Nvidia Invests $2 Billion in Nebius for New Data Center Deal

Summary

Bloomberg Intelligence Podcast

Episode: Nvidia Invests $2 Billion in Nebius for New Data Center Deal
Date: March 11, 2026
Hosts: Matt Miller, Christina Raffini
Analysts/Guests: Mandeep Singh, Anurag Rana, Herman Chan, Diana Rosario Payne

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Episode Overview

This episode delves into Nvidia’s $2 billion investment in Nebius, a neo-cloud provider, exploring the broader implications for the cloud and AI chip markets. The hosts and Bloomberg Intelligence analysts also discuss Oracle’s blockbuster stock rally, private credit stress in the banking sector, and headwinds facing the consumer staples giant, Campbell’s Company.

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Key Segments & Insights

1. Nvidia’s $2 Billion Bet on Nebius and the Changing Cloud Ecosystem

Timestamps: 02:40 – 08:04
Main Contributors: Matt Miller, Christina Raffini, Mandeep Singh

• Background on the Deal:

  • Nvidia’s $2B investment in Nebius is significant even if "relatively small…compared to $4 trillion market cap company" (Matt Miller, 03:16), because it reshapes Nvidia's partnerships in the cloud landscape.
  • Nvidia is purposely fragmenting its client base beyond the big three hyperscalers (Amazon, Microsoft, Google), betting on neo-clouds like Nebius and CoreWeave.
  • "They want more fragmentation. They don't want that cloud world to be limited to three hyperscalers. They want as much fragmentation as they can for their chips." (Mandeep Singh, 03:46)

• Strategic Rationale:

  • Nvidia seeks to future-proof its business, building a vertically integrated stack with neo-clouds while "thinking five, 10 years ahead when chips could again become a commodity." (Mandeep Singh, 04:31)
  • By aligning closely with partners like Nebius, Nvidia ensures its latest architectures (e.g., Rubin) are adopted first and robust customer pipelines are established.

• Circular Financing & Market Impact:

  • The investment alleviates Nebius’ need to raise external debt, a critical concern as "the market is very sensitive about raising more debt to finance the infrastructure buildout" (Mandeep Singh, 04:55).
  • Refers to "circular financing"—Nvidia funds are used to buy Nvidia chips. Some find this model concerning, but it helps neo-clouds avoid costly bond markets (Christina Raffini & Matt Miller, 06:09).

• Potential Risks:

  • The threat remains that hyperscalers develop their own AI chips: "That's the big risk for Nvidia—all these hyperscalers don't want to spend…$30, $40 billion a year…so they will try to develop their own chips" (Mandeep Singh, 07:28).

Notable Quotes

• "They want to build an end to end Nvidia stack that Nebius is hosting…and really optimize the performance to the Nvidia stack."—Mandeep Singh, 03:56
• "Why doesn’t Nvidia just be its own Neo cloud company?"—Matt Miller, 06:13

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2. Oracle’s Results and Cloud Spending Discipline

Timestamps: 10:58 – 18:10
Main Contributors: Christina Raffini, Anurag Rana, Tom Keene

• Stock Surge Context:

  • Oracle up more than 10%, biggest S&P 500 gainer, driven partly by reassurance it won’t raise capex as aggressively as Big Tech peers.
  • "It's relief that it did not raise its full year outlook." (Christina Raffini, 12:00)

• Capital Discipline:

  • Oracle asks new cloud customers to prepay or bring their own GPUs—a sign of financial restraint and focus on cash management.
  • Their cash flow remains negative, and they plan to trim thousands of jobs, balancing investment with operational cuts.
  • "Their operating margin…was only down 1%, which is basically that they cut so much in sales and marketing...to offset some of that pressure." (Anurag Rana, 13:16)

• Capital Markets Dynamics:

  • Investors now punish aggressive capex increases. Oracle’s "measured means" approach has been rewarded.
  • Maintaining investment grade status is a priority, meaning new financings are carefully balanced.

Notable Quotes

• "When last year we saw Microsoft raising capex, everybody was liking it…a month, a month and a half ago…all the cloud providers fell down."—Anurag Rana, 14:31

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3. How Many Players Will Dominate Cloud—and What About Neo-Clouds?

Timestamps: 16:46 – 17:18 Main Contributors: Tom Keene, Anurag Rana

• Current Landscape:
  • The main hyperscale cloud providers: Amazon, Microsoft, Google, and Oracle.
  • Rising stars like CoreWeave and Nebius are "the ones with the leading chips right now and…everybody is going through to build their applications." (Anurag Rana, 16:52)
  • Fragmentation of the market is accelerating, led by Nvidia’s strategy.

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4. JP Morgan, Private Credit, and Banking Sector Exposures

Timestamps: 21:05 – 28:07
Main Contributors: Christina Raffini, Herman Chan, Matt Miller

• JP Morgan’s Move:

  • JP Morgan marked down the value of private credit loans to software companies—a move to limit lending to private credit funds and reduce risk.
  • Unlike some rivals, JP Morgan has covenants allowing such mark-downs, giving it more control over its risk profile. "JP Morgan is the big kahuna and they can dictate credit terms." (Herman Chan, 22:40)

• Industry Exposure:

  • For the banks covered, "about 15 to 20% of their total loan portfolio is to non-bank financial institutions, which private credit is a subset of." (Herman Chan, 23:52)
  • Private credit is booming, but there's concern over froth and risk of cascading asset sales if the market sours—echoing early warning signs from the pre-GFC period.

• Market Comparisons:

  • "Not 2007, but maybe like, I don't know, 2006," (Christina Raffini, 26:37), capturing the sense of rising risk without outright crisis.

Notable Quotes

• "We're seeing some stress, but…private credit as a whole…could be fairly absorbed within the industry."—Herman Chan, 26:06

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5. Consumer Staples Squeeze: Campbell’s Company Under Pressure

Timestamps: 31:02 – 36:44
Main Contributors: Matt Miller, Diana Rosario Payne

• Profit Outlook Cut:

  • Campbell’s lowered its profit forecast to a decade low, suffering from volume declines despite high prices.
  • Consumers are trading down to "private label" (formerly called generics), which have improved in quality and sophistication.

• Cost Pressures:

  • Supply chain risks remain high due to geopolitical hotspots (e.g., protein, fertilizer flows through Node Strait of Hormuz).
  • The company is taking marketing—not pricing—actions to handle volume declines, meaning "more hit on gross margin or EBIT margin for Campbell’s." (Diana Rosario Payne, 34:09)

• Investment Perspective:

  • Campbell’s stock is down 52% over five years; analysts are watching for volume stabilization and normalization before turning bullish.

Notable Quotes

• "Usually when disruptions like this happen…that usually will take about 12 months. Now…a longer time to get those prices back because…already the consumer is tapped out."—Diana Rosario Payne, 35:43

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Memorable Moments & Quotes

• On Industry Speed:
  "The tech speed of the innovation is just so fast. Anything from six months ago, I mean, it's just antique." — Anurag Rana, 15:03

• On Cloud Market: "In the end…five years down the line, the supply demand equation will be very different. Right now, everyone is supply constrained but they are thinking five, 10 years ahead when chips could again become a commodity." — Mandeep Singh, 04:21

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Representative Segment Timestamps

• Nvidia–Nebius Deal and AI Chips: 02:40 – 08:04
• Oracle’s Strategic Moves: 10:58 – 18:10
• Banking & Private Credit Risks: 21:05 – 28:07
• Campbell’s Consumer Headwinds: 31:02 – 36:44

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Overall Takeaways

• Nvidia’s gambit with Nebius exemplifies the AI hardware leader’s proactive efforts to diversify its client base and prevent chip commoditization as mega-cap tech firms increasingly build their own alternatives.
• Neo-cloud players, financed in part by chipmakers, are fragmenting a market long dominated by Amazon, Microsoft, and Google—reshaping the competitive landscape for hosting advanced AI workloads.
• Investors are rewarding capital discipline among infrastructure players, especially after recent punishment for unchecked capex hikes.
• US banks are growingly exposed to private credit, a risk mitigated by the likes of JP Morgan’s superior ability to mark down questionable loans—while others lag in risk recognition.
• Consumer staples continue to battle cost inflation and changing shopper habits, with established brands like Campbell’s struggling for momentum and margin improvement as consumer behavior evolves.

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For anyone tracking the intersection of AI infrastructure, cloud computing, financial sector risk, and consumer staples resilience, this episode is a dense and highly timely resource.

Transcript

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[Matt Miller]

All right, I listen on the Bloomberg mobile app.

[David Gura]

Good, right?

[Matt Miller]

I have the Black app, so I'm always Listening to Bloomberg Radio on that. When you do, you'll hear stories about Nvidia undoubtedly every single day as it's the largest company in the world. It's Investing. Today's story, $2 billion in Nebbyus. It's a new data center deal. Nebus obviously is one of those Neo cloud companies. And we've got Mandeep Singh here from Bloomberg Intelligence, he runs our technology coverage for BI to talk a little bit about this Nvidia deal as well as what's going on with Uber and Zoox though I guess that's far less important. Mandeep, what do you make of the. I mean it seems relatively small, right, compared to $4 trillion market cap company throwing a measly $2 billion at Nebbys. But what does it get them?

[Mandeep Singh]

I mean things are changing in terms of the ecosystem and the partnerships that these companies had. Remember Nvidia plan to spend almost $100 billion with OpenAI at one point. So they scaled that back to 30 billion in their latest funding round. Well, guess what, they are investing a lot more in Neo Clouds, whether it's Core Weave or Nebulous. Now basically from an Nvidia standpoint, they want more fragmentation. They don't want that cloud world to be limited to three hyperscalers. They want as much fragmentation as they can for their chips. And, and really in this case, in Nebia's case, they want to build an end to end Nvidia stack that Nebbys is hosting and they are getting clients to use, you know, Nvidia throughout, whether it's training, inferencing and really optimize the performance to the Nvidia stack because in the end, you know, five years down the line there will the supply demand equation would be very different. Right now everyone is supply constrained but they are thinking five, 10 years ahead when chips could again become a commodity. They don't want that to happen. They want this to be more fragmented.

[Christina Raffini]

Does this deal, this $2 billion investment put nebulous on the map? I mean, is this, you know, game changer for that Neo cloud company?

[Mandeep Singh]

Absolutely. Right now it is all about raising the funds which we heard from Oracle last night. They're not going to the bond market anymore and that's why you saw a positive reaction. So the market is very sensitive about raising more debt to finance the infrastructure buildout and that's why Oracle saw such a big pushback. I'm sure it's the same for Core Weave as well. And so if Nebbys is getting $2 billion from Nvidia. And you can say it's circular financing to buy Nvidia chips, but it alleviates that need to go to the bond market to raise $2 billion. And so from that perspective it does solve that problem that, you know, they don't have to raise money right away.

[Matt Miller]

I mean they're only one of two Neo cloud companies anyone's ever heard of, right? No one knows Core Weave. Yeah, beyond Core Weave and Nebulous, what is there? There are, there are a ton, I'm sure. I'm just in Mandeep, you probably know me and Scarlett, we all know Core Weave and then that's number one. And Nebbys is the also ran right with by the way, weighted average cost of capital at Nebius, 20%. There you go. So yes, they don't want to have to go out and raise money. They'd rather have a chip maker give them money to buy that chip maker's chips.

[Christina Raffini]

Yes, that's what they call circular financing and that's what has some people concerned.

[Matt Miller]

I mean, why doesn't Nvidia just be its own Neo cloud company?

[Mandeep Singh]

They are, they do have a DGX cloud offering but look, in this case Nvidia has new architectures every 12 months. They have already announced their Ruben architecture. So what they want is these new clouds to have those new chips first as opposed to an Amazon or a Microsoft. And that serves them well because these new clouds will end up signing up customers which will be long term customers and I think it's great for Nvidia to have that fragmentation.

[Matt Miller]

I'm going to throw an audible here if you don't mind because we were going to talk about Uber Zoox, but

[Christina Raffini]

I mean it doesn't matter in the context of Nvidia.

[Matt Miller]

I mean they're cool looking little things, but I don't care. What I care more about is this chip battle, right? We knew Nvidia completely and totally dominated. Still does I'm guessing. But Google has a chip that's like a contender. Amazon has Trainium. And I thought that Meta had just like, you know, not joined the party, but now they just showed up, right? That's breaking news this morning at 10 o'.

[Tom Keene]

Clock.

[Matt Miller]

What's Meta deploying?

[Mandeep Singh]

And look, that's the big risk for an Nvidia is all these hyperscalers don't want to spend, you know, 30, $40 billion a year on buying Nvidia chips. So that's where they will continuously try and develop their own chips. Now Meta is way behind a Google tpu. Google TPU is still, you know, deployed. They have seven versions of their chips. Meta is still in the initial stages of building, but with the scale that Metta has, that means down the line it will be less of a purchase for Nvidia. And that's the risk that Nvidia wants to avoid here.

[Christina Raffini]

Stay with us. More from Bloomberg Intelligence coming up after this.

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the pulse of every community. They bring people together, create opportunities and drive growth. With a widespread presence in communities across the country, Chase for Business supports small business owners at a local level that makes it possible for you to connect, learn from each other and grow together. There's a real commitment to seeing small businesses succeed. The Chase for Business team has knowledge and expertise that span a wide range of financial areas. They can help you make more informed decisions as you navigate the complexities of running your business. They'll help your business grow with individual guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn [e-mail] business chase for business Make More of what's yours the Chase Mobile app is available for select mobile devices. Message and data rates may apply JPMorgan Chase Bank NA member FDIC Copyright 2026 JPMorgan Chase Co.

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[Christina Raffini]

The big gainer and that stock that everyone's paying attention to right now is Oracle. Biggest performer, biggest gainer I should say in the S&P 500 best performer up more than 10% and in fact this looks like the best day for Oracle if it closes at these levels. Biggest rally since it announced that $300 billion open air deal. Let's bring in Anurag Rana. He is our go to guy in all things tech because he is our tech analyst here at Bloomberg Intelligence and Oracle did report earnings. Were the earnings that solid to justify this massive 10% advance?

[Anurag Rana]

You know, I think when you go back and see when or when Microsoft and Amazon and Google reported they all talked about increasing capex and that spooked investors out. And I mean I guess Oracle had the, the foresight to say that, listen, we added a lot more backlog to our, you know, balance sheet but we are not raising capex. I think that's the big difference right now. That's what the market is, is less, I think concerned about that. Maybe they're going to be not as aggressive as the others in terms of capital expenditures.

[Christina Raffini]

So it's relief that it did not raise its full year outlook.

[Matt Miller]

Yeah, yeah.

[Anurag Rana]

And the other thing you have to say is when, when you look at their press release, they talked about two things. One was for the customers coming in, they're going to ask them to prepay some of that stuff or they're going to ask them to bring their own GPUs because it just shows that being a little bit more disciplined on the finance side.

[Tom Keene]

Do you bundle them into the other big guys? Are they a separate bolt on almost a Mag 7?

[Anurag Rana]

It was a bolt on for cloud providers few years ago but in the last two years the orders that they're getting from OpenAI has really catapulting them into the bigger why do people go to Oracle?

[Tom Keene]

What's their distinction versus going to the 47 others?

[Anurag Rana]

Well the thing is there are only three big ones, the Amazon, Microsoft and Google frankly. But the Oracle only is another one that has the capital to come up with a cloud infrastructure at par with some of the others.

[Christina Raffini]

However, you look at what Oracle's results also showed, which is that cash flow is going to remain negative for the next few years. And this is a company that's definitely looking at its expense line. You mentioned how some cloud customers will pay for their own chips, so they're being more discerning in that regard. But they've also are making plans, according to our reporting, to cut thousands of jobs too. How much, how much fat can they cut right now?

[Anurag Rana]

That's a very good question because when you look at their gross margin, declined quite a bit, but their operating margin or the adjusted operating margin was only down 1%, which is basically that they cut so much in sales and marketing and journal and administrative expenses to offset some of that pressure. But you're right, they cannot do that forever. They really need to get scale in and see the benefits of these cloud contracts in order to offset that.

[Tom Keene]

I mean, I know you don't talk to Robert Schiffman, you're not in speaking terms, but he just put out a blistering note on Salesforce in their bond deal, an Iraq Rana on a given 30, $40 billion cash call, they make four phone calls, maybe five, they bring it in three or four times. Oversubscribe. Does this party just keep on going for the Mag 7?

[Anurag Rana]

The question is for how long? I mean I think that's the big concern. But when we talk about Oracle, for example, their bond deal was oversubscribed but now they have to go in the market and raise equity also because one of the things they have said is they don't want to get rid of their investment grade rating. So I think this is where a lot of the relief is coming for, for some of the investors that they're going to have a much more balanced approach on raising finally be adults instead

[Tom Keene]

of being prima donna's. You were up at Buffalo years ago reading about these prima donnas out on the west coast and now they're finally growing up, right?

[Anurag Rana]

Well that's because the investors are behaving differently than they were before. I mean when last year we saw Microsoft raising capex, everybody was liking it. But just a month, a month and a half ago when they talked about raising capex, all the cloud providers fell down.

[Christina Raffini]

Right?

[Anurag Rana]

So that's a lesson for the next one to come in and say, I don't want to give that message.

[Tom Keene]

Can I do an audible? Always. What in God's day do you Read. I mean, how do you keep up on this? When I was a kid, the old man would say to me, hey, stupid, read this article in MIT Technology Review. Because he'd read it cover to cover. What do you read to keep up, Tom?

[Anurag Rana]

It's very hard nowadays. I think the podcast recently, where Satya is speaking or you know, when, when the Google CEO is speaking, those are the ones you really have to follow because the tech speed of the innovation is just so fast.

[Christina Raffini]

Sure.

[Anurag Rana]

That you know anything from six months ago. I mean, it's just antique.

[Christina Raffini]

And of course you're listening to these podcasts at double or triple times the speed, I'm sure. When Satya talks, when the CEO Satya Nadella of Microsoft, when Satya talks, how

[Tom Keene]

much I just love Mark busting her job.

[Christina Raffini]

How much does he really reveal, or is it in what he does not say that you get your, your most insightful thoughts on what's next?

[Anurag Rana]

I think I really look for him to figure out how much is he going to spend more because at the end of the day, he is not somebody who benefits from buying Nvidia chips. I mean, he's the one who's funding a lot of this expansion with, you know, let's say according to our calculations, he's spending on a year, 50 to 60 billion dollars just on Nvidia GPUs. That's a very big amount. So if he's doing it for a reason, I have to see that there is some ROI to that.

[Tom Keene]

So I'm at Paladino's down at Grand Central Station at the Bourbon Bar with Joseph. He's just like old school bartenders, like he's on a madman or something. Like somebody comes up to me and they go, do they really not let Mandeep Singh and Anuragran in the same room? Do you guys. When you're in, when you're at 7:31 Lexington, are you two allowed to speak?

[Anurag Rana]

No, no, we sit next to each other. Absolutely.

[Tom Keene]

Really? Yeah. Okay. I just, the guy came up to me and I said, I really don't know. I mean, there's just so much Scarlett. There's just so much voltage there.

[Christina Raffini]

There's a lot of voltage there. And we tend to have them both on, but at separate times because we've got to make sure that we sprinkle their expertise throughout the hours.

[Tom Keene]

Yeah. Well, also there's a security issues as well. How many players are there going to be in five years?

[Anurag Rana]

See, on the hyperscale cloud providers, we know of the top three for sure, it's Amazon, Microsoft neck to neck, then Google, then Oracle, then you have the new cloud providers, that's Core, Weave and Nebias. So these are the five I watch most closely right now because they have the capital. They are the ones with the leading chips right now and they are the ones everybody is going through to to build their applications or run their inference or training workloads.

[Christina Raffini]

Andrew, you were saying that Oracle has made clear that it wants to maintain its investment grade credit rating and of course there were some concerns about that and that's why we saw the CBS the credit default swaps climb in recent weeks, although it's come back down a little bit here. How convinced are you that they can do that?

[Anurag Rana]

Yeah, and I talk to Rob Schiffman all the time as well. And he, he and I are on the same page that they are very careful about that investment gate rating and whenever they come up with the bond deal, it gets gobbled up very quickly.

[Christina Raffini]

How much does that matter to equity investors?

[Anurag Rana]

I mean, it does matter because, you know, you don't want to be financially irresponsible for a company like this that houses one of the most important software products, their database business, that is really the cash cow for them that can allow them to expand. What we saw last night was the expansion is going to be there, but maybe with a little bit more measured means rather than going, you know, all in.

[Christina Raffini]

Stay with us. More from Bloomberg Intelligence coming up after this.

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[David Gura]

Support for the show comes from public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts? Yep. High yield cash? Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support. That actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing Member FINRA SIPC Advisory Services By Public Advisors SEC Registered Advisor Crypto Services By ZeroHash all investing involves risk of loss. See complete [e-mail] disclosures small businesses are

[Christina Raffini]

the pulse of every community. They bring people together, create opportunities and drive growth. With a widespread presence in communities across the country, Chase for Business supports small business owners at a local level that makes it possible for you to connect, learn from each other and grow together. There's a real commitment to seeing small businesses succeed. The Chase for Business team has knowledge and expertise that span a wide range of financial areas. They can help you make more informed decisions and as you navigate the complexities of running your business, they'll help your business grow with individual guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn [e-mail] business chase for business Make More of what's Yours the Chase Mobile app is available for select mobile devices. Message and data rates. May apply JPMorgan Chase Bank NA Member FDIC Copyright 2026 JPMorgan Chase Co.

[Bloomberg Intelligence Podcast Announcer]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Christina Raffini]

All right, let's go to another one of our talented analysts, Herman Chan. He is our senior analyst covering U.S. banks. And Herman, there's a big headline today that got everyone's attention. JP Morgan marking down the value of some private credit loans, mainly to software companies in the latest sign of stress in private credit. I guess it's not a surprise if you recall that Jamie Dimon, the CEO, had talked about the possibility of more cockroaches. That's right.

[Herman Chan]

So we view this as a prudent risk management measure by JP Morgan. Basically, by reducing the value of these loans, it means that the private credit companies can borrow less from JP Morgan, so it reduces their exposure in the case that there's some more volatility ahead for for the private credit folks.

[Matt Miller]

So to me, what was the most interesting about this news was not that JP Morgan marked some of these credits down or some of these assets down, rather, but that its competitors aren't allowed to do that. I hadn't Realized before I read the FT piece and then the Bloomberg cover that that J.P. morgan, that J.P. morgan's competitors and probably a lot of other lenders that lend to smaller direct lenders have it in their covenants that they're only allowed to mark their assets during like change when there's a credit event. Exactly. Like open enrollment. Right. That's insane. Is that a reason that we see so many of these private credit assets going from like 97 to 0?

[Herman Chan]

It just goes to show that JP Morgan is the big kahuna and they can dictate credit terms, whereas others may not have the same capacity. So having those advantageous credit terms helps them protect themselves in the event that we have potential loss. You know, we, we've seen headlines of, and expectations and predictions of 15%, you know, potential losses in the credit software books for, for these private credit companies. So I think banks will continue to try to get ahead of it. And then you speak to some of the credit terms and conservative underwriting at JP Morgan. I think that's one of the reasons why Western alliance was dinged a little bit with the Jefferies news because they thought they had pristine credit terms, but then Jefferies eventually just backed out of paying back the loan.

[Christina Raffini]

So the back story here, if we take a step back, is that these Wall street banks like a JP Morgan are not making a lot of private loans directly because they de risked following the great financial crisis of regulators are breathing down their necks, but they are exposed indirectly because they lend to private credit funds. Do we have a sense Herman, or is this still kind of something vague of just how exposed Wall street banks are to private credit funds?

[Herman Chan]

Yeah, we have some data that the Federal Reserve puts out every quarter and we calculate it so it for the banks that I cover, it's about 15 to 20% of their total loan portfolio is to non bank financial institutions, which private credit is a subset of. So it's a growing piece of the banking industry's pie. And it's really, last year was the sole growth driver for banks. For JP Morgan as an example, they grew their non Bank Financials books 7 to 8% year over year. So it's a hefty position for banks across large and regional banks. And really that's because that's where the growth was because of this financial arbitrage where banks have lower risk weighted assets on these loans. So it helps from a capital treatment standpoint to lend to these non bank financials.

[Matt Miller]

So you say that J.P. morgan's book there grew what, 7 or 8% 78%. 78%. That's a massive growth. Are there other banks that also grew those loan portfolios massively and maybe are more reluctant to mark them down?

[Herman Chan]

It's across the board. Right. So Wells Fargo was, was particularly aggressive in the fourth quarter. The banks that have larger markets, businesses like, like a jp, like a B of A, like a Citi, have grown much faster than some of the regionals. But. But the regionals have also participated as well.

[Anurag Rana]

Yeah.

[Christina Raffini]

I think about the headline just last month about bank of America committing $25 billion of its own cash to private. In that instance, it's making those loans directly as opposed to indirectly through private credit funds. Right?

[Herman Chan]

That's right. So, so that's. There is a bit of a regulatory arbitrage, as I mentioned before, where you have to hold less capital when you lend to private equity or private capital versus doing the loan.

[Christina Raffini]

Does your feel like, I don't know, 2007, when different firms were trying to get in on subprime mortgage after the boom of the growth had already been seen and there's a little bit of

[Matt Miller]

FOMO driving activity leading the witness. It does feel like not in a court of law.

[Herman Chan]

We are feeling a bit of froth in the markets. We're not. We're seeing some stress, but we haven't, we're not at that level where we think things are seizing up at this point. And, and private credit as a whole, the, the industry is about $1.7 trillion. So it could be fairly absorbed within the industry. You know, you have A, banks like JP Morgan, B of A, Wells Fargo CIT, their entire balance sheets over $1 trillion.

[Christina Raffini]

So not 2007, but maybe like, I don't know, 2006.

[Matt Miller]

Well, I mean, the question is, what's the fallout? Right. I know it's only 1.7 trillion and frankly, software is probably less than 30% of that. So you're talking about 500 billion max.

[David Gura]

Right.

[Matt Miller]

But the question is, what kind of fallout do you have? Because a lot of these banks don't have the kind of direct lending approach that Scarlet's talking about, B of A. Rather, they lend money to the BDC and then the BDC lens it out.

[Herman Chan]

Right.

[Matt Miller]

And then those BDC is when they're looking at everybody headed for the gates, sell off their best assets first so that they can say we got 97 cents on the dollar and then they're left with bad bank holdings.

[Sonesta Travel Pass Advertiser]

Right?

[Herman Chan]

Yeah. So. So you do have that phenomenon where, where companies like you've seen it from, from some BDCs and the direct lenders where they're selling the assets that they can sell now. So it remains to be seen what's still remaining on the won the books, how the credit performances and you know you have to put on your credit lens of probability of default and loss given default and how that shakes out. So we're still waiting. This is more at this point a and client and investor are a bit more skittish on the performance going forward, but we haven't really yet seen that performance sour. So this is like early innings for of the credit market private credit story in our view.

[Christina Raffini]

Stay with us. More from Bloomberg Intelligence coming up after

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[Bloomberg Intelligence Podcast Announcer]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Matt Miller]

Matt Miller here at 731 Lex filling in for Paul Sweeney and Scarlett's rushed off to do our weekly deal show. Every Wednesday at noon on Bloomberg Television, we have a show focused completely on M and A Scarlet and Danny Berger, my co host on Bloomberg tv, anchor that show. Definitely one you want to tune into if you care about deals. Right now, though, we're going to drill into consumer staples and specifically the Campbell's company because it cut its profit profit outlook to the lowest level in a decade as consumers are avoiding the kind of snacks that Campbell's makes. It's not just a soups company, which is why they changed the name. They also make Snyder's pretzels and Kettle Brown brand chips as well as Pepperidge Farm cookies and Goldfish. So let's get over to Bloomberg Intelligence analyst Diana Rosario Payne as she she covers this sector for us. And Diana, what's the story at Campbell's? I guess it makes sense that they're focused not as much on chicken soup, but more on potato chips.

[Diana Rosario Payne]

Yes. And basically this company is is suffering from what the industry as a whole has been suffering in terms of, you know, volumes do not seem to be growing. Pricing is still elevated. Consumers are being very strategic with their spending. They're moving to private label. They're curving their expenditure on things, for example, snacks and chips, which was one of the biggest, you know, disappointments in

[Matt Miller]

the quarter for Campbell's, by the way, private label products. Not to take us on too much of a tangent here, but when I was a kid we said generic products, right, the store brand. But they've really picked up in popularity. It seems like consumers feel almost more sophisticated when they, you know, save 25, 30 cents buying the private label product.

[Diana Rosario Payne]

Yes, for sure. And not only that, retailers have invested in their private label portfolio. They've entered different tiers in terms of private label. So you have the cheaper versions, you have the medium, you know, price and then the high end. And that actually brings people into the store and definitely builds loyalty for the retailer.

[Matt Miller]

All inside private label.

[Sonesta Travel Pass Advertiser]

Right.

[Matt Miller]

Kirkland is the one at Costco, I go to shoprite, they have bowl and basket and you can buy just the ground level bowl and basket product or you can buy their super fancy organic bowl and basket.

[Diana Rosario Payne]

Exactly.

[Matt Miller]

All right, all right, back to Campbell's, the Campbell's company, because I want to zero in on the pricing issue. A real concern about the impact of this war has been that it drives prices higher. We were already worried about tariffs driving prices higher as well as immigration policy driving prices higher. And as you point out, or as our reporting points out, they have had elevated pricing on some of their products, but that hits volume. So what do they do here?

[Diana Rosario Payne]

Yeah, that is the question that it keeps avoiding this. These types of companies, particularly with the, you know, not only oil prices being so high at this point, spiking in such a rapid pace, you also have the conflict itself, you know, in the street of Haram, I believe it's called. And that obviously is going to affect supply chains for these companies. So they seem they want to be a little bit more strategic in lowering prices. They don't necessarily want to do that. They want to compete on the marketing side. So you will probably see for the remainder of the year more hit on gross margin or EBIT margin for Campbell's because they're investing more on marketing rather than, you know, just a race to the bottom on pricing.

[Herman Chan]

Yeah.

[Matt Miller]

More fertilizer, by the way, travels through the Strait of Hormuz on the way to international markets than hydrocarbons. So it's more about moving fertilizer than oil. Obviously, oil is the product we pay more closely attention to as consumers. Most of us buy gas, fewer of us buy fertilizer. But one third of the global fertilizer trade passes through the Strait of Hormuz. It's massive. And of course, we're coming up back again to planning season. You could see real price reverberations in foodstuffs from this war. Right. It's not just about the price at the pump.

[Diana Rosario Payne]

Yes, exactly. I mean, even if the disruption delays, you know, let's say 90 days, that is probably going to have a significant headwind to cogs for these companies. The problem is, is that usually when disruptions like this happen, you will have the ability to increase prices to match that disruption and that usually will take about 12 months. Now they're probably talking about a large a longer time to get those prices back because you know already the consumer is is tapped out.

[Matt Miller]

Right? Campbell's Soup stock, by the way, or the Campbell's Company. Sorry I keep forgetting they changed their name the Campbell's Company and they're serious about that. I got a note actually to the principal when I said it wrong once Campbell's company stock down over the last five years, 52%. They've lost half of the value of their company. At what point is it cheap enough for investors to go in and pick it up?

[Diana Rosario Payne]

Well, I will say when volumes start to at least normalize, which we could probably see more on the like, that will be a more of a 4Q story, fiscal 4Q story, even the beginning of fiscal 2027. So those are I think that will be the main point and the main driver of any any appreciation.

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This is the Bloomberg Intelligence Podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 10am to noon Eastern on Bloomberg, 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.

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