Good morning. This is Bloomberg Daybreak
Europe. Happy Thursday. I'm Tom McKenzie
in London. These are the stories that
set your agenda. Nvidia earnings match
forecasts, but blockbuster sales growth
decelerates after 2 years of booming AI
spend. Shares in the world's most
valuable company slip after hours.
Bloomberg learns Mexico plans to raise
tariffs on Chinese imports after months
of pressure from President Trump. Plus,
Bahu's battle. France's prime minister
warns against new elections, saying he
plans to negotiate directly with
lawmakers over next month's confidence
vote.
[Music]
[Applause]
So, Nvidia earnings coming through and
that is reflecting across the markets.
Of course, this is what investors have
been geared up for. There are
expectations that you could see a move
of around 6% either side for the S&P
500. It looks unlikely we're going to
get that later today, of course, when US
market trading reopens. There's a little
bit of pressure on Nvidia after hours.
As we mentioned, European stock futures
though pointed to modest gains of a
tenth of a percent after essentially a
flat close yesterday for European
stocks. Here in the UK, footy 100
futures pointed to gains of 16 points.
S&P futures then digesting the Nvidia
earnings pointing just a little lower,
just by a tenth of a percent, but within
the context that you had another record
high for the S&P 500 yesterday, up
around 30% right now since the lows of
the year on April the 8th. NASDAQ 100
futures also of course with that read
across from Nvidia currently pointing
low just by 3/10en of a percent. So no
major shutters through these equity
markets a little softer again in the
context of those record highs. Let's
flip the board and have a look cross
asset. Then you've seen those moves into
the front end in terms of US treasuries
with the yields down and the selloff on
the long end that is moderated to some
extent in the session today 361 right
now on the front end. That's where the
attention should be as well as the
30-year where the sell-off continues of
course, but again less pronounced in
today's session. Euro dollar at 116.
Three straight days of softness for the
dollar. We'll see how that story
transpires of course with continued
focus on the Fed and pressure and
concerns about independence. $67 a
barrel on Brent. Just currently down
9/10 of a percent. So a heavier drop in
fact uh in terms of the selling pressure
on Brent. We got further criticism from
the Trump administration aimed at India
and its purchases of Russian oil. Gold a
little softer as well down 2/10en of a
percent. Let's get to Nvidia though
because it has reported a 56% jump in
quarterly sales but the shares as we've
mentioned have fallen in after hours
trading on the back of a tepid revenue
forecast. The world's most valuable
company still facing difficulties of
course selling into China and has
excluded sales of its H20 chip from its
forecast. The CEO, Jensen Hang, says
he's lobbying to be allowed to sell its
most powerful chips into China.
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 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.
Okay, Jensen Juan speaking there of
course on the back of those earnings.
Let's bring in our Asia Tech reporter
Annabelle Drillers now from Hong Kong.
Annabelle's been working through the
numbers through this morning. Annabelle,
what stood out to you then from the
numbers we got from Nvidia.
Yeah, I think that the China theme was
really interesting and how that also
played into the numbers. But just
broadly, I mean, I think if anything
stands out, it's also that that Nvidia
can have pretty good results really. I
mean, basically a slight beat on on
revenue for the second quarter, the
third quarter projection, pretty much in
line with the average estimate on Wall
Street, but that's not really enough to
impress investors. And and thinking
about that forecast, for instance, I
mean, Nvidia is looking for revenue of
around $54 billion for the third fiscal
quarter. The loftiest of projections
have been for 60 billion. And so that of
course played into sentiment. We saw the
stock sliding for instance around three
up to 4% in late trade. Not as much as
perhaps options had been pricing because
it was looking for as much of a 6%
slump. But still though the stock under
pressure and again a lot of that coming
back down to to the the question mark of
what happens with the Chinese market in
particular. Yes, it's it's making up
less revenue. I think 13% in the latest
reading, but still it's it's an
important market for the company and a
big sort of unknown as to how they
proceed from here.
And you talked about the China question
and H20 of course is the primary chip
for now at least when it comes to Nvidia
and its China sales and yet they have
excluded them from from their forecasts
Annabelle. What what is the rationale
for that? What does it tell us? What
does it signal?
I guess it's just sort of the lack of
clarity. I mean it's not just a lack of
clarity on the US side and and for
instance I mean Ed Lello our US tech
correspondent had an interview with the
CFO of Nvidia Colet Crest for instance
after talking about this 15% commission
that the US government was looking to
place on Nvidia chips that it sold or
H20 chips that it sold to the mainland
market. Colet Crest told us look we
haven't actually got any of the details
on that just yet. The talks are still in
the early stages. It could in fact pose
legal risk. So right now they're not
even looking at at paying any sort of
commission to the US government. So
that's one side. There's also the China
demand equation and how much they really
want as well. And what's clear is that
is that Nvidia still sees a big
opportunity in the mainland market.
Again going back to Colet Crest, but in
the earnings call she was talking about
they could be shipping up to $5 billion
of H20 chips this quarter alone, the
current quarter if uh geopolitical risk
start to subside. I think that again
goes really back to the China side of
the equation. What else was interesting
as well was Jensen Huang and you had
that in that soundbar at the top, but
he's saying that China could represent a
$50 billion opportunity for for the
company as well. It does depend on what
they can actually sell. And yes, you've
got that H20 chip right now that's from
the Hopper series. He's talking about
maybe they could be allowed to sell some
sort of newer Blackwell design and
that's something that even President
Trump himself has has hinted at in
social media. Whether we get any further
progress on that from the US side is a
big question mark. And again going back
to China, what does Beijing want? And
that drive for self-reliancy or
self-sufficiency is is really not going
away.
Yeah, no signs of that abating.
Bloomberg's Asia Tech reporter Annabelle
Drillers going through the key lines of
course and the implications of the
Nvidia earnings. Annabelle, thank you.
Let's get to the market reaction then
and see how Nvidia is tying into all of
this. Bloomberg's Paul Dobson, of
course, our executive editor for Asia
Markets standing by. Paul, how do you
expect the Nvidia numbers to work
through the broader markets?
Uh good morning Tom. So far it looks
like they barely caused a ripple which
is quite uh surprising given just how
much expectation the market had been
placing on these figures for uh for the
week. Uh and as you said the option
market was pricing in potential
volatility. We did see the Nvidia uh
stock trade lower after hours. Um but
the the drop that we saw in the US uh
futures markets for for both the uh
NASDAQ and the S&P weren't that
pronounced to begin with and they've
largely paired since then. So there's
still that sense that there's plenty of
momentum left in the market that's put
us on this really uh long rally that
we've seen since the since that bottom
in April. I feel like you know as people
reassess uh the Nvidia results as Annab
Annabelle was saying there's plenty uh
to be optimistic about within that as
well and the big question mark is that
China revenue which could uh rescue
things could take it ahead of its
forecast and and all the rest of it as
well. So um market seem to have just uh
basically uh taken it as in line maybe
with analyst estimates and uh at least
the Asia interpretation is we can move
on to other things.
Well, talking of other things, Paul,
what else is standing out to you this
morning in the Asian session? I saw the
lackluster demand for for J for Japanese
debt again. So, question marks in in
terms of how that story evolves and the
pressure on the BOJ. Is that the primary
focus or is there something else that's
drawing your eye in the in the Asian
session today?
That did certainly grab our attention uh
towards the middle of the morning
because it was a bit unexpected. While
we've seen plenty of jitters over demand
for Japanese longerterm bonds, this the
sort of short-term uh supply has been
generally pretty wellreceived. This time
though, uh we had pretty weak demand for
the 2-year notes. Uh much worse than
we've seen for several years, in fact.
Uh which betrays this idea that, you
know, investors are expecting now the
BOJ is going to be raising interest
rates sometime soon. uh might not be uh
September, might be October, might be
December, but at some point we're going
to get one of those hikes. And the way
that they're talking at the moment, it's
not going to be the final hike either.
And so the market is reluctant to take
down uh bonds at this kind of a yield
level in volume when the risk is that,
you know, the price will uh drop again
over time. So uh that was an interesting
signal that was sent from the market. It
didn't have huge repercussions just yet.
we didn't see, you know, the yen
rallying particularly and all things
being equal, you might expect that to be
more supportive for the Japanese
currency. But yeah, you know, this is
definitely something that is playing on
people's minds. And and I think what's
really important is whether that then
again rep has repercussions for the back
end of the yield curve where we've got
this really terrific story out there
today uh talking about how international
investors looking at really juicy yields
that have been on offer over there,
particularly if you take currency
hedging into uh uh consideration. really
thought that this was a wonderful
winning moment and have been burned
repeatedly and seen all of their
investments kind of uh or any profits
from those investments uh disappear and
so that tells you that the Japanese bond
market remains under a good deal of
pressure.
Okay, Paul Dobson, excellent. Thank you.
In terms of the market reaction,
Bloomberg's executive editor for Asia
markets, talking of bonds, French debt
of course has been under pressure.
French Prime Minister France Bahu says
he will negotiate directly with
lawmakers next week and has warned
against new elections as he battles to
stop France's parliament from forcing
him to resign. Bhu says serious
discussions must now begin over next
month's confidence vote.
There are 12 days left and 12 days is a
lot of talk. I'd say something simple.
We haven't opened negotiations because
there is a question to ask before
negotiations. It's whether we agree on
the seriousness and urgency of the
situation. And if we agree on the
seriousness and urgency, then we open
negotiations. We will still have a month
before the presentation of the budget.
We have plenty of time to look at
things. And I said I was ready to
examine measure by measure, as they say,
decision by decision everything we have
announced.
Well, let's bring in Bloomberg's
Caroline Corner standing by of course
for the latest. Karolene, is this a
prime minister who is trying to ensure
that his ouster is not a feta compliers
in those 12 days ahead?
Every day we seem to have a new charm
offensive from the Prime Minister Franu.
this time to the general public opinion
because as you know he's the least
popular prime minister since President M
was elected in 2017. Uh and clearly he
really tried to say that again the debt
issue is the most important of all and
that he is ready to discuss with every
single opposition party. So he's invited
all the opposition parties next week for
a round of talks before this confidence
vote the following week to try and
convince them that the debt issue is the
most important of all. And he said he's
open again to discuss every single
measure including scrapping the two bank
holidays, including the freezing of
welfare and pensions, including perhaps
a new tax on the highest earners. We'll
see how the discussions go on next week.
At the moment the socialists their only
hope of survival for Franceu have closed
the door saying you cannot really
dissociate the confident vote and the
actual measures within the budget and
more and more politicians within
Macron's own camp including for example
the former prime minister Edoar Philip
are actually saying in the media over
the past few days that perhaps new snap
legislative elections is the only way
out even though Franceu said last night
he doesn't believe that these new snap
legislative elections would create any
more stability for France.
Okay. Yeah. The argument from some then
that you need to do something to break
the deadlock in the French parliamentary
system right now. What what is next then
Carolene? Now the question of course is
are these new possible legislative
elections a good idea for the socialists
for example because the alliance between
the moderate leftwing the socialist and
the far-left has been broken. So if the
socialists have to go back to the polls
then they will have to be alone. Some of
them might be afraid of losing their
seats. Is that what they're going to
think about over the next few days? This
is perhaps one of the bet of Prime
Minister Franu. Meanwhile, he's going to
speak to the Medaf business lobby uh
this afternoon. Of course, the business
community is very concerned about this
new political uncertainty in France.
They're really exasperated with
everything that's been going on over the
past year. And you see uh the pressure
uh of course on the markets even though
we had a little rebound on the CAC 40
yesterday plus 0.4% 4% after two days of
losses. We still see obviously the
ongoing pressure on a French bond. The
spread between the French and the German
tennial has reached actually more than
80 basis points yesterday and it's
getting very very very tight with uh
Italy. You can see behind me it's at
just five basis points with Italy at the
moment. So of course uh executives are
very concerned about this uncertainty.
They need clarity. They need a budget
through. they need a new prime minister
if that's the way to go really quickly.
Of course, President Mron is the only
one who can actually call a new snap
legislative elections or even decide to
resign. Today is in Muldova with the
chancellor mess. So, we'll see over the
next few days how these negotiations are
going.
Okay, Bloomberg's Caroline Gon in Paris.
Caroline, thank you. Coming up, Mexico
plans to increase tariffs on China after
pressure from the US. We'll bring the
details next. This is Bloomberg.
A Bloomberg scoop. Right now, we have
learned that the Mexican government
plans to increase tariffs on China as
part of its budget proposal next month.
The move would protect the nation's
businesses from cheap imports and
satisfy a longstanding demand of US
President Donald Trump. Bloom's Jill
Disus is in Hong Kong with the details.
How significant then Jill is this move
both politically and economically for
Mexico.
Yes, good morning Tom. I think it's I
mean very significant, right? So we're
still obviously waiting on the details.
Um, this hasn't been entirely finalized
according to people familiar with the
matter, but what this would ultimately
aim to do is target imports specifically
of textiles and also automobiles, which
I think is pretty uh key considering
that uh Mexico has really become a top
destination for uh Chinese cars I
believe overtaking uh Russia um this
year. So um you know obviously really
really significant there. um I mean for
the Mexican government gives them an
opportunity to potentially shore up um
you know sort of domestic uh production
in in some of these industries but I do
think that you can't really understate
the US component of this and ultimately
the Trump factor right I mean this is
something that uh the Trump
administration has um been pressuring uh
Mexico to pursue for quite some time now
um their big worry according to the
president himself really is that uh
those um cheap Chinese goods that are
then coming into Mexico then eventually
make their way over the border. Um so
that's part of the pressure campaign
here and also I'd say is fairly akin to
um you know similar tactics that we've
seen the US pursue elsewhere obviously
you know really really trying to get
some of those key economic allies um to
uh you know sort of pursue some types of
tariffs or otherwise um you know in some
cases sanctions even against China. So I
think you know again obviously um still
a lot to come still a lot that we have
to see finalized within this budget plan
but um yeah I I think uh it is very
interesting one
and talking of allies and alliances we
we've heard from state media in both
countries that North Korean leader Kim
Jong-un will join Putin at a military
parade in Beijing next week. How
significant is that through the prism of
geopolitics?
Yes, I think you know very historic. I
mean, first of all, to set the stage for
you, Tom. This is uh, you know, really
critical uh military parade for China.
Um, for them, it's commemorating the
80th anniversary of the end of World War
II. There's a lot of leaders that are
coming to town. I think most notably
Vladimir Putin, of course. Uh, and now
you've got Kim Jong-un also joining. Uh,
I believe this is his first
international trip since 2023, uh, when
he went to Russia. He also hasn't been
in China since January 2019. So, that's
before the coronavirus pandemic. So, a
really significant overseas trip for Kim
as well. I mean, you know, this
obviously gives uh, you know, North
Korea an opportunity to bolster its
relationship with China, one of its
major backers. Um, and it puts these
three men in particular in the same in
the same room. So, I think uh, you know,
and there's there's other leaders going
as well from Indonesia, Vietnam,
Pakistan, um, potentially opportunities
there for Kim to meet up with other
world leaders. So, really, really big
one going into next week.
Okay, Bloom Bloomberg's a Jill Disus.
Thank you. With the latest, of course,
on the scoop around Mexico and North
Korea's leader potentially heading to
Beijing. Coming up, Peter Navaro calls
Ukraine's Ukraine Mod's war over India's
purchases of Russian oil. We'll bring
you our interview with the White House
trade adviser. Next, this is Bloomberg.
White House trade advisor Peter Navaru
has cranked up pressure on India once
again to halt its purchases of Russian
oil. Repeating accusations that New
Delhi is funding the Kremlin's campaign
in Ukraine on a day where we've seen
more Russian strikes reported including
hitting Kev itself. Navaro spoke to
Bloomberg's Joe Matthew.
Are we actually in talks with India
right now? Is there a potential for a
deal to change that number?
Look, it's it's real easy that India can
get 25% off tomorrow if it stops buying
uh Russian oil and and helping to feed
the war machine.
Not sending that signal.
They're not. And look, I it here's the
thing. I'm I'm puzzled, okay? Because
Mod is a great leader. These people are
are This is a mature democracy with
intelligent people running it. and they
look us bald-faced in the eye on on the
tariff part and say we don't have the
highest tariffs in the world when in
fact they do. There's no dispute about
that if you look at the numbers and then
they say uh we're not we're not going to
stop buying Russian oil. Now what what
does that mean? I mean we've talked
about this but it's worth talking with
your viewers again. When India buys
Russian oil at a discount and then
Indian refiners in partnership in India
with Russian refiners
make that and sell it at a premium to
the rest of the world. Right? Russia
uses the money it gets
to fund its war machine, kill more
Ukrainians. And then the next thing that
happens of course is Ukraine comes to us
and Europe and says give us some more
money.
So we everybody in America loses because
of what India is doing. The con
consumers and businesses and everything
lose and workers lose because India's
high tariffs cost us jobs and factories
and income and higher wages. And then
the taxpayers lose because we got to
fund Mod's war. Okay. The the the road
to peace runs at least partly right
through New Delhi I mean Modi's war
because the road to peace runs in part
through New Delhi. I mean that's a lot
of money.
It's a lot of money.
There are some who say that we're we're
losing leverage with China by
eliminating
the the next biggest economic
alternative.
You know, I'm so tired of these these
national security strategies being too
cute by half. The reality is you got to
stop India and China from buying Russian
oil. You do that tomorrow when the war
is over.
Okay, the war is over. If if if
everybody including Europe, this is like
Europe's still buying Russia oil, which
is crazy. Okay, if people just stop
buying Russia oil,
then it's only a matter of time before
Putin doesn't have the money to fund
that war. So Modi's a big part of that.
It's it's it's a million and a half
barrels of oil a day. That buys a lot of
lot of drones and bombs to kill
Ukrainians. Okay. A lot. Okay. So what's
troubling to me, Joe, is that the
Indians are so arrogant about this. They
say, "Oh, we don't have higher tariffs.
Oh, it's our sovereignty. We can buy oil
from anyone we want." India, you're the
biggest democracy in the world. Okay?
act like one. Side with the de
democracies, you're getting in bed with
the authoritarians.
White House trade advisor Peter Navaro
speaking to our team, of course, in the
US. Meanwhile, Bloomberg understands the
EU is weighing introducing secondary
sanctions in an effort to prevent third
countries from helping Russia circumvent
the blocks existing punitive measures
against Moscow. EU foreign ministers
will meet in Copenhagen later this week
and are expected to discuss the use of
the so-called anti-ircumvention tool
that was adopted in 2023 but has never
been used. NATO estimates uh its members
are on track to spend more than $1.5
trillion on defense just this year
alone. The alliance has agreed to a new
goal of course of 5% of GDP to be spent
on their armies by 2035. This includes 3
and a half% on defense and 1 and a half%
on related matters like infrastructure.
and the Dutch prime minister and his
cabinet have survived a no confidence
vote, easing concerns about a complete
collapse of the country's caretaker
government. The result means attention
now shifts to campaigning for snap
elections on October 29th for perhaps a
more permanent resolution to the
political crisis. Coming up, when 56%
growth is not enough, are investors
right to be concerned about a potential
slowdown in demand for AI data centers?
We get the details and reaction on
Nvidia's earnings next. This is
Bloomberg.
Europe. I'm Tom McKenzie in London.
These are the stories that set your
agenda. Nvidia earnings match forecasts,
but Blockbuster sales growth decelerates
after 2 years of booming AI spend.
Shares in the world's most valuable
company slip after hours. Bloomberg
learns that Mexico plans to raise
Bol's battle. France's prime minister
warns against new elections saying he
vote. We'll get some earnings right now.
In terms of Berno Ricard, the drinks
maker of course listed over in France.
In terms of fourth quarter organic
sales, it's a beat versus the estimates
for Berno Ricar. The redhead coming
through on sales coming in flat for the
fourth quarter. 0% in the fourth
quarter, but that is better than the
estimates of a contraction of 0.8%.
The company warning of weak sales due to
the exposure to the Chinese market,
which of course has been soft for
Bernard Ricar, and the impact on higher
US tariffs. The stock is down about 6%
year to date, but the top line is that
it is a beat in terms of fourth quarter
organic sales. We know the forecast is
in focus as well. Full year 2026 organic
next sales trends are improving in the
second half according to Perno Rickar.
Let's get to the broader markets right
now. We'll do more of a deep dive on
that drinks maker in the next couple of
minutes. But across the markets right
now the focus of course odds well is on
Nvidia and the earnings that came in
line with estimates and yet did
underscore that we have had a slowdown
in that growth and very high growth
indeed particularly when it comes to the
data centers and the AI accelerators but
that's moderated. The S&P 500 a little
softer after a fresh record high by the
end of the close yesterday. Today, US
futures down by a tenth of a percent.
NASDAQ 100 futures softer by three
times. Europe though pointed to modest
gains of a tenth of a percent on the
stocks 50 futures. Here in the UK, the
footy 100 looking to add 11 points.
Let's flip the board and have a look
across our set. You've seen a bit of a
moderation in terms of the selloff that
we've seen on the long end of the US
Treasury curve. That's moderated in the
session today. At the front end, the
2-year is currently yielding 361. It has
been bid in recent days. Of course, on
expectations, you got a cut in September
from the Fed. Euro dollar out 16. Brent
down 8/10 of a percent. Oil prices is
under pressure $67 a barrel. And gold
also a little softer, down 2/10 of a
percent. Let's get the analysis around
Nvidia right now because on the face of
it, Nvidia's 56% jump in quarterly sales
is pretty impressive stuff. But if you
compare it with previous quarters, as
you can see on the screen, it is the
lowest growth in revenue since the first
quarter of 2023. that has stoked some
concern that the AI boom is losing
steam. Let's bring in Rob Lee, senior
analyst at Bloomberg Intelligence for
the take on this. Rob, you've been
working through the numbers this
morning. What do Nvidia's numbers? What
do the earnings tell us about that AI
data center demand? That's a crucial
part of this story. Is is the boom
really over, Rob?
Okay. Um, great question. I think
fundamentally there are no uh major
concerns in the near term. the stock
price reaction. I mean from my
perspective I think it was a classic
textbook setup you know very high
expectations as we've seen many you know
many quarters running with Nvidia high
expectations quite punchy valuation um
you know people expecting them to
deliver another sort of beat and raise
and we didn't really see that I think
some of those expectations on the high
end were quite unrealistic to be honest
um but they were solid numbers that
don't really say a huge amount about the
near-term outlook for the business
however However, you know, this business
is substantially bigger than it was uh
18 months ago. So, the B there's a base
effect. I think that explains some of
the deceleration you're seeing top and
bottom line, but the business is still
growing strongly double digit and
they've got the market effectively uh to
themselves from a western perspective.
The big question marks though remain the
outlook for the Chinese business and
that remains highly uncertain. You know,
from my perspective, I think to to to be
blunt, the H20 is dead in the water. I
think the most interesting takeaway
finally from for me from the results was
it does appear that the company is
moving tact in terms of its China
strategy. There appears to be some
lobbying going on now with the US
administration to convince them and uh
to get permission to export the very
high-end blackwell chip into the China
market. Whether that is successful or
not remains to be seen.
Okay. So the H20 in your view is dead in
the water. What is is is this an Nvidia
as as they look to that Blackwell
product for the Chinese market? Is this
an Nvidia that ultimately can live
without the Chinese market if
essentially gets closed off to them?
Rob.
Okay. Well, I think if we look further
enough and as I've said many times in
our little chats, China's pursuing
self-sufficiency in tech. It's making
strong progress on upfront, but
obviously it's it's not there yet and
it's a multi-year strategy across the
board, not just AI. If you look in
telecoms equipment, so many different uh
subsectors of the industry um and
obviously going back to the earlier
export bands we saw on some of these
high-end um Nvidia chips. uh that's
forced the Chinese to again to refocus
on innovation to deliver and develop
more computationally efficient models uh
and also to try and ramp up the supply
of locally available chips chips uh from
the likes of Huawei and Camcon which is
a emerging high-profile uh Chinese tech
name you know in this part of the world.
So I think all of that uh is is sort of
the the the backdrop of what's going on
within the industry. And obviously from
an Nvidia point of view, there's still a
big market there to be had in the near-
term. There is a sizable revenue
opportunity. Um but obviously it's tied
up with the geopolitical environment. I
mean to state the obvious, China is the
main geopolitical rival to the states
and also an economic rival. So what
we've seen in recent headlines, we've
seen this again hoke koke in out in out
on the H20. Can they export? Can they
not? As I said, I think that's highly
unlikely from where we sit at the
moment. And it appears that the Chinese
uh government and authorities are
strongly encouraging for for obvious
reasons um given that from their
perspective, American suppliers like
Nvidia are unreliable or the
administration is unreliable. Therefore,
you've got to buy local. So I think um
as to whether Nvidia can tap into that
demand in the near term tied up with its
geopolitical uncertainty remains highly
uncertain.
Okay, Robbly smart analysis of course on
the earnings that have crossed from
Nvidia Bloomberg intelligence senior
analyst. Let's go more in terms of the
market take and bring in Maria Baitman,
head of equity research at State Street
Global Markets who has long advocated
having exposure to big tech in the US
and presumably that has paid off given
the performance. Maria, do you change
your thesis? Good morning. Do you change
your thesis at all on the back of a
slowdown in growth for AI accelerators?
growth from a very high level. Yes. But
a slow growth story that is starting to
decelerate now.
Yeah. Good morning Tom. Thanks for
having me. I mean our story has been for
a very very long time that there is
unparallel earnings growth in tech
sector and no other sector comes close
and again I mean we we haven't heard
anything in Nvidia earnings that kind of
dispute that this earnings growth sales
growth are 50 plus%
uh margins are 70 plus% there is no
other company that does it I mean you I
mean just before we came uh our segment
came in the primary card had results
right so we're talking about flat or
decelerating growth. So that's a that's
a competition. So I I I think the tech
story is still very strong and uh we
stand priorities of being very
constructive on the sector
and and and Maria we're showing a chart
right now the slowdown in that revenue
growth and as as we noted from a very
high level of course you've gone from
400% down to 56%. as you project out to
2026
and that revenue continues to decline,
the growth continues to come in at
slightly lower levels, if that is what
transpires, how do you reflect on that?
How do you position around that? Is this
just a ste is this how clean is this
story for you still into 2026?
No. Uh I mean absolutely I mean the the
previous commentator
Robert just mentioned that I mean it's
much much bigger company so you can't
really grow it 400% every years but
it's still there is very little
competition I think Nvidia has a market
for itself and it's growing very fast. I
mean I was really encouraged to hear
about like capex commitment for
hyperscalers
uh is still very very strong. So the
customers are there. They talk about
sovereign AI. They're talking about
finding customers for uh H20 chips at
like outside China. So I mean the market
is still very very strong. So we really
see that okay market needs Nvidia and
that's a great story.
There is the contention of course Maria
that you're very familiar with that
these tech stocks are priced to
perfection. How do you push back on
that?
I I I think that's no absolutely. So we
had that question for years now. So
they're so our answer is very well
rehearsed by now. So uh you have a set
of companies like Nvidia like tech
sector which have fantastic growth
forecasting fantastic sales forecasting
fantastic margins that are expensive and
you have another set of companies your
consumer companies your healthcare
companies your small caps what's not
that is really really cheap but they are
not growing they have I mean challenges
with maintaining their margins
maintaining the profits and you have to
choose you either buy high very
expensive quality or you buy cheap stuff
that is really not growing And again in
a world of uncertainty, in a world of
slower economic growth, you have to pay
high price for good companies that
generate growth. That has been our
status for the last two years. It's
still there.
Do you rotate out of big tech if we get
a Fed that is committed to cutting
rates?
Yeah, I think that's really really
important question. So when do you
rotate? So you rotate when you see
broadening of earnings. So broadening of
equity rally. outside tech, where are
the sector, other countries, other
regions when you see broader earnings
and yes um very kind of commit tech Fed
and other central bank committed to
easing um
easing monetary policy would be kind of
the first step there but you need it's
not just couple of cuts this year it's
really kind of continuous pass of lower
interest rates when low long end of the
yield curve comes down consistently and
then we're beginning to see improvement
in earnings. Yes, lower interest rates
will be definitely the first step in
this kind of protection process.
M before I let you go, I want to ask you
about what's happening in France and the
Kakaron underperforming again for the
second year in a row and of course the
political risk is is up front and
center. What do you do with French
stocks at this point?
So, so shortcut and sell and I I think
political risk really it's frustrating
to kind of run in in the spotlight but
really the story is earnings growth. I
mean we're talking about Nvidia with 50%
earnings growth or tech sector with like
I don't know 20% earnings growth in uh
in Q2. Uh for France we're talking about
contraction year earnings expectation in
kakarand is minus 10%. I mean that's
that's exactly what I'm talking about.
You have expensive companies expensive
sectors that uh that grow very very
fast. That's what you buy. You don't buy
cheap sectors cheap countries cheap
regions where earnings are falling.
That's exactly perfect example.
Okay, Maria Waitman, thank you for
taking the time hitting the nose on the
nose of course some of these key topics
and the view there uh on on tech versus
certainly what's happening in France.
Head of equity research at State Street
Global Markets. Thank you. Coming up,
the Ryan Air CEO tells us his hopes for
737 deliveries from Boeing over the
coming months. Someone else who's also
and always punchy of course in
conversations. We're going to bring you
more from our interview with Michael
Ori. That is next. This is Bloomberg.
Welcome back to Bloomberg Daybreak
Europe. Let's get back to the earnings
story right now because Perno Ricar
expects sales to decline in the
beginning of its next financial year as
the French spirits maker continues of
course to grapple with both trade
friction in China and the US. Let's
bring in Bloomberg's global business
reporter Jennifer Creery for the details
on this and the takeaways. What stood
out to you then Jennifer? You go through
the numbers. They dropped about 15
minutes ago. What really stands out to
you?
Yeah, so the headlines so far I think
are organic sales were fairly flat in
Q4. So that was better than what
analysts expected. Analysts were
expecting a 8% decline in Q4. Um if we
look at the full year, um I think it's
helpful to look at the regions. So
unsurprisingly there was a decline in
China. We know that demand has been
softer there, but also there's the kind
of lingering impact of those EU China
tariffs uh and also the removal of dup
sales of course really impacting uh
companies like Perno. Um but also
there's some weakness in the US as well
also unsurprising down 6%. I think
what's really interesting here is uh the
company has highlighted there's a
gradual improvement in the outlook for
global travel retail. So you know things
are looking up. It's not all a bad
picture for the company.
Okay. really interesting that you
highlight that drop in the US market of
of 6% given the the relative strength of
the consumer there but of course a
different set of uh data points to go on
uh versus what's happening in China.
What did what do they have to say about
you touched on this the tariff impact
what specifically did they have to say
about tariffs?
So on tariffs in this release they
they've highlighted the US as we
mentioned you know US is down 6%. U but
a lot of that tariff uncertainty is
impacting uh distributor inventory
levels at the year end. So no
distributor wants to have excess
inventory and that's really going to
bleed into 2026 particularly in Q1 and
hopefully the company says there'll be
some recovery waited towards the year
end.
Okay Jennifer thank you very much indeed
breaking down the numbers from Poor Rico
what it tells us as well about the
broader story around the consumer in
China in the US and the tariff impact as
well on global business Jennifer Curry
who covers global business for
Bloomberg. Talking of global business,
let's bring in our conversation with
Ryan Air CEO right now saying that
Boeing has accelerated 737 Max
deliveries with the carrier expecting to
receive 25 737s between August and
October. Michael sitting down with
Bloomberg's Guy Johnson.
I think we're reasonably optimistic. I
mean, I'm not sure the market is right,
but we've had constrained grow capacity
growth this year. So, Boeing have left
us short of aircraft. Certainly, the
summer trading has been strong. Forward
bookies are about 1% ahead of where they
were this time last year. Last year
fairs were down about 7%. It looks like
we'll get back most of that 7% fair
decline this year. Not all, but I'd be
reasonably hopeful we get most of it
back to
where's the market looking wrong?
I I think there's more growth available
in the marketplace.
So the market is is
fairs are recovering this year because
capacity is constrained. Uh but people
there's certainly strong demand for air
travel certainly from the UK to Europe.
Um if I had more aircraft, I think I'd
be able to deliver more growth. Okay,
you are going to get more aircraft.
You're going to get them from from
Boeing. You're getting 737s earlier than
anticipated. 25 of them beginning in
October rather than 6 months later.
Does that mean you increase your
passenger targets?
Uh, not in the UK. Uh, because
anywhere? Oh, yeah. Yeah. Yeah. I mean,
we're growing very strongly. I've
already
You're going to raise passenger numbers
because of those aircraft coming.
Exactly. I mean, we will grow with this
year we'll do about 26 million
passengers in the year to March 26. Next
year to year to summer 26, we'll grow to
about 215 million passengers. So,
is that brought forward? Is there any
bring forward?
No. Getting the aircraft?
Yeah. Yeah. Yeah. Yeah. No. I mean,
we're taking the aircraft early to, if
you like, to kind of to secure that
growth for next summer. The only area
where we can deploy those 25 extra
aircraft will be this Christmas. So,
there'll be a lot of additional flights
in most of our markets, including even
in the UK at Christmas, but other than
that, no, we'll sit them on the ground
until we get
you bringing them in early because
you're worried about tariffs.
We're bringing we were we're bringing
them in early because we're worried
about tariffs, but also we're worried
something else might go wrong with
Boeing. So get them in early. If Boeing,
it's a good sign that Boeing are able to
deliver these aircraft early. We want to
take them early. So at least we've
guaranteed we have them for summer.
So your confidence in Boeing is still
not that high. You're still worried that
that things could go wrong.
We should always be worried. You know,
the experience with Boeing, but I mean
the very fact that Boeing are able to
deliver these aircraft four or five
months early is a good sign that the
manufacturing process is going well. I
think Stephanie Pope would be doing a
good job in Seattle and the quality of
the aircraft we're getting the fuse
lines out of Witchah the aircraft out of
Seattle has immeasurably improved in the
last 12 18 months.
Scott Besson, US Treasury Secretary,
he's just been on television and he's
criticized Boeing for delivering a
massive buyback rather than investing in
R&D. Do you have some sympathy for that?
I don't really. I mean, if Scott Besson
wants you what he should be doing is
supporting Boeing. You know, one of the
reasons Boeing can't make more aircraft
is the FAA won't approve the increase in
the production rate from 38 to 42. Uh we
still need to get the Max 7 Max 10
certified. You know, so Scott Bessant
should let Secretary Transport Secretary
Duffy deal with Boeing, get the
increase, get the production rate up and
certify the Max 7 and Max 10.
Ryan Air CEO Michael speaking with
Bloomberg's Guy Johnson. Just reflecting
on the stock price performance for Ryan
Air. Year to date, you're seeing gains
of a little over 30% for Ryionaire. They
are confident they're going to get more
deliveries of Boeing and that they can
match that with the supply of demand
from their customers. That's a check on
Ryan's stock price then as we hear from
the CEO. Now, some of the stories making
the news this Thursday. Europe's new car
market, meanwhile, rising the most in 15
months in July as consumers shrugged off
concerns over the global economy.
According to the European Auto
Manufacturers Association, registrations
climbed 5.9% from a year earlier, driven
by sales of fully electric and hybrid
models, plug-in hybrids saw the biggest
jump with sales up 52%
on a year ago. The US State Department
moved to distance itself from reports
that at least three Americans with links
to President Trump traveled to Greenland
in a bid to get the territory to seed
from Denmark. On Wednesday, Denmark's
foreign minister summoned the acting US
ambassador after a report by Danish
public broadcaster DR said at least
three men with ties to Trump had
conducted covert influence operations in
Greenland. The Arctic Island is part of
the Kingdom of Denmark, but has its own
government. An AI startup Anthropic says
a hacker used its technology as part of
a widespread cyber crime scheme that's
impacted at least 17 organizations. The
hacker used Anthropic's agentic coding
tool. In a data theft and extortion
operation that affected victims across
government, healthcare, and emergency
services. In a report, the company said
the attack demonstrated quote a
concerning evolution in AI assisted
cyber crime in which a single user can
operate like an entire cyber criminal
team. Plenty more coming up. This is
Bloom.
When we have a a beat and stocks don't
go up or a hot stock like Nvidia doesn't
go up where it starts to roll over a
little bit, that suggests to a trader
and a technical analyst that everyone
who might own the stock already does.
But we're nowhere near there yet. The
reason the stock has recouped some of
those losses and I think will will uh
retain strength is because of that guide
for Q3. It was very strong. It's really
all about Q3 and it's because Blackwell
and Blackwell Ultra are starting to
ship. And if you know that story, you're
not selling this stock right now. They
were very good about signaling to the
market that the China hover tang could
continue and that has about a $5 billion
impact in the next quarter's numbers. So
having said that 54 billion represents a
very strong showing which means they
expect hyperscalers in other parts of
the world to pick up that slack.
some of our guests reacting to those
earnings from Nvidia and talking there
the last guest about the China overhang
and you have that expressed in terms of
the inventory buildup for Nvidia and
much of this will come down to the H20
that has not been able to ship despite
the fact that they have those export
licenses not being able to ship largely
into the Chinese market and you can see
the inventory buildout in the third
quarter for Nvidia and again much of
this will be age 20 and this is an
increase of almost $5 billion in terms
of inventory So that is the black mark
in terms of the report from Nvidia that
again came through with results that
came in line with estimates as well as
margins that improved. Let's have a look
at one of the key competitors in the
domestic market in China when it comes
to Nvidia and that is Capricorn. This is
a stock that has rallied and at one
point became the most valuable stock in
the domestic Chinese market. It has now
lost that crown but despite that is up
more than 120% year to date. This is a
company founded in 2019 and this is a
company that is private and yet has
result of course received that at least
jaw-bone support from the authorities in
Beijing as they try to get those
domestic players in terms of lang
language models and the labs to buy
domestic chips and Creon is a clear
beneficiary of that. Their chips don't
quite match Nvidia but they are
performing fairly well particularly when
it comes to the inference part of the AI
story. And it's worth noting as well
that in terms of what's happening with
the French debt story, we are just five
basis points. So, as we switch from tech
to the politics of France and the prime
minister saying that elections are not a
good idea, we're just about five basis
points away in terms of French 10-year
sovereign debt yields matching those of
Italian BTP. So, watch that story and
see how that evolves. Again, the prime
minister giving an interview yesterday
on French TV and saying he's going to be
working with lawmakers over the next 12
days, but the spread continues. Carmen
act warning of course that you could get
a 100 basis point spread over German
equivalents on September the 8th. Blue
terminal users can get all these charts.
Of course, the opening trade is up next.
Stay with us. This is Bloomberg.