Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. After the bell, in Vidia forecast revenue for the current quarter below the most lofty expectations. Fiscal fourth quarter sales will be about thirty seven and a half billion dollars. Here's the thing. The range of analyst estimates was as high as forty one billion. Let's take a closer look now at the Nvidia story with Angelo Zeno. He is
vice president of equity research at CFR. Angelo, what did you make of what you heard today from in video?
Yeah, so thanks for having me.
I think overall the results were pretty good and you know, nothing that I'm concerned about here. To your point, they provide guidance that I think was you know, it's about a billion and a half or so below maybe where the whisper numbers were looking for, but definitely above our expectations.
We were actually looking for about thirty seven billion in the January quarter, and I think all us equal and you kind of look at the beat that they had in the October quarter, which was about two billion out there, definitely shows that their demand remains very strong for their offerings. I mean in the October quarter was largely driven by their hopper architecture.
As we kind of look.
Ahead here in the January quarter, it was all about the cadence and trajectory of the Blackwell ramp here. And at least, you know, from the initial kind of view here, it seems like in video is being somewhat conservative in terms of that initial ramp with kind of a stronger ramp kind of going into the April and July quarters.
Are you concerned at all that maybe maybe just a bit the excitement that we have seen over artificial intelligence maybe getting a little ahead of reality.
Well, I guess what I would say is, you know, at some point in time, investors you know, almost kind
of become numb to the stuff. And you know, from that perspective, we could potentially be you know, entering a point in time here where investors might kind of be willing to look elsewhere, at least over kind of the next six to nine month period, especially with kind of a new Trump administration entering, and that kind of you know, typically kind of helping well, maybe some of the higher data, more cyclical type names that maybe have underperformed, So maybe
from a sentiment perspective, we can kind of see a period where some of these AI oriented.
Names take a step back.
But that said, when we start looking at the fundamentals the major drivers for these AI semi stocks as well as mag seven names here over the next three to five years, we still remain extremely optimistic about the fundamentals of these companies and believe that they will continue to be primary drivers of growth for the broader markets here in the coming years.
So, as we both know, Nvidia is restrained by the policies of the Biden administration from allowing China to have some of these most advanced and sophisticated graphics processors. You mentioned the Trump administration and perhaps a little bit of change in economic policy. Do you think that Trump administration will continue of the Biden administration's hardline on chips where China is concerned.
Well, I think that's a great question.
I think we have to wait and see, But I will say this, we do think kind of inn Vidia may be more of a beneficiary under kind of what we would call a transactional based approach under a Trump administration. So when you kind of think about the Biden Harris approach, it really has been a kind of limit China to certain advanced chips and equipment like GPUs. EUVS is another
great example made by the likes of ASML. But according to our Washington Analysis team, Trump we think might be willing to offer more advanced AI chips to other nations, even China, if the price is right, while kind of maintaining a certain technology lead. So China is held maybe a generation or two behind. So this could drive we think higher related and video revenue in regions like China where the company could potentially be able to sell let's say it's a one hundred.
Versus more, maybe more of a performance laid in h two.
So we see the potential for Nvidia to potentially actually be better positioned under a Trump administration relative to a Biden Harris administration.
I think we can agree that the centerpiece of the Trump policy with respect to China on the economic side tariffs. What do you think the fallout will be as the result of tariffs that may approach at least sixty percent and maybe even more than that.
Yeah, I mean, listen, on the surface, if they were to go through the way they.
Are intended to come through.
If we're looking at sixty percent tariffs in China or in north of twenty percent.
Let's say in.
Mexico for instance, you know clearly would have a negative impact i'd say in a broader tech sector. And a big reason for that if you think about about a third of all electronic goods within the tech industry is actually manufactured out in China, and when you think about how important Mexico is for.
Industries like.
The automotive space, the number of industrial markets out there, were a lot of semiconductors goods are kind of important from there, not to mention you know, the number of PC vendors like the Dells of the world. So there, you know, definitely kind of implications. It will have a negative impact and inflationary pressures, i'd say, to the overall tech space as well as broader markets. So it's not
necessarily something we want to see. But in the same respect, we think the Trump administration will kind of be a little bit more.
Tactical out there.
So all in all, it's probably going to be messy here for a little while, and I think investors just have to be kind of willing to kind of go for the roller coaster ride.
Angelo.
I'm not hearing a lot of concern from your perspective about further decoupling of the trade relationship between the US and China.
Is that the case again, I mean, listen, I think it's it's something that we have to, you know, just kind of wait and see how this all plays out. I think kind of initially, the way we would kind of look at it is I don't know if there would necessarily be kind of more of a decoupling to kind of be seen. But again, it's something that we kind of have to wait and see.
A lot of what we've been focused on are the nominees for various cabinet positions. We still don't have a nominee for Treasury Secretary. We do know that Howard Lutnik will be at Commerce and part of his portfolio will include the Office of US Trade rep. Generally speaking, when you assess the appointments that have been named so far, what is the takeaway from your point of view on how the Trump administration will proceed with governing.
No, I mean, that's listen, that's a good question. I mean, when we kind of think about, at least initially, what you know, what.
The impact is going to be to the broader tech space. You know, I'd say right now.
It's one where you know, hopefully we kind of see the ability for greater M and A potential within the tech space, and I would say that would kind of cause us to lean a little bit more in favor
of the software space relative to the semiconductor industry. I think there are a lot more uncertainties as far as this semiconductor industry is concerned, whether it's to your point about tariffs, whether it be the unknowns about Taiwan, but also as far as the M and A environment is concerned, semiconductor names still do a lot of business overseas and need to get approval in areas like China, which would be would still be hard pressed to see, whereas kind
of in the software spectrum, you're in a much better position out there.
M and A probably is.
More kind of fluid, and we think regulatory approval would kind of be met more willingly under this new administration. So I think there are different ways to kind of play the tech space. Under this new administration.
You don't see regulatory risk and the possibility that some companies like let's say alphabet would be confronted with the possibility of having to maybe divest I certain assets I'm thinking of the story that we had the other day about maybe Google being forced to sell off the Chrome browser.
So possibilities absolutely, But you know that said, you know, with the same respect, I think there's also a possibility for a company like Alpha Bit to be able to kind of go back into the deal making spectrum under an administration, a Trump administration. So think about rumors earlier this year of them potentially looking at a company like a Hubstop or even on the cybersecurity side of.
Things with a company like Whiz.
I think all of that stuff now become possibilities for a company like Alpha Bit, which is actually flushed with a ton of cash and you know, potentially could further diversify, let's say, their business away from search.
Angelo, I'm curious as to whether or not when you are having conversations with your clients that there is one issue that they are expressing a little bit of concern over.
You know, I think as far as you know where clients are at right now, I mean, I would say kind of the top of the list right now for our clients we guest asked a lot about from a concerned perspective, is on the valuation side of things, We've had a hell of a run when it comes to the markets here of last two years, especially on the
tech side of things. When you start looking at some of the multiple expansion we've seen, I think there is definitely fear out there from some investors that you know, maybe some of those gains that have been pulled in quite a bit kind of going into twenty twenty five.
And typically as you kind of go into year three of a bull market, if you kind of view the October twenty twenty two lows as kind of the lows, then you know, the year three kind of period typically tends to be one where you see lower gains relative to those first two years, and especially kind of you know, any environment where policy will kind of be a you know, take kind of center stage here, there's definitely more risk out there than what we've seen we think over the
last kind of twelve to eighteen months.
Angelo will leave it there. Thanks for making time to chat with us. Angelo Zeno is the vice president of Equity Research at CFRA, joining us here from New York City on the Daybreak podcast. Welcome back to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner. As we continue to unpack the results from Nvidia. We also want to take a broader look at what's happening in the Asia Pacific and joining us for that is Stephanie holtza Jen. She is the CIO for the APEC at Deutsche Bank Private Bank,
joining from our studios in Singapore. I know you're not allowed to talk about specific stocks, but I have to ask you about the Nvidia story. When you listen to the narrative that the market's received from the company, what conclusion do you come to.
The conclusion has to be that right now we're in a setup in regards to companies related to artificial intelligence theme that there has very lofty expectations out there. It's also coming at a time where we had quite a good market rally, where lots of investors are kind of asking the right question, is that here to stay? And of course you know these type of results are getting scrutinized under the magnifying class and if there's any reason to look for short term correction, then you know this
is being taken as such. However, it does not derail I think the long term, medium term investment theme that we've been going with on the back of the technological advance you see with the help of companies like Invidia, So you know, these are opportunities to get in at better levels, but it doesn't derail the investment thesis.
So when you imagine the applications of artificial intelligence, is there an industry that you would think really could benefit most under these circumstances.
Well, we look at everything upstream, downstream around the technology and the broader IT sector, and we have these as our sector pigs for a long time already.
Let's talk a little bit about the leadership change that we've been dealing with in Washington. I think for a lot of people it means a new global paradigm where trade is concerned. President Electroump has said that he loves tariffs. He also loves to make deals too, And let's talk a little bit about the dynamic that's playing out between Washington and Beijing or will after the inauguration in January.
Do you think that the US and China can reach some sort of grand bargain when it comes to trade and avoid the application of a lot of these tariffs.
Well, I think there's a lot of speculation around and I will not join the bandwagon of those because we're not yet there. We can only look at what the history is giving us to try to imply in the future. I think more importantly is what is it that the market is really concerned with at the moment. And there is next to trade and tariffs which could have an inflationary outcome. There's also the understanding that there will be no austerity, that there's a fiscal imbalance and what's been
proposed and how it will be financed. Tariffs can only make up for some part of the spend that's been proposed. So you've seen the market has been reprising to that narrative, looking at potentially less of a FED Central Bank reaction function to that new environment being you know, looking at less cuts as we do as well. We see street cuts from the Fed coming towards us until the end
of next year only. So I think that is that is the biggest topic right now, and that is also informing how you structure portfolios.
I'm very curious about the way that you're viewing China right now, in light of the lot of stimulus that we have seen unleashed on the part of authorities in Beijing. Does that leave you to be optimistic that there is some sort of recovery happening in China right now, or maybe what has been proposed will will fail to stimulate in the way in which markets have been promised.
Yeah, I'm in the camp that I believe that the probability for this stimulus to succeed has definitely picked up and risen quite remarkably. And let me just quickly go back and put this in context, because when we talk stimulus, lots of people only remember the fiscal stimulus one and a half weeks ago. I would want to put it in context of the three different arrows. Let's let's let's lose the analogy of ebinomics, the three arrows of genomics
that have been launched. We started out the structural reform package during the third Planum in July. It was followed up in September with the monetary policy stimulus package, which came at the heels of the big, the big fat cut that we saw. So I would I would put the picture out that was when the wind was blowing in China sales, so that was a very timely measure. It was also very large and it had very important
components like stock stabilization program. Now the third arrow to this is the fiscal stimulus which everybody been waiting for, which has been finally launched in its first step, focusing really on the local government, you know, re capitalization, recapitalization exactly so right now if you look at it in its entirety and the way it's been delivered timely, and the two elements we hadn't in the past, which is forward guidance that there can be more if there is
need be. And also I think there's quite a good communication with the market at this moment in time, so there's definitely listening to what the market is expecting and trying not to underdeliver. Again, it leads me to conclude that the probabilities have gone up that China has been able to create its own kind of revival story without having to necessarily react to you know, the concerns that you mentioned earlier that come their way, and that are of course concerns around tariffs.
So you talk about three arrows very similar to ebonomics. Obviously, Japan had to fight deflation for three decades. China seems to be struggling with that still, even though we've seen evidence that retail sales are picking up, industrial production is picking up. We just talked about how local governments may be able to respond to the property market, but is China's still confronted with a major deflationary problem that may be persistent for a while.
At this moment, it still is. So I just came back from Shanghai as well confirming this. So I do not want to paint a different picture. But I think it's also a little early to use activity data from today or that are backward looking that are being released in the market as we speak to kind of draw a conclusion on whether these three errors have been successful or art. So you look at a realistic pathway to find out. The jury is out obviously whether all of
this works. I think we have to look into next year. Most probably the first and the second quarter will be there to stabilize the market, and then the third quarter I will also see a pickup an activity data that most probably will help to convince the last naser to join the bandwagon also start broadening out investments into China again.
So how does everything that you're describing kind of inform an investment strategy? What does it translate into.
It translates into not a negative view on China so we are out there highlighting the medium and long term opportunity. Still, you have heard me saying that before. We have now seen that China is able to make a you to date results that are resembling others in the region. So as we're building a base, these are opportunities to build out. Well, it's not just China. We also like Japan's middle and long term story. Then of course this will be a
sideways market that also likewise gives opportunities to invest. But having said that, we still prefer the US and equities as to express our views that are fairly constructive.
Are there themes that you like right now? I'm sorry to interrupt, but I'm curious about the themes that you may be pursuing. And I know that when we were talking earlier about artificial intelligence, there is a certain herd mentality when it comes to technology. Maybe you can tell me some of the contrary positions that you're taking kind of avoiding. You know, what the mainstream is is trying to accomplish.
Well, but you look at the playbook that we have going into the elections, there is according to the different agendas, some of the sectors were definitely experiencing tailwinds, and of course we have been also riding these. You know, you look at the energy sector, you look at financials that will be benefiting from a more of a deregulatory angle. So it's not necessarily necessary to go against the market
when these themes are playing out. Right now, you're looking at long term investment themes as well that look also like short term investment. Seems like the artificial intelligence. I think you can also be joined joined in some of these themes that then become long I think there's health tech that is interesting, there's agritech that is interesting that
we keep on highlighting industrials. But the main drivers right now, as we've seen and most probably will continue to see, is writing on the current themes of deregulation benefiting financials, etc.
We were talking at the beginning of the conversation about the inflationary impact of a tariff policy. Do you believe there's opportunities still in fixed income right now? I hear a lot of what you're describing more on the equity side, but I'm wondering whether or not you want to be maybe balanced in a way that would allow you to place a bed in the fixed income markets.
Absolutely, and a balanced portfolio is also shown to be working better again in signs of stress. So fixed income is a very important part to our portfolios. And as I said, we have never been in the camp of looking for too many cuts from the FED down, never joined the bandwagon when the market was going gung ho and nine, so we didn't have to completely change our views with the new administration coming in. So this higher for longer relatively or relative attractiveness of US assets it's
been with us before. So you look at it from a bond perspective, it still argues to have a large fixed income allocations. We still prefer investment grade to express that view, just to be on the higher quality side of the spectrum. And yeah, most probably will also see a lot of this in the short term, given that we will see the Fed not being able to react as swiftly and as pronounced as most probably the market had been pricing in before.
We'll leave it there. Stephanie, thank you so much for joining us. Stephanie holtze Jen, she is the CIO for the APAC at Deutsche Bank Private Bank, joining from our studios in Singapore. Thanks for listening to today's episode of Bloomberg Daybreak Asia Edition. Each weekday, we look at stories shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, and the Bloomberg Podcast
YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on market moves from Hong Kong to Singapore and Australia. I'm Doug Prisoner and this is Bloomberg