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Videos app folks, let's get to it right now. We've got in studio our Mandi seeing Bloomberg Intelligence senior tech industry analysts. Mande, tell us what you like what's interesting in this report?
I mean, had it not been for the China right down, this company would have posted revenue which was five percent higher than the forty four billion dollar number, and the guide would have been almost fifteen to twenty percent higher. So we're talking about eight billion in lost revenue. So clearly, whatever they're doing, they are able to make up that revenue lost in China with some other customers because it's in line.
With consensus where they making up for it.
Well, I mean there are other customers.
We saw the deals in I think there's demand from other enterprise customers. And the one anecdote they provided was token generation was up ten times.
To explain what that is.
Yeah, So the way these AI models work is if you type in a query on chat GPT, it's going to generate you know, hundreds of tokens from that it's going to be passed with the model and the output is also you know, hundreds of tokens. So Google said at their io event their token generation was up almost fifty x.
Same thing from Microsoft.
Yes, and so we are getting those type of numbers from pretty much anyone who's exposed to demand for large anngreage models, and in this case, Nvidia is exposed through chat GPT because all the weekly active users that are going on chat gpt and using the product for let's say twenty minutes, that's what's resulting in the tenex increase in tokens. And I'm not surprised that everyone needs additional compute because if chatgpt needs to serve more users, they
need additional compute. The traditional CPU compute is just not good enough. And that's where I think they are finding that additional demand.
Ian King our live blog says how many companies could frontload their earnings released with details of what they're missing out on and still get a positive reaction from investors. So it's pretty impressive. Okay, you know, we just had a guest on, Jay Goldberg over at Seaport.
He's got the.
Only sell on the company, and he's got some questions about kind of like maybe all the good stuff is already factored in, I think questions about the AI and the build going to take longer. What do you say to some of that.
I mean, look, everyone acknowledges that, you know, semiconductors is cyclical.
You will see.
An air pocket or some sort of digestion and these kind of these kind of growth growth rates are too hard to sustain, you know, so you are not going to see sixty seventy percent growth when your revenue base is two hundred billion dollars run rate annually. I mean, from that perspective, there will be a tapering of growth. But look at all the hyperscalers. Nvidia is still growing top line way above everyone else, including Microsoft and you know Meta that are growing at a very healthy high
teen strate. So from that perspective, there is still a lot of runway when it comes to Nvidia's growth.
China and the China specific story here the age twenty, the restrictions, what do you see as the long term effect of what the Trump administration has recently said, but also export restrictions on some of Nvidia's products, specifically with regard to China, I.
Mean, that is the most plausible bare case against Nvidia because look, right now, China used to be about twenty percent of Invidio's revenue. It's very hard to fill that hole with all the additional demand. Even though Chat, GPT and other llms need more compute and they can take
whatever Nvidia is making. But in the long term, if you're looking five years out without China, I mean, that's where all the secondary LLLM companies are besides you know, Chat, GPT, Anthropic and Google, and so you are missing out on a lot of potential customers that would have used your chips.
What did we say about DeepC before that they had an update and like we're trying to understand, So if this is all real with what they upgraded.
The R one AI model that helped propel it to global prominence earlier this year, now we don't.
Still know exactly how they're doing all of this, but if they are doing it with less advanced chips, I mean, does that make the Nvidia story not as exciting?
No, because in videos to get this is all speculations. Yeah, yeah, and look there could be some pull forward in China. You know with Deep Seek using in videos chips because they anticipated these kind of restrictions, right, But in other regions everyone realizes and Vidia has the best ship. The only reason why you are going to look for an alternative is a hyperscaler looking to really kind of reduce
their dependency. So Google doesn't use in video chips because they have their in house chip and they serve traffic that's pretty much the seven most frequently used apps on the Internet.
So if they were to rely.
On in video, I mean, in Video's revenue could actually grow fifty percent just by serving Google.
But does Google then create those send those chips. Would Google sell those chips outside?
They don't, so they don't use the chips outside of their family of apps. They just use it for Google Search, YouTube, and their family of apps.
Why wouldn't they sell it because.
It's not a chip that is generic in nature that it can serve everyone else's traffic. It's customized for their data.
Do we see Amazon then doing that too?
I think that's the bare case that everyone is thinking, But so far it hasn't happened, and everyone is trying.
Would you disagree with j Goldberg who just told us that he thinks that Broadcom is the closest competitor right now, or not necessarily closest competitor. Excuse me, And I know you can't make calls Andy, but he's the only one who has a cell rating on Nvidia, and he argues right now that investors should be putting their money toward Broadcom.
I mean, look, we are in an AI infrastructure super cycle, and this is a tie that will lift all the boats. Broadcom Wild benefit other chip makers for benefits. So it's very hard to say only Broadcom wild benefit with AI infrastructure demand. And I think that's where you're too early to put a cell rating on a stock like Nvidia.
All right, so stock is at four percent and certainly investors buying in the aftermarket. There is a you know, a headline that crossed about ten minutes ago that in video saying maybe unable to create a competitive product for China, would have to foreclose from competing in China market. China market foreclosure would materially hit the business. Export controls Apple to China are complex. Help me make some sense out of these headlines.
I mean, look, if you want to see multiple expansion in a stock like Nvidia, you got to convince the investors that you can keep growing twenty twenty five percent. And the way you do that is by showing pockets of demand, you know, geographic diversification. If you lose out China revenue, suddenly everything is like, okay, you're two dependent
on hyperscalers. What if Amazon actually develops a chip and reduces their dependency altogether on in media and so that is the big bear case, the concentration of customers, and that's at losing China revenue is a rep.
So Mandy Business is saying, here, we're laying it out for you just to understand.
Yeah, in terms of the China, is.
That pressure on the Trump administration?
Not really because they keep eating their numbers like this, I mean really administration. You see the numbers and you're like, that's these guys get managed without China revenue.
But if they're.
Warning of that impact in terms of China, is that kind of a little bit of a subtle considering he just traveled with him to the Middle East, you know a little bit of a like settle message reminder.
That's a fair characterization. I would agree with that.
Okay, I want to bring in Joe Kaiser CEO and managing director at Mercado Partners. It's a grow stage investment firm. It's got over a billion dollars in assets under management Mercado Partners. He joins us from Salt Lake City. Joe, You've had a chance to sit back and look at some of these results over the last thirty minutes or so. First quarter data, revenue coming in close to estimates, second quarter forecast solid despite an eight billion dollar eight billion
dollars in expected lost China sales. The company stock up about four percent in the after hours. What's your view.
I think this growth and the profitable growth that we're seeing is really unprecedented in the venture community. We still use the term called rule of forty, so it's combining the top line growth rate coupled with EBITDAM margin. And I haven't seen the EBITDN number, but if we use the prior quarters EBITDN number, like they're approaching two hundred
from a rule of forty standpoint. And to give you some historic precedent, when Micro sorry, when Microsoft and Apple were at the same stages from a revenue size standpoint, those companies were at ninety and sixty, respect respect respectively. So This is truly unprecedented performance and at the end of the day, like what we're seeing is probably the greatest invention in the history of mankind and the company that singularly powers that and that's the performance that we're seeing before us.
Now, are you bullish that there is more upside, Joe to this company? Jake Goldberg is not.
Well.
I think it pays to be provocative at some occasions, but yes, I think there is a lot of upside. I think, you know, when we think about the deployment of AI, particularly in enterprise applications, both in the United States and abroad, we are very early innings and that and that and that deployment. You know, they've talked about the data iner deployment around the world across the GCC countries as well as domestically. Lots and lots of runway
in that regard. So there is a long road ahead for Nvidia.
Joe, I know you're well versed on the power side of AI, but I want to bring man deep in on that. Man Deep, is there a point you know, I think about you know, doing like basic charts anywhere, like the ramp up and AI and the power demands we talk about it all the time. Is there a point where AI deployment and usage might be limited because we just don't have the power?
Yeah, and that's where actually in Vidia's architecture excels because they give you performance per power what that your likes of AMD and Intel aren't able to give. It's not as if AMD doesn't have an offering GPU that can compete with Nvidia, But in Vidio's GPUs just give you better performance per power what And that is the constraint right now, everyone acknowledges yea the power constraints.
So from that perspective, also in Vidia does have an advantage.
See you nodding. This is certainly your wheelhouse given the history of what you've done and at the firm and outside of the firm too, How is in Vidia doing this and how solid and how big is their mode well?
That is one of the big developments with the Blackwell chip is the reduction and power consumption from black from Hopper to Blackwell, and and that that is one of the key breakthroughs. You know, I A lot of people, including in Vidia, including the hyperscalers, talk about the lack of power as the headwind here. The reality is we as a nation. We have the resources, we have the technologies.
You know, I invested in a company called Taurus, which has solved the storage challenge we have from a long term standpoint, I think a guest earlier today talked about small modular reactors and the technology of foot a small footprint nuclear. That technology exists, right.
But SMRs are taken a while. Yeah, we're still talking quite everybody talks about it and SMRs are the way to go, but it's going to be several years before we really see that build up.
Very true, Carol, But I think the challenges we have plenty of natural gas as a country as well. And the talk is, well, it takes a decade to build a power plant, but the reality is the long pole in the tent from building a power plant is the permitting process and the process of getting the right to turn on and use the power out of that power plant.
So if we streamline that process, and I know both the federal government as well as states like Utah are in the early inning right streamlining, but that is the long pole in the tent.
All right.
We're talking with two guests. We've got Joe Keiser, he's CEO of managing director at Mercado Partners out there in Utah. Mandy Singh, Senior Tech Industry Alice Bloomberg Intelligence right here in our Bloomberg Interactive Broker studio and Vidia out tim stock is now up about four and a half percent here in the aftermark.
Yeah, first quarter data center revenue coming in close to estimate. Second quarter forecast solid despite that eight billion dollars an expected loss to China sales. In Vidia shares rising and extended trading. It's providing a boost to other chip stocks as well. We're seeing shares of Micron also higher in the after hours by about one point four percent. Mandy, you've been glued to the terminal looking through these numbers.
You got to go in a minute, what's the last thought you want to leave us with ahead of this call?
I mean, sovereign AI is a big opportunity. Sovereign Sovereign AI, which is where you would put you know, revenue from the likes of UAE, Saudi Arabia, the deals they just signed. I just want to get a sense of how big this could get, because so far this was like low double digit revenue in terms of the revenue exposure that Nvidia had and look they are losing China revenue. So
what makes up how many types of entity? Sovereign entities want to build their own large anguid model infrastructure like the UAE and the Saudi Arabia, And that would determine, you know, the pace of growth when it comes to the non hyper scale piece of and Video's growth.
The Middle East trip like makes so much more sense, right.
Maybe they should be doing more trips the administration?
Well where else can they go?
Anywhere?
Right?
Anywhere?
I mean, look, you you've got so many pockets where there's so much sensitivity around AI in terms of you know, developing your own AI, serving it with your own infrastructure.
That that's the real bull case when it comes to sovereign AI. What can I ask one last question?
Cash, cash equivalents, marketable securities fifty three point seven billion, up from thirty one point four billion a year ago and forty three point two billion a quarter ago. What do they need to do? They tried to buy armed, couldn't do it right? Do they need to do bigger dividends? Do they need to do buybacks or what do you think?
I mean stock buybacks?
This company is generating as much free cash flow as Apple. Now you're close to one hundred billion dollars in free cash flow. So Apple does have a playbook when it comes to returning cash to shareholders. I think N Video should probably follow them. H