← Bloomberg Intelligence
Loading summary
Transcript51 lines
- [00:00]
Host 1
Ditch the complexity. Intuit Enterprise Suite delivers AI native ERP power that is intuitive and intelligent. Scale faster with advanced control. Getting started in days, not months. Learn more@intuit.com Enterprise and get the power you need.
- [00:19]
Podcast Announcer
Bloomberg Audio Studios Podcasts Radio news. 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.
- [00:40]
Host 2
TikTok Chinese parent ByteDance, they have closed a deal to transfer transfer parts of their US Operations to American investors, securing the app's future in the US and avoiding a shutdown, which I know is big for the gajillions of folks that are on TikTok. Matthew Shelton Helm joins us here. He's a media litigation analyst for Bloomberg Intelligence. He's based down there in Washington, D.C. matt, talk to us about this deal for TikTok. This seems to be, I guess, probably the best outcome for certainly TikTok users. What, what do you, what do you make of it?
- [01:12]
Matthew Shelton Helm
Yeah, I think this is, you know, getting to be the end of this long, lingering drama. This big open question of how is this effective ban on this app going to play out. This looks like a resolution that should keep TikTok continuing to operate in the United States and under a new structure that is majority owned in the US Itself. I think there are real questions about whether this really adheres to all the limits in the law that Congress adopted. But at the same time, I'm not sure there's going to be much will to push back on that. At this point, it's looking like this might be the end of this saga and it might let tick tock continue under this new structure.
- [02:02]
Host 2
So one of the concerns I think a lot of folks kind of carried was didn't want the Chinese government to access, have access to U.S. residents data, their personal information. Do we have safeguards up for that? Now? Does this deal assure that?
- [02:19]
Matthew Shelton Helm
Well, so you know, at the time that this all played out in the courts, TikTok was pushing for, for an arrangement called Project Texas, which had Oracle overseeing a lot of this data and protecting it from going, you know, in theory back to China where, where it would be at risk. What we see here is sort of a similar arrangement that they ultimately settled on where Oracle and other US Investors run this new entity and that new entity would be in charge of overseeing U.S. data under Oracle's leadership. So it's a very similar arrangement in that sense. The thing that's Sort of not clear here though, is that the law also says there can't be any sort of operational relationship between the US entity and ByteDance. And when you read through the materials, we don't have the actual contracts here, but when you read through the press release, it doesn't say much at all about limiting any sort of operational relationship between the US entity and ByteDance. That was really an animating concern. So I'm not sure that they've checked all the boxes in that sense, but there are protections here. This is a US entity under Oracle's leadership checking on this data.
- [03:36]
Host 2
Does this arrangement have any precedent for some of the other Chinese companies that operate in the U.S. i'm thinking like an Alibaba or a Tencent or Baidu. Does that have any application?
- [03:48]
Matthew Shelton Helm
You know, it's really difficult to say that this is anything more than a one off this. You know, the TikTok situation sort of drove a unique pushback. It was a strange situation where Congress was aligned on this and we had Democrats and Republicans joining together saying, absolutely, we need to ban this app unless we fix this. And you haven't really seen anything like that for other apps come together. And especially with President Trump pushing back on this, that really discouraged lawmakers from stepping up on this issue. So I don't really see a lot of read through to other companies right away.
- [04:29]
Host 2
So this new entity, it's got some private, I guess, equity. American investors, private equity investors is there. Where does the value accrue here? How does that work? Is there going to be an IPO of this US business at some point or will it just stay privately held, do you think?
- [04:44]
Matthew Shelton Helm
It's really tough to say. We've had some reporting that suggests there's a revenue share arrangement that goes for all of the TikTok data going forward, but really unclear. We don't have the terms of this arrangement and how it plays out going forward. A lot of missing details on questions like that. And we're kind of reading between the lines on the press releases. What we know here is this follows the law in the sense that ByteDance ownership falls below 20%. That was a key term in the law. It's not clear that it goes beyond that. Obviously ByteDance would still own the algorithm here, which was a big driver. And so this new entity doesn't own the most valuable piece of this business. Definitely limits future returns for this new entity.
- [05:41]
Host 2
Stay with us. More from Bloomberg Intelligence coming up after this. Is your business outgrowing your current systems? Are you tired of the cost and crushing complexity of traditional ERPs. Meet Intuit Enterprise Suite, the AI native ERP that simplifies complexity and adapts with your business. Its enterprise grade power made intuitive, intelligent, adaptive and ready for what's next. Built for modern finance teams, Intuit Enterprise Suite helps you streamline complex financial management and gain real time visibility across all your entities. This AI native solution automates workflows and unifies your data, acting as a force multiplier for your team. You no longer have to migrate off Intuit as you grow. Get the advanced accounting and multi entity control you expect, but in a solution that finance teams actually enjoy using best of all. It's quick to adopt, letting you get going in days, not months. Scale with confidence. Get the power of ERP without the complexity. Learn more@intuit.com Enterprise Today and Future. Proof your business.
- [06:45]
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.
- [06:59]
Host 2
Let's get back to some stocks. Intel shares plummeted about 15% after Chief Executive Officer Lip Bhutan gave a lackluster forecast and warned that the chip maker was struggling with manufacturing problems. Let's get some more analysis on that. Angelo Zeno joins us. He's the Senior Vice President and Equity Analyst for CFRA Research, joining us via Zoom here. Angelo, talk to us about Intel. The stock had had such a 12 month ride here. Now it's pulling back on some, I guess some guidance that was a little less than where the street wanted to.
- [07:30]
Elliot Stein
Yeah.
- [07:31]
Angelo Zeno
So thanks for having me. And you're absolutely right. I mean I'd say the biggest takeaway here is absolutely the guidance. And listen, the biggest issue is actually not a demand issue. They're finally actually seeing improving demand for their products. The bigger issue is that they are supply constrained in many respects and that's problematic. A lot of this is being self inflicted in the sense that they were in many respects caught flat footed, didn't have the inventory to really meet that the expected higher demand here going into the first half of the year. So you know they're going to have to be some adjustments being made here. The key really is going to be the recent ramp or unveiling of their 18A technology node. We're going to have to see some yield improvements there and the hope is that results in better supply as we go into the second half of the year and also potentially announced to new external customers later in the year and.
- [08:28]
Host 1
Of course we're setting up for what's going to be a gigantic week of earnings. It's typically gets a super busy run now and of course we've got big tech reporting to Tesla Metal, Microsoft, Apple. How high is the bar right now? Because I think about what happened with the banks and you know, by and large they came in when in with decent results but because some areas were not as good as had been anticipated, they didn't get the reception that they normally would have.
- [08:57]
Angelo Zeno
Yeah, no, I think that's a good question. And listen, I think it depends on the name we're talking about in this instance. Like if you were to ask me about a name like Alphabet which is more than doubled off its April lows and you know it's coming up, coming on here really, really hot I'd say there's very little margin for error and they better throw out some Gemini 3 numbers that are just really eye popping in many respect. But when we start thinking about a lot of the other mega cap tech names I think a good one would be a name like a Microsoft. Valuations there I think are really enticing at this point in time. It's been a relative underperformer. Since they reported Q3 results, expectations have actually gone up. So the, you know, we're looking at fairly enticing valuations across certain names matters. I think another good example where it seems like there's a lot of bad news baked into the name. So it all depends on the name we're looking at at this point in time. I would say, you know, when we look across the of big tech I'd say the most important thing or I'd say the one item that everybody has to look out for is the capex targets here for this upcoming quarter and for the upcoming year. The biggest reason I say that is we've got so many bottlenecks going on, you know, component price increases. It'll be interesting to see how much of an increase we get from these hyperscalers.
- [10:16]
Host 2
Angela, as it relates to intel, where is the problem in getting enough supply? The supply chain issue except we hear from others other than intel as well what's going on out there.
- [10:27]
Angelo Zeno
I mean I think you know, it depends in many instances but you know the biggest bottleneck across the supply chain right now is absolutely the memory bottlenecks.
- [10:37]
Host 1
Right.
- [10:37]
Angelo Zeno
I mean we've seen it in the stock prices for many of these stories related names but you kind of look at the kind of the shift towards high bandwidth memory, the greater memory that's needed as we shift especially from high bandwidth memory. High bandwidth memory for as Ruben launches in the middle of this year, there is, you know, there is a ton of demand out there for memory and there's just not enough supply out there. So it's going to result in, you know, we think a number of issues in areas specifically across more cyclical areas in the markets like, like PCs and smartphones where they may not even be able to get the actual chips in certain instances. As far as this server demand is concerned though, you're going to see pricing hikes and again, that's going to have an impact on these hyperscalers and likely need for them to increase spend if they want to sustain some of these cloud type growth numbers.
- [11:33]
Host 1
Angela, you said you're going to watch for a capex announcements and that's kind of been the theme for the last couple of earnings cycles. How much more increases are we going to see in these capex budgets or have the companies pretty much telegraphed what they need to.
- [11:50]
Angelo Zeno
Again, I think it depends on the name. So you know, I think Microsoft did a really good job in kind of ripping off the band aid last quarter in terms of saying, hey, listen, we're going to go from moderating our capex spend to actually accelerating the investments that are needed and throw out exact numbers. But the street is pretty much, they understand that Microsoft is probably going to have to continue to increase their spend because of the elevated demand on, on the cloud side. I will say this from our understanding, from my understanding, I would say there's probably at least 5 to 10% at the very least upside or need to. When you look at the capex numbers for a meta and an Alphabet where you need to at least boost the number, the street numbers out there by at least 5 to 10% and hopefully that's something that's well understood in the markets.
- [12:42]
Host 2
Stay with us. More from Bloomberg Intelligence coming up after this.
- [12:50]
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.
- [13:04]
Host 1
Big tech moves ahead, plows ahead. And China is now saying to its tech firms, its homegrown tech firms, get ready, you can buy some Nvidia each 200 chips.
- [13:12]
Host 2
Nice. Okay, so it's good for Nvidia, maybe.
- [13:14]
Host 1
It'S good for Nvidia. It's good for Nvidia sales and I mean does Nvidia then pay a portion of that to the US Government.
- [13:20]
Host 2
That's right.
- [13:21]
Host 1
Part of the deal. Let's ask Ed Ludlow, he is BTech's co anchor and he joins us now from San Francisco. Ed, is this the chip that the company Nvidia would need to share some of the proceeds with the US government on?
- [13:35]
Ed Ludlow
That's the agreement on the US Government side. And you guys summarized it really well because the biggest consideration and hold up on this hasn't even really been the US Government. It's been well, do the Chinese government even want to allow Nvidia to put the H200 into China? 2 things. You know, when I speak to sources on the White House side, they always caution, wait until we actually see some chips up and running in China. Right now this is just negotiation in the public forum and on paper. But when it comes to this, this sort of revenue sharing agreement with the US government, Nvidia's position has always been that they abide by US laws. And when last I spoke to the CFO Nvidia, her point was we're a publicly traded company in the US and until there is a codified mechanism that allows Nvidia to share revenues with the US government, she is bound by the rules of Sarbanes, Oxley and the sec. And so that part is still kind of missing as well. But our reporting on this overnight did move Nvidia shares and also TSMC because this is apparently a $50 billion addressable market that for Nvidia is currently zero. But also there's the reporting that they have been ramping up production capacity with TSMC in anticipation of getting the green light.
- [14:50]
Host 2
And I know investors have effectively removed all Chinese related revenue from the forecast for Nvidia is there. What's the point where they start putting that back in there?
- [15:01]
Ed Ludlow
I'd wager that they've remodeled already a little bit. I mean, when we were in Vegas at the beginning of the month, Bloomberg's Ian King was sat next to me, 10ft from Jensen Huang, the CEO of Nvidia and said, you told us about this $500 billion figure over the next five fiscal quarters. That assumes zero revenue from China. Could that number get bigger? And Gents Wang's answer was yes, it could get bigger. In particular because we think we might get some revenues from the 200 in China. So from that point in early January, you'd expect the sell side at least to start trying to calculate something, but very difficult because again, this is a sort of tit for tat behind closed doors at the moment. And no H200 has moved into China.
- [15:44]
Host 1
Right. It's all very theoretical right now. No, H200 has actually moved. Everyone's still negotiating everything. What about the H20 processor? It's less powerful. Yeah, well, you know, I have to look these up. But H20 processors is less powerful. But is it still useful to Chinese tech companies to do what they need to do so.
- [16:04]
Ed Ludlow
Exactly the right point. And Scarlett, I really appreciate you bringing it back to H20. H20 even more deprecated than H200. And when the White House and the president sat down to decide if they wanted to allow Nvidia to do this, the calculus that they considered, and I know, I've seen the briefing document that was shared with the president is we either export zero technology, no matter how deprecated it is, or, or we let them have the absolute latest or we land somewhere in the middle. Better technology, but not the absolute best. And they landed on that part in the middle on the basis that H20 isn't that useful. But you want American companies to have access and be the main player, lead the technology stack in an important market, China. So H200 is better than H20. It's not the absolute latest and greatest, but it prevents China from having the impact impetus to allow its domestic champions to try and catch up. And that was the calculation that they've made.
- [17:03]
Host 2
Stay with us. More from Bloomberg Intelligence coming up after this.
- [17:09]
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.
- [17:23]
Host 2
President Donald Trump. Trump is suing JPMorgan Chase and its CEO Jamie Dimon for $5 billion. That's accusing them of illegally, quote, debanking, unquote, his businesses due to his politics. Let's see what there's any meat to the bone here. Elliot Stein, Bloomberg Intelligence litigation analyst, joins us here. We have to be quick because Elliot, he bills us by the hour here. Elliot, is this talk to us about this case. Does this have merit, do you think?
- [17:51]
Elliot Stein
I don't think it does. And the bank came out and said yesterday too that they don't think it does either. You know, the challenge for President Trump and the affiliated Trump entities that are suing is that the customer agreements with JP Morgan allowed the bank to close accounts for any reason at any time. And Trump's complaint concedes that they acknowledge that. So they can't really sue for breach of contract. So they're stuck with what's called a Breach of the implied covenant of good faith and fair dealing, which is sort of saying that JP Morgan violated the spirit of the contract by allegedly debanking Trump for political reasons, which is unlawful, but they don't cite what law was violated. So I think the Trump entities are gonna have a hard time winning this case. And I think JP Morgan has a good shot of winning on its anticipated motion to dismiss.
- [18:47]
Host 1
Let me ask a dumb question, Elliot. Is this Donald Trump, the private citizen, suing JPMorgan and Jamie Dimon, or the White House suing JPMorgan and Jamie Dimon? Who pays for the lawyers?
- [18:59]
Elliot Stein
Right. It's Trump in his individual capacity, and then many Trump Organization entities. And, you know, they're saying that after the January 6th riots, JP Morgan closed their account. So at that point, he wasn't president anymore.
- [19:18]
Angelo Zeno
In any event, is there a scenario.
- [19:21]
Host 2
Where maybe just JP Morgan, I guess if they don't win summary judgment, maybe they just settle out of court or something like that?
- [19:26]
Elliot Stein
Yeah, I mean, you know, that's certainly within the realm of possibilities. I think the bank's definitely going to take its shot on a motion to dismiss. You know, we'll probably see that in the coming weeks. And then, you know, and I think they have a good shot at winning that. But, you know, it's a pretty low bar, generally for a plaintiff to get over a motion to dismiss. They just have to allege plausible allegations. So let's say JP Morgan loses on its motion to dismiss and the case proceeds into discovery. JP Morgan will have another shot on summary judgment to try to avoid trial and say that there's not enough facts developed to warrant going to trial. I think if they lose that, then you're talking about a settlement rather than going to trial. And we've seen Trump sort of win settlements from other business entities that he's sued, especially in the media space like ABC and Paramount and YouTube, Google and. And others, you know, sort of in this, like, 15 to 25 million dollars range. So that's potentially an outcome that we're not ruling out down the road.
- [20:32]
Host 1
So the other angle to this is that JP Morgan has asked, or says it has asked multiple administrations under different presidents to change rules that oversee it and other banks that, quote, put us in this position, put us in this position to perhaps restrict some clients access to banking services because of various requirements or overviews. What kind of rules are in place that. That JP Morgan might be put in this position?
- [21:02]
Elliot Stein
Right. So during the. During the Biden administration, the bank and regulators sort of made it easier for banks to close accounts for legal or reputational risk. They got a lot of criticism from that, from industries like the crypto industry, and certainly from other conservative causes who said that banks were closing accounts related to industries that maybe were considered not woke enough or not popular on the left, like gun industries and things like that. So we've sort of seen a shift away from that now in the Trump administration, where the banking regulators are sort of stopping that, stopping what they. What they call operation choke point 2.0, and saying that, you know, banks should not be closing accounts so easily for reputational reasons. And actually, we've seen several states implement laws, too, saying that banks can't close accounts for political reasons, like Florida, for instance, where this lawsuit was brought. But those laws were not in place back in 2021. The Florida law, for instance, didn't come into effect until 2024. So that sort of goes to the point I was making earlier that, you know, there's no law here that Trump can point to that say that J.P. morgan violated.
- [22:24]
Host 2
I guess what got my attention here on this story, Elliot, was naming CEO Jamie Dimon personally in the suit. What's the strategy there, do you think?
- [22:34]
Elliot Stein
You know, I mean, it's hard to say exactly what the strategy there is. You know, Dimon and Trump have sort of been going back and forth, you know, on various issues related to, for instance, Trump sort of attacking the Federal Reserve and also his proposal to cap credit card interest rates at 10%. And, you know, it goes back even farther for several years. You know, Jamie Dimon has said things over the years that were critical of Trump and then walked them back. So I think there is a little bit of tension between the two. So, you know, it may be as simple as that, just trying to sort of poke him in the eye a little to, you know, and then maybe bring them to the table for some sort of settlement.
- [23:16]
Host 1
We also know that the Trump, his company or his companies have also sued other companies like Capital One, BBC, the New York Times. Have any of those come to anything?
- [23:27]
Elliot Stein
So, you know, the one that is most analogous is the one against Capital One. The claims are almost identical, but we don't have a definitive ruin in that case like the J.P. morgan case. The Capital One case was filed in Florida state court that actually got removed to federal court for sort of arcane reasons that only lawyers appreciate. So I won't bore you with it, but I don't think JP Morgan is going to have this same reasons for removing it to federal court. So I think the JP Morgan case may stay in state court, but in the Capital One case, we're waiting for a decision from the court on Capital One's motion to dismiss, which I think will be informative with respect to the J.P. morgan case.
- [24:12]
Podcast Announcer
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.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.