Agriculture Secretary (3:55)

We're talking to three or four countries right now about getting between 70 and 100 million eggs into the country in the next month or two, which of course will help with supp.

Luke Vargas (4:05)

However, imports, including from countries like Turkey, may do little to stem surging prices. The USDA is now forecasting a more than 41% increase in the cost of eggs this year, up from an estimate of 20% just last month. Coming up, HSBC's Frank Lee joins us to break down Nvidia's latest quarterly results as the chip maker's earnings and outlook beat expectations. That and other news moving markets after the break.

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Nvidia Analyst (5:01)

Chipmaker Nvidia yesterday reported a sharp rise in its sales and profit.

Luke Vargas (5:06)

For the fourth quarter, the latest in.

Nvidia Analyst (5:08)

A string of bumper earnings results for the company.

Luke Vargas (5:10)

But were those results enough to shake.

Nvidia Analyst (5:12)

Off some jitters about the outlook for the AI boom?

Luke Vargas (5:15)

Frank Lee is the global head of.

Nvidia Analyst (5:17)

Tech, hardware and semiconductor research at hsbc, and he joins me now this morning from Hong Kong. Frank, Nvidia's shares are trading around $130. You have $175 price target on this company. What were your reactions to the earnings update we got last night?

Frank Lee (5:33)

I think if you've seen the share price Reaction, it's been a little underwhelming. It looks like the numbers are strong, they're solid, the fundamentals are there, demand has not softened. But I think the key issue is that it was such a big earnings surprise for most a year and a half. And that was because the constant changes in the roadmap gave people confidence to take their numbers up again, including analysts like myself. The last two quarters, they haven't really been able to do that. And I think part of that reason is pricing power. The first year and a half of this AI, the roadmap, they were seeing significant increases in their pricing power almost every six months. The last peak was mid last year. Since then, we haven't really seen anything new come through.

Nvidia Analyst (6:12)

Let's talk about Nvidia's new Blackwell AI.

Luke Vargas (6:14)

Chips, its latest generation product.

Nvidia Analyst (6:17)

In this just concluded first quarter of shipping those chips at volume, Nvidia reported sales of $11 billion. I'm curious, how does that stack up against expectations?

Frank Lee (6:27)

Yeah, so I think this is a great question. The Blackwell revenue that came out today, that what they reported in the fourth quarter 11 billion was significantly higher than our estimate. And I think most analysts was somewhere around 5 to 6 billion. But I think what the confusion, or at least head scratching is that when you look at their current April quarter guidance of 43 billion, that's a net addition of about 4 billion. So I think that begs the question that some of their existing line, especially the hopper, is going to start to come off.

Nvidia Analyst (6:54)

Frank, are those older chip lineups being retired or just falling out of favor?

Frank Lee (6:59)

It's a product transition. Right. And so while there's going to benefit from Blackwell, the hopper is going to drop off. So your net addition isn't maybe quite as much as people had hoped. The other issue is that one of the big reasons people were quite excited last year was that they had pushed this new change or this new model of doing the entire downstream rack. So you would BUNDLE Something like 72 GPUs together and that increased a lot of content growth. But the progress of this rack architecture has generally been a little bit slower than expected. And so I think that is still something that we need to continue to see over the next couple of months.

Nvidia Analyst (7:30)

Tell us about how Nvidia's offerings match up with the capital expenditures we've been seeing from the hyperscalers of late. I mean, overall top line spending by the biggest tech companies in the world on AI data centers and chips seems really strong. And yet it's, I guess the kind of spending they're doing and whether it persists, that is a question of paramount importance to Nvidia.

Frank Lee (7:55)

The spending on the hyperscaler has always been something that the market has been somewhat worried about since the very beginning of the AI story. The first year for Nvidia, there was constant questions like can the hyperscalers keep this up? And so far the answer is yes. When Deep Seek first came out about a month ago, one of the biggest worries was that this is going to change the AI CapEx trajectory, especially for the hyperscalers. Well within a couple weeks the answer was clear. It was that it was not going to change the spending in the near term. In fact, most of the hyperscalers raised their capex budgets for this year quite a bit. Now, there still is a longer term question of does it change the long term trajectory? We need to continue to see that. But Deepseaks also created something interesting, is that it's boosted the confidence, especially in the China market. So if you look at the Chinese Internet players for the last couple years, whenever you ask them about what's their AI strategy to get around the chip bans, there was always this little bit of hesitation. But that body language seems to have become a lot more positive since Deepsea came out with a sense that they don't need to use the most high end chips now to have an AI model. In fact, it's creating some short term upside to Nvidia as well because along with the Deepsea introduction, you've seen a very strong pickup in the H20 chip that goes into China. For Nvidia, one of the other trends that have emerged in the last six months has been the impact of the asic.

Luke Vargas (9:14)

Actually, Frank, just explain that business for us because I don't think we've talked about it here on the podcast.

Frank Lee (9:18)

So basically, besides the GPU chip that everybody's using today from Nvidia, a lot of the hyperscalers, like a Google or an Amazon, they have their own chip. It's called an asic, an application specific ic. It's their own ip or they have control of that and they work with other chip companies such as Broadcom or Marvell to develop that chip. So there's this concern that over time are they going to be looking to ramp their own chip? So far this year that has not impacted Nvidia's trajectory or growth. But it is another one of those variables that I think people look at that could be a long term competition.

Nvidia Analyst (9:53)

You mentioned earlier that really since the start of the big spending boom by the Hyperscalers on AI servers and chips that there's been a concern the good times were going to end. More recently, we have seen some reports from analysts at TD Cowan that companies like Microsoft might be trimming back their data center expansions. Curious to get your take on that. Is it something Nvidia investors, really, anyone investing in AI chips right now should be aware of?

Frank Lee (10:24)

Yeah, that's a great question. I think if you look at Nvidia itself, they feel very comfortable with the near term demand. But if you see what Jensen Huang has been talking about since beginning this year, he's already starting to talk about other narratives, such as the auto business that needs AI, such as the robotics side, where there's going to be AI demand. The question though is that while those are potentially very interesting narratives and TAMs, how significant is that going to be in the near term to compensate if the spending on Hyperscaler comes off? So I think that's the bigger question that investors are trying to figure out.

Nvidia Analyst (10:56)

Frank Lee is the global head of tech, hardware and Semiconductor research at hsbc. Frank, thank you so much for joining us on what's News.

Frank Lee (11:04)

Okay, thanks, Luke.

Luke Vargas (11:10)

Well, speaking of chips, we are exclusively reporting that Microsoft is pushing the Trump administration to loosen and simplify export restrictions on cutting edge AI chips. In a blog post set to be published today, Microsoft will call for the White House to relax the limits on chips that can be used in data centers for training AI models so that they no longer apply to a group of US allies, including India, Switzerland and Israel. That is according to company officials who say Microsoft believes that allies who have limited access to American chips under the administration's proposed new rules will turn to China to get tech infrastructure they need. According to people familiar with the matter, Trump administration officials are weighing steps to strengthen the restrictions while simplifying the export control rules. And speaking of China's efforts to undercut the US's dominance not just at the cutting edge of technology, but on the broader world stage. We've been working on a special series about Beijing's trillion dollar infrastructure program and how it's helping Xi Jinping to rival the us. You can find the first episode of Building Influence on the what's News feed and the next one drops on Sunday and in markets news today. European shares opened lower this morning and the euro has edged lower after President Trump said Yesterday he's considering 25% tariffs on the European Union, putting a number on a threat that he's made. Trump said the tariffs would be on cars and all the things, end quote. But didn't specify when they would be imposed. He did, however, say that many trade actions would come on April 2 after the completion of a trade policy review. That comment also raised hopes that levies on Canada and Mexico could be further delayed, though a White House official said a current March 4 deadline remains in effect, pending review. And that's it for what's news for this Thursday morning. Today's show was produced by Kate Bullivant and Daniel Bach with supervising producer Christina Rocca. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.