Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moving news.
Find the Bloomberg Markets podcast called Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. Right now, we're gonna get a little political with you. We had that debate last night. So what we're gonna do here is we're gonna talk to some smart people. Wendy Schiller, professor of Brown Universities joining us here. And then at ten thirty we're gonna have that simulcast with Bloomberg Television Joe Matthew and Anri Horden interview GOP presidential
candidate NICKI Haley. So we're gonna go a little politics for the next twenty minutes or so.
Wendy, thanks so much for joining us here.
We had a debate last night, Sons President Trump, what were your takeaways from the Republican candidates?
Well, I mean, I think some of them did themselves some favors. I think Ron DeSantis held his own. Maybe he didn't strike a knockout blow against anybody else, but I think he showed he was still formidable and wanted to fight.
I think Mike Pence.
Even though he's got a tough climb, really held his own and sort of emphasized his experience. Nikki Haley, whom you're going to speak with, I think she had a banner night.
She did not shy away from debate.
She tried to be more transparent I think about some issues like abortion, and she really I think wiped the floor with David Bromsway because she indicated that she was, of course representative of the UN under Trump, that she knew how to navigate international and foreign policy, and that he had a very simplistic response to engaging with the world, and it just really showcased his inexperience and it really
highlighted her experience. So I thought that was one of her stellar moments throughout the whole debate.
Abortion, because I know voters have been coming out, as evidenced by the recent referendum, I guess it wasn't in Ohio when it comes to abortion, and the GEO p has typically been more anti abortion or pro life, whereas it seems like the majority of the country believes that at least in the early stages, a woman should be able to decide herself what she wants to do with her body.
Yeah.
Man, this was really a showcase for people who are trying to get the GOP to a place that the majority of Americans might agree with, like a fifteen week abortion ban. I'm not saying that would, you know, necessarily attract a majority position, but Mike Pence had it out there, and I think that seems quote unquote reasonable to a lot of people, particularly independent voters. So that's a position
that would not lose the White House. An outright ban or a six week ban, I think, given that Roe v. Wade has been basically revoked by the Supreme Court, I think that's a losing position for the GOP to get the White House in twenty twenty four.
And Nikki Haley understands that.
Hey, when you talk about Ron DeSantis, you know, one point was polling fairly well, but as kind of fallen off dramatically. Talk to us about his candidacy to date, and particularly about last night.
Well, I think it shows you the difference between running on a national stage and running in Florida. Big state, running really well, winning a big campaign, you know, getting a lot of national attention, and I think the mismatch was in how to run a campaign on the ground in this GOP against Donald Trump. He never came out really hard against Donald Trump.
He still won't.
In fact, it was hard to get an answer from him about whether Mike Pence did the right thing and ratifying the twenty twenty election last night on the debate stage. So I think that was a mistake on his part. I mean, I think Trump voters want someone who will fight for them. That is constant refrain in the polling that we see, and that's what people want to see.
So Desanta showed up last night as a fighter. But the issue is is he more of a fighter than Donald Trump?
And if he's not willing to fight Donald Trump, how does he actually illustrate that.
To the voters in the general?
I mean, you know, everybody who hasn't followed his career closely is just going to know DeSantis for don't say gay and you know, trying to fight Mickey Mouse.
Is that really going to help him?
Well?
I think amongst the core, you know, really conservative and highly religious wing of the primary elector at the Republican Party, which you also saw Senator Tim Scott from South Carolina trying to appeal to number of times last night at the debate stage.
That will appeal to them.
And we've seen the rise of a lot of anti gay legislation rhetoric and state legislatures. So in the core red states that might help the Santis in the primary process. But in some of the bluer or mixed purple states, you know, Michigan, Ohio, bigger states in the Republican primary, I'm not sure how that plays, and I just don't know how far that gets him. And I think his challenge is to really show that his poll numbers can move up in the next couple of weeks, that they
can move at all. If you can show that by September twenty seventh, the next debate, then I think he becomes still the story of being the number.
Two behind Trump.
Did Mike Pence?
You know, I had to get up very early this morning, so I went to bed before the debate, but I heard there was a question of whether or not each candidate would support Donald Trump if he wins the nomination. Did Mike Pence raise his hand there? Because you would think he would still harbor a little resentment from the time that Trump tried to have him lynched.
He well, he so Mike Pence, I thought, as I said, I thought he held.
His own and better than held his own.
Last night he was very feisty for Mike Pence from what we've seen before, but he sort of hedged on it. But what he didn't edge on him was if Trump was convicted. That was a weird thing, like, well, you know, the question was if Trump is convicted, not indicted, but convicted, would you still support him? And most of the nominees except for Asa Hutchinson, raised their hand and Mike Christie sort of waved his hand and then said, oh, no, no, and then Mike Pence kind of raised his hand a
little bit. But it was not a profile and courage for any of the people on that stage. And as one of them said to another, if you support the rule of law, you know, how can you possibly discount this kind of conviction. So this is going to be
a problem for the Republicans moving forward. I didn't see anything last night from most of those candidates that would tell me independent voters would choose them over Biden yet and I saw some inkling that some of them could peel away that group from Biden.
All right, Wendy, thank you so much for joining us. Wendy Schuler, Professor at Brown University. Right now, I want to bring in McK mulroy. He's the co founder of the Lobo Institute, and he's got a lot of experience within the US government, former US Marine Infantry officer, former Power Military Operations officer at CIA Hey Nick. Part of the debate last night, I was talking about Ukraine. Love to get your thoughts to where the Republican Party is
in its support of Ukraine. Did you learn anything at the debate last night, one way or the other?
So unfortunately I was I was on the news talking about precosions, possible demise night.
Yeah, we want to get your thoughts on that as well.
Yeah sure, but when it comes to Ukraine. And I do stay out of politics altogether, but not on the issue of national security. When it comes to Ukraine, I think it's important that this adminised, current administration does a better job explaining the why we're doing it, not just the what. It doesn't do much good just to talk about the billions of dollars that are going there. I'm not opposed to that at all, but it's more important
to talk about why. And I think there's plenty of Republican candidates that do understand the why, and they are explaining it. We have a strong partnership with Ukraine. They have been invaded a lawfully by one of our most significant adversaries, who, if left unchecked, could easily continue on into a NATO country, which would put us at war. So I actually just got out of the Churchill War
Room here in London about an hour before this. And if that tells you, if you look at that history and how the United States support support AR did England during the during that time, I view this very much the same. And I hope that everybody that would ever seek to be the commander in chief what as well. Partners deserve to have partners in times of peace and in times of war.
Well only for so long, right, I mean? President Biden showed that no matter what kind of promises we made to the Afghani people, we pulled out of there without without saving them.
Do you think that's going to be a problem for him in the election.
The Afghan withdrawal. I absolutely do think that's going to be a problem, particularly not that we're a big voting block with the Afghan veterans that you know. My position, although it doesn't matter much, was that we should have left for residual force to maintain what we fought for for twenty years. But we certainly shouldn't have not just abruptly pulled out and left all of our partners, those that fought alongside us for twenty years, to the whim
of the Taliban. I think that was a national embarrassment, and I think most Americans, regardless of the party they're in, I agree with that, and I do agree with the premiacy of question. I think that's going to cause some problems at least as much as foreign policy does play into a president election. That is a blight I think on this administrative.
Let's get to what happened in Russia yesterday. Reportedly you have get any Pregotion was on a private plane that crashed outside of Moscow, And as most commentators have said, if that's true, it's not a huge surprise because his days were numbered after leading some kind of mutiny against Moscow.
What's your take on that?
How does that change the picture for Wagner, for Ukraine for Russia.
So if progosion and apparently Utken and Utkin was actually the person who started Wagner his call sign when he was in Russian special Forces was Wagner. He was apparently on the plane as well. If he is on that plane, it looks like the Kremlin may have been trying to figure out how do they deal with Wagner post pregosion, and apparently, if this is true, they figured it out,
and that's how that's why this event occurred. They need to figure out how to continue operations they find economically viable in Africa, for example, without him, and maybe they did that, and that is likely in my it's just an analysis. I don't have any information specifically on that, but why this took so long to happen, all right? And I think from all the analysis I've seen, it was definitely something that struck the plane that brought it down.
All right, Mick, thanks so much. We have to run just because of the time. Mc morroy, co founder of the Lobo Institute.
You're listening to the Team Ken's are Live program Bloomberg Markets weekdays at ten am Eastern.
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Welcome to Bloomberg Television. I'm Ann Recverder and alongside Joe Matthew or please to have joining us now the former South Carolina governor and u N Ambassador NICKI Haley Ambassador, Thank you so much for your time this morning. The Wall Street Journal editorial board is leading with this. Most GOP voters who aren't in Iowa or New Hampshire are only getting to know these candidates, and Miss Haley may have been the most pleasant surprise.
How are you feeling this morning?
What have your overnight fundraising numbers looked like?
Well, there's more where that came from. So the Wall Street Journal needs to get ready. But you know, it's great when you can be on a debate stage and allow everybody to see their options for who's going to lead the country going forward. I think it's a good time. This is the start of the debate season. We think we did really well. We're seeing that we're getting support. It hasn't stopped since the debate was over last night, all the way into this morning, and we welcome it.
I hope your viewers will go to Nicki Haley dot com.
But I think what's really important is we have to focus on the issues at hand.
How do we get inflation down.
Too many families can't afford groceries, they can't afford their rent, they can't afford gas, they can't afford childcare. Fifty percent of American families can't pay for diapers, and one in six American families can't pay their utility bill. And while everybody would love to say, oh, Biden did that to us, we have to remember our Republicans did that to us
as well. And that's why I called out Tim Scott and Ron Desanis and Mike Pens and Donald Trump for the you know, spending like drunken sailors and raising the debt limit. I think it's time that we start to really make sure we get our fiscal sanity in order.
Yeah, that was a big moment for you last night, calling out not only Democrats but members of your own party on that debate stage and here in Washington, Ambassador, as you pointed out, specifically, the Trump administration added eight trillion dollars to our debts. So let's be specific today on Bloomberg, the third rail that nobody wants to touch is the entitlement Social Security, Medicare. How would you manage the entitlements to try to start getting our arms around soaring debt.
Well, you know, you've got multiple candidates on that stage that said they wouldn't touch in titlements, including Trump, And any candidate that says they're not going to touch entitlements means that they're basically going to go into the go into office, and then leave America bankrupt. Social Security is going to go bankrupt in ten years, Medicare is going to go bankrupt in eight. So the way we deal with it is we don't touch anyone's retirement or anyone
who's been promised in. But we go to people like my kids in their twenties when they're coming into the system and we say the rules have changed. We change retirement age to reflect life expectancy instead of cost of living increases.
We do it based on inflation.
We limit the benefits on the wealthy, and we expand Medicare advantage plans.
What's the right age there that investador?
Well, I think we have to do the numbers. We've got to figure out what it is. But what we do know is sixty five is way too low, and we need to increase that.
We need to do it according to life expectancy.
You raise your hand.
And last night, when asked if you would support the Republican nominee, of course if that ended up being someone else. I know you're running for president here, but if Donald Trump was responsible for adding eight trillion dollars to the national debt, how could you support him again for another administration?
Well, first of all, I don't think Donald Trump's going to win the nomination. I think I'm going to win the nomination. And secondly, I think that we have to focus on the fact that anybody is better than a president Kamala Harris.
I mean, you look.
At the socialism creep that Biden and Harris have gotten us into, whether it's the Chips Act, whether it's Inflation Reduction Act, whether you see all of these subsidies that they are green subsidies that they're doing. They're the ones that have left us into a situation where I don't think our kids are.
Going to forgive us for it.
And so any person on that stage is better than Kamala Harris. And I'm going to say that all day long, but I think the American people are smart. I don't think Donald Trump's going to be the winner of the primary. I think I'm going to be the winner of the primary. And I think that's why we need a new generational conservative leader, because we've got to leave the past and the negativity behind us, and we've got to start focusing on the real problems at hand and start getting things done when.
Look at the new generation, the most googled individual today, Ambassador is Vivek Ramaswami. You took issue as foreign policy yesterday as an individual number one googled in America. Who wants to give Ukrainian land back to Russia, something that actually individuals in the Republican base agree with. Kind of taking a playbook from the former president who has called
what Putin has done in Ukraine genius and savvy. You chastise mister Rabiswami yesterday, but you worked for the former president. Are both these men wrong when it comes to Russia's invasion of Ukraine?
Well, you know, President Trump used to have it right when it came to Russia and Ukraine. He reversed the Obama strategy and he sent Javelin missiles to Ukraine and I was proud to serve with him. Then he's now backtracked now and is going into where he's weaken the knees on Russia again. You've got vivid Ramaswami who basically wants to side with a murderer over a pro America, freedom loving country. That doesn't make sense. You've got Ramaswami
who wants to cut aid to Israel. He doesn't understand that it's not that America needs Israel. It's not that Israel needs America. America needs Israel. They're the frontline of defense for Iran. He wants to feed Taiwan to China. He's missing all the points of You can't be so narcissistic to think America doesn't need allies. We do need allies, and when you have an ally, you take care of them.
Everybody's talking about this funding to Ukraine. First of all, I think economic aid should come from the Europeans, but equipment, military ammunition, we should be sending that. And when we send it. Let's keep in mind it is less than three and a half percent of our defense budget that
has gone to Ukraine. If you look at the percentage of GDP eleven European countries have paid more than the US, but making sure we have to always a win for Russia is a win for China, and we can't let that happen.
You're saying Trump did get it right at one point, but it was under the Trump administration that withheld millions of dollars hundreds of millions to Ukraine that was appropriated by Congress. Did they not prepare Kiev well enough for this onslaught?
Well?
I think that.
Look, there was a problem with the fact that I think Trump had two sets of ammunitions that were supposed to go to military equipment and ammunitions that were supposed to go to Ukraine before Russia invaded, and Biden pulled it because he didn't want to upset Putin.
This war could have been prevented.
Biden was slow to the take he didn't act strong enough, and that's what happened. And then you go and you add the Afghanistan debacle.
I mean the idea that.
We left Bagram Air Force Base in the middle of the night without telling our allies who stood shoulder to shoulder with us for decades because we asked them to be there. It was the green light putin needed. It was the excitement that pressed she and China got. It's why Ron started building a bomb and North Korea started testing ballistic missiles. When they see weakness, that's when they smell blood in the water, and that's why we saw aggression.
We need a strong American president who understands what it takes to keep Americans safe. And the way you do that is you make sure you defeat Russia when it comes to Ukraine, because that sends the biggest sign to China on not to invade Taiwan.
The Biden administration at the moment is sending billions of dollars to Ukraine. They've also, under their leadership, were able to help expand NATO.
Do you not agree with that?
I absolutely agree with defending Ukraine, and I agree with the fact that we need to expand NATO. I mean, it's good to see and I actually think that it should go further than that. I think that an invitation to NATO should go to Ukraine. They've proven that they're good military fighters. And let's keep in mind, Russia has never invaded a non NATO country. They've invaded Georgia, they've invaded Ukraine, They've invaded Moldova. They don't ever invade a
non NATO country. So we need to make sure that we continue to expand NATO. And we also need to work with our other allies India, Australia, Japan, South Korea, Israel. We need to start going to the Arab countries. We need more friends, not less.
I have to ask you about an important issue on the campaign trail, Ambassador, that loom large over the midterm elections and will certainly be top of mind for voters Democrats and Republicans in this next election cycle, and that is abortion. It came up in the debate last night. You've suggested that there are no votes for a national abortion ban, or for that matter, a regulatory bill here in Washington. You made that point last night, but I also I know that your state of South Carolina has
put in place a six week minimum. Mike Pence and some others and the Republican Party are suggesting a national fifteen.
Week What is your minimum?
What should be, in fact, the number of weeks for this country to coalesce around.
I am unapologetically pro life, not because the Republican Party tells me to be, but because my husband was adopted, and I had trouble having both of my children, so I am surrounded by blessings.
Having said that, I don't.
Judge anyone for being pro choice any more than I want them to judge me for being pro life. We didn't need unelected justices deciding something this personal and this important, So I think it was right to send it back to the people to decide. If the people of South Carolina chose six weeks, you know, they decided.
I'm happy with that.
Other states have chosen other things, but at least the people's voices are being heard. The debate that happened last night was whether there should be a federal law. And I think there is a place for a federal law. I think that most Americans, you know. But we have to decide. In order to get a federal law, you have to win a majority of the House votes, and you have to get sixty Senate votes. We have had sixty Senate votes on the pro life side in over
one hundred years. So we need to come together on consensus. Where is the consensus. Let's agree that we should ban late term abortions. Let's agree that we should encourage more adoptions and good quality adoptions. Let's agree that doctors and nurses who don't believe in abortions shouldn't have to perform them.
Let's agree that contraception should be accessible. And let's agree that no state law should tell a woman who's had an abortion that she's going to jail or she's going to get the death penalty.
Let's start there.
We have to humanize this situation. I'm not going to be a part of demonizing this issue. It's personal for everyone and we need to treat it with the respect that it deserves.
And bastard, thank you for sharing some of your also personal experience with this. Penn says, every candidate, though, should support a banned abortion before fifteen weeks as a minimum nationwide standard.
What is your minimum? First of all, why put women through this?
Why put men through this in a way that they're going to hate each other and demonize each other. We don't have sixty Senate votes, so where is the consensus? We have to figure out what the American.
Bable want to know from you, as a woman as well, where you would stand on this. A lot of cadidates have come out and said they're either for six weeks, there for fifteen weeks.
What is your number?
Well, first of all, I'm for whatever the states decide where they are. But I'm also going to tell you my job is I'm going to support or promote saving as many babies as possible and support as many moms as possible. Wherever those sixty Senate votes come down, we're going to do it. If you can't get sixty votes, you can't save babies. So it's going to require a lot of coming together and figuring out where people are. But we're not going to divide our country over this issue.
We're going to bring our country together and where we can get sixty votes, that's what we're going to do.
We have an honest conversation before we let you go, Ambassador, about Donald Trump. He chose not to attend the debate last night because of his commanding lead in the polls. It's difficult to discount the trajectory here. I know you don't think that he's going to be then, but he's leading the field by anywhere between twenty and forty points when you look at the poll. I remember the day
you endorsed Marco Rubio in the twenty sixteen campaign. You said I will not stop until we fight a man that chooses not to disavow the KKK referring to Donald Trump. That is not a part of our party. That is not who we are with. That said, your party seems to be in love with Donald Trump. What is your path to the nomination?
Well, look, I was proud to serve in Donald Trump's administration and push the foreign policy that we did that basically took the kick me sign off of our backs at the UN and had America respected again. And I support a lot of the policies that he supported. But I think that you have to look at the fact that three quarters of Americans don't want to see a Trump Biden replay. The majority of Americans. I mean, Trump is the most disliked politician in America, and the most
disliked politician in America can't win a general election. So this was the kickoff to the debate season, to the election season. I think now people are paying attention. I think there's a big difference on people who support Trump and people who are going to vote for Trump.
I think people know that.
We've got new issues, big issues that we need solutions. We can't keep looking to the past. We've got to lead the drama and negativity to the past. We need a new generational conservative leader that's going to focus on what it takes to really get America back on track. I was a two term governor that took a double digit unemployment state and turned it into an economic powerhouse. I was at the un I didn't deal with one country. I dealt with one hundred and ninety three. I'm not
a lawyer, I'm gonna accountant. I think it's time that we get our fiscal house in order, close our border, make sure we have law and order, get transparency in the schools, and have a national security that will keep American safe.
She's fresh off the debate station with us here on Bloomberg former governor, former Ambassador Nikki Haley. We thank you for the time this morning on Bloomberg.
If you're listening to the tape, catch our live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, Bloomberg dot Com.
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All right, let's talk about the stock of the day, and really the week and maybe a year to date. In Vidia, little chip maker, all time high today it's up one point three percent.
Just extraordinary story.
Let's talk to somebody who does his chip stuff for a living, Kun John Sabani. He is the lead at Semiconductor Analys. He doesn't follow anybody. He's the lead semiconductor analys for Bloomberg Intelligence. I meant I did not hire this guy, so let's see how he does though. Okay, scoo, John, thanks so much for joining us.
Appreciate it.
He joins us via zoom in San Francisco. He says, so cow guy undergrad USC Business School UCLA. I don't know where his loyalties lie between those two schools. But in Nvidiakujohn, talk to us about the quarter we had yesterday.
Just monster monster revenue.
Right.
All right, I mean it was not a big surprise to us, at least it was in line with our
preview call. Yet again they delivered a blockbuster quarter. Most of the upside, again was primarily given by their Data center segment, which are their GPUs that go in all the data centers and primarily used for AI these days, so it was more of a function of them able to get a lot more supply because the demand has been rising and is running ahead of the supply, and we expect similar growth to continue because again there's a lot of signals that demand continues to rise.
Kunjan.
When in Vidia put in an order right because they don't make their own chips, so they go to TSMC and they say we want this many GPUs. Does TSMC say, well, you know, get in line everybody wants these things, or does Nvidia get to step to the head of the line.
I mean Avidia does have garnered a lot of high power. Look, they're the number one player when it comes to GPU and they've been getting the growing the most fastest, so they do have a lot of pull. But it's not just a function of getting lined. When you have growth like this, it has not I've not seen I've been in an industry for twenty years and I've not seen such beats in the twenty years. So it's not just easy to just bring up supply because it's not sitting somewhere.
These are leading edge nodes products, and especially the supply crunches at the packaging side, because these are most advanced packaging and the supply just didn't exist. So suddenly when you go and say I need double than what I expected, it takes time to bring up supply. So it's not a function of ESMC not putting them back in the Queue's just it takes time to bring up that supply.
Hey, Kunja, this is Barry Ritolts, and I'm looking at this chart. A year to date, we're up two hundred and twenty two percent in video raises the question how much of the upside is priced in already?
I mean, coming into this quarter, there were a lot of concerns exactly about that point. But look, we think this another blockbuster print and raise should ease some of those concerns because there's definitely less doubt when it comes to sustainability of the demand. And like you saw, you know, we've seen market reactions similar to last quarter. It's helping boost another sort of rally to the AI exposed names.
In terms of the other chips, does it matter, does it matter what they make for PCs? Does it matter what they make for card, does it matter what they make for phone?
I mean, overall for the company does matter, But right now people are only focused about data center because that's really. I mean it's become close to seventy percent or more of the revenue. So that's what really people are focusing on right now.
All right, So how about like AMD, Intel, Broadcom, Qualcom. Were those guys in terms of I don't know just.
Their AI ness if you will, their exposure to AI. How do you think about those companies?
I mean, this is the largest and the fastest growing opportunity that we have seen in a long while in the semi world. So everyone is trying to get get a bite on the this large piece of the pie. Now you know, they are all playing catch up, and
Media was the leader. We think there's definitely opportunity for some other names like AMD, Broadcom to some degree Intel to grab a small sliver of this pie, which against even though it's a small percentage of the total market share, adds to your tapline in terms of billions of dollars. So they're all playing catch up. They should all still see the benefits of it. But we believe and it comes to GPU and accelerators and VIDIA will be the dominant share.
I mean, but Kunjan, if you look at a pie chart and it's you know, GPUs in server center today. Not GPUs that they you know, have designed, Not GPUs that they have for sale and maybe a customer is going to buy, but GPUs that are already in the big server centers. How much of that pie is Nvidia?
Oh gosh in like.
So huge?
So that is very reminiscent of Tesla. A decade ago, all we heard was, hey, this is an up and comer and they have a huge lead and it's gonna take.
Forever for people to catch up. It's still Tesla's world. Everybody else is just paying rent. As Dan ives, I'm not so.
Sure that's the case anymore.
They used to have the market all to themselves. You can't say that anymore. There are credible competitors to Tesla. That wasn't true five years ago. So the parallel I'm trying to raise is it's in Vidia's world, everybody else is living in it. How long is that going to last for you don't have the same consumer loyalty issues that have been driving Tesla. This is just who could produce the most GPUs for the least cost. That's going
to be who's winning huge head start. When might other companies begin to make a dent in that massive unsustainable ninety plus percent market Tunjohn, what do you think?
I mean, Look, you're correct, there's definitely going to be some dent, but we don't see it in the near term. I mean worst case. You can think of what we've seen numbers or what we think right the ninety five share could go as low as like eighty five eighty in the next maybe three or four five years, but that's still huge. One thing you have to remember is they are not even able to ship to the entire orders they have, like even after such a high beat.
What we're hearing from customers is they can't get enough Nvidia chips and they are not willing to go to another chip maker right now that we cannot get Nvidia, let's go and buy something else. They still are waiting to get the Nvidia chips and solutions.
All right, what's the I don't know, I'm gonna say, not gonna say the barecase from Vidio, But what's maybe a headwind out there that maybe the market's not paying them enoughing tention too?
Do you think.
One risk factor is definitely China, which people are paying attention because, you know, any more incremental sanctions in this area because the AI area comes under a lot of focus when you think about US China trade sanctions they have, they're already sanctioned last year from not allowing them aligned selling their highest generationship.
To the China.
And look outside of the US, the largest cloud supply service providers are in China, So that could be, you know, in the case of really restrictive sanctions, that could be that could limit that upside, that could limit their TAM opportunity. So that's one of the risk cases right now.
Really really quite fascinating. Other than other than AI, is there any other field than in Nvidia sort of the way Qualcom took over mobile. Is there any other potential use case for Nvidia chips or is this an AI story only?
Well, there's definitely. The other up and coming market for them is automotive. Look, everyone's aware cars are becoming sort of computer running on wheels, as we go to autonomous driving, as we get a higher penetration of evs. There's really three key players when it comes to computed cars, and then media is one of them.
All right, cu John, thanks so much for joining us. Really appreciate getting your thoughts. John, Sohani he is the lead semiconductor animals for Bloomberg Intelligency's based out there in our San Francisco officer right smack in the middle of the Silicon Valley and all the tech speak out there, so giving us his thoughts on Nvidia and again just a monster beat and raise again.
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Matt Miller, Paul Sweeney joining in live here on a Bloomberg Interactive Chris Studio. We're joined with Battery, Ridholtz, Ridholts Wealth Management joining us here for a spell here, and we're also on that YouTube thing. Boeing shares a Boeing and its biggest supplier, Spirit Arrow Systems Holdings, fell after the planemaker disclosed improperly drilled holes in a component that helps maintain cabinet pressure within the seven three seven Max jet.
Here we go again. George Ferguson he joins us.
He covers all the aerospace stuff for Bloomberg Intelligence.
He is a veteran of the.
US Army so we thank him for his service, but of course the highlight of his career was the four years he spent at Penn State cheering on the Nitly Lions. George, we love Boeing. It's a great, great American company.
What's going on? How serious is this latest issue?
So first, thanks as always for having me on. So, yeah, the you know, Boeing has said that there's no safety of flight issues for these these holes that were sort of misdrilled in the rear pressure bulkhead.
I mean, so I think in the story that's the positive.
The challenge here is the challenge we've been seeing all year, multiple years, right, it's really quality controlled down at the suppliers. The supplier bases have really gone through a lot of turnover employees since the pandemic, and that just keeps biting them, right, and so again another story. We don't know full numbers on what it's going to cost to repair. The great news is we don't have to bring everything in from
out of the fleet right away to repair it. My guess is that they'll worry about maybe crack propagation over time, you know, as you do more takeoffs and landings on an airframe. So that probably required some level of inspection. It may slow down deliveries this year as they try to fix what they have going through the processes right now before they get into the fleet and don't need to do the extra inspection later on. So it probably puts some of Boeing's deliveries at risk this year. We'll
wait to hear what they've got to say. And again the good news is I'm not gonna spend a lot of money bring everything in from out of the fleet.
But again the challenge here.
Is supplier you know, is supplier skill set, supplier stability.
Hey, George Barry Ridholts. So you're you're touching on exactly where he wanted to go. Which is is this just a freakish one off or is there a larger problem with process? How does something like this happen? How is it not caught sooner? And what does it mean for all the rest of the systems we don't know anything about.
Yeah, well, look I think there's a I think the good news is on aircraft builds there it's very robust and so there is some tolerance.
For everything not being perfect.
You clearly want to be it perfect right so that you can minimize any risks as you build an airframe. But I think Barry, we've gotten way past the one off. There's been so many problems coming out of the supplier base see Spirit, where I think you have to concern
yourself now with process, right. I think Boeing really needs to get in there and figure out why Spirit can't get the you know, these really critical manufacturing processes standardized and stabilize, so they're coming through the factory correct the first time.
Is this specific to the seven thirty seven or might this be a broader problem that affects everything that comes out with a Boeing logo on it.
So the seven thirty seven and the rear pressure bulkhead would be built at Spirit, and no other Bowing airplane would have that rear pressure bulkhead done its Spirit. So I'm guessing this is going to be largely a seven thirty seven issue. I mean, maybe the seven sixty seven seven six seven runs through Spirit as well, but we haven't heard anything about it.
It's low volume two. I'm guessing it's going to be largely seven thirty seven issue right now.
Georgia, you also cover a Spirit aerosystem stock is down fifteen percent on the news today, it's off thirty four percent year to date. Most of us don't know anything about Spirit Aero Systems. Tell us who they are, what they do, and does this come as a surprise to you.
Yeah, So they make a lot of fuselage pieces for Boeing. They make I think it's something like about seventy percent of the seven thirty seven aircraft, so they're really integral to that airplane. Spirit was spun out of Boeing a bunch of decades ago. You know that it's a Wichita factory. I think that Boeing probably wanted to get outside of the main company so they could save a little bit
of money on labor. Again, it doesn't surprise me because we've seen other problems at Spirit recently in processes.
You know.
One of the things I think very telling about how important Spirit is to Boeing is i'd call Spirit somewhat challenge from a financial standpoint. They've recently received advances from Boeing, you know, to support some of their cash flow. We saw them go into the markets, but I think it was last year or early this year, actually early this year, and they raised some bonds at over nine percent, which I think is really difficult for a supplier to kind of support that kind of that kind of that kind
of debt costs. But then Boeing has put money into the supplier because they are so important to Boeing.
And I think part of.
This story is going to be I think the market's telling you they think Spirit's going to be responsible and ultimately have to pay for these repairs. Right Boeing would try to recoup it from them, but Spirit only has so much capability to pay for those, you know, for the cost of these problems, And so it's going to be interesting to watch Boeing as they work with Spirit to figure out a repayment plan in some of this stuff.
George just got about thirty seconds here, but Boeing seems to be beset with issues on the seven thirty seven, even though Paul trusted more than any other plane. Is the Airbus A three twenty just a better platform.
You know, I wouldn't call it a better platform, but I think the Airbus does have more stability in the builds of that They do more of it in the house, and that's going to lead to higher build rates for Airbus and better profitability.
So something that Boeing absolutely has this come out all right?
George, thanks so much for joining us.
As always, George Ferguson, He's the senior Aerospace, Defense and Airline analyst for Bloomberg Intelligence. And as it relates to Bowing, I'm going to go back to my personal opinion. They never should have up left Seattle. They are Seattle. Seattle is Boeing. One of the great drives in from an airport to a downtown is Seattle. You come down whatever that interstate is. It's a thirty minute ride roughly, and almost the entire ride on the left of the interstate is Boeing hangars.
Airfields, jets taking off. I mean, it's just the engineering gut of the company. So what do you do? You move to Chicago and now Washington, DC. This is Bloomberg.
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Jordan Lopez joins as he does this stuff for a living as.
A director and high yield portfolio manager at Payton and Regal. Jordan talked to us about the high yield market this year. How's it it been. It looks like it's outperforming, it looks like it's the place to be. It looks like they're not too worried about a recession.
Yeah.
I think that's been the story of the year. I think coming into the year, you know, the the base case expectation was for recession, and we're really seeing few signs of a recession, which which is really keeping default forecast low. So so if you look at you know, both macro data on the employment side or the growth side, they're both coming in much stronger than expected. And then when we look at earnings, you know, earnings have been
very resilient. So when you take a step back and look at the big picture, I think, you know, some of these Dractconian default expectations just aren't coming to fruition. Uh And and that's really what's what's driven at at least the the rallying spreads.
So that's exactly where I was going to go. You know, high yield look at look at a fund like HyG you're getting five point three percent investment grade corporate not getting a.
Whole lot less.
Why do I want to go out on the risk scale and embrace high yield over investment grade corporates.
Well, when you when you look at the broader market, the yields are closer to you know, mid to high eight percent, and so there is still a decent pickup. And like I said, if you're if your default expectations aren't much, you are still getting paid to go out.
When when we.
Look at the high yield market itself, you know, credit metrics are still very very strong. They are certainly coming off of what we're all time highs. But you know, when when you look at something like interest coverage ratio or or a company's ability to service their debt, it's
still very very well above historical averages. So even if we are to have some sort of recession, we think that that you know, most of the companies within the high yield space should be able to manage that, and therefore you are getting paid above something like investment grade.
What sectors do you like out there?
I've had a lot of experience in the highield space and the media, telecom space, and boy, the hyold market loves that those companies.
Where are you guys looking.
Well, are you still going?
I mean, hasn't high yield done so well that it's outrageously expensive at this point?
No?
You know, spreads are still slightly above historical averages, and and you know, back to the conversation about which sectors we like, media and cable will actually have some of the more problematic companies in the in the space right now. Surprisingly enough, what people don't really appreciate about the market is the energy companies have done exceptionally well. I know, they were kind of the black sheep of the market
back in twenty fifteen early twenty sixteen. But when we look at a lot of those companies now, a lot of them actually have investment grade credit metrics, and for many of them, we just think it's a matter of time before they get upgraded to investment grade. So although that space trade is tight relative to the market, we still think there are several opportunities there for further spread compression.
All right, So I'm looking here, so is it a sense of this high yield market is feeling pretty good about the economy that they're maybe just not pricing in that risk at this point, or do you really still have to be careful here.
I think where you have to be careful is the companies you choose. So certainly there is going to be some dispersion. There are going to be winners and losers. But if if you're able to do your your credit work, you know, you can still find plenty of opportunities out there where you get paid a healthy yield and you can sleep well at night owning a lot of these companies.
How about the in the in the media space, I'm gonna go back to my Baileywick here, having punched out a bunch.
Of these over the years, that's tough sector right now.
Advertising headwinds potentially here all the cord cutting issues, and there's a lot of cable debt out there, there's a lot of broadcasting debt out there.
What's your feeling on the broader media space.
Yeah, it's certainly been one of the most challenged spaces, and from a fundamental standpoint, you're you're absolutely right, uh, there there have been a lot of slowing of growth in some of the you know, uh, some of some of the cable operators. It is challenged, but you know, when when you look at valuations, a lot of that's already priced in that that's one area where you do see more distressed type of companies. And so from a fundamental standpoint, that's a tough story, but that is being
reflected in the overall spreads of the market. And again, you know, like anything else, there will be winners and losers coming out of that space, and there will be some opportunities there.
All right, Jordan, thanks so much.
Jordan Lopez a director and high yield portfolio manager for Paydon and Regal. I think it's interesting there that the highyield market doing really well in front of what everybody's been talking about for the last twelve months of recession.
Yeah, you could get about three hundred basis points, That's what Jowan was talking about. But you're you're looking at B grade companies. You're not even looking at double B. You're looking at So do you what.
Do you do with high yielded with your clients? Do you have anything in there? Not a whole lot?
You know, up until very recently, you weren't. First of all, go back a year and a half, the spread between investment grade and high yield was so tiny and the returns were so pitiful. You know, who cares about the difference between one and three quarters and two and a quarter percent if you have to go out on the curve. It's amazing how far everything has spread out. But keep in mind, if you want to want a safe investment, the ten year is well over four percent.
You could do okay without taking a lot of risk.
Yeah, I mean you can buy the twos and get five right.
They're the risk is whether or not we run into a rake cuts or a recession in the next year.
Yeah, but you're still getting five percent, so you don't have to do anything except for let them be.
Sure if you want to.
Yeah, I guess's and frankly, yep, twenties you get four and a half.
All right?
That was Jordan Lopez, director and High Yeld Portfolio Matter Paydon and Regal helping us out with the High Yield space.
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Matt Miller here in the studio with Paul Sweeney and Barry Ritholds, and we have a special guest. We were talking about Hannah Elliott earlier from Bloomberg Pursuits. We've got her on the cam from Los Angeles. Hannah, thanks so
much for joining us. I wanted to talk about the car that I was driving last week, which is I think widely controversial, and that's the BMW x M. It's supposedly it's a dedicated M car and they haven't done one of those since the M one, And this means basically their speed shop, you know, their skunk works unit is making this, and they're not gonna have a regular
kind of street version of it. But they detuned the four point four leader twin turbo V eight to be less powerful than it is in the X five M, and there's no air suspension and a lot of people think it's kind of ugly. And first I want to get your take on it. What do you think about this big behemoth of a hybrid.
Well, I have to say BMW is making us work really hard to really like them these days. And I don't really understand why. I do agree that they're styling choices, and the choices they're making with their engines and power plants right now are a little bit confusing and even puzzling. I have to say, my disclaimer is I haven't driven this vehicle, so I can't speak to that. But I have driven the IX, which is the electric version, which I thought was very capable but unfortunately didn't look great.
It sounds like you felt a little bit the same way about this one, Matt.
Yeah, this so this is we're looking at pictures of it now. For those of you only listening, you go to YouTube dot com. You can stream us live by searching for Bloomberg Radio there. I mean, I personally like it because it's so big and aggressive, but I think, first of all, it's way overpriced one hundred and sixty seven thousand dollars for a car that doesn't even get
the sunroof option. I could understand if they're saying, like, because it's a track car, you know, we want the stiffness and the low low weight of just the flat roof. But why then D two the V eight and there's no air ride suspension, so It's not like a luxury suv for you know, the well heeled. It's not like a Kardashian mobile. So I just don't really get what they're doing with it. And Barry, I love I'm a huge fan of the brand, and I know you are too.
Yeah, I'm gonna I'm gonna give this car a sort of backhanded compliment. This is the least ugly new BMW in a couple of years, maybe because the I don't know what the thing with those giant grills that are on the three and four series are just horrific, and some of the choices that have been made. I understand you want the electric vehicles to have a different look, and so they went for something that was a little less rounded, let's say, than some of their other stuff.
This isn't a terrible looking car. I don't have a problem with no air suspension. They're notoriously quirky. They break, and they're really expensive to repair.
One hundred and sixty seven grand.
That's a whole different question, Hannah can answer. What are they thinking? Who are they competing with with the exam.
You know what, This seems to me like a case of we're gonna price it. Again, we're gonna price it compared to the people that we think we're competing against, which is probably Portia and Mercedes. But the price is a bit aspirational, like BMW is hoping that the price means that they're competitive with those other vehicles, but I just don't think the product is. And when you can get a Cayenne for less than that, again, I think you're absolutely right. The price does seem wildly inappropriate.
Well, k I learn the GTS or the turbo. What are you getting from that?
You can get the Cayenne Turbo for less than one second? Oh really?
Yeah for sure?
And this goes up against the Cayenne Turbo Hybrid, and I think you're right, that's what they want.
But you can't beat that car tough.
Right, That's that's the thing. Just because you make your price the same as another company's product doesn't mean your product is comparable. It doesn't work like that. I don't think you know, certainly, consumers are not dumb, and they're going to pick up on that really quick.
I did drive the snot out of this thing, and it was super fun. I mean, it's a gigantic, obviously beast but it's got this active electronic anti roll bar in it that holds it flat and neutral even when you rip it around corners at speeds that.
Are super legal.
But I feel like I could get a lot more car from the same manufacturer for so much less. I'd much prefer the X five if you need the suv. If you don't need something like that, I much prefer the two series. Hannah, what do you think about BMW in terms of their you know, competitiveness and in other segments.
Well, obviously they're competitive in in the X five and the two series, and of course you know their sedans and they have been. I think where it gets confusing is when BMW is doing the hybrid things, the electric things, and they're also, let's not forget doing hydrogen. It's just a little muddled to me, and I think their messaging is muddled and they haven't really figured out what it means for a BMW to be running a hybrid or
an electric power plant, whereas other company. And he's just seen miles ahead in that regard, Hannah.
I know you just spent the past week at Monterey. What'd you see there? And oh my, did it reach your expectations? That this is simply the best auto show in the world anywhere, anytime.
Yes, yes, it's a little bit mind blowing. We saw more than twenty new car debuts. This is obviously the new auto show. If you want to see new cars, you go there. I'll tell you what really interested me, which was this three hundred thousand dollars Ford Mustang GTD. Ford's Jim Farley has made no bones about the fact that he's going right after Porsche with this Mustang. It's a street legal Mustang based on the car that they're
going to run in Lamon next year. And Jim Farley told me straight up, Hey, I've been a fan of Porsche for fifty years. I've been watching what they did with their racing programs, their GT three cars, their GT two cars, and we want to do that with Mustang. There's no reason why we can't. So I'm very interested that particular car three for.
Uh, I mean, they price themselves higher than any Porsche competition.
You could get two, almost get two of the MX's for that much.
Money, Yeah, you could. I mean here's the thing. I think if the race car version of that car wins next year at Lemon, all will be forgiven, including the the rear transactal on the production car and the front engine and the pricing. Honestly, I think it all goes away if they win next year, so we'll see.
What else did you see that caught your eye?
Okay, there's this, I'm sure you read about it, the thirty million dollar Rolls Royce droptail. This is part of their Coach Built series, which basically means consumers can design a car from the ground up. They're making four of them. They don't want to say who's buying it, but you have to imagine this is an international family, longtime collectors. Rolls Royce says, it's not about just who can come to us with a blank checkbook. It's not just about
people who own twenty Rolls Royces. It's actually a mix of things, and it's people who are engaged with the brand. But this thirty million dollar droptail, it's a roadster. Actually was was pretty striking.
It looks hot.
I mean I saw it on your either your on your Twitter feed or your Instagram feed. One of the other things that I saw on your social media is the new Lamborghini or.
I guess it's a prototype electric.
So hot.
Yeah, that looks great.
I'm excited about that me too.
It's all electric, and I have to say there there was some grumbling among of course the Lamborghini periods that what is happening? We swore we'd never do this, et cetera, et cetera, et cetera. But that car looks amazing.
Uh.
That's a Mitcha Boker creation. Mitya is the head designer of Lamborghini. He actually was formerly at Portia. He's actually German, but he's making some great Italian cars. This is his latest concept. I think it looks fabulous and they kind of have to make it right.
Yeah, they have to go electric at some point. And of course Lamborghini's in the Porsche stable. They're all folks, few orud East.
But yeah, yeah, I can't wait to see that Elliott.
Business. We're talking cars with a couple of car geeks.
What could go wrong here in the Bloomberg Interactive Broker studio. Concourse, the elegance, I've been there many many times, very very cool on the Monterey Peninsula.
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Bloomberg Business App.
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A bit of an m and a trade here in the I guess the restaurant business, the fast food restaurant, the sandwich business. Rowar Capital is in a deal to buy a subway for more than nine billion dollars. Row Our Capital, as private equity firm, owns brands including Arby's, Duncan, Buffalo Wide, Wings.
And rival substore Jimmy Johns.
Let's break down this transaction get a sense of what's happening in the restaurant business. We check out with Mike Alen. He's a senior restaurant analyst for Bloomberg Intelligence. Hey, Mike, talk to us about row Our Capital.
And this deal for subway. What's What's what's going on here?
Yeah, Rourck has.
A long history of activity in the restaurant space. They currently own a ton of brands, you know, a lot of a lot of great brands that you mentioned. They've been very active in.
The space over the last decade or so.
Uh, and and this is you know, another interesting addition to their portfolio, you know, to their to your point, they own Arby's and Jimmy John's. That's through their Inspire Brands group. And so you know, they've had a lot of experience turnaround brands, turning around brands. They've had a lot of experience running sandwich shops, and so they see
some value here. They pay thirteen times ebitdah, which is kind of high considering some of the problems that they have, but you know, clearly with the scale that they have, you know, there is definitely some potential in this brand.
So, Mike, this is Barry Riddholts. Subway has thirty thirty seven thousand stores across one hundred countries. What is it that Rourke Capital is looking for? Is it the footprint, is it the real estate or is it just Hey, this is a lot of potential that's been underperforming.
I think it's the latter, right. This is a franchise brand that you know, spits off a lot of cash flow, right, and so that's very attractive to somebody like Rourke. You can you can lever it up and you know, really juice to returns on something like this. You know, this is a chain where average unit volumes have really lagged over the last you know, five, six, seven years, and average unit volumes are less than a half a million dollars. You know, that's less than half of what Jersey Mikes
is doing. They're at about one point one million. So there's definitely some room for growth. And you know, I think that the chain has been moving in the right direction. You know, adding slicers is going to improve you know, what they've done recently has improved the quality of the of the meat. They spent a lot of money on advertising with like very high profile celebrities. They've made some menu changes, and they're closing a lot of stores, right
and so when you close your underperforming stores. You know, they've closed six thousand stores I think since twenty fifteen or twenty sixteen. Even they're still closing it. I think six hundred stores or so. We're closing twenty twenty two. So when you start pairing the underperforming stores, the returns on investment cash on cash returns start looking a lot
better for franchise ease. And then franchisees are from outside the system, you know, might kind of look back into Subway again, Right, So I think they're all pushing the right buttons. But you can't turn around an aircraft carrier on a dime, right, It's going to take some time.
So let's address that. Because Josie Mike's feels younger, newer, fresher. They haven't been around quite as long Subway. This is a storied brand that's been around, you know, more than half a century, and it feels like it's kind of gotten tired and stodgy. How can you inject new life into a company like this when you know there's a lot of history to overcome.
Yeah, I think you know, quality is usually a great starting point for a good turnaround, and like you know, to my point earlier, like spending money on slicers is a good start, but you know, maybe there's some other things that they need to do. Maybe it's upgrades on the quality of the meat. Maybe it's a grades on the quality of the bread and things of that nature.
But you know, you know, to your point, you have to get people in the door, right, Like Jersey Mikes is bringing twice as many customers, maybe more into their stores, and so by proxy, the food is going to be fresher, right, inventory is not going to sit there in the deli case, So you know, it's gonna definitely take some take some time. But you know, listen, they have this massive footprint. They have a ton of scale, right, so they can source
product more cheaply than anybody. They are in a lot of locations that Jersey Mikes isn't, So there's the risk of Jersey Mike's continuing to move down the street from them and kind of maybe take some of their market share if they don't act aggressively enough, you know. So you know, it's going to be interesting to watch. But we're Capital and Inspire brands. I don't know if they're
going to fold this into Inspire brands. Both have a tremendous track record of turning around restaurants and running great restaurants and restaurant brands. So it's going to be interesting to watch.
Hey, Mike, you covered the entire restaurant space. Where where's the consumer spending money these days?
What do you see?
What are the trends out there and who's doing a good job in the restaurant space.
Yeah, I thinks it's slowing a little bit.
You know.
I was talking to a client essay, which was kind
of on the opposite side of the spectrum. What had surprised me on the downside, and that's fine dining, and I've heard, you know, some some issues with some of the high end retailers, and it looks like that's kind of spilling over into restaurants, which is interesting and kind of surprising, right because we've had this K shaped recovery where people that on the higher end of the income scale were able to work from home and during the pandemic and saved a lot of money because they weren't
going on vacations and going out to restaurants, have all this disposable income and continue to spend, whereas the low income consumer and middle income consumer were more we're tightening their belts a little bit.
You know, who's doing well.
There's a couple of chains though, that continue to do well, you know, McDonald's, even in a slowing in A McDonald's in a slowing environment for restaurants tends to have a pretty good advantage, you know, like Subway, they have a ton of scale and they can offer price points that competitors just can't match, and so their sales trends continue to be very strong, but we've seen a slow down
in the second quarter. A few chains saw some some slowdowns versus twenty nineteen Starbucks, Chipotle, A bunch of names that we cover started to slow a bit. But in general, those those fast casual, those quick service type names and fast casual type names are probably better positioned than the full service chains that we cover. Some casual diners companies like Cheesecake Factory and Brinker.
And of course my favorite, as you well know, is Cracker Barrel Stock said a fifty two week low today off thirteen percent. The country Boy breakfast to die for. Just loosen the belt, sit right down, Boom you hit it. Mike Klin, senior restaurant analysts for Bloomberg Intelligence, joining us. I know what I'm talking about when it comes to restaurants. Mike Kaylin is the experts. We appreciate that S and P. Five hundred and off a half of one percent.
I will keep that in mind.
Barry Reholds, thanks for stopping by giving us some of your time on Thursday.
Thanks for listening to the Bloomberg Markets podcasts. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three.
And I'm fall Sweeney. I'm on Twitter at pt Sweeney.
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