Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. You can join Brian Curtis and myself for the stories making news and moving markets in the APAC region. You can subscribe to the show anywhere you get your podcast and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.
Intel making a custom chip for Amazon Web Services for use in artificial intelligence computing. A lot more on this story, we will cover it now with Ian King, Bloomberg News US Semiconductor reporter. So Ian investors really seem to like this story in that obviously Aws a very big customer, the largest cloud operator, and this will help the foundry business, which Intel has been pushing. And then the postponing of the foreign plants kind of helps on the cost side.
So it's seems like a good step. But my question for you is how long will it take for some of these gains to be reaped?
Quite a while, that's the issue at hand here. I mean, the cost cutting should help actually closer to sort of bring the company into sort of alignment with what it can afford. The foundry wins from companies like a WS. It's kind of in the future next couple of years when those kind of things will kick in and hopefully start to have those new plants pay for themselves a bit more so.
Ian.
This is the Intel eighteen A microprocessor, right, or is it more kind of like a GPU that in Nvidia produces for a lot of these functions of using kind of the data server as a way to process AI functionality.
Yeah, And eighteen A is the name of the process technology that it is both using itself and offering for use from external customers. So it's basically saying, hey, this is our latest and greatest production technology. This comes in to use kind of around now and into next year. And guess what we've got a customer, what Amazon? The only detail we've got is that it is what's called a fabric chip that is usually a kind of chip
that links other chips together. So it's not the absolute pinnacle of high volume or importance, but it's nonetheless an important part of an overall computer network that would perhaps link things like a GPU to other parts of the computer, maybe to a CPU, the kind of thing that Intel specializes in. So we need more details. We need volume,
and we need to see revenue. But having Amazon's name associated with their founder is definitely something that helps Intel sort of prove the naysayers wrong.
It's a big deal. Intel's been under a lot of pressure. Must have been a very tough board meeting last week. I'm wondering does this buy Pat Gelsinger some more time?
Yeah?
I mean we spoke with Pat earlier and asked, you know, about his plan, about their support for it, and he was very clear that it had been a rigorous board meeting. You know, people had asked him tough questions and so forth, but that you know, he has their support, that they accepted his prognosis for how things are going to play out, and that they are behind him.
So what does this do. I know there was some concern that Intel may not qualify for funds being distributed from the Chips and Science AEC. Does this help in any way?
Well, the important thing to point out there is they are qualified, right, but that doesn't mean they're going to get the money. The US government, which is good for taxpayers like me, has said yeah, yeah, here's you know, eight billion dollars that will set aside for you, but you have to do certain things before we give you that money.
So that's still a work in progress. Right.
It's got some the local grants from places like Ohio and Arizona, but the federal money has not been handed over yet.
So I'm curious what this means that. You know, we mentioned the Germany and the Poland plants who be postponed, and that will help on the cost side. The Malaysia plant goes continues, but you know, may maybe postpone. The actual usage maybe postponed. Does does Intel lose anything by moving slowly?
Now on the Germany and.
Poland plants, Yes and no, right, I mean in Europe they were set to get a lot more state money and obviously this decision to postpone throws that into.
Debate whether they'll ever get that.
But at the same time, these things are not cheap, right, as soon as you build one, as soon as you put that equipment in there, you've got twenty thirty billion dollars of capex that within five years will be obsolete. So if you're going to do that, then you have to be ready and you have to be sure you're
going to fill it. So in that sense, it's a prudent move to move, you know, sort of moss ball these ideas, So you're keeping the option open, but at the same time you're not risking that massive cash strain.
So the news on Intel making this custom chip for AWS for use in AI computing, that was just one story involving Intel today. Bring us up to speed on where this company is with respect to building chips for the Pentagon for the US military.
Yeah, I mean that was another piece of positive news. There's some money being set aside for what's called the Trusted Foundry type operation, where the US government is reserving capacity in a factory or multiple factories that it will be for the exclusive uses of military type chips.
Obviously there's a national security thing. There.
There a lot of debates backwards and forwards about whether this should be Intel, whether it should be a number of companies, or we got today was affirmation of news that we actually broke last week that it didn't it will indeed be Intel and now the major beneficiary of that.
So that's a big help. Ian.
I want to ask you kind of a lofty question here. Just just after reading Chip War by Chris Miller. Both Doug and I read the book and loved it and you know, I think you know this move by Intel into trying to bring home production and to stand on its own on the global stage as a sort of barometer for American manufacturing. Is there a lot at stake here or is this just one company? And you know, every company is different.
I would separate the two that the issue for Intel as a company is we all think of Intel as this omnipotent force in the chip industry and in technology, and it's trying to get back to that. If it was just an ordinary company that kind of did okay in some years and and others, we'd have different standards. Intel has held to the standards, said it will get back to them, and that is clearly harder than anybody had imagined. So that's why people are looking at them.
In terms of bringing manufacturing to this country. Intel would be the champion if you wanted a local company to do it. But guess what, TSMC, Samsung they're building here too, and they're not having anything like the amount of problems, if indeed no problems at all in TSMC's case. So if you want high in manufacturing here, of course Intel should be the first look. But that's very much a backward look right, Intel has to prove itself again.
Yeah, we've seen power in this industry shift a lot over the past sixty years, and it seems like it has definitely shifted. Listening to Jensen Wong talk about TSMC the other day was unbelievable the praise that he was giving to their manufacturing processes. All right, Ian, thank you so much for joining us here in king Bloomberg News US Semiconductor Reportal Michael Dyer, Investment Director Equities at Multi Asset at MNG Investments. Michael, thanks very much for coming
into our studios here in Hong Kong. You wonder a little about a cautious FED and whether or not they send a little bit of a message to investors. You might worry investors with a fifty basis point gut. I know they've tried to prepare the ground a little bit, but your thoughts on whether fifty might speak a few people.
I think, coming into a week ago that was the case that equity markets had certainly not started to think about a fifty basis points cut. Seeing futures markets rally to where they are now, maybe it's in their sphere of influence, but the bomb market and the equity markets certainly seemed to be set up for different courses of policy from here. The bomb market very much saying that the FED is behind the curve, and the equity market
ready to sort of enjoy increasing gains. So let's feel like there's some unresolved issues as we move through this week.
So in terms of the overall view on the American economy, do you think the FED has been able to engineer soft landing.
I think it's too soon to say. We try and avoid making too much of a forecast in going into twenty twenty five. Instead, we're very much valuation lead investors. So looking back over the past few months, you know, April was really the time to put the trade on to look at the two year and the five year
part of the curve. And now we're more interested in the long end of the curve because the threat does seem to be that, you know, if this hire for longer has played through there are these variable lags, then we do get a bit of a slow down there, and the longer end of the curve isn't pricing that. So we don't have a forecast, but I would say we're set up for a more cautious look into the rest of twenty four and into twenty five.
One of the interesting developments of late with this idea of sliding from twenty five to fifty basis points, is that you've had breadth in the market advance, and you've seen quite a pretty strong rally here of late.
A lot of.
Companies that you know are not among the top tech company, not among the the twenty biggest companies in the world, that have benefited so much of le Do you buy that line that this is going to be much better for them? I think the thinking is it will lower their costs and runnings haven't been then great without it.
I think the sentiment coming into this has really been the equity markets have shown a willingness to take on risk and bounce back, whereas the fundamental scene they may be more challenged. So I would say that we are more cautious on equities. Within that we only really talk about the headline industries here. We're big pitch and macro, so we're looking at that as being preferring the rest of the world to the US.
So I'd like to get your view on China. We had the monthly activity data recently both industrial production, retail sales a little disappointing. I mean there was positivity there. The latest readings that we have seen when it comes to government figures on inflation show this economy is still struggling with deflation. Is is China a market that you want to dabble in right now or the risks simply too great.
China's been a market that we've been active in for the past couple of years, and it's really been one where being a traaring has been fruitful. So being willing to step in when sentiment is as low and valuations as cheap, such as you know late January, has been rewarded. And perhaps taking profits in the sort of April to May space when things have felt better has been the way to trade it. And the reason for that really is that I think every client that we speak to
wants to know if China's turned the corner. So while everyone's waiting for the turnaround story the data to look better, there's these tactical opportunities. A sentiment really fluctuates around a lot, so the data over the weekend and the day trail yesterday is further confirmation that, you know, China does have some material headwinds. You know, these deflationary challenges don't go away overnight. The policy response has been somewhat underwhelming to
international investors. But within that, you know that the markets, you know, Hong Kong particularly, still trade on a single digit multiple, and that's attractive. Gives you some of the level of margin of safety going in there. If you can pair that up with finding the guts or the intestinal fortitude to make those trades when it feels difficult.
Yeah, yeah, it's valuation helps a lot. So you're not really that fond of equities, although you know you're sort of picking and choosing in China, it seems like you're a little bit more interested in the bond market at the moment. So if we look more broadly at fixed income, is it sovereigns, is it credit? And inside credit? I mean, would you be you know, looking at high yield or investment grade?
For us, it's really been the case the last few years of where the big swings in emotion and markets have really come in the bond market. You know, like we've seen people run from one side to the other several times and you get these points such as April, as I mentioned, after the CPI came in hot in the US where everyone was back to thinking about twenty twenty two again and maybe race even to go higher. So that's where we feel you get good odds, good
asymmetry in entering these positions. Today is one of those markets where everyone's fixated on what's going to happen on Wednesday. With the FED, it's too close to cool. I'm not even sure that the FMC members quite know what the results going to be even now, maybe not until they drive to the meeting. So placing your chips on that right now as a small point feels like it's destined to try and be a hero with that one, and
you know it's probably not good odds. So government bonds have come a long way, so we feel there's more to do there, but it's more in the long end of the curve. Sorry, just on your credit point, we don't have a lot of risk in credit right now. Years look attractive, but spreads are very tight.
Maybe we can talk a little bit about Japan. The dynamics between the FED and the BOJ created an enormous amount of volatility in the end within the last several weeks, and right now, I mean we're looking at a one forty handle, which seems somewhat hard to believe. The velocity of change, how this is accelerated has just been kind of amazing to watch. What is your view first on the currency? I mean, are we to kind of accept yen volatility for a while longer?
Yeah?
I mean August was fun, wasn't it. I mean we saw quite the moves in markets, and they certainly as a tactical multi asset investor, that was interesting for us. I think what happened there was there was a lot of sentiment build up and then people got caught off side. The end has continued to power higher, and that really does look like it is rates driven. So as those thread futures have moved in towards fifty basis points, yend strengthened.
So if we do get fifty basis points on Wednesday, that sort of moves past and maybe we see it flattening out of that yen volatility a little bit. On the twenty thirty of view, the yen is still competitive versus it has been. The Japanese economy is still attempting to reflate, So I think on a fundamental view, over five year period. You can still be positive on the en but it does feel like those interest rate moves are more or less in the price for what is expected.
So if the FED does get moving here and has a little flourish with it, can the dollar become a kind of kerry currency.
Ah, that's a good question. I mean, I think there's a lot of stays strong for the time being. I think there's too much of the reserve currency nature of it, but we have seen it weaken off a little bit from here that the yeend actually still looks like a attractive funding currency is part of a diversified basket, so I wouldn't necessarily rule that off the table despite the spot appreciation that we've seen.
Best opportunity very quickly, Michael, that you are seeing across the APAC right now is what.
In APAC. I think China is something we're looking at. We've taken a little bit of capital away from that, but we're seeing how the sentiment evolves. And again, if we get a better entry point where things feel depressed, I think we could see us adding to that and Japan on the long run. You know, the structural coase is still very much intact, but we've seen maybe a slightly better entry point over the past few weeks.
All right, Michael, thank you very much for coming into our studios here, sitting down with us at the table. Michael Dyer, Investment Director, Equity and multi Asset at MG Investments.
So let's take a closer look at the attempt on Donald Trump's life and other assassination attempt. Joining us now, Bill Ferries, Bloomberg Senior Editor. He's with us from our studios in Singapore. Does it surprise you, Bill that the former president is trying to capitalize on this event?
No, not at all. Listen, after that first assassination attempt, and it's hard to believe we're talking about too now, but after that first one, you saw the president get a bump in the polls. There was there was a lot of people had, you know, sympathy, and what came at a time when when Joe Biden's campaign was basically imploding, and you know, the past week or so leading into this second assassination attempt had been a really rough one
for the former president. It was coming off off that debate with Kamala Harris Tuesday last week that didn't go particularly well for the former president and a lot of the political discussion since then had been focused on whether immigrants in Ohio were eating people's pets or not, not
really a winning issue for the Republicans. So this latest news out of Florida is essentially a chance for the Trump campaign to kind of turn the page, start new with seven weeks to go, literally seven weeks from today, and try to focus on issues that are a little more important to voters. And they're going to do that by attacking the Harris campaign, and I would assume by starting to focus on things like the economy.
Assassination attempts are not really all that common. It's a little surprising we've had a couple here just of late. Prior to that, it seemed like we've gone through a fairly long period. I remember thinking just on a walk recently that you know that we we'd move beyond that in the world, obviously more so in the United States because you have had assassinations elsewhere, But kind of belaboring the point, what's changed. Why are we seeing this now? Bill?
You know, I think it's there's been this process over over maybe the last decade where the political rhetoric has become more heated. People's views of politics have have become more hardened.
Uh.
You know, I think you see that in a lot of you know, even families, see that within within their own family, but within communities. Between red states and blue states, you know, people's views are are a lot more fixed, and they're a lot more strident. Uh. There doesn't seem to be quite as much. Uh, there's not quite as much vote. There aren't quite as many voters who you know, sometimes are with Democrats and sometimes with Republicans. People are
are sticking to their sides now, so uh. And I think the online you know, the Twitter wars, the social media wars, feeds into some of that. So, you know, you often have people who get worked up about it and go, you know, much too far with their political political actions.
With yesterday's event, I was struck by the fact that, Okay, it was mid July that the first attempt was made, Yesterday made the second. It was nineteen seventy five when Gerald Ford survived two assassination attempts in California. Brian probably remembers this. I think he was in southern California at the time. At that time, I don't think that there was much in the way of criticism on the Secret Service. Different story these days, particularly in the incident that happened
in July and Butler, Pennsylvania. How do you feel the Secret Service has been able to deal with this? What do we know about what we have heard from from Secret Service authorities? Bill Well?
According to the Secret Service, they did ramp up security for the former president in the aftermath of that first attempt, where they were widely criticiz Eyes for, you know, leaving the roof of that building with a direct line of
sight of the stage unprotected. This time, you know, the initial reports are that, you know, the Secret Service agent who was one hole ahead of Donald Trump on the golf course did a great job spotting a rifle coming through the fence and directing fire that way may have prevented a tragedy, but there's still going to be some very hard questions about how the gunman was able to apparently camp out on that fence line for about twelve hours ahead of time with an AK forty seven type
rifle and not be detected. We're learning now The New York Times is just reporting that the Secret Service says it didn't scout out the perimeter of the golf course before Trump went out to play. There's I think going to be almost inevitably a focus on whether the Secret Service needs some more financial resources, whether they need more agents out there, and and I wouldn't be surprised if the security perimeter around both Donald Trump and Kamala Harris gets built up even more.
Bill, thank you for making time for us. I'm sure you've got a lot on your plate there at the Bloomberg News offices in Singapore. Bill Ferries, Bloomberg Senior Editor, as we try to get the latest on this assassination attempt that he occurred over the weekend here in the US. That would be US Sunday on a golf course very near by Donald Trump's marl Lago property in southern Florida.
This is the Bloomberg Daybreak Asia podcast, bringing to 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.