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China Orders Companies to Stop Buying Nvidia AI Chip · Bloomberg Intelligence

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  Speaker 2: Through China reportedly telling its tech companies stop buying Nvidia's
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  Speaker 2: AI chips. You know what, even canceled your existing orders
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  Speaker 2: here too. Talk about it as Man Deep saying, Bloomberg Intelligence,
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  Speaker 2: Global head of Technology Research, joining us here in a
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  Speaker 2: New York studio, Mandy, thanks for being here. Just how
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  Speaker 2: big a blow is this to in Vidia at this
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  Speaker 2: moment in time, given how much of its business is
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  Speaker 2: tied to China.
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  Speaker 3: Well, if you go back to the guy that Nvidio
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  Speaker 3: gave during their second quarter earnings, they sort of anticipated
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  Speaker 3: this that a lot of the China revenue may not materialize,
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  Speaker 3: even though they said it could be too to five billion,
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  Speaker 3: but the guide was almost de risk that they didn't
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  Speaker 3: include any of that. So from that perspective, it's not
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  Speaker 3: that big of a deal, and I think the stock
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  Speaker 3: reaction validates that. With that being said, they also said
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  Speaker 3: that the China GPU market is almost fifty billion dollar
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  Speaker 3: addressable market and it's growing at almost fifty percent plus
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  Speaker 3: growth rate. So when you factor in, you know, the
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  Speaker 3: multi year investment cycle we are in, and not being
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  Speaker 3: able to sell into China will be a big kind
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  Speaker 3: of factor in terms of if it continues, if it continues,
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  Speaker 3: and look, I think when I look at the biggest
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  Speaker 3: large ANDREID model companies, it's either in the US or
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  Speaker 3: in China, and those are the companies that need the
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  Speaker 3: Invidia chips for training their models. And so from that perspective,
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  Speaker 3: once they move away from Invidia, they're not coming back.
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  Speaker 4: Isn't this just a political football? And at some point
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  Speaker 4: President Trump and You're going to get together somewhere hashing
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  Speaker 4: all this out, including chips and TikTok and all that stuff.
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  Speaker 3: It sounds like Nvidia has been caught in that crosshairs
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  Speaker 3: when it comes to the US China deal. And clearly
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  Speaker 3: there is a lot of sensitivity around the use of
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  Speaker 3: their chips when it comes to you know, the data
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  Speaker 3: and how important it is for countries in terms of
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  Speaker 3: just how they're thinking through their AI strategy. So with
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  Speaker 3: that being said, look, I don't think there is an
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  Speaker 3: easy resolution here when it comes to the use of
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  Speaker 3: Nvidia long term for a country like China where clearly
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  Speaker 3: there are tensions, and I don't think even if there
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  Speaker 3: is a deal, the sensitivity around the data is kind
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  Speaker 3: of going back to where it was, you know, a
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  Speaker 3: few years back. That's why we have the TikTok deal
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  Speaker 3: and you know, what we are going through in terms
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  Speaker 3: of by edance having to give up ownership is because
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  Speaker 3: clearly the US doesn't want, you know, the data of
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  Speaker 3: the users to be stored in China or be accessible
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  Speaker 3: in some ways. So from that perspective, I think the
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  Speaker 3: data sensitivity is big, and chips are a big part
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  Speaker 3: of that.
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  Speaker 2: I'm glad you brought up TikTok, and since we have
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  Speaker 2: you here, I wanted to ask you about that. More
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  Speaker 2: details are now emerging. It looks like there may be
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  Speaker 2: a consortium right including Oracle, Silver Ac and recent Horowitz
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  Speaker 2: that may take over the US operations. But might there
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  Speaker 2: be a bitting more here in any talk as to
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  Speaker 2: how much they're valuing this company.
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  Speaker 3: So when we did evaluation a few months back, because
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  Speaker 3: this has been in the news, you know, for quite
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  Speaker 3: a while, we thought a good benchmark would be companies
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  Speaker 3: like Xai, Snapchat, Pinterest, Reddit, and so from that perspective,
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  Speaker 3: you know, TikTok Us assets will be valued at somewhere
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  Speaker 3: between forty two fifty billion. In fact, xas last valuation
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  Speaker 3: before you know Xai and ex merged the Twitter portion
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  Speaker 3: of it was valued at around thirty three billion, So
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  Speaker 3: from that perspective, it would be somewhere in that vicinity.
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  Speaker 3: But with that being said, you know, given the geopolitical
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  Speaker 3: aspects involved in this deal, Oracle seems to be the
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  Speaker 3: one entity that will likely be involved in buying the
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  Speaker 3: assets because it's running the TikTok back in infrastructure right now,
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  Speaker 3: So I can't imagine this deal happening without Oracle. The
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  Speaker 3: private equity players are silver Lake and Clearly and recent
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  Speaker 3: Horowitz and look, I mean, this would be among their
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  Speaker 3: biggest deals. Even if you think about that forty to
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  Speaker 3: fifty billion sort of transaction value, it will be quite huge.
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  Speaker 3: So I do think, you know, it's a valuable asset.
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  Speaker 3: But because of the geopolitical nature of this, there may
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  Speaker 3: not be a an entity among the Max seven players
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  Speaker 3: that would try and bid for.
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  Speaker 4: To pick up political football, right ye, yeah, exactly, So,
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  Speaker 4: I mean, but part of a deal. If this thing
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  Speaker 4: were to be spun out as a separate company, you'd
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  Speaker 4: have to ask all these little TikTokers out there to
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  Speaker 4: download a new app and all that kind of stuff
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  Speaker 4: that perceived to be a potential problem. Or is that not.
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  Speaker 3: Actually, if you had asked me that question one year back,
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  Speaker 3: I would have said yes. But now with generative AI,
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  Speaker 3: a lot of the systems are being rewritten. So when
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  Speaker 3: I think about TikTok's algorithm advantage, I feel it's somewhat
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  Speaker 3: offset by the fact that we have got all these
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  Speaker 3: new generative AI based recommendation tools and new things that
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  Speaker 3: are out there that companies that are looking to develop
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  Speaker 3: new AI apps are doing that natively using lllms. So
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  Speaker 3: if somebody was to rewrite the algorithm, they could do
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  Speaker 3: that now with all the LLLM tools that are available.
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  Speaker 3: That wasn't the case one or two years back, when
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  Speaker 3: TikTok really had an advantage with their algorithm. I think
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  Speaker 3: that's been somewhat offset.
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  Speaker 2: I'm a little confused. I don't know if you have
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  Speaker 2: any clarity on this, But say you're an influencer. Influencer
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  Speaker 2: who gets a lot of income from TikTok. Right, a
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  Speaker 2: lot of people do. If you have to download the
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  Speaker 2: new app, do all of your followers come along too?
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  Speaker 2: Is it just basically your your account but on a
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  Speaker 2: new app.
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  Speaker 3: In essence, that's true, and you get all the social graphs.
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  Speaker 3: It's just the recommendation algorithm changes. And guess what. Google
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  Speaker 3: Search changes their algorithm so many times in a year.
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  Speaker 3: They change their algorithm a lot, So what's the big
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  Speaker 3: deal if the algorithm changes, Look, it will impact the
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  Speaker 3: creators and how they're used to monetizing it. Wants a
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  Speaker 3: recommendation algorithm changes, but meta has changed it. Google Search
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  Speaker 3: changes it, So I don't think it will be that
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  Speaker 3: big of a deal. And that's why I think they
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  Speaker 3: are going in that direction where either they license the
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  Speaker 3: algorithm from by Dance or they rewrite their own algorithm,
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  Speaker 3: and I think both should be acceptable solutions.
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  Speaker 4: All right, here's the one I have to do. Every
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  Speaker 4: time I see it, My AI is going to kill Google.
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  Speaker 4: I'm not clicking on the links, Dude. If I put
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  Speaker 4: in a search query into Google, Google AI serves me
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  Speaker 4: up exactly what I want. I don't have to click.
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  Speaker 4: How's that changing their model? I'm not clicking.
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  Speaker 3: So you're right, the ten blue links has definitely changed.
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  Speaker 3: So the relevance of maybe in addition to AI overviews,
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  Speaker 3: the top two links has increased. And so because generative
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  Speaker 3: AI drives more engagement that you are going to ask
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  Speaker 3: a follow up question in addition to your first query.
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  Speaker 3: So instead of showing you ten blue links at once,
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  Speaker 3: they'll show you two blue links in the first one,
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  Speaker 3: two blue links in the follow up query. And even
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  Speaker 3: though you are interacting with the Google page a lot
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  Speaker 3: more than going to the publisher website, they will show
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  Speaker 3: you the top two links and charge more for those
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  Speaker 3: links to the advertisers. So clearly the model is changing
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  Speaker 3: and the algorithm is changing, but they seem to be adopting.
• 8:00
  Speaker 5: Go stay with us.
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  Speaker 4: More from Bloomberg Intelligence coming up after this.
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• 8:21
  Speaker 4: We're still looking at some earnings, even though it is
• 8:23
  Speaker 4: a FED day. General Mills is one of them. I
• 8:24
  Speaker 4: put out the Bloomberg Intelligence research, which is awesome. Now
• 8:27
  Speaker 4: I'm going down this rabbit hole where you can get
• 8:30
  Speaker 4: the earnings model for all these companies that the Bloomberg
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  Speaker 4: Intelligence and also put together right there on the terminal.
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  Speaker 4: I'm going down this rabbit hole. I'm changing scenarios and
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  Speaker 4: changing margins and all this kind of stuff to see
• 8:41
  Speaker 4: how the earnings are. So let's get back to it though,
• 8:44
  Speaker 4: Jano Roseide opinion. She covers a lot of these consumer
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  Speaker 4: stocks for Bloomberg Intelligence. Yan I talked to us about
• 8:50
  Speaker 4: General Mills here. How were their earnings recently?
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  Speaker 5: They were mainly in line with expectations.
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  Speaker 6: It wasn't that much of a surprise, but still, you know,
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  Speaker 6: the stock is a little bit on the south side.
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  Speaker 6: People expected better news than what they disclosed.
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  Speaker 2: Yeah, I mean North America sales came under pressure. What
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  Speaker 2: was the drag there?
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  Speaker 6: It was mainly on volume. We expected volume declines but
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  Speaker 6: not to the magnitude that they did. It was down
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  Speaker 6: four percent on organic on the organic part, so obviously
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  Speaker 6: consumers are still trading down. They are mentioning that, you know,
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  Speaker 6: about eight eight brands of theirs. It was positive, but
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  Speaker 6: it's still it wasn't enough for the whole segment two
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  Speaker 6: to pull through what.
• 9:41
  Speaker 4: Are they doing or what are they saying about tariffs
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  Speaker 4: and the impact on their costs versus maybe what they're
• 9:46
  Speaker 4: trying to pass along to customers.
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  Speaker 6: So they are upsetting some of the costs with cost
• 9:51
  Speaker 6: savings it's usually going to be. They expected to be
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  Speaker 6: about one to two percent of cogs this year, which
• 9:58
  Speaker 6: is a little bit lower than and for example, Campbell's
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  Speaker 6: expected they expected around four percent.
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  Speaker 5: So you know, they're not they're they do not want
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  Speaker 5: to raise prices.
• 10:10
  Speaker 6: They want to be competitive because obviously volume growth is
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  Speaker 6: not happening.
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  Speaker 2: So yeah, I mean, they're getting competition from more folks.
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  Speaker 2: I mean, on the one hand, they're they're benefiting from
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  Speaker 2: the fact that more people are eating at home, right,
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  Speaker 2: but yet when we're going to the supermarket, more people
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  Speaker 2: are choosing those private label brands.
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  Speaker 5: Correct, So do they do they talk.
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  Speaker 2: About that at all on the earnings call, And what's
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  Speaker 2: their sort of you know, plan of attack there?
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  Speaker 6: Yeah, So they're increasing marketing, They're they're hoping for innovation.
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  Speaker 4: Uh.
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  Speaker 6: They mentioned that twenty five percent of sales growth will
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  Speaker 6: come in North America retail will probably come from innovation
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  Speaker 6: this year. And this is what all everybody's trying to
• 10:49
  Speaker 6: get to the problem is. And that was mentioned on
• 10:51
  Speaker 6: the call as well, was that even the price increases
• 10:54
  Speaker 6: are not as significant as it used to be, they're
• 10:57
  Speaker 6: still high. So on a on a in a basket size,
• 11:01
  Speaker 6: you're still paying a lot more than the used to
• 11:03
  Speaker 6: two years ago.
• 11:05
  Speaker 4: Talk to us about store brands versus kind of the
• 11:08
  Speaker 4: the brands we all grew up with. Here, tell us
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  Speaker 4: how that's changed over time. Our store brands are becoming
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  Speaker 4: a bigger, bigger part of the average cart.
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  Speaker 6: Yes, well, retailers are investing more on their private label.
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  Speaker 6: It allows them to bring people into the store. Some
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  Speaker 6: of the brands.
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  Speaker 5: Are have a cult following. I will say, hello, Costco.
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  Speaker 6: So exactly, so people are going to the store to
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  Speaker 6: buy that particular brand. They're more profitable than national brands,
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  Speaker 6: so obviously they're still incentive for retailers to deploy some
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  Speaker 6: of that some of their own brand.
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  Speaker 2: I think some people think it cheek to buy private label, right, Well,
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  Speaker 2: we're at like a badge of Honor's certainly.
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  Speaker 4: I was shocked at the price differential.
• 11:53
  Speaker 2: Yeah, because they have that pricing power right These stores
• 11:56
  Speaker 2: to you know, make their products a lot more attractive,
• 11:58
  Speaker 2: really quick, blue Buffalo, it's their food. I was surprised
• 12:01
  Speaker 2: to see that that that was not a leader for them.
• 12:04
  Speaker 6: Yeah, so Wilderness was not is not doing as well
• 12:08
  Speaker 6: as they are hoping. Dog food in general has been
• 12:12
  Speaker 6: ahead wind, not only for them but also for the
• 12:15
  Speaker 6: overall industry. Cat food seems to be the leading indicator here,
• 12:22
  Speaker 6: which is surprising.
• 12:24
  Speaker 2: But cat food is outpacing dog food.
• 12:26
  Speaker 5: Yes, correct, We have seen this for the past year.
• 12:30
  Speaker 3: Going on.
• 12:33
  Speaker 2: John Tucker, how to chime.
• 12:36
  Speaker 4: Food.
• 12:36
  Speaker 6: Well, there seems to be a growth in the cat
• 12:40
  Speaker 6: population more than the dog population.
• 12:42
  Speaker 4: Wow. Interesting?
• 12:43
  Speaker 3: What have we had?
• 12:44
  Speaker 4: A good retail sales number yesterday, better than expected. Are
• 12:47
  Speaker 4: your companies the consumer protus companies? What are they saying
• 12:50
  Speaker 4: about the consumer? Yeah?
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  Speaker 6: Like I said, they're looking for value. They're still seeing
• 12:56
  Speaker 6: their budget as a whole rather than the price increase
• 12:59
  Speaker 6: or decrease. They're looking for price cuts wherever they can,
• 13:05
  Speaker 6: and they're willing to trade down for it.
• 13:07
  Speaker 4: Stay with us more from Bloomberg Intelligence coming up after this.
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• 13:27
  Speaker 2: More details are emerging now on the US China TikTok deal.
• 13:32
  Speaker 2: We know it is an app that nearly half the
• 13:34
  Speaker 2: country has one hundred and seventy million Americans. What might
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  Speaker 2: that deal look like? What are some of the hurdles.
• 13:39
  Speaker 2: Let's bring in Matthew schettenhaulm Bloomberg Intelligence media litigation analyst.
• 13:44
  Speaker 2: He is joining us from Washington, d C. So Matthew
• 13:47
  Speaker 2: just tell us sort of where do things stand right now?
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  Speaker 2: We know that there might be this consortium that would
• 13:51
  Speaker 2: take over the US TikTok, but might there be other
• 13:56
  Speaker 2: bidders here?
• 13:57
  Speaker 3: Yeah?
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  Speaker 7: So I think we're finally seeing progus here for the
• 14:01
  Speaker 7: first time. As you know that the Congress passed this
• 14:04
  Speaker 7: law last year, the Supreme Court upheld it in January.
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  Speaker 7: It was supposed to take effect and effectively ban TikTok
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  Speaker 7: on January nineteenth, and President Trump has granted extension after
• 14:17
  Speaker 7: extension to prevent that from happening. I think this is
• 14:20
  Speaker 7: the first sign of real progress. It sounds like there
• 14:24
  Speaker 7: are you know, two or three bidders involved. And the
• 14:27
  Speaker 7: potential framework for a deal that potentially could be announced
• 14:34
  Speaker 7: as early as tomorrow.
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  Speaker 4: Well, you know, I think, well, I certainly forgot that
• 14:38
  Speaker 4: TikTok passed the law and says, hey, you either got
• 14:40
  Speaker 4: to divest this thing or shut it down. I mean,
• 14:43
  Speaker 4: Congress is involved here. So whatever deal eventually gets done,
• 14:47
  Speaker 4: it has to kind of a huge of those requirements
• 14:50
  Speaker 4: by Congress, doesn't.
• 14:52
  Speaker 7: Yeah, I mean that's right. This isn't This is not
• 14:54
  Speaker 7: the way the law typically works usually, you know, Congress
• 14:58
  Speaker 7: passes the law, that law is still on the book
• 15:00
  Speaker 7: looks and as of January nineteenth, TikTok is supposed to
• 15:03
  Speaker 7: be banned, and yet it's continued to operate because President
• 15:08
  Speaker 7: Trump's Department of Justice has sent letters basically saying don't
• 15:12
  Speaker 7: worry about it. So that raises the question how much
• 15:14
  Speaker 7: is the law going to matter with respect to this deal?
• 15:18
  Speaker 7: Because Congress specifically addressed what sort of divestiture should happen
• 15:24
  Speaker 7: under this arrangement. One of those terms says that byte
• 15:27
  Speaker 7: dance can't control the new entity. I think they can.
• 15:31
  Speaker 7: They can address that by keeping Byteedance's interest below twenty
• 15:34
  Speaker 7: percent in the new entity. But the second one might
• 15:38
  Speaker 7: be trickier, and that goes to the operation of the algorithm,
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  Speaker 7: which is TikTok's secret sauce. The law that Congress passed
• 15:47
  Speaker 7: said that there can be no operational relationship, no cooperation
• 15:53
  Speaker 7: between byte Dance and any new entity. And that's going
• 15:57
  Speaker 7: to be the really interesting thing to watch as these
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  Speaker 7: deal terms come out. How are they addressing the algorithm
• 16:04
  Speaker 7: going forward and how will that change TikTok as we
• 16:07
  Speaker 7: know it?
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  Speaker 2: And Matthew, one of the stipulations I read is that
• 16:11
  Speaker 2: the US government would have a seat on the company's board.
• 16:14
  Speaker 2: This is not common, right, I mean this usually see
• 16:17
  Speaker 2: this when the government has to come in an emergency situations,
• 16:19
  Speaker 2: maybe there's a sponsored bailout like we saw during the
• 16:22
  Speaker 2: two thousand and eight financial crisis with some of the
• 16:24
  Speaker 2: insurers and the auto companies.
• 16:25
  Speaker 5: Do you think if the US.
• 16:27
  Speaker 2: Gets a seat on the board, it gets a seat
• 16:29
  Speaker 2: on the board, you know, forever. It's not a temporary situation.
• 16:33
  Speaker 7: All of this is is sort of unprecedented, so you know,
• 16:37
  Speaker 7: it's possible that this is sort of just a temporary solution.
• 16:44
  Speaker 7: It's also possible that it lasts longer than that. We're
• 16:47
  Speaker 7: sort of making it up as we go here in
• 16:50
  Speaker 7: terms of the law, and so it's very difficult to
• 16:53
  Speaker 7: say exactly what shape a deal like that takes and
• 16:57
  Speaker 7: how long any of it endures.
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  Speaker 4: So what are next steps here, matt from your perspective.
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  Speaker 7: Yeah, so yesterday President Trump again issued an extension. The
• 17:07
  Speaker 7: law was set to again take effect and effectively ban TikTok.
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  Speaker 7: His extension extends it through the middle of December, and
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  Speaker 7: so that gives some breathing room now to make this
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  Speaker 7: deal happen. Of course, he could just kick it, kick
• 17:23
  Speaker 7: it down the road again if the deal doesn't happen.
• 17:26
  Speaker 7: So it sounds though, like there are there's real progress
• 17:29
  Speaker 7: on a framework for a deal, and so I think
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  Speaker 7: we should learn more details about it tomorrow and the
• 17:36
  Speaker 7: day after and potential for a deal that actually resolves
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  Speaker 7: this issue and is a genuine divestiture from byteedance as
• 17:45
  Speaker 7: Congress intended. This may end up actually working out as
• 17:47
  Speaker 7: Congress intended it to work at the end of the day.
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  Speaker 2: Matthew, I think you hit it earlier when you were
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  Speaker 2: talking about the algorithm being, you know, the special sauce,
• 17:54
  Speaker 2: the most lucrative part of any deal. To be clear,
• 17:57
  Speaker 2: do we know. I mean, the US would not be
• 17:59
  Speaker 2: out right buying this algorithm, may be licensing it at
• 18:02
  Speaker 2: the end of the day, right.
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  Speaker 7: Yeah, that's what it sounds like from some of the
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  Speaker 7: reporting on the deal. And there's the potential that that
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  Speaker 7: would be consistent with what Congress intended. What the law
• 18:15
  Speaker 7: bars is an operational relationship and cooperation with respect to
• 18:21
  Speaker 7: the algorithm. So the work around here may be a
• 18:24
  Speaker 7: licensing of the technology and saying the US entity gets
• 18:29
  Speaker 7: to do all the work on that algorithm. But it's
• 18:32
  Speaker 7: really curious about the details of how that will work
• 18:35
  Speaker 7: as a practical matter, whether that's consistent with the law,
• 18:39
  Speaker 7: and maybe the biggest question of all, whether anyone's going
• 18:41
  Speaker 7: to stand up and insist that the law befollowed.
• 18:44
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  Speaker 4: M