Nvidia, AMD AI Deal, Intel CEO to Meet Trump

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1:40Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco.

1:51Caroline Hyde:This is Bloomberg Tech. Coming up, NVIDIA and AMD agree to pay 15 % of their revenues from Chinese AI. chip sales to the US government. Plus, Intel CEO Lib Wutan is set to visit the White House today, just days after President Trump called for his resignation. And lithium prices and stocks spike after CATL halts operations at a major mine in China. But we return to these public markets. And Ed, this is an entire show really focused on the semiconductor world. So I bring you the chip sector in particular. And I'm looking at the stocks, of course, the Philadelphia Semiconductor Index is currently up almost a percentage point.

2:31We're coming off of our highs, but really a focus on the macro picture right now. We're near record highs for stocks. Bonds waver. We're looking at inflationary data, but we on this show are looking at semiconductors. Dive into them for a moment.

2:42Caroline Hyde:There are so many chip stories. Micron is raising its guidance for the current period because of pricing power, particularly in DRAM. There's a lot going on in high bandwidth as well. Intel is up 4.8%. Its CEO, Lit Boutan, is off to the White House to meet with President Trump will bring the reporting later in the hour. Then the top story, NVIDIA and AMD, according to a Bloomberg source, have agreed to give the United States 15 % of any revenues from chip sales to China, AI chip sales to China, in exchange for export licenses in what is a very clear quid pro quo. Cara? It is unprecedented. Many people say let's get out to Bloomberg Balancer Power host Joe Matthew, whom we welcome to the show for the perspective of the administration.

3:28Why do this, Joe? Well, boy, it's a great question. It is unprecedented. Remembering the golden share that the White House scored in the Al Nippon takeover of U.S. deal. This is a whole new level, and it's raising a lot of questions, beginning here in Washington, at least, with national security. Wall Street might have slightly different questions here, but of course, remembering that these chips were going to be off limits to the Chinese, and it's something that we've talked about a lot here on the air. That was only a couple of weeks ago. Then you saw the turn to making them available. The licenses, even after that moment, were not actually being given to NVIDIA or AMD for a couple of weeks.

4:06So this apparently unlocks the license. But my goodness, the role that the administration is now playing in business, I think we can say openly that the U.S. government is now part of the semiconductor industry. They're invested in the business. And the big question is, where's the line? If 15 percent is enough to get The H20 is on sale in China. Is there a number that Jensen Wang can come up with to sell even more?

4:30Caroline Hyde:I want to point out that AMD has not said anything about this reporting. It was first the FT, then it was us. NVIDIA has said something. They've said a lot, actually, but they haven't addressed the 15 percent number. To your point, Joe, what they've indicated is that so far, at least I think in this fiscal year, they haven't shipped any H20s to China. So that's important for Wall Street to kind of model for. But boy, they're kind of indicating that they're getting what they want in some sense, because China is such a key market. And the president seems right now, if this reporting is accurate, to be willing to oblige them because he's getting something in return.

5:07Caroline Hyde:He's done a deal. That's right. He's done a deal. And this is the same president who just days ago, of course, asked for the resignation of the Intel CEO. As you mentioned, Lip Bhutan is at the White House today. And it had us last week asking the question if President Trump is, in fact, the chairman of the board at any major company. We've seen him do this before, calling for boycotts of certain goods, calling for personnel changes, calling for policy changes within companies. You've certainly seen the impact that he's had when it comes to DEI. But actually exchanging money with these companies is a whole new prospect.

5:39And it's unclear exactly where this 15 percent would go. Will that be used to pay down the debt or do something else in terms of national security? We have a lot of questions that remain. The president, by the way, is briefing reporters right now at the White House talking about crime here in the city and his effort to federalize Washington, D.C. It's a very separate and big story here, but they will go to questions. And I suspect that these will come up today.

6:02Caroline Hyde:We suspect so, too. Bloomberg Balance of Power host Joe Matthew, thank you very much. Let's get more on the reaction to the NVIDIA and AM deal with Riva Goujon. She's a director at Rhodium Group, an independent research firm that analyzes economic and political issues, including those relating to China. Reva, you have more than two decades of experience as a geopolitical strategist advising companies on what on earth is happening around the world. Have you ever seen the United States impose what is essentially an export tax in exchange for those companies being able to export technology to a specific market?

6:38Well, unorthodox is an understatement here, right? And there's that whole pesky detail of what about Article 1, Section 9 of the Constitution that says no tax or duty shall be laid on articles exported from any state, meaning any part of the U.S. government to include the executive branch. So, yeah, we're in uncharted territory here, but it does fit with a highly transactional administration. But as you just referenced earlier, what is exactly the line here? If the administration is driving toward revenue generation, not just in trade policy with tariffs, but even in export controls, right, to include high end semiconductors.

7:18what's the line on what is considered too advanced, right, as it balances against this revenue generation goal? Let's just repeat that now we've heard from NVIDIA. We are hearing from AMD as well saying that an initial China licenses have indeed been approved and AMD in confirming it received the China AI chip export licenses and something that we quizzed Lisa Su on just last week after her earnings. And it's what the market really wanted to hear about, Riva. But go further a little bit here as to ultimately companies looking to sell into China, thinking longer term whether they'll remain to have access.

7:55The response from China thus far has been one of concern about the amount of information and so-called backdoors they've been questioning, particularly with Jensen Wang. Well, Trump has made himself intrinsic to the U.S.-China chip whores. So now we need to see how far this actually goes. Liputan is going to be in the White House. Can he pull off a Jensen? That still remains to be seen. But Intel has a lot of problems attached to it. And there is an American imperative to create an American chip champion out of Intel's setbacks. And so I think there's a lot more deal making to come out of that as well.

8:30But, you know, with this level of transactionalism, there's always a degree of uncertainty of how long does this actually last? If we are applying a sliding scale to chip sales to China, then at what point does that start to retrench as U.S.-China AI competition is undoubtedly intensifying? We're still in the early stages of AI diffusion as we start to see more of these physical AI applications become more real, right? as we wrap our heads around that, as we wrap our heads around the competitiveness issues around that, the critical inputs where China still has intense leverage, will we start to see a delayed reaction in the U.S., that freak-out moment, so to speak, where these kinds of controls could fall back to a more restrictive nature?

9:17River, push us forward. How has the American president decided to forego national security concerns for a billion dollars at least per quarter coming from NVIDIA, if our math is right, and what 15 % earns them? Or do you think that they can manage to in some way location track and understand what really ultimately gets into the Chinese tech stack and how it is used? Well, there are a couple different issues here, right? H20s are optimized for inference compute. So the assumption that the administration is making here is that inference compute is not the chief national security concern. Now, that raises a question, again, if Huawei is able to produce comparable chips to NVIDIA or AMD, will we see U.S.

10:05chip controls ease to allow U.S. technology complete head-to-head with Huawei? So, again, where is that line drawn? But still, we're in a highly transactional phase here. And so we need to see just to what degree is the U.S. going to be concerned about those end uses? And again, the economic competitiveness concerns are still in play here.

10:29Caroline Hyde:I don't know. H20 can be used for training. You know, it's had performance engineered out of it. But I know, you know, talking to a lot of people inside the company, there are lots of questions here. You said something a minute ago, doing a Jensen or pulling a Jensen. I find that so interesting because his principal argument in line with what we've just debated about H20 is if you don't export American technology, China will use a domestic champions technology and then they'll start exporting it to under international markets. Forget the revenue side of this for a minute. Is this smart by Trump to kind of have the PR effect of allowing them to export technology to an economic adversary and at the same time doing a deal showing that he's got something out of it?

11:14It's a slippery slope. And as we're seeing, the preparation for a U.S.-China summit between Trump and Xi. What is Beijing thinking at this point? Obviously, it wants to take advantage of this highly experimental transactional phase. So what is it going to push for? We know they're pushing for an easing of the 20 percent fentanyl tariffs. On the chip controls front, they're going to want to push for an easing of high bandwidth memory chip restrictions. Now, that's really tricky, right? Because if you start to say, OK, because Chinese memory chip makers are becoming competitive in this domain, that the U.S.

11:51will allow Micron, for example, Samsung SK, to export these chips to the U.S. That doesn't help NVIDIA because Huawei is getting access to HBM chips that are going to improve its production. So you see a selective application of that sliding scale approach. And the U.S. so far is also not easing semiconductor manufacturing equipment controls. So the tools to actually make those chips, if the U.S. imperative is to throttle Chinese chip production, really constrain that so that U.S. companies like NVIDIA and AMD can flood the zone in the Chinese economy, get the Chinese technologists addicted, so to speak, to U.S.

12:30tech. You don't necessarily want to help Huawei in its production either.

12:36Caroline Hyde:How do you anticipate China is going to respond to this? Well, China has a ton of leverage at this point with the critical raw material, the rare earth licenses. And if you look at comments from USTR recently, Jameson Greer, and what you can see from those talks is that that issue of licensing for critical input seems to be a major theme of the U.S.-China bilaterals. So if the U.S. raises threats on tariffs or raises technology controls in any significant way, China can basically say, look, the terms of Stockholm or whatever European capital, they're off and you're not getting your licenses and your production lines are going to be paralyzed.

13:17And good luck with your manufacturing ambitions, right, for this big AI renaissance, for your manufacturing renaissance. We hold the cards. And at least for the duration of the Trump term, that is an uncomfortable truth. Riva Gujon, director at Rhodium Group. Fascinating to talk to you. Thank you. Now, coming up, Intel CEO, Lit Bhutan, we just mentioned it, reportedly going to be meeting with President Trump today. That story's next, Ed. What are you looking at?

13:43Caroline Hyde:Yeah, I'm going to take another look at Micron because shares are pushing higher. Again, they've upped their guidance for the current period, saying that adjusted EPS will be up to$2.92. Previous end of their guidance at the top range was$2.65. But it's all about kind of favorable DRAM pricing because margins also looking better as well. Again, this is a company that wants in on this great build out in data center in particular, but its historic business has been so commoditized and cyclical. But investors in this moment really like what they're seeing. Micron up three and a half percent. We'll be right back.

14:17Caroline Hyde:This is Bloomberg Tech.

14:30Caroline Hyde:intel ceo litbu tan is set to visit the white house today this just days after president trump called for his resignation due to potential conflicts of interest bloomberg's ian king joins us you've also kind of gone deep on like where litbu fits in right now with intel strategy with the white house but what do we understand that he will be discussing with president trump when he's in D.C. later today? Yeah, I mean, it's still TVD, obviously, but there's an awful lot going on in Washington right now regarding chips. But fundamentally, what the Trump administration wants is an affirmation that all of these projects, all of this physical building of semiconductor plants in the U.S.

15:09is going to go ahead. They don't want any sense that, oh, maybe we will, maybe we won't. And that has been the message that kind of Intel have delivered recently because from Wall Street's perspective, we don't want to build these factories until they can actually fill them. So there's kind of a push and pull there, whether their investors want one thing and frankly, the White House wants another. So the topic has got to be how do we get the two sort of positions closer together? What kind of language can Intel come up with that will keep the White House happy and also not scare investors? Ultimately, Ian, what would scare investors?

15:47a lack of access to the chipsack money, a pullback more broadly from fabrication in the US? Or is it more worrying that they're going to be plowing money in before the demand is certain? Investors really don't care where chips are made. They care whether the companies who are making them are making money or not. Building plants when you don't have orders is not a good way to make money. It's a way for your company to go out of business. So that would be their position. Ultimately, though, there is a lot of realism out there. And obviously, as we're discussing, the supply chain is becoming more complicated and the geopolitical imperatives are becoming stronger and stronger.

16:25So there will be some understanding that, hey, maybe we do need to build out capacity. But Intel has a lot of capacity in the US already. So why does it need to build these mega factories unless it has orders? What they want from Intel more than anything else is, hey, we've got some giant customers who want to use our factories. The moment, Intel cannot say that. Ian King, always across the reporting, we thank you so much for more on Intel and look at the broader chips sector. Joanne Feeney is with us, advisors, capital management partner, portfolio manager. Joanne, what is it that you would like to see Lit Bhutan manage to navigate today?

17:00Is it better that he promises more investment into the U.S., more manufacturing, and that he has extricated himself from China? Or ultimately, does he even need to stand down in some way as CEO? Yeah, it's really unclear, Carolyn. Obviously, I think he can defend himself from the concerns that he's conflicted, and that's his main mission today. I don't know if that means he needs to do more to separate from his prior work and investments. I don't know how much capacity he has to do that. I think Ian is right that the administration wants to be able to continue to push the narrative that they are doing something to bring more chip manufacturing back to the U.S.

17:40And so his announcements of less investment or delayed investment is a concern to the administration. But they don't have the customers yet. Maybe he can say, hey, we've got these guys on the line. We're reeling them in. Maybe that would be reassuring. But ultimately, Intel needs to keep those subsidies, but not at the cost of having to spend so much CapEx in the near term when they don't have customers. So a very fine line for the CEO to walk here.

18:08Caroline Hyde:The stock's up 6 percent. So the market likes something about the idea that Lit Boutan is going to go to D.C. and meet with the president. Present day, you're a fund manager looking all across tech, but you had a long career in semiconductors. Lit Bhutan also has had a very long career in semiconductors. A lot of this affiliation with China or indirectly has been well known. Were you aware of it? Do you understand his history? Yeah, I mean, you know, I don't know him that well, but I think the public information about his prior work is pretty clear. He's obviously very highly respected. He was brought in by the board to take Intel in a different direction, one that is more measured, less capital spending forward.

18:50than Pat Gelsinger wanted to do. And so it's just worrisome, right, that he might have to be removed because of concerns that really aren't well-founded. So he seems like he's a very good person to run Intel at this point, and Intel desperately needs the help. They need to take that company in a different, more streamlined, more efficient direction while they sort out the recipe for designing and manufacturing chips, which was a huge stumbling block for them. And that's why they're in the position they are, why AMD has taken so much share from Intel over the years in server chips and elsewhere.

19:31So, you know, this is something, this is a company we would avoid. We are avoiding at this point. We don't think it's a good place for investor money. There are just way too many uncertainties about the potential of Intel to make a comeback. Meanwhile, the uncertainties loom large about access to China and what you have to pay to do that from an AMD and an NVIDIA. but an uncertainty you're willing to swallow if the underlying tailwinds are still so strong. Make of it what you will. Tell us what you thought about the AMD and NVIDIA deals. Yeah, so clearly, right, the companies need act. The companies are better off with access to China than without, even with the 15 % export tax.

20:09The potential revenue at risk,$30-ish billion for Intel,$6 to$10 billion for AMD, likely to potentially grow over time. So to pay 15 % on that, it's going to cut into their margins to some degree. They probably get a 50%, 60 % gross margin on those sales. I think that they're going to have to swallow this. They're charging what the market will bear right now for those chips selling into China and elsewhere. I don't think they'll be able to pass on this export tax to the Chinese customers. They're charging them as much as they can get away with already. So it's definitely going to be a hit to margins on what is a minority, part of their businesses.

20:52But it's better to have access than not. And I think the stocks are up because maybe this resolves the uncertainty. Maybe people will say, OK, they're going to have to pay this. But hey, now we can rely on the fact that they'll have these export licenses. Whereas before it was this sort of vague national security concern. No, you can't sell ships to China. Now that's gone away. It's clearly not a national security issue. if the government is willing to let them pay a fee to gain that access.

21:18Caroline Hyde:AMD put a statement out this morning saying they have an initial export license. They didn't address the 15 % revenue split. NVIDIA put out a statement saying they've not yet shipped any H20s to China for months, but they hope to. Can you and your desk analysts start modeling for some real China revenues in the near term from both those companies? Yeah, I think, well, you know, from what we know, yes. I mean, it's good that AMD has confirmed they have the licenses. So I think we can. We would definitely model in that 15 percent hit to revenue. And it's not clear, by the way, where this goes legally.

21:53Right. It's unconstitutional to impose an export tax like this. But it's not clear who would have the legal standing to object to the tax. And clearly, NVIDIA and AMD aren't going to because they don't want to up unbalance the apple cart here and risk those export export licenses. But perhaps, you know, one of the business associations does. This is unclear whether this shouldn't stand. But, you know, we're seeing more and more of these kinds of pay-to-play arrangements by the U.S. government that could increasingly, you know, put a tax on businesses. And it should be known, this isn't ex-post tax, right?