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- [01:43]
Malcolm Gladwell
Radio News this is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg businessweek Daily podcast with Carol Massar and Tim Stanweck on Bloomberg Radio.
- [02:09]
Carol Massar
Well, Israel said it killed Iran's security chief that in an overnight attack intensifying a region wide war that shows no signs of abating. And we are well into our third week. President Trump earlier today from the Oval Office referred to that action. He also talked more broadly about the US War in Iran, including timing. He talked around noon Wall street time today.
- [02:31]
Mandeep Singh
We're not ready to leave yet, but we will be leaving in the near future. We'll be leaving in pretty much the very near future. But right now they've been decimated from every standpoint. And again we've had great support from countries in the Middle east. Great support, but we've had no support from, essentially no support from Naito.
- [02:54]
Carol Massar
And that of course is President Trump earlier today from the Oval Office with more on what's going on we want to head first of all to Jerusalem and to Bloomberg News Jerusalem journalist he is Dan Williams. Where it is later there, of course, in Israel. Dan, good to have you here with us. Glad we could check in with you. Glad to see you are still safe. There's so much going on. What do we know about this security chief in Iran that was said to be taken out?
- [03:19]
Dan Williams
I think it would be fair to say that he was the de facto, at least publicly available, ruler of Iran after Israel and the United States in the early hours of this war on February 28 killed the supreme leader, Khamenei. As everyone knows, Khamenei was officially succeeded by his son Moshtaba. But that man has not been seen in public. He is rumored to have been injured in that in an Israeli strike or a US Strike. And indeed Trump, the US President, has even speculated that might not be alive. By contrast, Ali Lari Jenny, a veteran member of the national security echelon in Iran, was available for interviews. He made televised statements and even marched in an annual parade or an annual march on Friday in Tehran as a sign of his defiance. It's possible that as a result of that public appearance, he enabled the Israelis to tag him and track him and ultimately kill him overnight.
- [04:20]
Tim Stenovec
Dan, obviously it sends a message to the that Israel and the US View the leaders as they are right now. But I'm wondering, with the killings of the top brass in Iran, who is left to actually be the leader of the country?
- [04:38]
Dan Williams
Well, if you ask the Israeli or US leaders about this, that would be the Iranian people, the Iranian public, they said at the outset of this war that the secondary objective, the initial objective was to degrade, destroy Iranian capabilities, namely ballistic missiles, what remains or remained of the nuclear program and in the case of the US also the Iranian navy in order to enable maritime traffic free of Iranian harassment in the Gulf. A secondary role or a secondary objective was to create a space, as they put it, for the Iranian people to take over control of that country. Israel assesses that 70 to 80% of the Iranian populace oppose this regime or have opposed this regime. And while that is hard to assess objectively, certainly from outside, just two months ago we saw protests sweeping Iran and a very brutal crackdown by the Iranian state. So the official line is that the allies are seeking to destroy that regime and embolden to the extent possible or create the conditions to the extent possible that will enable protesters to come back and the streets and actually give that regime the final push required to topple it and replace it.
- [05:58]
Carol Massar
Dan, we're going to talk more about Iran in a segment right after you. What I want to ask you though about in terms of Israel, the foreign minister earlier said the war is effectively, quote, already won, but vowed to, quote, continue till the point the mission will be completed. What exactly is Israel's mission? And I got to ask you, when we talk about backing and what people and citizens want, what do the people of Israel want? Are they still backing their prime minister? Will they still him after all of these conflicts are over?
- [06:28]
Dan Williams
Well, that's an excellent question. I think while the allies, at least at the level of their leaderships, their militaries are very much in sync about the objectives here, they say they speak repeatedly and in fact, the US Military has compared or described the Israeli air force as a peer air force to the US Air. So it's being brought into the region. Quite an extraordinary statement for the US power, this dominant power in the world, to be speaking about what is basically a region power in the form of Israel. Nevertheless, the Israeli public, to judge by polls, unlike the American public, are broadly in support of this war. This war has not found popularity among the American. Among Americans, there's a very good reason for this. One is geographical distance. Americans are on the other side of the world. Israelis are in the region, feel directly threatened by Iran, not just by its statements but its actions, including the support of proxies such as Hamas, which Israel has been battling for two and a half years, albeit in a state of ceaseful cefar. Right now in Gaza, a fairly fragile ceasefire, but a ceasefire nonetheless. Hezbollah in Lebanon where there has been an eruption of violence, there have been also reining backed militias in Iraq and in the past in Syria and currently in Yemen as well. So the Israelis would appear to be seeing this as the crowning, the crowning battle or the last war of this multi front campaign that's really in its third year now.
- [07:53]
Carol Massar
Dan, 20:32. But do the people of Israel still back their prime minister who was on shape? Yeah, go ahead.
- [08:00]
Dan Williams
He his approval ratings have improved given his conduct of recent policy issues, I believe, including this war. There is an election later this year. I think that's the ultimate plebiscite because no matter his successes and there have been successes regionally on the battlefield. They will remember the October 7th attack which began this multi front campaign, a disastrous attack for Israel which happened on his watch.
- [08:23]
Carol Massar
Dan, so appreciate it. Please stay safe. Please be well. Bloomberg News Jerusalem journalist of course there in Jerusalem in Israel. All right, so that is our view from Israel. Let's get to a view on Iran.
- [08:36]
Tim Stenovec
Back with us, Alice Batanka, senior fellow at the Middle East Institute specializing in Iran. He's also Senior Fellow of Middle east studies at the U.S. air Force Special Operations School and teaches as an adjunct at right Pat Air Force Base. He's the author of several books, including the Battle of the Ayatollahs in Iran, the United States Foreign Policy and the political rivalry since 1979. He joins us from Washington, D.C. i want to just pick up where we left off with Dan and the killing of this latest figure in Iran, where does that leave the country in terms of leadership right now?
- [09:13]
Alex Vatanka
Tim, obviously, is a pretty big news. Ali Laura Jordi is a figure that anybody who's been watching Iran knows has had one or another political, senior political role for pretty much as long as the Islamic Republic has been around 47 years. And he most recently returned as the head of the Supreme National Security Council back in August of last year with his sole job as trying to sort of coordinate best policies as they right after the 12 Day War. And now he's gone, most likely, although I haven't seen Iranian official confirmation, but he's probably gone. And I don't think we should underestimate what that means. It's pretty significant, at least a psychological blow. But I would be surprised if it's quickly replaced. I mean, the regime is still able to put people in position, senior positions, at least for now, whether that means that those are the best people they have or whether it just suggests that they want to show continuity, which is obviously very important for him, again from a psychological point of view, to show that they're not on their way out.
- [10:16]
Carol Massar
Alex, you know, Tim just turned to me and he says it sounds like whack, a mole. And it does. It feels like as soon as there you've reminded us the regime is not one person and that as soon as someone's out, they find somebody else. But having said that, not everybody is interchangeable and not everybody is a supreme leader. So I just, you know, I guess I keep wondering, Israel's Prime Minister Benjamin Netanyahu said in a video statement that his military is, quote, undermining this regime, meaning Iran, in the hope of giving the Iranian people a chance to remove it. Is it true? Has the regime been undermined and is this what Iranians want?
- [10:53]
Alex Vatanka
Well, Carol, there's no way to deny the fact that the regime is undermined massively. Certainly has never been under such amount of attack in his history. And I would also say, Carol, no doubt in my mind that the people of Iran, by and large, really want to see the end of this regime. Obviously, from their point of view, they want the regime to fall with minimum casualties, minimum damage to the country's infrastructure. But Islamic Republic in the eyes of many, are a political system that brought one crisis or disaster upon the nation after another going back to 1979. I mean, it made a host of bad decisions. You could go back to the taking over the U.S. embassy in November of 1979, provoking Saddam Hussein to attack Iran in September of 80. And I can go on, look, the regime is weak. It's not on its way out just yet. The big question, and I think that might answer partly what you were asking me, Carol, it's not just that the figures, all of them have to go. The question is, does Israel and the United States perhaps have it in him to accept so called pragmatic figures from within the regime emerge as possible candidates to take over? That kind of tallies nicely with what President Trump has been suggesting a number of times over the course of this war.
- [12:12]
Tim Stenovec
Who are, are there any of those figures that we know about? Have those figures been identified, Alex? Are there any names of people who might be pragmatic and acceptable to the United States and Israel?
- [12:25]
Alex Vatanka
Well, that's the big question mark. I mean, I can give you names, Tim. Let me give you a former president, Hassan Rouhani. For some, he might be just pragmatic enough to be able to change course, take the country in a different direction. Many others would oppose him, say, well, that's not going to solve much. He's been part of this system for from day one, so why go through all this trouble just to have someone like him in place? So really, I guess it comes down to how much appetite you have if you are US, if you are Israel, for this war to continue to get to a point where you say, I've eliminated all of them, or you say, well, I don't want to stay here for months and years. I want to have somebody who is sensible enough to compromise and I will then call it a day and move on.
- [13:06]
Carol Massar
You know, Alex, one of the things that we keep talking about as we look at this war now in its third week, and it's something that, you know, President Trump said earlier. He talked about the war in Iran. He said that everybody in the world should be thankful and that if he and his administration had not taken all the steps it has on Iran, including withdrawing the US from the landmark 2015 accord to curb Iran's nuclear program during his first term, that in his words, Iran, an unbelievable nuclear holocaust would have taken place. Is he right? Is this something that actually changes the trajectory of the region of perhaps Iran's role with the world?
- [13:47]
Alex Vatanka
Carol, that's a great question. I mean that was certainly the motive. That's how the president has tried to sort of, if you will, sell this to the American public from a.
- [13:56]
Carol Massar
But is it a sell or is it may be right?
- [14:01]
Alex Vatanka
Depends. Look, if the regime collapses in the sense that we can say Islamic Republic is no longer here, is no longer relevant, Iran has moved on, the region will move on, then I would say that's pretty, I mean, to end something that's been with us for 50 years in less than a month that I know the world is going through energy crisis, but it's still a significant success. But if the remnants of this regime stay with their thousands of drones and so forth and act like spoil is going forward, then the question becomes was this the wisest way to do it? Why the timing? Why rush into something? And all sorts of questions can be then asked, but obviously it's too early to judge. Let's see what, how long more this war goes on and what, you know, what any political transformation major one might come out of it.
- [14:45]
Tim Stenovec
You know, Joe Kent, the director of the National Counterterrorism center, resigned over the war with Iran. He claimed that Israel had misled President Trump into believing that the regime in Tehran posted an imminent threat. He said Iran posed no imminent threat to our nation. It's clear that we started this war due to pressure from Israel and its powerful American lobby. Those are the words of Joe Kent. Is he right that that this country posed no imminent threat to the U.S.
- [15:13]
Alex Vatanka
look, I certainly as an open source analyst did not see any Iranian intentions to attack the United States anytime soon. It just didn't have that capacity. But the point is, obviously the Israelis sit in a very different part of the world. So they have a very different perspective. They are much closer. And the regime in Tehran for decades vowed to destroy them. So they have a very different sort of sense of threat. When it came to the Islamic Republic. Another way of looking at this, Tim, is the Islamic Republic did not do itself any favors going back to 1979, not sort of looking for ways to, you know, if you will mend ties with the United States after hostage crisis of 79. So again, depends how you measure hostility. The intent was never certainly to be a friend or partner of the United States. Ali Khamenei, the last supreme leader, openly talked about, you know, getting the United states out of the region. So. But did I see an Iranian effort on the way to attack the United States? As I said, I certainly in my position did not see that, but I also didn't see then wanted to be friends with the United States if that makes sense.
- [16:17]
Carol Massar
Alex, thank you so much. Such a go to for us. Senior Fellow at the Middle East Institute specializing in Iran.
- [16:26]
Tim Stenovec
Stay with us. More from Bloomberg Businessweek Daily Coming up after this.
- [16:33]
Carol Massar
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- [16:49]
Ellen Wald
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- [16:50]
Carol Massar
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- [17:04]
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- [18:03]
Malcolm Gladwell
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- [18:19]
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- [19:09]
Malcolm Gladwell
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- [19:34]
Carol Massar
Taking a look at where we are in terms of the energy trade. WTI and Brent both are higher, but we're looking at them definitely off their top levels, highest levels of the session. Having said that, President Trump, he made a lot of comments earlier today from the White House in the Oval Office. He said that as soon as the war is over, oil prices will drop like a rock. He says it won't be long too, before cargo ships can move through the Strait of Hormuz.
- [20:02]
Mandeep Singh
I have a lot of friends from Ireland. They're very happy that I'm getting rid of a nuclear power, a nuclear terrorist. And as soon as that war is over, which will be soon, your prices are going to drop like a rock. You watch.
- [20:17]
Carol Massar
All right. We will be watching. We are watching President Trump, of course, earlier today from the White House. As for oil, as we mentioned, it is higher off its best levels of the session, but we do know Iran has continued attacks on energy infrastructure around the Middle East. And then of course, we talked earlier with our own Dan Williams from Israel how Israel has killed senior Iranian officials. We want to get another check on the energy markets because the longer this goes on, we think about short term but also longer term impacts. Dr. Ellen Wald is back with us, president of Transversal Consulting, senior fellow at the Atlantic Council, author of Saudi Inc. Once again with us from Boca Raton, Florida, Ellen, is President Trump. First of all, great to have you back back. We love talking with you. Is President Trump correct that as soon as the war is over, oil prices will drop like a rock?
- [21:01]
Ellen Wald
Oil prices will definitely drop when the war ends. And it's clear that shipping can resume, but we're not going to return to the previous state of affairs immediately. And that's, that's very clear. First of all, there's going to be a huge backlog. We're going to need to see the stores of various products, crude oil, but also various petroleum products be refilled. And then there's also the damage that's already been done that has to be contended with. For example, Iran landed its first hit to an oil and gas field in the uae, we don't even know how the extent of the damage, how long it might be offline when it comes to LNG and natural gas prices in the LNG trade, it's going to take Qatar at least a month to get, just to get its facilities back up and running. So there's going to be some long term reverberations of this. And so while crude oil prices and futures may definitely drop, we're definitely, certainly not going to see, you know, return to everything as, as usual.
- [22:02]
Tim Stenovec
Yeah, I'm looking at futures many months out at this point and we're still, if we go to December of this year, Alan, for WTI, traders are still betting that's going to be $76.25 per barrel and that's a price that we hadn't seen in years until earlier this month. So at least the way that traders are thinking about this, they're not looking at this either they're not looking at it ending anytime soon or they're looking at the repercussions of this extending far beyond, quote, dropping like a rock.
- [22:31]
Ellen Wald
Absolutely. I mean, it depends what dropping like a rock means. Does dropping like a rock mean that prices will be back, you know, in the 80s or 70s? Yeah. Does it mean they'll be back? You know, we'll see $50 oil which is what Trump claimed we were going to see right after, you know, the, the Venezuela, you know, debacle or the Venezuela victory, whatever side you're on, you know, I'm not sure that we're going to see that. We will definitely see a drop simply because is that danger presumably will be removed. But the long term repercussions are going to be felt for a long time. I mean agriculture, just backlog of products, this is going to take some time to unravel.
- [23:09]
Carol Massar
So talk to us about those longer term implications. When you say it's going to take a while, how long, Alan? Are we talking a few months? Are we talking six months? Are we talking a year?
- [23:19]
Ellen Wald
I mean, I think that the markets are incredibly resilient at, you know, rerouting things. So I think that we will see markets take the most efficient and best ways to sort things out. But the real test is going to be the extent of the damage. How long is it going to take to get these oil facilities? We don't know how much more is going to be damaged. We're still in the phase of Iran has the capability to destroy and damage oil production in its neighbors and we don't know how much, you know, how Much more damage it's going to do. The more damage it does, the longer it will take to, you know, to recover from this. So, yes, six months, I say is probably a minimum.
- [24:01]
Carol Massar
What's more problematic, some of those other Middle Eastern targets or, you know, oil operations in Iran. And I only bring that up because the President did reiterate that the US could knock out oil on Carg island, adding that it hasn't done so yet because of how long it would take to rebuild it nation previously bombed military targets on the key Iranian export hub, but spared its oil infrastructure. If indeed that happened, what would that do to energy markets short and longer term?
- [24:30]
Ellen Wald
So I think that energy markets are really operating in general without accounting for Iranian oil. So if all Iranian oil is off the market, I don't think that that's going to push prices up all that much because. Because, you know, it's really just China that is buying Iranian oil anyway. So, you know, China is probably going to buy more Russian oil to account for a loss in Iranian oil or it will buy oil from elsewhere. It would be great to have that oil available for the market and also for Iran when it's in some kind of rebuilding stage. But if that oil is off the market, I don't think that is going to have the biggest impact.
- [25:08]
Malcolm Gladwell
Ellen.
- [25:09]
Tim Stenovec
You know, I. If we are indeed, and we are a net exporter of oil, I think a lot of people have this misconception about what it means to be energy independent when a conflict many thousands of miles away that cuts off 20% supply of the world's oil has such dramatic effect on West Texas Intermediate. Can you explain that connection for people?
- [25:31]
Ellen Wald
Yeah, exactly. I mean, oil is a global commodity and it's priced globally. So even though we don't really import all that much from Persian Gulf countries at the moment, what happens anywhere to oil impacts the price at home. Now, that doesn't mean that we're going to see shortages. I don't think we are in danger of seeing shortages of any sort. But because most of the price of gasoline is the price of the barrel of oil, we are impacted by the fact that, you know, when prices rise because of any kind of global incident, we are going to feel that at home.
- [26:06]
Tim Stenovec
Is there a way, though, for the US to become more energy independent if we do, in the words of the president, drill more here in the United States? But. Or is the challenge, you know, the oil that we extract here, the oil that, you know, maybe we'll get from Venezuela, is not necessarily the oil that we are should we can be using or we can be refining.
- [26:28]
Ellen Wald
Right. I think that the best way to insulate the United States from the kind of price fluctuations that we're seeing is actually to become more oil interdependent. And I think that we do that by strengthening our connections within North America. One of the biggest reasons why we aren't feeling these impacts beyond just in the price of gasoline and the price of diesel, is that we have such a great interface with Canada. Most of our oil imports right now actually come from Canada. And so if we can strengthen our interdependence as, as part of the North American oil ecosystem, then we are either even better insulated. The other way to do that is to do more refining and to produce more diesel here in the United States, produce more gasoline. California, for example, can only use gasoline that is produced and refined in California. Well, that needs to change or California needs to have more refineries. The more that we can have our own refineries and the more that we can do that, the better insulated we can be in from global issues. And also the more we can help assist. You know, I mean, we, we started this war in a sense, and we have the capability to assist other countries that are more impacted by it. And if we produce more at home and we produce more products, we can help other countries more by exporting.
- [27:50]
Carol Massar
Ellen, you mentioned Canada. I don't know if you've seen any of the stories over the last year, but we're having some troubles with that relationship, certainly with this White House. Having said that, I do think about the administration and how they do think about national security, and that includes energy security. Does this somehow grease the wheels, no pun intended, in terms of that relationship, the US And Canada, to kind of figure out something a little bit more constructive?
- [28:16]
Ellen Wald
I think it absolutely should, because the better relations we can have with Canada, the more ease of transportation, of goods, services, but also the things that we need to, you know, build oil infrastructure will be better. Canada really has no choice but to export a lot of its oil through the United States. The United States technically imports that oil, and then a lot of it is also exported or used in the U.S. now they do have the option to export, you know, via ports in Vancouver. But the more that we can work with Canada and build more infrastructure and do more exchanges, the better those relations will be and the more flexibility we'll have in terms of gasoline and energy prices in general.
- [28:59]
Carol Massar
One distinction I want to make, because we have a great story out on the Bloomberg too, about just reminding us that US diesel rose above $5 a gallon for the first time since December of 2022 because of what we are seeing, the surging oil prices amid the war and disruption in the Middle East. We talk about diesel, its role in freight, agriculture, construction industries. And so everybody's kind of trying to to juggle and manage that. What do we need to understand? I mean, we talk about energy as this bucket, but there are different pieces within that bucket.
- [29:30]
Ellen Wald
Absolutely. And one of the reasons the diesel prices are surging is because we didn't have a lot of diesel in storage. And so we haven't had that cushion to kind of fall back on. Whereas in terms of gasoline, we have have more, we had more in storage. And so we have more cushion to fall back on. But rises, increases in diesel prices are really what reverberates throughout the economy. And that's really where we will see the where, you know, people who aren't buying diesel gasoline might not necessarily feel it at the pump, but diesel is what's used in trucking. It's what's used in construction. And so we will feel those increases in other ways in the economy, increases in grocery prices, for example, and other goods that need to be transported. I mean, our trucking is, I would say, the lifeblood of this country. I mean, everything is transported via trucking, essentially. And so we're going to feel that in the economy in a variety of ways.
- [30:25]
Tim Stenovec
Yeah. And I think Carol of complicated time, to say the least for a midterm election, but would think right for an administration that has been so focused on affordability. Dr. Ellen Wald, always great to see you. Thanks so much for joining us on Bloomberg businessweek Daily. Ellen Wald is president of Transversal Consulting. She's senior fellow at the Atlantic Council. She's the author of Saudi Inc. Stay with us. More from Bloomberg businessweek. Dan Daily Coming up after this,
- [30:55]
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- [31:55]
Malcolm Gladwell
Malcolm Gladwell, host of the podcast Smart Talks with IBM. I recently sat down with IBM's chairman and CEO Arvind Krishna, and I asked him how can companies use AI to its fullest potential to create smarter business?
- [32:10]
Arvind Krishna
My one advice to them Pick areas you can scale. Don't pick the shiny little toys on the side. For example, if anybody has more than 10% of what they had for customer service 10 years ago, they're already five years behind. If anybody is not using AI to make their developers who write software 30% more productive today with the goal of being 70% more productive.
- [32:42]
Public Ad Narrator
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- [32:42]
Malcolm Gladwell
Wow.
- [32:43]
Arvind Krishna
So we are not asking our clients to be the first experiment on it. We say you can leverage what we did. We are happy to bring out all our learnings, including what needs to change in the process. Because the biggest change is not technology. It's getting people to accept that there's a different way to do things.
- [33:01]
Malcolm Gladwell
To listen to the full conversation, visit IBM.com smarttalks. This podcast is brought to you by Wise, the app for international people using money around the globe. When it comes to sending money abroad, many providers claim to offer free fees and competitive rates. But don't be fooled, this can be code for inflated exchange rates. With the Wise account, you can send, spend and receive money in over 40 currencies without ever having to worry about hidden fees. Sending pounds across the pond. Most transfers arrive in 20 seconds or less. Spending reals in Rio the Wise Travel Card gives you the mid market rate on every purchase. No costly markups on your bill. Getting paid in dollars for your side gig. Avoid hidden fees and get the real exchange rate every time. With 24. 7 access to live support, your international transactions with WISE are quick, transparent and safe. Plus, WISE runs over 7 million daily checks to catch and prevent fraud. 15 million people already trust WISE to manage their money internationally. Be smart, Get Wise. Download the Wise app today or visit wise.com Terms and Conditions apply. This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at 2pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our first flagship New York station. Just say Alexa play Bloomberg 11:30 well,
- [34:30]
Tim Stenovec
it is day two of Nvidia's developer conference in Nvidia GTC is what it's called. It's happening in San Francisco. Nvidia CEO making some comments right now at a press conference, he says. This is Jensen Huang. He says buybacks dividends to be a very large number. He also says that Grok, that's Grok with a Q, not Grok with a K, as Ed Ludlow talked to us about Yesterday, could add 25% to data center opportunity. Some other headlines include HP announces that HP grid is powered by Nvidia.
- [35:02]
Carol Massar
On those buybacks, he says this sees the shift to buybacks dividends in the second half. Okay, so a little bit more in terms of that.
- [35:09]
Tim Stenovec
Let's bring in Mandeep Singh. He's Bloomberg Intelligence Global head of technology research. He joins us here in the Bloomberg Interactive Brokers studio between the 4 and 5 o' clock hour. Yesterday, Mandeep, after markets closed, this slew of announcements came out about different partnerships that Nvidia had with different companies. That happens every few months at these GTCs, whether it's in San Jose in March or back in October, I believe in Washington D.C. what are the most important partnerships that have been announced?
- [35:37]
Mandeep Singh
I mean, look, they're trying to expand the ecosystem and they want to convey to this street that it's not just about the data centers, but also about autonomous vehicles. With the Uber and Lyft partnership and actually those stocks were up today. So physical AI is a big theme for Nvidia. And their whole thing is we are a systems company. Don't treat us like a chip provider who is just supplying the GPUs. Okay, we do end to end systems,
- [36:06]
Tim Stenovec
but how much do they make from just the chips versus how much they make from these other markets?
- [36:11]
Mandeep Singh
I mean, right now it's all data center driven.
- [36:13]
Alex Vatanka
Exactly.
- [36:15]
Tim Stenovec
And the idea is that they want to show that they there's this physical AI, these robots that are going to be folding our clothes and doing our dishes and that's going to be powered by Nvidia. You cover Uber and Left, you cover ride sharing. Is there a future there for Nvidia inside these cars?
- [36:30]
Mandeep Singh
I mean, it's a moonshot for me. And all these hyperscalers have moonshots. In the case of Alphabet, we know Waymo has paid off, but it took more than 10 years, you know, for that to get to a certain point. So from that perspective, I think it's still ambitious in terms of revenue generating opportunity. But look, I think that's what you can do as a CEO is to say that you have technology that is Pervasive. That is not too niche. And Nvidia has proven, you know, the fact that they're guiding to trillion dollars in revenue through 2027 is a testament to the fact that they have expanded the addressable market in a big way.
- [37:13]
Carol Massar
Address that number because we did see the stock pop in the aftermarket on and then it pulled back again and all of us were kind of like searching through and like reminding us about what they've said is was that a big upgrade in terms of their forecast or not really?
- [37:26]
Mandeep Singh
It certainly is from a growth perspective. 2027 growth numbers, consensus numbers are at least 5% above their consensus. Consensus was based on this 1 trillion guide. The reason why they are not getting the credit from investors right now is because it's all driven by Nvidia's supply agreements. They have locked in TSMC supply. I would argue if Google TPUs have more supply, they would be growing faster too. So right now, because the market is so supply constrained, if Nvidia is saying they have locked in 70% of TSM TSMC's wafer capacity, well, guess what, anyone else who wants to make a chip cannot make a chip because there is no supply of TSMC wafer.
- [38:14]
Carol Massar
That's amazing. 70%.
- [38:16]
Mandeep Singh
Yes.
- [38:17]
Ellen Wald
Wow.
- [38:18]
Mandeep Singh
And they prepaid $95 billion Nvidia data. If you look at their just recently reported quarter, yeah, they had $95 billion in prepaid commitments to their suppliers, notably TSMC and you know, some of the memory guys.
- [38:34]
Carol Massar
So they own it and it's harder for everybody else.
- [38:37]
Mandeep Singh
I would argue Google TPU is a very close second to Nvidia. The problem is they cannot ramp up supply.
- [38:46]
Tim Stenovec
So explain how that constricts a company like Broadcom or AMD.
- [38:49]
Mandeep Singh
So Broadcom also guided $400 billion in revenue for 2027, which is why I think Nvidia gave that 2027 number is
- [38:58]
Tim Stenovec
because so Broadcom says $100 billion, Nvidia says a trillion trillion through 2027.
- [39:04]
Mandeep Singh
So if you kind of do the back of the envelope math, it equates to about $500 billion in revenue for 2027. Okay, so from a ratio perspective, Broadcom and Nvidia are currently at, you know, Broadcom has a 10 to 15% market share. Nvidia has almost 75%. And then you have AMD. That ratio is still more or less in line in 2027. And that's why they guided.
- [39:31]
Tim Stenovec
But the $500 billion extra figure, does that imply no growth then in the industry that year or for Nvidia that year. If they're bringing in $500 billion this year in that category and 500 billion.
- [39:42]
Public Ad Narrator
No.
- [39:42]
Mandeep Singh
So right now they're at a $215 billion run rate in data centers. In 2027 it goes to 375 billion. So that's like 70%. And then for 2027 it gets to 500 billion, which is another 35% growth. So their growth is still astronomical. When you think about a company of this scale growing at 70% and then 35%, that's phenomenal. So there's nothing to take away from what they are doing in terms of execution and how they're ramping up. But partly that has to do with how well they have managed the supply chain. It's like the Apple days, you know, when Apple was ramping up iPhones, they had a lock on the supply chain. Similarly, you see that within video, they have managed the supply chain extremely well. In an environment where everyone is supply constrained, Nvidia did a great job of
- [40:37]
Carol Massar
managing mandeep in terms of Nvidia putting that lock on the supply chain. Is that because. Because the visibility and the actual orders, they're there. Like I keep wondering how much are they kind of locking in just to make sure they own it right. And have it as the demand comes in, like, how much are they guaranteed actually comes to fruition?
- [40:57]
Mandeep Singh
Well, they have the best performing chip. And that's why, you know, I said it's really a tight race between Nvidia and Google GPUs. Everyone else is behind. And so from that perspective, the fact that Hyperscalers are still 60% of Nvidia's $500 billion revenue in 2027 just goes to show that there is no other place to go. If Meta wants to add AI infrastructure capacity, they have to get Nvidia chips.
- [41:25]
Alex Vatanka
Same thing.
- [41:25]
Mandeep Singh
Even Google with their TPUs is a big Nvidia customer. Why? Because that's the only way to add AI infrastructure capacity. Not with their own tpusc. They cannot make more TPU chips. So that's why all these hyperscalers are still such a big chunk of Nvidia.
- [41:42]
Carol Massar
It's pretty remarkable, right?
- [41:44]
Tim Stenovec
Yeah, I'm looking.
- [41:45]
Carol Massar
I mean in terms of really no competition, right? Or at least not they're not in the position of Nvidia is at this point.
- [41:51]
Mandeep Singh
I think that supply factor is huge. If TSMC was to somehow raise their supply of chips, then I think Google TPU's has a shot at really ramping up faster. But until that happens, are they not
- [42:05]
Carol Massar
doing that or they can't do that.
- [42:07]
Mandeep Singh
You can see TSMC's capex for 2026 and all the capex. It takes about 18 months to ramp up a fab for it to be online. So this is, you know, the lead. Times are quite long when it comes to ramping up supply of TSMC manufacturing capacity.
- [42:26]
Tim Stenovec
Just a few of the headlines of Partnerships Salesforce Teams with Nvidia on AI Agency Agents Hyundai Kia Nvidia Expand Autonomous Driving Partnership IBM Announces Expanded Pack with Nvidia Salesforce I mentioned STMI ST Microelectronics to partner with Nvidia. The headlines go on. HP unveils AI factory supercomputing advancements with Nvidia. Does everybody want to work with Nvidia?
- [42:51]
Mandeep Singh
I mean that's if you have a 75% market share in one of the fastest growing areas in the enterprise market and everyone sees it's going to be a trillion dollar market, then yeah, you go with that.
- [43:06]
Tim Stenovec
75% L' Oreal expands AI partnership with
- [43:09]
Carol Massar
Nvidia I think it's just L'.
- [43:10]
Tim Stenovec
Oreal.
- [43:11]
Carol Massar
They're planning to use 50% of free cash flow for investor returns. Is that smart when they say they're going to do buybacks, dividends?
- [43:17]
Mandeep Singh
It is the Apple playbook to me. Apple did exactly that in terms of, you know, being shareholder friendly with their buybacks and reducing the share count. You're seeing that.
- [43:31]
Carol Massar
Such great stuff. As always, Mandeep Singh of our Bloomberg Intelligence team.
- [43:35]
Tim Stenovec
Stay with us. More from Bloomberg Businessweek Daily coming up after this.
- [43:42]
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- [44:42]
Malcolm Gladwell
Hello, I'm Malcolm Gladwell, host of the podcast smart talks with IBM. I recently sat down with IBM's chairman and CEO Arvind Krishna and I asked him how can companies use AI to its fullest potential to create smarter business?
- [44:58]
Arvind Krishna
My one advice to them Pick areas you can scale. Don't pick the shiny little toys on the side. For example, if anybody has more than 10% of what they had for customer service 10 years ago, they're already five years behind. If anybody is not using AI to make their developers who write software 30% more productive today with the goal of being 70% more productive. Yeah.
- [45:30]
Tim Stenovec
Wow.
- [45:31]
Arvind Krishna
So we are not asking our clients to be the first experiment on it. We say you can leverage what we did. We are happy to bring out all our learnings, including what needs to change in the process. Because the biggest change is not technology, it's getting people to accept that there's a different way to do things.
- [45:48]
Malcolm Gladwell
To listen to the full conversation, visit IBM.com smarttalks. This podcast is brought to you by Wise, the app for international people using money around the globe. When it comes to sending money abroad, many providers claim to offer free fees and competitive rates. But don't be fooled. This can be code for inflated exchange rates. With the WISE account, you can send, spend and receive money in over 40 currencies without ever having to worry about hidden fees sending pounds across the pond. Most transfers arrive in 20 seconds or less. Spending reals in Rio. The wise travel card gives you the mid market rate on every purchase. No costly markups on your bill. Getting paid in dollars for your side gig. Avoid hidden fees and get the real exchange rate every time. With 24. 7 access to live support, your international transactions with WISE are quick, transparent and safe. Plus wise runs over 7 million daily checks to catch and prevent fraud. 15 million people already trust WISE to manage their money internationally. Be Smart, Get Wise, Download the Wise app today or visit wise.com Terms and Conditions apply. You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2 to 5pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [47:14]
Tim Stenovec
Let's bring in Samantha Dart. She's co head of global commodities research at Goldman Sachs. She joins us from New York City. Samantha, good to have you on the program. We talk a lot about gas prices and how they're up about a dollar. Just going back to a little over a month ago, but you have a note out talking about other refined products. We're talking jet fuel, we're talking heating oil and diesel for example. Why are other refined Products more affected than, you know, traditional gasoline prices with this shock.
- [47:43]
Samantha Dart
Yeah, the majority of the crude that you're missing from the Middle east is heavy crude. And that type of crude tends to produce more of the, what they call the dirtier products. So your diesel, your jet fuel, fuel oil. So you end up with a production of those refined products in particular more impacted and losing more barrels than gasoline at the margin. So jet fuel, I think is the best example of that. With prices skyrocketing.
- [48:18]
Carol Massar
Yeah, I always think this is important when we dig and we did a little bit of this with an earlier guest, Ellen Wald. But just like understanding, again, we go, we talk about, about commodities, we talk about energy, we throw everything into the same kind of bucket, if you will. But understanding the distinctions and differences in terms of how it can impact our world, Talk a little bit more about this. And when it comes to refined oil products, where it's all coming from, how it gets around the world, and certainly how it can affect the global economy and specifically the US economy.
- [48:48]
Samantha Dart
Yeah, on one hand you have this outright supply of a lot of these products from the Middle east that is not crossing through this trade. For example, a lot of your Asia naphtha comes from the Persian Gulf. A lot of your European jet fuel comes from the Persian Gulf. But I think in addition to that, because you're also losing a lot of crude supplies from that same region, you end up losing your ability to produce additional barrels of those products, whether it is in Asia or Europe or in other places. And because these products are widely traded, what we end up seeing is that product prices from gasoline to diesel to jet fuel, they go up everywhere because you end up, if it's cheaper here than there, you end up trading and moving those products around so that you equalize the price. So even though certain regions are more directly impacted by the volumes not crossing the straight at the moment, your marginal increase to product prices, they end up impacting all the regions.
- [49:58]
Tim Stenovec
You know, I'm looking at the futures curve on the Bloomberg terminal right now. In terms of where we think, or where traders rather think that at least WTI is going to go over the next few months. What's your prediction in terms of, okay, if there is some sort of cease fire, if the Strait of Hormuz opens, how quickly and where will oil prices get down to?
- [50:22]
Samantha Dart
Yeah, think about it this way. I think there are two key variables here. One are the volumes that we're losing every day and to the market perception of the duration of this conflict. The volumes we're losing are still extremely high. We have barely anything crossing the strait at the moment. And even taking into account the IEA Strategic Petroleum Reserves release that was announced last week, we end up with north of 10 million barrels a day of oil and products that we're missing every day. So, so that's one. But the second component that goes straight to what you just said is that market perception of duration and the more concerned the market becomes, that's when you tend to see your brand prices cross $100 a barrel. That's the signal that it sends because you can only destroy demand more significantly once you're above that threshold. You don't. Historically we haven't seen much of a response below $100 a barrel. We're now seeing, you probably saw the headline of SAS curtailing flights because they probably can't pass through such an uptick in jet fuel prices to consumers. So that's the signal that the market is sending. So to your point, if you have have let's say a ceasefire tomorrow, the signal that sends is huh, then maybe the, the disruption through the strait is not going to last much longer. It's going to take okay a few weeks to restart refineries, restart oil production, but of the need of destroying demand that goes down and then you can give up a lot of your risk premium. You could, you know, just as easily as, as you've gone above $100 a barrel for Brent. You could be back in the low 80s.
- [52:11]
Carol Massar
Right. Demand destruction can certainly happen. Hey, one of the things I think about Samantha, coming out of this war, we hope sooner rather than later that there is an end to the US war in Iran and Israel pulls back as well their involvement. Is there something different that we're going to see in terms of national security moves when it comes to energy supplies and maybe things being built out closer to home where they can be. Is there something longer term that happens in terms of the energy global energy supply chain?
- [52:44]
Samantha Dart
I think that's such an important point and it's not just what's happening now. I think since the COVID shock we've seen how we can be vulnerable to supply chain disruptions. That was followed by the European energy crisis in 21. And now we have this conflict that is creating a lot of disruption worldwide. So I think you're absolutely right. This ends up incentivizing. I think the widespread build out of strategic reserves initiatives like Project Vault in the US or the strategic reserves build out that we saw in China even last year. I think we're likely to See more of those initiatives. Exactly. Because countries are likely to try at least to become more self sufficient. You look at Europe today For example, almost 50% of Europe's energy consumption is still covered by imports.
- [53:41]
Carol Massar
Yeah, right. I mean it's just tremendous. And you think about to certainly Asia, China, we talk about this a lot. I wonder if in terms as you guys game out scenarios longer term do you see a world where global anti energy markets Iran is not really factored in because of some of the restrictions. Right. In terms of where it can go, is there a world where Iran is a part of that global mix?
- [54:07]
Samantha Dart
You know it's really hard for us to say what we do best I think is count the barrels and work the scenarios of how pricing can respond to different supply availability. So right now Iranian cargoes are pretty much the only ones crossing the strait and not even the usual number of tankers. So we'll continue to look through how that crossing evolves, what's available to the market and work through the scenarios.
- [54:38]
Tim Stenovec
You know I want to just talk about domestic production a little bit and you know, commodity our own commodities. Bloomberg intelligence intelligence analyst likes to say the cure for high prices is high prices but with the oil industry it's not as easy as just producing more especially if it involves infrastructure. And and I'm wondering how higher prices here in the US affecting consumers might make production change in the US or cause companies in the US to invest more in production like the President President wants to see. Is this enough of a supply shock to do that or does it seem so short lived that companies will not make the capex investments to increase production?
- [55:24]
Samantha Dart
So firstly I would say that your last point I think is exactly right. Usually we see lack of investment in supply reflected in the back end of the forward curve that rises and rises and that that signals the need for additional long term investment. These things can't be built overnight. But I would say given the rally that we've seen in oil so far, what we've seen is that a lot of oil companies in the US have hedged. So you see at the margin a little bit of an increased incentive for growing production. But that's not overnight either. We like to call shale short cycle supply because it doesn't take years to show up, it takes months.
- [56:08]
Dan Williams
Months.
- [56:09]
Samantha Dart
But we're still talking 6, 9, 12 months to see that show up.
- [56:14]
Carol Massar
All right, I don't know if I can do this with the co head of global commodities research but I'm going to go ahead and do it anyway. Samantha, should we be talking like or do you guys talk about as a result of this, it's a reminder that it's good to have different forms of energy. And I think about alternative energy, which has taken a major backseat, certainly it feels like with this administration, I know Europe and the world thinks differently in terms of alternative forms, but do you, do you factor that in about how this war again is reminding us that it's good to have different forms of where our energy comes from?
- [56:49]
Samantha Dart
No, but again, I think you're exactly on point. So for example, let's look at China. China dominates in a lot of metals production and refining, but not, not so much in oil and gas. They are net short oil. They are net short gas. So what did China do? They invested a lot in EVs domestically. So you're shifting your demand towards electricity because electricity you can produce. And to produce electricity, they're relying again on what they have, which is coal. They can produce it and stockpile it. And renewables as well. So if you turn to places again like Europe, Europe has some oil and gas as well, no question. But those reserves are not growing. So by investing in more renewables, yes, they can become a little bit more resilient. The only thing is they shouldn't shut down their alternatives.
- [57:40]
Carol Massar
Samantha, we gotta run. We gotta continue this in the future. Samantha Dart over at Goldman Sachs.
- [57:45]
Malcolm Gladwell
This is the Bloomberg Business Week daily podcast available on Apple, Spotify and anywhere else you get. Your podcasts listen live weekday afternoons from 2 to 5pm Eastern Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal. Ryan Reynolds here from Mint Mobile with a message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop with Mint. You can get premium wireless for just $15 a month. Of course, if you enjoy overpaying. No judgments.
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Tim Stenovec
But that's weird.
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Malcolm Gladwell
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Samantha Dart
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Tim Stenovec
See full terms@mintmobile.com it's tax season and
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Malcolm Gladwell
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Tim Stenovec
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Malcolm Gladwell
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