Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive from coast to coast with Caroline Hyde in New York and Vlow in San Francisco.
This is Bloomberg Tech coming up in video. The world's most valuable company underwhelms on earnings as investors digest decelerating growth. This as its CFO weighs in on the Trump administration's fifteen percent commission on.
Chip sales, telling us the.
Plan needs to be codified first, and we break down other earnings from the tech world, the Snowflake HP gaining on results and Dell on deck after the bell. But first are we check in on this market, which of course is dragged lower by one key stock we're looking in in video, off by nine tenths of a percent looking after ours trade yesterday, it was more than three percent lower, as people just digest a company that is now revenue in with.
Both of fifty percent. But it's not a two.
Hundred and sixty percent growth that we were used to in previous years. And I'm interested in the focus on China in particular.
This is a company that.
Has no h twenty sales for fiscal second quarter, no sales baked in for the third quarter, but there is opportunity there. Just listen to what jensup Huang said on the call.
So I think the you know, the opportunity for us to bring Blackwell to the China market is a real possibility. And so we just have to keep advocating the sensibility of and the importance of American tech companies to be able to lead in win the AI.
Race for more bluebergs Ian King, who covers semiconductors, who was up late last night, does this with us. Now, Look, China is the big overhang and why some think that perhaps the numbers were a little light, largely because we didn't know whether to factor in Chinese.
Revenue or not.
I yeah, I mean they said that in the release and there was nothing China related in there in terms of the data center stuff. Then on the call they gave us a slightly extended picture and said, look, if everything goes okay, if everything gets sorted out, we might have up to five billion dollars worth of Chinese revenue. And if you add that back into their forecast, then this is an amazing quarter for them. So there's a lot of moving parts.
There is and it feels as though it's a knee jerk to send the shares lower, many would feel the analyst community out there saying, look, strip this out.
And this was actually quite a rich beat.
But in you got even more detail from the CFO, in particular collect cross walk us through what she said about that fifteen percent stake taking that the government wants on future H twenty sales.
Yeah, I mean, I think it's important to frame this appropriately. This isn't some kind of political stand or dispute with the Trump administration. What she was doing was what investors would like to do, which is to you know, for sheer duty, which is saying, look, there is no mechanism by which I can give fifteen percent of this China related revenue to the government as statutes currently exist. Something
will have to happen before I can do that. So she was really just making a point and reassuring investors that, look, we are running this company properly according to the rules that exist.
So give us the detail on whether they do or do not have licenses to certain Chinese customers yet in the bag, and whether or not that two to five billion dollars worth for the quarter coming could become a reality in.
Yeah, and again, I mean they were very clear to say, look, we've got a few licenses right now, but there are so many geopolitical variables in the mix here. What does Beijing want? What does Washington really want? Will there be more licenses? Will they be given quickly? And all of these, to be fair to video, are not knowable right now because as we know, things change on a daily basis.
With a social media post, the whole world changes. So I think you know, when people calm down and look at what we said, they'll perhaps realize that this is something which you know, this is a company taking a conservative, perhaps measured approach to it and collect told us and that was a message that was given to investors. Look, we think we'll get some of this where you know, we're not saying this has all gone away, but we
just don't know when and how much. So we're going to be careful, going.
To be careful, Ian King always careful with this. Who ads, we appreciate it. Let's get an investor. Take someone who's dug deep onto the detail. Is Nazi Tengler, CEO CEO at Leffa Tengo Investments. You've been taking some money off the table with Vida recently, You've still got significant exposure. And Natzi, what's so interesting is this question mark on China. What's your read? Because again and again someone quit saying there's a fifty billion dollar opportunity here.
Yeah, thanks for having me, Caroline, and I agree with Ian on just about everything he said. I mean, China's critical, of course, but they already took the charge last quarter, and so the big disappointment overnight was they came in below the whisper number, but their guidance did not include China at I think it was fifty four billion, and
the whisper number was at fifty five. So if you back out China from the whisper number, they actually beat not only the street but the whisper number on guidance. So I'm giving it a triple play. A beat beaten rays, but I think it doesn't make I mean, if this was a disastrous report, the stock would be off significantly more than it is. We trimmed some at one seventy nine.
That's where it's trading right now. We put it to work in some other names like Palanteer and CrowdStrike, and we got some good execution there, but it's still four percent of our portfolios and a candidate for our twelve Best Ideas portfolio. So I think that the report was excellent. Decelerating growth is something that Microsoft dealt with with Azure
early days, from ninety percent now down to thirty. I mean, I don't think Nvidious valuation is even as expensive as Microsoft if you look at it on price earnings to growth basis below one time. So I think this is an opportunity.
I mean, to that point, when a four point four trillion dollar company is still delivering in excess of fifty percent revenue and earn ex for the share growth, it's pretty extraordinary.
But the opportunity still is so extraordinary.
I think Jensen Hung did a very good job at reminding us four trillion dollars is how big AI infrastructure spend could be alone, but he wouldn't really give us an amount of how much his take is of that market.
Can you do the math on that a little bit?
Well?
Yeah, I mean, if you look at at earnings growth expectations for twenty twenty fiscal year twenty twenty five, it's one hundred and thirteen percent growth. For twenty six it's fifty percent growth, so you if you factor that in to the total numbers, I mean, this could be an incrementalion one hundred billion dollars in revenues over the next twelve months. Don't forget too, Sovereign is starting to pick up.
That was about twenty billion euro in expectations. And then you've got the buyback putting a floor under the stock. They announced a sixty billion dollar buyback. So the market share take from Nvidia continues to remain or grow. And what was interesting to me today is that you're seeing AMD and Broadcon up on the news, but in Vidia down slightly.
It's really interesting actually that all the Chinese names are up on the news as well. You just think of what's happening with Smick, what you're having with other key players who are building out AI accelrators for China.
AMD.
It really reminds me of AMD because they'd beat and in any ways they raised, but they couldn't give clarity on the future of China and they were punished because of that.
Do investors just need to understand.
That it's very difficult to get real clarity on China.
Yeah, and Caroline, remember too, there are investors and then there are the hedge funds and the algorithms, and the latter tend to drive the volatility. Investors like me look at opportunities like this and say, I want to be in this for the long term. So last summer we picked off in video at one hundred dollars a share. Remember last summer people were saying the story was over. It's not going to continue. The hyper six scalers can't
continue to spend capex at this level. And not only did they do that, but many of them increase their capex budgets. So if you think about data center, it's twenty nine percent growth, right, But China, he's saying, could grow at fifty percent. So to answer your previous question, China's growing faster than the rest of the world. But twenty nine percent is unlikely to be the growth number. It's likely to be closer to thirty to forty percent in data center growth for Nvidia in the coming year
or two. So I think again, as I've said, you want to take advantage of these periods of confusion or you know, melancholy around the stocks future performance and add to your holdings if you own it, and initiate if you.
Don't, okay, and then the real opportunity is the fact that the cadence of innovation keeps them coming. You've got Blackwell Blackwell Ultra already in the FABS according to the CFO. So is the Ruben an architect show. Why does that take us?
Yeah?
I mean I think it takes us to quantum and then some I think, you know, robotics. We've launched a new fund that we're incubating at the firm and it's called New Ara Thematic and it's all of the above. So you know, it's not just nuclear, it's quantum, it's robotics, because photonics. So this is an area that investors need to be sure they're not underestimating. You know, I heard the naysayers overnight it's decelerating the growth. There's not ai
trade is over. It's not even close to over. We're in the early stages, and I think you want to be continue to be looking around and look for those that are going to get left behind. And there will be companies I believe, like Adobe that will probably get left behind. But then you want to focus on the winners and you don't want to shy away from them too early. And this is I think Reuben is the
next stage Blackwell had. We haven't even realized the staggering demand for Blackwell that Jensen Wong spoke about last night. So yeah, strap in it's going to be vol little bit volatile to the upside.
It's interesting yesterday we had Jamigambetta of IBM on talking about their deal while that partnership with AMD, the fact that they're looking in the future of soup coop and computing twinning with the future of quantum as well. You're talking about that as an area of growth. Where are these companies, though, managing to pick away at in Video's chants really with inference? Because yes, they are the chip of choice, they are the architecture of choice when it
comes to training models. Are they really the only game in town when it comes to inference?
No, I mean I think not.
But that doesn't mean it's just like, you know, maybe you could argue that Microsoft sort of pioneered cloud computing. Larry Ellison might disagree with us from Oracle, but but you can. But you know, you see eventually they that their growth slowed, but there's still a dominant provider and AWS obviously would disagree with me that as well. But so I think you have to step back look at where the marginal erosion is coming from. Yes, we know
Apple and Microsoft are developing your own chips. That's that's fine. I don't think that's going to change the dynamic. It goes back to Jevon's paradox. So when we had the deep Seek news, you know, everybody sold the stocks. I happened to be on air that day and said, listen, this is an opportunity because Morbi gets more, and so I think this is I mean, that's that's really the story. That they can lose share and still be growing at rapid pace. And the margins. We haven't even talked about
the margins. You know about seventy percent. I mean, I don't know what there is to complain about.
Instagram add a sixty brilliant lot of stock buyback, I mean, and still the stock cast away some Nancy tang of lef at Tangra Investments. It's always so good Tavy on the show, Thank you very much. Indeed wearing a leather an ode to Jensen that I mean, well, coming up more in Nvidia as China trade tensions. Of course, they're weighing on earnings. We're going to speak with Teresa Payton for Alis Solutions CEO on the China AI landscape.
This is Bloomberg Tech.
Check in on those Nvidia shares we're off by let's call it nine ten percent for a more than four trillion dollar stock. That's thirty eight billion that you've just wiped out in terms of market capitalization in Vidia's business. I mean the overhang has been China clouding the area because of trade tensions. That the company now saying that unconventional plan of course by the Trump administration to charge a fifteen percent commission on AI chip sales to China
when it hasn't progressed actually beyond its early stages. Let's check in what the CFO, Collect Crest told us earlier. She said to Bloomberg, I don't have to do this fifteen percent until I see something that is a true regulatory document. Let's get more from New Meg's executive editor.
Mike Shephard.
You really sit at the intersection of politics and technology mine. So the ball is in the administration's court. They've told us that they're going to take fifteen percent. Well, where's the regulatory approval here?
Well, that's really the question of the hour here in Washington, in Silicon Valley and on Wall Street. When are we going to see the fine print on this? And as Ian noted at the top of the hour, the company is proceeding very carefully on this front. It doesn't want to commit without seeing something in writing, because the terms
could even change, especially with this administration halfway through. So they want to make sure they see this imprint and if they understand the legal and regulatory mechanism under which they would make these payments to the US Treasury. Remember, it's not quite a tax, it's not quite an import fee. It's really kind of hard to figure out how they would define it. And in a way it is holding the company up a little bit in terms of making those sales once again of the age twenty AI chip
to Chinese customers. They don't want to proceed too fast, as a CFO suggest that they had the right to do. They have some of the export licenses in hand. But then again, if they proceed without actually giving the government a cut, that does risk angering the administration. And this is a government that Jensen Wong, the CEO of Nvidia, has tried very hard to cultivate good terms with He is visited with President Donald Trump a number of times,
and the two men have built this report. So they want to make sure they are treading carefully here, Caro, because they're playing the long game. They are looking ahead to how Trump can help them in China.
And I think Jensen and his CFO are trying to really remind the administration just how much money's left on the table. Up to five billion dollars worth could be made in H twenty sales in this next quarter alone. They're talking about the fifty billion dollar opportunity of China sales if they can get a modified Blackwell architecture the country.
And that really was what Jensen was talking about, his hopes to talk to Trump about that, and actually the administration, in fact, President Trump has put messages out posted on his truth social about the fact that he expects some sort of request.
Yes, and he is signaling his openness to granting that permission to the company to sell a scaleback version of the market leading Blackwell chip to Chinese customers. Now, again, we would expect the president to insist on getting his cup.
Would it be fifteen percent, would it be more? What other demands might he put there, But again, this would be very much in tune and in line with what the administration is doing, not only with Nvidia, but also in a way trying to, I guess, restore some of those economic and political ties with China that we've seen bruised over the years.
Mike Shephard, we thank you so much, Bloomberg. Let's get more insight now. Teresa Payden's with us for Tallis Solution CEO, former White House Chief Information Officer. At the moment, we're seeing Chinese rivals gain on the back of this lack of Nvidio competition.
Right now, what do you make of it?
Well, all I know is we're going to have to figure out there's a long race here and a short race here, and we have to secure not only our global leadership but also our intellectual property. And that's really some of the underpinning of the discussions here of is there a fifteen percent? Is there not a fifteen percent?
What does this mean from an export control? So a lot more to come on this, but obviously China is amping up their part in the race, trying to win the global war on who's going to dominate AI?
What is the IP risk.
Well, the IP risk. So even though we're talking about sending a modified chip over to China, in my opinion, based on my years of experience, it's like handing over the keys to your R and D lab and saying just be in the small QA lab, not in the bigger lab, and don't look around. You wouldn't hand the keys to your R and D lab to your competitor. And China is our global competitor here for this technology.
So that really what we're thinking about here is how could they get access to these chips and perhaps reverse engineer everything from performance to how things behave. Really, you just don't know what they're going to be able to do once they have their hands on all these chips.
Teresa, let's say you're back as the White House Chief Information officer. What are you advising President Trump as to whether Jensen should have access to the Chinese market.
Well, I think this is a tough one because the private sector does have the right. You know, companies do have the right to sell their goods and services all around the globe. We don't have a blockade on selling technology and other goods and services to China. So this is a very delicate balance here between a White House
administration and a private sector organization. And so really what you have to do is look at the laws we already have on the books, and then so what kind of safeguards is this US based company going to follow based on the laws on the books, What types of inspection processes, what types of control processes. There is a playbook for doing this, even though this technology is new, and so we have to look at this playbook. The question is is whether or not new rules and regulations
are going to be codified. And I think that's the open question that in Nvidia is having to deal with.
In Vidia put in its ten Q that it could be exposed to potential legal implications because of this fifteen percent issue.
What would it face in terms of legal issues?
Well, if we end up codifying some type of a new barrier to the market in China or enforcing one of the existing regulations in a way that hasn't been enforced before, then in Video would have to make the decision of am I now blockaded from actually selling to China? Or do I have a lot of burdens on me that maybe don't exist for other companies who are selling technology to China. Remember, you've got big tech who's in China's social media is in China. It's not just Nvidia
who is selling goods and services to China. And so they may decide, well, this is an undue burden placed on us. So they may decide to take on a lawsuit, or they may find themselves answering to for example, Siphius. As you know, TikTok Usa has had a lot of legal challenges in legal bills as it relates to how
they operate and sifias interpretations of how they operate. So I think they're just kind of looking at past cases president precedent and then also looking at the president's remarks as a potential future precedent and deciding that there could be a risk for a long protracted legal battle.
Theresa.
We heard from Jensen Wang there's a fifty billion dollar opportunity in this year alone in China, but push out five years. Does that exist at the rate that Chinese government trying to push their own companies away from the US tech stack.
Yeah, it may not exist in the future. That is a tough one. All I can tell you is from the frontlines of working with companies who have done business with China. It is a very tricky proposition, especially as it relates to cutting edge technologies, whether it's sort of like clean energy, whether it's computer technology, and it's very difficult and challenging to really understand what the regulatory environment is going to be and the protection for your intellectual property.
You know.
Kind of the big elephant that we're not discussing in having all of these conversations is we have a new more detailed report from the FBI on Salt Typhoon, and the findings from that report are stunning. We're talking eighty countries were impacted, not just the United States, and the
access to metadata, phone calls and other information. You know, this is one of those things in China denies that they had any part in this, but this is one of those things where we're seeing sort of this vacuum cleaner effect of China basically vacuuming up intellectual property data information to use it for economic espionage.
That was a breach that really hit the major US carries in particular Verizon and AT and T and T Mobile. Teresa Payton, thanks for reminding of us off it for Alice Solutions and it's time now for Talking Tech and first Up d D Global will pay seven and forty million dollars to resolve a sharehold or lawsuit concerning it's fort twenty twenty one USIPO Now, an offering that not only attracted into its scrutiny from Beijing also preceeded the
company's dlisting. The right Haling Giant announce the deal Thursday alongside its second quarter results. Plus Taiwan, the prosecutors have charged three people for allegedly stealing trade secrets from TSMC, alleging that proprietary tech was stolen to help improve a.
Take Tokyo Electron Now.
Taiwan is seeking jail terms for at least seven years for the Trio, citing threat to the islands, national security and delivery hero cub It's earnings guidance for the full year this after a week dollar in South Korean one cut, interprofit and free cashlow look. The company saw revenue rise nearly eight point four billion dollars in the first half, but faces increased competition for rivals in Asia and the
Middle East. And coming up more on Nvidia, let's take a look at the stock and other global chip exposed names. Shine Light on ASML. It is lower in sympathy. That's the European hip equipment maker can look on though. This is the upstart in China trying to eat in on AI accelerators in that country. We're p fifteen percent record high. It has doubled its market cap in this month alone.
This is Bloomberg Tech.
Welcome back to Bloomberg Tech. We take a look at the earning story. Because benchmark's relatively flat, we're actually higher just on the likes of the Nasdaq one hundred. I'm looking at what's happening with Snowflake having an absolutely brilliant day best place that's November twenty twenty four.
We're up eighteen percent.
Are showing that the desire for Agenderki is working in their business right now.
Revenue grow thirty two percent.
They beat and they raised as well in terms of their forward looking guidance. The analysts across the street really liking the strength coming from this particular software company that many had anxiety perhaps that new AI startups the spell to eat.
Into the business model.
No, no, they're managing to show real growth here and retention of customers. Move on though, and we're all a little bit lackluster about what happened with Nvidia last night.
Look, this is a company that delivered fifty six percent revenue growth for their fiscal second quarter.
Fifty four billion dollars is promised for the fiscal third quarter, and that's not including any Chinese revenue.
That's only upside.
But this is already a company that was very close to its record highs were off by one and a quarter percent, but off of those lows in the pre market trade, here is the reaction on the results from a few analysts on Blueberg TV on Invidia.
When we have a beat and stocks don't go up or as hot stock like in video doesn't go up where it starts to roll over a little bit, that suggests to a trader and a technical analyst that everyone who might own the stock already does. But we're nowhere near there yet.
The reason the stock has recouped some of those losses and I think will rule retain strength is because of that guide. For Q three, it was very strong. It's really all about Q three, and it's because Blackwell and Blackwell Ultra are starting to ship, and if you know that story, you're not selling this stock right now.
They were very good about signaling to the market that the chinahovertainning could continue and that has about a five billion dollar impact in the next quarters numbers. So, having said that, fifty four billion represents a very strong showing, which means they expect hyperscalers and other parts of the world to pick up that slack.
More reaction for you now from an investor. Daniel Pilling's with US Sans Capital Ponio manager.
So why is the stock down?
Well, I think there's a few reasons. One stock had a good run into the quarter, and two it probably slightly a missed sort of the byside expectations and it was mainly around I think China. And then secondly black Hole is still a little bit supply constraints, so that ramping it as fast as they can, but I guess
the ramp wasn't fast enough. But I would say though to us, those were pretty strong results and maybe one interesting fact to look at if you take out the China revenues completely out of the data center, then the rest of the world for them actually accelerated from about sixty ish percent growth in Q one this year to a guide that eighty percent growth in Q three this year. So actually in Nvidia X China has been accelerating, which which I think is really strong.
I think that's a really interesting take. We had Vladimir Galibov from MDA.
Yesterday talking about how Europe is stopped starting certain countries. You've got them up really going hard on sovereign AI, other countries less. So we got told twenty billion dollars for sovereign AI. Is that strong enough for you, Daniel, Yeah, I.
Think that's a great number. But the truth of the game is still within high scalers and AI startups. I think that's where the real action is for now, and it's a much much much larger number, and I think the interesting aspects there are one as Jensen noted that reasoning AI is so much more compute intensive. He quoted one hundred two thousand times more on the one inside and then on the other inside though it's also much
better so it reduces hallucinations. And he also mentioned that the return and invested capitally received from buying these ships is phenomenal.
Right.
He mentioned if you invest three million today, you can make thirty millions in token revenues in short order. So I think that's where the real action is as of today, and is.
That why the real action is talking about where Rubin takes us the cadence of innovation over at in video.
I think so. I think Ruben will again that the most important thing that Nvidia is doing is they're increasing the performance per what and they noted that it costs about fifty billion dollars for each one giga what data center.
Ruben will again improve that performance per WHAT, which means that Nvidia's competitive situation improves on the one inside, but also on the other hand side, you can do more computer you can build better models with Ruben, which means it's a self fulfilling prophecy a little bit because whatever comes out of these models again have higher IQ and effectively bigger and better apps.
You're not worried in any way about Amazon's trainium, about Google's TPU, the fact that the customers are innovating themselves.
Yeah, no, I think it's our job to worry sometimes. But we've looked at this in detail out and I think the idea here is again to say, well, so here's in Vidia. They're building a giant system of a company. They have both networking CPUs, GPUs, hundreds of difference of suppliers and they put the software on top. They say, and we believe in this that they are the best performance for one supplier in the industry bar nobody else.
And as long as that it's true, something like Trainium cannot compete simply because they don't have the scale, they don't have the system, and they don't have the software. So in Vidia to us remains the winner in the sense.
And that's what's interesting about and what I'm trying to say, Look, we are more than just hardware in many ways, we are the one stop shop, and we're leaning more into that. Did it lean more into the future opportunities enough for you the robotic side of things, cause automotive remains a bit of an overhang when it comes to China. But thinking also about quantum and real future here, I.
Think in Vidia is probably the company in the world that runs the fastest that I've ever seen. I mean, what they're trying to do is they're trying to align hundreds of difference of suppliers. They try to design a GPU on an annual cadence, and they're trying to update their systems on an annual to eighteen months cadence, which is unheard of. At the same time they're focusing on quantum robotics, et cetera, et cetera. So I think in Nvidia is running as fast as anything else I have
ever seen. And if I may mention that too, I think quantum is probably going to slot into the Nvidia ecosystem by saying they have CPUs, they have GPUs, and at some point they'll have quantum somewhere in there too, And you can just switch between those various sort of compute layers.
And that was what was interesting with IBM and AD's partnership, the idea that almost you reference how these reasoning models work.
While I'm thinking of GPT five.
How it just pushes you towards the best possible model for your question. We're going to have the best possible computing standard for your general task.
Yes, I fully agree with that, the best possible as well as the cheapest and the fastest. And again I mean as we think through the next few years, the question is like how much more compute can a video sell? And as truthfully continues to be a question of the scaling laws, right, and we've seen with GROCK four that
compute still provides better and bigger models. We're going to have black Wood clusters scaling in the next twelve months or six to twelve months, and hopefully we'll be seeing good results coming out of whatever comes after GROG four and chat GPT five, and that's ultimately truly going to drive the bus fund video in terms of demand and in terms of the revenue outlook.
So you think we should think more about Colossus, We should think more about what Meta is doing in terms of well it's scaling in Louisiana.
Should we figure China out entirely.
Considering the government wants to push its own homegrown domestic talent anyhow.
Yes, I think we should, and I would actually argue what China is doing seems to be relatively rational. What China is basically saying is that you're trying to sell the chip that's based off of an architecture that's three and a half years old. And secondly, we've also grown a local AI architecture or a stack that has caught
up somewhat to that old chip. So unless you start selling us a newer derivative of Blackwell, we don't really maybe need you as much anymore as we needed you three years ago, so that all seems to make sense.
And I don't know whether the licensing will work out or not, but the interesting piece is if it does, that's a big, big upside of time fun video because Jens noted is a fifty billion dollar market and if they're allowed to ship a derivative of the newest chip their market share that should be enormous because there is nothing in China that even can remotely compete with what Nvidia has.
Fifty four billion dollar forecast for physical thirty culture and not even fracturing in China.
And Daniel pilling A sounds capital. It's great to have you on.
All about Nvidio, But there are several of China's big tech names also reporting earnings this week, including Ali Baba. Now, the company has been stepping up it's AI efforts since Chinese firm Deep Seat released its own R one model. Remember Blomberg's Isabelle Lee joins us. Now this stock has been on a tear this year at some forty two percent. What more can it give in terms of where it is on AI and cloud?
I think it's like everything in tech, investors just want more and more and more, and even if you beat, it's still not enough. So for Alibaba, there's later to report on Friday, and they're likely to really highlight their AI strategy. But if you look at their peers, ten Cent and by Do, they're likely to kind of disappoint because it's really going to struggle or it may struggle to show how it's big investments in AI will be
paying off. I mean, these companies ever since the chat gip they came into the picture, they've invested billions of dollars in AI, They've rolled out their llms, they've infused therm flag your products with that, but making money has been hard. Why because analysts are saying that Chinese users, unlike Western counterparts, are reluctant to spend on premium paid subscription models.
What's also interesting is just everyone's trying to get on every other game. They will want to be like the megaaps to a certain extent, and you have a super ropp with may Twon for example, that the phase competition in food delivery, so.
That too, and then I feel like if you look at, for instance, the ten cents earning this month, they showed revenue from that business including selling a services going more slowly. By Do also when it comes to the cloud business didn't expand fast enough, so I feel like, how will you improve to your point? And if you look at the contribution of AI, it's really going to dampen the gross outlook of Alibaba, I mean, and it comes at a time where their e commerce business is kind of
struggling compared to the arrivals. Consumption in China still remains weak even as the economy slightly improves. So really lots of moving parts for Alibaba. But in relation to Nvidia, yesterday, we do have Bloomberg Intelligence saying that despite uncertainty over Invidia's ability to provide H twenty chips, all these three Alibaba, ten and by Doo are still well positioned, at least in the medium term.
In begs as Vali, we love our breaking it down, thank you.
Let's stick with Chinese firms, but shift gears to the automotive industry. Hong Kong shares of electric vehicle maker byd fell yesterday concerns about possible decreases in exports after Mexico announced plans to tariff China.
For Let's bring in. Bloomberg's Craig Trudell so.
BYD on the day had had some issues around maybe accessing Mexico, but boy, their sales in Europe going well, what were they were up threefold while Tesla actually saw sales drop forty percent.
Yeah, we've seen BYD really put a dent in the European car market and take advantage of the softness for Tesla, maybe be a sort of factor in that softness where you know, it's not been uncommon now for BYD to actually outseell Tesla in this region, which would have been unthinkable even just a year ago. This was a company that was really sort of taking off in its home market, and yet overseas sales it's still had a long way
to go. So we've seen some progress on the export business, I think we have seen maybe a little bit of a slowdown and some softness at home, And that's been the real story this year where you know, for all the sort of continued growth that we've seen out of BYD, there's some real questions starting to emerge about can they hit the full year sales figures that they were expecting for twenty twenty five.
Yeah, because what they've already sold two point one five million in the first half of the year, but that's only a less than forty percent of what they're aiming to do for the full year, so having to discount in some ways.
Yeah, and I think it's really an ironic story in China, right where you've seen so much state support for this industry, so much attempts to sort of foster this really competitive auto industry and particularly ev industry, and yet maybe we've seen sort of some overdoing of it. Right we have Chinese companies with by D maybe front and center, discounting
their lineup in really aggressive fashion. Concerns about suppliers not getting paid in a timely manner, and you know, maybe some concerns too about you know, just how long this can continue if if we just see manufacturers, you know, aggressively discounting, at what point is enough enough? And do
we see some companies go out of business? So you've seen this kind of campaign in China and the part of the government to do away with the you know what people refer to as a price for and yet some real reluctance on the companies to sort of sort of take heed.
There most creature dell On BYD, we thank you.
We're also keeping an eye on Dell today.
The stock is climbing ahead of earnings release of its own after the close.
Mesters looking for signs that the company.
Will boost its forecast for AI server shipments has bring in blooming intelligence analysts reugin Ho regin is interesting that it's actually higher on the day when in video is down. Often they move in sympathy with one another. But we're expecting big things.
Yeah, so there's a good thing. There are a couple of things that's going on with Dell this morning. A relative not only for AI but also for PCs, right, you know, and video was more China related. Dell has no China exposure as it relates to AI servers, and I do expect them to report seven billion dollars in AI server revenues. They guide you to about fifteen billion. Street some of the bullcase on the street has guided
potentially guiding up to twenty billion. So that's the bogie that the street is looking for.
HP is an interesting read if you're thinking about PCs and HP had really resilient PC strength. It's about the AIPC apparently, and actually the commercial adoption of that seems to be holding things up as well as Microsoft's upgrade reigin is that how we read across from perhaps HP to Dell.
That's exactly it, so that that's the second tailwind for Dell. Let's keep in mind that Windows eleven upgrade cycle is actually going strong, and what we learned from the HP earnings, callers had only fifty percent of actually upgraded to Windows eleven, So that means we have an elongated Windows eleven cycle that's going to benefit Dell. How eighty percent of their revenues come from commercial PCs, and those are the customers who need to upgrade, and Dell should be a beneficiary
from that upgrade cycle. And the PC business actually actually has been more resilient. So HP results essentially tell us that downside risk on the PC might be limited, at least for the near term.
The thing with Dell is everyone's very bullish on it. We've got twenty two buys across the analyst zero cells, and actually the price is pretty close to overall consensus price targets. How much is already baked in to a good set of numbers. Yeah, so.
From well, let me tell you how much is baked in? I think from a valuation perspective, fourteen times forward earnings. If you look at Hpe, which is another enterprise IT company, they're own trading around eleven times. So there was a lot of good news baked into the shares from evaluation standpoint, so sales upside is expected. Now I will want to cautions some people heading into the print. There are a
couple of red flags. Other enterprise IT companies are not benefiting from an uptick and spending net APP report the last night, New Tanics, Cisco a couple of weeks back, they all cautioned US federal spending as being weaker than anticipated. Keep in mind that Dell has roughly about three percent sales exposure to the US FED. So if there is any pocket of weakness, that could be one and a yellow flag that I want to raise to investors heading into the print.
So, Sarah, thank you, Lujin Hove, Senior analyst, Rubag Intelligence, so appreciate having you on. Let's get back to the key story of the day. Though it is in video the world's most valuable company, but there are other companies around it that tell us the hardware versus software story.
Let's bring in Bloomberg Intelligence Senior analyst man Leep saying, Look, when we're anticipating Dell doing very well on AI servers, this just speaks to the strength of AI adoption that some are perhaps sleeping on a bit today.
When it comes to in video's numbers.
Yeah, and look, I mean when you look at the overall ecosystem. You know, this quarter we saw Microsoft Azure growth accelerating to thirty nine percent. Now Snowflake and Mango deb outperforming. Just when you connect the dots, you can see if Microsoft's AI consumption is going up and it's reflecting in their cloud numbers, who is the user of that cloud consumption. It's your Snowflake. And so from that perspective,
you know it's all intertwined. Dell doing well, Microsoft deploying that on their clouds, Snowflake actually seeing an increment in their product growth because companies are deploying more AI agents. So you can see how the ROI question is getting answered. When it comes to that aispan, It's like the.
Whole food chain, isn't it. You've got the picks and shovels of the end video and then got the user of that. That's Microsoft that's going into then the use case of Snowflake talk us through the Snowflake numbers. Because the shows are more than twenty percent. It was clearly some anxiety built into these numbers that we were going to see competitors take a bit of an edge on a GenTech.
I mean, look, traditionally database businesses are very sticky. It's just right now we are in an environment for everyone is trying to figure out what gets disintermediated by llms and AI agents, and all the software companies were getting beaten up because everyone thought llms can do everything that these software products do. Well, guess what if you're trying to deploy an AI agent, llms don't have the data
that you want to customize your chat pot on. Snowflake does or you know, data breaks does, and that's where Mango dB does, and all these database companies are what you need to custom your chat pot experience to your particular use case. And I think that's what you are seeing in the numbers. You're seeing them sequentially outperformed.
I mean, can we look at Manga DV for a second.
Two days you pointed this out, it is almost fifty percent. It is the best two day run for the company on record. So they really managed to push back also on that m I narrative that perhaps people aren't getting any bang for the buck when it comes to using AI pilots as well.
When it comes to valuation multiples, what we have seen traditionally is companies that grow at thirty percent will trade at twenty times sales. But once that growth comes down below twenty percent, then multiple goes from twenty times to five times.
Wow.
So the multiple compression is always huge and software and that's why the top line growth is so important, I mean snowflake. Going back again to thirty percent plus growth, you will see a multiple expansion. It's not as if the story changed completely, but just the multiple that investors put on these companies growing over thirty percent versus under twenty percent, it's huge.
But let's go to say, then a multiple on Nvidia, it's not that high. If you're thinking about a Blend and Ford version of the price to earnings estimated price to earnings, it's one of like thirty three times.
Yeah.
And look with Nvidia, the biggest concern is it's not a recurring business. Although they are proving that. You know, they can keep releasing a new architecture every year and it becomes a recurring refair cycle when it comes to their data center chips. But that's the biggest I would say risk is Right now, they are growing over fifty percent. They said Hyperscalers will increase their CAPEX by fifty percent next year, so that translates into similar growth for next year.
But it's very hard to sustain that. I mean, do you think capex will keep growing fifty percent in perpetually? No, And if your largest customers are for Hyperscalers, then that's a big risk. And that's what you have to model for two years from now, three years from now.
Man Nave saying he's always modeling for us from Bloomberg Intelligence.
We thank him. That does it to this edition of Bloomberg Tech.
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