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Chip makers in Vidia and Advanced micro Devices are squaring off in the fight to control artificial intelligence. We have more from Bloomberg's Johan Wog in Hong Kong.
The two company CEOs fleshed out there are different tacks on AI. At the world's largest computing conference in Taipei and Vidias Jensen Wang headlined his presentation by teasing a new rubenship and visions for twenty twenty six. He spoke about the company's dominance in generative AI AMDs. Lisa Sue focused on the design of neuroprocessors that run AI surfaces
directly from laptops. She matched Hwang's annual upgrade timeline by announcing new chips for twenty twenty five and twenty twenty six. Deta Gates at Huang's performance rove home and Vidia's dominance, and that AMD has a long way to go to catch up in Hong Kong. Join Wang Bloomberg Radio.
Joining us now on the program is Daniel Newman, CEO of the Futureroom Group, with a close I look at the computext Tech show in Taiwan, which is turning out to be quite the show. Daniel. We not only heard from Jensen Huang who cheated a little bit and went early before the keynote from Lisa Sue, and then you also had the qualcom CEO, Christiano Amone, and then we've
got Pat Gelsinger coming up later this morning. I think one of the key questions for everybody coming out of this will be is there any sign of Nvidia peaking in the selling of these AI accelerator chips or is that a long ways in the future.
Look, I think there's a significant opportunity right now to consider how my which frontloading the market is doing in terms of all this CAPEX investment, and how much of this is going to be sold through, how much of this is being used.
We've got five hyperscalers.
Making up a big component of in Videa's overall revenue. But having said that, the company has what seems like a multi year, if not really a decade lead in some of these accelerated compute capabilities. And they really did a good job at this particular computext reiterating that one year cadence they teased out the Ruben and the Ruben Ultra, and I think they really cemented for both their investors and their customers that they have a plan to.
Really stay the course.
Of course, hearing from the other side, Lisa seu is saying, hey, don't count us out yet, I expect that Pat Gelsinger is going to say the same thing today. So on the data centerside of video has got a great advantage, but it does have concentration with customers, and there is really still pretty early innings.
So if nvidio is being so aggressive Daniel as to upgrade AI accelerators every year, how costly is that? That's a pretty expensive endeavor I would imagine, am I right?
Oh yeah, so you know you.
Even Salilon Musk tweeted out something yesterday that kind of talked about how he is intending his CAPEX between moving generation to generation from his H one hundred cluster, which is one of the more recent advanced in vidio chips to their B two hundreds and how many he intends
to buy. He also put a dollar in a price tag next that they could see just billions of dollars by a single company in order to invest in Having the AI capabilities that they will need to lead a market a year over year is going to put companies in position, whether it's an AWS, whether it is a Microsoft or Google, in a position to decide when do they invest when do they also invest in their own homegrun soaken, which many of these companies are doing it
as well, but they're going to have to stay up to date to compete. And of course AMD and Intel and others want a piece of that. And in video is winning the market and it's going to be hard to take away later.
They're just minting cash. It's very interesting and curious what to do with all that cash. But it's also on the other side in terms of all those people buying. He's got a catchy phrase that he Jensen Wong does that he rolled out a number of times recently, which is the more you spend, the more you save.
Yeah, I mean, look, he's looking at how much ect a computing can add capacity, drive efficiencies and productivity inside of businesses, and of course we're seeing that move now from the data center to the edge and interestingly enough in the computext capacity. This show has been all about moving it to the edge and onto the devices. So you're seeing Qualcom, Microsoft, AMD, Intel, So the data center, Jensen's really has that in a good place right now, and Intel and AD are going to fight, but at
the edge and on these PCs. It's actually much more exciting seeing what Qualcom's doing. And Microsoft is sort of minting and king making right now a little bit with QUALCMM and Itstey architectures, and of course Intel AMD there again are trying to fight to keep up and stay in this conversation.
Speaking of conversations, Daniel, I'm curious about the conversation around diversifying chip production out of Taiwan. Is that a do you think high on the mind of a lot of people in the industry.
I think it's high on the mind and by a lot of people here. Sorry I'm in Taiwan today, but in the United States, I mean it's definitely top of mind, you know, having zero percent of our leading edge capacity manufactured. There's a lot of geopolitical and macroeconomic risks. I mean, our partnership with TSMC are various bablist makers is strong. They all value that relationship very much. But the chips acts.
The fifty plus billion dollars spending to not only support Intel's growth but also TSMC and Samsung and others to build capacity in the US is critical because there is too much risk in the entire economy right now seems to be determined by how fast we could move in silicon and semiconductor advancement.
So it seems like you've got some companies that are really at the forefront for all of this. You can correct me if you think I'm wrong, But in Nvidia's at the top, and you've got Broadcom, which is in there. You've got obviously AMD, TSMC. I mean those four right there are just, you know, sort of in insane positions. Microsoft because it can come up with applications to interact with basically the enterprise sector and maybe meta with the
consumer sector. The one thing that I'm curious about with Microsoft is it had a great quarter, the sales and the profits, but the stock has been down over the past couple of months, and you wonder whether or not that's because you know, it's got this weird relationship with open Ai. It turns so much of what's happening in the future to open Ai, but it doesn't control the company. It's not part of Microsoft. You know, how delicate is that.
Yeah, well, you've seen some of the comments from Satia Adella about sort of how deeply entrenched it is with open Ai, and of course its products have embedded in.
Its ability to advance the.
Copilot across its enterprise and consumer stack has been somewhat prolific. How quickly they were able to get this into market. At the same time, I think there's two things really at stake here. One is what does Microsoft need to build on its own I think you saw recently they started launching some of their own large language models. They've discussed building more of their own large language models and small language models for enterprises, and that's a big stake.
And then, of course, on the other side is you know, there's been a lot of controversy around Sam Altman. You've seen top lieutenants of the company leaving citing concerns about the company's privacy and security and trust, and this has brought question marks. Of course, Microsoft tried to be and focuses on me very ethical, very progressive that way under Sati Nadella's leadership, and there's all kinds of controversies right now, and it seems to be following Sam Altman, and I
think they want to hedge that. And so I think to some extent, Microsoft has to hedge that, and I think they're doing it, you know, with the excitement und copilot, plus with building open AI and Azure in their own models of open you know, democratizing models, bringing in third parties, building their own, building their own silicon. And I also think to some extent, you know, right now the market's a little tough on software. But I do think the market's kind of getting that one wrong.
Well, what do you think the market is overlooking or maybe not focusing squarely enough on when it comes to the application of artificial intelligence. Is it how it may impact drug development, is it management of the electrical grid?
What is it?
I think the long term we are seeing it largely correct. I think right now the market has a little bit over rotated to hardware. You know, if you actually look at a lot of the deep value that's in do Vidia or AMD, It is in the software. If you look at what these new aipcs coming from Microsoft, Qualcom and others, it is the software that makes these things possible. But also you look at enterprise software last week, you looked at the sell offs of Salesforce, you looked at
the selloffs of service now in these other companies. These companies have hundreds of thousands of diversified customers that are in sticky contracts where AI is going to add value. But I think the market's uncertain of how much to software add net dollar retention and value to a customer versus how much AI has to be baked in just
to keep a customer. And if the market can show some clarity there, I could see more dollars rotating to software because they're very durable, and I think you're getting kind of the wrong deal right now.
I've been thinking about that a lot in the past couple of weeks, seeing those huge sell offs and wondering whether or not software might be an interesting place for investors to think about deploying money going forward, at least over the next quarter.
Yeah, I mean the concentration of the hardware companies and especially some of these chip makers. You know, I've seen data points that some of these shipmakers, like the Nvidia has you know, two customers generateing over ten percent of their entire revenue.
Five that's generating more than half.
That doesn't mean it's not an incredibly valuable company with a great product.
But like I said, you look at an.
Oracle, or a salesforce or a service now fifty one hundred, two hundred thousand plus customers that really can't pivot. So AI is going to get added, They're going to be able to charge for it. And I see a lot of value in that, but I don't know what the market is seeing clear concrete value from AI. And everybody wants to say your growth, your margin, your expansion, your revenue is somehow tied to AI, and really in Nvidia is the only company really showing that right now.
Yeah, a lot of these stocks are down like twenty twenty five thirty percent. It's a pretty interesting story. Daniel, thank you very much for joining us. Daniel Newman, CEO of the Futureroom Group, with us from the Computechs Tech Show in Taiwan.
Let's talk markets now with our guest Robert he joins us in the New York studio Robert Is Cio at Blank Ye Shine Wealth Management. Good of you to join us, Thanks for stopping by. I want to begin. We can talk about the macro, the fed, all of it in a moment, but I want to begin with the election because I was struck today by the note from the strategist over at Morgan Stanley saying that this year's election has the potential to impact markets in a major way,
and a couple of things maybe at risk. One is the fact that we've got these macro trades that seem to be very popular right now, and the closer we get to November, Morgan believes there's a risk that they could get unwound pretty quickly. One is being long the dollar versus some of the other currencies that we talk about on this show, like the end. The other is being underweight longer term treasuries. Does the election have the potential to really rattle the market?
Do you think? You know?
It's funny because every time we have every four years or even a mid cycle election cycle, there's a lot of sides that weigh in, right, and there's a lot
of money that's being shifted and moved around. If you look at election sort of calculus in the math today, it would show that Trump beats Biden, right, But we've got a lot of room to run, and there's a lot of stuff that could happen between now in November, and quite frankly, much like what we saw at the beginning of the year, where everyone anticipated multiple rate cuts,
all bets are off. Everyone's wrong, even the experts. So I'm almost inclined to take the opposite of this trade the counter of this simply because you could have the Fed conceivably rate cut back end of the year. Right, what does that do the dollar? You could have a lot of different sort of aspects that will play out
that are completely unknown. While it feels good to make that trade or that call right now, you know, if you look at the baskets, you know, if Trump were to win today, those baskets of stocks, if you will, a lobbying basket, if what I'm referring to of stocks that would benefit if he was in the office, are doing better than the Biden index. The strategy just puts up a great pay piece as it relates to that, but it's bounced around back and forth, and it's as
volatile as anything else. So as much as we'd like to say, okay, this is sort of the way of proceeding, i'd be careful.
One of the interesting sort of inflection points that we could talk about is it appears the market is switching its concern from sticky inflation to growth. It's kind of a combination of the data that we've seen manufacturing week, consumer spending, weaker than expected, labor with a few notes of caution there. It's not exactly a growth scare yet, is it. But is that where we're heading.
Yeah, we just talked them before we got on the radio just now, which is you know, right now we're in that sweet spot of bad news is good news for the equity market. But when does bad news become
bad news for the equity market? As we're seeing with the ism, you could, you know, tease out some good information from it, but it's a softening economy and I think but we were also discussing if you travel around some certain cities there are some booms and bustling and everything that we're seeing and it doesn't meet the eye. And then you add in I know, it's the story of twenty twenty four and it will be for twenty
twenty five. But the AI, I mean, if you look at what AI is contributing and what everyone has to do just in the s and P. Five hundred to increase their capex spending, you know, it's a game of it's it's a game of war right now with regards to everyone has to play catch up and everything they had set for like, okay, let's be conservative and cautious everyone. You know, the primal spirits are playing out right now with all the competition.
The question is on ROI in AI do you expect that.
It will but not from a profitability standpoint, sooner than everyone like it to be. I mean, they're gonna they're gonna overspend and outspend, and you know, quite frankly, aren't they just buying chips and sitting on them. And that's just to keep your competition off the on the sidelines. I mean, that's what's happening right now. So but if you have the war chest the cash to do it, which we're seeing certain companies are doing it, you're basically
you know, sitting on your little brother. Well you're taking off you know, for the for the races, and you know, everyone's gonna say it's unfair fight, but when has it not been?
So I don't worry that much about rates at the moment because I'm focused on earnings. That's one view. And so if you look at the three important areas Robert for investors, and we're looking at stocks, you've got earnings, valuations, and then the macro backdrop rank them in order of importance for you at the moment.
It's funny you say that because it depends what week we're in. Right at the start of the year. You know, at the beginning of the year, it's you know, it's the FED, and interest rates would run that week sort of you know, how we would finish on all indices, and now we're looking at you know, AI and AI spend and so that would then be the trend. And so last week it was the and sort of the
soft numbers that we're getting economically. I think at the end of the day, both of those are important, but earnings is number one.
So I'm curious as to how you're viewing markets offshore right now. We may get a rate cut from the ECB, and you could make a case that Europe right now is showing signs of maybe modest recovery. Do you want to pull some money out of the US and it'd be more exposed to other parts of the world right now.
Yeah, it's mixed in terms of the recovery in Europe right places like Germany are still kind of pulling out of it, but then Japan and India show signs of strength. So yeah, you definitely want to take an opportunity to see what's out there internationally speaking, and we do that
for our clients. We're always looking for those opportunities. But yeah, it broadened the portfolio look for opportunities internationally, and the US conceivably is going to be the last to cut in this rate cut cycle, so we're seeing that, you know, play out.
The FED on hold seems to now be the best scenario. Both cuts and hikes cause concerns. But as you were, as Doug asked you a question about one trade, which is you know, dollar strength, and maybe that turns around. You know, for international markets, what would they want to see from the Fed? They probably want to see some cuts, right, get a weaker dollar.
Yeah, everyone wants to see cuts, and that's the challenge and even the FED knows that and they have to be. You know, when I was in the studio right before Christmas, at the end of the year, I said, higher for longer. We positioned our portfolios for our clients, higher for longer, and that was you know, everyone's asking me, Well, no, we were looking about five or five maybe six cuts
for twenty twenty four. And the reason why is because eighty seven percent of the time, if you look at the last waves of inflation, there's always been two waves. And that's what the FED has to do. They have to hold as long as they possibly can for fear of inviting inflation in right.
So talk to me about how you are balanced right now on the equity side versus fixed income. Yeah, maybe it's kind of up to each investor, each portfolio. I mean, I'm sure that's a very specific ratio, but broadly speaking, what's that balance in your mind?
Ideally in a market like this, we like sixty percent equities, thirty percent fixed income, and ten percent alternatives. Alternatives are looking really attractive in the private markets, especially the ones
that we've been able to source. But alternatives might not be right for everybody, But for the most part, yeah, balance portfolio is sixty forty overall is a good mix right now because the fixed income again is sexy again because it's paying you four and a half five percent, right And also, once we see volatility return in the equity market, because we really haven't seen that, we usually strategic rebalance, which means we'll take out of maybe the
treasuries that we're sitting on clipping five percent and then buy some equities that are down ten, fifteen, twenty percent that we like cap gain.
Right yo, yeah, big time.
Yeah. Well, let's talk a little bit about those alternatives as well that you just mentioned. Sometimes people put property in there. You don't have to, but what looks best among the alternatives for you?
Yeah, we avoid you know, we're from California in terms of most of our clients, and so most of the clients made money in real estate. So really when we look at an asset allocation for a client, we take in a big picture consideration of their portfolio. So we don't need to add in private real estate, if you will, because most, if not have their own private rates that they've accumulated or commercial that they have built for many years.
So we avoid the fixed the excuson the real estate side of the private equity you know, but there's others out there that have really cracked the code of diversification within private equity.
I will leave it there, Robert, good of you to join us. Robert Chine is the CIO at blanky Shine Wealth Management. Joining us here at the Bloomberg Interactive Broker Studio in New York.
Bloomberg Opinion informed perspectives and expert data driven commentary on Breaking New y.
Hi.
Everybody, Good morning from Hong Kong. It is nine forty three in the morning here nine forty three pm on Wall Street time to check in with Bloomberg Opinion. Were joined by opinion columnists Karishma Vaswani, who is writing about Tiananman Square, the massacre there thirty five years ago in nineteen eighty nine, with a piece that says, China wants you to forget Tinan Man. Don't so nice to have you with us, Karishma. So many around the rest of the world may have moved on to a certain degree
from the massacre. In some sense, it was kept alive by the annual candlelight vigil that we had for so long here in Hong Kong. But it is no more and it's not coming back. The consequence of that.
Yeah, I think it's really interesting the fact that this won't be taking place in Hong Kong. As you point out, it was one of the main places post the mascaret that happened in nineteen eighty nine where people could commemorate those who had died and the moment where just briefly it felt like China, you know, was going through this really momentous period where young people were demanding freedom, hoping for a different kind of country that they wanted to create.
Now that cannot happen anymore under the National Security Law and Article twenty three, those sorts of protests or rather demonstrations,
I should say, have effectively been stamped out. My understanding is that where these annual vigils used to take place in Victoria Park, there is a probaging group that has organized a food carnival that will take place that is taking place there instead, And so the focus now falls to Taiwan, which has become the de facto inheritor, if you will, of these kinds of demonstrations and large ceremonies
are planned there today, but also around the world. I was speaking with a former student leader from Kieneman Joe fun Shou, and he was saying to me that because of what's happened in Hong Kong, what he described as the deteriorating environment there, this has become an even more live issue. And so he when I spoke to him, was on his way to a rally in London. There are, you know, opportunities for people to go and pay their
respects and other big cities around the world. So I do think thirty five years after this has happened, it is becoming a fresh issue again. It is becoming part of the consciousness again.
It's so amazing to think back to nineteen eighty nine and five years after this horrible event, the trade relations between the US and China and how they began to deepen and would only grow through the inclusion of China into the World Trade Organization. And I'm wondering whether there was a missed opportunity on the part of the US. Could the US in any way have had an impact on this history.
Look, I think it could have. And you know, there was this belief at the time that if a country becomes richer, it becomes more free, and that has not
been the case, has it? And I think there was a real opportunity there at a time when China was not the world's second largest economy, has not amassed the kind of wealth that it has today, where perhaps the United States and China could have worked in some shape or form, perhaps that sounds idealistic, to find a way through and address some of those issues, but that didn't happen, And in fact, a lot of student leaders from that time and human rights activists point to that as one
of the big failures of the US administration at the time, for ignoring some of those things in favor of economic development and economic growth, which then, as you point out, created this hugely symbiotic relationship between the US and China, which you know in effect exists till today, and that has been so hard to unpick. And it's what you're seeing as the result of the trade tensions between the
two sides. In that time, the Chinese Communist Party has become even stronger, had more control over China, particularly under she gen Pin.
You open your piece with the Orwell line about who controls the past controls the future, who controls the present controls the past. In some ways, it's kind of like saying that the winners write the history books. I'm curious. I mean, obviously China writes its own history books, but doesn't control the history books around the rest of the world.
You know, will historians look back over this, and will they say that the students overplayed their hand back in nineteen eighty nine, almost like some would say the students and the and the activists overplayed their hand in Hong Kong between twenty fourteen and twenty nineteen.
I think that's a really, you know, difficult parallel or question to answer, simply because if you're a student at that time, both in nineteen eighty nine and you know, on the streets of China, and I watched their interviews again and I was struck by their enthusiasm and their hope for the idea of wanting to create a different country. I mean, you know, in many ways they were patriots, right, They wanted a different vision of their homeland to materialize.
And I don't think anybody had a particular strategy when they were going about doing that. They were just really passionate about their cause. And it's the same thing in Hong Kong. When I've spoken to student activists or protesters and demonstrators there before there's just this real desire to ensure that what they want achieved is something that they can see in front of them. And you know, did
they overplay their hand? Did they? Were they not strategic enough? Perhaps, and perhaps that's what the history books will say, But I don't think you can fault them for trying to change the way their country was run.
Kushma very quickly, what is the risk if Taiwan does indeed become the focal point for remembrance of Tianan Min?
Well, I think the risk for Taiwan is it continues to be a target of China's over the weekend that the Shangrila dialogue. We heard that from the Chinese Defense min. So that's the risk.
Yeah, all right, Kriushma, thanks so much for joining us. Bloomberg Opinion columnist Karishma Vaswani. You can read more on this and other stories from Bloomberg Opinion at Bloomberg dot com, slash Opinion and on the terminal by typing opin go.
This has been the Bloomberg Daybreak Asia podcast, bringing you the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.