Nvidia Investors Digest Decelerating Growth Forecast

24:52Teresa, we heard from Jensen Wang there's a$50 billion opportunity in this year alone in China. But push out five years, does that exist at the rate that the Chinese government are trying to push their own companies away from the U.S. tech stack? Yeah, it may not exist in the future. That is a tough one. All I can tell you is from the front lines of working with companies who have done business with China, it is a very tricky proposition, especially as it relates to cutting edge technologies, whether it's sort of like clean energy, whether it's computer technology. and it's very difficult and challenging to really understand what the regulatory environment is going to be and the protection for your intellectual property.

25:37You know, kind of the big elephant that we're not discussing in having all of these conversations is we have a new, more detailed report from the FBI on Salt Typhoon, and the findings from that report are stunning. We're talking 80 countries were impacted, not just the United States, and the access to metadata, phone calls, and other information. You know, this is one of those things, and China denies that they had any part in this, but this is one of those things where we're seeing sort of this vacuum cleaner effect of China basically vacuuming up intellectual property, data, information to use it for economic espionage.

26:15That was a breach that really hit the major U.S. carriers, in particular Verizon and AT &T and T-Mobile. Teresa Payton, thanks for reminding us of it for Alice Solutions. It is time now for Talking Tech. And first up, Didi Global will pay$740 million to resolve a shareholder lawsuit concerning its fraught 2021 U.S. IPO. Now, an offering that not only attracted intent scrutiny from Beijing, also preceded the company's delisting. The ride-hailing giant announced the deal Thursday alongside its second quarter results. Plus, Taiwan, the prosecutors have charged three people for allegedly stealing trade secrets from TSMC, alleging that proprietary tech was stolen to help improve Tokyo Electron.

26:54Now, Taiwan is seeking jail terms for at least seven years for the trio, citing threat to the island's national security. And Delivery Hero cut its earnings guidance for the full year. This after a weak dollar and South Korean won cut into profit and free cash flow. Look, the company saw revenue rise, nearly$8.4 billion in the first half, but faces increased competition from rivals in Asia and the Middle East. Now, coming up, more on NVIDIA. Let's take a look at the stock and other global chip-exposed names. We're shining a light on ASML. It is lower in sympathy. That's a European chip equipment maker.

27:26CameraCon, though, this is the upstart in China trying to eat in on AI accelerators in that country. We're up 15 percent, record high. It has doubled its market cap in this month alone. This is Bloomberg Tech.

27:47Welcome back to Bloomberg Tech. We take a look at the earnings story because benchmarks relatively flat were actually higher just on the likes of the Nasdaq 100. I'm looking at what's happening with Snowflake having an absolutely brilliant day. Best day since November 2024. We're up 18 percent. Look, they are showing that the desire for agentic AI is working in their business right now. Revenue grew 32 percent. They beat and they raised as well in terms of their forward looking guidance. The analysts across the street really liking the strength coming from this particular software company that many had anxiety, perhaps, that new AI startups would start to eat into the business model.

28:21No, no. They're managing to show real growth here and retention of customers. Move on, though, and we're all a little bit lackluster about what happened with NVIDIA last night. Look, this is a company that delivered 56 % revenue growth for their fiscal second quarter. $54 billion is promised for the fiscal third quarter, and that's not including any Chinese revenue. That's only upside. But this is already a company that was very close to its record highs. We're off by one and a quarter percent, but off of those lows in the pre-market trade. Here is the reaction and the results from a few analysts on Bloomberg TV on NVIDIA.

28:52When we have a beat and stocks don't go up or a hot stock like NVIDIA doesn't go up, where it starts to roll over a little bit, that suggests to a trader and a technical analyst that everyone who might own the stock already does. But we're nowhere near there yet. The reason the stock has recouped some of those losses and I think will retain strength is because of that guide for Q3. It was very strong. It's really all about Q3. And it's because Blackwell and Blackwell Ultra are starting to ship. And if you know that story, you're not selling this stock right now. They were very good about signaling to the market that the China Hover 10 could continue.

29:35And that has about a$5 billion impact in the next quarter's numbers. So having said that, $54 billion represents a very strong showing, which means they expect hyperscalers in other parts of the world to pick up that slack. More reaction for you now from an investor. Daniel Pilling is with us, SANS Capital Portfolio Manager. So why is the stock down? Well, I think there's a few reasons. One, stock had a good run into the quarter. And two, it probably slightly missed sort of the buy side expectations. And it was mainly around, I think, China. And then secondly, Black Hole is still a little bit supply constrained.

30:13So they're ramping it as fast as they can. but I guess the ramp wasn't fast enough. But I would say, though, to us, those were pretty strong results. And maybe one interesting fact to look at, if you take out the China revenues completely out of the data center, then the rest of the world for them actually accelerated from about 60-ish percent growth in Q1 this year to a guided 80 percent growth in Q3 this year. So actually, NVIDIA x China has been accelerating, which I think is really strong. I think that's a really interesting take. We had Vladimir Galibov from Omdia yesterday talking about how Europe is stop-start in certain countries.

30:50You've got Denmark really going hard on sovereign AI, other countries less so. We got told$20 billion for sovereign AI. Is that strong enough for you, Daniel? Yeah, I think that's a great number. But the truth of the game is still within hyperscalers and AI startups. I think that's where the real action is for now. And it's a much, much, much larger number. And I think the interesting aspects there are one, as Jensen noted, that reasoning AI is so much more compute intensive. He quoted 100 to 1 ,000 times more on the one side. And then on the other side, though, it's also much better. So it reduces hallucinations.

31:24And he also mentioned that the return on invested capital you receive from buying these chips is phenomenal, right? He mentioned if you invest$3 million today, you can make$30 million in token revenues in short order. So I think that's where the real action is as of today. And is that why the RealAction is talking about where Rubin takes us, the cadence of innovation over at NVIDIA? I think so. I think Rubin will, again, the most important thing that NVIDIA is doing is they're increasing the performance per watt. And they've noted that it costs about$50 billion for each one gigawatt data center.

31:56Rubin will, again, improve that performance per watt, which means that NVIDIA's competitive situation improves on the one hand side. but also on the other hand side, you can do more compute. You can build better models with a Rubin, which means it's a self-fulfilling prophecy a little bit because whatever comes out of these models will again have higher IQ and effectively bigger and better apps. You're not worried in any way about Amazon's Tranium, about Google's TPU, the fact that the customers are innovating themselves? Yeah, I know. I think it's our job to worry sometimes, but we've looked at this in detail.

32:29And I think the idea here is, again, to say, well, So here's NVIDIA. They're building a giant system of a company. They have both networking, CPUs, GPUs, hundreds of different suppliers, and they put the software on top. They say, and we believe in this, that they are the best performance per watt supplier in the industry, bar nobody else. And as long as that is true, something like Tranium cannot compete simply because they don't have the scale, they don't have the system, and they don't have the software. So NVIDIA to us remains the winner in this sense. And that's what's interesting about Jensen Huang trying to say, look, we are more than just hardware in many ways.

33:06We are the one-stop shop and we're leaning more into that. Did he lean more into the future opportunities enough for you, the robotic side of things? Of course, automotive remains a bit of an overhang when it comes to China. But thinking also about quantum and real future here. I think NVIDIA is probably the company in the world that runs the fastest that I've ever seen. I mean, what they're trying to do is they're trying to align hundreds of different suppliers. They try to design a GPU on an annual cadence, and they're trying to update their systems on an annual to 18-month cadence, which is unheard of.

33:38At the same time, they're focusing on quantum, robotics, et cetera, et cetera. So I think NVIDIA is running as fast as anything else I have ever seen. And if I may mention, too, I think quantum is probably going to slot into the NVIDIA ecosystem by saying they have CPUs, they have GPUs, And at some point, they'll have quantum somewhere in there, too. And you can just switch between those various sort of compute layers. And that was what was interesting with IBM and AMD's partnership, the idea that almost you reference how these reasoning models work. Well, I'm thinking of GPT-5, how it just pushes you towards the best possible model for your question.

34:12We're going to have the best possible computing standard for your general task. Yes, I fully agree with that. The best possible, as well as the cheapest and the fastest. And again, I mean, as we think through the next few years, the question is like, how much more compute can NVIDIA sell? And it truthfully continues to be a question of the scaling laws. And we've seen with Grok 4 that compute still provides better and bigger models. We're going to have Blackwell clusters scaling in the next 12 months or 6 to 12 months. And hopefully we'll be seeing good results coming out of whatever comes after Grok 4 and ChatGPT 5.

34:45And that's what ultimately truly going to drive the bus for NVIDIA in terms of demand and in terms of the revenue outlook. So you think we should think more about Colossus? We should think more about what Meta is doing in terms of, well, its scaling in Louisiana? Should we figure China out entirely, considering the government wants to push its own homegrown domestic talent anyhow? Yes, I think we should. And I would actually argue what China is doing seems to be relatively rational. What China is basically saying is that you're trying to sell us a chip that's based off of an architecture that's three and a half years old.

35:20And secondly, we've also grown a local AI architecture or a stack that has caught up somewhat to that old chip. So unless you start selling us a newer derivative of Blackwell, we don't really maybe need you as much anymore as we needed you three years ago. So that all seems to make sense. And I don't know whether the licensing will work out or not. But the interesting piece is if it does, that's a big, big upside for NVIDIA because Jensen noted it's a$50 billion market. And if they're allowed to ship a derivative of the newest chip, their market share there should be enormous because there is nothing in China that even can remotely compete with what NVIDIA has.

35:59$54 billion forecast for fiscal third quarter and not even factoring in China. Daniel Pilling, Assange Capital, it's great to have you on.

36:12All about NVIDIA, but there are several of China's big tech names also reporting earnings this week, including Alibaba. Now, the company has been stepping up its AI efforts since Chinese firm DeepSeek released its own R1 model, remember? Bloomberg's Isabel Lee joins us now. This stock has been on a tear this year. It's up 42%. What more can it give in terms of where it is on AI and cloud? I think it's like everything in tech. Investors just want more and more and more. And even if you beat, it's still not enough. So for Alibaba, they're slated to report on Friday. And they're likely to really highlight their AI strategy.

36:42But if you look at their peers, Tencent and Baidu, they're likely to kind of disappoint because it's really going to struggle or it may struggle to show how its big investments in AI will be paying off. I mean, these companies, ever since the chat GPT came into the picture, they've invested billions of dollars in AI. They've rolled out their LLMs. They've infused their flagship products with that. But making money has been hard. Why? Because analysts are saying that Chinese users, unlike Western counterparts, are reluctant to spend on premium paid subscription models. What's also interesting is just everyone's trying to get on every other game.

37:16They all want to be like the mega apps to a certain extent. And you have a super app with Meituan, for example. of the fierce competition of food delivery. So that too, and then I feel like if you look at, for instance, the Tencent earning this month, they showed revenue from that business, including selling AI services, growing more slowly. Baidu also, when it comes to the cloud business, didn't expand fast enough. So I feel like how will you improve, to your point? And if you look at the contribution of AI, it's really going to dampen the growth outlook of Alibaba. I mean, and it comes at a time when their e-commerce business is kind of struggling compared to the rivals.

37:48Consumption in China still remains weak, even as the economy slightly improved. So really lots of moving parts for Alibaba. But in relation to NVIDIA yesterday, we do have Bloomberg Intelligence saying that despite uncertainty over NVIDIA's ability to provide H20 chips, all these three, Alibaba, Tencent and Baidu, are still well positioned, at least in the medium term. Bloomberg says, well, Lee, we love our breaking it down. Thank you. Let's stick with Chinese firms, but shift gears to the automotive industry. Hong Kong shares of electric vehicle maker BYD fell yesterday on concerns about possible decreases in exports after Mexico announced plans to tariff China.

38:22For let's bring in Bloomberg's Craig Trudell. So BYD on the day had had some issues around maybe accessing Mexico. But boy, are their sales in Europe going well. What were they were up threefold while Tesla actually saw sales drop 40 percent? Yeah, we've seen BYD really put a dent in the European car market and take advantage of the softness for Tesla, maybe be a sort of factor in that softness where, you know, it's not been uncommon now for BYD to actually outsell Tesla in this region, which would have been unthinkable even just a year ago. This was a company that was really sort of taking off in its home market and yet overseas sales, it still had a long way to go.

39:08So we've seen some progress on the export business. I think we have seen maybe a little bit of a slowdown and some softness at home. And that's been the real story this year where, you know, for all the sort of continued growth that we've seen out of BYD, there's some real questions starting to emerge about can they hit the full year sales figures that they were expecting for 2025? Yeah, because what they've already sold 2.15 million in the first half of the year, but that's only less than 40 percent of what they're aiming to do for the full year. So they're having to discount in some ways. Yeah, and I think it's really an ironic story in China, right, where you've seen so much state support for this industry, so much attempts to sort of foster this really competitive auto industry and particularly EV industry.

39:58And yet maybe we've seen sort of some overdoing of it, right, in that we have Chinese companies with BYD maybe front and center discounting their lineup in really aggressive fashion, concerns about suppliers not getting paid in a timely manner. And, you know, maybe some concerns, too, about just how long this can continue if we just see manufacturers aggressively discounting. At what point is enough enough? And do we see some companies go out of business? So you've seen this kind of campaign in China on the part of the government to do away with what people refer to as a price war. And yet some real reluctance on the companies to sort of take heed there.

40:44Bloomberg's Crow Trudell on BYD. We thank you. This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. Globetrotters hunting for airfare bargains are in for a rude awakening as the days of stumbling across a cheap seat on a popular flight could soon disappear. Bloomberg's Juan Ha reports that airlines from Delta to Virgin Atlantic are adopting artificial intelligence to change seat prices more quickly by weighing dozens of variables in real time, helping capture more revenue while shrinking pricing gaps that once allowed travelers to find bargain fares.

41:22Machine learning models can more accurately forecast demand by analyzing historical booking patterns, seat inventory, and seasonal trends, while also continuously tracking competitors' fares and capacity changes to update prices in near real time. The technology could lead to higher fares on busy routes as airlines pack flights closer to capacity, but may also result in lower fares on off-peak and lower-demand routes. That's the Bloomberg Tech Minute brought to you by ChachiPT. Put ChachiPT to work on your most ambitious ideas and projects. Get started at ChachiPT.com today by selecting Work Mode, available on Plus and Pro Plans.

42:26We'll see you next time. Sending money to family overseas, spending while on your holiday abroad, or paying bills across borders, Wise makes moving money simple, transparent, and straightforward. Wise offers 24-7 customer service and runs over 7 million daily checks to spot and stop fraud. And most transfers happen in under 20 seconds, which means your money arrives in less time than you've been listening to me. Join millions, saving billions. Be smart. Get Wise. Visit Wise.com or download the Wise app today. T's and C's apply.

43:05Let's talk about healthcare for a second. It doesn't always work the way people expect it to. If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling. The system should just work better for everyone. That's exactly what the people at Optum are trying to do every day. They're a healthcare company linking patient care and pharmacy services and using data and technology to drive the whole system so care is connected, not complicated. for patients and providers. Things like making it easier to get care that looks at the whole person, from primary care doctors to mental health support and even in-home care, and then using technology to make sure they all work together.

43:44Technology designed to help doctors spend less time on busy work and more time with their patients. And those prescriptions? Optum is working to bring costs down, save patients money, and make it easier to get refills. Little by little, Optum is helping make healthcare work as one for everyone. Head to business.optum.com to see how.

44:10We're also keeping an eye on Dell today. The stock is climbing ahead of earnings release of its own after the close. Investors looking for signs that the company will boost its forecast for AI server shipments. Let's bring in Bloomberg Intelligence Analyst Woojin Ho. Woojin, it's interesting that it's actually higher on the day when NVIDIA is down. Often They move in sympathy with one another, but we're expecting big things. Yeah, so there's a good thing. There are a couple of things that's going on with Dell this morning relative not only for AI, but also for PCs, right? You know, NVIDIA was more China-related.

44:42Dell has no China exposure as it relates to AI servers. And I do expect them to report$7 billion in AI server revenues. They guided to about$15 billion. And some of the bull case on the street has potentially guiding up to$20 billion. So that's the bogey that the street is looking for. HP is an interesting read if you're thinking about PCs. And HP had really resilient PC strength. It's about the AI PC, apparently. And actually, the commercial adoption of that seems to be holding things up, as well as Microsoft's upgrade. Rujun, is that how we read across from perhaps HP to Dell? Yeah, that's exactly it.

45:20So that's the second tailwind for Dell. Let's keep in mind that Windows 11 upgrade cycle is actually going strong. And what we learned from the HP earnings call is that only 50 % have actually upgraded to Windows 11. So that means we have an elongated Windows 11 cycle. That's going to benefit Dell. How? 80 % of their revenues come from commercial PCs. and those are the customers who need to upgrade and Dell should be a beneficiary from that upgrade cycle. And the PC business actually has been more resilient. So HP results essentially tell us that downside risk on the PC might be limited at least for the near term.

46:02The thing with Dell is everyone's very bullish on it. We've got 22 buys across the analysts, zero sells, and actually the price is pretty close to overall consensus price targets. How much is already baked in to a good set of numbers? Yeah, so from, well, let me tell you how much is baked in. I think from a valuation perspective, 14 times forward earnings. If you look at HPE, which is another enterprise IT company, they're only trading around 11 times. So there's a lot of good news baked into the shares from a valuation standpoint. So sales upside is expected. Now, I will want to caution some people heading into the print.

46:46There are a couple of red flags. Other enterprise IT companies are not benefiting from an uptick in spending. NetApp reported last night, Nutanix, Cisco a couple of weeks back. They all cautioned U.S. federal spending as being weaker than anticipated. Keep in mind that Dell has roughly about 3 % sales exposure to the U.S. Fed. So if there is any pocket of weakness, that could be won and a yellow flag that I want to raise to investors heading into the print. So thorough. Thank you. Woo Jun Ho, senior analyst for Bloomberg Intelligence. So appreciate having you on. Let's get back to the key story of the day, though.

47:23It is NVIDIA, the world's most valuable company. But there are other companies around it that tell us a hardware versus software story. Let's bring in Bloomberg Intelligence senior analyst Mandeep Singh. Look, when we're anticipating Dell doing very well on AI servers, This just speaks to the strength of AI adoption that some are perhaps sleeping on a bit today when it comes to NVIDIA's numbers. Yeah, and look, I mean, when you look at the overall ecosystem, you know, this quarter we saw Microsoft Azure growth accelerating to 39%. Now Snowflake and MongoDB outperforming. Just when you connect the dots, you can see if Microsoft's AI consumption is going up and it's reflecting in their cloud numbers, who is the user of that cloud consumption?

48:04It's your Snowflake. And so from that perspective, you know, it's all intertwined. Dell doing well. Microsoft deploying that on their cloud. Snowflake actually seeing an increment in their product growth because companies are deploying more AI agents. So you can see how the ROI question is getting answered when it comes to that AI spend. It's like the whole food chain, isn't it? You've got the picks and shovels of the NVIDIA. You've then got the user of that that's Microsoft that's going into then the use case of Snowflake. Talk us through the Snowflake numbers. Because the shares are up more than 20%.

48:36There was clearly some anxiety built into these numbers that we were going to see competitors take a bit of an edge on Agentech. I mean, look, traditionally, database businesses are very sticky. It's just right now we are in an environment where everyone is trying to figure out what gets disintermediated by LLMs and AI agents. And all the software companies were getting beaten up because everyone thought LLMs can do everything that these software products do. Well, guess what? If you're trying to deploy an AI agent, LLMs don't have the data that you want to customize your chatbot on. Snowflake does or, you know, Databricks does.

49:13And that's where MongoDB does. And all these database companies are what you need to customize your chatbot experience to your particular use case. And I think that's what you're seeing in the numbers. You're seeing them sequentially outperform. I mean, can we look at MongoDB for a second? Two days. You pointed this out. It is up almost 50%. It is the best two-day run for the company on record. So they really managed to push back also on that MIT narrative that perhaps people aren't getting any bang for the buck when it comes to using AI pilots as well. When it comes to valuation multiples, what we have seen traditionally is companies that grow at 30 % will trade at 20 times sales.

49:53But once that growth comes down below 20%, that multiple goes from 20 times to five times. So that multiple compression is always huge in software and that's why that top-line growth is so important. I mean, Snowflake going back again to 30 % plus growth, you will see a multiple expansion. It's not as if the story changed completely, but just the multiple that investors put on these companies growing over 30 % versus under 20%, it's huge. But let's go to, say, then a multiple on NVIDIA. It's not that high if you're thinking about a blended forward version of the price to earnings, estimated price to earnings.

50:29It's what, like, 33 times? Yeah, and look, with NVIDIA, the biggest concern is it's not a recurring business, although they are proving that, you know, they can keep releasing a new architecture every year and it becomes a recurring refresh cycle when it comes to their data center chips. But that's the biggest, I would say, risk is right now they are growing over 50%. They said hyperscalers will increase their CapEx by 50 % next year, so that translates into similar growth for next year. But it's very hard to sustain that. I mean, do you think CapEx will keep growing 50 % in perpetuity? No. And if your largest customers are for hyperscalers, then that's a big risk.

51:08And that's what you have to model for two years from now, three years from now. Mandeep Singh, he's always modeling for us from Bloomberg Intelligence. We thank him. That does it for this edition of Bloomberg Tech. Do not forget to check out our podcast, find it on the terminal, as well as online on Apple, Spotify, and iHeart. This is Bloomberg Tech.

51:50Thank you. for everyone. Learn more at business.optim.com. As industries evolve faster than ever, companies need an environment that accelerates strategic growth, and Michigan delivers on that promise. From emerging startups to global enterprises, Michigan offers what executives value most, a resilient, innovative ecosystem, diverse communities that attract top talent, and a quality of life that supports work-life balance. With our unified Team Michigan approach, businesses scale faster and compete at the highest level. Michigan, pure opportunity. Seize your opportunity at michiganbusiness.org.

52:28Whatever your goal, trade show giveaways, client gifts, or team gear, 4imprint has the promo products to match. With thousands of options, from apparel and drinkware to tech and totes, it's easy to find the right fit for your brand and budget with standout choices at every price point. And with their 360 degree guarantee, you can be 4imprint certain your order will show up just right, right on time. Explore more at 4imprint.com. 4imprint. 4certain.