Chapter 1: What is the main topic discussed in this episode?
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This is Bloomberg Tech. Coming up, we zero in on tech earnings, with Dell raising its AI server shipment outlook while HP announces job cuts. Plus, Warner Bros. Discovery asking bidders for sweetened offers by December 1st as it explores options for a sale. And Nvidia in focus as doubts over the company's AI chip dominance are growing.
I'm Jim Senevec in New York, in for Caroline Hyde and Ed Ludlow. Let's get a check on markets right now. U.S. stocks advancing as expectations for an interest rate cut at the Fed's next meeting are helping to fuel gains before the Thanksgiving break. NASDAQ 100 up right now, and look at the last three days, up 4%.
This after both the S&P 500 and NASDAQ 100 moved away from their last record highs in late October. The NASDAQ 100 down about... let's say 3.6% from that all-time high. The S&P 500, though, down just a little over 1%. We're also looking at tech earnings with Dell and HP.
Dell raising its annual projections for the AI server market thanks to sustained demand for machines needed in the current data boom. Meanwhile, HP stock under pressure, down 2.2% right now. The company announced 4,000 to 6,000 job cuts over the next couple of years by using more AI tools. For more on HP and Dell, let's bring in Bloomberg's Dena Bass. Dena joins us here in New York.
I want to start with HP. 4,000 to 6,000 jobs sounds like a lot. And indeed, if we go to the 6,000, that's like a 10% of the company's workforce, but that's through 2028 fiscal year. So we're a few years away from that. And if it's AI that they're going to replace these people with, AI can change a lot between now and then.
Sure. And to be clear, HP did a similar magnitude job cut over the last three years. They just finished it. They have these kind of periodic efficiency plans, I guess. What's new about this one is the idea is that they are going to use AI tools and models to do things like product development, customer service, sales. And that's where you're getting these job cuts.
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Chapter 2: What is Dell's updated outlook for AI server shipments?
Dina, always good to see you. Welcome back to New York. Happy Thanksgiving. You as well. Well, let's bring in now and talk of NVIDIA, because NVIDIA shares over the last five days taken a hit down more than 3%. The stock facing pressures as AI chip rivals gain ground, leaving investors wondering if its dominance can be sustained. Bloomberg's Ryan Vestelica joins us for more.
So, Ryan, I think the big question that investors have after seeing what happened with Alphabet in this report and the information earlier this week is, can Google's TPUs actually compete with the GPUs from NVIDIA?
Hey, good morning. Thanks for having me. So I would say that while there are a lot of differences between NVIDIA's chips and Alphabet's, Alphabet's are designed for one specific purpose, which is working with AI workloads in the cloud, which is really the dominant use case for a lot of the AI infrastructure that's being done right now. So there is certainly a very big market for the TPU chips.
As we saw with the Anthropic deal that was announced, announced a couple of weeks ago and with this report with Meta. So that opens up potentially a huge new market for Alphabet, and it does put Nvidia's market share under a little bit of pressure. Now, this is still very early days, and it's not like Alphabet is out there
selling chips to people in the same way that Nvidia is, but certainly people are reassessing what our market share is going to look like over the coming years. And if Nvidia's is a lot smaller than previously expected, what does that mean for the stock? What does that mean for the valuation? What does that mean for its expected growth rates going forward?
Yeah, I mean, the analyst community, though, at this point, even investors may be a little concerned. But the analyst community, they've still got buys on this stock. I mean, there's only one analyst who's tracked by Bloomberg, Jay Goldberg over at Seaport, who has a sell on NVIDIA. Is he changing his tune? Are these analysts changing their tune?
No, in fact, I spoke with him yesterday and he said he is more negative on Nvidia now than he was a couple of weeks ago. I would say that the new concerns about custom silicon and new rising competition for Nvidia, this comes at a time when people are increasingly questioning the AI trade.
There is a lot of debate right now about the amount of spending going on, how durable is this going to be, how sustainable, what kind of returns are companies seeing on this, and if they're not seeing big returns on this investment, Are they going to pull back on their AI spending going forward? NVIDIA is really at the heart of a lot of AI debates right now.
And then you add in this new one where what does their market share look like? What about competition? That is just another reason for people to be skeptical. Although analysts so far are holding firm and remain pretty positive.
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Chapter 3: How is HP planning to implement job cuts using AI?
So I think it's broadening out. We're hearing it from all across. Raytheon talked about how they were utilizing AI in order to improve supply log jams. That's a stock we own in TGLR. All of these we own there, actually. So I think it's important to start listening to the companies, paying attention to who's seeing margin expansion. And we're definitely seeing it at the company level.
Nancy, if we were talking a week ago, I think we'd have started our conversation focused on the idea of a bubble, maybe concerns about CapEx spending, the hand-wringing that we saw last week over some of these valuations that has seemed to recede just a little bit this week.
But you've been through multiple cycles, and I'm wondering how you view the whole AI bubble talk right now compared to, let's say, the tech boom of the late 90s and bust as well.
Well, I wish I was as clever as Ed Yardeni because he coined this phrase too, but I wrote a piece called The Bubble in Bubble Talk. And I think it's important to note a couple of things. In the 90s, from 96 to 2000, the growth stocks whose valuations were skyrocketing were actually experiencing contracting earnings. We're not seeing that now.
The growth stocks in this particular technological revolution were are experiencing about 20% growth on average. CapEx was also something that was healthy and then accelerated through the entire decade. We're just now starting to see that ramp up in the last couple of years. So I think it's important. And then these companies have Fortress balance sheets and all this...
I don't want to say I am going to say nonsense around Oracle. I think it's important to remember that this is a company that's always had a ton of debt. Debt to equity was 427 percent at the end of the quarter. That's down from 780 percent year over year. This is all before They issued the $18 billion in debt for the open AI data center build out.
This company has a history of using debt, but the PPE is up 130% year over year while debt is only up nine. So debt to equity will decline.
So you're not concerned at all about the price of five-year CDSs for Oracle rising to the highest going back to October 2022? That's not concerning you?
It is. It's a pair trade, though. What concerns me more is the concentration in the market around open AI. And I think that has to sort itself out. Now, Satya Nadella would tell you that data centers are fungible. If we don't use it for this, we'll use it for that. And I think that's certainly true. But I am concerned about the spend. I mean, that's a company with a burn rate, right? Open AI.
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Chapter 4: What challenges is Nvidia facing in the AI chip market?
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Well, today we take a look at America's power system. It was already under stress even before the AI boom. Now with AI data centers coming online, a new Schneider Electric analysis foresees the U.S. facing a potential electricity crisis. This as the surge in demand comes at odds with the reality of aged and vulnerable grids. Bloomberg's ESG reporter Alistair Marsh joins us from No More.
Alistair, how does an electricity crisis manifest in the United States? Certainly higher bills is part of that, but are we talking rolling blackouts here for many Americans?
Well, essentially the Schneider Electric data shows that the massive amount of power demand, so power demand in the US has basically been flat for about two decades, and all of a sudden with the advent of AI, or the vast AI acceleration that we're seeing in the US, with the billions of dollars of Capex being put to work and the mass build out of data centers, you suddenly have this surge in demand.
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