AI Boom: Bigger Infrastructure, Bigger Fortunes

SPEAKER_1 (0:02)

Bloomberg Audio Studios, podcasts, radio, news. Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco.

Ed Ludlow (0:22)

This is Bloomberg Tech, coming up, another sign that AI spending spree isn't slowing down with Hon Hai beating revenue expectations as the infrastructure boom rolls on. Plus, the AI boom leads to a billionaire boom. Tech's richest are now worth a combined $4.6 trillion.

And we dive into how Apple's new CEO is putting his own stamp on the company and making design a much bigger priority. Good morning, welcome to a new week. The NASDAQ 100 is building on the record close. It's set Friday, up about half a percentage point of the session, a little bit of underperformance in chips. There's a lot going on in financial markets. I don't know, it feels kind of weird. It's like summer arrived on a Monday in October. We will get to more of that throughout the hour. Let's get to our top stories. The AI spending boom isn't slowing down. Nvidia partner Hon Hai, the publicly traded name better known as Foxconn, beat sales estimates and revenue jumping 47%.

It's demand for AI servers surges. Bloomberg Senior Tech Editor Mike Sheppard is with us.

This is the infrastructure story continuing to have momentum.

Mike Sheppard (1:27)

Yeah, Ed, every week we're looking for another sign that the AI build out will continue unabated. It's something that investors and Silicon Valley leaders are counting on really on a week by week basis. And last week we saw Micron Technology indicating that, look, our sales are going to be better than expected in the coming quarters. And this time around we're seeing this from a key NVIDIA partner that demand for the service that they make is stronger than expected. And this comes as we're seeing some headwinds for the sector. There's increased concern over the amount of debt that a lot of the hyperscalers and other companies are taking on to ensure that construction of these data centers continues to pace. There's also concern we have seen in more recent weeks about the idea of pacing AI development and what that could mean potentially for the construction of all these facilities.

But so far we are not seeing any sign of that kind of slowdown and look for Hon Hai, this is pretty key because they also are known for making iPhones and smartphones and a lot of other gear, but the margins on that are much lower.

The margins for those AI servers containing NVIDIA's chips are much higher and much more lucrative for them. So this is a key moment not only for the AI trade broadly, but for Hon Hai specifically.

Ed Ludlow (2:43)

There's another story out of Asia that I want to get to, which is Qualcomm agreeing to license patents, which underpin Huawei's logic folding chip making technique. This is technical, Shep, but it seems like an important story to me.

Mike Sheppard (2:56)

Well, Ed, I love digging into the technical stuff with you and especially this one because it was only back in May that we saw Huawei unveil this new idea of logic folding, that it would be able to pack more transistors onto a chip and somehow optimize data transmission speeds. And this was a way for them of making a step change in function that would allow them to gain ground on the US in the advantage when it comes to chip making and do so using domestic resources rather than having to rely on outside semiconductor manufacturing equipment, which has been subject to all those export restrictions imposed by the US and other limits that the US has imposed on access for China to advanced technology. But the question hanging over it at the time was, well, will it work? Will it gain purchase? Will it actually gain traction? And we're seeing that with this patent licensing agreement from Qualcomm that, yes, perhaps there is appetite for it, not only in China, but perhaps outside China as well. We don't know the financial terms, Ed, but this is certainly a signal and a vindication for Huawei that its bet on this logic folding technique could actually pay off.

Ed Ludlow (4:07)

Bloomberg's Mike Sheppard in Washington, DC. Thank you very much. Let's go back to financial markets. So the NASDAQ 100 is extending its record run this morning. Chip stocks taking a bit of a breather. Oil is falling. Yields remain elevated. And investors are asking how much further this AI-driven rally can run. Perfect conversation coming up. Carol Schleif, BMO Chief Market Strategist.

All of the above, I guess, cross your desk at the moment. But is that a fair summation of where the market is right now?