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The stock story of the day is in vidiot. Always highly anticipated. They reported numbers inline, guidance in line. But it wasn't a beat and raised Like a lot of investors had become accustomed to a lot of fuzziness in the numbers and the estimates out there, whether to include China revenue, not to include China revenue. Who are you given the US government it's fifteen percent cut. I think the numbers are kind of squishy out there, at least in the near turn. It's a CFA term squishy. Cu
John Sabani. It's his job to kind of make sense of it. He's a senior analyst covering semiconductors for Bloomberg Intelligence. He's based out there in San Francisco. Cu John, love to get your informed opinion about what you saw from the good folks at in video last night.
Yeah, like you said, it was once again a solid sprinted guide. It checked all the fundamental key boxes, but as has been the case with this name, you know, the expectations always run higher, and maybe not all the numbers were able to clear that high hurdle of expectations. Specifically the data center compute numbers in two Q. You would have liked to see that come in a little bit high. But there was still a lot of strong
positive underlyings. One, the networking was a significant bead, which shows the strength and the attachment that they're getting from their networking switches and chips in the Blackwell ramp.
Second, like you mentioned, the.
Three Q consensus had China included, and they still beat their three Q guide without China. If you add in the China guide of two to five billion, they would have handsomely beaten the three Q numbers. So that noisy sort of consensus shadowed the goodness is coming out of the guide of Nvidia.
All right, So what's the company telling us now about China? Guess quite frankly, I just I'm reading the press. I don't know whether they're going to be able to sell stuff in the China or when, or whether they're going to have to give a fifteen percent cut to the US government.
How's that going to play out?
Yeah, so China still remains, you know, after learning sort of that overhang in terms of uncertainty. The company did guide to a two to five billion revenues from the age twenty in China next quarter, which is positive.
That means they feel confident that they'll.
At least be able to ship some and get some of the revenues back. But yes, you know, the spark here for the China story will not appear until we have a clarity, and we believe until they have a blackwell version of a China chip, which they get approval from the government, that will end really open up a massive amount of revenues coming from China. And there's a lot of hurdle's unit to clear. Right, there's the government,
which has nothing to do with in media. The US China relationship needs to get sorted out because now even China can put in a roadblock from Nvidia selling or allowing their companies in China from buying in media chip.
So there is work to be done.
As you mentioned, the fifteen percent cut is not ironed out in terms of laws. There is We've heard new stories about potential lawsuits.
So those two.
Government and geopolitical angle needs to be cleared before we can start seeing billions of dollars of data center China revenue coming.
In Ku John, we're what's the competitive landscape here for these chip companies VISA, v in Nvidia and just kind of positioning for AI.
I assume in Vidia's position A. Who's kind of B and C.
Yeah, So you know this space is divided into two categories. One is the merchant GPUs, which is what in Vdia sells and dominates that landscape, this sort of second competitor there, or the B is AMD, which is a very far distant. You know, Nvidia today has about over ninety percent in terms of revenue share and the remaining is going to a very small to AMD.
But there's another piece, which is.
We call what we call A six, which is what these big hyperscalers and cloud providers like Amazon and Google designed their own chips. So that's sort of the other competitive landscape where there's a risk of the A six taking sort of share away from merchant GPUs even though they don't compete directly for the same socket, they could take away the wallet share.
And so does that mean companies like Nvidia have to pour money into R and D for that next chip to stay on front, because I know in your business technology changes quickly.
Yeah, definitely.
I mean, look, and Media has been even before the AI event happened, and Media has been the biggest R and D spender. They have continued and this is what really got them to the stage of being ahead of everyone else, and they have to continue spending out spending everyone else to sort of keep that lead. Their roadmap for the next two and a half years does suggest that they should be able to keep this lead handsomely, and for that it will definitely require high R and D spending.
So this name to me who I'm used to stocks trading in, you know, much lower multiples in my world, But this seems like a stock that can actually earn its way, and we have seen it earn its way into its multiple.
I mean, you can make an argument this is not an expensive.
Stock, You're right.
I mean, if you look at from a historical perspective, it's actually the multiple is much more lower than what we have seen in media trade in the past two years. So given that fact, and also when we look at the relative comparison when you think about a company growing at fifty percent and making revenue in the hundreds of billions, that isn't unprecedented, especially growing with gross margins of seventy
mits or low seventy percent. I mean, you're talking about a financial profile for software company, not a seving net company. So definitely, when you take into those two things into account, it does seem that it might not be really highly valuable.
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Dollar General the stocks pretty much, they reported numbers, lifted their guidance. Stock's flat today, but boy, it's a forty seven percent year to date, so the street definitely likes what's going on at DG. Let's talk to an expert on this, Jen bartashes. She covers all the retail stuff for Bloomberg Intelligence. Jen, what'd you take away from Dollar General's results?
Yeah, Hi, Paul, you know, overall, the results were pretty encouraging, and you know, we're looking at the consumer who is willing to spend selectively, and the value proposition for people who are in the discount space is really resonating. And so the tactics that the companies put in place to really improve store operations and things like that seem to be gaining traction and drawing more people into the.
Stores, drawing more people into the stores, and drawing people from different income strata as well. More higher income customers are coming in. So that being the case, GEN does it need to broaden its selection of products available to customers.
Well, I don't know that they need to broaden the selection, but they need to be thoughtful about the selection that's in the stores. I mean, these are small boxes, so you have very limited space, and in order to retain those higher income consumers from middle income, high income that are coming into Dollar General, part of it is going to be making sure that there are things that are
fresh and interesting but still at very good value. And I think one of the interesting points is that Dollar General has been able to maintain a selection of things at one dollar price point, and when you think about it, their biggest rival in the Dollars Tree, the dollar space. Dollar Tree move to one twenty five as their baseline price, So there's definitely some opportunity there to appeal to that value seeker and give them something to be excited about.
So if I look on the back of or on a tag for most of those items, I'm going to see made in China or something like that. How are they dealing with tariffs? How much are they passing on to consumers versus maybe taking in their margin.
I think one of the advantages Dollar General has is that they have a lot less exposure to imports than most other retailers in the discount space, and that's really because over eighty percent of their sales are consumables, which is more food and household items, and the discretionary parts, which would be the decorations, the apparel. That sort of stuff is a much smaller part of their business, so they're able to mitigate some of the costs they are.
They did talk about passing through prices when absolutely necessary, but I think that's part of the solution for Dollar General is that that product mix is playing in their favor right now.
Right so they're like a smaller scale Walmart in many respects, rather than a smaller scale five below for instance. So given all of that, Jen, you had mentioned Dollar Tree being one of the biggest competitors to Dollar General. That company reports September third. How much can we take away from Dollar General and apply it to Dollar Tree.
Well, I think Dollar Tree is in a bit of a unique position because they've shed off the Family Dollar operations, which means that they can really now focus on getting Dollar Tree to function at the best that it possibly can. I think that you have customers who are going into Dollar Tree. They have a multi price point program that they've been rolling out that's been doing pretty well. That
should help support some of the top line growth. It's really going to be a question about margin for Dollar Tree and how much tariffs are impacting them already, although from what we've seen from other retailers, that impact may still be delayed into further in the second half of this year, just because they already had things in inventory that they're currently selling.
So, Jen, in any town, USA, do these four dollars stores, Dollar Tree, Dollar Rama all that did? They are they all in the same town together? Is it more regionally carved out?
Well, Dollar General by far has the greatest penetration into what you would call rural America and so you find them in very small communities sometimes is one of the key retailers in very small towns. When you look at like Family Dollar, it tends to skew a little bit more urban. There is some there is some rural presence, but not nearly as much. And they're in the process of closing a lot of stores for the other dollar, you know, the other dollar in low price you know,
providers like A five below. They're still in the growth stage, so they don't have nearly a number of stores. You know. You have to remember Dollar General has over twenty thousand store locations just the United States, so it is pervasive through a lot of smaller communities.
That's amazing. I didn't know that.
That is pretty remarkable. Now now that Dollar Tree is shedding Family Dollar, what kind of opportunities does that provide for Dollar General.
Well, it certainly gives an opportunity to look, especially where stores are closing, in terms of gaining market share, but it's also about re asserting value position and you know, capturing customers that have been dissatisfied or who may be
looking for another alternative. We also saw Party City close, you know, last year and into the beginning of this year, and so you know there are there are strategic opportunities where they can go after you know, some of those types of occasions that historically people might not have gone to Dollar General for.
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One of the ones I always like is Dick's Sporting Goods.
Give a sense of how the sporting goods business is doing, and they reported some number stock trading off a little bit.
Here.
Lindsay Dutch joins US Consumer Hardlines senior analyst from Bloomberg Intelligence. Lindsay, talk to us about dick Sporting Goods. What did they report most recently.
Hi, Paul, thanks for having me. Yes, Dick's Sporting Goods had another strong quarter five percent same story growth. That's an acceleration sequentially and year over year. You know they're seeing strength across apparel, footwear, team sports, and golf. So a strong quarter, but the stock is trading off, and I think a lot of that is sort of a conservative outlook for the second half, you know, with some uncertainty and a lot of investors are still worried about
the incorporation of Footlocker. With that deal to close in September, talk.
Just about the foot Locker deal, what's the upside there?
Yeah, So the Footlocker deal is a little bit different for DIS in terms of, you know, it leans a little bit more towards lifestyle rather than sport. It is it is a big acquisition, you're talking about adding about eight billion dollars in revenue. It also Footlocker skews to a lower income consumer and they have mall based stores, so it's a little bit of a different animal for DIS.
You know, Dix has proven their own turnaround over the past couple of years and they really have strong demand with their assortment, but they're going to have to show that they can do that again with Footlocker.
Is there is there a carefully articulated strategy about integrating Footlocker into Dix or I know they said that they're going to run as separate business unit. So I'm wondering, what's the point of buying footlocker then.
So you're right correct, they're going to keep the footlocker banners, They're going to keep the stores there. As a customer, you might not even know that Dix has made this purchase. I think the big thing for Dix is expanding, you know, their customer reach and therefore the longer term opportunity for the company as a whole. So, like I said, you know, Dicks already caters to more of a sports type focused customer,
you know, a higher income consumer. A foot locker is bringing a whole nother consumer set to two Dicks, and they're going to really try to lean into their expertise on assortment, bring newness to footwear, bring a little bit more apparel into those foot locker stores, and they're going to try to gain market share, you know, with this broader reach.
Lindsay, what are the the the.
The Dicks of the world, the footlockers, the lord.
What are they saying about tariffs and how much they're going to take in the margin, how much they're going to pass a on the consumers. What's the because I think a lot of sneakers come from China.
Yes, So Diggs noted that they have seen you know, some price increases they sound more sporadic in nature. That's relatively consistent with the other you know, coverge in my retail universe. You know, we're seeing very few retailers you to take every single item up by a certain amount.
So the price increases are coming in more selectively. They're most easily passed through to the consumer when it's a new product, you know, something that people are willing to pay up for anyway, so you know they have seen, you know, new things coming from saying Nike for example, you may be able to get that customer to just take on that price increase in terms of margin. When I think about Dix, you know they're still expecting expansion both on the growth basis and on an operating basis
this year. You know, they are trying to manage costs as well, but this company is also investing. They're opening new stores, and so that that is adding you know, additional cost pressure, not just on on.
The product side.
So Lindia, I got to ask you about that, spy as well.
The stock is down more than six percent in early trading, even though the second quarter did beat analyssessments and the company ended fourteen straight quarters of quarterly sales declines. What has investors disappointed?
I think the real worry bead for Best Buy is demand for second half. So even this year, you know, just for the first eight months of the year has been a little bit of.
A wild ride for Best Buy.
You know, we came into the year with positive demand momentum, things were looking good, you know, then we got tariff announcements, we had to roll back guidance. You know, there was a lot more uncertainty, and now we're flipping back with these results to more on the positive side. So I think there's concern entering the second half of the year about you know, where demand is going to shake out. We did see strength, you know, in gaming, particularly with
the Nintendo switch to for the second quarter. We're seeing momentum continue in computing and phones for the third quarter. All of that is positive, but home theater and appliances have sort of remained weak for Best Buy, and at home theater entertainment category, that's a really big one.
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We want to go back to company news and how the NASAC is the lone index there that is really moving higher right now. A lot of it can be due to earnings from companies like Snowflake, like CrowdStrike, not necessarily do in video, which is lower. So let's bring in Mandeep seeing Bloomberg Intelligence senior tech industry analysts, and Mandep, I want to start on I wanted to start on CrowdStrike because I know what they do, but I'm going to go to Snowflake, which is up about eighteen and
a half percent trading right now. It's another one of these enterprise software companies that there are so many of. So let's talk first about what Snowflake said that got investors so excited and how tied the AI story it is.
Yeah, I mean, Snowflake is another one of those database analytics companies that got beaten up because everyone thought lms will take share from them. And there's been a pretty wide spectrum when you look at the valuations for database and analytics companies. On the one hand, you've got a palenteer that's trading at almost one hundred times sales, not earning sales. And on the other hand, you've got you know, players like Snowflake that are at a much more reasonable valuation.
Mango dB, I mean, the stock is up almost fifty percent since they reported earning three days back. So to answer your question, what they said was they are now participating in this AI agent deployment. Basically, all these enterprises who are renting the GPU capacities, who are trying to build a product on chat GPT, they're actually deploying that in production. Now that AI agent, customer service agent, or that search chat pot is getting deployed with enterprise data.
And that is what I think is helping someone like Snowflake, which caters to enterprises. But everyone thought they would be disintermediated with the chat GPT solving all the problems. So that's not the case. That's why Mango dB did well, That's why Snowflake did well. Not every company is going to participate like that, but clearly these companies have, and that's why you're seeing their stock getting bid up.
So these I guess, I know, I guess they're classified as infrastructure software.
Yeah, databases yeah, and their databases yeah.
And so databases you're going they're going to have value in an AI world, right. I would just think it's the raw material of data for this launch language model.
You go back in the last thirty years, database is one of the stickiest business. Like think of Oracle database. Nobody was able to get rid of their Oracle database databases. Look, I mean, and that's why databases are like so hard to displace. Once your data is in a like particular products, database I cuturally migrated. I mean, there's no way out. Technology will come, they will be AI. What do you
train AI on? It's your data, right, So your custom data is still in that product, and that's why mainframes are still around. So from that standpoint, I think database when you look at their gross retention, their net retention, their metrics are always better than application software. You can replace your application software with a chat GPT product that can automate the whole thing.
I see.
But that's where the stickiness comes from. And you know, the pendulum keeps swinging. I mean, the market was very bearish on these companies for a while, but now they're realizing, oh guess what they will participate in this AI deployment, and I think Snowflake is definitely one open.
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