All right, good Nvidia morning. We have
positive futures 30 minutes until the
start of trading. I'm Matt Miller
and I'm Katie Gridefeld. Bloomberg open
interest starts right now.
[Music]
Coming up, the AI boom uh takes a
breather. Or rather, it looked like that
when Nvidia signaled a growth slowdown.
Now, Nvidia shares have turned positive.
The CFO tells Bloomberg that President
Trump's plan to skim $15 off of China
chip revenue could face legal
challenges. Meanwhile, on the data
front, the US economy expanded in the
second quarter thanks to a pickup in
business investment. I feel like that's
a related story as well.
Yeah. And just to go back, it's 15% of
revenue. $15.
Did I say $15?
No, I did. That wouldn't be very much.
Sorry, I meant 15%. That's the export
tax.
Let's take a look at what's going on
with Nvidia shares right now. As Matt
mentioned, they did go positive. They
erased a decline of as much as 3.3%
overnight as traders reacted to those
numbers. You can see shares now deciding
what to do. Matt, we have a great round
table coming up. We'll get into the why
exactly.
Yeah. Uh what a story. Ed Ledllo came in
from vacation to do an interview with
the CFO of Nvidia who gave him a
forecast for China chip sales in the
third quarter. Watching the other Mag 7
stocks which are the main drivers of
Nvidia's revenue. Um not a lot of change
here just like Nvidia. So pretty much
everything is hovering at these record
highs KD and not making any movement um
forward or backward. Well, a lot of that
has to do what's going on with Nvidia
Shares pre-market in terms of that
trading range. Let's listen to the CEO
speaking on the company's future
prospects to crack the China market.
So, I think the, you know, the the
opportunity for us to bring Blackwell uh
to uh the China market uh is a real
possibility. And so we just have to keep
advocating uh the the u uh sensibility
of uh and the importance of uh American
tech companies to be able to to uh lead
uh and win the AI race.
And in a Bloomberg interview, Nvidia CFO
says that the Trump administration's
plan to charge a commission on Nvidia's
AI chip sales to China hasn't progressed
beyond the early stages. She says, "I
don't have to do this 15% until I see
something that is a true regulatory
document." Let's keep the conversation
going now with Bloomberg Tech co-host
Caroline Hyde and Mandep Singh, global
head of tech research for Bloomberg
Intelligence. Great to have you guys
with us. Caroline, I'll start with you
because we were talking about the share
reaction uh just before the show
started. And I mean, you take a look at
these numbers to see these declines
pre-market. Did they match up with with
what we actually heard from the company?
Look, this is a company that is $4.4
trillion worth already is posting more
than 50% gains in revenue and in
earnings per share. It delivered on its
second quarter. In fact, the fact that
the Chinese sales weren't included in
the third quarter and they still
signaled 54 billion worth of sales. I
think this was categorically a meat or
beat, but many people want to see Nvidia
smash it. So perhaps that's why we saw a
little bit of like digestion. And the
shares now seem to be coming up to flat
because I think more broadly the
opportunity was really signaled well
here. $50 billion worth could be done
with China if they're allowed to. And
they are in talks with the government.
That's what certainly is being discussed
today with the government about a
reorientated blackwell architecture for
China. They're also saying$2 to5 billion
could be going in terms of H20s already
$4 trillion worth. He said this already
but this is the Nvidia CEO's key
takeaway. $4 trillion worth of AI
infrastructure needs are there already.
How much are they going to service that?
$600 billion worth of capital
expenditure already committed to by
their key hypers scale clients and AI
sovereign was another big number 20
billion I'm throwing a lot of numbers at
you but for me the scale of the
opportunity is still clear it's a
company that vindicates
I'm listening but the camera didn't show
my Olympic eye roll when you mentioned
the China opportunity because we've uh
injected so much volatility into this
story and the Chinese Communist Party
has essentially ordered companies in
China not to buy Nvidia chips and I'm
sure that's H20 or Blackwell, right? So
even though the CFO says they could have
2 to 5 billion if they ever get an
agreement with the Trump administration
on paper, I mean, isn't the likely
outlook for China chip sales closer to
zero? Manddeep,
I think that's how the company is
guiding. But when you start comparing
year-over-year growth numbers or even
compared to what
the slowest revenue growth in over 2
years.
No, but the reason why it's slowest,
it's because the China number was there
before and now it's not there. So from
that perspective, the comparisons get a
little noisy. But I want to go back to
Caroline's point about $600 billion
capex from hyperscalers. To my mind, if
you add up the capex of all the
hyperscalers as of today, it's around
400 billion.
So that's implying a 50% bump in capex
for I think he's talking about next
year. So from that perspective, we
didn't hear Microsoft guide to 50%
increase in capex for 2026. We didn't
hear meta guide 50% increase in capex.
So clearly that concentration is growing
and he sees those commitments from the
hyperscalers that they will increase
their capex next year. And so from that
perspective I think it's a negative for
companies uh like the hyperscalers where
they continue to spend big. I mean if
you're looking at their free cash flow
you're probably taking those numbers
down because we're talking about a 50%
increase in capex. I want to push back
on your China negativity to a certain
extent, Matt, and the eye roll is
vindicated in many ways, but we just
heard from the CFO telling Ed Lello and
Ian King that she's got the licenses.
She can sell into them. They even, you
know, until she gets a true regulatory
document, she doesn't even need to give
the 15% to the US government.
Xiinping says don't buy. So, if you
operate in China, are you going to buy?
I think many still are having to buy
because Huawei hasn't got the capacity.
Neither does some of the other players
yet. It's just not there. They're asking
you don't do work on government related.
Mandep agrees with you. He's shaking his
head.
Singapore sales. I mean Singapore is
such a big market for uh Nvidia. You
have to ask yourself are those all for
US customers and some of them are being
used on the cloud by Chinese LLM
companies. So it's very hard to tr track
exactly how those their chips are being
used. And to my mind there are so many
large language model companies in China
that are keeping up neck andneck with
the US uh LLM companies. How are they
doing it? They have to find the clusters
to train their models on. And some of
that capacity, I bet you, is getting
used in China.
Well, also to Matt's point, I mean, if
the Chinese government encourages you
not to buy uh chips from Nvidia, what
are your other options? We heard from
the CFO also saying that the company is
urging the US government to approve a
version of the more up-to-date Blackwell
chip for sale in China. Who competes
with Blackwell at this point? I mean
look uh it's your US companies whether
it's AMD or any custom ASIC but if
Nvidia can't sell to China so can't AMD
so you go back to the local Chinese chip
makers and to Caroline's point Huawei
still doesn't have that kind of capacity
so clearly I think when it comes to
training you rely on a certain type of
chip and you're not going to switch it
overnight but if they can't get access
to either Hopper or the depre like the
lower version of Blackwell then you have
to ask them uh yourself what are they
training on and if it's a non US company
chip then they probably have moved away
I mean it may not be as power efficient
as an Nvidia chip is but they are able
to use a cluster that's a non US chip
cluster
I mean I I'm I'm trying to push back
here right I feel like Chinese uh chip
makers can really just steal the IP and
try and copy it um that's how they've
operated historically
And then there's also the question of
return on investment. Right, Caroline?
You and Ed on your show every day talk
to these giant hyperscalers. You talk to
the customers. You talk to the people
that are making the AI apps that work on
Nvidia's chips. And if they don't show a
return on investment that's quantifiable
soon, maybe they pull back a little bit
on the margins in terms of their spend.
And I think that's what some of the
negativity was creeping into this print.
Is there around the edges the
vindication that this report from MIT
that 95% of these trials of AI
applications just aren't delivering in
terms of productivity and in terms of
savings. But you didn't hear any of that
from the earnings of these companies. In
fact, you heard Alphabet scale up their
capital expenditure and they were
rewarded for it. Their share price went
higher. I think thus far people are
giving the hyperscalers the benefit of
the doubt. Don't get me wrong, they
probably don't want some of the other
companies, those that are desperately
trying to compete, the sales forces and
the like, they're not giving them as
much bandwidth. They've got to have a
Gentic AI working right here, right now.
But I think the bandwidth is being given
to the capital expenditure, big players
of the hyperscalers for now. And maybe
in the look, think about, we always
laugh about how much Microsoft, we're
like reading into whether or not they've
really got the data center licenses or
the the ongoing relationships there or
whether they pull them back, whether
they scale them up. We're always trying
to get the devil in the detail. But I
think more broadly, if you just take him
at face value, Nvidia is saying they're
there and they're there spending big and
$600 billion worth is a lot of capital
expenditure.
All right, guys. It feels like we're
just getting started, but we have to
leave it there. Fantastic round table to
kick off this show. Our thanks to
Caroline Hyde of Bloomberg Tech. You can
catch her at 11 a.m. Eastern and Mandep
Singh of Bloomberg Intelligence.
Meanwhile, let's take a look at the
market right now at the index level. We
were talking about how Nvidia actually
erased much of its losses pre-market.
You can see that reflected on the big
benchmarks. The S&P 500 now mildly
positive. So too is the NASDAQ 100. The
Russell 2000, which is kind of isolated
from all of this Nvidia talk that we're
having this morning, higher by about
half a percent. Let's take a look at
some of the other stocks that are moving
on earnings that aren't Nvidia with
Bloomberg crosset reporter Isabelle Lee.
Hey Katie, we have to start with Best
Buy. We have the company warning that
tariffs continue to weigh on its
business and that's ahead of the crucial
holiday shopping season. Shares are kind
of up now by one and a half% but it was
down pre-market trading. So you see
there the stock is fluctuating. So this
takes the shine of a quarter in which it
boosted sales for the first time in more
than 3 years. Again the tariff comment
shows the vulnerable position a company
like Best Buy is in whose product lineup
is largely exposed to China. Up next
we're looking at the exporting good. The
company raised their fullear outlook.
This is a welcome sign again for strong
consumer demand. This comes as the
company prepares to acquire Foot Locker
and that's a sneaker chain. You see
though the stock is seeing some pressure
down by more than 3%. So the exporting
goods now see comparable sales and EPS
above its previous projections. The
forecast includes expected impact from
tariffs currently in effect. And lastly
we're looking at Victoria Secret. So
this is also good news for the company.
The company raised its outlook after
strong quarters quarterly sales and you
see a stock there popping nearly 10% in
pre-market trade. The signals that the
turnaround plan of its new CEO Hillary
Super is taking hold. So the company now
expects folure revenue to be higher than
forecast but its outlook includes an
updated estimated tariff impact of
around hund00 million a year. That's
double the previous projection. Back to
you guys.
All right, Isabelle. Thanks very much.
Isabelle Lee there uh talking to us
about some of the other movers that
aren't Nvidia. Obviously at $4.3
trillion in market cap. Nvidia towers
over every other company though. So
we're going to continue talking about
their earnings, dissect them, break them
down, look at the outlook and see what
we can um divine. Nvidia analysts have
been looking past the company's tepid
forecast, if you want to call it that,
and lifting price targets. At least 10
of them have done so. VJ Reesh of Mitsuo
Securities joins us next. This is
Bloomberg Open interest.
Let's get now to high interest. Look at
what's making headlines around the
world. And Five Below, it's raising its
outlook, saying that it has passed on
higher costs from tariffs to its
customers who still embrace the chain's
budget friendly products. The CEO says
another driver of growth was the global
suspension of the dimminimus exemption
that allowed packages valued at less
than $800 to enter the US um without
charging tariffs. The suspension gave
five blow an edge over online discount
drivers like Teeu. I believe that uh
dimminimous exception though comes to an
end this week. Deli meat king Hormell is
cutting its guidance as it posts a
disappointing quarter. The parent of
Spam and Applegate brands cited higher
commodity costs as the main driver of
the weakness. The interim CEO expects
the profit recovery to lag into next
year. Um and uh you can see the shares
down 13%. And we've got breaking news on
Fed Governor Lisa Cook. Michael McKe's
Bloomberg's uh international economics
and policy correspondent. He joins us
now with the latest headlines. Mike?
Well, Matt, we have now official
confirmation that Lisa Cook has sued the
president to keep her job at the Federal
Reserve. The details of the lawsuit
haven't yet been placed on the court's
computerized system, but as soon as we
have that, we will get more for you on
exactly the grounds on which she is
suing. But she has sued the president
over his move to dismiss her from the
Fed as uh they said she would. And Mike,
I mean, bring us up to speed. Give us
the context for what we're talking about
here. We know that, of course, President
Trump has been pressuring the Federal
Reserve. Mostly that has been up until
this point kind of focused on Chairman
Jerome Pal. But of course, he's turned
his attention to Fed Governor Lisa Cook
in the last week or so. Well,
there's a couple of elements to this,
Katie. One is that the president could
in theory, if he can get rid of Cook,
end up with a majority of governors on
the board of governors. Whether that
would translate into getting him what he
wants, we still don't know. But it also
may be if she sues and loses, especially
if she loses a request for a temporary
restraining order to keep her job while
this goes through the courts, then that
puts more pressure on Jay Powell because
then the president might think he could
get rid of Powell without a court
stepping in. It all is going to turn on
the question of what for cause means
because the Federal Reserve Act says
they can only be fired for cause and the
Supreme Court said that that is accurate
that they need a reason. So we will keep
an eye on that and uh see what what her
uh argument is and whether that would
apply to Powell as well.
Right. I mean, how likely is it the that
the Supreme Court questions the reason
that the president of the United States
gives considering the fact that the
Supreme Court has ruled in favor of the
Trump administration in the lion share
of uh the cases it's reviewed this year.
And the market um regardless of what
your take on that is seems to not really
care about this. The 10-year yield is at
423 right now and the curve is
flattening. Well, we don't have a
decision yet and we don't have any kind
of adjudication yet. So, the market is
kind of looking past this. There have
been some signs in the long end that
there is a little bit of concern about
what might happen. But in general, it
appears the markets are either going to
wait for some sort of decision or they
just believe that the president will not
win this one. We don't know. Uh, as far
as Pal and Cook, Cook's I issue is that
what uh the president's cause is is
something that she did before she came
to the Fed in her private life. Does
that rise to the level of for cause in
the Federal Reserve Act generally with
government officials? It deals with uh
behavior while you're on the job. But if
uh they can make this for cause a
private matter as well, then that might
open up pal or other members of the uh
Federal Reserve Board of Governors to
actions by the administration.
All right, Mike, appreciate your quick
reporting here. That is Bloomberg's
Michael McKe. Just to bring you that
headline again, Fed Governor Lisa Cook
has filed a lawsuit challenging
President Trump's attempt to fire her
over claims that she lied on mortgage
applications. that was filed in federal
court in Washington today. The complaint
not immediately available. We'll bring
you more updates as we h get them. But
let's turn back now to Nvidia. Of
course, that is the stock story of this
morning. And despite forecasting slower
growth, VJ Reesh, Mazuo senior analyst,
remains bullish on the company, writing,
quote, "We see Nvidia remaining the
leader here in the AI training and
inference chips for data center
applications." And I'm pleased to say
that VJ joins us now. he has an
outperform rating on Nvidia. So, put
these numbers into context because it
seems like the initial knee-jerk
reaction was disappointment, maybe that
the forecast wasn't uh really beating
expectations here, VJ. Now, it seems
like the market's trying to decide how
it actually feels.
Yeah, thanks for having me on, Kitty. I
think if you look at the data center
numbers, they definitely came in line to
what the street was looking for. uh and
so that was a little bit you know u more
you know downside to what the very
optimistic assumptions on the street was
but that said if you look at the AI
space I think no other space in the
semiconductor market enjoys the
visibility and the long-term capex
outlook that the AI space enjoys and if
you look at what Nvidia is talking about
there's a 3 to four trillion AI capex
that they have line of vis line of sight
to over the next five years that's a
significant time that uh Nvidia is
chasing and the other leaders in it. So,
while you have some near-term uh numbers
that are kind of in line, um you got to
you you can't miss the long-term outlook
here, which is very significantly
positive for them. So, we we we think
this is kind of still the name to own in
the space. Um VJ Jacob Bourne over at
Earketer says these results showed hints
that spending by giant data center
operators could tighten at the margins
if near-term returns from AI
applications remain difficult to
quantify. And this is the kind of thing
that you know um investors write in and
comment on every day. The ROI, is it
there? Will it materialize? Can we
quantify what it's going to be? because
otherwise
maybe Google doesn't want to spend $80
billion in capex. Maybe uh Meta isn't
going to keep spending hundred billion a
year on this.
Yeah. Hi Matt. So just if you look at
this whole capex commentary um I I think
what we have seen is over the last 3
months uh which is a pretty short period
uh you have seen capex from the top core
CSPs get raised from about 28 30%
entering the year to 50% plus uh for
calendar 25 so you are seeing capex
actually accelerate and even if you look
out to candidate 26 uh we have CSP
spending the cloud uh spending for the
for AI growing 17 to 20% year on year.
So there is still significant growth
coming. Talking about meta, they are
obviously spending a lot on super
intelligence. Uh but they have already
got kind of pointed to might be a 40%
capex growth into next year close to the
100 billion number 95 billion number
that you talked about. So so this capex
continues to grow uh and you know you
are seeing multiple business models on
the reasoning side like anthropic u you
know perplexity uh etc. Mistral, Coher
all do very well. Uh and and the
valuations there also get significant
upside. So this continues to be a very
long-term um roadmap for uh semis and
the AI space. So
and VJ, I know that you have an
outperform rating on this company, but
I'm really curious to hear what you
think the existential threat is here.
Matt brings up this point all the time
and I think it's a good one that you
think about how the fiber network was
overbuilt for example that maybe some of
these uh big tech companies rethink
their capex spends in the years ahead.
Is that the existential threat or is it
maybe the idea that if Nvidia can't ex
access the China market that some of
those homegrown competitors actually
will be able to take share and compete
here?
Yeah, I think that's a good point Katie.
I think if you look at the AI space, the
big spenders today are still the CSPs.
So you always have the risk that the
CSPs could slow down, that they might
want to focus a little bit on the free
cash flow. But that said, what we are
seeing here in the next couple of years
is a pretty big focus on building out
the AI space. There's still lot of
dollars to to get there, a lot more
efficiency and performance that can be
driven from the from the AI side. So
you're still seeing CSP spending grow
but we are also seeing uh a huge uh
couple of new vectors in AI server
growth from sovereign spending growing
100% and it could pro possibly expand
into 26 as the Middle East shipments
start to pick up but also enterprise
tier 2 uh spending from the likes of XAI
at Tesla and Grock uh but also you know
Oracle OCI is spending uh up
significantly into next year. So you're
seeing some uh other vectors also start
to pick up uh alongside uh the CSPs
which should uh definitely help the 2026
outlook and and to that add to that uh
the whole China side right we at this
point they're not shipping anything into
China and they're talking about a 2 to 5
billion per quarter tailwind into 26 if
those licenses get approved so there is
still uh potential for upside to the
numbers uh that they that they laid out.
I uh you know I've been thinking about
this China problem because there were
zero China sales in Q2 and they didn't
initially include a forecast in Q3
although the CFO now says maybe 2 to 5
billion in China sales but um there have
been multiple signals from the Chinese
uh Communist Party through various
regulators that they do not want Chinese
companies buying Nvidia chips be they uh
H2O or H20 or uh um any newer chips and
historically China just steals IP and
then you know makes their own version.
Aren't the Chinese going to do this with
Blackwell chips as well? Maybe even with
Reuben.
Yeah. No, absolutely. There's been a lot
of noise around this and it makes a lot
of sense that China would want to, you
know, hold off on importing uh H20s or
B20 so they can develop their homegrown
domestic AI. uh but that said you know
the commentary from Nvidia on the call
definitely says there is demand for even
H20 which is let's say year and a half
old two years old u and to the tune of
almost 2 to 5 billion a quarter uh and
so if they can move forward ship those
but also develop a toned down despect uh
B40 or B30 um that could be the next
driver as well for for 2026 if you know
they can make it it's taped out and it
gets licensing from the US government
obviously. Uh but you know I think from
from the US government side they also
get a 15% uh take on the on the revenue.
So we we think that that there's a
possibility for approval uh down the
road on on both of those products.
All right VJ, great to get your take.
Really appreciate you joining us. VJ
Reach there of Mitsuo. In the next hour,
we're going to talk AI investing with
Winston Ma of the Global Public
Investment Funds Forum and Joe Kaiser of
Marcato Partners. This is Bloomberg Open
Interest.
We are just moments away from the start
of trading. This is Bloomberg Open
Interest. I'm Matt Miller. It looked
like, you know, before last night that
whatever Nvidia did um would almost
change the narrative uh for this market
or at least continue the momentum train
as Kim Forest told us. But right now it
feels like uh nothing is changing at
all. S&P futures are unchanged. Um
although look at that 6,500. So we're at
uh a a high level there and we will be
on the cash trade as well. NASDAQ 100
futures uh unchanged, Russell 2000
futures, actually the small caps are up
about a third of a percent, but as Katie
says, they're relatively disconnected
from the Nvidia story. Uh at the NYSC,
you have uh some sort of non-publicly
traded company or a council, some
organization ringing the bell. It's it's
August, folks, in the slow doldrum days
of the summer. You at least have a
public company traded here. OME uh
ringing the bell. OM is the ticker there
on the NASDAQ. Of course, nothing
matters besides Nvidia. Um, even Five
Below earnings didn't get me to look
away from the AI story. And you know, I
love
I know you love
I love Five Below.
Everyone loves a deal. Anyway, let's
talk about Nvidia. Looks can be
deceiving. You don't see too much
movement right now. Of course, we know
that it was much lower pre-market, down
about 3% after it signaled that growth
is decelerating for the first time in 2
years. Really adding to concern that the
pace of investment in AI systems is
unsustainable and of whether or not
we're actually going to see returns from
all of that capex being funneled into
this company. But Nvidia shares
currently about 1% higher. You're just
really digesting what exactly we heard
from the company and from Jensen Wong
last night. that
all right watching the other Mag 7
stocks because they are for the most
part you know Nvidia's customers the
four biggest uh data center um operators
cloud operators hyperscalers whatever
you want to call them that you see here
Meta Microsoft Alphabet and Amazon make
up 40% of Nvidia's revenue and um with
the exception of Facebook the Facebook
owner meta platforms they're all in the
green today uh joining us now is
Sanctuary wealth chief investment
strategist Maryann Bartell's. And
Marian, let me first get your take. You
know, we we know and love you because of
your technical analysis, but everybody
has a view on Nvidia, what the earnings
meant, how that signals uh uh for the
rest of the year on on the stock market.
What what what's your take?
Well, I'm going to put it in a broader
context. As you know, I've been a big
fan of semiconductors. In fact, for the
past 3 years, my argument has been that
semiconductors are the true leaders
within this marketplace and Nvidia does
remain the key leader, particularly in
AI. You know, we're going to have some
quarters that are great for Nvidia.
We're going to have some quarters that
might be a little bit more lukewarm, but
it's not going to change the trend in
semiconductors. the demand for AI and
just the demand for chips overall as
we're in the digital era are going to
continue to grow. So on any pullback um
and even at these levels I am still very
bullish the semiconductor space.
Interesting. And when you say bullish
the semiconductor space I mean is this a
pyramid that just descends from Nvidia?
What are some of the other names that
you think actually could close the gap?
because right now it just appears that
Nvidia is dominant.
Well, it's dominant in AI. They
basically have created this whole space
and we haven't seen really a competitor
come up yet. You know, you'll hear about
AMD, but they're not there yet. So,
really what I've learned through the
years, when a company comes out with a
leading technology that the market wants
to own, they dominate 80% of the market.
And at least right now I think that's
the trend that it's invi Nvidia is on
unless it's proven otherwise
in terms of the technicals when you look
at Nvidia what do you see um can you can
you make out a pattern I mean it for the
most part has just been up right 35%
this year 171% last year 238% the year
before that
so if I take a long-term view you know
not you know dayto-day week toe quarter
quarter. I think the market has just
gotten too focused short shorter term.
I'm bullish the market out to 29 to
2030. I think the S&P is tracking
towards 10,000 to 13,000. In that
context, you can eventually see Nvidia
trade up near 300. I don't think that's
a straight run. We're going to get
corrections within that, but the longer
term trend in Nvidia from a technical
perspective remains extremely bullish.
extremely bullish there when it comes to
the technical perspective. Let's talk
about other sectors of this market
though. Uh it's interesting even with
Nvidia's draw down earlier today, you
did see the S&P 500 at least at the
index level appear resilient in the
pre-market. What does that say about
where we are when it comes to the
breadth of the rally that we've been
experiencing?
Well, the breadth of the market has been
expanding and you certainly see that
through the Russell 2000, but the
advanced decline line that I like to
look at is the S&P and that has already
reached a record all-time high. Last
Friday was a very important day for the
markets. It was, you know, a what we
call a 90% upday in breath. 90% of the
issues actually advanced and that's
extremely bullish, especially in the
doldrums of of the latter part of of the
summer. It's a confirmation with breath
hitting a new high and you know such a
strong move in terms of a 90% day that
we remain in a very strong uh bullish
trend. Doesn't mean that we can't get a
pullback in the fall. I think the market
is acting a little tired. I don't think
we're out of the woods for September or
October, but I still think at year end
it's possible that we're going to see
7,000 on the S&P 500.
You you said though that momentum is
slowing here. We see it every day. um
you know in the past uh couple of weeks,
Maryanne. So, do we get a near-term dip
before that or how does this uh change
from flatlining to either moving up to a
new high again um we're not that far
away from it uh or moving down?
So, the indicator that I'm looking at is
actually the VIX volatility index. It's
trading around 14 right now. We start
getting around 12 or 11. I think that's
a red flag that we could get a pullback,
you know, maybe five or 10%. I'm not
looking for anything significant. I
think this Friday um coming up with core
PCE will be very important because the
market pretty much is lock locked and
load loaded that the Fed is going to cut
interest rates. And I didn't take that
away from Powell's speech. What I took
away was he opened the door to the
possibility of a rate cut. But I don't
think it's a guarantee. So I think
watching the jobs data, wa watching uh
core PCE is going to be really important
in terms of how the market really prices
in where interest rates are truly going.
And if you look at the five-year break
evens, they're they're ticking up the it
seems that the bond market does not want
a rate cut here. So I think that part of
the market could add a little bit of
volatility. Yeah, that's interesting uh
to hear that and it's a good reminder to
your point that we have PCE data coming
tomorrow. We are eight days out from the
next jobs report. Let's game plan here.
Let's say that we don't actually see a
rate cut from the Fed next month, which
would certainly be a surprise looking at
the pricing here. Which area of the
market would that hit the hardest at
this point?
Well, obviously it's going to hit the
growth stocks, the tech stocks, the the
the stocks that are up the most are
going to come down the most. I still
believe we're in a mega cycle for
growth, but if we do have a correction,
you're going to see the value part of
the market rally, but I don't think it's
it's sustainable. So, I don't think
clients, you know, if you're a long-term
investor, you really just have to ride
out the volatility. Traders can come in
and, you know, move around their book a
little bit, but I still think again, as
we go out to uh the end of the year,
we're tracking higher, we're going to
continue to hit new record highs in this
market. All right, Maryann, that's a
good place to leave it. Great to get
some time with you. That is Sanctuary
Wealth chief investment strategist
Maryanne Bartell's. Let's get a check on
the stock market right now. We're just
over eight minutes into the session. You
can see pretty quiet at the index level.
Once again, the S&P 500 higher by just
about a tenth of a percent here. You
take a look at the split of gainers
versus losers. You can see a view of
more than 200 names in the green right
now, slightly more in the red. It's
interesting the fight that's going on in
the tech sector right now because up at
the top leading gains you have Broadcom
higher up by about 2.7% Microsoft,
Amazon, Alphabet, Meta Tech having a
good day, but then you take a look at
the downside. It's going to be hard for
the S&P 500 to get much higher right now
when you have Nvidia off by about 4/10en
of a percent. Not a huge decline, but
we're talking about the biggest company
that's going to do it. We're
highlighting Johnson and Johnson as
well. uh down about 1% right now. Let's
take a look at the sector breakdown. You
can see that fight that I'm talking
about because tech as a sector higher by
4/10en of a percent even with Nvidia
lower. Communication services also
rallying consumer discretionary some of
your biggest gainers today. Then you
take a look at the downside. Energy
consumer staples and healthcare that
ties back to Johnson and Johnson.
Healthcare your biggest loser on the
sector level right now down by about 610
of a percent. Matt.
All right. So, uh, struggling to get
anywhere except for the all-time high
where we closed yesterday and actually
making another all-time high again
today. So, these little tiny movements
um are are almost not notable except for
the fact that we've never been here
before, right? We're getting closer and
closer to
uncharted territory. There you go.
Uncharted, not unchartered as a lot of
people say. Some people even write
unchartered territory unless you haven't
chartered it yet. Coming up, analysts
are staying bullish on um Nvidia despite
its not necessarily inspiring forecast.
That's next. This is Bloomberg Open
interest.
Welcome back to Open Interest. It's time
now for our top calls. Some of the
analyst action in focus this morning. In
first up, Five Below is getting upgraded
to a buy at Telsey after the discount
retailer raised its profit outlook. Bis
says it's strong business momentum
should continue in for the rest of the
year and into 2026. Shares up about 3%.
Next up, Wall Street weighing in on
Kohl's after the retailer raised its
outlook and issued better than expected
earnings. At least four banks have
increased their price targets on the
stock and Gordon Hasuit is raising the
company to a buy, saying that management
has made progress in its efforts to
reconnect with its core customer. Shares
down a little bit today, but it had
quite a rip roaring rally yesterday. And
finally, analysts at major Wall Street
shops are sticking by Nvidia after the
world's most valuable company forecasted
decelerating growth. You had at least 10
firms hike their price targets on the
stock, including JP Morgan, City, and
Jeff. Shares still deciding what to do.
Matt, currently down about 6/10 of a
percent.
All right, so we're going to keep
watching that. Obviously, keep talking
about it throughout the program. Another
analyst bullish on Nvidia's future is
Dan Ies of Wedbush. He spoke earlier on
Bloomberg surveillance. when you look at
data center and then you actually factor
in what China's going to be when you
look at two to five billion and you look
at the acceleration in the next few
quarters I mean there's no region that's
not accelerating that's why I believe
there's a $5 trillion market cap you
know either by year end or early 26
right so it's no surprise that Dan Ives
is bullish but he has been right let's
talk about that with Bloomberg equities
reporter Carmen Reiniki she joins us
here on set so Carmen um he's almost
always bullish uh most tech firms that
he covers, but um you know the trend has
been up and to the right. So can you
really fight this momentum?
You know that's a really good point and
I think a lot of Wall Street analysts
were seeing they agree they're very
bullish on shares of Nvidia. You know
Katie just said at least 10 analysts
increase their price targets today. I
was just looking. I mean, we have them
rolling in as we're talking. Even that
means the 12 month average is now $25
for Nvidia shares. That's more than 13%
upside. So, I think a lot of people are
really joining in on the momentum. You
know, they see a longterm case here for
Nvidia shares to continue to go up. And
even though the earnings report might
have been a little bit less than people
were hoping for, they see it
overarchingly as sort of a minor
imperfection, a bump in the road, and
something that will ultimately, you
know, be worked out in the end.
Just for fun, uh Dan Ies, he has 44 buy
ratings, six hold ratings, zero sell
ratings. So, he has yet to meet a stock
that he doesn't like. But to your point,
what we're talking about here, the fact
that you're seeing price targets getting
lifted, even though by some measures
this was a little bit un underwhelming.
I mean, we were speaking with VJ Reesh
of Mazuo a little while ago, and he made
the point, I mean, Nvidia has the luxury
of kind of being the only game in town
here, the moat that they've built, the
competitive moat, it's going to be very
difficult to cross. It's true. And I
mean, we even were watching a Chinese
company yesterday, Cambercon, that
reported earnings, um, and they saw
increased demand from, you know, Nvidia
not being able to sell in China, and
they still shouted out Nvidia saying
that they have the clear advantage. So,
you're totally right. They are in a lot
of ways the only game in town. And I
think that there's still a lot of
positive things to come. I mean, we saw
um the news today. There was a Fox
headline about potentially selling
Blackwell into China. That's something
people have been really excited about. I
think it just shows that this is an ever
moving situation, right? Even when we
get the earnings snapshot, we hear
Jensen speaking. This can change day by
day.
Yeah. I mean, not everyone's excited
about the US selling Blackwell to China,
right? True. It would be a national
security problem for one thing. um it's
illegal right now and uh they would have
to pay 15% of their revenues to the US
government. That would be great for us,
right? For all three of us, I guess.
I think about that, but they don't seem
they feel it feels like they're kind of
walking back from that agreement, at
least in Ed Lllo's interview um with the
CFO. And it's also not clear that the
Chinese uh companies uh necessarily want
to buy chips from Nvidia, right?
Yeah, it's true. I mean the the
recommendation from Beijing is to has
been to stay, you know, homegrown, use
local chips. Um, but the Blackwell
really is, you know, the premier design
right now. And so a Blackwell chip in
China, analysts are excited about that.
Investors are excited about that and
yeah, it remains to be seen. All right,
uh, Carmen, really appreciate the
roundup there. Taking a pulse of Wall
Street right now, how they feel about
Nvidia. That is Bloomberg's Carmen
Rhinicki. do want to go back to that
interview that Ed Ledllo and Ian King uh
had with Nvidia's CFO Colette Crest said
specifically, we have been communicating
if nothing shows up, I've got licenses.
I don't have to do this 15% until I see
document. So the CFO is saying pretty
much show me to the government.
Yeah, absolutely. Um and they seemed
very cautious as well about the legality
of this situation. export taxes are um
historically not allowed. Um certainly
not encouraged. Uh so, you know, there's
a question as to whether or not this
will fly if there are court challenges.
Absolutely. She made that point as well.
Really great interview. Of course, we'll
continue to follow Nvidia, but we're
going to talk about something other than
Nvidia coming up next because Best Buy
sales beat estimates and says demand is
offsetting the impact from tariffs.
Traders wary on that stock today. We'll
discuss next. This is open interest.
This is open interest. I'm Matt Miller.
Let's take a look at stocks which are
now turning lower just about 20 minutes
into the session. The S&P down onetenth
of 1%. The Nasdaq although unchanged.
There's a red arrow. uh their small caps
are still treading water um but just
barely. One of the problems or the big
problem is Nvidia. Take a look. Down
1.9% now and falling. So Nvidia although
it had turned positive uh just before we
started trading um is now down almost 2%
and when it's a $4.3 trillion company
that makes a big difference. I mentioned
uh how much I was paying attention to
Five Below and look at that they're up
4%. Not that it matters. Victoria Secret
up 9% as well, but even those two
together aren't enough to outweigh
Nvidia and then Best Buy is falling.
Dick Sporting Goods as well. We're going
to talk about that right now. Katie,
let's get a little bit more detail on
those retailers with Bloomberg
Intelligence, senior retail and consumer
analyst Lindsay Dutch. And we'll start
with Best Buy since we have the bigger
move there. So, they beat estimates when
it comes to uh demand that they're
seeing for gaming, for computers. We
know that they're watching tariffs here.
How do you rate this company when it
comes to how they're actually navigating
some of those headwinds?
Hi Katie. Hi Matt. Thank you for having
me. Um, yes, tariffs are definitely a
headwind here and I would say Best Buy
is doing a great job managing the cost
side and I think the really big concern
is more on the demand side. So how is
the consumer going to react especially
for holiday? Obviously a very big you
know point for this type of a retailer.
you know what could those higher prices
impact on that holiday season especially
in some of the weaker categories.
So uh what are the weakest categories? I
mean what what are the problems for them
exactly? So home theater and appliances
are still the two biggest weake weakest
categories by far for Best Buy.
Obviously we saw strength in the second
quarter on gaming that was aided by
Nintendo's Switch 2. Um we're seeing
strength continue in computing and
phones and that's sort of supposed to
extend into the third quarter. That big
worry bead is really on that
entertainment um and the appliances
which you know if we were to see a drop
in interest rates and a pick up in the
home market that certainly would help
certainly would help. Uh I think you can
say the same across industries too when
it comes to interest rates. But talk a
little bit more about Dick. So uh it did
see its sales climb. It raised its
outlook as well. You're not necessarily
uh seeing that reaction in the stock
right now. We also know that they're
closing on Foot Locker next month. I
mean, give us a pulse check here. What
do you make of Dixs at this point where
they are in their story?
Yeah, so Dix is sort of a completely
different story than Best Buy, right?
Best Buy is on the cusp of a turnaround.
They're really looking to to spur that
sales growth turnaround that they've
been, you know, missing for the past
three years. Dix is completely on the
opposite. They're coming off of strong
momentum, really strong results for the
past couple of years. We saw another
beat in the second quarter. I don't
think it was tremendously surprising. I
think a lot of, you know, investors and
analysts thought the guidance was pretty
conservative coming into the second
quarter, but the bottom line is we saw
demand continue to strengthen in the
second quarter. Guidance is still
implying sort of a back half slowdown.
And you know, we're we're not really
liking that. We think that demand still
looks solid. We think that growth can
extend but the guide is telling a
different story.
What what uh what can we see about the
Foot Locker acquisition and whether or
not that's working.
Right. So Foot Locker, you know, they
got their regulatory approvals earlier
this week. The deal is expected to close
on September 8th. None of that is
factored into the guide for the year. I
think Foot Locker um is going to be a
big test for Dix. Stixs has proven that
they've been able to turn around their
own business and really fuel very strong
demand for their sports assortment and
they've even gone back into
brick-andmortar expansion which is is a
complete shift from the past couple of
years when many retailers were closing
stores. You know, Foot Locker is in the
early innings of its turnaround, and
they and Dix really needs to prove that
they can do this a second time with a
retailer that's skewed a little bit more
to lifestyle and a little bit more to a
lower consumer, which is going to be a
harder lift in this environment.
Lindsay, thanks very much. Lindsay Dutch
joining us there from Bloomberg
Intelligence. Coming up in the next
hour, um, we'll talk Nvidia and the
markets with Larry Adam of Raymond
James. This is Bloomberg.
We are 30 minutes into the trading day.
Welcome to Bloomberg Open Interest. I'm
Matt Miller.
And I'm Katie Grifeld. Not too much
happening at the index level. And coming
up, we'll talk about why Nvidia, the
world's most valuable company, signals
that growth is decelerating after a
staggering 2-year AI boom.
Meanwhile, on the data front, the US
economy expanded in the second quarter
thanks to a pickup in business
investment potentially related to that
AI story.
And Fed Governor Lisa Cook files a
lawsuit challenging President Trump's
attempt to fire her, kicking off a
historic fight. Let's get more insight
on Cook's lawsuit. Michael McKe. He is
our international economics and policy
correspondent. He's been parsing the
complaint. He joins us now. So Mike, we
talked to you just as these headlines
broke less than an hour ago. What have
you learned since then?
Well, we've got the substance of her
case that she has filed now and it's
pretty much as expected. The argument is
that the for cause reasons that the
president cited the allegations against
her are invalid because they are just
allegations and she was not given a
chance to respond to those and and that
means she was deprived of her right to
due process. What the lawsuit is asking
is that the uh allegations refer to
events before her nomination and they
ask the court to void her firing and
declare her an active member of the
Federal Reserve Board. Uh they seek the
court holding that Fed governors can
only be removed for inefficiency,
neglective duty, malfeasants in office
or comparable misconduct. In other
words, the usual things that are counted
as for cause as opposed to something
that happened before she became a member
of the Fed. In the lawsuit, she says uh
her lawyers say allowing the president
to remove members of the board over
policy disagreements would also render
elucery the board's independence. So,
they're wrapping the two issues
together. Her right to stay on the board
and the danger to the Fed of uh of
losing its uh credibility because of the
uh because of the firing and people
seeing it as political.
Well, if there's a danger if you say
there's a danger of the Fed losing its
credibility, that makes one big
assumption to begin with, right? Um that
the Fed has credibility. And I would
also point out that the Supreme Court
has sort of carved out the Fed as
separate from other institutions. So we
don't really have any precedent as to
what for cause would mean in this case.
Right.
Well, we do in the sense that that uh
the idea of inefficiency, neglective
duty, malfeasants in office are the
standards that have been used in prior
cases. They don't uh and they are in the
law for some other agencies, but they're
not in the law for the Fed. And
basically this will turn on whether or
not those are the reasons that the
president could order somebody fired and
whether her mortgage situation rises to
that level. So lawyers are saying that's
going to be kind of a high bar to get
to. But remember this is just a
essentially a preliminary request for an
injunction to keep her on the job while
all this works its way through the
courts. If it goes the way we saw with
the head of the National Labor Relations
Board, Gwen Wilcox, uh the lower court
will grant her that stay, then the
administration will take it to an
appeals court. Now, in the Wilcox case,
the appeals court said that she could be
removed from office. So they took that
to the Supreme Court and the Supreme
Court then said in this ruling that
included the for cause issue that Matt's
talking about that she could Wilcox
could be fired or until the process is
adjudicated. One of the issues here is
if that happened then the president in
theory would put in a substitute fed
person and that person would vote on
policies and have an impact. And then
what if the Supreme Court decides that
Cook is right and says she should be
reinstated. So it's it's a very
complicated situation going into this.
Yeah. And the timeline is complicated as
well because the next FOMC decision is
on September 17th. We are weeks away.
Lisa Cook of course is going to be
voting in that meeting. And there is a
question here about whether they will
get that injunction, whether she will be
still in her job at that point. Yeah,
we're waiting to see which judge this is
assigned to in US District Court in
Washington and how quickly they schedule
a hearing. We hope that we will get uh a
hearing scheduled by the end of the day.
So, we would have some idea of how this
will play out on a timeline and then we
don't really know how we we I can
imagine that if she is allowed to remain
in her job by the lower court, the
administration would file the same day
and appeal to the uh district appeals
court. Whether they would hear that
before September 17th is an open
question. Courts can move fast when they
want to, but in general, what we've seen
with Trump's firings is a little bit
more speed, but not the kind of uh
immediate request for uh relief that
people have asked for. All right. Uh I I
just wanted to give a little bit of uh
programming advice. June Graasso's show
on Bloomberg radio at 6 PM every night
is an excellent uh encapsulation of
what's going on um in the current legal
um environment. And I'm sure she's going
to be digging deeper and deeper into
this. I'm already looking forward to 6
p.m. tonight.
Got a lot of daylight to burn between
now and then. Looking forward to that.
Mike, thanks so much. Mike McKe, I'm
sure we'll talk to you more uh as well
throughout the day about this. But let's
turn back to the big story of today's
trading. That's Nvidia, the chipmaker,
forecasting a deceleration um in AI
growth after an incredible two-year boom
and really still um some serious growth.
We spoke to VJ Rakash Mitsuo, senior
analyst, last hour about Nvidia's
prospects in China.
That China would want to, you know, hold
off on importing uh H20s or B20s. there
is demand for even H20 which is let's
say year and a half old 2 years old and
to the tune of almost 2 to 5 billion a
quarter uh and so if they can move
forward ship those but also develop a
toned down despect uh B40 or B30 um that
could be the next driver as well for ne
for for 2026
an Nvidia CFO spoke to Bloomberg about
the president's revenue sharing plan
saying quote when When I first heard it,
I said, "I am sorry. Where's the
regulation?" I said, "No wired money
goes out of this company based on
someone told me cannot do." Uh, some
fiery words there from Colette Crest.
Joining us now is Raymond James, chief
investment officer, Larry Adam. Larry,
it's great to have you with us. I take a
look at your year-end price target, your
12-month price target for the S&P 500,
6375.
We are above that right now and we have
plenty of things that we could get
worried about. When you think about the
state of corporate America, our biggest
company out there giving what some have
called a tepid forecast. You think about
the state of trade policy and then you
think about valuations. You add it all
together. How do you feel about this
market?
So, as you just mentioned, we're a
little bit more cautious on the equity
market here going into the next couple
of months. And I think it's important to
recognize that this has been a summer to
remember. You know, since Memorial Day,
the S&P 500 is up well over 10%. That's
the third best summer that we've had in
basically the last 40 years. And if you
look at the amount of pullback that
we've had, the biggest pullback that
we've had during this summer has been 2
and a half%. Usually you get about 7%.
And then when you talk about the breadth
of the rally, all 11 sectors have been
positive so far throughout this summer.
That's the first time that that's
happened since 2017. My point is that
there has been a lot of good news priced
into the market and we just think that
this is a period of time where we should
see a consolidation because as you've
mentioned you have seen valuations move
to the upper levels. We're right now in
the 94th percentile of valuations.
So what kind of consolidation um do you
expect to see, Larry? I mean if I'm
looking to get into this market, how far
do I let it fall before I buy?
Well, it wouldn't be unusual to see a 5
to 10% pullback, right? usually get
three or four of those a year. We
haven't had that many over the last
year. So, I would look for at least five
to 10% over the next couple of months
here and that would provide a nice
opportunity as the market goes into next
year because I do think the more
important story is that if you do get a
pullback, it's likely going to be a
buying opportunity because the
underlying fundamentals are healthy. The
Fed is going to start cutting rates.
We're still looking for double digit
earnings growth going into next year. A
lot of these themes that we've been
talking about, you just mentioned, AI,
defense spending, the electrification,
those themes all remain in place and
should continue to drive the earnings
power of the S&P 500. The only
difference is I think earnings have to
take us higher on this next leg, not
just PE expansion.
Larry, it's interesting to hear you say
that. I mean, it's an optimistic bent uh
when it comes to these potential
pullbacks we could have. Is that a
blanket buying opportunity or would you
be picky within where you're shopping
for bargains?
Yeah, I think you have to be very
selective here. You want to be in the
areas that have the best earnings growth
and those areas continue to be within
the tech space. I do believe that if you
look underneath the the covers here, I
do think that healthcare has continued
to have a you know a negative cloud over
it. But if you look at their earnings,
they still have very good earnings
growth. And I think as some of these
clouds kind of dissipate, I think that
they'll start to reflect the earnings
power underneath that particular sector.
So I do like healthcare and I do think
industrials because of the AI buildout,
defense spending, electrification, they
have a lot of catalyst to continue to
help their earnings continue to move
higher well into next year. The areas
I'd be more cautious on are the consumer
because I do think as we go into the
latter half of this year, I do think
that tariffs are going to start to bite
and I think that that's an area where
you have very very low margins to begin
with. That could continue to crimp their
earnings going into again the back half
of this year. So that's an area I'd be a
little bit more cautious on. Another
area I think is it's controversial right
now is small cap, right? I just don't
see the momentum in small cap earnings.
People forget to realize that 10 out of
the last 11 quarters earnings for small
cap companies have actually been
negative, right? And that's been in a
good economic environment. So, I really
need to see the momentum before I'd get
more optimistic in that small cap area.
Do you uh worry that the Fed may have to
raise rates if you think tariffs are
going to bite? I mean, do you worry that
prices are going to rise and even if we
get a cut now or two or three that the
Fed's going to have to turn around? As
Ken Rogoff recently told us, um, he
thinks the Fed is going to have to
reverse course and start raising rates
next year.
No, we don't think we don't fall into
that camp. We believe, as Chairman Pal
said, I think it's transitory as we do
our forecasting. Yes, you are going to
see an interim bump in inflation, but I
think the disinflationary
trends are still in place. you know,
whether that's coming from some of the
competition from overseas, whether it's
coming from real estate prices that are
softening, and remember that, you know,
if you look at uh real estate and
owner's equivalent rent, that's still
around 30% of the CPI, right? And that
should continue to move lower. So, I
really don't see the big spike in
inflation coming. And that's why we have
two cuts priced in this year and at
least another two cuts priced in for
next year because we do think that where
the Fed funds rate is right now, it is
mildly restrictive for this economy.
All right, Rhman James, chief investment
officer Larry Adams, great to get your
take as usual. Appreciate the intel this
morning. Coming up, how should investors
feel about Intel in light of the US
taking a stake? We'll speak to Winston
Mob, the Global Public Investment Funds
Forum at New York University. Next, this
is Bloomberg Open Interest.
Let's get out of high interest. Look
world. The US economy expanded in the
second quarter at a slightly faster pace
than initially estimated on a pickup in
business investment and outsiz boost
from trade. The turnaround in GDP
followed a first quarter contraction
that was uh the first since 2022 as
companies raced to import goods ahead of
tariff hikes. US Health and Human
Services Secretary Robert F. Kennedy Jr.
said the Center for Disease Control and
Prevention, the CDC, isn't sufficiently
aligned with President Trump's agenda
and it needs an overhaul. His comments
come one day after the White House fired
the director of the CDC following an
intense clash over vaccines. We're going
to talk about that story a little bit
later on. And Florida Governor Ronda
Santis is trying to largely wipe out
property taxes in order to recoup those
funds. He's taking a page from Trump
politics with his own version of the
federal department of government
efficiency. The Florida Doge would
scrutinize municipal finances to
identify potential waste. Florida is
also a state with no income tax. So, how
would they raise money? That is a
fascinating story. Uh let's switch gears
though to uh essentially to tariffs and
I'll get to why the US is building a
sovereign wealth fund with American
characteristics. At least that's the
viewpoint of our next guest, Winston Ma.
He's executive director at NYU's global
public investment funds forum. He says
the Trump administration is launching a
decentralized transaction-driven
sovereign wealth fund with stakes in MP
materials and Intel as well as
involvement in Nipon Steel and Tik Tok.
And that will be funded with revenue
from foreign uh well from tariffs as
well as from you know the take that the
uh Trump administration gets from chip
sales at uh Nvidia and at AMD. Let's
bring in Winston, formerly managing
director and head of North American
Office for China Investment Corporation.
That's China's sovereign wealth fund.
He's also the co-author of the hunt for
unicorns, how sovereign funds are
reshaping investment in the digital
economy. Winston, you have incredible
you have an incredible resume to talk to
us about this because you are a lawyer.
You studied mechanical or electric
engineering uh semiconductors
essentially. You ran the North American
business of the Chinese sovereign wealth
fund. And even though the US Howard
Lutnick recently said we're not starting
a sovereign wealth fund here in the US,
you say that that's what they are doing
essentially.
Yes. Yeah. By the way, I'm a New Yorker
too. Yeah. So when you think about the
uh US sovereign wealth fund by Trump uh
it comes from a very different uh
direction because traditionally
sovereign wealth funds manage a wealth
right like the Middle East sovereign
wealth funds they manage the oil money
for financial returns but here US is a
deficit country and there's no uh
legislate legislative authorization from
the congress to uh allocate a budget for
this sub wars fund so the most unique
thing about Trump's Sign westbound is
the source of capital you know three
very interesting ways you know one uh
from existing legal authorization in
specific areas like Pentagon's
investment in MP materials was based on
DPA defense production act and the
second uh more interestingly maybe never
seen before uh the trade sales uh
sharing right for Nvidia uh AMD they
agreed to uh 15% sales kickback back to
the US government in order to get the
export license right and finally maybe
the most unique right is that uh for the
most part this US sovereign wealth fund
may be financed by foreign capital
because in connection with the tariff
agreements with Japan, Korea and to some
extent EU they all agreed to uh invest
several hundreds of billions of dollars
into the US at the guidance of the
president. Yeah. So soon we may see a
very large uh sovereign fund of the US
based on foreign finance.
Yeah, absolutely. That has been a
component of many of the trade deals
that we've seen uh being discussed in
recent weeks and months. You recently
wrote a blog for the CFA Institute
writing that investors should pay
attention because statebacked capital is
no longer theoretical. Expand on that a
little bit and why investors really need
to keep their eye on what's happening.
Yes. Yeah. Certainly sovereign wealth
funds investments will bring
complexities to deals. Uh but to start
with right actually they bring
interesting opportunities as well. uh
because in these strategic investments
that the Trump administrations are
working on uh actually the government is
working both as a co-investor and a
strategic partner right because in the
MT materials uh the Pentagon agreed to
purchase all the rare earth production
from this company and for Intel you know
maybe uh Trump administration can
persuade Nvidia MD to use Intel service
to build up Intel's capacity right so
for for all these there are strategic
angles the in the deals in addition to
the financing itself. Uh so that's why
we see uh private capitals coming in uh
after after the uh Trump
administration's investments. For
example, Intel situation uh Masayoshan's
uh soft bank bring in an additional $2
billion right for another 2% of the
company. And in the MP materials uh uh
deal after the MP after the Pentagon
investment uh 1 billion debt financing
was mobilized from Goldman Sachs and JP
Morgan to add to the project financing
of the company.
I'm interested in just because of the um
the kind of zeitgeist of social media
today in the Tik Tok angle. What do you
think is going to happen with Tik Tok
because the president of course he
originally was very much against Tik
Tok. He thought that was a way for the
Chinese government to spy on US
citizens. Probably is. Um but now he's
very much for Tik Tok and he keeps um
delaying the deadline by which it has to
be sold off. How do you think he's going
to deal with that?
Yes. Yeah. The Tik Tok case is a very
interesting case study about how many
different aspects that the national
security can be, right? because during
Trump's first term uh he wants to shut
down Tik Tok based on data uh uh
security issue, data privacy issue of
American citizens uh so on so forth as a
national security issue, right? And but
now he probably looks at Tik Tok as like
the most powerful uh social platform and
a platform with a powerful AI algorithm.
So maybe he sees a a different angle of
national security concern to keep it
alive. Uh so I think he will definitely
seek to find a deal but China is also
looking at this as a strategic AI story.
Uh so uh the Trump Trump side definitely
need to work with China to get the China
side approval to get the deal done. Uh
you know on the national security angle
um the Stargate project you mentioned
Masiohi Sun right has been one of the
things that Trump um pushed hard for. He
wants the US to have a leg up in AI.
That will be the best
um you know uh national AI uh I guess
environment in the world. It's highly
likely that that's the case. But what do
you think about the Stargate project?
Will that come to fruition?
Yes, I I actually I think Stargate might
find the best partner in the US Southern
West fund that Trump is putting
together. Uh because uh globally, you
know, infrastructure investing is a big
part of the global sovereign funds. you
know when you look at the Middle East
sovereign funds or the Canadian pension
funds uh a lot of their portfolio uh
will be infrastructure investments right
so here uh US uh is going to be a big
investor in the data center uh digital
infrastructure sector uh because uh of
the new white house AI action plan right
uh in connection with the AI action plan
uh July Trump going to acceler
accelerate the the license and the
approval process for uh data center
projects in the US right so we will see
a big push uh into these projects
including Stargate and for long-term
projects that that that that has a kind
of long payback circle the long-term
capital of government capital can become
an anchor uh to start the project and
then attract more private equity private
equity private debt into the project to
form a nice public private partnership
by the way And just to wrap this up, you
seem pretty bullish on this sovereign
wealth fund. You think it's going to be
successful?
Well, uh I I think uh it can create
opportunities for the market where
strategic angles and private interests
can merge like in the for example uh the
Intel situation. Uh but at the same
time, right, sovereign funds always
create complexities, you know, in some
some in some context, you know, creates
conflicts in terms of uh what is good
for the company and what is good for the
for the country. All right, Winston.
Great to get your take on this. I really
appreciate it. We'll keep in touch uh
with you. Winston Ma uh there used to
run the CIC here in the US. He now uh
works at NYU. This is Bloomberg Open
I think the boom's just starting. I
mean, if you look at these numbers,
especially when you factor in what China
is going to be. I mean, you know, Jensen
talked about 50 billion 50% type growth
number, this just shows the next stage
of adoption is actually just starting.
That was Dan Ives of Wed Bush speaking
earlier on Bloomberg. For more on the
future of AI investment, we welcome in
Joe Kaiser, Marcato Partners, CEO, and
managing partner. Joe, um I want to get
to Nvidia in a second, but we just had a
really fascinating conversation, not
unrelated, with Winston Ma, formerly the
CIC about the fact that he thinks this
is a sovereign wealth fund, uh the US
taking stakes in Intel and MP materials
and so forth. Do you agree?
Morning, Matt. Well, I think it's a bit
more of a of a utility play than it is a
sovereign wealth fund play. Um but the
the I think the underlying message is
true which is uh we must build uh
refinery capa capacity and capability
inside of our own country.
So and you are uh obviously you're a
venture capitalist um we've talked to
you a lot in connection um with Mark
Douglas and uh Mountain um but you
worked a lot on AI and in the technology
sector that's kind of your your
wheelhouse. Do you think we need the US
to have either a sovereign wealth fund
or its own venture capital fund or or uh
a utility play of some sort in order to
uh support the national security of our
infrastructure?
Absolutely, Matt. I think, you know,
when you think about the alternative of
what happens with the pressures
associated with Taiwan, the global
political pressures associated with
Taiwan, the alternative is much worse
than us um having a national uh refining
and fab uh capacity.
And uh I'm taking a look at a recent
post that you make made on LinkedIn
about this uh potential intel investment
by the US government. You said that this
will depend on how President Trump is as
an investor. You also make the point
that the company, it does have the
technology to become a TSMC substitute
or at least the backup to TSMC. You also
write about the potential that the
government might be able to motivate
Nvidia and AMD to commit meaningful
volume to Intel when it comes to fab and
packaging. With all this in mind, Joe,
do you follow the US government into
Intel? Is Intel a viable investment from
where you're sitting?
Uh, great question, Katie. Good morning.
Um I think that first of all I think
Intel is an interesting play for the
government to support. Um as you look
about as you look across the landscape
yet from recent earnings uh obviously
Nvidia crushed earnings in uh TSMC did
AMD Broadcom and Intel missed and Intel
announced layoffs uh coupled with their
miss. So I think the business is too big
to fail and needs the government support
and one of the things the government can
do to support it is uh motivate them to
move into the a more of a third party
refining uh business model Allah TSMC
coupled with bringing capacity and uh
demand from AMD and uh Nvidia. So so yes
I I think that's the right play for the
government to take from a from a public
market investor standpoint. ated. It's
not my forte, so I'll defer to the to
the long onlyies and the hedge funds out
there. Uh, but I think from a government
standpoint, it is the right play from a
national security point of view.
Fair enough. Fair enough. I am curious
what you think about the potential
timeline here. Again, going back to your
post and what you're saying, it sounds
like Nvidia, or not Nvidia, Intel
rather, has all the correct ingredients
here. Now, it of course has some
government backing as well, but this
isn't like turning a light switch, Joe.
How long do you think that it might take
for some of these factors to really come
together?
Well, Katie, some interesting things are
foot. So, TSMC as part of their earnings
announced 15 new fabs uh distributed
globally and they intend to begin
packaging in their Arizona facility at
some point in the future. But today, all
the packaging occurs in Taiwan. So, that
is a critical supply chain element
that's at a geopolitical risk today. So
from if you're the government and you're
Intel, this is a decadel long journey to
to convert the Intel business model to a
a third-party refining capability as
well as building the supply chain, the
domestic supply chain around it. So this
is not a 12 or 24month transition. This
is a decade long project. But I think
again from a national security
standpoint, it is one well worth taking.
Dude, while we have you, I want to get
to Nvidia. I think you said they crushed
it. Um I don't know if the market shares
that view. Uh what's your take on what
happened yesterday with the numbers and
what the outlook signifies?
Matt, I think the street is missing uh
the the concern over the data center
revenue. You know, if if you look at
what is happening from in their data
center revenue business, it is not a
demand problem. It is a supply problem.
They are the their black belt chips are
sold out well into next year. TSMC
capacity is sold out into next year. So
the the challenge is not how do they
generate demand and get orders. The the
challenge that they face is how do they
make chips fast enough to to fulfill
these orders. So the fact that Nvidia is
able to come in line with revenue
forecast despite the the bottlenecks in
supply chain I think is is really
compelling. You couple that with, for
instance, the the earnings report that
came out of Core Weeb and seeing them
continue to grow at 200% year-over-year
with Evid margins north of 60%. I'm I'm
had the luxury of investing in a company
called Lambda Labs and their performance
um that I I I agree with Dan Ies like
we're in the very first innings here.
What what do you think Joe and I ask you
as someone who has the perspective of
starting businesses uh working in this
sector? You know how long uh and how
much investment it takes to get
something off the ground. But if China
doesn't want its companies buying any
more Nvidia chips, can they just steal
the IP and make something on the level
of Blackwell or is it far too
technically challenging to get there?
It's far too technically challenging in
the short run, Matt. And I think what's
happening is um the the Huawei chip in
some respects is comparable to the H20.
You know, it has much it has much more
powerful compute, but is a much bigger
form factor. So, there's some trades
there, but in a in a export ready
version of the Blackwell chip, it is
leaps and bounds ahead of uh the
domestic Chinese uh alternatives. And
then if you think about what is in the
future with the with the Reuben chipset
coupled with TSMC's migration to the uh
to the uh 2Nm production cap capability,
the the gap is extending.
All right, Joe, good place to leave it.
Great to get some time with you. That is
Joe Kaiser of Marcato Partners.
Meanwhile, it's going to check on these
markets just over an hour into the
trading session. You can see the S&P
500. It was positive. It's not anymore.
Down about a tenth of a percent. Uh the
NASDAQ 100 tech is a really interesting
trade today. Much more interesting than
what the NASDAQ 100 would suggest,
higher by only about a tenth of a
percent because you have Nvidia lower
right now by about 1.6%.
And yet you have green when it comes to
the big tech benchmark because you have
the other names in that index doing
pretty well right now, shaking off some
of the concern that we have about
Nvidia, whether or not we're going to
see capex slow down there. uh Broadcom
and some of the other names higher this
morning. Then the bond market, nothing
to talk about there. The 10-year
Treasury yield is unchanged at just
about 422.
Whenever you say shaking off, I wonder
if that's a plant. Is it a purposeful
reference
to uh Miss Tillerson Swift?
Mrs. Ms. is Kelsey.
No, I feel like I think she's going to
keep
that's not going to happen.
Yeah, maybe Travis Swift his name. Yeah,
Travis Swift. That has a ring to it.
Could be. All right, let's get a look at
some of the single stocks uh moving this
hour. We had Dick Sporting Goods raising
its outlook as it prepares to acquire
Foot Locker. We were talking about that
with our BI analyst, a $2.4 billion
acquisition, but the shares are down 6%.
Meanwhile, Victoria Secret higher right
now showing signs that turnaround
efforts are paying off as sales rebound.
Uh shares currently up about three and a
half%.
Is it the place to go? Is that where
I don't know.
Are the people apparently some people
are going
Victoria's Secret? Best Buy beat
earnings and reiterated guidance as
demand offsets the impact of tariffs,
but uh
the shares are down 5%. So
yeah, I mean unless there was a healthy
runup into this earnings report, which
I'm guessing
there wasn't, that would be by the
rumor, sell the news. But uh in fact,
Best Buy, if you look at the shares, I
mean, actually, they're only down 16%
this year, including the 5% drop.
Right. Right. I don't know, pretty
middling overall, but really goes to
show that when it comes to the retail
names, and we just looked at three of
them, uh, a lot of nuances there. But
coming up, we're going to talk about
volatility, it's vanished in the stock
market this summer, and hedge funds are
betting that the comm will last. We'll
discuss with SIBO's Mandy Zoo up next.
This is Open Interest.
[Applause]
Hedge funds are shorting the SIBO
volatility index, the VIX, at rates not
seen in years. Net short positions
against the VIX are at the highest level
since 2022. Evidence of either
confidence or complacency in markets.
Let's discuss with SIBO Global Markets
head of derivatives market intelligence
Mandy Zoo. Mandy, great to see you in
person.
Great to be here. So shorting the VIX
with the VIX at 14, is that the move? Do
you think that we could actually head
lower here?
So I think the hedge fund positioning
data is a little not misleading, but
it's really just reflection of the fact
that we're seeing tremendous demand and
growth in lawn volatility ETPS that are
really coming from retail. So those AUM
have grown to two, threeyear highs and
hedge funds are really taking the other
side of it. Um now that said, you know,
that's not their only position, right?
they could have offsetting long
positions in either S&P options or in
other in other instruments. Um but
certainly I would say um you know there
we were seeing from a retail perspective
demand to go long volatility
particularly through these ETPs and on
the hedge fund side I do think that the
steep VIX term structure the roll down
being particularly attractive for those
who are short the VIX uh VIX futures I
think that plays a role in kind of the
positioning that you're seeing in the
futures market.
So Katie anchors ETFIQ. Sure do.
Uh with Eric Balchuna, superstar, and my
best friend, Scarlett Fu.
Yeah, it used to be you, but
I was on it. Yeah. Uh so, and but ETP I
imagine is exchangeraded product,
correct?
Is that right?
Y
Okay. I just want to get that uh acronym
clear. In terms of the VIX, we're
looking at a 14 handle right now. How
much lower can it possibly go? I mean,
what what's the
single digits?
Yeah.
What's the upside of shorting the VIX?
So, a couple things stand out to me kind
of with VIX being where it is. First is
that lowvall is not just an equity
specific phenomenon. We're seeing it
across asset classes. And actually, for
the first time since 2021, we're seeing
short-term implied volatility levels
across all asset classes trade below
their long-term average. So, very much
this tells me it's it's macroeconomic
driven. It's the fact that right now
economic data as we saw today with um
GDP with personal consumption it's still
holding up and then at the same time the
Fed is about to cut inflation's in
check. So current macro conditions are
positive which is why short-term
volatility is so low and it's so low
across asset classes. But if you look
longer term longer out on the curve we
are seeing more uh premium being priced
in for longer dated options. I think
that reflecting the fact that the
outlook still is more uncertain kind of
in the next year.
Okay. So, to dumb it down, short term,
it seems like everyone is feeling kind
of fine. You stretch out that timeline,
things start to get maybe a little bit
uh more nerve-wracking. Is that true
across asset classes or do you see any
divergences there?
Uh it's it's pretty consistent across
asset classes. So in equities you could
look at the VIX index which is one month
expected volatility for the S&P versus
VIX one-year index which is our you know
equivalent measure for one-year implied
volatility. We have similar uh measures
for uh credit for rates that kind of
give you a sense of term structure and
we're seeing that steep term structure
really consistent across asset classes
right now.
How does it look here in the US compared
to overseas? I mean, a lot of investors
aren't going to even look overseas, but
I imagine if you're this deep into it,
then you're looking globally.
And globally, it's it's very much the
same story like one month imply
volatility, whether you're looking at
Euro stocks, whether you're looking at,
you know, the MSCI indices, um, very
much toward the lows of the year. Um the
other thing I would say you know
comparing now versus say even a month
ago when VIX was at 15 the difference is
that back then VIX at 15 was still
embedding quite a bit of risk aversion
whereas this time around actually not so
much in the near term. So a month ago
VIX at 15 S&P
five right so it was like 10 point
difference and that premium was at a
one-year high now VIX at 15 realized
volatility at 12 where actually that
premium is below average. So people are
very confident or very optimistic of the
near-term like immediate outlook whereas
it's really the longer term that we're
seeing kind of a little bit more premium
versus premium
even in the near term it just boggles
the mind right uh we are just about to
see it feels like tariffs hit inflation
has turned around and is going the wrong
way no one knows exactly what the Fed's
going to do in September and maybe Lisa
Cook is actually fired and not going to
vote like there's so much
right craziness that the market is
reacting not at all to.
Well, that's the thing, right? We had
Nvidia earnings. Sure, we got past that
hurdle. We have PCE tomorrow. We have a
jobs report next Friday. Then we have a
very politicized Fed meeting coming up
on the 17th. It is a little bit
unintuitive that short-term volatility
isn't reflecting any of that.
So, I I do think, you know, a lot of the
the factors you talked about like
tariffs and inflation, the way that
people have been positioning and playing
for that, it's not at the macro index
level, right? It's at the single stock.
It's at the sector level. So, how are
tariffs impacting different industries?
How is AI disrupting different
industries? Even within tech, you're
seeing rotation hardware versus
software. So, a lot of movement below
the index surface, but because
correlation is so low. In fact, um
correlation is at historic lows right
now. Both realized correlation as well
as forward-looking expected correlation
at all-time lows. So, high dispersion,
low correlation helping to suppress
index level volatility. And the way that
people are really assessing these macro
factors is through stock selection,
sector rotation.
Well, just before we let you go, bring
us into that dispersion. What looks
extreme on either ends of the spectrum?
Just the levels of dispersion that we're
seeing right now in the market
in the different sectors. Like is there
any one sector that sticks out uh
relative to another sector as one looks
very volatile right now and is braced
for volatility versus maybe smooth
sailing? I I think at the the sector
level it's still it's the same story
like a lot of the sectors are seeing
quite a bit of high um correlation. If
you look at our correlation index core
1M which is the expected one month
implied correlation for the S&P 500
that's at historic lower today than it
was in 2017 when the VIX was at nine.
All right Mandy, great to have you in
here with us. Thanks so much for joining
us. CBO's Mandy Sue. Coming up, Fed
Governor Lisa Cook files a lawsuit
challenging President Trump's attempt to
fire her. That kicks off really an
unprecedented
uh fight, an historic fight.
I knew I knew you were going to bring
that up.
I don't like it when you say ah
historic.
I know you don't
because it's like it's like a vowel at
the gram anhistoric.
We're going to continue to uh follow.
It's unchartered territory.
Unchartered. Okay. This is Bloomberg.
The White House is responding to Fed
Governor Lisa Cook's lawsuit against
President Trump, saying the president
exercised his lawful authority in his
attempt to fire her for alleged mortgage
fraud. Joining us now with more context
is Elliot Stein, senior anigation uh
sorry, senior analyst of litigation um
here at Bloomberg Intelligence. So this
is I think it's so funny because this is
one of the most interesting stories out
there. It's not moving markets at all.
Not one iota. But uh putting that aside
um
it is unprecedented, right? We don't
know what cause really means uh in this
case.
That's exactly right. We've never seen a
president fire a Federal Reserve Board
governor. Um, the statute says that he
can fire Federal Reserve Board governors
for cause, but it doesn't say what cause
means and we don't have any court
rulings in this context with the Federal
Reserve, you know, helping us out. We do
have other statutes that say cause
usually means some sort of inefficiency
or neglect of duty or uh some sort of
malfeasants.
But we don't know if those are the terms
that are going to apply to Lisa Cook.
and we don't know if mere allegations
related to her mortgage applications
even rise to that level.
So, give us the timeline here because we
have a Federal Reserve meeting coming up
in September. That decision expected on
September 17th. She is a voting member
as the uh as a Fed governor. Will she be
able to actually do her job here? We
potentially may get a ruling pretty
quickly because she filed a TTRO, a
temporary restraining order that seeks
to block President Trump's letter from
having any effect. What's interesting is
she also named as defendants the Federal
Reserve Board and Jerome Powell because
she wants them not to effectuate the
letter. So, she got a good judge. We'll
probably get a hearing on her TRO
application within days. We may get a
ruling from that judge and that could
still be in place by the time the
September meeting rolls around. But in
my mind, the critical date is actually
February, not September. In September,
sees only one vote out of 12. You know,
I doubt it's going to have that much
sway. In February, the Federal Reserve
Board will be able to reappoint or block
the reappoint of the regional reserve
bank presidents who also rotate onto the
FOMC. And so if President Trump has a
more favorable balance without Cook on
the Federal Reserve Board, he can
influence the regional bank presidents
as well.
So, and I also wonder um about how
quickly the Supreme Court will hear
this, assuming she gets an injunction,
right? And this goes all the way to the
top. Um how quick have they been? They
can have it can be an emergency uh case.
Um what have we seen thus far in in this
court? Yeah, I think we could actually
uh get a Supreme Court ruling on sort of
these preliminary emergency issues
within a few months by year end. While
the
not by September 17th,
I doubt by September 17th, but again,
I'm not even sure that really is all
that important. I think more important
is that they have clarity on whether she
continues to serve before February. Um,
but we did see uh in other cases where
President Trump has fired commissioners
of federal agencies like the NLRB and
the Merit Systems Protection Board. You
know, he fired them in February. In May,
the Supreme Court ruled on whether those
commissioners would continue to serve or
not.
And we don't have much time left, but I
want to go back to the regional banks
because Bloomberg News did report this
week that the Trump administration is
reviewing options there on how they
could exert more influence. I mean, what
are the some of the potentials here?
Yeah, I mean it's going to be
fascinating. You know, this is like
looking ahead many steps, but it seems
like to me that's probably what
President Trump is trying to do here
because just controlling the Federal
Reserve Board isn't as important to him
in terms of monetary policy is
controlling the FOMC. And because you
have regional bank presidents who serve
on the FOMC, in my mind, that's what
he's trying to control.
Right. He needs Cook and Waller though
to go along with it.
Uh Cook and Bowman. Yeah, exactly.
Sorry. Cook and Bowman. Yeah. I I mean
sorry Waller and Bowman. We got there.
We got there.
Elliot, it is not Friday yet, but it
feels like
feels like we're almost there.
Certainly feels like something, doesn't
it?
Elliot Stein there Bloomberg
Intelligence talking about really f a
fascinating case, but once again, uh you
know, we haven't seen the 10-year move.
Um uh we're looking right now at 422 on
the 10-year. So, uh doesn't look like
the bond vigilantes care at all yet.
That could be the key word.
Absolutely.
Have you seen that John Kuzzac movie?
No.
Okay. Uh let's get a check on what's
going on in the markets right now. Um
Intel, sorry, Nvidia uh stock is down
and that's holding the S&P back from
bigger gains. You can see Nvidia off now
onetenth of 1%. Tomorrow we're hear from
Sarah Hunt, chief market strategist at
Alpine Sax and Woods.