those numbers. It is good for the U.S. to collect revenue, pay down or have less of a deficit, which ultimately will be invested and help the economy. Jay, I think the top story over the course of several days has been NVIDIA, the world's most valuable company, now being more free in a limited way to sell chips back into China. It's a headline and it's a single company. But what does that signal to you on the policy side about how America will continue to trade with China? Well, I think what you're seeing is that the Trump administration, notwithstanding the tariffs, which can be negative for a lot of companies, and trade restrictions, which hurt NVIDIA three or four months ago, is that they are pro-business.

12:32And if you lobby the administration, they are open to changing policy. So ultimately, that's going to support the stock market. It's going to be bullish for tech companies. So they're just way more practical than the prior administration and way more pro-business. You track a series of economic indicators, right? What is your projection on the net effect of this administration's policy Do you see growth near medium term, long term? Or what do you think we're being set up for going forward on the fiscal side? Well, it's fairly complicated because tariffs are negative for the economy in the very short run because you just take, it's really like a sales tax.

13:16So you take buying power away from consumers. But the real issue is the Fed is misanalyzing tariffs. They're not treating them as one time. they're sticking with their archaic expectations theory of inflation that tariffs might cause expectations and spiral out of control which we think is right no longer would jace no longer let me ask you this that's your view on this current Fed administration right I have to acknowledge that in the markets right now there is movement across assets on the reports and speculation about what the administration may or may not do vis-a-vis Fed Chairman Powell, right?

13:57I think we see that in the markets. What do you make of that, a potential change? And I'd note for our audience, right, this is Bloomberg Tech. We talk about tech companies that are valued on their future earnings. So rates impact that equation, right? Take it from there. Well, we actually have a differentiated view that if, in fact, the Fed chair gets replaced, Of course, the stock market probably would react negatively. That would just be a buying opportunity for a couple of reasons. First of all, the Powell Fed has been tremendously behind the curve. They use a flawed CPI, so they're always about two years behind the curve.

14:35But also, a new Fed chair is not going to have super loose monetary policy. They just have normal monetary policy. And they have to deal with the existing board, which has the core board has four Democrats on it. So they're not going to be all powerful. They're not going to lower rates too quickly. And it's important to note that rates are ultra tight now. So we really, really need a cut. That was in the context of media reports on the president's consideration of whether or not he can or will fire Fed Chair Jay Powell. Bloomberg's not verified that reporting. But as we discussed, Jay, we see it in the markets.

15:11Jay Hatfield of Infrastructure Capital Advisors, great to have you back on the show. Thank you. Now, coming up, Mark Zuckerberg is set to face off against Meta shareholders in a trial over the company's handling of user data. We're going to get the details next. This is Bloomberg Tech.

15:40meta today is in court in delaware over allegations from shareholders related to the fallout from the cambridge analytica data mining scandal i want to go to brunberg's riley griffin who's here in sf Okay, so the trial is underway. What is the context and the basis of the trial? Who's involved? What do we need to know? And this is a case that is not just about privacy, but it is about power. Mark Zuckerberg is expected to testify alongside former COO Sheryl Sandberg and board members about the Cambridge Analytica scandal, which has had quite a long shadow over Meta. But in this case, Meta is not a defendant.

16:17Actually, just the executives and the board members are. And the shareholders in this case are looking to hold them financially accountable for the fallout of that scandal. Okay. History is important here. Like earlier in my career, Cambridge Analytica scandal was a big story. What are the basics of it that our audience who may or may not know need to know? Yes. Years ago, this was a case where Cambridge Analytica firm had harvested data of millions of Facebook users. Inappropriately, this firm had ties to political operations, the Trump campaign, and ultimately Facebook had to pay a multi-billion dollar settlement to the FTC for that data breach.

16:56Okay, what are the shareholders actually accusing the specific executives of then? If it's not the company that's a defendant and it's those key names, what is it the shareholders want? Yeah, negligence, a lack of oversight over the company's actions during that time. Now, remember, Mark Zuckerberg has total control over the company via his voting power. He has the majority control over votes and essentially can set company direction. And shareholders here are saying that these executives didn't do their appropriate duty, didn't follow FTC orders, and allowed this breach to happen knowing that there were certain risks at hand.

17:33I feel like there is a lot of litigation going on with Meta. It's hard to distinguish and work out all these different paths. This one's happening in Delaware. Why is it happening now? Again, I reflect that the Cambridge Analytica scandal was more than a decade ago, something like that. Yeah, so it's great that you bring up Delaware because what makes this an unprecedented case is it's the first time we're seeing a CEO and board members actually go to court. Usually these kinds of things are settled or negotiated behind closed doors. And we're actually seeing this trial take place in Delaware, and it really has ramifications for all companies out there, whether or not Mark Zuckerberg and other executives are having to pay billions in dollars for this scandal.

18:21Now, one thing we need to remember is this is a really hard case to win. These Caremark claims, the battle is uphill, and it could set the direction for whether Meta ultimately reincorporates outside of Delaware in the future. So, Riley Griffin of Bloomberg News and Bloomberg Tech, you're kind of like six months into this beat of covering meta and so much has happened in the first half of the year. What I would like to get from you is Mark Zuckerberg himself. Like, he actually does appear and gives testimony in the context of litigation or if it is a political hearing, something like that. He often will stand up and speak, right?

18:55Yes, and that's an evolution of his career. What we've learned from our reporting and my reporting over the last six months has been that Mark Zuckerberg really wants to take legal fights to court now. This is no longer a time where he wants to just settle, but he wants to set the precedent that Meta can win these cases. And in this case, he can. You wrote an extensive and deep piece in Businessweek about the kind of magification of Mark Zuckerberg. I really encourage the audience to go out and read it. But you mentioned that the evolution of his career. there's also been an evolution of him personally, politically.

19:31Could you summarize what you learned through that? No apologies. This is something he... From him, that's his vibe. That is his vibe. He has said this publicly. He said it privately. He has done apologizing for scandals of the past and ready to move on and really dominate the space. And that demands winning, whether it's on the legal front or politically speaking. So the big news this week in Meta's world has been this commitment for massive, massive scale data center. You know, I broke the story this morning. We're going to do it later and show that XAI is looking at Saudi Arabia because you need the capital, the space, the energy.

20:04But what Meta is doing, you know, the image that they give is it could cover Manhattan, the scale of what they want to do. Summarize it as best you can and what our read on it was. Yeah, so hundreds of billions of dollars. That's how much Meta is expecting to spend on this AI race to beat out the competition. Over time? Over time, over time. We know that this year, as of the last quarter results, they're expecting to spend as much as$72 billion in capital expenditures, a lot on data centers, as you mentioned. And we're seeing$200 million pay packages for AI talent. They're poaching from OpenAI.

20:39I mean, this is a relentless race, and Meta is putting all the capital it has on hand to win it. Bloomberg's Riley Griffin, thank you very much. Some headlines that are crossing the Bloomberg terminal. President Trump is likely to fire Fed Chair Powell, according to White House officials and Bloomberg's reporting. That could happen soon. Bloomberg also reporting that Trump spoke to lawmakers on Tuesday about whether or not to oust Powell. I'd note some of the market reaction. We're showing the Bloomberg U.S. dollar spot index, The dollar spot index raising gains after that report, also seeing treasuries pair gains after earlier reports.

21:16We'll continue to bring you what we know throughout the day. All right, coming up, we're going to discuss the fate of the Genius Act stablecoin bill. That's with Kavita Gupta from the Delta Blockchain Fund. This is Bloomberg Tech.

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24:20Let Cincinnati Insurance make your bad day better. Find an independent agent at CINFIN.com. Crypto stocks rising along with Bitcoin after President Trump said the House of Representatives will pass the Genius Act stablecoin bill today. This after a procedural vote failed yesterday. I want to get out to Kavita Gupta, general partner at the Delta Blockchain Fund. There is some political wrangling going on, but it looks like the Genius Act stablecoin bill moves forward. Why is it important it does so? Hi, Ed. I mean, Genius Act is basically putting a basic structure of what stablecoin should have already been a long time back.

24:59The Stablecoin Bills or the Genius Act actually provides any companies who are doing stablecoins the rules and regulations around how to really release them, how much collateral do you want, what sort of underlining transparency and accountability associated with it should be there. And I think those are the things which companies like Circle were always watching. But putting a standard structure would help a lot of fintech companies, like whether it's Square, Block, or a bunch of other financial companies, to actually release it in a right way. We've been asking ourselves, when this bill passes, what happens next?