Nvidia Investors Wait for Signals of Growth in Earnings

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1:47Bloomberg 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, all eyes on NVIDIA. As the chipmaker reports earnings after the closing bell, what to expect from the world's most valuable company throughout this hour. Plus, SpaceX's Starship hits a major milestone after deploying satellites in space for the first time. And IBM and AMD partner up to develop quantum-centric supercomputing. We'll discuss with IBM's Quantum VP, but first, we check in on these markets. And actually, we just check in on the world's most valuable company.

2:26We check in one that dominates the S &P to the tune of 8%. I'm looking at a tenth of a percent higher for NVIDIA. We are just one percentage point away from a new record high for this company. Will it get there after the closing bell, after the market shut in that post-hours movement? We could see whiplash of up to 6 % either direction according to the options market. I'm looking at the weightings because this is why we focus on this company. This is why it's basically our Super Bowl today. 8 % of the S &P 500. We have 24 % of the tech sector within that S &P. The Nasdaq 100, now we're seeing NVIDIA make up 10 % of the weighting.

3:01And so therefore we go to a man that has covered this stock before you and I could pronounce NVIDIA properly. It is the one and only Ian King. It's your Super Bowl tonight, Ian. And just so many questions remain about the forecast. It feels that there is where the guide is going to be keenly watched. Yeah, no, that's absolutely true. I mean, historically, NVIDIA doesn't just have to beat on its forecast and project a rosy future. It has to blow past it and give Wall Street a sense that this never-ending surge is coming. And as we've seen with Carmen's story, things are very unclear this time. We really don't know how much China is going to be in that forecast, how much China can be in that forecast.

3:48And that's really the wild card this time. It is. We're going to have to hear from Jensen not only about H20, but where he guides in terms of a B30, the latest development of the Blackwell architecture that maybe gets signed off to be sold to China. But more broadly, are we hearing enough from the hyperscalers that the commitment is there? We're expecting, what, 50 percent growth in revenue for this fiscal quarter. It's got to slow down at some point, Ian. you you you would think so but then you look at the numbers and you look at the growth rate that has been sustained i mean as a percentage of course it's slowing it's going from above 60 to about 50 but 50 at an enormously high level and this is a company that's on course to become what a third of total semiconductor sales worldwide so i you know you you pick your numbers and you can tell a story, but every story is incredible at this point.

4:42Yes, by any measure, numbers have to slow down. These growth rates are not sustainable, but the numbers are still huge with$20 billion up probably from where we were a year ago on the forecast quarter. And when we think about that, his hyperscalers, they're about 40 % of demand. How much does Jensen Huang once again have to guide the market that they will dominate not only in the training of data, but in the inference, the use of that data going forward? Yeah, no, that's a very good point. I mean, hyperscalers have been around half of its data center sales for a long time, trending slightly higher, if anything.

5:20What would really, really please investors if that number went down? Because that would prove that AI and the use of AI and the deployment of AI systems is spreading out, spreading out across the economy, getting into all of these other industries and not just a kind of pet project for Microsoft and Amazon. That would be a really strong sign if they could deliver something like that today. I have a feeling Sovereign AI is going to be on your bingo card too. Ian King, we thank you as always as we prep ourselves for after the closing bell. Who else is prepping ourselves? Fiona Sincotta, Senior Analyst at City Index Financial Markets.

5:53And remind us, and the perspective here, it is so dominant for the rest of the market. Yes, we might get a big swing in NVIDIA up to 6 % after hours, but it's important for the other AI names. Yes, completely. And I would even go beyond that and say it's not just AI names. This is a stock that because it dominates and because it is such the litmus test for AI, it actually has the ability to hit sentiment more broadly. You know, it's such a large component of the S &P 500. We've obviously seen a little bit of caution, actually, as we've been sort of coming into these results. There was that MIT report that just raised some questions about profitability, revenue growth surrounding sort of 95 % of AI projects.

6:41And that did cause the market just to question, you know, should we be up at these levels for AI stocks? And I think, you know, that's why there is such a massive focus on these results, you know, not only just with what NVIDIA are doing, but what it does mean for the broader AI trade and tech, more broadly. Remind us, Fiona, NVIDIA's one percentage point off a record high, $4.4 trillion market capitalization. How much positive sentiment is in the rest of the space, even after last week's vague sell-off in names such as Palantir? Yeah, you know, it's really interesting. I mean, obviously, there is a lot of growth expectations which are priced into these levels.

7:23We've talked about forward guidance being the key figure to be watching in these results. And that's just so that the market can feel comfortable that the lofty levels we're trading at are indeed supported by some sort of fundamental. But I think, you know, the fact is we are expecting potentially a beat from NVIDIA. The question is by how much, you know, what will that forward guidance be looking like? Will we continue to see that level of strong growth that we have seen? That's what the market wants to see. That's what investors want to see in order to remain upbeat about this trade. I mean, I do think longer term, strategically, we know that AI is a solid trade.

8:06But near term, we have seen that caution set in just as far as sentiment is concerned, obviously, as far as geopolitical events are concerned and factors. And then also as far as that sort of lower model growth rollout might be concerned as well. So, lots to be watching out for. Yeah, Fiona, can you break down for us a little bit just from the sentiment that you get from your own clients but more broadly how many people are long only and long-term committed to this company or how many people are on the edges just trading it and could see therefore volatility in the name yeah so i mean this is by far our most popular um equity within our um business um we've seen that the vast majority of clients are long on NVIDIA.

8:53And we do see that, you know, there is this longer term sense towards the stock as well. That is something in there. But you also do see a lot of the attempts to trade on that volatility. But, you know, our clients are very keen on this. This is often the busiest day for us, one of the busiest days. And we do find that tomorrow there'll be a lot of conversation and sort of breaking down and unpacking what the results have been telling us as well. But we do see that this is one of those rare stocks that we do see both the longer position holding as well as the intraday volatility gets the day traders as well.

9:31And it's just so streets ahead of the competition in terms of just market capitalization. I mean, Broadcom is the only other chip maker out there that's above a trillion dollars. When you think about AMD, it is but a quarter of a trillion in terms of market capitalization compared to NVIDIA's. And we're not even going to talk about Intel's. But Fiona, have you seen any of your clients trying to hedge this? How have they been able to think about owning and being long NVIDIA and protecting themselves from any downside? Yeah, you know, it's actually quite difficult to be able to sort of bring together a pure hedge on this, given the dominance that we do see in NVIDIA.

10:07As you pointed out, you know, you can do some hedging surrounding some competitors. Also, if you can get hold of those AI indices, then that could also work as a hedge. But I think Broadly speaking, it is quite difficult to be well hedged against the upside in NVIDIA. Just because, as you said, it really is a streak ahead of competition. And there doesn't seem to be anyone really on its heels just yet. Obviously, we had those concerns at the beginning of the year about deep seek. But that hasn't really rolled out into something too dangerous as far as competition is concerned just yet. That's not to say it's not down the road, but just for now, it doesn't feel like there's too much snapping on NVIDIA's heels.

10:54I mean, isn't it interesting? Canberra Con Technologies is a Chinese name. It's an AI accelerator developer themselves making chips like Huawei is. They had phenomenal growth in their profitability. I mean, it has a much smaller market capitalization. But just going back to what we're discussing with Ian and their overhang of China, how important is that to you and the clients to hear about the future growth trajectory there? That's, you know, very important. I think, you know, we can't sort of diminish how important that will be. That's going to be a key area that we'll be watching out for because it does remain a key risk.

11:30And obviously that can then affect the valuation. It can affect what the growth outlook for NVIDIA is. So I think that is definitely going to be one of the key factors that we'll be watching as it does present itself as a potential to really weigh or limit the upside as far as NVIDIA's potential growth is concerned. When you're thinking about NVIDIA and the other industry groups, this engulfs. I mean, you're just saying what the limiting factor actually for many is power. And I'm wondering how many of your clients are looking at NVIDIA and feeling at this level they can't get in or are they and therefore looking to spread and diversify or are still people very committed to buying in even at a$4.4 trillion market cap?

12:17Yeah, do you know, there is still demand out there. We're still seeing demand out there, despite the fact that we are trading at really impressive levels. But I do think we still have this idea of the concept that this idea of the AI trade spreading out and diversifying. You know, we've noticed that obviously Nvidia has been the standout performer here, but we are seeing that there have been sort of a strong growth in other areas as well. We've seen the rest of the AI stocks have performed well across the year. And I think there is potential for those to continue performing well on the back of upbeat results from Nvidia.

12:58So, again, we keep coming back to that idea of, you know, if Nvidia does well, then we see that trickle back down into the rest of that AI trade. If it doesn't, if we see a slight disappointment on that forward guidance, then potentially we could see that really reflecting badly on those other AI stocks as well. So, yeah, that's what we'll be watching out for. And our hinges on 4 p.m. this evening. We thank you, Fiona Sincotta from Citi Index Financial Markets. Now coming up, SpaceX launches its 10th test flight successfully after days of delays. More on that next. This is Bloomberg Tech.

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15:55Time now for Talking Tech. And first up, Chinese food delivery company Meituan warns of huge losses this quarter due to a fierce price war with rivals Alibaba and JD.com. Now, the company issued a dire prediction, citing, quote, irrational competition that wiped out its profit in the June quarter with net income plummeting 97%. Plus, Chinese AI chip designer Camericon Technologies, well, it swung to a record profit in the first half. The results reflect an increasing shift to employ domestic chip alternatives, encouraged, of course, by Beijing citing U.S. security concerns and export curb uncertainty.

16:29And Apple plans to hold its big full product launch on September the 9th, when the company is expected to introduce an iPhone 17 lineup that includes a new, skinnier version of the signature device. Now, the event's tagline is awe-dropping, according to an invitation posted online and sent to the media. And it will stream online. Now, another company that we're watching, privately held SpaceX. It has successfully launched its 10th Starship rocket test flight last night. And in a major milestone, it carried and deployed Starlink satellites in space for the first time. This comes after a year with pretty explosive setbacks.

17:06Bloomberg space reporter Lauren Grush joins us now. And just how important was it that these satellites in particular were deployed? Well, I would say this was the exact kind of test flight that SpaceX really needed to achieve after that volatile year you explained. But deploying satellites is important because that's kind of one of the key objectives for Starship when it becomes operational. It's supposed to launch the much larger Starlink Internet satellites that SpaceX is building and optimize for the specific size spacecraft. So the fact that it was able to demonstrate that shows that they're one step closer to actually using this vehicle as a launch vehicle that can put satellites into orbit.

17:45Beautiful shots. But they rounded it out as an overall success. But not everything was too peachy, right? What else did they learn from the reentry in particular? Right. That reentry portion is still very difficult for them to perfect. But, you know, that is what they're trying to do. They're trying to do something that nobody else has done, which is create a fully reusable vehicle. And so what they're trying to see is if they can bring the Starship back without it disintegrating. Of course, there were some chunks of the vehicle that broke away during that reentry. But it just goes to show that they have a little bit more to learn on making that reusable orbital heat shield up to snuff in the way that they need it.

18:27But they say time and time again that sort of failure is the learning process here. But they had had a run up of failures in the years. This was a key test. Just remind us how this goes forward to replace Falcon 9, because already they've won big contracts with NASA to use this. Right. I mean, SpaceX has basically put all of its eggs in the Starship basket. It's supposed to eventually replace their workhorse rocket, as you mentioned, the Falcon 9. But it also has a lot of other tasks to do. It's designed to eventually take humans and cargo to deep space destinations like the moon and, of course, Mars to start that settlement that CEO Elon Musk has always dreamed of.

19:08Of course, there's still quite a lot to do before that reality can be achieved. You know, one of the big things is that they'll have to demonstrate in-space orbital refueling at a scale that no one has ever achieved before. And so they mentioned that they hope to demonstrate that as soon as next year. But that's going to be a really big part of actually unlocking this vehicle and making it the deep space vehicle that they advertise it to be. We most long brush on all things SpaceX. We so appreciate it. Thank you.

19:45IBM and AMD, well, they've announced a partnership to develop the next generation of computing architectures. IBM shares were up following the news that came out yesterday. Pleased to welcome to the show its VP of Quantum, Jay Gambetta. And the next generation of computing architecture is bringing together supercomputing and quantum. What does this partnership bring, Jay? Yeah, this is, well, first, thanks for having me here. What's really exciting is we are actually getting to the point where quantum computers are getting to become like almost a first-class citizen in the future of computing.

20:15And so this partnership is bringing AMD, which builds really high-performance, excellent GPUs, our leading quantum devices, and really starting to bring this fabric together. We want to create this future of computing that allows us to run things on quantum or run things on GPUs and really push computation to the next level. So that hybrid approach, it almost makes me think of the new GPT-5 model in terms of they will use the right model for the right question. Is this kind of where you're doing it? If it can be solved with supercomputing, you go that way. Otherwise, it goes to quantum. How will this function?

20:52That's exactly right. So a lot of people think quantum computers will replace classical computers. We've never had that view. We actually think quantum brings this unique ability to look at certain problems a little bit different. And now if you mix this and make it so that it works with HPC, AI, you really can start to bring many different forms of computing together and really advance what is possible. Okay, so make it tangible for our audience, because they've always seen the promise of quantum. You're saying now it's a first-class citizen in perhaps driving forward medical use, thinking about the future of finance or algorithms.

21:31But what precisely do you think that this hybrid will offer? So it's a great question. And we've got to get to the point where quantum is really getting us beyond what we can do with classical, which we think will happen in the next year or so. But we're getting at a point where it's allowing us to look at things in a different way. To give you an example, take a hard problem, I don't know, solving and designing drugs. You can spend a lot of money to model it. You can spend 10 years of research. Imagine a future where you could have AI scanning vast amounts of data, HPC or GPUs processing, crunching that data, and then quantum simulating the quantum physics at an accuracy we were never able to do before.

22:14Now you put all this together, you can start to imagine workflows that go beyond just AI or HPC or quantum and creating this, we call it quantum-centric supercomputing, but essentially this new fabric that allows you to do that. So what's quantum doing? It's giving you accuracy for problems that we didn't have that accuracy before. I'm going to ask a sensitive question, but why AMD? Because NVIDIA has got quantum accelerated computing as well. Honestly, we are creating this future and anyone that shares a vision and the same as us, that is towards this future that has quantum working with classical, we're happy to partner with.

22:55So we've got this partnership with AMD that has got two parts of it. One is making our quantum computers better. The second is bringing these accelerators working to it. But as we go forward, we have partners with the national labs all around the world. But we want to show that this future is not just words. It's actually real. So anyone that shares the same view, we're happy to partner. So Jensen could come and say me too, please. I'm happy to. I'm interested in what the limiting factor is now. because it's often been about sort of fault-tolerant quantum computing. Is that what you need to get to?

23:31You sort of promised us that by 2029. Yes. So think of two sides of it. By 2029, we want to have a fault-tolerant quantum computer. And what we've learned through all the hard science and engineering is we need classical computers to make that possible. They've got to do the, we call it decoding, but essentially removing the effects of errors. So part of this partnership is how do we actually use classical computers to make quantum computers better. And then at the same time, we really have to show the value of quantum computers and we have to solve them for interesting problems. So now we need quantum computers working with classical computers in this quantum-centric supercomputing hybrid approach to really bring forward early applications so that we can actually start to see for whether it's in finance, optimization, whether it's in simulating materials, we can start to see this value happen.

24:23What's interesting is we like to sort of pit the generative AI landscape as a race. You're very committed to open source nature of this to try and build learning. How much is quantum a race? Where does the money end up coming in terms of for IBM? So it is a race. We have to build hardware and we've been a leader as a quantum hardware for a very long time. We're going as fast as we can do it. But you asked before, how do we get from having the hardware to value? you need smart people to discover algorithms. And then through discovering algorithms, you create use cases, you create examples. We are committed to open sourcing the tools for that algorithm discovery to happen as fast as possible so that once we combine the hardware we build with that algorithm discovery, you really start to get those use cases.

25:14So think of the hardware as a race. We have to build as fast as we can, the most performant quantum computers, and then we have to, at the same time, create an ecosystem that really focuses and discovers algorithms at a rate that we probably haven't seen since the 60s or 70s of discovering new algorithms that use both classical and quantum. Jay, it's been great speaking to you. We have a demonstration later this year. We'd love to get the update then. Jay Gambetta, IBM's VP of Quantum.

25:46Welcome back to Bloomberg Tech. Let's take a quick look at these markets, which are totally dependent in many ways what happens after the bell but there have been earnings running up into it and boy did MongoDB manage to tell us a story of how AI is going to be helping their business continue to grow the earnings came out yesterday we're up 33 percent on the back of MongoDB's numbers crowd strike we anticipate after the bell 1.8 percent higher snowflake too what are the AI use cases that they're managing to roll out to their customers and how it affects the database market more broadly, we're up 2.9 % ahead of their numbers.