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Through President Trump has now opened the door to Nvidia selling some of its high end chips to China.
Yeah, I'm not sure. I kind of can't follow the policies. Some days the door's open, some days it's closed.
Yeah, and it could always move in the other that's the other risk.
Right.
Let's bring in Bloomberg Tech co host Caroline Hide to tell us a little bit more so on b Tech. I'm sure you're going to be talking all about this, but Caroline, what does it mean that Nvidia can now sell these h two hundred chips to China? Because that is not the most advanced chips.
Is it.
It's not.
It's based on Grace Hopper architecture, which isn't the Blackwell that we're currently in. It isn't the Vera Rubin that we're looking towards. It's the pre V's iterations. It is ten x superior to the ah twenties that remember cast Your Mind Back had also been deemed okay to ship from the United States to China if a fifteen percent cut was given to the US government, but that was never signed into law. They were never able to execute
on that. And most importantly, China doesn't want them. And I think this is the key the financial times of reporting that basically already China's looking at putting curves licenses, basically limiting the ability for certain companies to access the H two hundreds even if Invidia is allowed to ship them. And I think this is what everyone's got to currently digest.
I'm hearing time and time again from some of the most powerful people in the technology space that we are underestimating how sophisticated China is at using the Invidia chips, the small amount they already have and some of those homegrown ones.
Typically, how has this trade policy negotiated? Who typically says US tech company, you can sell this into China or to other markets, or you can't. Is because it just seems like it's now the whim of the present in his ex account or truth social account setting trade policies at how's it typically done well?
Isn't it interesting that just last week Jensen Wang was meeting with a president, but was meeting with some of the leaders over in Congress. Most crucially, he was with the Senate Banking Committee, because it's the Banking Committee oddly that tends to be in charge of export restrictions, and
so it was that group of leaders. But many are frustrated, and I was just at the Reagan Defense Forum National Defense Forum this weekend, and there is handwringing going on from Congress that they're being cut out of a lot of these discussions. Really they should have ownership of to how much trade should be allowed, But at the moment these are coming through executive orders. And we know that the President likes to cut a deal and Vidia, Jensen Wang likes to cut a deal. They have a very
personal relationship. And most broadly, in Vidia and Jensen want access to China. They think there's something like a fifty billion dollar total addressable market they're being forced to have to put down. At the moment, he's has zero percent revenue coming from that country. But you've got this tussel at the top of the China Hawks, who were worried from anal security perspective, if you allow technology to go from the US into China.
But on the flip side.
In Jenson Wrong would say, they're just going to build it themselves, and we're forcing them to speed up that by limiting my technology. Let our stack own that of China's big large language model development.
So you had mentioned that China didn't want to buy the H twenty chips. Does China want to buy the H two hundred chips?
I think if you asked, what the reporting shows is that if you turn to an Ali.
Barbar or a Tensen or a by Do, they are.
Limited by the amount of GPUs they have access to. So I think more is more from their perspective. And yes, the H two hundreds build on the H twenties, but longer term, the government wants to focus on domestic supply here. That's why you're seeing camera con do so well, while you're seeing Huawei do well, while you're hearing Bido wants
to spin off its chip manufacturer. While we just had that superb entrance to the market just of the Moore's technology company that has shot up more than four hundred percent, they do want to make it homegrown.
Great store on a Bloomberg terurnal.
Today, Apple shares have sorted thirty five percent since the end of the gym as the market scrutiny of AI development spending has made the company's lack of an AI strategy a strength.
So do nothing and benefit.
I don't know, but I mean Apple.
We always say about Apple they don't have to be first, and tim that they are not first, but when they do come into the market, they do it really well. It's a thought out approach and that people, you know, the Apple bullsmen saying, don't worry, don't worry, don't worry.
They're going to be fine.
There's two billion Apple devices out there, they'll be fine.
I don't know.
Yeah, And meanwhile, goodbye to the guy who is in charge of AI policy over at Apple. Because of that botched Apple intelligence roll up, people have been frustrated that Apple seems to be a slow player to adoption, but longer term, most in the generative AI space thinking that we are going to be using this from a consumer perspective, from our edge devices. Therefore, computer is going to change
in the way in which you know it. Your models are going to change in the way in which you know it, and eventually we will be doing running our Chatchpt or our Gemini or whatever model you like on your device. Eventually that means you'll need an Android or an Apple or maybe some future AI device that hasn't yet been created and is probably being developed in the
minds of the great leaders right now. But we'll have to see how Apple continues to basically do the benefit of not having got a load of debt and not having spent an awful lot of money on the buildout, because at the moment the come I think investors are just still grappling with the sheer scale of capital expenditure that's going into this and wondering whether there's going to be a real upside. Can Apple get the upside without making the infrastructure investment.
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Our next guest one of the most highly respected media analysts on Wall Street for a long time, and I think the value that I really find from her res or it's consistently over the years, is she's not afraid to be out of consensus here. And I think she's got a again, a non consensus call here that even if you don't agree with it, it makes you think. And
that's the value of a good animals. Laura Martin joins his senior analysts that need them company, Laura, as it relates to Netflix, do you think they should even pursue this deal here?
Yeah, So we published a note this morning say no that the big cultural Warner Brothers would create cultural problems at Netflix. Netflix has about fourteen thousand employees and Warner Brothers is about thirty five thousand, some of which they wouldn't be buying, but it would be about twice as many employees from let's call it the old world, the fifty year old studio who really is averse to make taking risks and they really do things the old fashioned
way and siloed, competitive, internally fighting culture. And that isn't Netflix. Netflix is sort of single purpose disruptor. Everybody on the same page, move fast and break things, iterate if you get it wrong. And I just feel like the culture that Warner Brothers is an anchor would be an anchor to Netflix and a time when jenerative AI technology risks
are collapsing timeframes into weeks with the changes. So we think the next disruption created by jeneritive AI requires really fast reaction times, which Netflix has the fastest in media, and it would really slow their reaction times if they suddenly brought on twice as many employees that were stuck in the fifty year old business model of the Hollywood studio.
And you quantified the drag that this would have on Netflix, what does that look like?
So?
I mean, I think what we're saying is that the eighty three billion dollar purchase price that they would pay to buy Warner Brothers would add another that cash would be at risk of not returning its capital because would bring all these cultural problems and envelop the entire consolidated four hundred billion dollar entity.
Lars, So, as it related to jen ai, is that a friend or a foe to Hollywood, to the media companies?
Yeah? So to date, Paul, what isn't different about jen ai is it's being used as tools by humans, in which case it's not different than the web. It's not different than our smartphones our you know, our Apple phones are you know, flashlights and communication devices and map they replace Thomas Guides, so their utility.
So so far.
Jenai technology has been a tool or a utility for human beings. I think the vision of Sam Altman at open Ai, Elon Musk, Mark Zuckerberg over at Meta is to have and certainly of course of Navidia is to have to achieve what's called superintelligence, where machines trained machines, and case it replaces people at some level. It does better, thinking, faster, it's less emotional. So if that comes true and they're saying that's ten years out, that's superintelligence, it would actually
replace humans. But in near term it's just like the other three technological disruptions you and I've seen where it makes our life better. It's a tool for humans to do faster, better, safer work.
So, Laura, you make the case that Netflix doesn't need to buy Warner Brothers Discovery. It would be adding an anchor and it would drag it down because it's this disruptor. What about paramount skuidance? Doesn't that argument also apply or does it not?
It does, But the distinction I would make is Netflix is large enough to go it alone, and with generative AI collapsing timeframes, their culture is really well suited to the technological you know, the future of the next five years. Peace Guy is subscale. It probably can't survive without bulking up, and it doesn't really have time to build in a generative world because it's just too small and change is happening too fast, so it needs to bulk up and
buy in something. We think they could get it closed in six months because we think the senior Ellison is good friends with Donald Trump and he would have it sale through regulatory so it would happen faster, there'd be less uncertainty, and it would allow peace Guy to survive. So I think they have to take the technological risk because they must have scale.
Or they're going to die.
So they might die because I'm right about the culture problem and the anchor problem, but they're going to die if they don't buy something anyway, so it gives them a better chance to survive. I think to buy Warner.
And Laurie you follow on Netflix, since it's inception here. This is a company and a management team and a board that's been pretty adamant.
They don't they'd rather build from within than buy.
What do you think is changed here, because this is a huge turnaround for this company strategic wise.
Yeah, Paul, you know, we really wanted to write a note that says dogma is bad. I mean, they said they'd never do advertising. They do advertising. They said we'll never do live sports, and now they've broadcast NFL games
on Christmas Day. And then they said, well, we don't like the Hollywood, we don't like the theatrical window, and we don't want to release any films in the theatrical window unless talent like directors force us because they want Academy Award consideration, which is a turn which is a requirement. To get an Academy Award, you have to have been released in theaters. So that is really hurting them in this In this those words are really hurting them with
the talent community. So when they say we will never do something, please take that with a grain of salt because they often reverse themselves completely one hundred and eighty degrees, and it's really those words about the theatrical window are really hurting their hurting the feedback loops with talent like big talent like Jim Cameron and Scarce. Like all these people that really are big talent, they all want a
theatre window and Netflix. They're scared to death that if Netflix bought Warners, the theatrical window over five years would go to zero.
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All right, let's move on here and talk a little bit about Home Depot. Home Depot, of course did come out with earnings a while ago, but they are giving a bigger long term outlook here for its business. It's an investor day kind of outlook. And for that we have Matthew Griffin, He's a Bloomberg Stocks reporter, to just talk us through some of the issues at Home Depot's face. Because at the last earning support, Home Depot made clear that the expected rebound in demand that it was looking
for had not yet materialized. Is the tone changing here from Home Depot?
Well, Scarlett I would say the tone really hasn't changed in a meaningful way. Everyone's trying to make sense of the economic moment that we're in. I mean, you were just talking about economic data that we got this morning that had some puts and takes in it when you look at job openings versus layoffs, and I would say that, like pretty much any economically sensitive company right now, Home Depot is facing some puts in takes as well. So they gave an outlook for comparable sales next year. They
are preliminary views. They'll be flat to up two percent. That's lower than what Wall Street was looking for. But then they also gave this market recovery scenario where there's a bit more of a rebound in the US housing market, more demand for home improvement, and in that scenario, comparable sales would beat estimates at up four percent to five percent. You know, you zoom out and you've got a picture where mortgage rates have come down, but consumers are still
under pressure. Housing prices are still high, and so are rates you know historically, and so you've got the consumer trying to muddle through, companies trying to make sense of it, and investors trying to make sense of it. You've got the stock down a little bit pre market and now just about flat on.
The day, four hundred and seventy thousand employees at home Depot. That is amazing, But I don't think I could gave a job there because I really don't know a hammer from a screwdrive.
Okay, so back up a little bit, because Paul's goal is to become a greeter at Walmart down the road. Like, that's what he that's his dream job.
That's the final career.
Path, final destination.
So what are they saying about just the consumer behavior these days?
I mean, interest rates are still high.
Are people still working on their homes, you know, the professional.
Versus the private?
What's going on with their core customer?
Yes, So we can actually look back to a few weeks ago when they reported earnings and actually cut their profit outlook for this year. What we saw in was a continuation of trends at the company, which is you have flagging demand for some of the bigger ticket home remodels. Again, because there's pressure on consumers, people are not taking on big projects, projects that require financing. At the same time, they are shifting maybe into projects like gardening, smaller projects.
So it's not that people don't want to do anything. It's that people are maybe the doing the home remodeling equivalent of trading down here, which is a trend that we've seen in other corners of the economy. For example, Walmart's business holding up. You know, if you want that greater job, it might be open for you because consumers are trading down. That's good for Walmart's business, it's good for a segment of Home depots business, but not enough
to support the overall outlook so far. And if you look at these slides from their analyst today, they see pressures continuing, including high home prices, and that's weighing on consumers here.
Yeah, the affordability crisis strikes again. So, Matthew, I'm looking at Loads shares, which are of course a competitor to Home Depot down at the moment as Home Depot's basically unchanged. Do we presume that these same headwinds that are dogging Home Depot are the same that kind of our clouding the outlook for our LOWS or does Loads have a different approach?
Interestingly, you know, they both serve similar corners of the market home improvement. So far, it does seem like LOWS has fared a little bit better this year, at least with how investors have viewed the way they've been managing through their shares currently down about two percent on the year, compared to down ten percent for Home Depot. If you look at that reaction today, it's possible investors are thinking there could be some of the same headwinds in their future.
But again, it do us seem like they've gotten a little bit more of a pass so far.
I about tariffs here, What's what are the companies saying about tariffs and their ability to deal with them?
So so far, the companies in their commentary have really focused on the state of the consumer rather than directly talking or at least talking constantly about tariffs. I would say though, that Home Depot did call out high building material costs as a reason that consumers are deferring home improvement projects, So you know, you do think about tariffs on lumber things like that. That doesn't help that side of the equation.
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We want to talk about Campbell's. The company came out with its fiscal first quarter earnings. Both the top line and the bottom line beat analy assessments, but the direction of travel for revenue profit is still lower. Let's bring in Diana Rosera, pennacious Bloomberg Intelligence consumer staples analysts on the latest on Campbell's and of course the package foods industry overall. So Campbell's has two businesses, the snacks business
and the meals and beverages portfolio. How are the two businesses doing, Diana, Well, they are just.
Put some takes on both of them. You know, for meals and beverages, there's some headwinds on ready to serve soup, whereas broth and condensed soup, which is usually used in cooking, is improving. You know, you have V eight, which is not really it's a brand that is not really doing that well so.
Well to me. To me, that's like my healthy eating for the day. Drink a little one in the morning.
When you're on the plane, You'll get a VA and you're like, I'm.
Good, I'm good, I'm good. That's WoT. No need to go to the gym on exactly.
So, but it's still facing some headwinds for snacks. It's it's kind of I found out odd because there seems to be a bifurcation of the consumer trends here. You have salty snacks being you know, challenged by people trying to eat healthier, reducing their sodium, but then you have cookies outperforming. So I guess it's the salad with the fries.
All right, which I love.
By the way, Yes, yeah, absolutely.
Campbell Wills agreed to take a forty nine percent stake in Lot Regina. What is law Regina? What's Campbell's trying to do here?
Yeah, so that is the supplier for REOs, which they bought it a year or so ago, and that it makes it kind of like have a little bit more control on the supply side. There has been some headwinds on this brand because tomatoes are being exported or imported to the United States, so they have to face some tariffs. So you know, with this they're trying to not only offset tyres, but have a little bit more on the supply chain, have a little bit more control on that.
Here's my Rao story.
I mean it's for people to arn't in New York City. It's a very famous restaurant in New York. It's very difficult to get a table there, to get a reservation. On my thirty years of Wall Street, I've asked people to take me. Who I know go there to take me. I haven't gone once. Really, Yeah, I mean it is impossible. Like I never asked people to take me out on their great golf course. I just wait for the invite to come.
But for REOs, I've actively tried to get.
And haven't gotten. Anyone who has to invite into Rao's, let possibly know. You know, I did actually get to eat there. We ordered take out during the pandemic when they take out. Yeah, so that was my one time I got to.
Eat Rare very good.
But Diana, I want to ask you about, of course, the controversy that surrounded Campbell's. Just last month, there was an executive he was a vice president of the IT department who talked about how the company's products are being made for poor people and you know, had some disparaging remarks about some of the employees, the Indian employees. Is that something that's going to cast a pall over Campbell's I mean, do you see any long term effects from that?
Well, usually they did not address that during the call, but I think it's it might be a short term headwind if there's any boycott happening. I don't I'm not necessary I don't necessarily think that there's going to be one. It's just one executive, and the company went ahead and kind of tried to put on record that they're not necessarily agreeing with what he said. So it's you know it, I don't necessarily see that as a significant headwind for the company.
Package good companies, I kind of think of them kind of a GDP top line growth story at best. What's the twenty twenty six out lot for your companies? Are what are investors looking for?
So for twenty six, they're hoping that there's some light at the end of the tunnel in terms of volume growth. Again, it might be a second half of the year story because comps get a lot easier going forward, but you know, profitability seems to be a little bit more difficult because they have tariffs, they have to contend costs steal are
a little bit higher. Specific specifically on the employee side, and there's also marketing that they have to do because they want to spur growth, and pricing is not necessarily the you know, the only lever that they have.
To But you know, I think about Campbell's and other packaged foods companies and how much competition they must face from private label products. I go to the supermarket, I'm going to get the check and brought that's cheapest, and it's usually the ones sold by the supermarket and not Campbell's or anyone else's. So that's I mean. And for private label, you don't need to do any marketing exactly. So what is there how do they counter that? Well, more marketing.
They're trying to work with the with the retailers to position themselves in the best part of the shell to be able to move their product. Yeah, well, obviously retailers have to contend with increasing their private label penetration. At the same time have a good relationship with this national brand, so they're not necessarily want them to go against you know, this product. So they're trying to there's some negotiations happening and usually you know, when I speak to retailers, because
I do cover Canadian retailers. They mentioned that they try to expand their private label into white spaces not necessarily served by national brands, So you're while your minds might see some you know, condensed soup private label, it's not as as intricate or better quality than probably Campbell's.
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