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I know Ed Ludlow and Jay Goldberg are watching clear screens closely. I want to bring both of them in as we do await these earnings. Ed Ludlow is the cost of Bloomberg Tech on Bloomberg TV. He joins us from the San Francisco Bureau, and Jay Goldberg is with us too, senior analyst Semiconductors and Electronics at Seaport Research Partners. He's still the only analyst on the Bloomberg terminal who has a celerating on Nvidia, Jay, is it lonely in that corner.
Of It's getting left lonely by the day, is it?
How come?
I mean in Q four November December, I had a lot of newfound friends.
Okay, right, okay, well we'll see.
If it was me being right, it was just I think the market is sort of rotating out of AI or de risking a little bit.
Yeah, I take it. Okay, we'll see and we'll see what the numbers say today. Is there is there a chance that And look, I know that I don't want you to get in trouble with compliance or anything, but I ask you this every quarter, can you hear anything from Nvidia today? And I'm gonna have to interrupt you if we do get those numbers, are we going to Are you going to hear anything from Nvidia today or could you hear that would make you change your view to at least neutral or buy.
It?
It's pretty unlikely.
My concerns are their capacity constrained, and I think they're just going to limit the amount of upside that they can deliver to revenue for the next few quarters.
All right, sit tight, We're going to continue to away. Jay Goldberg is with us or Ed Ludlow is with us. Keep in mind, Tim you mentioned earlier with we talk with Ouroni and King three months ago in Verdia Nvidia excuse me, it'd beat the stock went up a little bit and then we start go down the next day. So you know, high in terms of expectations, although the stock has been beaten up here Ed Ludlow, as we await those results. Top thing you're watching out for here.
Well usually hits it exactly twenty minutes the hours. So I'm a little bit on edge, and one wonders what's behind that. And I just state that as facts because I always go back and double check myself on the terminal evt go. Your last guest said that, you know, for the outlook for the current period April quarter, first fiscal quarter, that he was about seventy three to seventy
four billion dollars in sales overall. That's above consensus, but it is not as high as the most bullish estimates, right. And so we started this year with Nvidia and Jens Mung at cees and there was actually quite a lot more update in those on stage and in front of camera appearances than perhaps at the time we preciated in terms of them going beyond that that original five hundred billion dollar forecast for calendar twenty six for example.
So you know, you guys have done all week.
I guess this is quite tense for the market because even that really good results may not be good enough.
Yeah, And I Ian made that point on our program because we ask you know, and it's different every quarter, but in recent quarters this has been such a big event. But Ian made the point, Look, there's not you know, we've heard a lot from Jensen already about demand and so investors have that information. So yes, we will get obviously we'll get new information when the company reports its results and when we look at the you know, expectations
and commentary. But like you said, a lots out there already.
Yeah.
So basically, this forecast for five hundred billion dollars at the time, it was over five fiscal quarters, and it was something that he said toward the end of last year in Washington, DC's in DC. That was just for Blackwell system and then Reubin Systems, but it didn't take
into account any revenue whatsoever from China. Then what happened was Bloombergsine and King asked Jensen at a press conference how that number was looking three months on, and what he said was, well, we're tracking beyond it and that there may be some contribution from China, but right now, like until the print hits, those are imponderables. We don't know or we are pondering them, I guess, but they're not within the forecast, nor are they within what in
Video has actually stated. So again, I'm just kind of noodling here, guys, it's difficult bear with me with the audience. I don't think in videos reported late late being later than twenty minutes past since like twenty twenty three, So I don't know.
No, I think you're right to go there.
We're looking at our live blog, which is the whole team here at Bloomberg. Number is with us, but Sarah Fryar, our big technology team leader, she's like, men, video earnings are usually by four to twenty still waiting. I don't want to speculate, but it is unusual in.
I meta a few quarters ago and it was nothing.
Yeah, it does happen.
Yeah, can we talk quickly about margins unless the numbers like here? Yeah, you know, Like it's interesting that everyone discusses margins. This is a company that has seventy five percent gross margin, and we know that the economics of this industry are brutal. But something interesting has happened in recent months, which is that in Video owns more of the content of the server design. It's not just the
GPU anymore. It's the little plugins around the GPU, and those may not be major drivers of revenue growth, but
they have it would appear supported margins. But that creates some jeopardy for this print because if you have a gross margin of seventy five percent and the street and I think your last guest talked about this is the profile in terms of their risk tolerance that they like of a company like in video, they come to have an expectation and so don't just look at the earning statement, but when the CFO letter hits, look for the section on margins and where that that there's an indication that
seventy five percent gross margin going forward is the norm, the status quoite so to speak.
I mean, that's an incredible status quo for a company in the hardware business. Jay Goldberg, I want to bring you in here on the seventy five percent margins. I mean we heard this from Ian King earlier. These are software margins, not hardware margins.
Yeah, I mean strong agree with what it was just saying.
Is I think the bigger risk of my thesis or the bigger question mark this supporter is going to be margins. Like we have a pretty good fix on where you know what their revenue is going to look like he puts in takes.
But the margin question is a big one.
They make a lot of money money from memory. They buy memory from the memory makers then mark it up to their full margin. That's a lot of earnings for them. Their competitors don't do that. And we all know about the memory shortage. Is in Nvidia going to eat it?
Is they?
Are they going to be able to pass on the memory costs to their customers? I think that's I think that's going to be an area that the street's going to focus on a lot is how does how does their margin the gross margin that look look.
All right, folks, We are talking with our Ed Ludlow, and of course we've also got with s. J. Goldberg over at Seaport Research Partners. We expected that in Vidia would have had its results at about seven minutes ago.
We're still waiting two four to twenty.
As Ed reminds us, this is the time that they have reported over the last few years, So we're kind of glued to our Bloomberg as we speak, just waiting for it to cross. Having said that, as we await, the stock is just up about four tenths of a percent here in the aftermarket. I'm not going to read anything into that, but we did see the stock hire also in the regular trade today, Jay.
I want to go back to you as we do await these numbers. You mentioned some investors having AI fatigue, and indeed we've seen Nvidia in this narrow range really going back to just a few months ago. Explain more about how you're interpreting AI fatigue, because there's there are different different companies are working in different spaces here and in video. I think many would argue stands in a league of its own given the demand that it canntinues to see from the hyperscalers.
So I think the issue is there are so many constraints across the industry. Right We're short on chip capacity, on packaging, on copper, on electricity, on substrates, all these things we haven't really thought about in a long time are very tight, and so that feels a little precarious. And then on top of it, you have a lot of questions about how these data center data center financing
is going to work. There's a whole lot of financial engineering taking place on the construction side, and I think people look at that and they sort of think back to you know, past past periods and economic history of financial engineering going crazy, and it just I think in late last year it caused people to reassess how much exposure they want to AI. Even if you're not owning Nvidio stock, you probably have AI exposure in your portfolio just because the buildout is so spread.
Out across the economy.
Yeah, right, and so you can own you can own energy stocks, you can own you know, power plants, chemicals companies, all of them have a fair amount of AI exposure to growth. And so I think that sort of the market repriced that a little bit. And then you have in video who, like I said, just is sold out. But once you're sold out, there's no upside. And that's sort of stocks traded sideways for six months.
Ed, come on in here, because Jay got me thinking about constraints. Go ahead.
Well, the only thing I wanted to point out is that you know, we got salesforce no no salesforce earlier right after the market and it's down about four percent, and some of it has to do kind of feeding into the AI fears that are out there.
A little bit.
They gave a lukewarm outlook for sales growth. I mean it's in video and then it's the others because it's just been an interesting market environment as of late in terms of that AI scare, and it's been playing its way in a lot of areas, in particular in those software companies.
Yeah.
Look, the difficult thing with all of this is that the data center that gets built tomorrow with the latest generation and VideA, g use, the software results of that are in the future, right. And the way that Gentamong has explained it previously is that imagine if they were a handbag company bear with and they said to the market,
here are next five seasons of bags. We're going to tell you in advance, the next five years worth in videos, argued for a really long time, it has told the market from the supply chain to its customers what it is going to do, and to its credit, it has delivered those generations of technology annually to a relatively accurate timeline. So that's why we track capital expenditures, right. Capital expenditures are a commitment for a calendar or a fiscal year
in most cases in videos. The main beneficiary of that. The problem with salesforce and some of the other corners of the software market is that they know this is them showing the results of investments that they made in prior years, and those two timelines don't line up, and for investors, like, that's really hard. Again, I'm not an investor. This is just how it would be related to me, you know, on the show or in the course of being out there reporting, and you kind of have to sympathize with.
That, you know, we're I want to remind everybody we are waiting for in video earnings usually reporting at twenty past. It's four thirty one here in on Wall Street, and we're going to be speaking a little later about salesforce or maybe even more a little sooner if we don't get these in video.
Here we go.
There they are, here we go. All right, go ahead, Cheryl.
Let's go to actually the outlook first quarter revenue forecast, beating estimates, the company saying for the first quarter seas revenue of seventy six point forty four billion to seventy nine point fifty six billion, that is easily above the street estimate of seventy two point seventy eight million. Let's go back to the fourth quarter data center revenue that coming in better than expected sixty two point three billion versus the street estimate of sixty point thirty six billion,
and video saying computing demand is growing exponentially. Fourth quarter adjusted gross margin we expected seventy five percent, We got seventy five point two percent. Fourth quarter revenue coming in overall sixty eight point one billion, better than the street estimate of sixty five point ninety one billion. Tim we're seeing that stock up now about two point two percent in the aftermarket.
Yeah, just to remind everybody where we are with these numbers. The first the company ce's first quarter revenue coming in seventy six point four four billion dollars to seventy nine point five six billion dollars. That beat estimates handedly handily of seventy two point seven eight billion dollars. As Carol mentioned in video, CEO Jensen Wong saying in a statement,
computing demand is growing exponentially. Were also fourth quarter data center revenue worth repeating a beat there sixty two point three billion dollars the estimers for sixty point three six billion, and that gross margin coming in above estimates at seventy five point two percent.
Our Sarah Friar on our live blog saying that chairs are growing up on that data center revenue beat. Hey, Ed Ludlow, come on in. I know you're looking at these numbers. What jumps out for you?
Yeah, I mean straight to the outlook. And by the way, I would have done the same thing. Go right there. You know, revenue in the fiscal first quarter seventy eight billion dollars plus or minus two percent. You know, a consensus was really high. But like going into this, it's a very simple equation. There were many names from across sell side and buyside that said they wanted to see Nvidia beat revenues overall in the current period in by
the multiple billions of dollars, you know, against consensus. And so one thing I would say to confirm something is that the fiscal first quarter, which is the April quarter, does not assume any compute revenue from China. In the outlook does not factor in any compute revenue of China. That I guess is something to check off the list. It was one of the questions we had.
I want to bring in Jake Goldberg from Seaport Research Partner's senior analysts, your semiconductors and Electronics. He joins us, also from San Francisco. Anything in here that confirms your thesis or does it sort of go against the celerating that you have on Nvidia?
Yeah, I mean it goes I mean it's a good quarter. It's a good quarter and a good guide. It's above above consensus, above my expectations, but good for them.
We're still waiting to see a lot more detail.
What do you want to see?
I want to see I want to hear more of have to talk about gross margin for next quarter. I think that's going to be in the CFO commentary.
Yeah, Ed jump in.
Yeah, No, I don't have it yet, but it will be in the CFO commentary.
It's seventy versus seventy five percent expectations. I mean, can can Ed? Can you use that as sort of a guide for how the company could see.
First Yeah, I mean on a basis point basis, Yeah, it looked like margins are impacted by a number of things. It has been a sell side question on prior calls, the percentage of a server that in Vidia contributes to. And again, what's changed in the period is Nvidia starting to sell for example, CPUs as standalone product, and that was a part of the meta deal that was included. They talked about core Weave being an early user of CPU as a standalone product. You know, how does that
impact the margin profile going forward? But yeah, I mean what they do is they own more of the server and that has been one of the ways in which that they've got margins to where they are, and clearly being zero point two percent above you know, where where the hopes were is not a bad thing.
Yeah, I'm looking at that CFO commentary. As we know, revenue expected to be seventy eight billion plus or minus two percent, and as you correctly pointed out, not assuming any data center compute revenue from China in their outlook, gap and non gap gross margins expected to be seventy four point nine percent and seventy five percent, respectively, plus or minus fifty basis point, inclusive of a one tenth
of one percent impact from stock based compensation expense. Just looking at what else we have here, operating expensive gap and non gap operating expenses to be approximately seven point seven billion, seven and a half billion, respectively, including that's inclusive of one point nine billion of stock based compensation expense.
The headline getting my attention is in Vidia says that hyper scalers were just over fifty percent of four Q data center revenue. J Goldberg, I want to repeat that headline for you hyper scalers, We're just over fifty percent of fourth quarter data center revenue. Is that a sign that in Vidia is diversifying revenue? Who who made up the other half of data center revenue? Is it automakers? Like who's buying?
Well?
I think that's one of the most interesting things that's taking place with in videos is they're not just reshaping the semiconductor industry, they're trying to reshape the cloud computing industry as well. And that's why you see we see all these neo clouds getting investment from or support from Nvidio. In Vidia would much rather have one hundred neocloud customers.
Than three hybrid scale customers, of.
Course, and they're doing a really good job of creating that, willing that into existence.
So those other customers had come on in here. Those other customers are like the core weaves, the other neuroclouds.
Yeah, I mean, what is still important in this fact is that obviously the vast majority has been the hyperscalers plus meta, right, And so they've wanted to kind of switch between a story what they used to call an AI factory. At first, an AI factory was an on prem data center that enterprises and maybe some of the
neoclouds would operate themselves. Now an AI factory is what they you define any data center that's running AI workloads in so they have chopped and change between that story, but its origin was that they wanted to go beyond the hyperscalers to have people own their own infrastructure for AI workloads, if they were, say a software company or an enterprise of a slightly different size.
You know, it's interesting, I'm looking for supply constraints and they seem to say in the CFO commentary, I'm seeing it in terms of gaming. They say, we expect supply constraints to be a headwind to gaming in the first quarter fiscal twenty twenty seven and beyond. But it's so important, right, Ed, I mean, we want to really just see if that's a problem in the data center area.
Sadly, you know, my history within video, you know, before coming Silicon Valley and covering the data center thing was gaming and you know it's now such a small piece of revenue. It's I mean, Jay can jump in, but
really it's not where anyone's looking right now. There is some discussion later on as it relates to the balance sheet and cash flow on things to do with supply, but you're right that what they're basically saying is that that was the gaming was the segment that was impacted, and I don't know that that is having any effect really, And how we see the stock trading in after.
Hours, so in Video shares up three point four percent right now, and in fact we're seeing Broadcom TSMC and Micron shares follow in video higher. Jay Goldberg, come on in here and talk a little bit about the broader repercussions of a print like this outside of in video. What's the signal that it sends not just to hardware makers but to the entire market.
I think there are always concerns about how how long the spend is going to keep going, and we had certainly had some positive data points about that. Two weeks ago when hyperscale is reported, Facebook reported they have very strong CAPEX numbers. This just continues that trend, and I don't want to say it's a rising tide that lifts all boats. But it's it is six seven hundred billion dollars in CAPEX this year, and that's that's going to spread across the entire ecosystem.
No, and I want to go back to and I totally get like gaming non important, but I was like looking to see if there was any supply constraints in the rest of their universe, and I just thought it was kind of interesting that I haven't seen anything along those lines.
It was just in regards to gaming.
So is that a good sign that we haven't seen anything that the company has said so far in terms of supply constraints, Yeah, for the rest of the business, or I don't know, is it not that important?
Well, you know, I leave it to the analyst to model money left on the table if there were any, so to speak. But given the outlook in terms of sales and where it came in relative to consensus, you know, in Vidia, it's an enviable position to be in right
where demand exceeds your ability to supply anyway. But going back to that five year handbag analogy of a few moments ago, you know, the other argument that Jensen Wong and Video have made quite consistently is that if you tell your suppliers what you plan to do five years in advance, then the rest of the supply chain can help prepare with you and keep up. And you know
recently that that's been most difficult in memory. But memory shows up in pricing, you know, And if you're Jensen Wong, I'm sure you can make a phone call and make sure that the corresponding high bandwidth memory that you need is there or thereabouts.
Check on now ZAC one hundred to many futures here in the aftermarket, and they're up about one point eight percent, So we're certainly seeing a lift to the overall market. Jay Gilbert, come on back in what's top of mind when we get to this conference call in terms of what you want to hear. I know we talked a lot about orgins earlier, but.
What is it?
Yeah, I mean, I think this this margin stuff is important because what I'm sort of reading between the lines is they had to negotiate pricing with the memory memory makers, and the memory makers have the most leverage they've had in a decade, and we don't see any impact on in videous numbers. Compare that to pretty much any other electronics company out there.
Today, which is warning about memory.
I'm sure they're in video is feelings some of that, but the fact that their gross margins are guiding to at least in line tells me that they're just going to price on those memory increases to their customers, which is a testament to the to the to their pricing power, to their power their market position.
Jake Oldberg, Jay, we're gonna have to leave it there. We're gonna give you time to get ready to jump on that call. Jae Goldberger, Senior analyst, Semiconductors and Allow Electronics for Seaport Research Partners. Once again, Jay, the only analyst tracked by the Bloomberg terminal who has accelerating on in video and want to give you the last You've spoken to Jensen Wang many many times. What's a question that you would have for him on the earnings call tonight?
Yeah, Like, ultimately, it just always comes down to a projection of confidence that all of the stories we've been over in more than the last year is still intact. You know that the great build out of AI infrastructure is early, that they have long horizon visibility into what's going on.
All in video can control.
I suppose is the roadmap to go from one generation of compute to the next. And so they talk about in the CFO document margins being supported by the ramp up in Blackwell and mix of new products. Well, when does that mixed change? When does Vera Rubin really kick in and then go beyond that? That's kind of how the street would look at it.
I think, all right, we're going to live with there.
Ed.
We know you're busy as well. Ed Lodlo, thank you so much as we waited those numbers, then helping us break them down. Co host a Bloomberg Tech of Course on Bloomberg Television. Catch it at eleven am Wall Street Time Monday through Friday.
Stay with us more from Bloomberg Business Week Daily coming up after this.
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Then VideA shares continuing to trade higher. A couple of headlines also crossing that we want to bring to you, and Vidia says it's secured supply to meet demand for several quarters so we talk about supply constraints often when we're talking about Nvidia and the AI demand. Also in VideA, saying, the United States granted a license to ship H two hundred chips to China based clients. So they've granted a
license for specific China based customers. The US licenses to ship small amounts of the H two hundred to China, So we were looking for some clarification on its business in China, something that they've certainly been looking for.
We got a great Bloomberg Intelligence roundtable. May Deeeps saying his global head of Technology Research for Bloomberg Intelligence. He joins us here in the Bloomberg Interactive Brokers studio. He covers in Vidia, he covers Snowflake and more. Also, anurag Rana is senior technology analyst for Bloomberg Intelligence. He joins us from Chicago and he covers a salesforce. So we're going to talk software, We're going to talk hardware, me and deep. I want to start with your reaction to
in video. It was a beat, It was, I mean a very good quarter. Your reaction to margin and what is actually holding out margins here, because seventy five point two percent.
Yeah, no mention of any impact related to memory costs, which is surprising.
And why is that surprising? I know, my memory costs have gone up. But in video is such a big company, don't they have pricing power?
They do, but purchasing power und They clearly did a great job in terms of securing that supply and they don't have the premium. They don't have to pay the premium that everyone else has to pay on the hardware signe.
They said, secured supply to meet the man for several quarters. What's several well, I mean in this at least.
But they're saying that they've got it. That's a good thing.
They have got it, and they're guiding to you know, mid seventy percent rose margin for next quarter as well. So clearly memory not you know, an impact at all in terms of the margins. The thing that is clear is they are selling you know, to existing customers, not just GPUs, but systems. And that's the big difference between
an Invidia and AMD. AMD wants Meta to use their chips and integrate it, right, Nvidia is actually selling their custom to their customers entire systems that have higher asps. They are helping them reduce the token costs, and that's where the customers don't mind paying that extra you know, premium that in Vidia is charging because overall the total cost of ownership is lower than if you were to
standardize on any other chips. And that's what's reflected in their print is look, their customers see the value.
So well done in video right by doing the whole thing.
And the Blackwell architecture, that's really taken off. I mean all the concerns around the migration from Harper to Blackwell, I mean, they just proved that Blackwell will be probably a bigger product in terms of their chip architectures.
Does this in your mind?
I mean I always feel like you're like the calmvoice of saying, the aarspend is still happening, like everybody relaxed.
It's accelerating that.
But it's accelerate. That's what you're getting from this.
I mean, look at Nvidia's growth in the last fiscal quota, it was around mid sixty percent. They're pointing to seventy seven percent growth in their fiscal one q so that goes to show and the proof point you can see in the hyperscalar capex. The hyperscalar capex seems to be going up as well, so it's underpinned by healthy fundamentals.
We know why in Vidius top line is accelerating, right, because the kapex seems to be accelerating, and all these points towards more inferencing, more demand for AI compute, and we are hitting that phase where it's not just you know about training or whether it will happen or not. It's happening.
So the ROI the usage, right, we're seeing it.
The usage is happening, and companies are consuming the compute. It's going to get reflected in the cloud revenue next quarter. It's going to get reflected in all the possible forms of where infriencing will show up.
We're going to bring on aurag In in a second and talk Salesforce because I think that's a good transition to talk about what companies are doing with AI and the message at least that Salesforce trying to make with agentic AI. But before we get there, maybe if I do want you to weigh in on what Carol mentioned earlier about the China business. H two hundred shipped under a new program subject to a twenty five percent tariff.
Nvidia discloses US government in a ten K filing granted license by the US and February of twenty twenty six, the US licensed to ship small amounts of H two hundred to China for specific China based customer. What does our investing audience need to understand about what it can sell to China and the impact on that financially.
I mean it used to be China used to be mid single digit percentage of in Vidio's overall data center revenue. And Jensen has said China is about a fifty billion dollars addressable market when it comes to you know, chips, and so the fact that they're allowed to sell something now to China doesn't mean it's going to grow at the same rate as their overall top line, which is you know, seventy seven percent, and that excludes the China number.
But it's all incremental revenue. And this print shows there is just insatiable demand for Invidia's chips and whoever can get it well buy it. So it's just a question of whether in Vidio is willing to sell it to them or not.
All right, So let's go to salesforce.
We do want to bring in our anarag Rana, senior technology analyst a Bloomberg Intelligence.
He's in Chicago.
Shares of Salesforce Anaragor down about four and a half percent in the after market. Some of the red headlines that we crossed on the Bloomberg company in terms of the outlook sees first quote a revenue of eleven point zero three to eleven point zero eight billion, that's above the street estimate of ten point ninety nine billion. Also increasing its share buyback authorization to fifty billion dollars. Walk us through because this company has certainly been under a
lot of pressure. It's down about fifty percent since late twenty twenty four.
So there are two things that are happening right now. The first is, given so much spend going into AI, the non AI spending is the one that's under pressure, and that is hurting companies like Salesforce, workday accenture, and so forth, because companies have or the clients don't have that much money to spend in terms of how they're
allocating AI spending versus non AI. The second big piece right now is the market's extremely worried about software companies getting disrupted by all the model providers and all the AI native companies. So Salesforce are getting hit by two different ways. But the results, frankly, I mean I wouldn't say they were disappointing. I would say they were stay able to inline in terms of what they were saying
they're going to do. So from our side, you know, it is just going to take some time to sort out.
So Anni rog the question. I think a lot of people have excuse me about a company like Salesforce, and you know, we could go through any other software company, not any other, but many other software companies and ask you the same question is about the threat from artificial intelligence. And Mark Benioff was was very clear in the press release to say that this is a company that has like relaunched, I don't have the exact wording in front of me, but relaunched as an AI and agentic AI company.
Is is it really under threat? And specifically like, what is the threat from Claude, from Anthropic or from open AI that investors are so worried about and is it warranted?
So the question is the answer to the if is it warranted? I mean, I think we're going to take some time to play out because if the models get really smart, then why do you need a manufactured software like this? That software can do a lot of what you need to do in terms of managing your salesforce
or customer service. Now, the question is, in our view, when a company like Salesforce is there, there are a handful of their products that they have, they have that they sell into the enterprise, whether it's customer service cloud or sales automation cloud. Those are the ones I think they have a little bit better position of not being disrupted. But they have other visualization tools or some other smaller products that you know, may not be the ones where
anybody would pay for it. So I think there is a lot that needs to be done from Salesforce in terms of adding more AI capabilities to its core product and not be you know, change the narrative around it.
You know, the narratives have been so interesting on AI as you really well know, looking at names like Snowflake down about one point three percent here in the aftermarket, we're talking about Salesforce, and that's just.
A real quick rehash.
Here on the Bloomberg we're seeing that stock still down about four and a half percent here in the aftermarket, and then of course you've got Nvidia up about two point three percent. You put out some great research this week, Anaog you and the team about the haves and have nots and AI disruption. What do we need to know at this point, especially when everyone says, folks, we're still early in on this.
We don't really know how it all plays out.
You know.
I think that's the most important thing is we are very early in the inning. But at the same time, you know, when people are worded daily entirely sell the entire sector. We have seen that numerous times. So when we looked at this thing, I mean, the entire team worked on creating a framework of you know, when we see a company, does it have high market share, does it sell to very large companies versus smaller companies? Is
it a platform, is it a system of record? All those things takes into account, you know, kind of the history of a company. So let's say a company like I said, that's been around for fifty years, you you know, use it for your code, accounting, reason, supply chain, something like that is better entrenched than a very small company that's probably doing one particular function or selling only to the small and medium customers.
Hey, final question here on Salesforce. Just going back as we watch this stock down four point six percent, top of mine. I know I always ask you guys this, but when the call starts with the company and the C suite and analyston investors, what must be asked?
I think the biggest thing is going to be like, how what are you doing to change the narrative around them being disrupted by AI? And how are they adding more AI capabilities across their entire suite?
All right?
Love it, anarog Thank you so much.
Anaag Rana, his research certainly on the AI world.
And also on Salesforce. We'll be looking for that later on today.
Anirag Grana, senior technology analyst at Bloomberg Intelligence out there in Chicago.
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Geopolitics some certainly mentioned in President Trump's speech last night. The President, in his State of the Union speech, focused on the economy, and his view included statements about what we just talked about with our own Mike McKee. Inflation is plummeting, he said. He said, incomes are rising fast, and he also talked about Friday Supreme Court decision that struck down the president's global tariffs.
So an unfortunate ruling from the United States Supreme Court. It just came down.
It came down very unfortunate ruling.
But the good news is that almost all countries and corporations want to keep the deal that they already made. I used these tariffs, took in hundreds of billions of dollars to make great deals for our country, both economically and on a national security based. I introduced the Great Healthcare Plan. I want to stop all payments to big insurance companies and instead give that money directly to the people. The roaring economy is roaring like never before.
Our country is winning again. In fact, we're winning so much that we really don't know what to do about it.
People are asking me, please, please, please, miss the president.
We're winning too much.
Our nation is back, bigger, better, richer, and stronger than ever before.
All right, everybody, that, of course, was President Trump last night at the State of the Union address. We should point out his speech was criticized by Democrats, including US Senator Elizabeth Warren, who said he had nothing to say about issues like having credit card interest rates and making childcare more affordable.
Let's get a policy.
View of last night's address from President Trump and what policies and actions that may still be coming that could impact the future outlook for the United States. Great to have back with us, Libby Cantrell. She's Managing director, head of Public Policy for PIMCO. She joins us from pimco's offices right here in New York City. Libby, welcome back. Great to have you here. Let's just talk broadly about
this speech. What stood out for you and what do you think should stood out for the investing public, American citizens at large, the business community, and I think about American citizens who still think about this affordability issue.
So what stands out on those fronts.
Yeah, nice to be with you. I mean this was you know, there was more performance here than policy. We would argue there was a bit of us spiking of the football in terms of really sort of reinforcing some of what President Trump has perceived as victories the one big beautiful bill closing the borders, some of the other immigration policies that he has pursued, and also some of the foreign policy wins that he is character Zaly says
as wins. So I think that this was in some ways a lot of kind of red meat for his base. As as as these addresses, oftentimes our now he did talk about tariffs as you as you mentioned, I think that, to the relief of many Republicans in that chamber, he did not call on Congress to take a vote on tariffs. I think that is something that probably would have failed anyway,
but also would have been politically difficult for Republicans. But by and large, this was I think a pretty typical State of the Union address In many ways, it was again more of a rehashing of sort of the political wins and pretty light on policy details and light on kind of a roadmap I think for a lot of congressional Republicans heading into the midterm.
Yeah, I'm really glad you went to the midterms, because that's that's exactly where I want to go and try to understand from you if it actually moved the needle on how people could vote come the mid terms, because that's that's what Republicans Democrats are focused on right now.
I think it was a bit surprising that they're probably there were not arguably more policies that he'd actually highlighted in other speeches and other venues highlighted in last night's speech, And he did talk about this ban that he wants Congress to codify in terms of institutional investors investing in single family homes, but he didn't really talk about some of the other proposals. To Senator Warren's criticism, she remarked that he did not talk about, you know, capping credit
cards and what have you. Now, I don't think any of those will actually get you know, effectuated into policy. Those need Congress anyway. But in terms of really leaning into that affordability sort of framework and theme, he didn't really give Republicans all that much. Again, I think what his hope is, and what a lot of Republicans hope is, is that the voters sentiment around the economy will be different come this fall, and of course that one big
beautiful bill. People will be getting refunds on average four thousand dollars about one thousand dollars extra in terms of a refund relative to last year. So I think the hope is that there will be more optimism and that folks will have a different perception of affordability, and so maybe he won't need to lean into some of those policies. I think that was maybe last night was maybe a tell of that of that thinking.
Libby, he did focus on the stock market.
It's cerainly something we you know, focused on here at Bloomberg, but you know, talking about how good that was right and wealth created and good for investors. But is that always a good read or is that even a good read on kind of the state of the US as a nation and as an economy.
Well, I think there are lots of examples where you know, voters have one view of things in the stock market is doing something different. I think if you talked to President Biden, I think that was one of his frustrations, his economics advisor's frustrations is that actually the market was doing quite well and the economy objectively was doing pretty well,
but voters just didn't feel it. So perception is reality here and going into these midterm elections again, I think there is a hope that voters will feel better about things and I think, you know, to President Trump's credit in terms of the Trump accounts that were codified into one big, beautiful bill, this idea of broadening that out and giving folks access to retirement accounts who may not have access to traditional for one ky. But so I think he is trying to tie the stock market performance
to kind of every day people's lives. However, you know, we'll see there's a lot of distance between here and there in terms of getting that actually affection into policy.
I think a lot of folks think, what a great idea right to get if we talk about wealth creation, this is a great way to do it. But I do also think about how do we pay for all this stuff? And when do we think about kind of the Phisill House and when that's going to matter? I know, you know, go back a decade or so, and it was in every conversation I talked about here at Bloomberger even longer than that. Then it went away and now
it's back again. So I just think about when do we have to kind of when does that all come home to roost?
Or is it already?
Yes?
I think of you contrast this speech with the speech last February where President Trump was really leaning into this idea of doge and cutting federal spending and talking about the deficit.
There was no.
Mention of the deficit last last night, and in fact, he talked about how important Social Security and Medicare were and how those would not be touched. As you all know, those are important programs a bipartisan you know why bipartisan support. However, they're both at their growth very expensive as well. You know, our view here is that while there is no kind of immediate fiscal reckoning, I mean, the bond markets, as you all know, hasn't necessarily the bond vigilantes having to
come out here and discipline Washington. But there it's probably a question of you know, when, not if that there will be a an inflection point where members of Congress will have to actually do something. In terms of sort of the fiscal trajectory, it doesn't look like it's close. There's not a lot of political appetite to increase taxes or reduce spending. You know, our view is a sort of six to seven percent deficits as a percentage of GDP.
There will be a limit to that, and whether it's the bond market that is imposing that discipline, or when it's you know, Social Security Trust Fund starting to kind of go bankrupt so to speak, which is expected to happen in the early twenty thirties. So we do think this is a you know, again a question of when, not if, But it's just the win is probably not you know, under President Trump's term, at least as you know, if, if, what what the market signals are saying.
Now, you know, Libby, you know you've seen different market cycles, different economies under different presidents. We've talked about this a little bit earlier with our own Mike McKee. How do you describe the Trump economy? Is it a good one?
Well?
I think that, you know, and again there is a limitation to how much a president can actually impact the economy. So this is you know, for better or for worse. Presidents President Trump included, they like to take you know, take sort of credit for when things are going well, but also to sort of avoid any of that, you know, blame when when they're not. You know, I think we would characterize this economy, you know, this sort of you know, K shaped two speed economy is quite real. Where are
you know, if you just look at the components of GDP. Obviously, you know, AI related capex fueled a lot of growth last year, as did the high end consumer. I think there is a hope in twenty twenty six, and again, this is what I think Republicans are banking on, that the breadth of that economic growth is broader and that this sort of the consumer at the kind of middle to lower and starts feeling better about things and starts
participating in the economy. But if you if the economy just is predicated on kind of AI related capex and the high end consumer, that makes for a relatively fragile economy. And if you sort of see any kind of wobbles in the labor market for instance, that could you know, have maybe a nonlinear impact. So you know, I think it's a it's a stronger economy. It's been a resilient
economy for sure. But again I think Republicans are hoping that you can sort of broaden out the source of that growth and that they'll actually be rewarded then come November.
But that AI spend the impact on the market, sending it higher, and then you know, the wealth created among affluent spenders. That is something that Greg Daco has certainly talked about a lot for us from ey Parthenon and the importance and that starts to come undone that could be problematic.
Tim Libya, I want to shift gears a little bit and talk to your politics because ahead of the speech that the president and he's gotten quite a bit criticism in recent months, even from within his own party, about focusing too much on geopolitics, and well, he didn't talk too much about geopolitics. What he did frame last night was you know, Venezuela and the oster of Maduro, that being a win for oil companies and Americans who are
getting oil and will get oil from Venezuela. And just now we are learning that Cuba has shot for dead in a clash with a Florida speedboat. That's just breaking news just in the last few minutes. I'm wondering about geopolitics though, in the political risk for a president who came in and said, you know, no more on a platform, no more foreign wars, wants to end wars for focusing so much on geopolitics within his first year in office, is that alienating some of his base?
I think, I think, I think it's confused some of his base for sure, as you said that there is a wing of the sort of Trump base that you know is more isolationist. I think those folks thought that President Trump would be sharing in that view. He obviously, you talked about ending the war in Ukraine that has not happened. He's talked about, you know, bringing kind of peace globally. I think you could sort of quibble about
whether that has actually been true or not. And then to your point, he has focused on, you know, some of these more specific operations.
Now.
I think you know Venezuela, the way that they would characterize the White House would characterize this as this is an extradition, kind of a high profile arrest, if you will, that required a lot of resources of the US government, but was quite different from regime change. We'll see kind of how that how that plays out. But I do think to your right to sort of focus on this politically,
because midterms are all about turnout. It's not about persuasion, right, you need to get your base turned out, you need them to get excited, whereas a general election it's about sort of persuading folks who might be kind of on the fence. Again, midterms all about kind of your base turnout, and if your base is at all, you know, feeling maybe a little little bit less enthusiastic about you, they may not turn out. And so I do think this, you know, well, we'll sort of see how this kind
of movie plays out. But you could see President Trump, you know, maybe kind of be forced by his own party to be less focused on these issues because they just doesn't doesn't have sort of the galvanizing effect as you know, the kitchen table, gas and grocery issues you typically you typically have. The last thing I'll just say though, is I think President Trump was quite clear about what his framework was he was using yesterday as it relates to Iran. He definitely did not close the door on,
you know, potential intervention. He also didn't necessarily endorse that he was going to do this either, So he was using sort of this clear framework about you know, about Iron's you know, ability to develop a nuclear weapon and what have you as kind of a litmus test. So I think he's trying to be more clear about what it would require to engage. But again, politically, he may be forced to back back office as we get closer to the midterms.
Be going back to the affordability issues. We know President Trump and Vice President JD. Vance are hitting the road tomorrow and I believe on Friday, to kind of test their affordability message with voters in Texas and Wisconsin this week. So things like, you know, obviously the tax cuts that are already part of his big beautiful bill, these new savings accounts for kids, maybe banning of institutional investors from buying homes.
You know, although we didn't get anything.
More on that, are there policies or clarifications of policies or imp implementation of policies that are likely to come leading up to the midterms that you think kind of improve the affordability issues for those who will be voting.
I think the reality is is that even if President Trump wants to see some changes, it's going to be very difficult for Congress to get anything done before the summer, which is really the de facto end of this Congress.
That's when they.
Will adjourn for their sort of summer traditional summer recess for them to really go back to their districts and to campaign. So in terms of the runway to actually effectuate policy, we are talking about a very short one, you know, to July. Basically and we don't see Congress moving. We don't see them passing another tax bill, another spending bill, another bill that prevents you know, institutional investors from buying
single family homes or what have you. There is a housing bill that they may be able to pass both chambers and get signed into law, but that is likely going to be it. So I think kind of for all intents and purposes here Trump will have to lean on those policies he can effectuate, you know laterally, which is the agency's buying, you know, agency NBS. That's one thing that he did not talk about in his speech. It's kind of for us, you know, bond nerds over here.
But but you know, we do think that's actually that and deregulation, those are two things that he can and will, we think, continue to lean on to help you improve at least mortgage rates and sort of you know, the rate environment in general, and hope that that will actually trickle down to some kind of the perception again of affordability among voters. But outside of that, we do not expect Congress to move really period before between now and the midterms.
All right, I don't recall seeing mentions of agency NBS is on the prediction market.
Wait, that's what they all stood up.
Remember they like the exactly the only bipartisan moment we saw was at our agency, NBS.
Bretting the artists together.
Libby Cantrell, you Rock Managing Director, head of Public Policy over.
At PIMCO, joining us right here in New York City.
Stay with us. More from Bloomberg Business Week Daily coming up after this.
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Kebanvorce has killed four people and wounded six others who were traveling in a speedboat with Florida tags after they opened fire on the island's border patrol. The government said. With us is Dan cansel Ben, Bloomberg News Miami Bureau Chief. He joins us from our Miami bureau. Dan, we're trying to understand what exactly is going on, who who these individuals were, and what they did, and we're hoping you can shed some light on it. What do we know about the four people who were killed?
Yeah, very little. You know, the source of the information as of now comes from the Cuban military. As you mentioned, the Saban dropped about it, you know, an hour or so ago, where they you know, mentioned that this boat with Florida registration carrying ten passengers ran into this this incident conflict with the Coastguard with four dead and six injured. They haven't identified the nationality of these individuals are obviously
really study names. And on the US side, we don't have any information, you know, either kind of corroborating that information or providing new new details. So as of now, it's a bit of a sit and weight to see if the Cubans release, you know, additional information. But obviously there's a big backdrop here right to what's happening between US and Cuba relations.
Let's talk about that because we did know, I think earlier today.
The US announced that.
It would ease restrictions on Venezuela and oil exports to Cuba's private sector for humanitarian reasons. We know Canada has announced an aid package for Cubans because of President Trump's oil blockade. So kind of where are we, I mean, tensions are high right now between the US and Cuba.
They are Yeah, I mean since since January third, when when Maduro was was captured in Carucas. Obviously, Venezuela was the biggest, biggest ally and benefactor for the Cuban regime, and so taking taking those oil flows and that support away from from the Cubans has created you know, a lot of tension and obviously the situation on the ground in Cuba has deteriorated in terms of you know, energy
supplies and other other sorts of supplies. So you know, the US has not come out with a real clear strategy and what they hope to accomplish in Cuba, but clearly there are some new headlines about supplying the private sector with fuel versus so trying to kind of go around the regime in helping the people and avoid a bigger humanitarian crisis.
Yeah. I mean, again, the information we have Dan on this is very limited, and you make a good point about the backdrop of this and what it means in the context of everything that's happened in twenty twenty six thus far. That said, there has been reporting around where this boat at least was registered to what can you tell us about that and if that offers any indication about who was actually in the boat.
Yeah, listen, so far all we have is that is a registration number, which you know, curiously, the Cubans did provide in their in their statement. It's not you know, it's not returning anything solid as we look into that and report on it, you know, so you can, you know, you can kind of imagine this could be people that for you know, fishing, but you know, apparently they were armed, right,
so maybe not. We could be talking about people trying to bring supplies, uh, you know, to two Cubans, whether you know, whether it's food goods, whether it's elicit right kind of smuggling operation. So it's really kind of up to our imaginations here, you know, and in terms of what could have been happening, and and the fact that the US Coast Guard has not issued a statement or or verified this is something that we're obviously waiting for.
We do have US Representative Carlos Humanez out on social and he's saying Cuba, the Cuban government must go to quote the dustbin of history.
He posts this after Cuba.
Clashing with the US speedboat, and he calls quote again his words, murder Cuba killing of US speedboat but as you said, we don't know a lot.
We have to be very careful.
The devil is always in the details, and we are waiting some kind of statement from the US government.
Correct.
Absolutely, he's I'd say he's among the more hardline of the of the Cuban Americans in Congress, and so it's it's not rare that he'd have that rhetoric today. And again, we need to figure out exactly who these people were, you know, from the US perspective, are the US citizens? You know, are they Cubans? And so we just there's so many things that we need to figure out here.
I think the one thing again is, you know what's changed recently is that the private sector in Cuba is now authorized to import fuel right for the first time, and so you know, could people be running, you know, big jugs of gasoline or diesel right across the less Thane hundred miles that separate right the two countries. So again it's just a theory or one possible scenario, right, I just don't know.
One more line from a Representative Jimenez's statement on social he's calling for an investigation of the Cuba incident, But we would all concur that we need to know some more in terms of the details and find out exactly what happened before we can move forward. Danken sal thank you so much. He is Bloomberg News Miami Bureau chief. Joining us from our bureau in Miami.
We're going to kind of stay on. I don't know whether you want.
To call this geopolitics or just tensions. Global tensions and just finding our way forward when it comes to relationships between countries, but also throw things like technology and military and it kind of all gets interesting and a little tough.
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