Nvidia Delivers Upbeat Forecast to AI-Wary Market

13:32Sridhar Ramaswamy:But we also add the secret sauce of data of how Snowflake works into products like CortexCode. And we are seeing amazing wins both internally and also externally. one of our partners told us that having Cortex code was like Snowflake supplying them with bulldozers where previously they had showers. Shrida, one of the core pillars for you to grow is to go out and find new customers. And I wondered if you just give some detail on what's happening in the world of technology in AI that would bring a customer to Snowflake for the first time. What is it that they need that they didn't before?

14:10Sridhar Ramaswamy:Typically, they come to us because they need better insight into data. It is sitting somewhere. It's hard for them to get these insights. But increasingly, what we are able to do is have our sales team build an honest-to-goodness customized demo of something like a snowflake intelligence on the kind of data that a customer is going to have. It is that easy access that really is the big winner for our customers. And smart customers are also quickly realizing that having data in Snowflake means that they can think about how this data is going to be used in ways that they had not done before. Sanofi, which is an existing customer, is now using Snowflake intelligence or AI products to redefine a lot of workflows, replacing a lot of existing software.

14:59Sridhar Ramaswamy:These are the use cases that drive these customers to come to Snowflake and adopt it. Sridhar, last night, Jensen Wang, who you know very well, talked about profitable tokens. The idea that the output of an AI model is worth paying for, customers do pay, and they pay at a price that is greater than the compute used to generate it. Are you able to give me any evidence through Snowflake's lens that you actually see that in the real world? Well, what I can assure you is getting projects done has been changed dramatically. Something like setting up a pipeline used to be a multi-week task. We can get that done in a small number of hours.

15:41Sridhar Ramaswamy:My teams come to me just last weekend with speed ups going from four weeks for a software engineering project that they did down to 40 minutes. That is 100x speed up. And we are happy to spend any number of tokens in those 40 minutes to save that kind of time. I think coding agents are really quite magical in the value that they deliver. And I think it's only going to accelerate from here. And so these investments are going to be pretty foundational in every company succeeding and thriving. And that's why we are so bullish about CortexCode.

16:17Ed Ludlow:And how much are you having to invest in your own business? I mean, the bullying case for many is you need to keep up with a furious pace of innovation. Can you at this moment briefly?

16:26Sridhar Ramaswamy:We can because we are organized to drive rapid innovation. The team that is driving a product like Snowflake Intelligence is not that large, but we have structured it in such a way that they can make rapid progress. And it is more the meta structure of how you set up environments where people can get work done quickly and effectively. that matters a lot more than things like how much hardware you're investing in and things like that. The current moment is magical because all of us have access to great tools. It really comes down to how effectively we set up teams and projects to get things done.

17:01Sridhar Ramaswamy:And that's why we are very bullish on how we have set things up at Snowflake, because we now have a demonstrated capability to be right at the cutting edge of where AI is having impact. Snowflake CEO, Sridhar Ramaswamy, great to have you back on Bloomberg Tech. Thank you very much. Now, coming up continues, and this time it's with Hollywood. We'll discuss results from Warner Brothers and Paramount. That's next. This is Bloomberg Tech.

17:29Caroline Hyde:Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, Go see the record for yourself at vanguard.com slash audio.

18:11Caroline Hyde:That's vanguard.com slash audio. All investing is subject to risk, Vanguard Marketing Corporation Distributor.

18:37Caroline Hyde:as the day gets going.

18:38Sridhar Ramaswamy:From Brussels, I'm following the politics, policy and the people shaping the European Union right now.

18:45Caroline Hyde:And from London, I'm looking at what all that means for markets, money and the wider economy.

18:50Sridhar Ramaswamy:We've got reporters across Europe and around the globe feeding in as stories break.

18:55Caroline Hyde:So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens.

19:00Sridhar Ramaswamy:It's smart, calm and to the point.

19:02Caroline Hyde:And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube or wherever you get your podcasts.

19:18Ed Ludlow:For decades, people travelled across the world to see John of God, desperate for cures no doctor could offer. And when they arrived, they saw things they couldn't explain.

19:30Caroline Hyde:This is real. This guy's actually doing surgery and it's a miracle. I never believed that miracles were real until that point.

19:39Ed Ludlow:But behind those adoring crowds was something much darker. One of the reasons why I never went to the police is because I saw at least five or six men with guns everywhere he went. That was clear to me, like, close your mouth, don't open your mouth, don't say anything. I'm your host, Martina Castro. And in the podcast Two-Faced, John of God, we'll look back on a man who claimed he could perform miracles and got people from all around the world to believe him. From Exactly Right and Adonde Media, this is Two-Faced, John of God. Listen on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

20:19Caroline Hyde:Our board continues to lead a rigorous, highly competitive, and thorough sales process. We engaged with four bidders, which led to eight price increases and have thus far achieved a 63 % increase in value versus the first offer received in September, delivering significant value for WBD shareholders throughout the process.

20:45Ed Ludlow:Warner Brothers Discovery CEO David Zaslav there discussing the progress of deal talks. An increased offer from Paramount has renewed the takeover tension, and it comes as Warner Brothers posted a 6 % decline in revenue during the fourth quarter. Paramount, Skydance also came out with its numbers. Let's bring in Bloomberg Media reporter Hannah Miller. And all of this speaks to still profitable cable companies where they're trying to subsidize basically revenue, profits not showing up in streaming thus far. But subscriber growth is there. Yeah, the subscriber growth is there.

21:16Caroline Hyde:And, you know, Warner Brothers has made a point that they want to build up that subscriber count. They're shooting for 150 million people for their streaming services by the end of this year. And, you know, we have seen these gains. But again, they're overshadowed by the fact that revenue earnings have declined compared to last year.

21:36Sridhar Ramaswamy:There's also this idea of like what's happening with the bottom line and we can't get away from what's happening in the background. You know, it's awkward when you have company earnings and all the players involved are in a kind of bidding war. Did they explain any of that, Hannah?

21:49Caroline Hyde:Yeah. So, you know, all these earnings results, they've been overshadowed by this bidding war. And we saw on both earnings calls that, you know, the CEOs were like, we don't really want to comment on this. Things are still underway. What's happening right now is the Warner Brothers board has to determine whether or not the Paramount's most recent offer could be considered superior to their current agreement with Netflix. If they do make that declaration, Netflix has four days to respond with either a sweetened offer or just bowing out.

22:21Sridhar Ramaswamy:Bloomberg's Hannah Miller, who's been across all of this in real time. Thank you very much. Let's move on to another big media named Paramount. It posted$8.15 billion in revenue in the shares. Again, it's kind of interesting. They're reacting significantly. We're up 11%. Are we up 11 % because of the health of the business in the content of earnings, or are we up for another reason? Let's discuss with Laura Martin, senior entertainment and internet analyst at Needham & Company. Laura, you're recommending fundamental investors, hello, remain on the sidelines. I just showed the chart. Maybe they'll bring it back up.

22:52Sridhar Ramaswamy:It's up 11%. Reconcile that, please.

22:56Caroline Hyde:Right. So, I think what Wall Street likes is the fact that this company is subscale, and it looks like they're more likely to win the bid for Warner Brothers, which would then not make them subscale because they would be like a third of total linear channels. They have owned two of the largest film studios. And so, and really their revenue was up 2%. They had a lot of positive comments about UFC, which was their top rated streaming channel and streaming revenue was up 17 % Paramount plus in the fourth quarter. And it should, so, I mean, all of those numbers fundamentally were better. At least this business is growing.

23:35Caroline Hyde:Warner Brothers is shrinking, but Paramount Peace Sky is growing still.

23:39Sridhar Ramaswamy:I think we'll get to Warner Brothers in a moment. Like really simple question. And it comes from a sincere place. A lot of our audience have this. Based on what you've just outlined with Paramount Skydance, what does doing the deal with Warner Brothers Discovery, the whole entirety of it, fix or improve or accelerate? Okay.

24:00Caroline Hyde:So if they don't win, And if Netflix wins instead, they're an$11 billion market cap company, and their primary competitors will be Netflix, which if it buys Warner will be a$500 billion market cap, and Amazon and Google, which are$3 trillion round numbers. So it's competitive, it will be more subscale than it is today. If it wins Warner Brothers, it suddenly combines and cut costs from several of the largest streaming company, several of the largest, it will be 30 % of total linear TV ownership, and it will combine, it will have two of the biggest studios. So there's a lot of cost cutting in that, and it will not be near as subscale.

24:39Caroline Hyde:Round numbers, it will be around the same size as Disney and Netflix if it wins Warner. So it basically makes it a legitimate competitor to those other streaming companies.

24:51Ed Ludlow:And I think what Paramount Skydance, Laura did in its numbers was showed they can cut costs. And then some, certainly when it comes to the cable part of the business. How much does it need Warner Brothers Discovery?

25:06Caroline Hyde:So good question, because price is the thing you're not asking. But strategically, it must have Warner Brothers Discovery. But of course, you know, we do stocks and we do valuations and they're paying an awful premium for a shrinking business, as you saw. Like every single business segment. Advertising was down a lot at PeaceGuy. So some of their businesses at Warner Brothers are shrinking, or a lot of them are shrinking, actually. So, I mean, their buying of businesses is weakening fundamentally every single quarter, and they're paying PeaceGuy, bidding higher and higher values, which implies they're not going to get a good price on this asset because of the bidding war.

25:47Ed Ludlow:I mean, Laura, you're all about the fundamentals. But if they do have to pay over and above, they have to go to$32 for Warner Brothers Discovery. Is that a good deal fundamentally for the business longer term? And given maybe Netflix happens to be able to push them there? You know, I think the answer is, if they didn't have a billionaire behind this, I cannot imagine

26:11Caroline Hyde:an investor, a venture capitalist, a private equity guy, or public markets funding this stock price. But you've got a billionaire sitting behind them, and he can spend his money the way he wants.

26:24Ed Ludlow:I'm talking Larry Ellison, dad of David Ellison, of course, Laura Martin. It's always so great catching up with you. Thank you from Needham and Co. Coming up, more earnings. How are results impacting the AI disruption fears that engulfed this market, particularly in the area of software? We're discussing that next. We're also talking hardware. N, NVIDIA, we've got to talk about the Trump there.

26:45Sridhar Ramaswamy:Yeah, look, it's clearly having a drag on the market. We're not down as much as we were, but still down 4%. And like, it is a sentiment change. We've gone from basically muted on what was a beat, even against bullish buy-side expectations, to a very bearish reaction to what NVIDIA had to say about the durability of this AI spend. And there is a lot more to unpick, So much more analysis and reaction to come. It is halftime and this is Bloomberg Tech.

27:21Ed Ludlow:Welcome back to Bloomberg Tech. It is a big day in the markets because it's a big day of earnings and the number one most valuable company in the world has failed to impress. What more is NVIDIA to do? So by 3.9%, they saw 73 % increase in revenue for the quarter that they posted. for a giant that is worth$4.8 trillion. They say that that's going to accelerate to 78%. They see margins that are expanding as well, but yet the market isn't convinced. And still we see the stocks roll over across the board when you're looking at AMD down, Broadcom, Micron, the fourth hardware lower. Let's look at software though, because earnings have also been coming think of fast there, both actually in the green.

27:57Ed Ludlow:Snowflake, we just had the CEO one, talking about how they're able to be at the epicenter of the enterprise AI adoption. And for now, investors believe that. But I'm looking at Salesforce managing to turn around. It was down aftermarket yesterday. They posted$50 billion authorization to buy back shares. We're seeing an adoption of Agent Force that is now at$800 million run rate up from 500. We're up 2.5%. But both of these stocks have been battered over the course of the last few months then.

28:22Sridhar Ramaswamy:OK, let's get more on Salesforce's earnings and speak with Bloomberg's Brody Ford. And 24 hours ago when you were on the show, we were saying this is going to be about them evidencing organic growth versus inorganic growth. And actually, that did come up. They talked about whatever's happening in AI, the thing that they're offering will help them grow as opposed to just buying up other companies that are growing fast.

28:44Caroline Hyde:Absolutely. So, I mean, the big concern is that the core Salesforce products for, let's say, managing your Salesforce or managing your service, these are slowing down quite a bit. And so their new AI tools, they are making some money,$800 million per year at this point. Is that enough to offset the slowdown in the core business? I mean, they're in the green today, but we have to remember application software has been incredibly beat up this year. And if you zoom that chart out, it's still not an amazing picture.

29:14Ed Ludlow:It's an ugly picture, in fact, if you're looking over the course of the last 12 months, Brody. And in terms of agent force adoption, in terms of that average revenue run rate, are we seeing them being able to prove out that they're so intertwined, no one's going to be forcing out the platform, and it's more just a question of how much they can charge for it going forward?

29:33Caroline Hyde:They have proven at this point that agent force is a real product. People are paying for it. That was an open question six, 12 months ago. What's less clear is, do they have a ton of pricing leverage? are customers increasing total spend with Salesforce, right? I mean, is this a question of you're spending money on agent force, but you're not expanding your seats on the core platform? The jury is still out on whether generative AI means that leading platforms remain this kind of center of gravity.

30:06Ed Ludlow:Brody Ford, we thank you as always for talking us through software. Let's talk about how the markets are digesting all of these earnings. We're going to go back, of course, to NVIDIA's results as well with none other than Nancy Tengler, CEO, CIO, Fluffer Tengler Investments, who joins us on our birthday and also our Super Bowl day that is NVIDIA. But let's just start with software for a minute, Nancy. What do you make of the software numbers that we saw from CRM, that we see from Snowflake as well? Did they manage to push back on this disastrous fear engulfing the market that generative AI is going to eat their lunch?

30:40Ed Ludlow:Yeah, thanks, Caroline, for mentioning my birthday, goodness sakes. Pretending like I don't have them anymore. I do think that some of these companies are facing some really strong headwinds. We got out of Salesforce a while ago, not because we knew this narrative would prevail, but we just didn't see an exciting growth trajectory for the company. We also became a client. It was not a great experience. And so we canceled our contract. But in terms of software in general, I think some of these companies are going to win. And I've talked with you in the past about ServiceNow. We still own it. We added to it recently.

31:18Ed Ludlow:We think they are going to benefit from better margins in the future because they're pivoting and vertically integrating. But we got out of Adobe, and that was because we didn't see the company pivoting. And that was a number of years ago or about over a year ago. And so I think that's what investors have to digest is who are going to be the winners. and Salesforce will be in business, but they may not put up the kind of growth numbers they've put in the past. And we won't know for a couple of days because it was down pre-market, then it shot up and now it's falling back. So I think you have to wait for the hedge funds and the algos to settle in.

31:52Ed Ludlow:And then we'll see if investors come back to the name, long-term investors. It's interesting, Nassie, you call out ServiceNow. We know that you've called out before and indeed Jensen Wang has been on calling out ServiceNow himself as a winner. Now, see, go back to your own experience with using the Salesforce product. Why didn't you like it? Why did you cut it? What was it that we're not getting offered that keeps it sticky? So this is interesting, Carolyn. I think this is the story of this market. So we were going to use it internally for the obvious reason. And it took almost a year. They assign you to someone who helps you get set up and customize the product before we were even up and live, we had a price increase.

32:37Ed Ludlow:It was very clunky. It was not a smooth process, a lot of hard sell, not a lot of delivery and service. We are shifting our investment management software away from Advent to Ridgeline. Ridgeline was founded, built from scratch, new technology, founded by David Duffield. He made the pivot. I mean, he still obviously owns tons of shares in Workday, but that firm is a joy and a privilege to work with. So I think that's what software providers are going to have to do. They're going to have to service and show that they add value to the underlying business.

33:09Sridhar Ramaswamy:There is a link here between that and NVIDIA's earnings. Your main takeaway from the call last night is the same that we've been talking about all morning. Compute equals inference, which equals revenues. And the way that Jensen Wong explained that was profitable tokens. In other words, customers of all kinds are willing to pay for the output of an AI model and that actually the economics have improved. The thing is, I don't see any evidence of that in any of the software companies' earnings yet. Do you?

33:38Ed Ludlow:Not yet. I don't think so. Part of that is capacity, though, Ed. I mean, you heard Microsoft say they took some of their own capacity, but you heard them say, and Amazon too, we can fill whatever we get immediately in terms of demand. but they don't have enough capacity. So I guess I would look at it two ways. One is if you go back and look at CapEx in the 90s, it was about a two standard deviation above the mean spend in tech CapEx. We're not even one standard deviation away from the mean. And one man's CapEx spend is another man's revenue. So AMD, NVIDIA, Broadcom, names we all own, will continue to benefit.

34:16Ed Ludlow:And here's the last thing I'll say, 60 % earnings growth at NVIDIA, a PE of somewhere around 23 to 24. Procter & Gamble, 2 % earnings growth on next year's earnings and a PE of 24. So I know which one I want to own for the long term, but there's a lot of trading going on. There's a lot of hiding in the defensive names. That's what happens during this period. It happened last year. If you look at all these names after DeepSeek, where we thought the world was ending, I mean, we were buying NVIDIA at just over$100 a share. That's still a good investment. it.

34:50Sridhar Ramaswamy:You are an Nvidia shareholder. I think you continue to like the name, right? So what was your big takeaway from any of the earnings print or the call?

34:59Ed Ludlow:Yeah, I think no one's really talking about the growth in Sovereign, which is just getting started. So I understand it's a small portion of total revenues. It was$30 billion last quarter, up 3x year over year, though. And excluding China, right? Yes, yes, excluding China. I think that's important. And And the company, it's just like when Tesla's Megapack business got started, it became the fastest growing, most profitable business. I think we will continue to see these companies expand their reach and more compute is going to be more demand. And we are going, you know, I think he made a really interesting comment.

35:37Ed Ludlow:What if or what what if when we have 100 percent autonomous cars, let's call it 50 or even 35 cars that are autonomous? The compute demand is going to be great. And those data centers in space, while super intriguing intellectually and capture the imagination, that's not going to happen very quickly.

35:58Sridhar Ramaswamy:Nancy Tengler from Laffer Tengler Investments, thank you very much. Now, coming up, more earnings. We're going to speak with Chime CEO Chris Britt following that company's report. This is Bloomberg Tech.

36:10Caroline Hyde:I'm Carol Masser. And I'm Tim Stenevec, inviting you to join us for the Bloomberg Businessweek Daily Podcast. Now, every day, we are bringing you reporting from the magazine that helps global leaders stay ahead. We've got insight on the people, the companies, and trends that are shaping today's complex economy. That's right, Tim. We're all over global business, finance, tech news, all as it is happening in real time. And we've got complete coverage of the U.S. market close. Gotta say, basically, if it impacts financial markets, if it impacts companies, if it's impacting trends and narratives that are out there, we are on it.

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37:08Caroline Hyde:And I'm Tim Stanovic. Subscribe today wherever you get your podcasts.

37:15Ed Ludlow:For decades, people traveled across the world to see John of God, desperate for cures no doctor could offer. And when they arrived, they saw things they couldn't explain.

37:27Caroline Hyde:This is real. This guy's actually doing surgery and it's a miracle. I never believed that miracles were real until that point.

37:36Ed Ludlow:But behind those adoring crowds was something much darker. One of the reasons why I never went to the police is because I saw at least five or six men with guns everywhere he went. That was clear to me, like, close your mouth, don't open your mouth, don't say anything. I'm your host, Martina Castro. And in the podcast Two-Faced, John of God, we'll look back on a man who claimed he could perform miracles and got people from all around the world to believe him. From Exactly Right and Adonde Miria, this is Two-Faced, John of God. Listen on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

38:38Sridhar Ramaswamy:of growth, strong demand for digital banking products. Chime CEO Chris Britt joins us now. Actually, the other thing you're getting a lot of credit for is a technology story. A lot of the transition to your own tech stack, how you've managed the company. You don't need to grow headcount necessarily because of the focus and investment you've made on tech. Do you mind if we start with that and explain a bit about the strategy behind that?

39:02Caroline Hyde:Yeah, absolutely. And first of all, thanks for having me today. I'm so proud of this team and the way that we've executed. I think we're shipping faster than ever. And, you know, if you just think about this first year of this is the first time we're reporting as a public company, our full year results, and they were outstanding. You know, we, we added a million five new active members who are now at 9.5 million actives. We took the company public, we launched a range of new products, we launched a new business in our enterprise channel. And yes, to your point, we completed the conversion of our core processing and ledgering system onto our own in-house tech stack, top to bottom.

39:42Caroline Hyde:And that's really unleashed not only lowered costs, but also unleashed a whole set of new products and services for our members that drove awesome results for the year of$2.2 billion of top line revenue, growing at over 30%. And we got to a 10 % EBITDA margin in Q4. So feeling good across the board. And this technology platform really is an enabler for our future growth.

40:07Sridhar Ramaswamy:Last month, I was on your own website, you did this kind of blog post. It was, what is Chime? Chime is not a bank. And if you consider what the products you're offering are, a big part of where the street's focused on is new products coming to market and how you've monetize that. So you take Chime Card, for example, through that lens, explain what you are, but also how you've been able to launch a sort of wider offering of financial services as a fintech company. Right.

40:37Caroline Hyde:Chime at our core, we're a technology company. We partner with banks. And so when you sign up for a Chime account, think of it, you're basically doing, there's a three-way relationship between the consumer, Chime as the technology enabler and brand and the design and delivery of all the actual experience. And then the bank. So we have some community bank partners that actually hold the deposits in FDIC insured accounts for our members. And this approach has worked really, really well, particularly for mainstream American people that oftentimes live paycheck to paycheck, basically the population that makes up to about$100 ,000 a year.

41:12Caroline Hyde:That's the segment that we serve. And we offer a range of core banking services, fee-free checking accounts, the ability to get access to short-term lines of credit at low cost or no cost, the ability to build your credit and to earn high-yield savings. And because we're a technology company, we don't have physical branches and a heavy infrastructure, physical infrastructure. We're able to operate at a really low-cost structure, and we deliver that value back to our consumers. And that's allowed us to really outmaneuver the big banks. We've been continuing to increase our share of new accounts.

41:48Caroline Hyde:new checking accounts in America. And third-party research continues to show that we are having an outsized impact and increasing our share.

41:57Ed Ludlow:Let's go to swipe fees, because that is where you get a lot of the revenue. Is there any issue, any concern longer term as you scale that that will become a regulatory issue as you hit certain benchmarks and amounts of money that you manage?

42:10Caroline Hyde:Yeah, I think as we've grown over the past few years, you've seen an increasing balance in our business. So we were historically very heavily reliant on fees that we earn from Visa when our debit cards get used for everyday transactions. And we've now have a secured credit card product. We launched a product called Chime Card last year. That's a reward, a secured card that has rewards. And that's kind of changed the game for everyday transactions in America for average people, you know, average sort of mainstream consumers. And so that's also a contributing revenue line. And then increasingly, we have other services, our short-term overdraft services, and our MyPay product has been an outstanding, you know, just one year in, it's almost a half a billion dollar revenue run rate that allows our members to get access to their paycheck, essentially on demand.

43:06Caroline Hyde:And that's also been a nice, added some additional balance to our revenue mix.

43:12Ed Ludlow:I'm going to ask a sort of more complex and maybe a more emotive question in some way. You've talked clearly about how you have partnerships with banks. You're not the bank, you're not taking the details of the customer in so many ways. But there has been a consideration from the Trump administration that maybe banks should collect citizenship. Now, given the people that you serve at the moment briefly, Chris. Is this an issue for you?

43:34Caroline Hyde:It's absolutely not an issue. First of all, we open up FDIC-insured checking accounts in partnership with our bank partners. So we comply with the rules and regulations that are required as OCC-chartered banks that offer these FDIC-insured accounts. So for every new CHIME member, we collect the full Social Security number and comply with the Patriot Act and all of the KYC requirements to open up a checking account. So any rule changes in this area have no impact on our business.

44:06Ed Ludlow:Chime CEO Chris Britt, we thank you for joining us today. Now coming up, we'll come back on today's big story, NVIDIA earnings, how investors are digesting the numbers. At the moment, you can see they're pushing down the stock on the back of it. This is Bloomberg Tech.

44:22Caroline Hyde:NVIDIA continues to surprise and delight the market. NVIDIA hit it out of the park yet again. We saw phenomenal results. It was a solid set of earnings. And more importantly, they had a very confident outlook for how they were going to sell more AI chips and data center product going forward. And I think we were all looking forward to seeing, is that going to be a thing? I think what was particularly maybe not surprising, but impressive was 75 percent growth year on year on the data center space. As the marketplace tug of war over, is the AI economy booming or are there concerns around the AI economy?

44:58Caroline Hyde:And NVIDIA continues to beat regardless of what, you know, this debate is concluding. The stock just keeps getting cheaper and cheaper to the point where it's becoming an obvious buy. They're still investing and these are going to, you know, signal good times to come for NVIDIA in our opinion. Could it be any bigger than this? And they basically said yes.

45:20Ed Ludlow:The reaction, very positive from some of Bloomberg TV's guests after NVIDIA posted its whopping numbers. But the reaction in the shares is not. We're off by 4.5%. Let's bring in Bloomberg Tech equity reporter, Carmen Reineke, for what your sources are telling you. Because the numbers were stellar. Everyone agrees. So what more were they not able to demonstrate? Yeah, what I'm hearing from investors is that they're really worried about the cyclicality here.

45:46Caroline Hyde:That's sort of what they're seeing is, you know, the thing that might be still concerning people. So obviously, NVIDIA continues to beat and raise. And Johnson even said, you know, they think the hyperscalers are going to continue to spend. But investors are worried about that. They're worried that that's going to stop at some point and that then NVIDIA will be impacted.

46:05Sridhar Ramaswamy:Carmen, the market is now moving and the move is significant. What are the single names that you're tracking and what's the impact been from NVIDIA's move lower?

46:12Caroline Hyde:Yeah, so obviously, NVIDIA is the big one, but we're also looking at other chip makers. So shares of Broadcom, Micron. were also down today. You know, they spiked with NVIDIA sort of in after hours and then followed them lower. The other thing that's really interesting today is that software names are getting a little bit of buying here. So we saw Salesforce up. That's a reverse from where they were after hours after their own earnings report. And then we're also seeing things like ServiceNow higher. So that's interesting. We've obviously been seeing a lot of weakness in software and maybe a little bit more strength on, you know, in the NVIDIA side, although shares have been in range for quite some time.

46:48Ed Ludlow:So seeing a switch there today is really interesting. What's interesting is some parts of the supply chain or other areas that have benefited from the AI CapEx spend are still showing resilience. I'm looking at Samsung traded in London, for example, is still holding on to gains. SK Hynix had a whopping day over in Asia. So there's still areas that are resilient, the optical part of the equation, for example.

47:09Caroline Hyde:For sure. I think people still are looking at those sort of second derivative picks and shovels, kind of the other place where CapEx is going to be directed and saying, okay, we still think that there is strength here. They're still building data centers. That's going to continue. And so maybe moving into that piece of the puzzle a little bit more. It's so interesting though, because NVIDIA is getting really cheap. That's something we're going to keep watching. I mean, it's like 23 times forward earnings. That's barely a premium to the S &P 500.

47:36Sridhar Ramaswamy:Bloomberg's coming, Reinecke. Thank you very much. Bloomberg Intelligence out with NVIDIA earnings reaction, noting the beats in the fourth quarter, but more impressively, that first quarter Outlook, pointing to a stronger ramp of the GB300 system, Bloomberg Intelligence, senior analyst Kunjan Sabani with us. This was what they used to explain margins, you know, the Blackwell ramp. But then later this year, we're going to get Vera Rubin. There will be a transition of technology for their biggest customers. How have you modeled for that?

48:04Caroline Hyde:Yeah, so usually at the start of a new product ramp, your margins will get hit. But one key thing is different this time is the ramp of improvement of margins with the Blackwell has been very impressive. We all know about the rising memory cost, the rising wafer and package cost. Despite of that, and they don't pass on these costs to their customer, despite of that, they've been able to hold that 75 % margin, the software level gross margin. So that speaks to two things, their pricing power and their ability to optimize for costs in their supply chain. Hence that large purchase commitment increase, which really lets them deploy their balance sheet in their supply chain.

48:38Ed Ludlow:I mean, even the costs that they identify for stock recompense to those that work for them. I mean, people saying that's a really classy act from the CFO, from investor relations, to be making that clear within the gap numbers, Kunjun. But where, therefore, are we lacking clarity? Is it from the China perspective? Is it future build? Where did we need a little bit more?

49:01Caroline Hyde:I couldn't find anything negative in this print. I mean, looking at buy side expectations, it very clearly cleared the most lofty bogeys on the buy side. I think this is just the reaction seems to be overall AI fatigue. On one end, when the top five customers who are raising capex targets are being punished for spending that money, you can't have it both ways where the company that's capturing all that revenue also

49:23Sridhar Ramaswamy:gets rewarded for taking a lot of that high spending. Just very quickly, networking provided a lot of the upside. Just explain it.

49:32Caroline Hyde:Yeah, like, you know, people don't pay a lot of attention to the networking, but networking has been surpassing expectations every single quarter. And I think it will greatly because now they're networking, they can sell it even where their GPUs don't go. So even like ASICs for an Amazon, which are supposed to be growing and taking share away from the NVIDIA GPUs, they're going to plug it with NVIDIA networking. So that's a new source of revenue, even where they don't have the chips in the servers.

49:57Ed Ludlow:Kunjan Sabani, this is a bullish take from Bloomberg Intelligence, just not a bullish reaction on the stock. That does it for this edition of Bloomberg Tech. extraordinary day on these markets, Ed.

50:07Sridhar Ramaswamy:Yeah, and we had reaction from the sell side, from the buy side, and in-house the reporting of the things you need to know. Recap that on the podcast. You know where to find it. It's on the Bloomberg Terminal and online on Apple, Spotify, and iHeart. This is Bloomberg Tech.

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