Bloomberg Audio Studios, Podcasts, radio News.
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg
Terminal and the Bloomberg Business App. Angelo Zeno of CFRRA still bullish on Nvidia out of this afternoon's earnings results. He's looking ahead at the company's launch of its advanced black Wild chips thanks to the promise of greater market share. Angelo joins us now for more. Angelo, welcome back to the program. A question I think we've got to lead with is a question that you've been addressing in your
note as well. When will the data center CAPEX actually let up to see some selfness in the year ahead.
Yeah, I mean, I don't know if you start to see softness, but I think you definitely see some sharp acceleration in terms of the you know, the data center CAPEC spend. I mean we're looking at about you know, thirty five to forty percent growth here in calendar twenty twenty four from kind of you know, the big five spenders out there, and we know who they are in terms of the high paper scalers, the Big four plus Oracle,
the names we kind of look at. And then as you kind of go into calendar twenty five, initially we're kind of you know, pegging more of a deceleration towards about fifteen to twenty percent growth, still very good growth.
And then I think the question is all going to be, you know, what are we looking at as we kind of go into twenty six and twenty seven, right and you know, right now our placeholder is about five to ten percent CAPEX growth as we kind of look in some of those out years into twenty six and twenty seven. But that said, we do see potential upside to those expectations, more of a bias to the upside than the downside. But that's how we're looking at it. It's not necessarily
a let up in terms of CAPEC spend. It's more you know, sharp deceleration from likely unsustainable growth trends that we're seeing and you're seeing it right now and in Video's numbers, right, I mean, the last two quarters they saw their data center business grow north of four hundred percent.
That's clearly not not sustainable. We're looking at, you know, close to one hundred and forty percent growth here in the July quarter, and that will continue to decelerate also over the next couple of woks.
So we're talking about the size of the pie. The pie will continue to get bigger, just not the same rate. Can we talk about the slice of the pie? Is there any real upside to overall wallets share and is there a threat coming from anywhere? How big is that mot around this company?
Yeah, so, you know, I think that's an interesting question. So as far as the video is concerned, I think a lot of you know, people out there kind of look at the competitive pressures out there as far as GPUs are concerned. And you got the likes of you know, the A and Diesel Little World, which you know, we love what they're doing. We like the recent acquisition they
kind of made. They are kind of you know, definitely kind of you know, kind of filling up kind of what they need in terms of better compete with in Video on the GPU side of things in a in
a growing market. So you know, that's great from a competitive standpoint, But as you kind of look more broadly for in Video on kind of you know, the data center wallet share, as they kind of kind of roll out some of these new offerings with Blackwell, with a new kind of spectrum x Ethernet offering out there, this new kind of Blackwell offering is really intended to be more of kind of this platform offering rather than kind
of just a GPU offering. So what we mean by that is not only the GPU, but the CPU as well. We're going to be more arm based in nature. We think as you kind of see these next gen data centers really take off, and that's important because we haven't seen arm based CPUs out there find any success in the market. When you kind of just look at you know, Intel's recent guidance out there, they're clearly not seeing the
orders on their end. We think you're going to see something different over the next couple of orders from in Vidia specifically kind of as as they turn more into this platform based offering, and that will kind of give them a next kind of leg up in terms of their revenue potential. Here we think over the next twelve to eighteen.
Months, pairing the ideas that you just talked about, Hyperscaler is the bigger, biggest investors in Nvidia. How long until Nvidia is almost a competitor to their biggest customers.
Yeah, it's interesting because to an extent they are. I mean, they've got a big investment out there in a company called core Weave right and where they're kind of you know, they've got a big stake in there, and they're shipping a ton of GPUs out there as kind of this GP or AI as a service type offering for that company. In Nvidia definitely has the potential to kind of get
more on the cloud oriented side of things. Obviously they sell their own kind of you know, full suite kind of systems out there, and you know, over time, Yeah, I mean, I think there's there's definitely some concern probably out there from some of these cloud players out there, especially with what Innvidia has done on the software side of things, where you can essentially, if you're an enterprise customer, go directly with in video and kind of buy those
total systems out the outright. But that said, it's so capital intensive in nature, whereas it's really we think is going to continue to sit with these big cloud companies, and I don't necessarily think kind of in Nvidia wants to kind of get to that next level where they're directly competing with some of these cloud companies, even though to some extent, you know, you can kind of see that taking.
Voice Angela, this was awesome. Got to do it again soon and follow up after the results later on Angelo Zino there of cfl ray. So here's the latest. US National Security Advisor Jake Sullivan and his Chinese counterpart kicking off a second day of talk, set to discuss a range of issues, including foreign policy and trade. Bloomberg reporting that Sullivan will aim to make clear he won't speak
for the next US administration. John Liberview raise your group looking ahead to the next election, and writes in the following Harris would maintain the status quo with regard to Taiwan and would prioritize keeping the US out of regional conflicts. John jois from all John. In some ways that's been the approach of this administration as well, and in many ways it hasn't helped. If that's the approach. Do you ignite mare could send and perhaps not less.
I think the goal for both the Harris and the Biden administration has to have been to keep guardrails around what's obviously a declining competitive relationship. And nothing that Sullivan says when he's in China, and nothing that Harris or her team say in the next couple of months is going to change any of that. The fact of the matter is that Washington views Beijing as a rising threat and they're willing to take actions and steps in order
to contain that threat. But what they don't want is to get involved in another war or another actual hot conflict.
And that's what this visit is all about. It's about keeping channels of communication open, it's about maintaining warm relations And despite what they're saying, I do think this is about signaling that there'd be continuity in a set in a Harris administration between what the Biden team has been doing, which sets up a contrast with what Trump is trying to do, which is a much more aggressive approach to China.
So let's talk about tariffs. That's what it ultimately comes down to. John tariffs, Tariffs in the early part of the Trump administration were about a lack of reciprocity. You're putting tariffs on us, We'll put tariffs on you. In fact, we'll go further unless you do X. Then it became about national security much more so under this administration. We don't want to salu this because we don't want you
doing that. When it comes to leverage, John, and this is what I'm struggling with, the lack of clear evidence that we're able to find any real lever to gain leverage over the Chinese to influence their foreign policy. What can the West do to influence the Chinese to change their view about how foreign policy should be conducted.
I think the big I mean, the big thing you're getting out here is Taiwan, and the Chinese absolutely have been resolute that Taiwan is actually a part of China and that someday we'll be reunited with mainland China. And that's the single biggest flashpoint and the single biggest red line for the Chinese that the Americans. They do not want the Americans to cross. And I think that's kind of hanging out in the background of this entire discussion.
One thing you didn't mention when you're talking about tariffs, is jobs in the US, because that's really what I think the tariff regime is about. It's about decoupling from China, particularly in a second Trump administration, trying to bring jobs back to the US. And right now that's a bipartisan thing with the Biden administration making massive investments in terms of subsidizing green energy in order to bring a construction
boom back to the US to create jobs. So that threat of Taiwan is out there that the Chinese have been very clear the US cannot cross that red line, and the Americans are now saying, you know, our goal here is actually to protect ourselves, but also to bring jobs back.
To the US.
John, you talked about continuity from the last administration to the new one, whichever it would be.
Do we have a.
Sense of what Kamala Harris's policies would be.
Not really. She hasn't really laid out a specific China policy, and actually she hasn't really laid out a lot of specifics on any policy. At the convention, she did make a point to talk about a strong national defense, but we don't really know what that means. I mean, the US has massive fiscal challenges that's probably going to determine the path of its national defense and the size of
its military over the foreseeable future. Harris has said she wants to be strong here, but that could mean anything. And one of the questions for her, one of the big challenges she's going to face, is what happens when there's a provocation, What happens when the Chinese try to stop the Philippines from resupplying the second Thomas schoul for example. During her administration, how strongly does she confront them? And we just don't have a sense of that from her.
Some of her personnel are going to be left over or brought along from her vice presidency. Most of the Biden people will probably cycle out. But it's really difficult to infer exactly what she will do when that three am phone call comes.
How much is that framing some of the conversations that you're having with clients, both corporate and other governments.
I think the big question about what Harris is going to do is on the mind of every single person that we talk to. I think on domestic policy, it's a lot easier to predict. I mean, you know, she's going to inherit a Biden platform that looks like most other kind of democratic platforms, which won't be that different because it will require Congress. But on foreign policy, you know, presumably she continues what she's doing with the Biden administration
is doing with Ukraine. Presumably they continue this strategy of engagement with China. But how what the specifics does that look like? Who are the people making the decisions? These are all big questions that our clients are asking us.
John, as a journalist, we can sit here all day and complain about the lack of access. That will be a little bit of access. There will be a sit down conversation together with her running mate. The complaints will continue regardless, But ultimately I look at the results and whatever you think about it, the strategic campic you wou'd say, the lack of access, the lack of clear policies, it's working based on the polls. Now, John, you and I have been talking for a while. We all have about
a sub called Double heights as. How deep is that poll of Double heights as And how well is this administration, or rather this campaign, how well if they done at tamping into that reservoir.
Yeah, they're doing a great job consolidating support among the Democratic leaning independents who didn't like Joe Biden. And you see this in Harris's approval rating, and you see this in her poll numbers, where a lot of it looks like over the last few weeks, a lot of voters have come back home, both to the Trump campaign and the Harris campaign, as both of their numbers of support have risen in most polls. But Harris is buy a
lot more. So that double hater group is probably going to be a lot less relevant in this cycle than it was in either twenty sixteen, when Trump and Clinton were the least like candidates ever or twenty twenty when Trump was so deeply unpopular. So I think the double haters are less relevant here, and Harris is doing a very good job of presenting herself as kind of the normal, reliable, predictable option relative to Donald Trump.
Making it less relevant though, makes it a bigger issue for the Trump campaign and John As you've noticed, there has been a sailing. The former president has suffered from a sailing of support. If that's the case, what's his strategy and how does his strategy differ to say Kamala Harris's.
His strategy is to do what he's done the last in twenty sixteen, which is he pull out kind of an inside straight in the electoral college and win barely enough votes to get him there. So he needs to win some combination of probably Pennsylvania and Georgia. Now North Carolina. North Carolina is looking a little bit more competitive, and you know he's going after young black voters, He's going
after young Hispanic voters. He's going after the disconnected kind of voters who were supporting RFK, people who aren't regular voters. It's a high risk strategy, but that's what he's got because he is not your typical politician.
John Laber of you is great, John, I appreciate it, Thank you, sir. So here's the latest oil slipping once again ahead of key US inventory's data. This coming is both Goldman and Morgan Stanley count their twenty five crude outlook. Dan Strivan of Goldman Sachs revising his forecast to seventy
seven a barrel. Writing this, we still assume that OPEC will raise production in Q four as the market is potentially shifting from an equilibrium where OPEC supports spot balances and reduces volatility to a more long run equilibrium focused on strategically disciplining non opex supply. Don John just now for more good morning, sir, right. Want to start with that last line. We talked about it yesterday as well. When you say disciplining non OPEC supply, are you talking
just about shale or everything else? Who are you talking about?
Mostly US shild because the US shil is the short cycle, the short term producer that responds within a year or so to price changes. Supply elsewhere in the world is mostly long cycle where you're also price celested with it takes typically typically many years. Taking a step back, I think over the last two years, OPEK has really been quite effective at balancing the market by adjusting supply and to keep prices in a fairly narrow range by historical
crude standards. If OPEK goes ahead with raising production, and it's very much a close call, we may learn more in coming days. We may potentially shift to a new equilibrium with somewhat more volatility, where the new floor under old prices becomes the break even price of US shale producer.
Let's go back to the experience of the last decade the middle of the last decade, there was a real effort from the SAIS to discipline and almost punish shale producers. Arguably SHLLE producers came out of that more disciplined and much stronger. What's different about this time compared to them?
So I think, as you point out, US producers have very strong balance sheets. Now the reinvestment ratio is significantly lower. About fifty percent of free cash flows are reinvested in
new projects. And so I think that that means that to engineer, given slowdown in US shale growth, you arguably need a bigger drop in prices because those big US public producers their production plans, they're fairly, fairly sticky, and they're very strong balance sheets, And so to us that means that very sharp drop in prices is not that likely. It's more likely going to be a gradual shift shift lower.
Some people would argue the just structurally, what you see right now is you haven't seen that increased production by OPEC plus and what you've seen is actually inventory is getting taken down at eight out of US past nine weeks, as according to some industry data. I'm just wondering at what point you see this as kind of feeding on itself, especially with lower rates that might sustain the recovery. How much of a counterpoint do you really take to this?
Absolutely, So we only have a modest and gentle decline in old prices next year from brands sort of in the high seventies now to seventy four dollars bearyled by the end of next year, despite a moderate but meaningful surplus we have in our bounds next year. Why is that only slightly lower prices despite the surplus to assume the main reason is that we do think that oil currently is slightly undervalued, meaning that prices are a touch
low relative to the level of inventories. And also, if you do get these fat cuts, you should get some upward pressure on valuations and prices because basically the opportunity cost of holding oil is lower when interest rates come down.
So I apologize in advance for this, but your predecessor, Jeff Curry, who now is at Carlisle, came out yesterday and he said there's going to be a huge spike in crude prices because of lower rates and because of this sort of supercycle that you see on the on the heels of the investment in some of the infrastructure plays that we've seen globally. Why do you so vastly disagree with that?
First of all, I would like to, you know, thank Jeff for everything we and our team learn learned from him. It's very much building on the shoulders of a giant. And I agree with Jeff that wasitioning is very low, is very light at the moment. And I also agree that oil prices currently look somewhat low relative to fair value, and that's precisely the reason why despite the meaningful six hundred KVD surplus in twenty twenty five, we have a base case of only slightly slightly declining all prices.
Seventy seven is the average for twenty twenty five? Correct?
Correct?
How much of that is about Chinese demount softening and maybe not pouncing back.
I think that the big surprise this year on the de Man side has been softness in China. The Man growth actually it's the Man outside of China is surprising to the upside in the US, in Europe, in India, but I think the slowdown in China, the Man growth, which is I think mostly structural, is an important factor for all markets in coming years. To put this in context, in the five years before COVID, China was growing it's demand of oil by almost six hundred kbd every year.
In the first half of this year, annual oil the man growth from China was only two hundred KVD, so basically only one third. Some of it is a macrostory. GDP is structurally growing at a slower pace, but some of the factors are oil specific and more micro fuel switching into EVS, fuel switching out of diesel into liquefied natural gas, which is now cheaper as well. And we think that some of those fuel switching factors are are more structured, and.
We're saying that in other commodities as well. We're start to see that inside irono versus COMPA two in China.
So I think that the sort of two thousands China driven commodity supercycle was a supercycle where very rapid growth in China GDP and especially the property sectors sort of lifted demand and prices for all commodities. I think we're going to enter an era with greater divergences in terms of the demand trends across commodities, with I think a
pretty solid long run demand out look for copper. It's the green green metal of the future gold because I think Chinese including Central Bank, are looking for for new new assets in a more uncertain world. But then on the other end of the spectrum iron ore ferrous metals, where I think the demand out look looks league because of a structural slin down grind down in in demand in the property section.
This was an absolute clinic and we've got to do it again soon. Thank you sir. It's going to see you downstriving there of Goldman sax on the commodity market, Lisa starting on crude and finishing on everything else. This is the Bloomberg Surveillance podcast, bringing you the best in markets, economics, angiot politics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern.
Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business out