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Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner. Tomorrow after the Bell in Video will deliver its highly anticipated fourth quarter results. This is the world's most valuable company and without a doubt, it's been the biggest beneficiary of that big surge that we have seen in spending on artificial intelligence over the past two years. Still there are questions about whether data center operators will ease their
expenditures on artificial intelligence. Joining me now for a closer look as Daniel Newman. He is the CEO of Futurum Group. Daniel, it's always a pleasure. Thank you for joining us. You have called in Vidia's earnings kind of a national holiday in its own way. Make that case for me.
Well, we've seen over the last eight quarters it's become the pivotal moment in the market, and over the last two or three quarters you basically see the entire reflection of what's happened with the other mag six companies kind of culminate with this last report that comes out of in Vidia, and unlike a lot of the other big earnings, Doug, you'll see media folks like US analysts talking about this, not just for days leading.
Up, it's weeks.
Of talk about what is going to happen and is in Vidia the bell weather of the future of AI in trade?
So the stock was down today about two point eight percent. Over the last five trading days, I think we're off about nine percent, and today and Video broke below that two hundred day moving average. I know you're not a technician, but is that a troubling sign.
I think this is the most pessimistic view I've seen from the broader equities markets. Communities insist in video, though it is every tech company. If you were a fast growth liar like a Palenteer, you didn't see nine percent pullback, you saw thirty percent pullback. In Vidia has accelerated and pulled back, And of course it's felt like almost every
Sunday there's some piece of news. It's out to take down the markets, it's taken down crypto, it's deep seek, and so all these things are happening right now, and it's kind of left in Video just right around where it was six months ago. It's kind of just bouncing around.
But I'm not worried.
I think the trades very much intact very early ray So.
You mentioned deep seek there. I'm curious to get your take as to whether or not the development of that R one chatbot really kind of forces the market to recalibrate this notion of how much spend is necessary to get some of the most advanced AI without committing a great deal to you know, some of these advanced chips.
I think you think it did the opposite. I think upon initial reflection of what we read and what we saw come out of that team and out of China, it did look that way. But what we've found is that through all of these sort of we've found the cheaper, dirtier way to do AI moments, it actually turns out that we need more compute, and it's going to happen
for a couple of different reasons. We will certainly see techniques put into place that will enable more efficient compute out of existing llms, that will develop and create more utilization. But in the end that additional utilization is going to scale exponentially. And so you've heard Sati Nadell and others talk about Jevan's paradox. But we are at you know, we are aggressively building out the infrastructure of the future.
But in terms of consumption, and this is why a lot of people call AI a bubble, we are very early in consumption. You know, Microsoft spending eighty five billion on infrastructure build out in data centers and they are able to show around thirteen billion in revenue. That model
doesn't work over a long period of time. So when does that turn a corner where that eighty five billion is going to re turn more than eighty five billion in a short period of time, like the period of time in which this technology stays relevant.
So I'm glad you're mentioning Microsoft there, because on Monday we had a report from TD Cowen indicating that Microsoft has canceled some leases for US data center capacity. And with this news a lot of concern over whether or not this company is securing more AI compute in terms of capacity than it needs in the long term. I mean, that seems to be a real question.
Yeah, this is another one that I think got a little overblown. And let me tell you why the channel checks not wrong. There is some cancelations going on in the market, but what was not appropriately calculated in that report was Microsoft's overbuying. And so a number of analysts out there, and I've read some of these reports that looked at these channel checks actually determined that if Microsoft had not pulled back a little bit on some of its build out, it would have been well above the
capex commitments that analysts have. So the capax is very much attach. And actually Microsoft came out and said that now these are you know, decade plus long buildouts that are taking place. And while I do expect some EBB and flow, and I do expect at some point these returns have to come from all of this infrastructure investment,
I think the trade still intact. And one of the thing that's worth noting about Microsoft is there is a little bit of this movement with Stargate and the role of open Ai, and then of course Microsoft's relationship with open ai is pivoting. As open ai is looking at its own chips, it's looking at more of its own infrastructure.
And so these kind of projects that are going on in tandem are also going to impact Microsoft's builds a little bit because Microsoft was such a provider to open ai in its early era.
I'd like to get your view on what we heard yesterday in terms of Apple's commitment to invest over five hundred billion for new AI projects, particularly in Texas. A lot of this is focused on the construction of data center tech technology. Is this a bet that you would want to be behind? In terms of what Apple is doing right now?
It's really in vogue to build in the US and President Trump that's a big focus of his. Tim Cook and Trump. President Trump have been meeting. Clearly they've made progress. I think there's a lot to be excited about the investment. I'm a Texan. I love seeing companies come and build in Texas. Having said that, I have a lot of questions about Apple, It's AI strategy, its ability to execute.
It has made commitments in the past to build large factories and production facilities in Wisconsin and other places that haven't quite come to fruition. It's great when they announce, it's better when they build, and it's even better when they start to produce higher and create economic value through these commitments. But it's a positive in its sentiment.
We had news here in the US late in the day Monday on the Trump administration sketching out tougher versions of those export curbs for semiconductors to China. This was something that was initiated by the Biden administration. It seems like the Trump administration wants to get tougher when you look at US China and this war that may exist in terms of the development and the adoption of certain
AI platforms. Is this something that the US is going to win hands down or is there a real risk in terms of what China is doing that we have to be from the Western perspective on GUARD I would.
Characterize any underestimation of China and it's resolved to lead the world in anything it does, as a mistake. I believe that China will push the boundaries, including obtaining GPUs potentially through gray markets, and we know there's some question
around that with deep seek. Having said that, I think the West has found a largely an agreement, whether that's the Dutch with ASML, whether that's Japan and Korea, whether that's Taiwan, the US to have limited access to the most advanced semiconductors as well as the machinery and some of the materials required to build them. I mean, economic prosperity for the next multiple decades is going to be based on the parts of the world that are leading in AI, and that's not to say other parts of
the world can't succeed. But I genuinely believe that President Trump understands that winning an AI is critical to his presidency. It's critical to the national security of the United States and the West, and I do think that him and his team are going to be steadfast to make sure that the US does not lose its AI advantage under his watch.
So we were talking about the AI startup and Thropic finalizing of funding round worth about three and a half billion, and we were told when we discover that news that it would give Anthropic, this is the company behind the chatbot claude evaluation of around sixty one and a half billion. Does that seem about right to you? Are these numbers a little inflated?
Do you think so?
It's hard to believe when you do the comps of the well established companies that do not have sixty billion. I mean, you know that Intel's floating around one hundred and guess it has its problems, but it has a fifty plus billion dollar products business and fabs all over the world. And this company's like open AI and Anthropic do it, you know, sub five billion dollars of revenue and they lose money, so it is difficult at times
to understand. But I think any of us yourself myself included, who've been around long enough, No, there's a difference between kind of disruptive secular trendsetters and how those companies are valuated and sort of long established enterprises. But having said all that, I think the llms are rapidly being commoditized.
I think open.
Ai has real threats in some of the big incumbents, including Google and open source like a meta And I do think these valuations are quite frothy and without a large IPO for a real uh you know, uh current to take it to take it out to these valuations in terms of revenue and profitability, I do think it's risky for investors that are coming in these late rounds.
Dan, we'll leave it there. Thank you so much for joining us and helping us look ahead to the earnings Wednesday after the bell from Nvidia. Daniel Newman is the CEO of Futureum Group, joining us here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm Deek Chrisner. Stocks and Asia are moving lower. This is after a disappointing print on us consumer confidence, and this in turn is fueling concern about the health of the
American economy, the world's largest. We heard from Daniel Lamb, he is head of equity strategy at Standard Chartered Wealth Solutions. He spoke earlier with Bloomberg scherry On and Heidi Stroud Watts.
We're seeing in Nvidia sort of at the cheapest levels going into earnings in about a year. Given the importance of this software the broader market, could it really salvage this equity rally that we've seen in the US, especially after the Magnificent seven fell into correction territory Now.
Well, there are new factors at play nowadays in the markets. So the DEEPSEK is a big factor. If you look at the gap between Chinese equities and the mascor country world equities, the Chinese equities are still trained at forty five per cent discount, which is more than month standard deviation away from the ten year average. So basically what we're seeing is that there has been rotation of funds from US equities.
Into Chinese ones.
So that's what's been happening in terms of the variation that highlighted, and also the possibilities that China tech had to offer. So before people were seeing that the US tech is the only game in town.
Now things are a little bit different.
This is what the broader markets think. But Daniel, when I look at your notes, you're actually pretty neutral on Chinese equities and you still prefer the US.
Why.
Okay, So there are few things so Chinese equities overall we're neutral, but within Chinese equities we are favorable on the technology stocks. So it is a story of high end versus lower end. So previously US technology the only game in towne but now things need to be differentiated because the Chinese deep seek shows that they're capable of entering that tech space applied at the lower end level,
and basically people have to take account of that. In the longer term, what we see is that the US is still going to be dominating in the high end.
Of the tech space, right They're gonna take.
That and keep that. But then the Chinese, you know, they do have a share of that. Okay, So right now, because of the expensive valuation in the US tech, you probably will see a little bit more rotation to come in the near term, but in the long term we're favorable.
I wanted to ask a bit more about what you say is sort of opportunistic moments in China, right, what are you looking for the part at this point?
Well, at this moment in time, we've seen a big rally in the Handsing index right from just below nineteen thousand to above twenty three thousands, So that's pretty fast and furious. So in the near term there could be some correction, especially with the chip restriction news coming to the US.
But then our point is.
That if you know they can make something like deep Seak, then the box been opened, right. There are the possibilities available for different Chinese technology sectors, So that's what will be keeping the market going about China tech. Probably there will be you know, some correction, but then hangs in to about twenty one thousand and six to twenty two thousand is good level of entry for the longer term investors.
For a longer term investor, taking a look at Indian stocks and fifty to fifty is trading near the lowest level since about June house the sort of sentiment there, do you think that now kind of presents a good value point to re.
Enter well in terms of variations back to five year average for Indian equities right now.
I believe that the long term opportunities still exist. The government's budget has.
Been stimulatory in various areas, so that's encouraging.
The earnings is still reasonable. But then at this moment in time, I think.
People are just more focused on the China story right now because it's been very quiet for a long long time in China, so people are focusing on that. But Indian equality, we do believe that on the twelve on horizon there's upside from here.
On the other hand, it's been pretty noisy when it comes to Japanese equity markets, just because of the interest that we've seen from global investors. What will a stronger Japanese yen mean for the equity markets here and that rally that we saw last year, can it continue into twenty twenty five.
I think Japanese.
Equities you've got to be more differentiative, right, So we have a neutral overall, but in terms of the sectors, areas that we like will be the financials because we do see that the Bank of Japan is going to be pretty much the only central bank that will be tightening this year and stronger and STPU curve is favorable for.
The financials Daniel Lam, head of Equity Strategy Stander Chartered Whilst Solutions.
There Thanks for listening to today's episode of the Bloomberg day Break Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Prisoner and this is Bloomberg