Squawk Pod: Nvidia reports! And Berkshire hits $1T - 08/29/24 | Audio Only

bring in show music please hi I'm CNBC producer Katie Kramer today on pod the report heard around the world nvidia's much awaited results fell a little flat with investors the street has a pretty good fix on the business now those semiconductors may be tiny chips but they have a big hold on our Tech and our politics professor and former White House chips coordinator Ronnie chattergy explains both across memory and the most Advanced chips you're seeing the US government make investments all across the board you can't make your government policy dependent on a single company and I don't think we've done that here Plus open AI is aiming for a $100 billion valuation and cnbc's Emily Wilkins reports on a divisive proposal in our nation's capital a new plan from former president Trump would move 100,000 government employees away from DC and that could cost the state of Virginia about 28 billion according to one estimate it's Thursday August 29th squawk pod begins right now stand Becky by in 3 2 1 Q please good morning everybody Welcome to squawkbox right here on CNBC we're live from the NASDAQ Market site in Times Square I'm Becky quick along with Mike Santo and Robert Frank Joe and Andrew are off today we've got some huge news out there those big earnings reports from last night definitely having an impact on this morning's Market action as we mentioned sales for first up today on the podcast Nvidia the most important stock in the world the hype around the chipmaker's latest earnings report couldn't have been bigger Nvidia Nvidia earnings Nvidia Nvidia Nvidia and maybe such high expectations are hard to meet numbers are out by the way numbers are out Nvidia which provides artificial intelligence chips to the biggest technology companies in the world reported after the Bell on Wednesday 30 billion in sales versus an expected $28 billion but 122% growth year-over-year that continues a trend of absolutely massive growth the company announced a $50 billion stock buyback as well but and there's always a butt even though this company has been on an absolute rocket ship the beat wasn't as big as it has been indicating to some that the speed of nvidia's AI promise could be slowing and maybe the rapid moving adoption of this Brave new technology of AI could take a little longer than exuberant investors May hope the other side of the coin in all the excitement over Nvidia Salesforce surprises after the business software company reported a robust quarter as they continue to Tinker with AI offerings in the workplace and guys this was not what we anticipated we didn't think we'd be coming in here this morning talking about Salesforce and the impact it was having because Nvidia was expected to be the big mover if you look back over the last several quarters I think the move has been 12 or 13% to either the upside or the downside of those reports and actually sales for NVIDIA firming up here in the reaction so we'll get to the details of it but it seems as if it's sort of serving as a clearing event for the market we were fixated on it and uh and yeah Salesforce you know uh obviously a relief I think it's had a you know a little bit of a tough run relative to in in the stock so uh it all makes sense um the big picture story seems not to have changed I think that's what investors are are leaning back on this morning just in terms of demand where it's headed I mean we just sort of churned through so many scenarios with Nvidia leading into the numbers uh the stock traded between 99 and 130 in the last month there a lot of people had a chance to express positive or negative views on how this was going to come out and I think the other takeaway is the street has a pretty good fix on the business now it's not like massive multi-billion dollar Revenue beats or anything like that it's it's coming in closer to expectations but also that means you know the growth rates are decelerating coming down to 80% or something from triple digits before that Josh Brown I heard him talking yesterday maybe in 3:00 hour and he was making some really good points about how it's so unusual because when you see a company with that size market cap you don't expect big swings like that we won't know what this really is worth until we see what Apple does in the space and it might take two iterations so like the definitive answer of like consumer use of AI is probably a year to 18 months from now and then we'll have a really good idea of what this is worth or not worth maybe we're getting to that point a little bit more we will eventually yeah I mean look the the options market yesterday was handicapping a 10 to 11% immediate move now it did move as much as eight it's not like that was so far out of the realm um but that's just one of those whatif trades on either side because the stock has traded so wildly um but again it's it's moderating into a little bit more of a manageable growth Pace it still reminds you how concentrated this Market is I mean this is a stock that accounted for about a quarter of the gains in the S&P so far this year and I think a lot of people were Google search SE ing GPU GPU masks and process nodes last night to understand that manufacturing that manufacturing glitch that that they had to do to improve yields and and so there's just so much hyper Micro Focus on every detail because people are used to these expectations being surpassed when they announced and it's h it's happened and they did surpass once again yeah exactly but the guidance raise was impressive but a smaller margin relative to the street I mean I you just look at the street notes today and it was beat consensus fell short of expectations that's literally what a lot of the notes say because there's a sort of aggregated buide expectation that says yeah sure that's the consensus but we know they're going to be up here right yeah uh several tech stocks on the move this morning as we've been saying we will start with the details on Nvidia the anticipation of course was building all day all week the numbers from the AI chipmaker released around 4:20 p.m. yesterday afternoon so here are some of the highlights profits and sales both topping expectations as we said exceeding consensus Revenue grew by 122% topping $30 billion for the quarter data send Revenue up by 155% gross margins edged up slightly company also providing stronger than expected guidance for the current quarter and announced a $50 billion share buyback as well as for nvidia's Next Generation AI chip Blackwell the company expects several billion dollars in revenue from Blackwell in the fourth quarter CEO Jensen Wong on the call last night the data center worldwide in Full Steam to modernize the entire Computing stack with accelerated Computing and generative AI Hopper demand remains strong and the anticipation for blackw is incredible as you can see there the stock bouncing around when the numbers first hit the stock trailing off right now in negative territory but down only 1.6% year-to date Nvidia shares still up 150% the market cap dipping below 3 trillion briefly but I think right now we uh we're probably right back around that three trillion doll Mark um so you know huge numbers we're dealing with here and you know just for scaling purposes two years ago 26 or 27 billion in total annual revenue okay this year it's going to be $125 billion so 100 billion in incremental annual revenue over two years now that's of course going to decelerate but um you they're having you mentioned the production issues people going to have to adjust their timing for the Next Generation Um and maybe a little bit of margin pressure in the fourth quarter related to that that so that's just flowing through to the numbers but I think the takeaway is it's fine I mean some people were saying if it if it weren't for the blackw delay yeah you would be seeing numbers right in line you'd still be in that acceleration right possible exactly yeah right another big report getting overshadowed by Nvidia was Dow component Salesforce as we just talked about the stock is moving higher this morning second quarter results beat the estimates the company also raising its full-year profit Outlook CEO Mark benof Telling mad money last night the quarter and the Outlook is all still about AI we're just in an incredible new environment and I think that the technology is like nothing I've ever seen before and every company understands because they're using these new Ami AI models at home or personally but now we can really show how they're going to get value for their companies sales force also saying it CFO Amy Weaver will be stepping down but will remain in her position until a success is found so good news there for sales yeah and I think uh the the Dow this morning 92 points about of the upside to the Dow futures this morning coming from Salesforce thank you George Mana who's telling me this right now too so we'll keep an eye on that up by 5 and a quarter per. and this is an interesting story another evaluation jump for open AI CBC has learned that the startup is in talks to raise billions of dollars in a new funding round that could see the maker of chat gbt valued at more than $100 billion it's like three times what it was a year ago Venture Capital firm Thrive Capital that's Josh Kushner is leading the round and will invest a billion dollars The Wall Street Journal said Microsoft which is of course open ai's biggest backer is also participating in the round open AI Microsoft and Thrive Capital have not commented earlier this year open AI was valued at a reported $80 billion they had seen some share sales by employees uh a few months ago at at 110 billion so not entirely a surprise but at some point you have to figure this sort of nonprofit profit structure U is going to change given the valuation and how much more money they're taking in from you know Thrive capitals investors will want to see you know some kind of long-term structural change so that they know that their profits are safe in the long term you have the Microsoft position in there you know it's it's sort of unclear you're going to have you know Investments alongside Microsoft is open AI kind of just servicing back to to Microsoft products obviously not um so it's It's Tricky how how they're going to Microsoft now has so many Frenemies in this space where they they're kind of hedging their bet look we got open AI we're also doing our own thing with some former uh AI people and we're working with other companies so it's it's a interesting ecos system because no one knows who the winners are going to be and what the valuations are going to be a year from now so I mean the other issue is you have the worry about what Regulators will do um and the worry I say from the companies that are looking to profit off of this and the investors who are looking to profit off of this probably telling part of the reason that Microsoft would step down and give back those board seats that they kind of demanded when open I AI went through its crisis period um last year and then came back to see what happened with some of these things they had to give back the board seats because you have Regulators who are looking at this saying that this is no longer the structure we're already at the profit structure and there so there's the antitrust issue there's also the regulatory issue that's emerging now California Assembly last night passing that we're going to talk about that later but that's also you know going to change some of the competitive Dynamics because the the newer firms like mus firm they like this because it sort of hurts the leaders right now um so both on the antitrust and what governments both on the federal and state level does um fast moving changes it is we should also mentioned that Warren Buffett is now in the trillion doll Club Berkshire hathway reaching that market cap Milestone during yesterday's trading and this comes just before Buffett's 94th birthday that's coming up 31st of this month we'll be watching the stock has added 28% so far this year this has been pretty phenomenal because every other company the other six companies in the trillion dollar Club are all Mega cap tech companies this is the first old economy company to be able to do it there are so few conglomerates that are around today this is the first conglomerate that's been allowed to do it um it's a good birthday present it is a good birth a trillion dollar compan I mean this Market is still for all the hype and everything around AI it's still rewarding quality in other words great balance sheets and reliable earnings you know of the trillion dollars um you know a you know I don't know 300 billion of it is the public stock portfolio of which 275 is cash so you know there's plenty there um in terms of substanti it of course he's been pretty uh aggressively he meaning perhaps it's it's birthday is the 30th it's tomorrow tomorrow right yeah tomorrow for tomorrow and uh you know trimming back the apple and Bank of America shares doing a lot of pruning of this portfolio well and and there are lots of questions about why it's more than 275 billion in cash that they're holding at this point that's a huge amount obviously as the market cap has gotten bigger as their assets have gotten bigger it's not as massive as you would have assumed at one point but that is a lot of money to put to work there are people who suspect that it's because he thinks there's a downturn coming in the economy you can wonder about what might happen down the road with any potential tax changes on anything there's lots of things you can look at for this but Joe was saying yesterday I thought it was pretty um interesting and insightful just the idea that he's going to be looking at this thinking yeah okay when I'm 95 96 years old something happens we're going to have the yeah I mean you obviously have the ability to maneuver um also we know he doesn't see great compelling value surfacing in this Mar so we know that piece of it I also think that when it comes to you know there's no need to have a 12% 14% position in Bank of America like I think he just wants to reduce the outsize bets within the portfolio and create Mo room to operate for himself or whoever comes down I mean this is a really you know a huge cushion within the company for whatever the next move might be that's true te will be next up next on squawk pod Nvidia may have today's headlines but semiconductors across the board are at a pivotal moment Ronnie chattery oversaw the implementation of the White House's $ 52 billion chips act and now he's a professor he's explaining America's Tech strategy right here the fact that we're building these things in the US and World leading companies like tsmc Samsung Micron SK hinx and others are building here in the US that sounds a powerful signal in terms of the balance of power in microelectronics welcome back to squawk pod Robert you ever think about a column called to be frank to be frank or Frankly Speaking Frankly Speaking do that too yeah a lot of them although often when somebody says to be frank they're actually not about to tell the truth I'm always always Frank I'm always Frank no offense but that's the same thing all right you are watching squawkbox right here on CNBC I'm Becky quick along with Mike Santo and Robert Frank Joe and Andrew are off today Nvidia shares lower in the premarket that's coming despite beating Market expectations which remains Skyhigh for this company the stock um as a result too it's off just slightly for a broad look at the chip sector right now including Intel's recent struggles we want to bring in Ronnie chaty he's the former White House chips coordinator who oversaw the implementation of the 52 billion chips and science act he's now a professor at Duke University's business school and Ronnie thanks you thank you for being with us today um why don't we start off just with Nvidia what you think this tells us about Ai and the demand for AI and the promise well sure I think you know despite what's happening in the pre-market we're seeing really strong continued demand for AI infrastructure the hyperscalers are continuing to spend tens of billions of dollars in capital expenditures I'm building out infrastructure to uh to support Ai and most of the hyperscalers are saying they're worried about underinvestigated in the AI infraspace you'll continue to see a lot of Tailwind in that area going forward and yet we have Intel which doesn't have the AI chips that are so in demand at this point that stock dropped by 25% earlier this month when the company came out with very disappointing earnings that kind of shocked the street they said that they're going to be laying off 15% of their Workforce how does this happen to a company that just received $8.5 billion doar from the US government in Grants another 11 billion in loans to try and make sure that it's doing things like keeping us ahead in National Security and creating jobs well for Intel that money has not been allocated yet they had a preliminary award and they're going to have to earn it with Milestones on construction on technology and product road maps and I say look Intel is trying to catch up in the AI space pack eler said that recently they're ramping up production of their AI chips and that's what really hit margins uh this past quarter from the US perspective though they've made a diversified bet with the chip program when we set this thing up we realiz that we couldn't bet on a single company or single technology and that's why you see five different companies in the most Advanced Technologies all investing in United States of America so that Diversified bet is going to Pro protect American taxpayers regardless of the fortunes of any individual company let me ask you there are real questions people asking what happens if intel gets SM smashed and goes away would the US government allow it at that point are you going to pour more money into this company well for me I can't engage in that hypothetical not being in the US government anymore but what I will say is look at some of the programs and the support that's already been announced tsmc is building in Arizona in advanced nodes you have Samsung building in Texas you have Micron you have SK hinx on the packaging side both across memory and the most advanced chips you're seeing the US government make investments all across the board you can't make your government policy dependent on a single company and I don't think we've done that here we have been really slow though this this chips Act was passed two years ago now and it's now larger than the latest roll out of Chinese funding and yet it's been so slow to try and see any of the build out of Fabs is that because we've been slow at acting enacting this is this part of the plan is it because it's so hard to build some of these Fabs I mean where do you see us getting to the point where you think the chips act has accomplished what we set out to do I think we're on our way I mean yes two years from the bill we've now seen $30 billion has already been announced in terms of preliminary allocations why is it preliminary because we have to make sure that the companies are hitting their Milestones that they can build what they say they're going to build the taxpayer would demand no less so I think for a complicated project like this supporting Fab construction that will take years equipment that's very complicated and a market that's very cyclical I think this kind of pace is on track I also think when you look at the Chinese efforts to be Frank this is the third round of their so-called big fund and hasn't necessarily delivered the kinds of gains on the most Advanced Technologies that you would have expected so I feel like we're in a good place a lot of difficult challenges to unwind but I still think we're in a good place giv been two years since the bill was passed why do you think we're going to do it better than the Chinese have to this point I think if you look at the record up to this point we have all five of the companies on the most Advanced Technologies both in dram and logic building here in the United States no other economy in the world can say that so when I think it when you look at that picture we have the best chance to succeed in what the chip ecosystem is going to be five or 10 years from now remember when we did this program we didn't even think about how big AI was going to become and if we didn't do this program imagine where the United States would be not making a single chip to power AI in the United States we're going to make sure now we're going to have over a quarter of the most advanced chips in the decade made here in the United States so I think we're on track definitely a lot of challenges no one should get confident or cocky but I think we're on track and hitting our Milestones Ronnie going back to your point you mentioned that in Intel hasn't received this $8.5 billion dollars yet they have to earn it through certain benchmarks if they don't what happens to that money does does it get returned to taxpayers does it get redistributed to these other chipmakers that you talked about what's your guess yeah I think first we don't have sort of public confirmation on what all the specific Milestones are I imagine they'd be construction uh Milestones product and Technology road maps and if a company any company doesn't hit those Milestones then the taxpayer dollars will be clawed back if they're already allocated or if they're not allocated yet they would be distributed perhaps to other companies um as part of the program I think it's about achieving the goals of the program and so if you could do that best by investing in other places that's what's going to happen but we still haven't seen that yet and I think we we have to wait to see how Intel performs going forward to see what's going to happen and that goes true to every single company in the program there's been over 15 big Awards so we're going to have to watch all these companies in their progress a big part of the reason that this was able to pass Congress is the concern of our complete dependence on Taiwan for all of this chips manufacturing at this point um how long do you think it will take until we can say we're not so dependent on Taiwan National Security issues I think you'll see the money start flowing very very soon but of course to build the Fabs and build up the that capacity let's say in the most advanced nodes the ones that drive artificial intelligence training and inference that's going to take a couple years to actually produce at scale but the fact that we're building these things in the US and World leading companies like tsmc Samsung Micron SK hyx and others are building here in the US that sounds a powerful signal in terms of the balance of power in microelectronics so it'll be a little bit before we actually can produce these chips at scale that's just a business reality but the fact that we're starting and we have the biggest companies in the game that's a really important signal to the rest of the world Ronnie thank you thank you coming up on squawk pod a plan from former president Trump that could cost the state of Virginia $28 billion and maybe change the makeup of the House of Representatives cnbc's Emily Wilkins is on the ground at a commuter hot spot outside the Beltway Trump isn't proposing a cut so much as a move a move away from the DC Virginia Maryland area to other areas of the country you're listening to squawk pod today with Becky quick Robert Frank and Mike santoli here's Becky Republicans have proposed trimming the size of the government and former president Trump is proposing even deeper Cuts if elected but those cuts could mean losing a key seat in the house Emily Wilkins joins us right now she's got more on that story hi Emily hey Becky well I'm here today in Stafford Virginia where this parking lot is filling up with federal work workers who live here and then take the bus or carpool up to DC federal employees and government contractors they're a key part of the economy here but a new plan from former president Trump would move 100,000 government employees away from DC and that could cost the state of Virginia about 28 billion according to one estimate the proposal is facing a push back from a member of Trump's own party Derek Anderson and he's running for congress here now both the GOP and Democrats are targeting this house seat which will be key to who controls the chamber next year Anderson told CNBC in a statement that he will oppose any legislation that could weaken National Security raise the cost of living or hurt jobs in the district regardless of where that comes from going door too to talk to voters Democratic candidate Eugene vinman said he hears from a lot of workers who are worried about Trump's plan it would be devastating to this area um um first of all fundamentally unfair but devastating to this area because um you're talking about thousands tens of thousands of pretty well-paying jobs I would it would be horrible whoever controls the house next year will have a big say in Government funding and whether or not the federal Workforce expands or shrinks guys you know Emily that's always the the issue though right it sounds like a good idea to cut until the people who are going to get cut find out about it and and come through it's why governments tend to not shut or close or why government spending tends to not get get put down these this seems like it's going to be a battle we're going to see again and again it absolutely could be I mean this isn't certainly the first time that you've heard a proposal from Congress about Cuts but the fact is is that it's harder to do to actually eliminate some of these jobs and some of these agencies I think one of the interesting things to keep an eye on is that Trump isn't proposing a cut so much as a move a move away from the DC Virginia Maryland area to other are of the country that still of course would take a number of logistics but his idea kind of here is to take some of those employees move them elsewhere so we'll see what Congress does with that for sure Emily thanks so much all right folks that does it for us today guys thank you very much both for being here it's been fun and that's the Pod for today thanks for tuning in squawkbox is hosted by Joe kernin Becky quick and Andrew Ross sorin big thanks to Robert and Mike for their work today you can tune in weekday mornings to CNBC at 6 Eastern or get the smartest takes and Analysis from our TV show right into your ears when you follow squawk pod wherever you get your podcasts thank you we'll meet you right back here tomorrow and we are clear thanks guys [Music]