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Joining us now on the program to take a closer look at Nvidia is Louis Novellier, who is chairman and founder of Navalier and Associates. So, Louis, there wasn't a lot of nervousness leading into this print by Nvidia because the hyperscalers had already told us that they were buying big time in Vidia chips. But going forward, is that still the most important thing to watch or are there some other metrics that you have that will tip us on if and when business actually slows.
Well, certainly, with two hundred and sixty two percent sales growth, obviously they're not going to be able to sustain that much longer. Even super microcomputers slowing their sales. They're going from two one hundred and forty five percent next quarter. But I the order book is strong, the margins are ridiculous. The Blackwell chip is finally going to get implemented. That's
a given a nice little turbo boost. It really boils down to how fast they can put all this in the cloud and build all these great new data centers so we can do AI via the cloud. And of course there's also a rush to boost electricity to fuel all this, and so there's a lot of plays socio of AI. But it remains very healthy and we just went into extra innings on the AI rally today.
What is your sense on the degree to which AI is being adopted, how quickly that's occurring. Jensen Wog during the conference call with analyst was talking about an expansion into consumer internet companies, enterprise, sovereign AI, automotive healthcare. I mean it seems to be spreading out. Do you have a sense of the rate of change or the rate of adoption?
Oh, it's unbelievable.
I think the biggest problem is the way they're doing AI. Not everybody should do it the really fancy way. I have friends that are in the chip business and they build AI chips for samps and things like that, and Essentially, when you look at everything, you can get errors.
So you want to look at correlated things.
And you know, the intelligence community missed nine to eleven, they missed October seventh. So you can get what we call garbage and garbage out if you look at too much stuff. So it's very important when they implement all this AI that they just put in the things that are correlated versus the kitchen saying.
You are talking about the training data that they're using to create these models.
Right, correct, correct, And you know I build I built stock models and I'm very proud of them, and that they're online free and we great stocks, A, B, C, D F and and uh so I'm kind of a programmer to begin with. And but what's interesting is when you build a model, the more factors you put in, the more errors you're going to make. So my friends that are building chips, now it's for consumer products. They're they're basically chips are mimicking our pets in our household.
You know, our pets plot against us and figure out who we are and and and then try to condition us, you know, And so that's what consumer AI will be doing. You know, the new alexas of the world and things like that, and I just think it's recording. They don't go overboard and do it like the NSA or c i A.
Let's talk a little bit about some of these second, third, and fourth derivative place. Probably in the most immediate we can look at some of the Asian suppliers for sure, TSMC is a big one obviously, with Strawn and Skix and Samsung. Are you playing those as well, and if so, what do you like?
No, I'm not.
I'm playing the companies that are built making the electric demand go up, So that would be something like an eton An, Mcore, a Quantum Services, Vista Corporation. And I'm helping companies secure the cloud. That would be things like CrowdStrike, a New Annex, NTNX, Parsons, and virtual holdings. So it's all cloud and security. It's that's kind of where we're at.
So we also got news of a ten for one stock split and an increase in the dividend of one hundred and fifty percent is or would in Nvidia be better served taking that money into plowing it back into R and D or do you think they're adequately taking care of kind of what's necessary on on the research and development front.
Oh, they spent over two billion dollars on that Blackball chip. That's why I know we can compete with them.
And I mean if AMD wants to even try to compete with them, they're not going to. And you know, Apple and others have announced they're going to get in the AI chip business. But that's the that's the cheap AI stuff that it's not as fancy as what Navidia does. So I think Navidia has a monopoly. They're going to
continue monopoly to the end of the decade. You know, Jensen said he wants to double the processing speeds every year and then eventually at the end of the decade they'll have chips in a basically impliance sized device that will replace data centers. You know, all these chips have to be liquid cooled, and.
They run hot and they suck a lot of electricity.
So the electricity play is my big play at this moment.
Yeah, and you mentioned Eating and Quanta Services and companies like that. What about on the cooling side, which you just referenced, like Carrier or General HVAC companies that supply cooling systems to data centers, is that also in your in your target range.
Not yet, but I can tell you it's hard to get air conditioners. I'm in Florida now. We ordered some. It's going to take a while. Most of them come from Monterey, Mexico, although the crane ones are coming in heavy. But the uh, you know, they put the server farms, a lot of them in the desert so they can open them up at night and they actually cool themselves because the deserts get cold at night.
And you know, I have a home in Reno where Apple and Google have server farms there, and so it's but the server farms are always going to go. There's cheap electricity.
But no, Navidia and super Micro should be about eighty percent or AI investments, and those two stocks are about twenty percent of my portfolio. Not no, no, no, because they just don't have the results.
Yeah. Sorry, it's uh.
I mean, I know they're rallying in the wake of what Navidia did, but they just don't hit my criteria.
I'm pretty picky.
I got to have my sales growth, my margin expansion, positive anser visions.
I got a surprise, you know, so they got a guide hired.
What about the memory chips that a Micron would develop to go hand in hand with an Nvidia product.
Not yet. I have friends and Boise that ex Micron people.
That's my buddy who's building chips for Samson, and Micron has not shown up on my radar, although it has improved dramatically.
All right, Louis, thanks so much for joining us here live on the program. Louis Novelier, chairman and founder of novel Year and Associates. The chip maker in Nvidia announced revenue up two hundred and sixty percent from the same quota last year. It also had a big beat on the bottom line and second quarter revenue will be about
twenty eight billion dollars. Joining us now for some discussion is Vlad Savov Bloomberg Tech editor, So, Vlad that two hundred and sixty that means that revenue tripled, more than tripled from last year, profit tripling as well? Who does that?
And Vidia? The hilarious thing, Brian, is we're back here doing this all over again. I mean, three months ago, we're having a conversation, maybe we're previewing MVDA earnings and we were saying expectations as sky high. Can Nvidia meet them? And it did. He's doing it all over again, and maybe three months from now we'll do it over again. It's we can't see the top of this cycle. The thing that's happening right now, it's worth saying. I mean, I've been covering a Video since it was still a
purely gaming company. Gaming revenue was estimated at two point six billion. It came in at two point six billion. This is all about AI. This is all about data centers.
No doubt about that. And I think we can say safely that this is pretty much a monopolist right at this point. There's no chip company that can touch in video.
That's a bit of a tough time to put in it because it's not by any sort of unfair competition. The competition is wide open if anybody wants to compete with in video, and you can be sure that companies are trying. AMD is the closest competitor they can try it. It's just the technology is that clearly ahead. Everybody is deploying in video's AI acceleration protocols that he has developed itself.
It has developed this with billions of dollars of investment and over many years, and people have just adopted this technology because the best that there is out there right now.
Yeah, there's just so many superlatives with this. It's not like we're, you know, all pushing in VideA. It's just one of these things. It tends to be a freak of nature here at this point data centers. You mentioned that's the big thing. It's eighty five to eighty seven percent of total sales. We've seen the stock triple in a year, and we mentioned that revenue and profit had tripled, and so it means that the stock is really no
more expensive now than it was a year ago. The forward pe is thirty five.
You're right, Bran. I was just looking at our charts on the terminal and one of the things that stands out is that the quarterly sales now are bigger than the videohead annual sales as recently as one or two years ago. It really is just a skyrocketing of sales. And it's worth saying. I mean, we keep talking about AI on a daily basis, is the predominant topic in tech, and one of the highlights actually for me from Video's earnings is that still about forty percent of these sales
are coming from the biggest US tech companies. You're talking Meta, Google, Microsoft, all the ones that have said AI is a big priority, big thing that we're doing, and they're investing most heavily in video chips. If you want to have some sort of balance here, there is a question to ask, when will those companies say we have enough of these chips. When will those companies start tapering off that spending and start investing in more software investments.
Well, look at the story earlier in the week with Amazon delaying the purchase of the last the most to let me call it, the recent generation, in favor of withholding fund so that they could buy the next generation of these chips. So there's going to be this constant cycle of upgrade and that's going to be driving a lot of the sales growth going forward, I would imagine.
But you know, Okay, so maybe the company is not a monopolist in the strictest sense of the term, but if you dominate the market to such an extent, you do have enormous pricing power, right, and so they are in a position to raise prices on the next generation of these advanced chips in a way that is going to continue to feed that revenue growth.
That's right, perfectly fair to say. One of the things that CEO Jensen Wang did say after the earnings is that the company is trying to broaden out is customer base. You've got to keep in mind we're here in Hong Kong. Asian companies are just as eager to get hold of those chips. I mean, the situation right now is Nvidia has far more customers than it has chips to supply. When you talk to TSA and seeing the likes, there is still some constraints in advanced packaging to put these
chips together. So Nvidia is very much in an enviable position today.
Yeah, I heard Mike Wilson from Morgan Stanley say that the only thing about AI is that, you know, we haven't really seen it in the sales outside of Nvidia. I'm not sure that's really true, because you are seeing a lot of companies report higher revenues and stronger growth as a result of let's say power supply or cooling systems or whatever. But how long is it before this really does trickle down to the average Joe.
Honestly, it really is a matter of the software side of things. We just saw Microsoft announce it so called co pilot plus PCs. Those are based on Quotcom chips almost entirely. That's one aspect of the chip market where Nvidia is not a player. Quotcom is trying to get in on Intel's turf and basically takeover is the leader in PCs, because when you think of PCs, it's really
laptops nowadays, that's the leading thing. They are the ones that are going to show us over the next few weeks and months how competing the AI features are going to be for end users. That part really hasn't come to fruition yet because it's still really early. Everyone is just buying the immediate chips to train stuff. But the next the next wave of innovation and the next wave of chip buying, as far as Ahi goes, is going to be in the end devices, the stuff that Quocom is setting.
Yeah in Frience Flat, Thanks very much, Flat Salvov, Bloomberg Tech Editor with us. We are joined online by Lorraine Tan who's director of Asia Equity Research at morning Star on the markets. So at the moment, Lorraine, we're not seeing this huge follow through from the optimism surrounding in Nvidia to the broader markets in Asia, but it shows you these are big markets and there are a lot of factors.
Yes, that's right, so you know, while you know Nvidia does provide some relief that at least that's not a risk trigger. I think the broader events are the ones that is going to drive Asian market direction. And first and foremost is people are still wondering when the Fed's going to cut, what the inflation numbers are going to look like coming up that would allow for that. So I think that still tends to be a key factor that the markets are looking for in terms of direction.
Lorraine.
One of the big ideals here in the States after the bell was obviously the Nvidia earnings shattering on estimates for sales. I mean, so the guidance here are very positive for the current quarter. This is something that is really kind of a revolution in the US. I don't know how you're seeing AI play out in parts of
Asia China. Let's put that aside for a moment. We can talk about what you're maybe seeing in Singapore, and if you could tie in the issue of energy, because I know you spent a number of years over the course of your career focusing on energy and utilities, and we know that AI generally speaking is very energy intensive.
Yeah, so I think there's a little bit of a difference here because in video is benefiting because it's got the platform to really extract the value from all the AI activities that are going on. So you've got obviously some fall flow through to the chip companies, but really the chip cycles are going to be driven by the broad industry, and for us, we do like that space, but it's going to be partly driven by the handful replacement cycle that we expect in twenty twenty five. So
there are slightly different nuances there. In Asia, I think it's harder to pinpoint specific companies that are going to benefit from what's going on in AI. So even within let's say China, when we look at what's going on in a cloud space, it's really the national telephone telecommunication companies that are benefiting. But even then the percentage of to their revenue is not as huge as what we
want it to be. Obviously, for by DO, this will become a gross driver for them in the future, but it's still not quite it's still not you know, as the significant or it's harder for us to tell whether they're going to be able to make a profit out of it so soon.
We've looked a lot at some of these derivative markets and areas sectors. Electrification is a big thing, the independent power producers in addition to the actual utilities themselves. And then you have you know, the HVAC companies, you have industrials generally, and a lot of the enthusiasm has spread to a lot of different sectors. But investors are still looking for companies like Snowflake that stumbled at one point
in the future and are undervalued. Are you finding companies that are undervalued or are you sort of swamped by all these markets with all these games.
Actually, we're still looking at we still see value in the markets even within the US that we think is slightly overvalued. You know, we're you know, we're looking at things like even Fortunate that we have a by call on. You know, these are stocks that are laggered and but
we think that they're still upside potential for sure. Even healthcare names that are not within the that haven't benefited from the BCD drug run up, you know, there's still value there that would come back to the broader farmers space as well. Within Asia, definitely. You know, we've seen value China remains in our views, somewhat undervalued despite the recent run up. Probably would be a little bit more cautious in jumping into more real estate China real estate
names that have come up the from the bottom. But definitely we still like the chip sector for the most part. In Japan, we'd like the lagging factory automation names. They also benefit from basically a cyclical improvement, basically inventory levels coming.
Back to normal, So chips. I'm also thinking South Korea and we just had to be okay raising growth it's growth forecast for this year to a level of two and a half percent, up from two to one. The last projection was made in February. How are you feeling about the South Korean market, particularly the chip makers like Samsung and sk Heinex.
Yeah, we do like Samsung. I think we still have a bikon on Samsung, but we are more so focused on the laggards regardless of where they are. So even within that space industry leader TSMC, we we think they're still upside potential there. Media tech on the Taiwan side is another name that we prefer. I think overall, we probably see a little bit more value in some of the Taiwanese names on the chip side relative to let's say, specific to Japanese or Korean chip makers at this stage.
And you know, we've talked a lot this morning about b HP and Anglo and uh, it's interesting that you know b HP is looking at copper mining but not wanting to do it itself. But buy buy it, buy Anglo. I'm curious what your thoughts about M and A. He's been picking up a little bit here of late. What what sort of message does it send?
I think when I think, what it means is that for companies still having holding a lot of cash, and I think that's across the board the number of companies that we see and for those you know where you have equity values also be at relatively low levels. That probably means it's a good time to look for acquisitions and and we do expect that to you know, basically continue, particularly for those companies that can that do have the
cash flow to afford it. Definitely, you know, debt levels of debt servicing is a little bit tougher now and obviously getting funding is a little bit harder now. So I think where you're probably seeing a little bit more appetite for by some companies to consolidate.
We were just talking here in New York about a Report City Group considering reducing some of its office foot print in Singapore. Remote work is obviously gaining traction. How is the commercial real estate market there in the Line City very quickly?
Tier one basically the top grade real estate is still highly demanded. If you look at the CBD areas, occupancy rates are still high at about nine so we don't actually expect any decline in rental rates unfortunately for US.
Laurene, thank you so much for joining us. Lorraine Tan, their director of Asia Equity Research, Morning Star.
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.