Transcripts For BLOOMBERG Bloomberg 20240702

Live from new york city, good morning, good morning. Equity futures positive on the s p 500 by. 5 . Coming into thursday, looking to reclaim alltime highs. It is a beat, it is a raise. Nvidia does what nvidia always does. Morgan stanley, overweight. No signs of slowing down. Another quarter of excellent growth. Wedbush, outperform. No signs of any pause in demand. Lisa we always talk about how much the share price has gone up in the last 12 months. Profit rose 628 in the last year. This is a company that relies on amazon and alphabet, and that is a feature at this moment. Jonathan that stock in the premarket up by 6. 6 . Dan ives joining us later on. Annmarie he says that is a masterpiece that needs to be hung in the louvre. What you are seeing this morning is not just everyone continuing to say bye, but Goldman Sachs saying we are going to raise our price target. Even though it was just this week they raised their price target. What was so clear on this call last night is that demand is outstripping supply. There is this insatiable demand, even for some of the older models that nvidia has. Jonathan north of 1000 in the premarket. It will not be for long. We are getting a to and from one stock split as well. I take the snobbish view on stock splits. It doesnt matter. Lisa from iso when it matters because it becomes a little bit more affordable. Basically is a nod to Retail Investors. He also increased their dividend by 150 to . 10. But it is 150 gain. Jonathan i was listening to manus cranny this morning. It is the direction of travel that matters. The direction is pretty obvious. Everything is moving up into the right on the charts. We are up by more than 6 in the premarket on nvidia. On the s p 500, positive by. 5 . In the bond market, a bit of price action off of the fed minutes. Some of the fed minutes, i have to say, was there any news in this . And how dated was this . Many officials expressed uncertainty over the degree to which policy is restraining the economy. Various officials mentioned willingness to raise rates. Was that a reason to sell or an excuse yesterday . Lisa this has been a rorschach test. Pretty much all of the notes that came afterwards reaffirmed previously that they thought this is evidence why. Various officials talked about her willingness to raise rates if it was necessary as being something that indicated maybe the specter of higher rates ahead is not totally off the table. Were these really changing anything significant . We have heard that from individual officials. Im not sure it moves the needle, but it was an excuse to sell. Annmarie i think there is some nuance there where it says, many participants comment on the degree of restrictiveness. I look at jay powells testimony from may 1, one of his first sentences was, our restrictive stance is putting downward pressure on economic activity. Is he really representing the committee . Jonathan we have been asking that question a few times. How much distance is there between jay powell and the rest of the fomc . Coming later, nvidia delivers once again. Anwiti bahuguna giving another boost to equities. Michael shepart on the latest antitrust suit out of d. C. Nvidia delivers another beat and raise, sparking a 140 billion stock rally. Also rewarding investors with a high dividend and upcoming stock split. Angelo zino covers nvidia for cfra. Joins us now. First of all, once again, a beat and a raise. Your reaction to this one . Angelo not surprised, right . It was definitely some concern going into the quarter about what the guidance would look like. I think everybody knew it was going to be a beat in terms of the quarter. In terms of the guidance, i think there was concern going ahead of that blackwell launch later this year, whether the momentum, you know, for these chips, would be able to hold up. Not only are we seeing at hold up, but the momentum continues to get Even Stronger than it had been earlier this year. I think that is a testament of kind of where, you know, the enterprise space is. Where these Cloud Service providers continue to significantly invest, which we told investors we do believe there is kind of an ai war going on. All of that is continuing to drive this Strong Demand for nvidias gpus. Jonathan that is microsoft, alphabet, amazon. When we talk about runway, how long is that here . Angelo i think that is the answer everybody wants. It is kind of like, when do we start seeing a soft batch in terms of some of these Cloud Service providers . Our view is what these Companies Just cited after they reported q1 results. I dont think you will see a soft patch in 2024, and for all intents and purposes, all of these companies have alluded to higher spending in 2025 as well. When you kind of look at the trajectory for the four biggest suspenders in the u. S. Over the last six, seven years, those companies have essentially tripled their capex spend. There is no reason to believe the capex spending environment is going to soften any anytime in the near future. As long as you continue to see improving dynamics from an end market perspective, Free Cash Flow will continue to grow, and they will continue to invest heavily on the ai side of things. You are looking at growth in terms of a hey i spend, spend. Here probably decelerates, but still a very healthy trajectory. Lisa nvidias market share in ai chips is estimated somewhere around 80 . Do they face any real competition . Angelo listen, they are not going to be able to sustained their share position within the broader accelerator space. We have told investors, expect them to lose share over time. Incremental share to the likes of amd, and potentially others, some of these cloud providers. Just from an affordability perspective. That said, nvidia will continue to dominate the overall accelerator space. The gpu environment. More importantly, we think they continue to take share in terms of the Broader Data Center dollars out there. What is going to happen is, you migrate toward blackwell, you know, greater cpurelated revenue, for instance. Like well is more of this platformoriented company. You heard them last night talk about spectrum, which is their new ethernet offering on the networking side of things. Thats going to be a multibilliondollar revenue trajectory in 2025. There is a lot more revenue potential outside gpus for this company, and that is going to bolster their revenue trajectory. Lisa you are going where i wanted you to go, which is the idea that a lot of people have been looking for what the competitive threat to nvidia is. Maybe that is the wrong question. Be nvidia is a competitive threat to amd and intel because they are broadening. They are moving into personal computers, or they are trying to, which is sort of new, since the hyper scaling aspect has been a main driver. Is that something that is an existential threat to intel and amd . Angelo i think as far as where nvidia holds their competitive mode i think most people are aware it is on the Software Side of things. They controlled the entire stack out there. But amd has been able to successfully do on the cpu side of things, in terms of taking share from the likes of intel, is really being able to have a hardware device out there to really be a second alternative. You cannot do that on the gpu side of things, in terms of a more aienabled environment, because you need the software offering. Nvidia has a twodecade head relative to the competition. Its going to be difficult for the amd, intels of the world to crack the code here on the nvidia side of things. In terms of the Competitive Landscape here, yeah, we do think nvidia is going to look to take share, specifically on the cpu side of things. That is a greater competitive threat for the amds and intels of the world. Especially when we start thinking about more Energy Efficiency issues going on as you move to these ai workloads out there. I think zuckerberg not too long ago cited that Greater Energy was more of a bottleneck at this point in time then even getting his hands on gpus. So, that kind of tells you, armbased cpus are going to be in hotter demand over the next several years. Annmarie given everything you just said, should you have a higher price target for the company . Angelo i think the debate here is really, what should be the multiple on this stock . I think a lot of people are wondering the same thing. Should this be a stock that trades at a ford multiple closer to 50 times . Listen, when we think about how to value this name and what the potential value of this company is over time, i think finance 101 kind of tells you the best predictor of the valuation of any company is kind of the present value of future Free Cash Flow. This is a company where we think it is going to generate about 60 billion of Free Cash Flow this year. Probably get closer to 80 billion in 2025. That is going to start to look like levels we are seeing from the likes of microsoft, which is the Biggest Company out there. You think about the Free Cash Flow trajectory, there is definitely upside potential to our 12month target price. Jonathan finance 101 would tell you that 10 for one stock dont matter. Do they matter . Angelo listen, if you are asking an analyst point of view, i would say it doesnt matter, right . Its not going to have an impact on the fundamentals of this company. Its not going to have an impact on my estimates. I will say this. A 10 for one split here, it does matter to the Retail Investor out there. Maybe some out there that dont have as much to invest out there. I think it is more of a perception thing. I think also it potentially gets them added into more priceweighted indexes. The one i am thinking about is the dow 30. It would make all the sense in the world for nvidia to get thrown into that index. Jonathan appreciate your time this money. Angelo zino of cfra with macron 1160 price target lets give an update on stories elsewhere this money. Here is your bloomberg brief with dani burger. Dani janet yellen has called for the u. S. And europe to Work Together to counter chinas industrial overcapacity. Speaking with the g7 finance ministers in italy, janet yellen called for a united front. G7 is has collectively recognized the need to protect our workers and businesses from unfair practices and overcapacity threatens the viability of firms around the world, including in emerging markets. I believe it also poses a challenge to chinas growth. Dani beautiful backdrop for that speech. Nikki haley has said she plans to vote for donald trump, but did stop short of an endorsement. Nikki haley had challenged the former president for nomination. She was speaking publicly for the First Time Since dropping out of the president ial primary. She said biden has been a catastrophe, so i will be voting for trump. Wall street homes are facing out working from home. An official at the Regulatory Authority said there is no rule requiring employees to come into the office five days a week. In fact, dear new rules will help preserve workplace flexibility. It was specifically responding to reports that barclays was weighing five days in a week for employees that come under finra regulations. Jonathan just a word on the g7. Should they hold it in italy every year . Given the backdrops . Lisa that would be pretty incredible. Jonathan isnt that what everyone in the g7 wants . Annmarie there are whispers where the officials alike, it is in italy. Jonathan up next on the program, the nvidia optimism goes worldwide. All eyes have been on nvidia, and i think there is opportunities outside just nvidia to play the ai game. Jonathan that conversation is coming up next. Live from new york city this morning, good morning. office chatter is it me. Or is work not working . At least, not the way it could work. Your people are buried in busy work. And you might be thinking. Can ai make it all work . Can ai help your people work. Without all the workarounds . Feel better. Make Customer Service work the way customers expect . That one. Make your old tech work with your new tech . Thank you. And todd here is wondering, can ai do all that. Now . No pressure. It can. On the servicenow platform, ai transforms your entire business. Your people work better, your customers are happier, and todd. Well. Hes practically euphoric. Practically. Because when your people work better, everything works better. So what are you waiting for . Lets get to work. Idris elba works here . Mmhmm. Ya, hes super nice. Jonathan equities on the s p 500 doing ok, up by. 5 off of betterthanexpected numbers from nvidia. We see that every quarter. The stock is up by 6. 7 in the premarket. The nvidia optimism goes worldwide. There is a lot of attention with the stock up as much as it is your today. All eyes have been on nvidia, and i think there is opportunities outside of just nvidia to play the ai game. I like looking under the surface at lessdiscovered names. Jonathan nvidia producing another bullish sales forecast, helping the u. S. Futures. In europe, tech stocks are performing other sectors. Around the table with us here in new york, Anwiti Bahuguna of Northern Trust. Stocks of bronze, that is your call. Stocks over bonds, that is your call. Anwiti thank you for having me. This was not the driver of the call, though. Looking more on growth factors, u. S. Gdp Growth Continues to get upgraded and growth is broadening globally. We are seeing that happen in other parts of the world also. That was the main driver, but i will take this. Jonathan is happening in europe, happening in china too. Looks like the growth policy mix is going to pick up there. Is that catch your eye as well . The continent, the euro zone . Anwiti absolutely. We have added to em. It is a broadening story globally. Lisa just to build on what jon is a saying, is that already priced in . We have been listening to people say, europe is going to be a bright spot. Now we get betterthanexpected activity get a coming out of the region. Is it fully priced . Anwiti certainly not in europe or em. When we look at our date of the one area of the globe where markets look slightly extended is, indeed, u. S. And not abroad. I dont believe it is priced in internationally. Lisa a lot of people argue that this was going to broaden out only when we saw the rate cutting cycle began. We do have some conviction from the ecb that we are going to see rate cuts starting in june. In the u. S. It is a completely different picture. You can read the minutes however you want to read them, but a lot of people are read them reading them as regular gently as relatively hawkish. Do you see the broadening out hinging on the idea of u. S. Rate cutting cycles Getting Started on an earlier basis . Anwiti yes, and i think the minutes yesterday were certainly interesting in that respect. That policymakers are actually debating whether policy is restrictive or not. I think it helps that the messaging so far, at least from leadership, has been that policy is restrictive and they are not looking to hike. So, clearly it will be quite disruptive if we saw Inflation Numbers continue to edge higher and the talk changes from policy is restrictive to that question we saw in the minutes yesterday. But is it really restrictive at these levels . Lisa which is something people have been debating. Maybe we are asking the wrong question. Should we be asking, which country is going to stimulate . Which country is going to invest dramatically in new technology . What money is going to be put into the economy that has a stimulative effect that offsets any potential change in the right cycle . Anwiti that is the debate of, do we need even more policy restrictive policy if fiscal is still loose . We are not seeing that in in any of the regions, except maybe some more stimulative policy from china, which the markets were waiting for. In the u. S. , an election year, you are not going to see any restriction. You are going to see some concern, is the policy restrictive enough to counter that fiscal . Annmarie when you are overweight stocks, does that include china . Anwiti doesnt indeed. It is part of the emerging market index. Annmarie and the risks that are out there, how high are they on the list . Anwiti i think those risks are very well known. They have been well known. It is reflected in the valuations we see in the markets. Again, it is not im disregarding them. We are not overweight china. It is part of the overweight of the entire complex. Very concerned about geopolitics on that front, but something we are going to take at these prices. Jonathan help me understand the call on Natural Resources. Where are you on Natural Resources now . Anwiti we are seeing better opportunities elsewhere in the equity markets at this point. Jonathan could you explain whether that is taking a bearish view on Natural Resources or a relative story . Anwiti it is a relative story. More that there are better opportunities elsewhere. Lisa you have been overweight stocks, more underweight bonds for a while. More neutral on credit in particular because of the risk capacity. We have seen that for a while and a pretty significant rally. When do you know that valuations are going to test the ability to gain more Going Forward . Anwiti gain more on the stock sign . Well, we get this question often from clients that are not valuationsrich. This happens not just at the overall stock market level, but for example nvidia. Or looking at any particular segment of the stock market. And we have done some research on that at the stock market level. When you look at the current p e s, and the current return of the stock market, the correlation is 3 . It was very little Predictive Power in expecting one year returns based on current valuation. It becomes extremely meaningful when you extend that horizon and look at five years or 10 years. In the correlations rise to above 50. It is very hard in the short term for valuations alone to be a driver of the selloff, but other catalysts matter more. Does growth slowed down . Does inflation become more worrisome . Those things seem to matter more. Annmarie lisa putting together where we began to where we are, there is a sort of at that stocks can be almost a safety bat right now because of how much investment there is an because of the ai play and because nvidia always is a beat and a raise. That is essentially what we are looking at, fueled by what some people might call revolution by a godfather in a leather jacket. How much have we left the 60 40 idea behind and the idea of bonds as a stabilizer is off the table for the foreseeable future . Anwiti it is worrisome at the moment. We have not left it behind. For an Asset Allocation portfolio it is ahead still. A little less than it was before. When i say we are overweight stocks, we are Still Holding a fair amount of bonds. What is driving that right now is that correlations are positive. We are looking for other things to find, hedges, and there are very few correlations driving this. And we need to see the correlation picture change for us to say bonds are back again. Jonathan another big morning for the market this morning. Anwiti bahuguna there of Northern Trust management. Stock of the week, the year, i think you get the picture. Nvidia is positive by 6. 7 . I do you take exposure to a i . Joseph morrow says, we think the backdrop warrants a i exposure even amid extreme enthusiasm, and nvidia remains the clearest way to get that exposure. Lisa we see that born out in the fact that everyone is putting the bar up here. We have been saying, is the bar too high . A 92 gain this year . Is that too much . No way, not a chance. Raise, a beat, you have dividends, stock splits, the whole works. Here is the question. At what point does that ended . Jonathan it is like the opera of the equity market. You get a car, you get a stock split. Dan ives about an hour away. Looking for to that conversation. Michael shepart, as the Biden Administration looks to break up live nation. That stock is down 8. 3 . The conversation, up next. So, what are you thinking . Im thinking. speaking to self about our honeymoon. What about africa . Safari . Hot air balloon ride . Swim with elephants . Wait, can we afford a safari . Great question. Like everything, it takes a little planning. Or, put the money towards a downpayment. On a ranch. In montana. With horses lets take a look at those scenarios. J. P. Morgan Wealth Management has advisors in chase branches and tools, like wealth plan to keep you on track. When youre planning for it all. The answer is j. P. Morgan Wealth Management. Her uncles unhappy. The answer is im sensing an underlying issue. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. Jonathan equity futures on the s p positive by. 5 . The nasdaq up by. 9 percent. Nvidia in the premarket up by 6. 6 . It is another be it, it is another raise. You knew that already. The bond market, shaping up as follows. Yields backing away yesterday off of the back of fed minutes. We will spend some time on that later in the program. A twoyear, 4. 8646. Lets finish on europe and talk about what is happening over there in the euro zone. Pmis picking up a little bit. This from deutsche bank. Eurozone growth is rising, inflation is easing, and the door is opening to an ecb easing cycle. Just improving slowly as the year goes on in europe. Lisa what this comes down to is the manufacturing coming back, particularly in germany. That was interesting at a time where everyone talks about it being left dead in the water. No one is saying, may the ecb will not cut. That is the difference between the european region and the u. S. You see betterthanexpected data . That is not a reason to doubt whether the ecb can go. Jonathan they seem committed to that move in june. Under surveillance on our radar this morning. Nvidia beating expectations and rewarding investors with an increased dividend and 10 to one stock split. It could add more than the entire market cap of intel to its valuation. We are talking about massive numbers. Lisa i was reading about this last night. I will say, this discussion around a complete change in the concept of retrieving information versus generating answers, generating information, it is definitely a different way of cloud computing, of in general technology. If amd and intel is behind on that, how do they break into the 80 market share nvidia has on ai . To me the question is not who is going to challenge nvidia, it is, what is the prospect for amd and intel Going Forward . Jonathan earnings season for nvidia started about a month ago when we heard from the big peck the big tech names. The big tech names come for about 40 of the revenue coming from this company, and they are spending. The question right now for this name and maybe the broader market, how long is that runway . The big tech players are telling you it is pretty long. Lisa people were worried that may be buying will stop before ahead of some of these chips. The answer is, absolutely not. The idea of getting this up and running as quickly as possible at a time when there is more demand and there is supply is more important than getting the latest technology. Jonathan before those numbers came out this happened. The british Prime Minister, rishi sunak, taking a risk, calling for a snap general election on july 4. The move will put 14 years of conservative government in the hands of voters. The labour party has been ahead in recent polls by double digits. Look at these pictures. Who did this to this man . Who sent him out in the rain . I annmarie i heard it was not raining when he came out of number 10. How do you not come out with an umbrella for the Prime Minister who says he is calling for fresh elections and they are down 20plus points in the polls . For him for making light of the situation. He told a london radio program, im not a fair weather Prime Minister. Lisa ive got to say, he can control the weather, the fact that he can control when the election was held was interesting to me. Had to hold at some point before january 28. At some point you have to explain this to me. He is completely behind in the polls. It is ironic. He is subjecting himself to punishment. It is sort of the ultimate metaphor. Just bring it to me, because basically the polls have him trailing the opposition. Have to wonder why he would do it before generating some more confidence. Jonathan the theory was that he would wait until growth has started to improve. That he would wait until we started to see rate cuts from the bank of england. It was a surprise to many. I think many within his own party as well. Lisa which raises this question about the rain. Maybe he is not a fair weather Prime Minister, but still, he comes out, but to me, lets get it over with. Jonathan i find the pictures absolutely terrible. I think the daily mirror, which is a tablet in the u. K. , went with drowned and out. That is the latest out of the u. K. , here is the latest stateside. The Justice Department will sue live nation for antitrust violations. The case will look to break up the company and ticketmasters control over concert cells. Ticketmasters mishandling of the taylor swift errors tour sparked public outcry and hearings on capitol hill. Bloombergs michael shepart joins us. The stock is down by more than a percent. I cant think of a company where more people will agree on this particular suit in washington, d. C. How popular is this move . Michael well, you would find a lot of favor here in washington, and probably elsewhere in the country. Ticketmaster is a Service People have come to really despise over their troubles in accessing tickets and finding tickets at affordable prices. This is, i guess, a nerve that has been hit not only among the public, but also among the antitrust enforcers under president joe biden. Remember, his administration has made competition and enforcement a central part of its economic policy. They have been focusing very much on the consumer experience. How people are feeling in terms of prices and also in terms of access to services too. Annmarie this was a bloomberg script, but can you detail what the doj is going to be going after . What does this case actually look like . Michael we are going to have to turn the clock back a bit to 2010, when their companies were actually joined in a merger. It brought together the nations largest concert promoter, live nation, with ticketmaster, which was the largest seller of tickets. At the time it went under a strict antitrust review during the administration of barack obama. The companies pledged they would not tithers services together. In other words, promoters were not tight artists would not tight artists do ticket sales per and if you wanted your concert promoter you are not necessarily have to have ticketmaster sell those tickets. Yet by 2019 saw the Trump Administration challenging and questioning whether the companies were actually abiding by whatever promises they had made. Already by 2022 we saw at being challenged yet again with ticket prices soaring for bruce springsteen, for taylor swift, and also the website going down, and people finding it hard to get tickets at an affordable price. Annmarie given all of that history and the backdrop of this merger, the fact that it was allowed through obama, but with strict policies attached to it, the Trump Administration also was not comfortable with how ticketmaster and live nation were operating. Why did the biting nation Biden Administration wait so long . Do you think there is any politics attached to this . Michael it is not necessarily politics. The antitrust enforcers here in washington had been very busy over the past three years. They are seeking to lock a grocery chain merger between kroger and albertsons. They are looking into exxons attempt to purchase pioneer Natural Resources. And then you have to look at all of the cases they are pursuing on anticompetitive grounds against the Big Tech Companies of amazon, google, meta, and apple. They have had a lot on their plates, and this is something they have been investigating for almost two years now. Lisa how successful have their antitrust suits been . Michael you know, we are going to have to see how this one plays out. I think the big tech cases that are coming up will be the biggest measure of how they do. They just closed arguments in the google anticompetitive behavior case, and we will be finding out how their batting average is when the judge finally rules on it. That will not be for a couple of months more. Lisa the reason i ask this is, we are talking about ticketmaster and live nation. Ticketmaster controls more of 80 of the market for tickets sales. You are looking at a secret an oligarchy, if not a monopoly. We are talking about nvidia having 80 of the Artificial Intelligence market. Companies continue to consult a date with cash they can put any which way. A successful are they really being im talking about the antitrust regulators in controlling some of this growth versus nitpicking around the corners . To visually seem like they are doing something . Michael the previous segment when i heard you talking about nvidia, the same thought struck my mind. But i think there may be one difference here, in that this is an argument apple has made in trying to defend itself that, look, we do a really good job with our products, and you should not single us out for anticompetitive behavior just because our products are such a success. That might be a similar argument that a company like nvidia, which was so far ahead of the curve, and really had developed technology that was naturallysuited to catch the wave of Artificial Intelligence and building the data centers needed to power this new frontier in technology. Jonathan thank you for being with us. Michael shepart of bloomberg on the latest out of washington, d. C. Im still struggling to see the case that comes from live nation. What is their defense against this . Lisa they make good money. Why stop it . That is a great question, especially since the barrier to entry is so much lower with online sales. Think about other platforms that could given both that could get involved. Annmarie following this taylor swift debacle you rarely see senators line up alongside each other, which they did in this hearing. This is more than your back. This is the definition of a monopoly. Blackburn said, this is unbelievable. Everyone in washington is prepared for this and excited about. Jonathan the arc of this is interesting from obama, to trump, to biden. Regardless of who takes the white house, out different it will be, how different the next government will be . Annmarie with a case like this you can see the senators lining up on both sides of the aisle, saying they want to go after some of these companies. We have heard that as well continuously from j. D. Vance, who says maybe lena con lion a khan is the most successful. Some came in, he said, this is very uncomfortable. There was a settlement. And biden said, we want a fresh probe. Jonathan lets get you an update on stories else where elsewhere. Dani i have an update on what could be the biggest mining deal and over a decade. The hp has an extra week to convince Anglo American of its 49 billion to cover plan. Anglo agreed to enter extended talks after rejecting bhps third and final offer. Anglo had criticized the first two approaches as too cheap, and so far has objected to the structure of the deal, saying it dumps too much risk on shareholders. Harvard universitys governing board has decided not to award degrees to 13 students who participated in a propalestinian encampment on campus. That was despite a vote by 150 faculty to allow the students to graduate. The students will be able to produce a paid in Commencement Ceremonies, but will not receive diplomas. Within 1500 College Students will get their degrees today. Warner bros. Discovery has agreed to a fiveyear deal with disneys espn espn to Share College football games. Espn signed a sixyear deal with the most 8 billion to carry the tournament, under this agreement some of the gains will air on tnt and warner bros. Maxon streaming service. Warner bros. Has been increasing its sports exposure. That is your bloomberg brief. Jonathan thank you. More in about 30 minutes time. Up next, the fed faces november. You were going to probably an unsustainable boom in 2025. I think the fed is going to have to start raising. Jonathan the prospect of hikes in 2025. From new york, this is bloomberg. Jonathan equity futures on the s p 500 positive by. 5 . A little bit of a lift in this market off the back of betterthanexpected numbers, which may be you expected. Nvidia is up by 6. 85 in the premarket. Under surveillance this morning, we are flying blind and 2025 lined into 2025. Whats happened what happens after the election is probably we get a fiscal boom. If you abide in, you have to spend more on defense, you have to spend on energy. If you are trump, you are busy pushing out tax cuts, whatever it is. Either way youre going to get a boom for 2025, and i think the fed is going to have to start raising. Jonathan here is the latest this morning. Treasuries following after fed minutes showed officials wondering if the fed may prefer to wait until the election is out of the way. If either side wins a clear victory u. S. Fiscal policy may become more expansionary again, with significant tax cuts or further spending increases. Holger schmieding joins us. Talk to me about the prospect of rate hikes next year. And imposing making a case yesterday. Holger i dont quite believe it, because we rarely get in the u. S. An election result that is clearcut, that one of the two sides, where congress is in control, really do something dramatic. We had huge fiscal initiatives in the u. S. Right after the pandemic, and everybody was panicking. We knew to do something big, but now with that unusual situation over we will likely be in congress regardless of the election result, into the kind of gridlock were not much happens. That means the fiscal impulse which is currently propping up the u. S. Economy will weaken over time, and that argues for rate cuts next year rather than rate hikes. Jonathan what kind of budget deficits are you expecting . We are running 6 to 7 . What are you expecting . Holger that is a separate question. Even with the fiscal impulse petering out, the u. S. Will likely have fiscal deficits in the range of 6 to 7 for quite a while. But this is no longer new. That is just continuing the strong fiscal stance which we have had. It is not new money giving you new growth. It is supporting the economy at the level it is. Basically the cases, we need to rebalance the u. S. Policy mix over time. That means Monetary Policy less restrictive than it is now. We dont need to do it now, but we probably will have to do it in the coming years. Our call remains first cut in december. Lisa it sounds like you didnt make much of the minutes and you think people are overreacting. Holger it is a hawkish tilt, yes, but we were not expecting a rate before december either. For us that his confirmation, ok, they are not close to cutting. They need a lot more evidence, and of course the minutes came before the latest economic data, which all consistently show a bit of weakening economic momentum. Plus inflation for once did not surprise to the upside. In a way this is passed news. The minutes. Lisa everyone was talking about u. S. Exceptionalism. I wonder how long it is going to be until we are talking about european sweet spot or european goldilocks, considering the fact we cap betterthanexpected activity data. In particular out of germany. In a time where the ecb is all but committed to a june right cap. How positive is that for the european economy . Holger goldilocks is a big word, but what is happening is the big putin shock is over. That is the surge in energy and food prices, which drove the economy into stagnation and drove inflation up. We are now returning with much lower energy prices. We are now returning to normal. And normal does mean growth. Growth of close to 1. 5 by the end of this year. Normal means inflation settling a bit above 2 . As a result, the ecb no longer needs to think about inflation getting too permanent. It can afford to cut rates somewhat. Annmarie when you look at the ecb, it is pretty much certain they are going to cut in june. What happens after . Holger the ecb will be in the slowing. Do not look for backtoback cuts. We look for quarterly moves. September, then december, early next year. Because inflation will hover around the current level. The economy will be picking up. It will probably be only wait this only late this year when household prices for gas and electricity will probably bring headline inflation slightly below the target rate of 2 , and that is when probably the ecb will then do a lot more cutting. At the moment they have preannounced the june cut, but they will be in the slow lane for a while after. Annmarie i would like to circle back to how you need a sweep of congress. But there is one area there could be inflationary that you dont need a sweep in congress, and this is tariffs. How are you thinking about potentially a Trump Administration putting a 10 tariff ring around the united states, and 60 on chinese imports . Holger tariffs are bad. Sometimes there are good reason for tariffs. If there is too much of subsidies going on, yeah, but basically tariffs are bad. Terrace make all of us a little poorer. Tariffs make all of us a little poorer. This is a domestic economy where imports play a role. I dont think that would really make the crucial difference. It would be a big bigger in smaller economies, if they protect themselves with huge tariffs. The impact on their prices would be bigger. This is a huge concern, but less so for the inflation outlook. Annmarie when you say tariffs are bad, are they bad if china is dumping supplies on markets and obliterating their own industries . Holger the first economist response to that is, if they give us a little gift, if we can get the electric vehicles cheaper, the solar panels cheaper, thank you for doing that. We dont have to spend the money on it, you spend money on it with subsidies. The snag is, if that is too much of a disruption. Then you might want to slow down the process, or if there are security concerns involved. Probably less so for solar panels, but with electric vehicles, who is getting what data . Do i want china to know where 25 of the european cars are currently parked . Troubling not, so there are serious security concerns that need to be addressed. Doesnt have to be tariffs. It has to be forcing them to make absolutely clear who gets what data, or that the key datarelevant components have to be produced locally in the u. S. Or europe. That is a better strategy than to have these blanket tariffs. Jonathan you have client meetings here in the u. S. How much daylight is there between the u. S. Perspective and the european one on this issue . Holger there is not all that much disagreement. There are more Political Considerations well, you have the election, which plays a role. We also have this not quite as important european parliamentary election. But among the majority of investors and economists there is a rough consensus, sickly tariffs are bad, but there are exceptions when you sometimes have to strike back. And especially if you want the other side to offer concessions, you want to show your weapons. But after showing your weapons you should sit down at the table and talk rather than just wield the weapons. Jonathan you know the German Economy better than most. What do you think the german automakers want right now . Holger there would be the most unhappy with any titfortat trade war. Having said that, this is not the key concern for europe. It is also not the key concern for the German Economy. We have to distinguish between two things. One is the profits that Companies Make who are listed on the german stock exchange. The other is, what is the actual impact on the German Economy . That probably would be much less. We have a shortage of skilled labor, for instance. That would be much less than the potential impact on profits of companies who dwell who do a lot of business in china, if what hopefully will not be the case, if this escalates. Jonathan thank you. It is good to see you. Holger schmieding of berenberg. Lisa, the trajectory for policy too. Lisa im glad that annmarie brought up terrace. There is one aspect these politicians agree on unilaterally, and it is immigration. Much immigration has brought on inflation in the country. Deutsche bank put out a report that said inflation would have been 50 points higher if it had not been for immigration. These are some of the discussions i think are going to be fascinating. Annmarie immigration kept a lid on wages. North of 3 Million People coming to the united states, and that is the supply the labor market needed to make sure they can keep this lid on this wage spike spiral. Jonathan this conversation will continue. Coming up, here is the lineup. Sarah hunt of alpine saxon woods. Tobin marcus of Wolfe Research. Ashok bhatia of Neuberger Berman. With a lot to say about what he calls a masterpiece quarter for nvidia. Lisa lets have predictions on his outfit. Its not going to be a regular suit. How many colors and patterns just to celebrate the joy that is another raise, another be . Annmarie because at the masterpiece for the louvre. Nvidia has become the mona lisa of the stock market. Jonathan in many ways it has. Equity futures on the s p, positive 5. 6 . The nasdaq doing better as well. With nvidia in the premarket higher by 7 . Lets see if these gains hold. A sneak peek at the bond market for you following the fed minutes from yesterday. Your 10 year, 4178. 4. 4178. aidyl hi, im aidyl, and i lost 90 pounds on golo. I struggled with weight loss and weight gain my entire life. With all the yoyo dieting i did in the past, i would lose 20, 30, 50 pounds just to gain them over and over again. Thanks to golo, ive been able to steadily go down the sizes in my closet and keep the weight off. For the first time in forever, i feel in control. announcer change your life at golo. Com. Thats golo. Com. We are starting to see cracks in terms of the consumer. There are more risks to the downside on the labor market, udc signs of consumers faltering. Downshifting in the consumer is very unlikely. We think the consumer is disarming right now, and that trend probably continues for most of the year. When will high prices lead to consumers pulling back checkup it looks like we finally hit the point. This is bloomberg surveillance. Jonathan the second hour of bloomberg surveillance starts right now. From new york city, good morning, good morning. Nvidia is higher in the premarket by 6. 8 . The opening bell in about two hours 30 minutes time. Dan ives joins us with this to say. The godfather of ai delivered another masterpiece quarter. Lisa a lot of people are agreeing with him. Every quarter they have blown it out of the water in talking about a technological revolution fueling a more than 600 increase in one year in net profit. I cannot get over that. Annmarie it was this concern going into this, an air pocket with these big buyers waiting for the newest generation of a chip. No. But we heard yesterday from the ceo is demand is outstripping supply. They dont have patients. It is not there. People are desperate to get in on this. There it is an older generation ship or waiting for new ones. Jonathan when these numbers came out yesterday, a beat and raise much again. They are poised for the next wave of growth after this massive wave of growth already. They boosted the cash dividend. They announced a temper one stock split. What didnt they say . Lisa nothing. They are talking about maybe even gaining market share from amd and intel. Living into personal computers, talking about cpus. You raised this point a couple of months ago. Their main clients are the big tech giants. They account for about 40 of the profits. That has been an awesome thing for them. These companies are not going to be affected by any kind of Economic Cycle in the same kind of way. They have the money to spend an right now it is, how much can you acquire . Jonathan we spent a lot of time talking about fed policy. We will continue to. But when you go through the last month or so, it has been about the earnings from big tech. What we have heard from microsoft, nvidia. The numbers have been phenomenal. Lisa it is independent of fed policy. It is independent of a lot of macroeconomic factors. We are talking about potential pockets of weakness. We are not seeing it in places that are undergoing a technological revolution. Much does that divorce the equity market from any softening we see with smallcap stocks . Annmarie these are the Big Tech Companies. Yesterday nvidia talk about the fact that there were 20,000 generative ai startups that are desperate to get in on these chips. Where is the next magnificent seven coming from . One of these. Jonathan the broader scores look like this. Lets start with the s p. Futures positive, up by. 6 percent. In the bond market, on a 10 year, 4. 417 eight. In europe, better data. Coming this hour, we will catch up with sarah hunt on why the boom is still on the end blum is still on the nvidia rose. Tobin marcus of Wolfe Research. And ashok bhatia of Neuberger Berman on debt sustainability concerns. Skyhigh expectations once again not high enough. Nvidia soaring after delivering another beat and raise. Sarah hunt readiness. Margins look strong, although there will be a point at which the undersupplied market becomes lesser. In other Industries Companies do not get as much credit when they are overearning, but the bloom remains on the rose for nvidia here. Sarah, lets start with those stellar numbers. How impressive was that yesterday afternoon . Sarah i think it was pretty impressive. The concern was there might be some slowdown in the change of rapid change has been so fast. People are not worried. I think the fact that they are able to absorb those when they have something new coming also tells you people want to get into this game and it doesnt matter if they have to break. They will take what they can get right now because they dont want to get left behind. I think it was a very strong report. It needed to be a strong report, like all of q1. That is driving right now what you can see is another series of potential alltime highs today. Jonathan you can see it on the screen, up 7 . Broadcom too. Amd up in the premarket as well. When you go through these names what is and is not driven by this theme in the equity market right now, given utilities are up a percent this month . Sarah i think a lot of the stock market is hanging onto not just the idea of ai in and of itself, but the productivity gains it is going to bring. I think that has been the biggest question. What happens coming out of this pandemic and what is going to fuel growth in the economy . This is at least giving the market a story to tell itself. Whether or not that is going to happen in the timeframe people are looking for, someone was talking about how long it takes to permit. It was a longtime friend that it is going to take. You have an infrastructure bill that is going to go on here. I think as we get more use cases that seems like something we can continue to think about. If it turns out this does not work as well, or it is not giving that productivity, that will be a different story. But we are not even close to that yet. Lisa what i find fascinating, sarah, the idea we talk about the fed rate hiking cycle, that left rates at the highest levels in decades, why is the economy so insensitive to that . You overlay a super cycle that is secular, that is independent from the macro cycle and all of the investments from big tech, how much can i keep going regardless of what happens in the macroeconomic backdrop . Regardless of whether there is a downturn in areas we are releasing softening . Sarah that is an excellent point, and when people Start Talking about, is the economy rate sensitive the way it used to be, in this particular sector it is not. I rates for companies that are cashgenerative and have a lot of cash is helpful to them, because it is giving them some return on their cash. Over the last decade and a half they were getting nothing. It is these giant cashgenerating juggernauts that are funding the spending broom. That is not going to be affected by higher rates. I think the market would be struggling because the question would be, what is going to happen to the economy next . This is giving people a reason to say, there is a lot of ways we can see efficiencies here. A lot of those efficiencies are going to end up with less people working, but that is a question moving for. It is not a question at this minute. Now we are building the infrastructure. If i think about the bill that for the internet boom and dark fiber and all of these things that were ancillary for the internet growing, you have heard a lot of companies were generating no cash. You had a lot of customers that needed to be financed. Now you have customers that have plenty of cash. They are willing to spend it, and that is a cycle that is not necessarily rate sensitive. Lisa we were talking this morning about whether the 60 40 is dead. I would take that as step further and ask about whether these tech stocks are the safety plays at a time when there is more uncertainty on the fiscal side, more uncertainty on Monetary Policy then there is for the ability of these companies to make bank, even with their cash piles. Sarah i think that becomes a question of valuation. There has been a lot of discussion about how valuation in and of itself does not stop cycles. There is a higher risk to the reward, and in some of these names you are starting to get there, just in terms of another economic slowdown, where some sort of pickup in terms up some of these bottlenecks we are talking about solving on the utility side and elsewhere, if you start to see companies having trouble getting data centers and getting them built, which i think there is some discussion on the edges of right now, you could see some timing delays, and neck the put into question the high valuations right now. But in terms of the longevity of this cycle right now, just from what you are hearing from nvidia and the discussions of what people need and the other companies trying to get into this, i think you have a runway on the demand side that is difficult to say there is going to be a problem unless there are bottlenecks. Annmarie when you talk about the potential for ai disrupting the labor market, john authers wrote about how nvidias play is not so healthy. Its would mean taking Capital Expenditure from other companies. This would mean taking jobs away from the american workforce. When does that story actually start to bite . Sarah i think all of technology has been a continuum of whining ways in which to make productivity better. It also often requires letting people go, or having less people. Mandeep singh had a great discussion yesterday about how annoying chatbots and all of the other things we have been looking at as ai have been to users, and how that experience is going to get better. Some of that has happened. You are going to start to see a better situation in places where you have already replaced people with technology. The question Going Forward is, how does that broaden out, and to the extent it does, how damaging is that today labor economy . I think that is a question we really dont have an answer to yet. Annmarie is there a company now that you think could potentially get on the ai space that we have yet to see within the tech world . Sarah i think everybody is trying to get into the ai world. The question is, how can they use it . This goes back to the use cases and whether or not they generate on a. You have seen on the web hosting side, in microsoft and chatgpt, there is money to be generated here. Question is, are Companies Going to find it useful and continue to invest in it . Down the road where it is that end . Every Single Company that has already been using ai for the last decade this is the Large Language Models making the iteration better and makes people get into it and places they were not. I think there is not anyone who is not going to be working into the space. The question will be, who ends up using it better . I dont know the answer, and it may well be that some of the old economy stocks use it better. We dont know yet, but i think that is the promise and what people are expecting. Jonathan something lisa mentioned a few times this week, how utilities are going to perform in a down market. We got an experience of that yesterday. Helped lead the losses on the s p 500. Even the way they have been bid up, are they defensive still in the equity market . Sarah it is hard to make the case they are defensive. With utilities especially you have a lot of issues that go into permitting, a lot of issues that go into spending. There is a lot of discussion about how we are going to have to build out a better grade. And we are. The timing is the question and the regulatory backdrop is going to be the question, and how fast you can get things done. There are an awful lot of projects that get hindered with also its of issues. I think there is a timing issue of that and extent to which those get it up that are also on the yield side. But those two stories together and makes them vulnerable. Jonathan good to catch up, as always. Sarah hunt of alpine saxon woods. Nvidia is up by 7. 3 in the premarket. Lets get you an update. Here is dani burger. Dani rishi sunak has called for a general election on july 4. In a statement outside of a very rainy 10 downing street he said the country needs clear leadership. Labor leader keir starmer kicked off his own campaign, saying his party can put an and to the recent turmoil. His shadow chancellor says the labour party will fight the campaign on the economy. The Biden Administration is touting its independence from the fed. White house economists cited research and Historical Data to make the case that central bank s independence bolsters their credibility. The move comes amid speculation over how donald trump could ramp up pressure on the fed if he wins another term in the white house. New york citys tax revenue from tourists has surpassed prepandemic levels to hit a new record. A jump in visitors offset a drop in international and business travelers. More than 62 Million People visited the city last year, generating 4. 9 billion in sales and other tourismrelated tax revenue. The city is expecting a rebound to continue next year, projecting 68 Million People will visit new york in 2025. Jonathan before you go, quick question, have you seen dan ives in the green room . And what color is the jacket . Dani dan ives and i are matching today. We thought because we would be in the green room, we would dress in green. Jonathan upon brand. I told dan if the numbers get that he has to dress in black, and i will give him a skinny tight too. I think we are a few quarters away from that. Lisa its going to be as bright as possible to thwart that. He agreed that he is never going to be seen in black. Jonathan up next, a highprofile vote for donald trump. Biden has been a catastrophe, so i will be voting for trump. Trump will be smart to reach out to the millions of people who voted for me and continue to support me. Jonathan the latest from nikki haley, up next. From new york this morning, good morning. [suspenseful music] trains. [whoosh] trains that sense what isnt on the schedule. Trains that use the power of dell ai and intel. To see hundreds of miles of tracks. [vroom] [train horn] [buzz] clearing the way, [whoosh] so you arrive exactly where you belong. Should i . Normally id hold. But. Taking the gains is smart here, right . Feel more confident with stock ratings from j. P. Morgan analysts in the chase app. When youve got a decision to make. The answer is j. P. Morgan Wealth Management. Jonathan live from new york city, with equity futures positive by. 6 on the s p 500, there is a lift in this equity market. A left for nvidia as well. That name is up Something Like 7 in premarket. Under surveillance, a highprofile vote for donald trump. Biden has been a catastrophe, so i will be voting for trump. Trump will be smart to reach out to the millions of people who voted for me and continue to support me. And not assume that they are just going to be with him. And i genuinely hope he does that. Jonathan former president ial hopeful nikki haley thrown her support behind donald trump ahead of the election. Having previously said trump was not qualified to be president. Tobin marcus of Wolfe Research joins us. If nikki haley is on a trump ticket, how many of those people actually go with her . Tobin i think that helps him in terms of the complementary he has been looking for on a ticket, but i dont think she brings a bunch of voters with her. The people who voted for her in these primaries, especially the current primaries, are trump dissenters. I dont think they necessarily follow her over. Annmarie there is and wants to this. She said she is voting for him. She did not explicitly endorse them. Tobin that is why it remains unlikely he she is going to in up getting the vp not. Trump has made it clear he wants loyalists. Is not trying to assemble the team of rivals from 2017, 2018. You know, whether or not she is going to vote for him, i take her at her word. Annmarie she also called him unstable and unhinged. Can this do damage to her reputation . Tobin among certain moderates i imagine it would. I dont think it reflects well on her. But by the time she is going to be seeking office i doubt this is going to be the thing that hangs over her. Annmarie so you take her off of trumps vp list. Ben carson has the highest favorability rating with republican voters. Where is your thinking of who trump could actually pick . Tobin i thought he was looking for someone who brings demographic and or ideological complementarity, but as a loyalist who is going to tow the line for him and not be afraid to defend him. I think that list includes tim scott, Elise Stefanik i have always thought is promising. Looked like more of a dark horse, but now is firmly in the running. He seems enamored of doug burgum, which is less complementary, but does double down on the economic message that is the core of his appeal. Lisa it seems like terry haynes would agree with you. He said it doesnt mean anything for nikki haley to vote for donald trump. Does it say about the zeitgeist in the Republican Party in a time where everybody, i think at one point the Republican House of representatives, were going to lose a majority because so many of them were at the courthouse supporting donald trump. Where does it say about where the Gravitational Force is . Tobin in president ial elections you see people come home. I have heard various people swearing to my face that huge numbers of republicans are never going to vote for trump again. That never seem to write to me, because generally you get partisans coming back to their home base. I think from here on out that dynamic stands to benefit biden a little more than trump. That is why i suspect bidens numbers are softer than trumps, but generally you see a lot of people wringing their hands about their complaints with the nominee, but ultimately you have good reasons to be in the party they are in. Jonathan what are you expecting from the debates in late june . Tobin generally debates tend to not have as much importance as they are made out to. You usually see a bump, but the bump tends to be shortlived. Both after debates and conventions tend to be shifts in nonresponse bias. But actually persuading people is fairly challenging. In this case where you have a lot of people who are going to be unfavorable to both candidates, and are a little bit less attached than they otherwise might be, it is slightly more important than usual. But i suspect that the debates are not going to reflect incredibly well on either candidate. Certainly that is what happened in 2020. Jonathan how is biden going to change this story . Nearly three in five americans wrongly believe the u. S. Is in recession, and the majority blame the Biden Administration. Go through it point by point. 55 believe the economy is shrinking. 49 believe the s p 500 Stock Market Index is down for the year. Putting 9 believe unemployment is at a 50year high. Where is this coming from and how does he change it . Tobin i think the stock market numbers there are the most enervating thing for the white house. That is not something where you have to look at the headlines. You can look at your own portfolio. That shows where the real dynamic is here. People feel bad about economy, primarily because of inflation today. The price level remains high, regardless of race. When you run focus groups, people say what they are looking for is for prices to come back down. Of course no economist is waiting for the deflationary spiral to start. You are getting never activity adding negativity, and people are expressing it. Anything you ask them about the economy it is, the economy is bad in a way that reflects inflation. Any element you ask me about ongoing to say is bad. I dont think that dynamic is changing. The Economic Strategy for the Biting Campaign is going to be to run on a contrast of vision and values. Trump cut taxes for the rich in 2017, biden is fighting for the working class. There is no way he is winning a contrast of records. People are always going to remember 2019 as a time that felt better than now. Regardless of the Current Situation on election day. Annmarie when you talk about partisan politics and people coming home, we saw that. For the first time trump brought more in for the month then biden. Politico this morning has a story about how biden is struggling to shore up grassroots fundraising. Where do you see this money game playing out . Trump is beginning to pick up speed. Tobin i think it probably was inevitable that the gap narrowed. I think that the biden people are not going to suffer from some great shortage of money. President ial campaigns are less dependent on money than any other campaign in american politics, because you have annmarie but you need millions of dollars. Tobin sure, they need money, but they both will be swimming in money, to first approximation. If you are running a Congressional Campaign against an upon against an incumbent, you are desperately in need of money. For president ial campaigns their finance operations are running full steam, they won every dollar they can get, but it is a question of, your 1000 campaign ad in a given swing state. We are going to be blanketed in media about these guys. The main thing most people are going to see all year or what they are doing through earned media. Annmarie how much does that hinder trumps war chest, but also his poland . Tobin it remains to be seen. If you take the polling at face value, trump is going to suffer a sevenpoint hit if he gets convicted of a felony. People are notoriously bad about how they will feel about something happening. I will take the under on that number. I do think it will weigh on him if he gets convicted. It was a lot of people who are going to be unfavorable to both candidates. I think a lot of suburban collegeeducated moderates are not going to love the idea of a convicted felon as president. Even if the set of felonies he stands to be convicted of are not quite as great as the ones being alleged in other cases. Conversely, even if the jury hangs i think that is a benefit for trump. I think that is closer to an acquittal. We will know soon. Jonathan good to see one person. Tobin marcus of Wolfe Research. That poll was stunning. Just to go through some of the details, 56 think the u. S. Is experiencing recession. 49 believe the s p 500 is down for the year. 49 believe unemployment is at a 50year high. Lisa and you cannot discount the way people feel. You can say maybe it is a perception issue, but we were just talking about how certain aspects of this recovery have been independent from the masses because it has been an invidious story. It has not been a Small Company story. Jonathan tobin nailed a. The price level is not inflation month over month, it is the last five years. Coming up, dressed in green, dan ives on nvidias guidance. The quote should be hung in the louvre. From new york, this is bloomberg. Her uncles unhappy. Im sensing an underlying issue. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. After military service, you bring a lot back to civilian life. Leadership skills. Technical ability. And a drive to serve in new ways. Syracuse universitys Daniello Institute for veterans and military families has empowered more than 200,000 veterans to serve their communities and their careers. From professional certifications, to job training, to help navigating programs and services, we give veterans access to support from anywhere in the world. Before i give you an update on the market, just take the shot quickly. Sit tight, stay close, dont go anywhere. Equity futures on the s p looking like this. Posited by 0. 6 on the nasdaq we are positive by one percentage point. We will get to that in the moment. Twoyear, 10 year, 30 year. Yields just about unchanged on the 10 year. On the twoyear, 4. 8646. Lets just sit on eurodollar for a second. The euro shaping up as follows. Positive by. 2 . Under surveillance this morning, jobless claims do you in just under an hours time. The weekly data expect to reaffirm the resilience of the labor market as the fed speak goes into overdrive. Lisa a conclusion they are tilting more hawkish as the data continues to surprise. It is not continuing to move to the upside. There seems to be a rethink about what the neutral rate is. About what they have missed and gotten wrong. Based on the timeline its looking less and less likely to see a rate cut. Jonathan what did you think of those minutes yesterday. Various officials also mentioned a willingness to raise rates a foreign to. Officials expressed uncertainty to the degree in which policy is restraining the economy. Lisa we have heard this from every official who has spoken. There is a question that annemarie brought up which is how much jay powell represents the mainstream of the committee. There is an honest debate at the federal reserve. It seems like it will be hard to get consensus around something before september and september will be a hard call considering the implications. I promised you an update on european data. The gaining momentum here. Beating estimates and the highest level in the year. Negotiated pay increasing in the Third Quarter from a year ago posing an inflation warning just two weeks before the ecb is widely expected to cut Interest Rates. Will they embrace the better data and say inflation is doing ok and we can cut Interest Rates. Based on what we heard from pimco just yesterday they are very interested in getting more exposure to europe because this growth policy mix will improve from here on out. What incentive with the ecb to have not to cut next month. They basically want to support the economy all of a sudden the soft landing is looking more in line for them then it was before. When people were talking about the u. S. Is an exceptional shot, why wouldnt they say great we will cut rates and watch that and see how it goes but i think we are good. The fed just doesnt have that confidence. Lets talk about the number one story. Shares of nvidia soaring after the Company Reported a beat of the end raise. The godfather of ai delivered another masterpiece quarter of guidance that should be hung in the louvre. Good morning to you sir. A masterpiece quarter. What was impressive for you yesterday. If you look at the guidance in terms of what we see on the data centers it was even i think a billion beyond whisper numbers and if you look at the demand this is the most important thing. Demand is accelerating. Its not even slowing down so when we start to look and trajectory out not just for nvidia second, third and fourth derivative. I think its time we get the popcorn out because this ai revolution in 1995 moment starts. Chipmakers go through cycles, sometimes you hit an air pocket. Whats different about this one. Its unlike anything weve seen. I think even from a component perspective you are seeing this across asia and weve seen it. Theyve never seen any demand like this. But theres only right now nvidias world and everyone else paying rent. You will have and and others who are chipmakers that are going to benefit but this is significant for the likes of microsoft, google, meta. Then you look at the service now , so youre going to now start to see this title wave spend. Its good to be hitting the shores of tech thats wife you are there right now theyre going deep into those caves into hibernation with their valuation spreadsheets because i think its not being captured in terms of what we are seeing from the demand perspective. You should be scared when bears go into hibernation. The check on markets are important to have. Theyve shown they are the only game in town. 80 of the ai market is potentially some of the threat to the ands and the intels of the world. You said its nvidias world they have such a leadtime in terms of the chips that people want and now going into personal computers. That is someone in terms of what they are doing it intel, disaster of epic proportions. They are going for 35 miles and nvidia and for are in the left lane. But with this what this really means is the appetite. If you look at the demand from an enterprise perspective, this is all the drumroll to june 10 where apples can a their ai strategy for consumers and thats why this is a 1995 moment not a 1999. I was looking at the Profit Margins of nvidia. Something like 76 which is the envy of grocers and things looking at the 2 margin. At what point do you see the googles of the world, the microsoft of the world pushback and start to create their own chips and say we are paying a lot. The godfather of ai chips right now is really dictating that. In a few years you will see others and youll see apple and microsoft look to build their own chips but for the next two to three years that is really something thats not feasible. They will have to do continue to buy these chips and thats why nvidia chips is a new gold or oil when it comes to that. Intel market cap 134 billion u. S. Dollars. We are up in the premarket for nvidia more than the market cap of intel. What is everone else getting wrong now particularly that company. I think what have they gotten right. Its really a nightmare that just continues. Really a horror show relative to what they could have gone after. They have almost if you look apple has beaten them at their own game. Why is it so difficult to turn around . Dan when you look at how janssen and nvidia and intel i thought that was good to be a fad and ultimately that was something a miscalculation that they will be paying for for decades. And we could talk about u. S. And some of the things they are doing for innovation building here. Jonathan you think the winners now will potentially be the winners for decades . It wasnt quite that way there were some big winners at the time but ultimately ended up being big losers. These are the winners for the next decade. Dan it starts to go theres not too many tech Writer Companies that are still around and if you look at intel they will have to do, day and they will have to specifically accelerate this because nvidia and jensen thats the new age. There there were apple was when they launched the iphone. When you look at jensen its not someone you want to bet against which speaks to and we even brought this out what it means to the rest of talent. For software because now the baton is being hit. Thats what you see now, a look at dell. If some until to six months ago dell was an ai play they would say i dont really understand that perspective. But it just shows where you are and i believe in the early stages of this new tech market playing out. Intel is doing a lot when it comes to investing. 20 billion from the chips and science act out of washington. Besides, day what more should intel be doing . Dan they have to focus on trying to be nvidia, and in some component. Have the install base. Its good to be about innovation. I think the problem with intel is its been nightmare after nightmare, a blackeye after blackeye in terms of going from an engagement perspective. They have the right strategy but that three dollars gets you a cup of coffee. When it comes to intel, and we theresa report i have to ask you about this we are recent report about what this would mean if china were to invade taiwan and how these companies can flip a switch because all their chips mostly are being made in taiwan. You see some pretty aggressive military moves around the taiwan country and the straight because of the recent elections. When these kind of risks how much do they weigh on you. Its right now contained risk so that if you say what could spoil the party its not the fed or demand, china continues to be the biggest risk here from geopolitical perspective and thats why i think right now probably the biggest concern is geopolitically whats can happen there but if you look at that balancing act between the u. S. And china. They are right now able to balance it where you also have a huge ai story thats happening. At the end of the day the u. S. Needs china and the china needs u. S. Building the chips here in the u. S. On the supply chain is you dont seem to have a lot of confidence in his ability to actually increase in the united states. That you think a lot of the money that federal subsidies wont necessarily create the behemoth and the hightech touch of supply but a lot of people are talking about. We can start to move some to the u. S. And we are starting to see that but the reality is for the next five or 10 years that supply chain, if you like to 500 iphones they continue being made. And i think thats the issue here in terms of this balancing act despite what we hear. We are basing all on aced on all of this how long before they are a 3 trillion company . Dan they will get there sooner than a lot of people expect. That is something that will be on the horizon. Thats where you start looking at about 4 trillion, 5 trillion and we look out over the next two or three years in terms of what we see tech going, i think thats what starting to play out. This is an ai gold rush thats being led by the godfather. Tough loss last night i think rangers get in. I think just ultimately theyre too tired, injuries. But i do believe the knicks next year just like i think what we are going to see this year i think rangers could potentially be the stanley cup. A renaissance of new york sports. Its 1995 in tech, 1995 in sports. Its like formula one. Dan ives, thank you sir. Appreciate it greatly schedule update on stories elsewhere. Heres a bloomberg brief with dani burger. China held its biggest military drills in a year. The exercise coming just days after taiwans new president took office. Chinese state media sing the drills will serve as a strong punishment for the acts of taiwan independence. Taiwan deployed sea, air and Ground Forces in response and condemned chinas actions sing the undermine regional stability. Jp morgan is looking to buy a private credit firm to add to its Asset Management arm going to be familiar with the matter. Adil was never reached. Jp morgan has earmarked 10 billion for direct lending as a private credit industry has exploded in recent years. The 51 game unbeaten run to win footballs Europa League fresh off of winning the german lead title. The italian side spoil their perfect season winning 302 when the first major european trophy. Shout out to owner of the bostic celtics for an amazing win for that company and that club. Just absolutely phenomenal. Steve will try to join us next week. On his way back to the celtics game. What a life. He goes to a lot of the games. Hes not one of those owners who just sort of check sin. He was on the pitch last night celebrating. Holding the trophy. Very cool. Fed officials holding the line. Making sure we are coming back to 2 on a sustained sort of basis. Things can downshift here pretty quickly as we go forward. Jonathan that conversation up next. Do you want to close out . Should i . Normally id hold. But. Taking the gains is smart here, right . Feel more confident with stock ratings from j. P. Morgan analysts in the chase app. When youve got a decision to make. The answer is j. P. Morgan Wealth Management. Just stop calling each other rock stars. And using workday to put finance and h. R. On one platform. Tim, you are a rock star. Using responsible ai doesnt make you a rock star. It kinda does. You are not rock stars. clears throat okay. Most of you are not rock stars. Oooh. Data driven insights, and Large Language Models. Oh, thats so rock roll. It is, right. He gets it. Yeah. Jonathan equities near session highs positive by 0. 7 on the s p 500 yields about unchanged. I feel like every single segment iou an update on nvidia up by 7 . Which is about 170 billion dollars for a capitalization. Two point 3 trillion stock which raises the question its bigger than intel at how far can it go with dan ives talking about 4 trillion. I dont know. Not after that quarter. Under surveillance this morning, fed officials holding the line. I think you will see continued slowing as we go forward now. Certainly not looking for a rate cut anytime soon. Making sure did we come back to 2 on sustained sort of basis. Things can downshift pretty quickly as we go forward. The yield curve shifting to its flattest and more than a month following hawkish fed minutes. Writing this we continue to favor the short and intermediate parts of the you just yield curve but remain cautious on longer dated bonds on debt sustainability concerns. Good to catch up with you so it has been waiting on the split of the curve and go to the short into the long end. What are these debt sustainability concerns are they in or sovereigns. They are in sovereigns. Good to catch up to with you all. Its really a corporate Balance Sheets, they are largely in good shape here. Got levels in the corporate sector are not at historical lows but they are sitting in the lower percentiles for where theyve been historically. On the flipside its been the buildup of Government Debt and its not just the u. S. If European Countries as well. Obviously the japanese fiscal situation is well known. Particularly for the u. S. The Government Debt is no longer going to be bought by the fed. Its no longer good to be bought by the chinese to the same level and Foreign Investors like the japanese are struggling with the cost. We look to the world over the next couple of years and the clearing cries for some of this longterm debt we think is likely to creep higher as we have to attract more private sectors back into the government bonds. Ive always said the test between adm and avm sovereign issuer is how they perform in an economic downturn. Do you know what happens with treasuries. The bid and rally yield strong. How do you think they will perform in the next downturn given what you have. Ashok lets just imagine we get a big slow down, the fed rates five and 3 8 right now. They will probably take it down at least 200 basis points in that type of environment. You can get that performance from short and intermediate rates but in a world where policy rates may be settled around 3 , 3. 5 . The 10year note at 4. 5 . Thats not terribly unreasonable. This sort of ties in to why we are emphasizing these maturities is the hedge benefits. Its a lot more uncertain how longterm rates will perform. What you think the clearing price will be if we run 6 to 7 budget saps aphesis to gdp. What are you looking at to compensate investors . Ashok its got to depend on what the fed ends up doing on these deficits in a world where growth is stronger. Say we get this slowdown in automatic stabilizers kick in. That clearing price can be for longterm rates. If we are going into a world where growth is going to be around these levels at the same time fiscal policy remains pretty loose that clearing level could be 5 may be a little bit above that. I think that really just speaks to one of the big debates thats coming in the bond market started last year and will be with us for a while is where is the right clearing level for longterm rates. A lot of things go into it. The last 15 years weve been knowing where the clearing rate will be because the fed buys these bonds. This is all in a lot of flux right now. A lot of people say we dont see that typically when there is some sort of economic downturn. People go into longterm data treasuries and whats the alternative . Not necessarily u. S. Markets but internationally. Why wouldnt buyers come back to treasuries because even though the deficit is not great in the u. S. Is not looking so much better in other developed markets. I think the answer to that is its a lot tied to hedge costs. Particularly for the u. S. Obviously a current account deficit so we need foreign buyers and one of the challenges if you take the japanese, they have a steep yield curve. We have a flat yield curve and our policy rates are a lot higher so dont dispute at all if we have a significant slowdown of recession we can see a little bit of performance from longterm bonds may be a little bit but i think its going to be hard for Foreign Investors to really embrace our markets right now with how their yield curves look to ours. The big change on this point of how it will look Going Forward is we are probably going to be in a positive real yield environment given the end of qe for a while. That limits the amount of downside you get in yields compared to a lot of the last 15 years. Youll thats your investment pick right now, the argument you are making. That is really the way to go. These some of the comments you are making that i thought were fascinating. 90 of the inflation flight it should is already done. Its good to be just fine and stocks tend to do better in that environment. To me this is really the key. Its not a choice sensitive to inflation. You think they are employment sensitive and they will respond to that and allow inflation to remain at these levels which would be supportive of stocks. Mi characterizing that right . I think the general point will the fed grow the economy into significant slowdown or recession to get the last mile of inflation out of the system. Probably quite unlikely. We have to remember if the fed has a dual mandate, employment and inflation for the last two years or so its been they can just focus on the inflation mandate and employment was going to be fine. The labor market is in really good shape. We will see how that develops. We think we are on track by year end may be a little bit lower i think we are on track to mid to inflation by 18 months from now may be a little shorter. The fed is on the right track and will they try to squeeze 2. 5 down to two, but our guess is its not. It is an environment where if the fed and other Central Banks are able to stick a soft landing like weve communicated, that doesnt have to be a commute environment for equities and other asset prices. Jonathan im been think out loud for the next 40 seconds which is sometimes dangerous. Quite clearly weve transferred risk away from Balance Sheets to soft rate which is the point you are making. Corporations have turned down their debt as well. And the key issue here not in the corporate Balance Sheet and the yields could be hard where would that leave spreads. Could you help me understand how Different Things might be right now. Weve got spreads an economic downturn, the state of things as well. How things sort of shape up down there. Ashok if we look at index levels, ig spreads around 80 basis points, high yield is around 300 and the u. S. , really in the post financial world, the lowest highyield spreads have gotten a little bit below 275 so not quite at the lows but we are not within we are within a pretty close distance. I think the world where theres more Government Debt and decent corporate fundamentals, of the big picture level that should be resulting in tighter equilibrium spreads weve maybe been used to and defaults we think will remain low. Our main message on the credit markets. One is expect spreads to remain sort of tighter and ranges that fundamentals support that. One of the big changes has been the rising yields. We havent really been able to participate in those mortgages suddenly on track for yields. I could talk to you all day, its good to catch up. Thank you sir, appreciate it. what took you so long . Im sorry, there was a long line at the thai place. You get the sauce i like . Of course youre the man i wish. The future isnt scary. Not investing in it is. Nasdaq100 innovators. One etf. 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Dont be afraid to seize that moment to talk to your friends. Cloud, you okay . Because checking in on a friend can create a safe space. The first step on our new journey. You coming . Reach out to a friend about their mental health. Seize the awkward. Its totally worth it. What we think we are going to see is softer inflation and softer activity premarket. The potential earliest depends on what is happening with the data in september. Well probably see about half of the cuts, the fed is currently anticipating. The risk is that they either hold out and cut too much too quickly and have to reverse course. You are probably going to get an unsustainability in 2025 and the fed is going to have to start raising. Announcer this is bloomberg serveillance with jonathan ferro, Lisa Abramowicz and annmarie hordern. Jonathan its been at least five minutes since we squared nvidia. The prices up by 7 . Talking about 140 billion dollars of market cap added to a 2 trillion name which is just absolutely outstanding. We look at a breakdown again of the numbers, review some analysis for you. The standout quote for me came from joseph moore over at morgan stanley. Bottom line, we think the backdrop warrants exposure even amid extreme enthusiasm. Nvidia remains the clearest way to get that exposure. If you want to ride this wave how else do you do it apart from this man right here . Lisa a lot of people have tried to be cute about it. Theyd gone into utilities and other sectors that the benefit. When people are worried about valuation, nvidia shows that you have not priced in how much we can actually capitalize on this the biggest take away is how much does valuation matter in a certain technology . Annmarie Goldman Sachs upping the price target on it comes to the blowout report. It is nvidias world, everyone is paying rent. And he sees the trajectory going to four, even 5 trillion for this company. Jonathan shades on, ive never seen him so cool, so relaxed. I know some people might be watching thinking that if the top, green jacket, glasses. I could have said that last year in the year before on some of these stories. Lisa check out his outfits generally, theyve always been pretty bright. You could have done it from last year or the year before. People are still underpricing even after shifting the bar so much higher. This comes to the question of how divorce is this from the rest of the economy vs. The trickledown that people have been expecting in terms of productivity gains . That i think is the bigger question. Jonathan what did he say, told them to get there valuation spreadsheet and go back to their caves . Equity in the s p 500, posited by 0. 7 . Yields not lower by even a basis point. Foreignexchange, 108. 52. A stronger euro, some better data as lisa mentioned earlier. Manufacturing picking up just a little bit. Coming up, we will catch up with sebastian page on what he calls his boring market outlook. Mandeep singh as nvidia delivers on ai hopes and Dana Peterson on why she sees two rate cuts to end the year. Nvidias earnings pulling stocks even higher. Sebastian page saying bulls have done well because they are focused on earnings. Companies are flush with cash and spending on ai. This is not the tech bubble. Largecap tech is printing cash. To see you come it always is. Likewise. Jonathan enthusiastically neutral, boring is good. Was anything about last night boring . Not at all. My colleague likes grand statements and you had a lot of great statements last night. He said that ai is going to be the greatest productivity boom for humanity since electricity. Im not sure how onboard i am with that level of grandeur in the statement, but this is real. If you think about it, the price earnings ratio is down. Earnings have just gone up so fast. As an asset allocator, i dont think ive ever been so interested in stocks. 2. 3 trillion market cap. Jonathan its incredible. The market cap of the russell two is 3 trillion. You just are dan ive say nvidia is going to 3 trillion. So those markets are very concentrated. We actually have a tilt towards value stocks. Jonathan why . Im not ready to take my spreadsheet and go back in my cave. Im just going to say you are in the bottom quartile of valuation for value stocks relative to growth. That has been a trap historically because it has gotten cheaper and cheaper but if you look at that bottom quartile, the outperformance of value over growth over the next 12 months historically is about 5 . Then you asked what are the catalysts . I do think geopolitical risk adds some risk. You have stickier inflation, stickier Interest Rates. So you potentially have macro catalyst and one more going back to ai. We think over time, i guess dan ive called it the tidal wave of ai spending. This is going to come to stage Year Companies as well and that does not look priced in at all. Annmarie but john alluded to this. Basically the best way to play ai with through nvidia, through the ai giant, not all these ancillary bets of the trickledown into the older economy and utilities and everything else. Why not just be overweight . The basic play on Artificial Intelligence if you believe it is going to be the biggest since sliced bread. That is definitely what has worked. I do think that the effective ai and this is not pounding the table, i think you should own growth stocks, look for opportunities to add to value stocks. But if you look at earnings and the broadening of earnings let alone the broadening of market returns, by the end of this year, yearoveryear for the fourth quarter, the expectation is that value stocks will outgrow in terms of Earnings Growth stocks. Granted, this is because the comparables are really easy for value stocks but you do have a passing of the baton. We like to be contrarian. You look back and you say being long nvidia has worked. But i think what is not priced in right now is that tidal wave that he talked about. Lisa meanwhile, you say that you like to be aggressively and happily neutral, but you said you have never been more interested in stocks. So why not overrate stocks at a time when you see sticky in nation, and you do see such a rosy backdrop . You have an economic slowdown, i dont think it is a recession, but a slowdown. You do have some long invariable lags and this is very controversial because the effects have been a rolling recession, but you do have a fair amount of tightening in the economy that hasnt come through because everyone has refinanced on longterm debt. The bears are looking at that, looking at the slowing economy and ultimately looking at toplevel valuation. 21 on the s p 500 vs. 16 historically. We talked about this last time i was on the show, strategic Asset Allocation. Jonathan which we dont talk that much. You have a strategic Asset Allocation as an investor. Why not stick to it . You think that your risk tolerance, how much stock you should own in general over time. That is what im saying. Im not saying get out of stocks. Im saying stick to the kind of risk tolerance you have in your assets. We look a lot at lifecycle models. How far are you from retirement and how much stock should you own . The whole 6040 debate, people lose the idea that if youre 15, 20 years from retirement which i am, it is not 6040. It is 80 stocks. All im saying is dont be a hero, dont peddle to the metal on risk. Think of your strategic allocation. Its boring but that is the kind of market environment where you have to do that. Jonathan we just spoke to a guest who made the point that he didnt like longer dated sovereign debt here because he was worried about the School Sustainability concerns and the potential in the next economic downturn that they would not be bidding in quite the same way, that yields would have to stay at elevated levels. What were your thoughts when you heard that . Look, if you asked me what is the scariest chart in all of Capital Markets right now, it is Government Debt service cost. It looks vertical. And that is worrisome. What does that lead to . Lisa, you made the point earlier, there is no alternative to u. S. Treasuries in a big market downturn, in a crash. That is still there. Im sympathetic to that idea. If i look at 12 months, we have cash. At the same time, overweight credit because we dont expect a recession but we are net short duration. Im sympathetic to that idea. It is really hard to actually know how this will play out. You can have spending cuts and are we really going to get that . You can have higher inflation, that is another way to get rid of that debt problem. And i think that is quite possible. You can have higher taxes. So i think that Debt Service Payments are due to continue to rise. Hard to think how this is going to get resolved. Or you can just have bond vigilantes like you had in the u. K. Where the bond market said that is it, we are not going to buy this auction. I know you like auctions, lisa. Lisa to this point, you say when you are looking at the market, be boring. This is anything but a boring year when it comes to the politics. How are you thinking about the election when you look at your market and Asset Allocation . And this is coming into focus right now. It is a really close one. Again, kind of a 5050 country and i do think that you do have differences in terms of tariffs. I do think that with a republican win, you would have higher tariffs. Depends if you get a slick congress or not but overall, fiscal, pedal to the metal. Lisa do you agree that whoever wins, there is going to be a fiscal boom, some sort of inflationary boom one way or the other . That would increase the chance of a fed rate hike next year. Do you agree . I agree if you say that the consensus is that the chances are zero. Increase the chances from what to what . From maybe with the market are seeing right now, close to zero to 5 , 10 chance of a hike. Combine that with a commodity shock which always kind of doesnt matter until it really does and it happens really fast. Now you have an inflation problem. We are running at 4. 5 . You might be running 5 . Im not saying 9 , but combine that with the commodity shock and we will be glad we are short duration. Jonathan where did that come from, commodity shock . Is that something youre focused on . Yes, in the sense that if you look at the strait of hormuz where everyone thinks it is ok, this is 40 of oil flow traffic to the strait of hormuz. That kind of disruption. And i am not a geopolitical expert. I talked to some and it is hard to predict how that would happen, but there have been tensions in the past. And if you block oil flow right there, you are off. Low probability, but always possible. This is back to the inflation team. This includes energy companies. It includes also real estate which is a much longer term inflation hedge, doesnt behave the same as energy stocks, there is a diversified portfolio. Talk about copper rallying on ai. Diversified portfolio, we are along the asset class. Jonathan always love catching up with you. Talking classical a la Asset Allocation, which we often dont do here. When was that, a month ago . Annmarie and we talked extensively about it every day. Ive been thinking about my retirement. Jonathan how many years . What should annmarie be in . I think annmarie should be 90 stocks. Jonathan will sort that out. Thank you, sir. Lets get an update on stories elsewhere this morning. Dani an ev that it hopes can one day compete with tesla. The chinese smartphone maker is accelerating its push and at the same time reported its fastest pace of Revenue Growth in more than two years. They now expect to deliver 120,000 models having received close to 90,000 orders as of april. Nikki haley says she plans to vote for donald trump but stopped short of an outright endorsement. Haley who challenged the former president for the republican nomination is the latest critic to back his white house bid. She is speaking publicly for the First Time Since dropping out of the president ial primary saying biden has been a catastrophe so i will be voting for trump. And taylor swift is giving europes economy a boost, a story that continues to play out according to new data from bank of america. Or concert help to lift Consumer Spending by 22 . The bank added that other european cities can look forward to a similar boost upcoming tour stops include madrid, london, and milan. Jonathan more in about 30 minutes. Next, Mandeep Singh of Bloomberg Intelligence recapping numbers from nvidia. That is next. This is bloomberg. [introspective music] recipes. Recipes that are more than their ingredients. [smoke alarm] recipes written by hand and lost to time. Can now be analyzed and restored using the power of dell ai. Preserving memories and helping to write new ones. Jonathan one hour 12 minutes away from the opening bell and looking to reclaim alltime highs on the essence 500 just posited by 0. 7 . Nvidia up by close to 7 in the premarket. Lets get to your morning calls. Anyone stocking vocus. Morgan stanley raising its price target to 11. 60. The analyst calling and video the clearest way to get ai exposure. Next up, cowan. The dawn of a new industrial revolution. And finally, citi raising its price target. The analyst calling the stock split a positive surprise. Nvidia shares are up over 200 from a year ago. Mandeep singh is with us around the table. Mandy, what did you think of that . This is a business that didnt exist back in 2016. For a company to have 100 billion dollars revenue in a span of 78 years, it tells you a lot about how well they have executed, and it is a virtual monopoly at this point in time. Even though we talk about amd and other competitors, they are very close to how this company a shipping product and how they are able to raise prices. I think what really stands out here is that there are increases that they continue to show. They are adding more capabilities, networking and other kind of things and they are charging more to the customer and they are happily paying it. So that is the most impressive part about what they are doing. Jonathan they are adding intel plus to the market cap which is phenomenal for a company that did not exist as recently as 2015. Thats ridiculous. Weve gone back to this quite a few times. This name is the clearest way to get ai exposure. Is there nothing else . This is table stakes. That is why when they called out last night that tesla is a big buyer along with the hyper scalars and the sovereigns, countries like france, italy all buying nvidia chips to build their own gpc equivalent, it tells you something that there is an arms race and this is the only game in town in terms of giving you that functionality. But when it comes to valuation, that is where you have to ask yourself what is the normalized level of earnings for this company . Clearly they are going through their numbers, triple digit growth is phenomenal, but stocks look at perpetually. Perpetuity. Are the overearning now . We seen instances of companies during the pandemic, triple digit zoom and a lot of other ecommerce names. And what happened afterwards . This always ate normalization and that is what youve got to fear as an investor. Will the competitors catch up . Probably not, but the law of large numbers will come into play and at that scale it is very hard to keep going 25 , 30 . Lisa this raises the issue of how long can they keep having a 76 profit margin on their sales . At what point do the microsofts in the metas pushback . So far this has been a feature, not a bug. The big four that will be comprised the bulk of their business account for about 40 of their sales. When does that become a headwind given that they are trying to develop their own chipmakers, maybe eventually pushback . They called out of china last night. China market is getting competitive. I understand the restrictions aspect of it, but why is it getting competitive . Yes, they dont have their latest chip in the market but the fact that it is getting competitive tells you that there are players out there who are developing the stack in a way where they can create a large model without nvidia chips. And that is the biggest risk for nvidia. The one other data point they gave, inferencing is 40 . That was not an uptick. We are so used to nvidia gaining share or doing better than the previous quarter. Guess what, it with the same number, 40 and we dont know the details around what comprises that 40 . With all these Companies Launching their new pcs or if apple comes up with a new smartphone, i think that is the risk that nvidia has. They dont have as much exposure and there are more players. Training side they are a monopoly and i think they will remain a monopoly. There will just be a digestion period when it comes to training these models and maybe gpt five need more chips to train, but how often are you going to train those models and how large are those models going to get . Thats the question that you have to grapple with here. Annmarie yesterday they said we are racing this obvious insatiable demand we are seeing. How much is demand outstripping supply . It clearly is the case for both the architecture. Right now they are shipping architecture and they talk about being in short supply, but not to the extent im using a lot of the chip names because that is how fast they are shipping. When you look at traditional cpu cycles, it used to be to your architecture. Nvidia has really fast track that. They are shipping new architecture every year. And if youre a Company Buying chips you have to ask yourself how often do you buy and how much do you have to depreciate . What will happen is hyper scalars, they have to depreciate that expense. Now they are replacing it every year. They have to depreciate much faster and that is going to show up in their income statement. So clearly that is a risk they run. Jonathan ultimately if you are shipping faster it is going to add up to the depreciation expense of your buyers. Thought. As always. Thank you, that name is up by anywhere by 6 and 7 for most of this morning. In just a moment, we will be talking about this. Jobless claims in america. The estimate is 220,000. Andrew always has thoughts. Hes looking for a rate cut in july, even after those minutes. Yesterday we sounded pretty hawkish on the margin. He says datadependent and he goes on to say fed officials emphasizing higher for longer policy rates but softer inflation would provoke a series of federal rate cut than we expect those trends to emerge in upcoming data. This is not a multiquarter call. Hes talking about the next couple of months. Lisa would not necessarily disagree in the direction of travel in terms of where the fed is. He said the fed pertains to be inflation sensitive but it is actually employment sensitive. Breaking jobless claims just around the corner. We will catch up. They will be here to break this down. Michael mckee the oversight as well. Lots to talk about. Equity features near session highs. A record high insight. The opening bell about an hour away. From new york, this is bloomberg. You want to close out . Should i . Normally id hold. But. Taking the gains is smart here, right . Feel more confident with stock ratings from j. P. Morgan analysts in the chase app. When youve got a decision to make. The answer is j. P. Morgan Wealth Management. Jonathan equities positive here by three quarters of 1 on the s p 500. The nasdaq up by more than 1 . Around the open we will be talking about alltime highs. Nvidia up by another 7 . Right now we need to talk about the economic data. This is what we are looking for. With the data, here is mike. Lets see what we get only we download the numbers. 215,000 down from what was initially reported last week. So we are back to the same sort of range that we were before. When you talk to fed officials and oddly enough ive been doing that for the last three days, they are not particularly worried about the labor market right now. As long as these numbers stay contained, the fed is going to be happy but it does show that the economy is still Strong Enough to keep the labor market in place. That means they are not in any hurry to cut rates. The continuing claims number, that is down from 1,786,000. That is the revision from the week before. There revision to last weeks initial claims. No real change there. All in all, the labor market still seems to be about where it was. Jonathan off the back of this yields pickup just the tiniest amount. Just about unchanged. Equity futures, session highs now up by three quarters of 1 . But i do think the state is important. Only a few weeks ago we broke out on jobless claims and the question is being asked, with this the beginning of it . You said be careful, we seen this before and weve come all the way back down. Is that what we are doing again . The jump two weeks ago was basically because new york state allows School Employees who are not teachers to file for unemployment claims when they have vacations, and they had spring break so everybody filed and that pushed the numbers up. Happens every year about this time. Now we are back down again. At this point the numbers dont suggest any real deterioration. You talk to the fed folks that i was talking to and they are basically saying that what ceos are telling them that they are not the hiring so much anymore. Really interesting to see what happens with the payrolls report, but they are not getting rid of people, either. There is enough business that they need everybody they can get. And of course they went through the scarring effective trying to find people. Lisa youve just been spending a couple of days speaking the fed officials. Do they have a dashboard of indicators of which are the most reliable and how they are shifting . Today will count a little bit more because it is going to matter a little bit more. Today, unemployment claims. How do we understand that what point this is a reliable metric . I dont think anyone metric is going to move the dial. They did mention yesterday that they are looking at Services Priced nonhousing wages. Trying to see if that goes down. That is a big contributor. They are watching goodspraised inflation because it has started to go up again and now it looks like some disinflation. But one of the things they talked about at the conference was the fact that they are following all kinds of data these days, and a lot of it is not the government data. They are looking at the private sector data on prices and unemployment and they are just trying to make sense of it all. And no one number is what they are relying on. They try to get a comprehensive trend. Annmarie also in the Meeting Minutes we saw that many participants are questioning the restrictiveness that the fed has on the economy. We havent really heard that from jay powell. What is your sense when youre speaking to them behind closed doors . They can see a restrictive impact on things like housing and auto prices and credit cards, obviously, but it is not affecting wall street. Wall street keeps going up and up so financial conditions indexes start getting looser. It is sort of circular. Wall street goes up, conditions go down, wall street goes up again. That does impart something of a wealth affected to the economy that they are trying to keep an ion. They are not seeing americans slow down spending all that much. Weaker retail sales, but that may be a seasonal effect because of easter. We will have to see what happens in the next report. But if americans keep spending even though they are not buying houses or cars, it tells you that maybe they are not restrictive enough. Jonathan id love to talk about some of these misconceptions with you. We have this poll conducted exclusively for the guardian. These numbers are absolutely incredible. I will share them with you as well. 56 think the u. S. Is experiencing a recession. 49 believe the s p 500 is down for the year. 49 believe that unemployment is a 50 year high. Where is it all coming from . It is something that political scientists in particular are trying to figure out because the fed earlier this week released their 2023 Consumer Attitudes and 72 of people said they are doing just fine, thank you very much. So everybody sees the problem as somebody elses, but they do see that there is a problem in the national economy. The fed in the minutes talks about the fact that they think that people understand what they are doing and they just need to do more of it. Keep talking about it. But obviously for political people, this isnt a problem. People are not seeing what is really happening out there. Jonathan six minutes ago we got jobless claims at 215,000. The estimate was 220,000. The previous week around 220something. Equity futures stay elevated on the s p, that record high is in sight and just around the corner. The nasdaq 100 up another 1. 2 percent coming off the back of developments with nvidia. The bond market yields just about unchanged at the front end of the curve. Mike mentioned payroll next week or a few fridays away. A few fridays away, looking for 203k in the survey at the moment. That is the median estimate. The reason i bring up those estimates is because the likes of holman horse, they are looking for weakness. You dont see it in claims or in the estimate for payrolls. Lisa youre saying about 150,000 would be enough to get the fed to move in this to me is compelling at a time where maybe ceos arent hiring, but they are not doing mass firings right now based on these claims. Jonathan lets get to the panel. Dana peterson alongside matt. Dana, the scare of a few weeks ago, is it over . Dana we dont really know, but jobless claims are still extremely low and as lisa said, any companies are not letting their people go. They are holding onto their workers, they are warning them. We are probably not going to see much uptake in the Unemployment Rate Going Forward. Companies need them and they are facing lots of people retiring. I dont really see the labor market weakening significantly over the next year. Jonathan do you share those thoughts, do you have that constructive view . We do share those thoughts on the employment market. Corporate health looks very good right now. How are companies feeling, so we do feel very good about that. But the idea that rate hikes dont work, the idea that it wont slow the economy somewhat, wed be a little skeptical on those kinds of arguments. Lisa taking a step back, you were the one saying that the fed pretends to be inflationsensitive is actually employmentsensitive you say rate hikes work. It might just take a lot longer. Does that preclude the idea of a rate cut if inflation is still too high . Our baseline forecast is we will get one rate cut this year, probably in december. But to your point, it will take time to see these work their way through the economy. Fed funds rate just peaked about nine months ago. We are not even in that 1224 month window. Come back to us in early, mid to late 2025 to see how these rate hikes work. We do think we are starting to see some of that now. Uptake and credit card delinquencies, auto delinquencies. Retailers reporting earnings, seeing a shift and lower income guys pulling back a little bit. Lisa can you weigh in on the odd discrepancy right now between what matt was talking about, the slowdown between the data that shows that jobless claims are not picking up and the fact that people feel really bad . Do you have a sense of whether it will take actually getting laid off for them to stop spending entirely for that to actually crack the market material way, or do you think the stay softening will eventually bring us down to that soft landing nirvana . Dana consumers have mixed feelings. For the most part they are happy to be working right now but they are still very upset about it nation. Certainly when they look six months from now they have concerns about their income, employment prospects and also business prospects. Thats why weve seen some weakening in our Consumer Confidence measure. But when it comes to spending we are seeing consumers pullback. Certainly they are not buying homes. The Housing Market responded almost immediately. We also saw that businesses stopped investing because the cost of capital is rising and we see that consumers are pulling back on goods and our survey suggests that they will continue to pull back on those big ticket items. They question now is services. Can they continue to spend on services . Right now consumers have run out of excess savings so a lot of the trips that are going on, they are putting it on credit cards. And we know that Interest Rates are very high, and the debt service is rising. I think that this is all part of the plan and we will continue to see Consumer Spending slow and we will probably have a bit of a soft patch of this year, but as long as consumers are continuing to work, i think the fed can continue to focus on patient. Jonathan how wellaligned is Consumer Confidence with Business Confidence at the moment . Dana ceos are, i would say, cautiously optimistic. For about a year and a half they were very negative and in the last two quarters, they ticked up above our threshold in terms of optimism. But still, businesses are saying we are not having trouble finding by workers, we are not laying people off, but we are not looking to invest much. The thing is that we are still facing high cost from labor because they intend to continue to raise wages to hold onto their people. But still they are very concerned about a number of risks, especially the implications of the elections coming up, and also a number of geopolitical issues. I would say ceos are not as gloomy as they were last year, but they are still very cautious. This is what we are trying to figure out. We can identify some of these retailers have lost pricing power, that is clear. What we are trying to understand is what happens next. Do they pull back on cost . Do they award, given the experience coming out of the pandemic . We do think labor hoarding is probably going to continue. This is not pessimistic news, this is good news. This is what we want to see. We need to slow the economy somewhat. But the big picture, inflation was 9 and is now down to 3. 5 . We dont have to worry that much about getting down to that exact, on the screws 2 number. We are in a much better place right now. If you look at equity market returns, doesnt matter whether you have 2 inflation, you do just as well on nominal and on real. What the fed is doing will eventually work. They can keep rates about this level and if they can do that, we could have that mid 90s set up where the thought of a recession was happening, it didnt happen, credit spreads estate tight for a while, and the slowdown we are seeing is optimistic. Lisa sounds like you agree with dana that this is just a soft patch, not going to be softer for longer. But if these companies are having to cut cost, you dont think at any point that will mean letting off employees . I absolutely do. That is exactly what you expect to see. So it is always a question of when that starts to happen, what is the fed do . We completely agree, pretends to be super in nationsensitive. Now they are not. So when they start to see that more, then they will adjust. Then hopefully they cut in december and next year, fine tune, keep the economic expansion going. Jonathan how does that influence your fed call for this year . Dana we have the fed cutting twice probably at november and december meetings by have to disagree a little bit. I think the fed is still very inflationsensitive and probably a little less labor marketsensitive. Why . They will be ok if the Unemployment Rate rises a little bit. 4. 2 , that is extremely low. But the problem is that everyone experiences inflation and they do want to get key inflation gauges back sustainably to the 2 target. Sustainability is important. They dont want to just touch it and move off of it. They have to do that because of credibility purposes. They say the target is 2 , they want to get there. Annmarie response . As we think about the Inflation Numbers, they are going to keep 2 , we believe that. If you let inflation go to 9 , you are probably not going to average 2 . We dont find that to be a tremendous problem. A percent inflation, problem. 2 3 , not a problem for nominal gdp. Meanwhile, fixed income valuations are so much better now. Now weve got the 10 year about 4. 5 and cpi, pc below it. Jonathan we will get to the bond market in just a moment. Why did last year get an a if its not a problem . There are problems within the inflation data as we all talked about. Right now we are getting goods deflation or almost no inflation, about 0 . But you cant have an average inflation of 0 goods and 4 services. So there are definitely areas that they need to focus on and watch. In the fight is not done but they are much closer than they have been and some fine tuning hopefully gets in the head. Lisa you think that the fed is particularly inflationsensitive and less employmentsensitive at a time where adam was talking about how a policy shift in december or january of next year could singlehandedly increase tariffs or change the immigration policy. Frankly, the extra immigration has put a downward pressure on inflation that otherwise would be in the system. Do you think that given potential inflationary policies, that would actually put the fed enable the awkward position with a labor market seeing the weakness that you are expecting while also seeing patient remain sticky, even inflect upward . Dana we are already seeing inflationary pressures on policy. Certainly industrial policies and the trade war that we experienced back in 2018, 2019, those are all placing upward pressure on inflation. This is the new normal. The fed is going to have to operate in the world it is in. And as it sees policies or Consumer Behavior or external events like climate events pushing up insurance costs, whatever it is, the fed is going to have to deal with that within the bounds of its mandates. For this year, the fed will probably see that slowing in inflation that it once to see, it will feel comfortable cutting rates one or two times this year. But next year is another story and they are probably going to have to take a more gradual approach to cutting Interest Rates next year, and i think where rates will land will be higher than what we saw during the period between the great financial crisis and the pandemic both in nominal and real terms. Upward inflation pressures are the new reality that the fed is going to have to resist day in and day out. Lisa which really points to this reason why many people are so optimistic about equities right now. That environment is supportive of equity valuation different latent is allowing them to profitability. As an investor, as chief investment officer, do you say it is a safer bet to go with equities at this point than certainly duration, given that type of backdrop . We actually dont. We do like equity risk, to be fair. Even 5 inflation. If you can grow your sales at that level, your earnings will be fine. Great for equities. We do want a little more macro in the portfolio. At the same time, if we look at the valuation picture on fixed income you can easily build, diversify a great portfolio of over 5 . More importantly in tilray terms, 2. 5 real. If we were talking january 2021, it was 2 . For the privilege of getting your government 100, you can get 80 per person back in 10 years. Thanks for that. Again, that actually gets a bond guy excited. I know maybe 5 yields, if you hold for a whole year if you can get half the return of a particular tech stock, but for bond folk, that is actually interesting. And we have to build portfolios. What happens if we dont expect . We do expect the treasuries, they will provide diversification. Maybe a little bit in terms of price rates coming down but more importantly by steady, reliable, predictable income yearin and yearout. So actually slightly longduration at the moment. Jonathan doesnt take much to make you happy after the previous decade with rates so low and negative. Good to see you. Mike mckee still with us. Final word on this one . A couple quick points. One is that the fed wants to see a slowing economy. They expect a slowing economy. They wont cut rates, they might it inflation is falling because then the real rates go up. But there thing is they wont get to 2 before they start cutting rates. They will start cutting rates before they get to 2 . Which may mean we dont get to 2 . But then both sides will be more or less happy for the time being. Jonathan equity futures positive amid session highs of three quarters of 1 . Some stories elsewhere this morning, here is your bloomberg brief. Dani wall street firms are facing our work from home and finra wants you to know it is not their fault. An official said on wednesday that there is notable requiring employees to come into the office five days a week. In fact, the new rules that will take effect soon are meant to preserve workplace flexibility. The statement was in response to announcements from firms, especially barclays that are weighing return to Office Mandates five days a week. The Justice Department and a group of states say that they will sue livenation for antitrust violations. Shares down about 6 . Regulators are looking to force a breakup and address ticketmasters unrivaled control of concert ticket sales. The merger was originally approved by the Obama Administration in 2010 but the Biden Administration opened a probe into 2022 over concerns the company was violating its original terms. That issue came to a headwind ticketmaster fumbled the massive demand for taylor swifts eras tour. Harvard university has decided not to award degrees to 13 students who participated in a propalestinian encampment on campus. The board made the decision despite a vote by wondered 50 faculty to allow the students to graduate even though they violated the University Policy according to the harvard crimson. The students will be able to participate in the Commencement Ceremonies but will not receive diplomas. More than 1500 Harvard Students will receive degrees today. That is your bloomberg brief. Jonathan appreciate it. Next, setting you up for the day ahead. The short road going into a long weekend. From new york, this is bloomberg. The future is not just going to happen. U hav. And if you want a successful business, all it takes is an idea, and now becomes the future where you grew a dream into a reality. The all new godaddy airo. Put your Business Online in minutes with the power of ai. Jonathan counting you down to the opening bell, heres the training diary for the day ahead. Atlanta fed president Rafael Bostic speaking at 3 00 p. M. Eastern tomorrow morning. Consumer sentiment, treasury market closing earlier of course ahead of the memorial day weekend. To wrap up the market morning so far, take a listen to this. If you look at the demand, this is the most important thing. Demand is accelerating. It is not even slowing down. Not just for nvidia but second, third, fourth derivative. I think it is time to get the popcorn out because this ai revolution and 1995 moment, right now it is nvidias world and everyone else is paying rent. Nvidia of 7 . Nvidia launching in 9095 all over again and basically the optimism. At what point can people say this is a safety play at a time when other things are raising flags . I love that quote, and videos world, everyone else is living in it, we are all paying rent. Price targets keep lifting on this company. Look out for record highs at the opening dow in about 34 minutes time. Heres the lineup for you. Terry wiseman, kathy bus transit bostjancic. Thank you for choosing bloomberg tv. This was bloomberg surveillance. So, what are you thinking . Im thinking. speaking to self about our honeymoon. What about africa . Safari . Hot air balloon ride . Swim with elephants . Wait, can we afford a safari . Great question. Like everything, it takes a little planning. Or, put the money towards a downpayment. On a ranch. In montana. With horses lets take a look at those scenarios. J. P. Morgan Wealth Management has advisors in chase branches and tools, like wealth plan to keep you on track. When youre planning for it all. The answer is j. P. Morgan Wealth Management. And theyre all coming . The answer is those who are still with us, yes. Grandpa whats this . Your wings. Light em up gentlemen, its a beautiful. Day to fly. People couldnt see my potential. So i had to show them. Ive run this place for 20 years, but i still need to prove that im more than what you see on paper. Today im the ceo of my own company. Its the way my mind works. I have a very mechanical brain. Why are we not rethinking this . I am more. Im more than who i am on paper. For our viewers worldwide, nvidia knocks the cover off the ball. Countdowns of insights right now. Countdown to the open starts now. Coming up, futures pointing to another record high. The ai darling delivering yet another quarter. Jobless claims posting their biggest backtoback decline since september. We begin with the biggest issue, nvidia