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Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Prisoner. Markets in the Asia Pacific will be playing off a mixed day for US equities. Of the eleven industry groups within the S and P five hundred, only one was positive information tech and that was due to news on Nvidia and Advanced micro Devices resuming some chip sales to China. We'll take a closer look at that story when we catch up with Ray Wang at the Futureum Group, but we begin with market action in the States. Joining me
now is Chuck Camillo. He is president and CEO at Essex Financial Services. He's on the line from Essex, Connecticut. Chuck, thank you so much for taking time to chat with me. I'm curious as to what you're hearing from clients these days in the current environment.
Sure teb Well, thank you so much for having me.
Yeah, I mean, we've just gone through a heck of three months in change, all away from Liberation Day and a twenty percent sell off in the market to where we are now. Where Monday mark the sixty fifth trading day from the below in April and the S and P five hundreds of twenty six percent, So you know, clients were a little bit whipsawed, but I would say
buy and large. They you know, stayed the course and we did a lot of work, you know, a lot of handholding and trying to explain things, and you know, we made sure people tried to focus on the long term. But people are generally, you know, in a good place right now, certainly with positive moves in the market since April obviously, but you know, this has been the most you know, I'm trying to get right word that the most extreme views based on someone's politics in terms of
the market. You know, people's politics always tend to drive what they think, but it's never been more extreme than we're seeing it right now, which I which I guess is a reflection of the.
Country writ large.
But generally though people are doing well, stayed the course and you know, are where seeing people updug just to expect more volatility. You know, it's going to be a bumpy ride, but there's a lot of challenges ahead and there's all some good things add so we will see.
So we had this reading on consumer inflation this morning for the month of June, relatively tame reading. But I think the street is still worried about the potential inflationary impacts of the tariffs. Is that something that you share right now when you look at the tariff story.
Yeah, I think everybody's concerned about that because anecdotally, right, I mean, a tariff is attacks, it obviously is inflationary.
However, you know, the more.
Time that goes by since April when these very high tariffs were initially rolled out and then rolled back, you know, companies have proven to be very nimble and sort of getting their heads around how best to handle this. But you know, inflation is one of the worst things that
can happen in an economy. It also drives so many things regarding interest rates and the bigger picture that higher rates versus lower rates have, and then throw in rates with President Trump and Drome Powell and all the noise that comes with that, and it just continues to cause a cause uncertainty. Personally, I don't think we see inflation
skyrocketing by any stretch. I think even this past monthly number, you had some things that were more terrorf sensitive, such as a parel rise, but you had that offset by reductions and car prices in airlines. So I think we're just sort of going to bounce around here in this range. But the bottom line, it was up. I don't think anybody was surprised by that. It was in line with expectations. But listen, higher inflation is a headwind in just about
every area. But you know, companies, the economy have been extremely healthy, extremely resilient, and we're optimistic that at the end of the day, you know, teriffstonetally help anybody. I think we'll get hopefully to a more normalized place and then we can continue to try to grow this market and grow this economy.
So markets seem to be pricing in somewhat lower odds of more than one rate cut this year. How do you see the Fed proceeding between now in year's end.
Yeah, and they especially with this most recent inflation report. I mean, they have certainly every reason to wait. There's no clear direction in terms of what you know, Well, listen, we're going to get PEPI tomorrow, which will be interesting, but there's certainly no hard evidence for proof that we're through this and that you know, the FED can say, okay, great,
all clear, We'll start cutting rates. They don't want to make the same mistake, right, they made the big transitory mistake coming out of COVID.
They absolutely don't.
Want to have to They don't want to make the mistake of cutting rates and then all of a sudden inflation just jumps and they got to vent raise rates.
That's the absolute nightmare scenario.
But at the same time, they can't just cut rates for the sake of cutting rates. I mean, you got to be careful what you asked for. Last year, the Fed cut rates one hundred basis points right September November December, and the ten year treasury went from three point six percent to four point eight percent. So if the market does, if the market doesn't agree that the move is the
right move, it's going to reject it. And I think that's the big risks out there in terms of the bond market, which again I think was one of the big reasons why President Trump rolled back the tariffs that he rolled out in the beginning of April.
So we had some bank earnings this morning, kind of a mixed bag. JP Morgan Chase with a surprise gain and investment banking income and if you look what what City Group had to say, revenue from fixed income trading was pretty robust wells Fargo, on the other hand, cut its guidance for net interest income. How are you feeling about the financials broadly?
I think broadly we feel really good about him. You know, this type of environment generally abodes well for them. I think I think your phrase mixed bag sums it up perfectly right. JP Morgan's report is actually pretty good. They dropped a little bit today. City has been such a challenging mess for so many years. You know that the stock buyback they announced as well was a big thing.
And I think the news with JP Morgan in terms of about the better results coming out of investment banking hopefull bodes well for the overall market in terms of more deals and things being done, especially maybe with the hope of some deregulation coming down the pike. So overall, you know, we're we're bullish on financials, but as in any sector, you're going to have some that outperform, and you're gonna have some that you know, trip.
All over themselves.
But overall, financials should have done well this year, and hopefully we'll continue to do so.
We had a lot of positivity when it came to tech today, the big news was in Nvidia and AMD saying that they're going to be able to resume some chip sales to China. This is obviously all a part of the AI theme. And at the same time today we had President Trump in Pennsylvania talking about a big project for AI and also energy development that would be used to power those data centers. This is obviously a
trade that's still getting a lot of attention. I'm curious, Chuck, as to how you're playing it.
Yeah, boy, it sure is getting some attention, right.
You think about where Nvidia was, you know, beginning of April there, you know, traded you know, well below one hundred dollar and it's a one seventy and one seventy. I think you closed that today. You know I've mentioned to you before. I think you you don't own tech at your own peril. I mean, I think it is an unbelievable time in you know, the country and in the world's history in terms of whatever is about to come with AI.
Uh, the level.
And the impact that will probably have on everybody's lives over the next ten to fifteen years. You know, we were having a discussion about you know, you never thought about all the things that would change in your life and to make things easier and better, and certainly the rest of challenges. You know, when the iPhone came out and the internet launched, right, I mean thinking about Google Maps or you know, door Dash or pick any app you choose, of how that's impacted every single person's life.
We're we seem to be on the cusp of that, and so I think you're going to have volatility. I think that volatility is an opportunity to buy. But these these cutting edge leading, you know, American companies, you know, I think it's something you certainly want to own.
Do you think think we're closer to some type of resolution when it comes to these various trade deals? And we had an announcement today from President Trump on a trade deal with Indonesia. Obviously China when you look at Asia, is the big wild card here. But I'm wondering whether we're beginning to get a little bit of relief in markets.
Yeah, you know, boy, I wish I knew the answer for that one, for sure. I think the safest thing to say is we're closer to some sort of conclusion than we were before, you know, and who knows in terms of this agreement with Nvidia being allowed to sell these chips to China, if that's part of a bigger picture, bide into getting these rare earths out of China. I mean, so the way that we view it is it's gotten
better now. You and I both know I could change on a dime with a tweet or whatever it might be. But I think the reason that the market has run so much, and the reason there is this more optimistic feeling is that we saw the worst. I don't think back at being in April. I don't think we ever go back to that. And I think it's also in no one's best interest to have these tariffs that are
to bilititting to everybody. So hopefully, you know, there's negotiations that occur to get us to a better place and
wrap this up. But it certainly seems like and I think the news flow and some of the things that have come out of this that do prove that out that we're getting closer to it and then we can get to a better place so that at least this part of the volatility in the market tamps down and you don't have to be on the edge of your seat every day waiting for some sort of press release or tweet or something on truth social.
Are you still primarily focused on looking for opportunity in the US or are you more curious about things offshore these days.
No, we've always you know, we've always had us leave of client assets that we look to invest outside the US. I mean, I think the average US investor has always historically been underweight non US investments, and quite candidly performance wise for good reason.
But look, if you look at.
The MSCI e FA Index over the past three years, it's outperformed the Dow, It's outperformed the Russell two thousand, and you know, it's still trailing obviously NASDAK and the S and P. But it's combat very wrong. But no, we're we constantly do look there, whether it's through mutual funds with great managers or ETFs to play the non US side of things, and that also includes emerging markets, but to a to a smaller percentage for the average client.
What about the US bond market or US treasuries.
Yeah, listen, treasury bills are a great place to hide out. I mean we've we've we've done a ton of them. I mean that that's the million dollar question what happens with rates, and I think there certainly is some concern there that depending upon what happens with you know, you know, hopefully there's not you know, we don't all of a sudden wake up in President Trump's fire chair, Powell, but no treasuries, you know, were born change on treasury bills
or a great place for clients to hide out. We had a great municipal manager in the office today talking to us about the municipal market. We think there's a lot of opportunities there and the intermediate range of maturities, so no, we think it is the right opportunity. But you know, I think equities obviously a longer term give
you more volatility but a greater return. But for somebody that's a little bit more conservative or looking for a hedge, I think fixed income now with these rates and with these coupons in this raid environment, do give you a much more give you much more cushion than you got years ago.
Chuck will leave it there. It's always a pleasure, Thank you so very much. Chuck Camello there. He is president also the CEO at Essex Financial Services. On the line from Essex, Connecticut here on the Daybreak Asia Podcast. Welcome back to the Daybreak Asia Podcast. I'm dek Krisner. Nvidia and Advanced micro Devices are planning to resume sales of some AI chips in China. These companies say they've been given assurances from the Trump administration that such shipments will
be approved. The key issue here is the necessary licenses, and in the case of Nvidia, it's the H twenty artificial intelligence accelerator. This move, by the way, could add billions of dollars to Nvidia's revenue this year. For a closer look, we heard from Ray Wong. He is research director at the few Terum Group. Ray spoke earlier with Bloomberg's HEII Stroud Watts and Paul Allen.
Right, thanks so much for joining us. I just wonder if you can explain fir US what you see as being the impact on the video's bottom line considering this reversal. I mean, previously it was selling about fifteen billion dollars worth of chips to China. Can those sorts of numbers be recaptured?
Hi boy, hey Gred morning.
Yeah, definitely, this is a huge news, not just for MDIA and also for AMVA, potentially auto chip makers. Right in April, there's a new informulator from BAS that restricted H twenty five media and autoships that have similar capabilities in terms of memory, bandwidth and networking speed.
This is huge for a.
Media because now they can re enter Chinese market with their H twenty ships and also the upcoming P thirty or RTX six thousand D ships they're going to China, and this is significant offsites.
Here in Forturing we.
Model together between B thirty and also H twenty that could bring potessional, potentially additional seven to eight billion revenue a quarter for NBDIA and this is huge.
Well, if history shown us anything it's that the Trump White House can be somewhat mercurial in terms of its decision making. How much confidence can Nvidia have van imd that this reversal is going to be permanent, that it won't be reversed again.
Yeah, I see this policy shift is relatively permanent in a way that this is number one, this is part of the negotiation with US and China. And I see there's a policy aliement between n media and also the current strong administration because remember back into April, there's a contentious intension between administration and media because they couldn't really
figure out the controversy around h twenty. But right now after the policy ship, I see more policy aliment between media, the Trump Minstration and also other airtion makers.
Right, you're seeing on our screens at the moment top three percent of making up three percent of total global market.
Cup.
How much bigger can this company get given the presumed presumption of business in this key market.
Yeah, I think there's a still significant upside right right now, we'll talk about in a let's say, in Q three and Q four, right, we'll talk about additional seven to eight billion revenue coming off from China, and you know, throughout the rest of the twenty twenty five we'll talk about fifteen to twenty billion in the second half this
year and moving forward in twenty twenty six. I believe there's your strong AI demand in terms of a training AI inference coming on from China because we are seeing significant and rapidly developments in Chinese AI landscape.
Another way I'm looking at it is just how big video is when it comes to some very very big countries. This start showing that video is larger than Canada. If it adds another trillion in market cup it would be contending with the size of India as well.
Pole sort of.
Talked about some of the you know, policy uncertainties from the Trump administration. We know that, you know that is a tendency for this administration, but how much of this is really a watershed moment for Chinese policy makers. Does the sort of argument that the White House is making in terms of the advantages to the US make sense to you?
I think it actually makes sense because this really complicates two things. Number One, when you have more Amedia chips right now, going back to China, it's actually marginalized. A lot of Chinese domestic chip makers, including Huawei, can become higen inframe. All those domestic air chimmakers, right they really marginalized,
marginalize their potential market in China. Right from a Beating's perspective, this will make the self sufficiency self sufficiency pushed in air chips even harder because right now there will be still significant reliance on a media MD solutions in terms of air hardware.
How long is that situation going to endure? Though, Because while those curves were in place, we saw China becoming very creative and not just finding ways to circumvent them, but also nurturing its own homegrown version of this. Are there any equivalents saw better than the Age twenty chip, either in production and development in China?
Well, I think in terms of Age twenty given the memory bandwidth importance for AI inference, I think for now there's not much solutions right in China that is comparable to n media. But this reflect to an media's sort of media and long term concern, right, because essentially they can only sell chips that under the new Asper control thrashold right, So in the long term, I do think there's a concern that there will be other competitors against ANBDIA.
But I think for now in China and media is still well, you know, maintaining its technological and market leadership.
Is this a game changer for some of the homegrown AI then the likes of deep.
Sick, Yeah, I think it's definitely. The ones for number one did give them more computes, right, But this is the the chips that is one at least one generation behind blickwell, right, and you know, if you look at a computational performance and mary bangweb is really not compare comparable to the current ships that most of the US
companies are using. And I think another thing is this really complicates a lot of domestic Chinese ship makers because essentially they want to fulfill the market's share their lab media. But right now Amedia coming back to the market, I think that makes things a lot more difficult.
Right, Really great to have you with us, very well, Research director for Semiconductor, Supply Chain and Emerging Tech at the Food From Group.
Thanks for listening to today's episode of the Bloomberg Daybreak 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 Kong to Singapore and Australia. I'm Doug Prisoner and this is Bloomberg