Nvidia’s Big Test as AI Chip Race Heats Up

**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, Nvidia leading the Magnificent 7 higher and rebounding ahead of its earnings report tomorrow. Nvidia's chip maker set to snap its 7 session losing streak. Plus, Apple announces new Mac mini and Mac Studio desktop computers with major processor upgrades. And OpenAI says its new Jalapeno chips perform better than Nvidia's current lineup. We'll discuss with the company's hardware VP, Richard Ho.
We have one and a half sessions to go until Nvidia's quarterly earnings report. And the stock is rebounding. It's off session highs, but after seven straight days of losses, it's longest losing streak since September 2022 The situation is the stock year to date is matching the performance of the S&P 500 From a forward price to earnings perspective, much more in line with the S&P 500, and it's likely to double both revenue and adjusted earnings. Let's get out to Bloomberg Tech equities reporter, Carmen Reinecke, to set us up. We've been tracking Nvidia on a daily cadence for lots of reasons. What are you seeing in the markets this morning?

**Carmen Reinecke** (1:22)
So we're seeing a rebound here. As you just said, this snapped a seven-day losing streak for the stock. It's worst since September 2022 So that's before the whole AI boom took off. And that route wiped more than $400 billion in market value from the stock. So seeing a nice rebound today, it's leading the S&P 500 higher in terms of points. It's leading the Mag 7, leading other chip stocks higher. So going into earnings tomorrow, it's really interesting to see this kind of setup.
Earnings hasn't been a positive catalyst for Nvidia shares for a few quarters now. The last four out of five quarterly earnings report, the stock has actually fallen after results, even though the company continues to beat on revenue and give really solid forward guidances. So there are a few key things investors are really looking at in this report. They want to know more about sort of the circular financing woes that Nvidia has given even more money sort of to this ecosystem. They want to hear about gross margins, if those can continue to stay high, especially given higher input costs. And then they want to hear what Jensen has to say. I mean, he is still considered sort of the king, the Pope of AI and what he says about future forward demand is really important.

**Ed Ludlow** (2:36)
Carmen, just very quickly, I mentioned that the stock is much more in line now with the S&P 500 on a relative year to date performance basis, but also on a valuations perspective. Very quickly, talk about that.

**Carmen Reinecke** (2:48)
Yeah, the valuation is really interesting. It's come in a lot. It's about 18, 19 times forward earnings. And that's incredible because the growth is so large here. What we're seeing or what I'm hearing from investors is some of that is because this type of growth is expected to start slowing.
So, even though growth is going to continue, it's not going to be 100% year over year over year going forward into the future. So, investors are starting to bake in some of the slowing revenue growth here and look to other places of the AI infrastructure trade that are just more exciting at the moment, like memory stocks, which we've seen be very, very volatile lately.

**Ed Ludlow** (3:28)
Bloomberg's Carmen Reineke with the Nvidia preview. Thank you very much. Breaking news, crossing the Bloomberg terminal. Canadian Prime Minister Mark Carney matched dollar for dollar the new tariffs imposed by President Trump and announced support programs for Canadian businesses hurt by the escalating trade war. Canada will double its existing counter tariffs on US steel and aluminum products to 50% and then apply new tariffs to other US goods such as furniture, clothing and electronics. We're seeing those headlines cross the Bloomberg right now, looking for more market reaction. If any comes, we'll bring it to you. Let's stay with Nvidia. Our next guest believes that with its earnings, Nvidia needs to show the markets how it's going to afford the investments it's made in the AI sector. Sara Arahi, Franklin Templeton, portfolio manager, but also partner with Franklin Venture, both public and private market perspective joins us now.
Whatever Nvidia does numbers wise, beat, raise, what is it that they need to say or do to change sentiment right now?

**Sara Arahi** (4:28)
Yeah, thank you again for having me here, Ed. You know, as Carmen just said, they're doubling earnings here every quarter, right? You've got a really acceleration again this quarter, especially versus last year, and still the stock is trading in 18, 19 times, 16 times, 28 earnings. They're going to have to talk about these investments. That circular financing narrative is out there every week. Every day, you wake up and there's a new, every day, there's, you know, that calm team at Nvidia is the hardest working team you've seen in the market today.