A.M. Edition for Feb. 27. Microsoft is pushing the Trump administration to ease proposed export curbs on a group of U.S. allies, warning they could turn to China to get the tech infrastructure they need. Plus, HSBC analyst Frank Lee breaks down Nvidia’s latest earnings. And the U.S. looks at importing eggs to control rocketing prices as the USDA forecasts costs could keep climbing through 2025. Luke Vargas hosts. Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What is the main topic of this episode?
Microsoft urges President Trump to ease limits on chip exports, warning they could push allies into China's arms. Plus, we'll crunch the numbers on Nvidia's latest earnings and explain what to watch next.
If you look at the China market, that body language seems to have become a lot more positive since DeepSeat came out. And in fact, it's creating some short-term upside to Nvidia as well because DeepSeat You've seen a very strong pickup in the H20 chip that goes into China for NVIDIA.
And the U.S. looks at importing eggs to control rocketing prices. It's Thursday, February 27th. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today.
Chapter 2: How is the U.S. government addressing foreign aid and humanitarian assistance?
Chief Justice John Roberts overnight temporarily halted a lower court requirement that the Trump administration resume nearly $2 billion in foreign aid payments, marking the Supreme Court's first substantive action since the administration began its efforts to remake the federal government.
That order, however, doesn't resolve the underlying dispute over whether the administration can unilaterally nullify appropriations approved by Congress. Aid organizations have until Friday to file a response to the order, suggesting it will remain in place at least into next week. Well, Roberts' order comes amid newly revealed Trump administration plans to eliminate the vast majority of U.S.
humanitarian assistance and overseas development aid. According to an internal memo and court filings seen by the Associated Press, more than 90% of the U.S. Agency for International Development's foreign aid contracts and some $60 billion in overall U.S. assistance is on the chopping block.
Separately, President Trump signed an executive order yesterday that requires all federal agencies to draw up plans to review existing contracts, freeze workers' credit cards, and cut staff beyond layoffs of probationary and diversity-focused workers.
President Trump is revoking a Biden-era license allowing Chevron to produce oil in Venezuela, saying strongman Nicolas Maduro has failed to take in deported migrants and to make democratic reforms.
The announcement comes less than a month after the Trump administration struck a deal with Maduro to restart deportation flights to the country, a pact many regional observers thought meant the president would allow the oil to keep flowing. Trump said Chevron's license will be terminated as of March 1st, requiring the company to wind down its Venezuelan operations within months.
A Chevron spokesman said the company does business in Venezuela in compliance with all laws and regulations, including U.S. sanctions. And the U.S. government says it's got a plan to address the spread of bird flu and lower the price of eggs. That plan will help poultry farmers with biosecurity measures and increase support to those who've lost their flocks.
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Chapter 3: Why is the U.S. considering egg imports?
The administration didn't approve the use of an avian flu vaccine but said it would keep studying them. To lower egg prices, Agriculture Secretary Brooke Rollins said the administration would consider rolling back certain state regulations, like a California law establishing minimum space requirements for hens. And she told the Journal the U.S. would look at scaling up overseas egg imports.
We're talking to three or four countries right now about getting between 70 and 100 million eggs into the country in the next month or two, which of course will help with supply and demand.
However, imports, including from countries like Turkey, may do little to stem surging prices. The USDA is now forecasting a more than 41% increase in the cost of eggs this year, up from an estimate of 20% just last month. Coming up, HSBC's Frank Lee joins us to break down NVIDIA's latest quarterly results as the chipmaker's earnings and outlook beat expectations.
That and other news moving markets after the break. Chipmaker Nvidia yesterday reported a sharp rise in its sales and profit for the fourth quarter, the latest in a string of bumper earnings results for the company. But were those results enough to shake off some jitters about the outlook for the AI boom? Frank Lee is the global head of tech hardware and semiconductor research at HSBC, and he
Chapter 4: What are the highlights of Nvidia's latest earnings?
And he joins me now this morning from Hong Kong. Frank, NVIDIA's shares are trading around $130. You have $175 price target on this company. What were your reactions to the earnings update we got last night?
I think if you've seen the share price reaction, it's been a little underwhelming. It looks like the numbers are strong. They're solid. The fundamentals are there. Demand has not softened. But I think the key issue is that it was such a big earning surprise for most a year and a half.
And that was because the constant changes in their roadmap gave people confidence to take their numbers up again, including analysts like myself. The last two quarters, they haven't really been able to do that. And I think part of that reason is pricing power. The first year and a half of this AI, the roadmap, they were seeing significant increases in their pricing power almost every six months.
The last peak was mid last year. Since then, we haven't really seen anything new come through.
Let's talk about Nvidia's new Blackwell AI chips, its latest generation product. In this just concluded first quarter of shipping those chips at volume, Nvidia reported sales of $11 billion. I'm curious, how does that stack up against expectations?
Yeah, so I think this is a great question. The Blackwell revenue that came out today with a report in the fourth quarter, $11 billion was significantly higher than our estimate. And I think most analysts were somewhere around $5 to $6 billion.
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Chapter 5: How do Nvidia's Blackwell AI chips compare to expectations?
But I think what the confusion or at least the head scratching is that when you look at their current April quarter guidance of $43 billion, that's a net addition of about $4 billion. So I think that begs the question that some of their existing line, especially the hopper, is going to start to come off. Frank, are those older chip lineups being retired or just falling out of favor?
It's a product transition, right? And so while there is going to benefit from Blackwell, the hopper is going to drop off. So your net addition isn't maybe quite as much as people had hoped. The other issue is that one of the big reasons people were quite excited last year was that they had pushed this new change or this new model of doing the entire downstream rack.
So you would bundle something like 72 GPUs together. And that increased a lot of content growth. But the progress of this rack architecture has generally been a little bit slow and unexpected. And so I think that is still something that we need to continue to see over the next couple of months.
Tell us about how NVIDIA's offerings match up with the capital expenditures we've been seeing from the hyperscalers of late. I mean, overall, top line spending by the biggest tech companies in the world on AI data centers and chips is Seems really strong, and yet it's, I guess, the kind of spending they're doing and whether it persists. That is a question of paramount importance to NVIDIA.
The spending on the hyperscaler has always been something that the market has been somewhat worried about since the very beginning of the AI story. The first year for NVIDIA, there was constant questions like, Can the hyperscalers keep this up? And so far, the answer is yes.
When DeepSeek first came out about a month ago, one of the biggest worries was that this is going to change the AI CapEx trajectory, especially for the hyperscalers. Well, within a couple of weeks, the answer was clear. It was that it was not going to change spending in the near term. In fact, most of the hyperscalers raised their CapEx budgets for this year quite a bit.
Now, there still is a longer term question of does it change the long term trajectory? We need to continue to see that. But DeepSeek has also created something interesting is that it's boosted the confidence, especially in the China market. So if you look at the Chinese internet players for the last couple of years, whenever you ask them about What's their AI strategy to get around the chip bans?
There was always this little bit of hesitation, but that body language seems to have become a lot more positive since DeepSeq came out with a sense that they don't need to use the most high-end chips now to have an AI model.
And in fact, it's creating some short-term upside to NVIDIA as well, because along with the DeepSeq introduction, you've seen a very strong pickup in the H20 chip that goes into China for NVIDIA. One of the other trends that have emerged in the last six months has been the impact of the ASIC.
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