Nvidia Wins US Approval to Sell H200 Chips to China

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0:11Bloomberg 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. President Trump allows NVIDIA to ship its H200 AI chip to China in exchange for a 25 % surcharge. Plus, we'll drill more into the Warner Brothers Discovery saga and antitrust concerns rising from the proposed bids. And Microsoft is committing$17.5 billion over four years to help build India's cloud and AI infrastructure. We dig into the markets first and foremost, though. And Ed, not much of a movement. We're up 10th of a percent on the NASDAQ 100. The jolts data, basically jobs opening, coming in better than had been anticipated, but scratched beneath the hood and maybe less optimism there than the market had hoped for.

1:01More broadly, we're in wait-and-see mode for the Fed tomorrow, but we're not in wait and see mode when it comes to some significant moves for OneStop. Yep, Nvidia. This is how Nvidia is traded over a 24-hour period and two sessions. We're down marginally, basically flat in Tuesday's session. When news broke from the president that Nvidia would be authorized to ship H200 to China under certain circumstances with a 25 % surcharge, the stock spiked. But then when reports hit that China would move with its own restrictions on how and why and which companies could have access to that technology, the gains fizzled.

1:42And the same can be applied to both AMD and Intel. Let's stick with the NVIDIA story as you look at that two-day chart of the stock and the big jump that led to a big fade. Let's bring in Bloomberg's Ian King, who leads our coverage of semiconductors. That's the news broadly. What else do we need to know about the calculus of America's decision to allow H200 in particular to go to China in certain circumstances and whether or not China wants it? Yeah, I mean, that's exactly it. We've shown a willingness to sell. We've effectively said, hey, we're prepared to give you something better. The question now is whether China actually wants that and how Beijing will react.

2:18We have the president saying that he's cleared it with his counterpart in Beijing, but we haven't really seen a concrete response on how that will manifest itself in terms of orders or shipments. We know that the articulated total addressable market is$50 billion for Jensen Huang. But what does the H200 bring that the H20 doesn't? How much better is it? Yeah, I mean, it's multiple times better. It's still a mainstream chip. It's still in widespread use in the world's data centers. It's not, of course, NVIDIA's latest. It's nowhere near as good as the Blackwell generation, but it's still very, very good.

2:54And according to our analysis, it's a lot better, which is more important than anything else that the Chinese can make themselves. So that there is the what happens next. China has two domestic players, maybe three, that have AI accelerators. They are not as performant as H200, we think. But the main issue for China is also the supply constraint and manufacturing. Explain that part of the story. Yeah, I mean, as you know, China has been cut off from advanced semiconductor manufacturing, including TSMC. So the chips that it can make itself are constrained by the actual amount that it can make, but also the quality that it can make based upon the manufacturing capabilities of plants inside China.

3:38Ian, quickly, just when I reference H20, the 15 % never went to the government because that was never signed off legally. Do we know whether the H200, yes, we've got a true social, but will it be signed off legally by the U.S. at least? Yeah, I mean, as we put in our story yesterday, we had some reporting on that and exclusive for us. This is going to be a different arrangement. Because these ships are made in Taiwan, what's going to happen apparently is that they're going to be imported into the U.S., which would make them subject to an import tariff. So that's how we basically, the U.S. government gets paid.

4:11And then they become re-exported to China. The nuance always clear. Thank you, Ian King. Now, let's discuss the broader impact now on the tech markets. We bring in Ipek Oshkodeshkaya, which is analyst at SwissQuote. Ipek, what do you make of this potential for NVIDIA at least, and whether or not China will indeed import the market reaction from your perspective? Well, this is a win for NVIDIA, but it has to be taken with a pinch of salt because we already hear that there are tensions among US politicians regarding what this means for the national security for US is a very sensitive segment of business.

4:50China isn't sure to let its own companies buy these chips for the same national security issues and also because they are backing the domestic chip production. So for NVIDIA, which assumes that its China sales are now zero, every chip that's going to be sold to China is a bonus. It is a tailwind. But for long-term forecasts, we still remain very much coches regarding what this means and how stable the steel is going to be. Ipek, the base case assumption from NVIDIA is right now in the fiscal year and maybe next fiscal year, zero revenues from China. But clearly this news has led everyone to recalculate.

5:29Would you assume some upside from Chinese AI data center chip revenue next year? Well, again, the geopolitical backdrop is so uncertain that the best thing to do in terms of the safest way to go with these assumptions is to keep that forecast at zero percent. But obviously, investors are happy to hear that there is an opportunity in China for NVIDIA. But again, that opportunity is very much uncertain right now. We don't know if China is going to allow these chips to be sold. And again, we don't even know if the Chinese companies will be willing to buy these chips, given that it is politically very sensitive.

6:11And if they could use domestic alternatives, even though they are less efficient, maybe it's going to be a better deal for them, especially from a political and geopolitical perspective. So in my opinion, investors will continue to assume that the NVIDIA's Chinese sales are going to be zero with a little bonus maybe if some of these chips actually get sold. Ipek, bring us your global perspective as you sit in Switzerland. This tussle between US and China to say who's got more dominance. But what do you hear from your perspective as to how far along China really is with its domestic chip manufacturing and use?

6:50Well, obviously, US and US technology is ahead of China. What China is good at doing is basically to find the chips to manufacture, for manufacture chips in order to serve their own needs and serve the basic AI needs. So China is generally better in transforming their AI investments into real revenue, Whereas the U.S. is this prestige technology hub that's really aiming for the best. But even from the European perspective, where we could be a little bit more neutral, well, U.S. is allies, first of all, and U.S. is well ahead from a technology perspective than China. Then China is clearly coming.

7:33And the fact that these chip restrictions have hit the Chinese technology sector means that they will be accelerating their efforts and do anything in their power to catch the U.S. technology. It really has been a mounting concern from some of these tech leaders that perhaps were underestimating how sophisticated China is. Is the market underestimating how superior TPUs are, how other chips are being manufactured by big tech players for their own inference? How much do we need to bake that into the NVIDIA story? Well, I think that TPUs are interesting, but they are actually serving in one particular area, and that's AI.

8:12Obviously, the fact that Google is now out there and commercializing TPUs is a negative risk, is a negative factor for NVIDIA. It is a risk in the sense that for those companies who are looking only for their AI applications, they would find it cheaper and as efficient as buying NVIDIA's GPUs. But at the end of the day, NVIDIA is not only selling chips, they're also selling the ecosystem that comes with it. So not every company is going to be comfortable going into the TPUs just because it's cheaper and is as efficient. I think that Nvidia still has the GPU market and the ecosystem well anchored.

8:50And Google, for example, with its TPUs doesn't really have it. Ipek Oskar-Deshkaya, Swiss Quote Senior Market Analyst. Thank you very much. Coming up, we'll come back on the talk of Hollywood, Warner Brothers Discovery. And the antitrust concerns, the proposed bids are definitely raising. That's next. This is Bloomberg Tech.

9:24Let's get to what everyone has been talking about in entertainment, the rival bids for Warner Brothers Discovery. After Paramount came out with its own hostile takeover offer yesterday, Netflix co-CEO Ted Serrano says he's not too worried. He spoke at the UBS Global Media and Communications Conference in New York yesterday. Just take a listen. Today's move was entirely expected. We have a deal done and we are incredibly happy with the deal. We think it's great for our shareholders. We think it's great for consumers. We think it's a great way to create and protect jobs in the entertainment industry.

9:57We're super confident we're going to get it across the line and finish. So we're excited. Let's bring in Bloomberg's Lucas Shaw, author of the Screen Time newsletter. Should he be as confident, Lucas? First of all, I love those old photos that you have of Ted back from, I guess, the release of Lillehammer. Of course, he's going to project confidence. He agreed to a deal. And what Paramount is proposing at the moment is not different from what it proposed when it lost this auction last week. Right. They're sticking with their$30 a share. And their insistence is that the board just didn't take the time to really consider it.

10:33and that if more shareholders hear their point of view, that they will be swayed. I think if Paramount stays on that current course, Ted has reason to be pretty confident because he already won with that. The risk for Ted and for Netflix would be if Paramount comes back and offers even more money because then the board and the shareholders would likely think about opening it back up. Lucas, you have spoken at length and in some detail in the last year and two years with both Ted Sarandos and with David Ellison. The reporting overnight was really focused on the coalition that David Ellison has pulled together for the financing.

11:09And part of that includes people that have proximity to the administration, Jared Kushner and his private equity firm being the easiest example. Just reflect on what you know of both CEOs in the competition between them, but also David Ellison's ability here to manage that relationship with the White House if there is one. Right. Well, look, I think one of the reasons that Netflix prevailed in the initial auction was that you put Ted Sarandos in a room with the Warner Brothers Discovery board and leadership, and he is charming and charismatic and is generally very good in those situations. Right.

11:49It's it's one of the reasons that he is Netflix's primary person when it comes to, you know, wooing talent. David Ellison has a little bit less experience with that. Right. He's younger. He is he is very amiable, but he doesn't have he's not kind of like oozing the charm in the same way that Ted is. We've now entered a different phase of this, to your point, where a lot of it is more about who you know and their proximity to people in positions of power. that's one area where Ted Sarandos is still very strong but he comes generally from the Democratic side of the political aisle and so Netflix is having to kind of find the people who can help them get in in the Trump administration.

12:26To your point, David Ellison, in part because of his father Larry and then also the various financiers he has, he has a lot of different ways to access the president. Now of course all of this is moot or should be moot if the board decides one way or the other But, you know, times are different now, I guess. Times are different. But let's just go back to cold, hard cash here, because this really comes down to how much the investors are going to think the cable networks are worth, right? That's a big part of it, yeah. I mean, the fundamental breakdown between what Paramount thinks of the state of play and what Warner Brothers Discovery thinks of the state of play is the value of the cable networks and the importance of cash.

13:08Paramount's bid is all cash. Netflix's bid is primarily cash, but not all cash. Paramount is valuing those cable networks at about a dollar a share. By that valuation, their bid is superior to Netflix. Warner Brothers Discovery is valuing it at three or four dollars a share, which and by that metric, Netflix is superior. That's why I think it's it's feels almost inevitable that Paramount, if it really wants it, will have to come over the top and just add, let's say, three dollars to its bid. But but we're not there yet. Bloomberg's Lucas Shaw. Thank you very much. President Trump first raised antitrust concerns over Netflix's market share if the deal goes through.

13:45Now, Senator Elizabeth Warren also weighing in on Paramount's bid, saying that merger would be, quote, a five alarm antitrust fire. Let's break it all down with Jennifer Huddleston, senior tech fellow at the Cato Institute, whose work covers antitrust. a deal a proposed deal of this scale and size and value is inevitably going to be looked at by regulators and reviewed in part because we have a set of codified guidelines and rules from 2023 that allow for that to be the case when regulators do look at it jennifer what is the top consideration about this market that they'll be making thank you so much for having me and you're right one of the things we're going to see in this conversation is how do these 2023 guidelines potentially play out in this case?

14:36And what does that mean if such ends up in court, as well as what does that mean for any challenges? One of the interesting things is going to really be around this question of market definition. What is the market that these two platforms are potentially competing in? And what does that mean for the actual average consumer? Is this online streaming subscription services? Is this some kind of bigger attention economy issue? Or is this something specific about the amount of time individuals spend on any type of entertainment as it goes about? Jennifer, will any of the regulators involved look at what the benefit is to the consumer in either merger or deal going through?

15:22I mean, we can certainly hope so. U.S. antitrust law is supposed to be based in the consumer welfare standard, which means what regulators should really be looking at is will this merger or acquisition harm consumers in some way? Will it negatively impact prices? Will it negatively impact the ability to have a certain quality or certain other elements that really should be based on sound economic factors? This shouldn't be about a subjective idea of how many players should be in the streaming market. it should really be focused on this question of are consumers going to be harmed, are consumers going to be worse off if they have this combined company as opposed to two separate companies.

16:05The Cato Institute is so interesting because it's a libertarian think tank and it's really thinking about individual liberty, about limited government, free markets. You come in it from that angle. But Jennifer, give us your global perspective here a bit because this doesn't just get sign-off from the United States. We go worldwide. We're just seeing what the EU is doing again today, for example, with Alphabet and competition within AI, are they going to hit roadblocks there as well? I mean, that's certainly going to be a question depending on the nature of any particular transaction. And we've seen this happen in other cases when it comes to questions around large US tech companies and their potential acquisitions.

16:42For example, we certainly saw a large debate around the Microsoft Activision acquisition in Europe as well. And ultimately, that was able to go through. We've also seen European regulators trying to put up various structural roadblocks that would allow some of America's leading tech companies to continue to innovate, to continue to go into new markets. So I think it's certainly a worthy question of not only how might such transactions play out when it comes to U.S. regulators, but if this is something that's a global international debate, are there other regulators where there might be other conversations that get had along the way?

17:16It's interesting, Jennifer, that Netflix has tried to front run a lot of these concerns by putting out the statement that consumers will win from their perspective, because already they sign up to Netflix and HBO, and more broadly, they'll probably get more bang for the buck. But they're also having to talk about how they're going to benefit content creation, or indeed the industry of Hollywood writ large. Should they have to do that? Will the narrative be based on that in any way as to how this might help jobs and creativity? I think one of the big questions is going to be around that market definition.

17:49Is the market, the definition, definition include markets for content creation? And if so, what does that mean? In our, in this day and age where we have such significant amounts of user generated content, is it only about studio created content? Or is it also about looking at content more holistically, the way short form video or even long form video on platforms like YouTube have arisen to allow creatives new outlets? So we'll certainly see that be part of the conversation as well, possibly, if that gets included in the market definition. Jennifer Huddleston, great to catch up with you, senior tech fellow over at the Cato Institute.

18:25Now, we're going to think about entertainment a little bit more because Walt Disney is bringing Jimmy Kimmel back for at least one more year. Now, the late night star who was suspended in September over remarks about slain GOP activist Charlie Kirk, where he's going to continue to host Jimmy Kimmel Live until May 2027 under a new one-year deal with Disney's ABC network. It's all according to sources. Ed. OK, coming up, investors have been disappointed in Apple's lack of AI strategy. Now, that weakness may be a strength. We're going to talk about why next. This is Bloomberg Tech.

19:12Take a look at Apple shares since June. Have you noticed this? Back then, analysts were talking about the iPhone maker falling behind big rivals in the AI race. But now the company is the beneficiary of rising doubts about the AI trade. Here to talk us through is Bloomberg Equities reporter Carmen Reinecke, who is going to help us really illustrate a story that everyone is reading today. Almost we'd forgot, we'd all thought Apple had been beaten up. And actually, it is worth$4.1 trillion. It's the second most valuable company on the S &P 500. The narrative shifted. Yeah, it totally shifted. It's really like a complete turnaround from the beginning of the year.

19:48Now it's, you know, in spitting distance of taking over as the biggest company from NVIDIA, right? That gap is ever narrowing in terms of market cap. So really what we've seen is that people are getting more worried about the AI trend. They're looking at these companies more critically. and Apple sort of at the same time has benefited because it's not seen as this huge AI play. I think at the same time as well, what we've seen is that there's been a little bit more shine around the new iPhone, iPhone 17. The big story for Apple, at least I've been hearing for the last few years is the upgrade cycle, right?

20:22People getting the new phones that they've had for four or five years and analysts and investors are starting to see that happen and they're excited about it more and more going forward. But, you know, at the same time, Apple's valuation is near record highs. It trades at 32 times forward earnings or nearly 33 times forward earnings. That's more than any other stock in the Mag 7 aside from Tesla. So it's expensive. And what's extraordinary is that 33 times. I mean, we hardly ever see it trade at those sorts of levels, right? Yeah. And if you think about it, it's pretty incredible because Apple's revenue growth is very small compared to NVIDIA, for example.

20:58I mean, they've been doubling revenue and having these huge numbers, Apple's not been doing that. But its revenue is so massive. It is. It's so massive. It's not that it's not putting up big numbers, but the growth, the percentage gain year over year is not really comparable to NVIDIA. So it's interesting to see it become more expensive. If you study the technical charts, we think Apple in the short term might fade a little, but long term, the bull thesis is really simple, right? When AI goes mainstream, Carmen, where are people going to be using that technology? Yeah, so one thing that I keep hearing, and I just spoke to an investor about this, is they really want an agentic Siri.

21:36They want that conversational experience with the phone. And so this is something that actually I think we see from Apple, we've seen in the past, is that they wait on the new technology until they can really get it right. Obviously, they've introduced some Apple AI, but I think we're going to see just leaps and bounds going forward. And that's what investors are looking at, that true conversational assistant. looking at A &R and the consensus ratings on the stock where where where are we right now in the sell sides position on Apple so I think what we've been seeing or what I've heard at least from technical analysts is that there could be a little bit of downside sort of baked in here I mean Apple is near record highs it's you know price to earnings ratio is near you know 15 year highs I think for the stock or at least the highest since 2020 and they think that there could be a little bit of a shakeout, right, or that some healthy selling might give a new place for investors to jump back in and actually really start buying with momentum.

22:34Bloomberg's Carmen Reinecke with the Apple stock story. Thank you very much. Now, coming up on the show, we're going to get back to Warner Brothers saga and discuss with Ross Gerber from Gerber Kawasaki, who's got skin on the game with Netflix. What's his take? We'll find out next. This is Bloomberg Tech.

23:03Welcome back to Bloomberg Tech. Our top story is NVIDIA getting approval from the government to export H200 chips to China, but with the condition of a 25 % surcharge. In yesterday's session, the stock spiked tire. We're now softer, two tenths of one percent. That same rule applies to both AMD and Intel. But in their cases, of course, much smaller exposure in the market, although it will be interesting to see how the dynamic goes going forward. The reports overnight very much focus that China will put in place some rules that will move to restrict the access of Chinese technology companies to those chips, even if America is allowing it.

23:43The other top story, the saga behind Warner Brothers Discovery. We have the bid from Netflix, cash and stock,$27.75 a share. We have the bid now from Paramount Skydance,$30 per share. And we are looking deeply into the financing of both. There is the Wall Street take, which we'll get into, but there's also the Hollywood take. What is this moving for the industry going forward? Later in the program, Caro, we'll get to that. What are the news? Yeah, it's time now for Talking TechEd. And first up, we're talking Microsoft committing$17.5 billion to help build India's cloud and AI infrastructure. The spend coming over four years will focus on scale, skills and sovereignty, according to Microsoft.

24:22It's aligning with Prime Minister Narendra Modi's AI goals for his country. Then there's the EU, which is investigating whether Google is abusing its market power in its AI rollout. Regulators are probing whether Google is favoring its own model and how AI overviews and AI mode use and compensate publishers for content. Google argues the probe, quote, risks stifling innovation. And then sticking with Google, remember these. Google Glass may have been ahead of its time. We're now developing two new smart glass designs as it battles meta in the AI device race, we understand. One with displays, the other audio only.

25:00The first pair is expected next year. Ed. Let's go back to that NVIDIA story. President Trump has announced a major policy shift on NVIDIA, allowing the company to sell its H200 AI chips to China in exchange for a 25 % surcharge. And as Bloomberg's Ian King explained, because the chips are manufactured in Taiwan, they enter the United States. That's the point of surcharge and tariff. But there's more about the market opportunity. Bloomberg Intelligence's Mandeep Singh joins us. I was really interested in BI's reaction to this because prior to yesterday, this was about opportunity lost in China.