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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. Here's the latest CEO, Jensen Fag telling Bloomberg supplies will be plentiful, even as in Video's new black wild processor lineup is proving more challenging to manufacture. Danaus of Webbursch still bullish, we believe in videos surging AI chip demand, black whol delay concerns are laid. Robust outlook and a meteoric enterprise pipeline speaks to this AI revolution just starting to kick off its next phase of growth. Dan drops by the studio for more.
Thank him, mon, it's here.
Great to be here.
Let's start with the production problems. What did he say of a night that ALLEXI your concerns.
There were worries that these Douys were actually going to linger into your end, and essentially they put that to rest. And I think that's something you talk about billions from Blackwell, but ultimately we're talking about what could be tens of billions. So if anyone thing was going to spoil this party, it was the Blackwell douy is. And I believe even though the initial reaction bears came out of hibernation mood for a whittle last night, it was good to see him.
I believe this is a star that should be green today. And for broader tech, you heard everything you needed to and from a demand perspective from godfather.
Of Ai Jensen, manufacturing this stuff is incredibly complex. Apart from saying it will increase. Was there any real detail about manufacturing yield improving somewhat through the quarter. Did you get any real detail about what was actually happening at these factories?
He talked about yields improved, and if you look from a yield perspective, the biggest thing that could hurt this story was significant Blackhall delays, and that's something that that checked the box. You look at the demanders in terms of the October quarter, Okay, could whisper has been thirty three billion or thirty two point five on the margin. Realistically, as they executed, this is probably going to be a
thirty three thirty four billion type of quarter. So then you look out further and you're like, okay, you start to get these two billion and two billion continued beats. You start to look at earnings power that significantly goes higher into next year, and relative to Cappax and everything we're seeing in tech, this was the most watched earnings.
I mean, we had watch parties.
I'm going sure if you were at one of the watch parties and it's something where I think they came delivered and I think for tech it's going to put fuel in that rally.
Sure's a comment from one of those parties.
It's fun.
It's like a cultural thing.
You don't have to be here to root for a winning team. I'm just letting you know very much of the popular site.
Guys.
I'm very curious.
Though about what you think with the Blackwell revenues that they are projecting out.
They were very non specific.
They said, yeah, billions of dollars, and people are looking at that and saying, if you really want to convince us that this Blackwell delivery delay isn't going to be a serious problem, why not provide specifics, especially at a time where margins are coming in, especially at a time where they're not able to diversify their buyer base.
Yeah, and we think that's ultimate from all of our checks in Asia, tens of billions, not just billions, but Jensen a grand wizard, grand master poker player, not going to reveal the playbook.
That's smart. But if you look at Nvidia.
Here, this is Lebron in high school in terms of where this story is ultimately going.
And the most important thing is.
The multiplier effect because it is for broader tech.
It's not just spout in Nvidia. It's not just spent Microsoft.
For every dollars spent on Nvidia chip, we believe it's an eight to ten multiplier cross tech. And I think that's something that's probably the most important for investors.
You know, it's fun and it's fun to talk about the Godfather and popcorn and all that. You actually have been in Asia a lot, and you've been looking at the factories and you've been talking to people who are the um buyers of some of these chips and the producers to understand exactly how much demand there is.
What have you seen that gives you such confidence.
That this really is a takeoff story, even now with some questions about how long the magnificent three or four US big tech companies can continue to support it.
Yeah, we'll be going back to Asia next week.
A trillion dollars of.
Cap backs is what we see from an AI perspective over the next three years. You go back six months ago, we thought that was five hudred billion, and every quarter if you look at the underlining demand not just some hyper scalers, but eventually what's going to be other enterprises.
It's just starting.
So all of our checks are showing demands actually continuing to accelerate.
You know, it's far out to yield.
You're improving from production perspective that they're the only game in town. Use cases are coming, so that would pollenteer. You see that with service now. Now this Fourth Industrial Revolution Roome wasn't built in a day, neither AI revolution. It's starting to come together. Anyone that thinks this is hype, you listen to commerce calls Nvidia, AMD, Microsoft, Pollunteer and others. I mean, I don't know what watch party dudes, Bears are, but they're not listening.
To the calls that I am you Sain, it's the Brunet High School. Why isn't it zomb Williamson. Why couldn't we end up with a situation when we actually get real competition and it just doesn't do that well anymore? How big is this mout around this company?
Yeah?
And I think it's a great question. Right now, only game in town AMD and obviously least as soon others are going to benefit. The reason this is the lebron in high school is because they are so ahead of any other competitor, and right now they're the only game in town. The new gold, the new oil, the AMD chips. And when you come away from that conference call last night, now I get after hours and Bears will come out. But there's nothing that makes me think that we don't
have a year from now or less. You have three four trillion dollars. Mark Aps, godfather of AI and Emdia. What's happening kuper Tina with the AI supercycle starting off on iPhone sixteen and what's happening then Della in Redmond.
Well, okay, in fairness to the bears, because the bears weren't exactly coming out and saying this stock is going to tank. They're saying, maybe, you know, just cash in a few chips after one thousand percent rallies going back to October of twenty twenty two, a real question here of how big the addressable market is, and a question about whether they can essentially go into some of the data centers that their buyer base are trying to fund
and create. Basically, how much do they become competitors with their main customers, And a real question about cannibalization At a time where big and bigger companies are increasingly getting the scrutiny of regulators, how much are you sort of factoring that in as a ceiling for how far this godfather of AI can go.
Yeah, and it's abound even look where Microsoft's going, where Google and Clouds and Amazon. So definitely like it's a little bit of a coappetition that's happening here. Look from a regulatory regulatory is forty miles an hour in the right lane in a minivan. The technology is one hundred miles an hour in a Ferrari in the left lane, and I just think this will be self regulation. You'll have a lot of em and look at open AI in terms of you know what looks like that next
round of funding is it's a scarcity value. You will start to see those eventually, you know, some more competition bill butt heads. But this market it's the first second inning of a nine inning game. That sort of our view in terms of where you know, where we are from an AI.
Revolution months of this weekend right from the one yes, Big Rice is going to say it, Yeah to see it, thank you. One question. Let's talk about the politics. Comla
harrisonton Well sitting down with CNN this afternoon. Top of Mind Policy Haidi Creeber Retica of the Council on Foreign Relations, saying it's likelier than not that a Harris white House would build out foreign policy with a focus on international leadership, nurturing ties with allies and partners, including NATO, new minilaterals like trilateral with Japan and Korea, and critical minerals partnerships and the G seven. Heidi Creeper Retica of the Council
on Foreign Relations joined us. Now, Heidi, let's build on that if we can, and welcome back to the program. Can I start with this one. You're incredibly well connected in Washington, d C. I'll say that for you. How much daylight is there between Harris and Biden?
Well, I think I think you're likely to see quite a bit of continuation in the foreign policy agenda of a Harris presidency. And I think probably the most important area would be the relationship with allies and partners, because Trump has really shown that he's a go tolone president and so you know, in this day and age, the world is far more complicated than when Trump was president.
You have an alignment with China, Russia, Iran, and.
North Korea in a world where America really needs to lead, but we have to do it with friends and partners, and that includes bolstering supply chains and resilience.
You can't do that alone.
So I think, you know, just the in the in the broadest sense, you would see a continuation of.
Many of the features you've seen in Biden Adi.
When it comes to Chinese specifically and the issues in China. Do you think they can make the case that a multilateral approach has been more effective in the last few years than what we saw under President Trump.
Absolutely, I mean, I think you know you do have you have a more complicated geopolitical backdrop where you have China actually helping Russia's war econ it me, where you have a much more cooperation across as I mentioned, those four those four key countries who are geopolitical rivals right now, and so you need to have friends, you need to have allies, you need to have doubling down on the existing mini laterals, the new minilateral between the US, Japan, Korea,
building on the quad relationship with Australia, Japan, India, and the United States, and also building out the critical minerals partnerships and what we're going to need for energy transition and for defense. And I think also the traditional forums like the G seven take a lot of work, They take a lot of nurturing, and we did not see that during the Trump administration.
Hidie, we were just talking about how unusual it is that Jake Sullivan went to China and got such a high audience at a time where Joe Biden is a lame duck press it in and there's a lot of questions around who's actually going to be the head of this country come early next year. Heidi, Why do you think he went now and got such an audience.
Well, I think I think it's important to make sure that there is a channel of communication when there is any when there is any change, when there is UH, when there is uh uh you know, uncertainty, which is you know, pretty you know, running pretty rampant in in the global geopolitical uh space right now as well as
in the global economic space. So knowing directly from the National Security Advisor, what is uh, you know, what is the the likely Harris agenda, what is coming potentially down the pike before before the election or after the election.
With regard to any rumored.
Expansion of of export controls, How to manage manage the managed competition in a way that sustains sort of strategic balance and and and safety. We have had a number of run ins with with China in the South China season, trying to make sure that we don't have any any unintended consequences from some of China's more aggressive military actions of late. So I think, you know, just maintaining a senior dialogue at this critical juncture is crucial.
Heidi.
I think that a lot of people are going to be watching tonight when we hear the first televised interview with a major media outlet of Kamala Harris and her running mate Tim Waltzon. I'm wondering. I'm sure China will also be watching to understand exactly what some of these policies may be, as well as many other international partners of the United States. Heidi, what are you expecting to hear tonight or not? Does it matter if we hear nothing in terms of policy.
So I think this is about politics as well as policy.
You have. You know, we're seventy odd days out. Harris is sitting on momentum.
She said she'd do an interview before the end of the month, and I don't expect her to really break any new news in this interview, but I think it's an important one to watch. And you are absolutely right, everybody outside of the US will be watching this to see you for any policy insights, and I think she you know, this has been a sort of a policy light campaign on both sides.
You have.
You know, Trump has had this project twenty five you know, home Outside Holmes made by others and not himself on many many issues. And then you know she's not is the first candidate to be light on specifics. I mean Bill Clinton was criticized for far too little on specific policy issues, and then Secretary Clinton when she ran for president, was far too specific.
And so I think at the.
Stage in the game we're close, you know, we're really close to election day, she has an advantage. Harris has an advantage that she did not have to go through a primary process. She did not have to define her views and take some hot like harder policy positions. So's she has an advantage right now, and I think she's not going to squander it. So and I think I like the fact that she's doing it together with Governor Wallas.
I think this is going to.
Be an attempt to really show their personalities, human.
Side, the way they interact.
And he also gives her the out of not getting cornered by somebody that not pointing fingers but looking at an oppressed desperate to figure out specifics.
She's going to try not to get cornered, and I think that's smart.
Said that a lot of people are watching internationally in terms of trying to understand what Harris presidency would look like.
Do you think it will bother them.
If they get no specifics.
I don't. I don't think so. I think, you know, she she wants to win. I think that that there's been a lot of a lot of criticism of not having the not having drilled down on specifics. And I don't really think that she's trying to play to an
international audience in this interview. I think she really this is really a chance for her to talk to the American people and to voters, and so you might hear less on international and maybe more on on domestic and what and what she and Governor Waltz would mean for for some of her domestic economic agenda.
Atoms, How do we got to leave it there? Come by soon? It's been too long. It's going to catch up. HAIDI crew by Redeka, the Council on Farm Relations. Oh, Dave Sabina joined us some more on that, Oh Davis unequivocally dubvish your view of chairman power last week. It's time to go long anywhere on the curve? Oh can you build on that? Why anywhere on the curve?
Because what will experience actually is going to be a bull steepener, which means you know you're two years while perform your tens and thirties. But it's actually our preference to go long tens and thirties because the volatility in tens and thirties will be lower. So from a sharp racial or a risk adjusted racial, makes more sense to go long tens and thirties.
Despite our steepening by us.
This time yesterday we caught it with chow Swab Colin Martin. He said, the treasury yield plunge more recently makes extending duration less attractive. Oh, how do you think about that? Just the valuation proposition?
Yeah, you know what, I fully agree with that statement. That's why we're only to call it a five on ten long the market. But the thing with this market, all the valuations have gotten arguably ahead of themselves for now.
You never know when the next spike lower will be.
As I like to say, I've been in the market for thirty years, and you know what, if timing was my strongest suit, I wouldn't even be on the show right now, be on the beach somewhere. But I always want to make sure I'm in the position I want to be. But we're looking towards four percent, where we really add to our longs and go full in long in tenure yields.
You'd be calling us from the beach.
I know you'd be calling in.
I wouldn't be here either, all right, Moving on.
You said something that volatility is less in tens and thirties, and that's one argument for going into them.
Is that true? I mean at a time when a.
Lot of people are talking about a sort of new environment for yields more broadly, but especially duration of more volatility there, especially with the election coming up.
Yeah, you know what, I didn't say there's going to be no volatility. There's going to be volatile everywhere. But this is why I love being an active manager. This is why it's perfect time to be in the shoes that we're in. You know, we have our expectations. You know, as I said, we do expect yields to go lower, but the market we also expected to go higher.
But that allows us opportunity to get long.
This is the difference between passive and active and it's the perfect time from an active manager perspective to monetize that volatility. And our team has been doing that for the past two years. You've heard us with the two years trade before that was an example of volatility in the two years now, we think we'll see it in ten years and we can monetize it.
There is there a contradiction in this foolishness across the curve in bond markets. Is there a contradiction with the strength of the economy that we're seeing.
No, there's no contradiction.
Actually, it's very similar to the weather argument that you brought up before in regards to the employment number. I would expand that weather argument to the markets. There's so many credible, plausible outcomes in this market in regards to rates, higher, rates lower. But this is why it's important from our perspective as an active manager, don't get caught on where do you think rates will go, because you're going to miss the volatility and that's where you can monetize. So
I think all the arguments are credible. Our team we have a process where you know what it's been validated in regards to outlooks and views, and that's why we do see lower rates from here, but it's not going to be as straight line lower as we're seeing. It would not surprise us if we see four percent ten year yields, but we feel that's the level where you start backing.
Up the trump.
You have made some assumptions about the destination for FED funds though, and it stood out for me after the Chairman Poal speech of Friday, you said, once easing starts, you believe the target is neutral at a minimum. What is neutral to you? I guess would be my question. What do you think the FED thinks it is? And are we talking about twohundred basis points of cuts over the next I don't know, twelve months, eighteen months.
Yeah, you know, it's a good question.
I would argue that neutral to me doesn't count because I'm not the one doing the eases. So I try to listen to the FED governor's speak. We heard Hawker last week say it's three percent. I would say it's somewhere in and around three percent, but says there's two hundred basis points of cuts coming over the next couple of years, all else equal. The market's only discounting one hundred right now. That is why we were and we saw the speech as unequivocally dubvish. You know, the path
and timing to lower rates, that's the uncertain part. But we definitely see a move towards neutral The interesting thing about this, there's three things we're looking at in the market that will add to volatility impact our positioning. One is, as we've spoken about the employment rate. We think that's very important. The second one is the election and that will take on more and more be more amplified as
we get towards November. And then the third one, this is the important one, is those risk off moments that could come from idiosyncratic actions. You know, the butterfly wings that.
Starts a hurricane.
So it's that third one, you know, neutral three percent, but the FED foot is squarely on the table.
Now.
We saw talk of possible fifty in the market when we had the Japan selloff.
That hasn't gone away.
So we like being long, we like seeing rates go to neutral, and now we think we have a free option on the FED foot which could go way blaw neutral.
Oh, this was great. Appreciate it, sir, oh Davis there of BMO. This is the Bloomberg Surveillance podcast, bringing you the best in markets, economics, and geopolitics. 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 app.