Daybreak Weekend: Nvidia Earnings, Europe Airlines, Japan GDP

Bloomberg Audio Studios, Podcasts, radio news.
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world. Straight Ahead on the program,
look ahead to earnings from chip giant Nvidia, along with
some of the biggest US retailers. I'm John Tucker in
New York.
I'm Caroline Hebge here in London, where we're looking at
the upcoming earnings test for Europe's low cost airlines.
I'm Dog Krisner looking at whether Japan's economy will show
improvement in the first quarter.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three year, New York, Bloomberg ninety nine to one, Washington, DC,
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Radio dot Com and the Bloomberg Business app.
And good day to everybody. I'm John Tucker. Let's start
today's program with the company founded in a Denny's restaurant
in East San Jose, California, Wednesday, after the close of
regular trading. The biggest company, in Vidia opening its books
to investors. It's going to preview and walk you through
all the details. We're joined by Bloomberg Technology co anchor
Ed Ludlow. Ed, I got to start with a China question.
Which of Nvidia's future results are going to reflect purchases
from China?
Nobody knows.
That is the great That's why we bring you on board, Ed, That.
Is the great mystery and mystique of Nvidia, because you know,
for all the headlines and the discussion of what Nvidia
can or cannot sell to Chinese companies, you know, with
Jensen Wang alongside President Trump in China, there's a big
misunderstanding of how it actually works. So like the US
government will say we have approved Nvidia to sell a
certain generation of chip to a certain group of Chinese companies. Great, fantastic,
and Jensen one will go on stage as he's done
many times in twenty twenty six so far, and say
good news, guys, like we have orders from Chinese companies
for the H two hundred, which is the generation of
chip they're permitted to sell, really good like real orders.
And so as a result of those orders, we're going
to ramp up. We're going to go to our suppliers
make sure that we have those chips. But nobody actually
knows if China's okay with this. And you know, it's
really interesting because to his credit, Gensmong has always been
really consistent with me when I've discussed it with him.
When they negotiate this stuff, they don't actually themselves negotiate
with the Chinese government. If Chinese tech companies are allowed
to buy their chips, they will, they'll place orders, and
that we should infer from that means that the Chinese
government said it was okay. And so the only way
of knowing is if it shows up on the income statement.
That's the joy of covering earnings and public companies, it's
either there in black and white or it's not.
Yeah, you know, it's it's kind of hard for me
when I go home in the afternoon, said to pass
someplace that doesn't have a data center under construction. What's
the where's the growth going to come from? For in video?
Is it those data centers that are popping up seemingly everywhere.
Well, look, I really want to have some fun and
make this like just digestible for the audience. All you
need to know is that wherever it's coming from, the
video numbers are really big. You know this story. You
mentioned Denny's right in April nineteen ninety three. When this
company was found in Denny's, I was less than a
year and for most of the company's initial history it
made chips that powered video games consoles and no one.
Really can the GPUs work, right, Yeah, gpu.
The origin of the GPPU, the graphics processing unit, is
that it's very good at running multiple computations at the
same time, which for the layman means when you're playing
a video game, all those pixels appear on the screen.
You know, that's what its origin was. Now fast forward
to present day. You know they are still growing revenues
at near to eighty percent year on year. You know, actually,
what we'll see is revenue growth accelerate into this quarter.
Their margins are at seventy five percent. Like margins at
seventy five percent for a company that sells chips, it's
just bonkers. It's just nuts, That's all you need to know.
And they do it with massive profits and cash generation,
and so in this quarter that's not changing. But here's
the to answer your actual question, where does it all
come from it's still the big cloud computing companies what
we call hyperscalers, that account for more than fifty percent
of those revenues. But that's why the timing of earnings
is really interesting. You know, if you're a real nerd
like me, you look at the calendar and you're like,
oh wow, in video reports earnings mad twentieth. But the
reason that I stress that is that all of nvda's
biggest customers have already done earnings and they've told us
how much they're going to spend on chips this year.
So it always kind of logical, and it all results
in video winning.
Frankly, it's still safe to say in video pretty much
as a near monopoly in this film.
Yeah, well, just to make sure that we're covered and
I adhere to my own and Bloomberg's high standards. A
technical monopoly is where you have more than seventy percent
market share. And what's happening in AI right now is
a very big shift from a period of time where
all of the computers, and we're talking about computers right GPUs, clusters,
data centers, what you're talking about is absolutely ginormous computers.
Until this point, what those computers were largely doing was
training the models, taking really vast volumes of data and
training models on that data. Now people are using them.
They're running the models either through prompts that generate a
text response, it can be an image response. That's what
we call inference. And when we get to that in
Prince phase and video looks over its shoulder a little
bit more because there are more custom silicon. Different car
companies have their own chips. There are other chips on
the market that would claim to be better than in
videos in that sense, but there's not yet any evidence
that they've sort of had their market dominance chipped away
at by any of these would bees.
You're going to pour over those earnings as they come
across Wednesday after the close of regular trading. All right,
thanks to Bloomberg Technology co anchor Ed Ludlow, Let's take
a look now at some of the stocks making news
in the week ahead. I'm John Tucker along with Isabel Lee,
the Bloomberg Cross Asset reporter. The parade of earnings continues,
and we're going to start with the biggest retailer in
the world, Walmart. What's the expectation there?
Walmart ticker WMT earnings will be on May twenty. First,
that's a Thursday, which I checked right before we came
on because you said we had to know the day.
It's Thursday, seven am.
ET earnings call is eight am, so early wake up
if you really want to know more about Walmart revenue expected.
The consensus estimates is seven hundred and forty eight billion dollars.
Adjust the diluted EPs two dollars and niney three cents
and deluted EPs two dollars and ninety three cents. So
I could bore you with the numbers, but key themes
to watch definitely market share gains. We know Walmart is
positioned to benefit from its value and convenience proposition with
sustained e commerce momentum.
Maybe not in New York. I really can't relate whenever, Yeah, you.
Know, I would love to go to I've never been
to one.
Oh my gosh, they're not around here.
I think I may have been to one, or maybe.
I'm making it up, but which makes us more than
qualified to talk about.
It's a once in a lifetime thing for me. I
would love to go to. You and I can go
on a field trip there we.
Go, We can expense. It Now, when I talk about Walmart,
I said that the world's largest retailer, but it's also
the world's largest grocery chain too.
Is a lot of people shop there.
So according to Jennifer bartist Huss of Bloomberg Intelligence, she's
going to be looking at online profitability. They're going to
see whether e commerce margins have improved. Same Star sales
Ana wealet revenue gains of four to five percent are anticipated,
And of course you're going to see consumer health.
I mean we have all heard this.
Yeah, this is kind of a bell weather in terms
of economic performance for do I dare say the lower
end consumer.
Yes, so you're going to see that. And we've heard
time and again and all the radio shows the K
shaped economy. I just read again a note today that
travel is going to see heightened K shape economy. And
I thought, obviously, I mean, the higher income will be
in private jets and I will be in economy.
You know, So.
Okay, let's move on. This is one store I have
been in, actually put an Anderson window there. It's expensive,
but I'm talking home depot. One of the things I'm
seeing more and more at home depot, more and more
like professionals, carpenters, whatever, show up and it's not just
you know, people bozos like me.
So okay, Home Depot ticker is HD. You are not
a bozo.
But I think home Depot is the kind of place
that you're welcome on. I think it's the kind of
place that you just have what you If you need something,
it's there Because I go to Home Depot guess for
what plans?
Really?
Yeah, they have you see, you never noticed because that's
not what you need. I never noticed the carpentry because
I live in the tiny New York apartment. But Home
Depot is also going to report earnings May nineteen. That's
a Tuesday. Oh, this is even earlier. The release will
be at six am ET earning is called will be
nine am, so you can have breakfast in between. Revenue
expected is one hundred and seventy eight billion dollars. Adjusted
diluted EPs is sixteen dollars and thirty one cents, gap
diluted EPs fifteen dollars and ninety eight cents, and that's
earning sixteen billions. So again key themes to watch your also,
consumer confidence, I mean uncertainty, inflation and job security has really.
I guess the hed people from making large home improvements.
Why will you remodel your kitchen when you think you're well.
The other thing is the mortgage rates and what the
ten year going out, the thirty year the long bond
that was hovering right around five percent with the latest
economic figures, that feeds through mortgage rates home expenses one
hundred percent.
That's a great point.
And I think another key theme to watch is we
have management indicating they've learned to manage tariff, so we'll
see how that plays out. I feel like tariff we
kind of forgot about it. When I say forgot, like
new headlines have kind of dominated the market, but it's
still very alive and well.
Okay, let's finish up with the last stock on your list.
And I'm just hoping there's some intersection between artificial intelligence
and John Deere. I mean, they're building all these data
centers everywhere they are, and Deer makes stuff that you
can build data with, like tractors and stuff like that.
I guess, yeah, that's actually no tickers. The they have
earnings also made twenty one Thursday six am. Earnings call
is ten am, so you get a longer breakfast in between.
Net sales is estimated to be forty one billion, total
revenue forty seven billion dollars net come four point eight
billion dollars, et cetera. So they're expected to post a
better than expected fullier twenty twenty six results. Again, to
your point, it's driven by maybe agricultural equipment makers and
the and the momentum in building construction.
Well, you know the farmer, you know, we call it
farm again, and what's happening on next ye right now? Well, yeah, no,
it's been a very difficult time, especially with the tariffs
and the planting season. So you know, again dear something
of a bill weather for the Yuba's economy.
Yeah, tarriff.
Also, you're right is a key risk and used inventory
overhang because there's an elevated use tractor inventories which can
continue to weigh a new equipment demand in pricing. I
guess where do you store these things? They're so gigantic and.
They're trust me, they're expensive too. I can imagine I
know from firsthand experience. Wow, Isabelle, thank you for showing
up today. Appreciate it. Isabelle Lee is our Bloomberg Cross
asset reporter. Coming up on Bloomberg day Break weekend, we're
going to take a look at the upcoming earnings test
for Europe's low cost airlines. I'm John Tucker, and this
is Bloomberg. This is Bloomberg day Break weekend to our
global look ahead at the top stories for investors in
the coming week. I'm John Tucker in New York. Up
later in the program, we're going to look ahead to
some key economic data in Japan. But first, Europe's largest
low cost airlines report earnings in the coming days. And
this comes against a backdrop of rising ut certainly jet
fuel costs driven by the war in Iran. Let's get
more now from Bloomberg Daybreak Europe anchor Caroline Hepger.
John, we will get into an uncertain airline business as
we approach peak travel season here in Europe. Willie Walsh,
the industry veteran of the Director General of the International
Air Transport Association, has worn recently that airlines can't keep
absorbing the additional costs that they're seeing. The war in Iran,
which began in February, has upended the industry. London's Teithow Airport,
one of the major hubs in Europe reported a drop
in passenger numbers in April of five point three percent
from a year earlier, and that's down to six point
seven million passengers. As the Middle East war has disrupted
global air travel. The airport's CEO called it though a
short term disruption now. Bloomberg Intelligence forecasts that the big
European carriers like IAG and Air France CARELM are going
to see their fuel costs go up by twenty seven
percent for LIFTANND so that figure is twenty two percent
for twenty twenty six, so creating a big challenge for profitability.
Others cast doubt on the risk of jet fuel shortages,
seeing them as an excuse to cut unprofitable flights of
the low cost carriers reporting in the next week or so.
Ryanair is relatively well protected by fuel hedging, but it
remains exposed to potential supply disruptions and pressure on consumer spending.
Easy Jet meanwhile has warned that the war in the
Middle East will widen its first half loss and weigh
on summer demand. Overall, investors will be watching very closely
for further cuts to full year guidance for both of
these airlines.
Well.
Joining us now is Danny Lee, Aviation and transport reporter
based in Asia. Danny good to speak to you how
much is air travel currently being affected by the impact
of wars Well Caroline.
The airline industry is grappling with a more than doubling
in fuel costs and the counting of that cost is
resulting in multiples of billions and higher fuel bills. And
right now we've only seen a fraction of that be
reported by the airline industry through at least one month
of earnings that has filtered through. But it's now into
the second and the third quarter where we are seeing
the volatility and the surge and jet fuel costs which
is absolutely wrecking airline balance sheets across the piece, and
in particular, when you see airlines grappling with higher fuel costs,
they are now thinking about how they can mitigate those losses,
in particular having to cut the number of flights they
operate because simply there are flights out there which are
just not profitable. So there is a balance to be
brought between operating profitably and being being generally conserved. Even
how they approach this, this ongoing war we have seen
stretching into almost three months now, and this is a
challenge for aliens. How do they grapple with a surge
and fuel costs and when they have to pass on
the alans have to pass on the costs onto customers.
How much are passengers willing to bear? And this is
a challenge for airlines to figure out, and particularly if
your low cost carrier, where you are trying to stimulate
demand with lower prices, all of a sudden those prices
become a lot higher.
Yeah, So then what do we expect to hear from
Ryan Air an easy Jet in terms of their results,
because they are obviously the big low cost carriers in Europe.
Yeah, easy Jet has already braced investors for bad news.
So the UK low cost carrier expects a headline loss
of between five hundred and forty to five hundred and
sixty million pounds. It tends to be the weaker period,
those first six months of the year, and it's the
earnings period which captures only a month of the year
round war. But so far the airline says it has
added twenty five million pounds to its fuel bill. So
as volatility in Jeff does settle down a little bit,
it's still going to be more than counting the costs.
That doubling of costs of pressure is only going to
be felt in the later quarters. And I think it's
that kind of clarity from CEO Kent and Javis which
we'll be able to understand just what impact the Iran
war is having on the likes of the locals Carricer
and easy Jet in particular, because they just cannot pass
on the full amount of higher jet field costs on
to price sensitive passengers. So I think the key question
is how much is that down arrow story going to
extend into its kind of forecasts in future and how
will it be able to recoup as much of the
fares as it can pay airlines and not able to
do it so much in the near term, but it's
towards the later end of view that they will be
able to. As for Ryan, it will post its for
year earnings and it has already guided towards very healthy
profit architects of two point three billion euro But Riina
has been cautious in the large about its full year
targets and whether its fiscal year ahead will change materially
in terms of how it's thinking about demand, the amount
of flight to operate and even being able to carry
as mess and many passengers that can. However, just like
with easy Jet Rhine, they may well be beneficiaries from
the war in as much as the fact that passengers
may not choose to fly long haul because of the
costs and because of various other risk factors and may
stick to Europe. So this could still be an upside
momentum when people think about booking their travels this summer
and beyond.
Yes, I think that's really interesting. I mean, consumers in
many parts of the world are under a lot of pressure,
aren't they. So what do you think the airlines are
going to say about summer bookings? As you know, consumers
are facing her petrol prices inflation affecting lots of goods
that they might be buying, including holidays.
Well, the airline industry by and large has seen that
level of demand keep up with pace, and so airlines
are seeing booking levels largely about the same. However, easy
Jet has worn that the conflict situation has resulted in
a kind of denting of booking's momentum, So they are
seeing a little bit of a hit easy Jet, And
I think the question is does that continue, so that
would be very key for the CEO Kenson Javis to
spell out. But also that kind of elasticity really the
ability for customers to be willing to pay more off
for airfas because ultimately the higher oil prices doesn't just
affect airfares, It affects a whole facet of the economy
and for households from goods to services, particularly into the
shopping baskets, So that extra cost is coming everywhere, and
I think people will be thinking about what do they
prioritize in spending in the near term.
What is the state of jet fuel supplies? Are the
shortages real? Are they particularly affecting Europe? I know where
you are in Asia, it's been a very pointed issue.
Yeah, the jet fuel shortage is still a live and
real issue. We've heard a lot from airlines talking about
being covered in jet fuel needs for March, April, May
into June, but there is limited visibility and given the
Straits of hor Moos is still largely blocked to an
extent a pre key critical waterway. You know, there's been
a lot of scrambling to find all terms of sources,
particularly from the US. We haven't really heard too much
more in terms of deep concerns that airlines have we
already have seen out and start to cut schedules just
to make sure that where they're there are more challenged
airports where fuel supply maybe a question, they will focus
on a higher priority bookings and airports where there is
bigger business. I don't think we've seen too much more
in terms of shortage concerns out there, but as we
get into the peak summer season that dynamic may start
to change a little bit more. But the Europe and
Asia are the big areas to watch when it comes
to fuel availability because of the reliance of the imports
of jet fuel.
What about the cost of flying? We know that consumers
are thinking about this. If you look at surveys of consumers,
what are we actually seeing in terms of ticket prices?
Well, ticket prices are going up by and large, and
some industry surveys point to a doubling of airfares and
even in the recent months so into May and June
that fair airfare is about fifty sent higher then from
then last year. Because of what we have seen with
the around more impact on jet fuel prices, on the
disruption in demand, because of the impact in the Middle East,
so there is seeming a tendency that airfares will stay
higher for longer. Not great, but at the same time,
airlines still feel fairly optimistic in the near to longer
term about or midterm about passengers still wanting to travel,
that level of demand out there, and so therefore we
are still seeing airlines looking at expansion, and so therefore
that level of expansion will feed into stimulating more bookings. However,
there is still that challenge of filling those flights at
those relatively higher prices, and I think airlines are still
going to be grappling with that level of price sensitivity overall,
because at some point and passengers will say we're not
going to be paying this price, and whether they try
to look for a cheaper alternative or just not fly
at all or delay their travel. It remains a big question.
As we move into the latter part of a year.
What do you think might come out of this energy
kind of impact. Do you think there'll be fewer airlines,
fewer routes or is that too simplistic.
There may well be a consolidation. We are already seeing
consolidation that has been the case pre war, particularly in Europe,
Asia and in the US. But as the cost of
offline becomes more expensive for airlines, we have already seen
the likes of Spirit airlines go down. Will there be others.
It's still too early to tell to see which airlines
may not survive at this stage, but there is a
very much concerted effort to see airlines which have a
better war chest, who are better capitalized, are looking at
taking advantage of weaker airlines, and as result we may
see consolidation, we may see some trimming as a result.
But I think airlines overall, where they have the opportunity
to make money and it still does and they can
have that overall connectivity within their network of flights, they
will all stick around and overall that level of competition
will become even more intense as their stronger airlines look
to become even stronger.
Danny, very interesting, Thank you so much for your time.
Danly Lee is aviation and transport reporter here at Bloomberg
base in Asia. My thanks to him, and of course
we'll have more coverage of Ryanair's results to you on
the eighteenth of May and Easyjets earnings on the twenty
first of May. On Bloomberg Radio and across our platforms.
I'm Caroline Hebger here in London. You can catch us
every weekday morning for Bloomberg Daybreak you at beginning at
six am in London. That's one am on Wall Street.
John all right, thanks Caroline, and coming up on Bloomberg
Daybreak Weekend. I'll look it here into a GDP reading
for Japan. I'm John Tucker, and this is Bloomberg. This
is Bloomberg Daybreak Weekend, our global look ahead of the
top stories for investors in the coming week. I'm John
Tucker in New York. We go to Japan next, where
the economy is expected a rebound of the first quarter,
and for more, let's go to Bloomberg's Doug Krisner, the
host of the Daybreak Asia podcast.
Thanks John. The Japanese economy is expected to have grown
at an annual rate of around one point eight percent
in the first quarter. Now, this will be a preliminary reading,
and if it were to hold, that would make for
a second consecutive quarter of economic expansion in Japan. To
help us understand the dynamics at play, let's bring in
Bloomberg's Paul Jackson. Paul is ECO GOV for Japan and Korea.
He is the team leader joining from the Japanese capital.
Thank you, sir for joining us. One of the things
that we have to touch and I think to begin with,
is the fact that the war in Iran is having
a great deal of impact on the Japanese economy right now.
Now we know that it began in late February, so
the impact on Q one will be limited only felt
for the month of March. Obviously, this is very much
as oil story, which leads us to inflation even before
the war. Can we agree, Paul, that Japan was dealing
with much higher inflation and a stubbornly weak currency is
a big reason why.
I think the inflation story in Japan that's been taking
place over the last three or four years has been
a generational change for the nation. And then you have
another war emerging starting. Obviously we had the Ukraine War
few years, but the start of that launched a wave
of inflation, and the latest war is going to do
the same. And you know, those higher oil prices, we're
already seeing the impact of that on like producer prices.
We recently had data showing four point nine percent increase
there has been the highest in like three or four
years there, So that means inflation is going to be
heating up, and the Bank of Japan has already revised
up its forecasts on that expectation.
So to go back to the GDP report, private consumption
accounts for roughly fifty five percent of domestic output in Japan.
When you talk about higher prices, do you think it's
going to have held back private consumption?
I think this is really one of the key points
of you know, examining Japan's economy at the moment. It's
it's this new concept of inflation, prices going up, and
can consumers adjust to that. And we have seen gradual
strengthening of consumption and as people get used to the
idea that prices can go up, you don't have to
put everything on hold because of a bit of inflation.
But Doug, the overall picture is that that consumption part
of the economy is still on the weak side. It's
still on the limp side, and we're expecting probably one
of the weakest readings in recent quarters on the consumption side.
Still positive, but this is not the kind of figure
that's showing that Japanese consumers are totally on board with inflation.
They've got it and they're spending again. That is not
the case at the moment.
So give me a sense of how the export economy
performed in Q one. Obviously, we have the US tearuffs,
the auto related industries in Japan have been affected by that,
and then there has been can we call it a
deterioration of diplomatic relations between Tokyo and Beijing, and that
may have weighed on the tourism industry.
Bit.
Yeah, that's right. We've got all those issues weighing on trade.
So you would expect that the figures don't look too good,
but actually the figures have been looking pretty good, pretty strong,
and the reason for that is this global surge in
demand related to AI. And I think if you look
at like exports out of Japan in March, they're up
nearly twelve percent and largely fueled by thirty percent growth
in chip exports. And we're saying in countries all through
Asia this trend, I mean, especially over in South Korea,
just you know, large gains in the tech sector and
chips as economies look to feed this incredible surge of demand,
which you could say is kind of masking you know,
larger problems lurking in the global economy and in Japan too.
So what was the role that the government may have
played in Q one when we think of public investment.
Was there a lot of government a lot of fiscal spending.
Well, I think we've got in terms of reacting to
the inflation story, which is now we're going to see
elevated energy prices through this war, that the government is
taking action to subsidize energy, and this is going to
lead to more spending. So I think, really, rather than
looking at Q one, it's kind of looking ahead. This
is a big question mark hanging over Takchi primary Takhi's
administration because she's kind of put a marker out there
saying we're not going to run Japan in the same
way as before. We're not going to have extra budget
after extra budget. As she tries to reassure markets that
her kind of expansionary approach to fiscal policy isn't going
to buckle yields, buckle the bond markets and scare everyone.
The problem she's going to have is that if you
subsidize energy, you are going to run out of reserve funds,
which mean at some point she may have to have
an early extra budget and that's going to be a
very bad look for her and could spoop markets going ahead.
But so far their standing firm saying no extra budget
is needed. But that is a point to be watching
over the coming month.
So as we're looking ahead just a bit. I know
that a lot of our conversation has focused on Q
one GDP, but let's look ahead. Given the fact that
you mentioned PPI in the latest reading was the highest
I think since twenty twenty three, so that obviously everything
fueling this inflation narrative. Does that necessarily mean that the
Bank of Japan is at risk of being behind the
curve in terms of tightening and will we necessarily see
a rate hike in June.
Well, we've just had Treasury Secretary at Scott Besant in Tokyo,
and he's one of the leading voices out there saying
that the Bank of Japan certainly is at risk of
falling behind the curve. And I think the takeaway from
his meeting with officials here is he kept re emphasizing
the message that the fundamentals of Japan's economy are strong.
So what's the takeaway from that Doug, Well, if you've
got a pretty positive GDP reading, you've got American officials
honing in on Japan's strong at the moment. All this
points to the idea that, hey, you should raise your
interest rates and you should get on with it. And
I think if you look at market expectations, you will
see that there's more than seventy five percent chance of
a rate hike coming in June. And just recently we
saw one of the more sent trist board members on
the Bankagapan board saying that we should raise rates as
soon as possible as long as there's no clear sign
of weakness in the economy.
So has that been discounted? Do you think by the
currency with a end right around one point fifty eight
against the green back, does the foreign exchange anticipate a
move in June? And I'm wondering if the market is
already adjusting to that notion, maybe more is necessary to
strengthen the currency a bit.
I think you're right, Doug, to point out this vulnerability.
In the end, as we know, Japan has intervened, and
this could be multiple times. We're looking at over sixty
billion dollars worth of intervention so far. By our estimates,
so they have been trying to prop up the end.
So the hope would be that if you raise the
interest rates in June and you give a hawky signal
about potential further rates to come, that the yen bears
might start to back off at that point. But I
think there is a big question mark hanging over how
convince investors will be that that's the direction we're heading in.
Paul will leave it there, Thank you so very much,
Bloomberg's Paul Jackson, team leader for Eco gov coverage for
Japan and the Koreas we go to earnings news next
in China, where last week twin tech leaders Ali Baba
and ten Cent reported revenue well below estimate. Baba recorded
its first operating law since twenty twenty one, and ten
Cent reported its slowest pace of revenue growth in over
a year. Even so, Ali Baba's cloud revenue growth accelerated
and margins expanded. This helped a fuel optimism for returns
from Baba's investments in AI. And that's where we begin
our conversation with Eleanor Leung. Eleanor is head of Asia
Teleco and Internet Research at CLSAY. She spoke with Bloomberg,
zivonn Man, and David in Glaze.
I think my first question is comparing it to market.
Seems to be happier with Alibab, whether it is with
ten Cent.
Relatively quest for much of this year, right, yes, correct,
We are entering a very exciting moment of the AI
eras that moving away from model training and to actual
application and to p monetization is a lot easier compared
to see. That's why what get people excited is that
AI cloud, which Barba, is better position for the A
cloud compared to ten Cent. So I think the last
port of result on Alibaba, the management given a very
bullish guidance on their cloud growth. So the external cloud
revenue already as to forty percent year neargirl in the
last quarter. They expect that we're further a salt rate
with noticeable margin expansion. They're so bullish is because they
think that AI revenue is going to be able to
grow at a triple digit and contribute more than fifty
percent of the cloud revenue in one year's time. That
is driven by MS model as a service, which ramping
up very quickly in China, which including agentic applications such
as coding, productivity, generative video tools for the enterprises, and
they're willing to pay, and they have a chance to
raise prices now because we are not just model training,
which is a commoditized service, but now we are able
to differentiate in capability that we're able to raise prices there.
So that is driving the cloud growth. And the company
expect to achieve one hundred billion USD revenue with twenty
percent monjor in five years time.
Run us for some of those numbers, right, I was
looking through that, so they said ten billion REVENBEE in
terms of AI intelligence services revenue, right, so that's by
June thirty billion by the end of the year. Are
those tall orders you think or do you think they'll
be easy? Easily they can surpass these numbers.
I think they can surpass the numbers because the demand
in China is very high. The bottom actual is the
chip supplies right now, is that the supply is demand
is far greater compareditor. Surprise, as you know that China
has a chip constraint because we cannot buy a lot
of the Nvidia chip. But luckily, starting this year, the
domestic chip supplies start picking up, so we expect the
token in China is going to are full times this
year in China, but all of a seventy percent is
inference chip demand, and China is going to go one
hundred percent self sufficient in domestic infance chip, so that
will help to support the growth. And you're also saying
that China doesn't really have a SaaS industry in the past,
meaning that when these agentic applications come through, people jump
onto it.
That was Eleanor Leung, head of Asia Telecom and Internet
Research at CLSA. I'm Doug Krissner. You can catch us
weekdays for the Daybreak Asia podcast. It's available wherever you
get your podcast, John.
And that does it for this additional Bloomberg Daybreak weekend.
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