Nvidia Fails to Impress Investors; Supreme Court Keeps Trump Foreign-Aid Freeze
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Good morning. I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. Karen, we begin with the latest reaction to the earnings report investors around the world were bracing for. It has been volatile, but shares of NVIDIA have turned higher. They are now up three quarters of one percent in early trading. The chipmaker at the center of the spending boom delivered good but not great quarterly numbers.

That's drawing a muted response from investors who've been accustomed to blowout results. We get more from Bloomberg's Tom McKenzie. It's about expectations and it's also about whether or not this is a company that, by the way, in the last five years has only missed quarterly results once and this time was not a miss. Again, it was a modest beat. The question mark is to what extent the huge revenue growth that we've seen from NVIDIA in the last two years is starting potentially to

peak? How much further can they go in supplying these chips and continuing to generate the, frankly, eye-watering growth, almost unprecedented growth that we've seen from one individual company in the months and quarters ahead? And that question has not yet been resolved, and it hasn't been put to bed by the results that we've had out. Bloomberg's Tom McKenzie says NVIDIA is putting its quarterly sales at about $43 billion. That is slightly above the average analyst estimate.

Well, Nathan, many analysts pointed to a disappointment with NVIDIA's gross profit margins. Here's Angelo Zeno, vice president of equity research at CFRA. The gross margin number was probably the one black eye as far as where we kind of were looking at the guidance side of things. It was definitely a disappointment.

I think when you kind of especially look at the trajectory of gross margins over the last couple of quarters, it kind of hit a peak run rate of about 78 percent in the first half of calendar 2024. So the margins continue to compress here going into the April quarter. The good news is we do expect that to essentially be the trough of the cycle here in the April quarter.

CFRA's Angelo Zeno also says Chinese startup DeepSea has sparked fears that chatbots can be developed more cheaply, potentially reducing the need for NVIDIA's powerful chips for AI. In the meantime, Karen, we have some sad news to report this morning. The death of a Hollywood legend, Oscar-winning actor Gene Hackman, and his wife were found dead in their New Mexico home. Their dog died as well. Authorities did not release any details of the circumstances of their deaths, but they do say foul play is not suspected.

Gene Hackman appeared in more than 80 films, including The French Connection, Unforgiven and Hoosiers. He was 95 years old. Well, Nathan, let's turn now to some breaking developments on the Trump administration's push to freeze foreign aid payments. We get the latest with Bloomberg's John Tucker. John, good morning. Good morning, Karen. Chief Justice John Roberts has handed President Trump a victory. At least for now, he temporarily blocked up to $2 billion in foreign aid.

Roberts paused a lower court's order that had lifted the administration's freeze on foreign assistance. Humanitarian groups say this freeze is having a devastating impact, upending hundreds of projects, forcing USAID partner groups to lay off or furlough thousands of U.S. workers and putting people who depend on the assistance at risk of disease and even death. The groups say the money includes payments for work already completed.

The humanitarian groups challenging the freeze now have until Friday afternoon to respond. I'm John Tucker, Bloomberg Radio. Okay, John, thank you. President Trump is warning federal workers who haven't responded to Elon Musk's email asking what they did last week. They could be out of a job. I think it's a good idea because, you know, those people, as I said before, they run the bubble. You've got a lot of people that have not responded, so we're trying to figure out, do they exist?

Who are they? And it's possible that a lot of those people will be actually fired. In cabinet meeting remarks heard on Bloomberg Radio, President Trump spoke after the White House told federal agencies to submit large-scale workforce reduction plans by March 13th. The president says the Environmental Protection Agency is looking into cutting up to 65 percent of its staff. One agency, the National Oceanic and Atmospheric Administration, is putting together a list of workers who have yet to respond to Musk's email.

Now, Nathan, the latest on Trump's trade war. The president says tariffs on products from the European Union will be 25 percent. At his first cabinet meeting, he used strong language to attack the EU. It was formed in order to screw the United States. I mean, look, let's be honest. The European Union was formed in order to screw the United States. That's the purpose of it. And they've done a good job of it. But now I'm president.

While Trump's proposal for a 25% tariff on the EU is new, officials later clarified that all options are being considered on whether those would affect all exports from the bloc or only certain products or sectors. And we have breaking trade news crossing the Bloomberg terminal. Karen, the official is in

India are exploring ways to lower tariffs on a wide range of imports, including cars and chemicals, in a bid to evade President Trump's threatened reciprocal levies. Sources tell Bloomberg News officials in New Delhi are discussing reducing duties on automobiles, agricultural products, chemicals and critical pharmaceuticals. Well, Nathan, Trump's announcement on EU tariffs come as UK Prime Minister Keir Starmer heads to the White House to meet with the president.

It is with Bloomberg's James Woolcock. Good morning, James. Good morning, Karen and Nathan. Since the Second World War, the UK has framed itself as having a so-called special relationship with America. So with Europe's leaders scrambling to change Ukraine's fate, Prime Minister Keir Starmer's visit to the White House today is a test.

How strong is that alliance? And will Starmer be able to sway a US president who has been willing to upend transatlantic relations? After watching France's leader Emmanuel Macron's trip this week, Starmer's aides told Bloomberg they would be delighted if they can get through the week without any public disagreement with Donald Trump.

In London, James Wilcock, Bloomberg Radio. All right, James, thank you. And Bloomberg will bring you live coverage of the news conference with President Trump and Keir Starmer, scheduled to begin at 2 p.m. Wall Street time here at Bloomberg Radio and on the Bloomberg podcast page on YouTube. Karen, Secretary of State Marco Rubio is laying out a strategy for managing Russia's relationship with China. He says he wants to dilute ties between the nuclear powers but not have them at each other's throats. The big story of the 21st century is going to be U.S.-Chinese relations.

And if Russia becomes a permanent junior partner to China in the long term, well, now you're talking about two nuclear powers aligned against the United States. Secretary of State Marco Rubio tells the conservative outlet Breitbart News Russia wouldn't be able to improve relations with the U.S. even if it wanted to, if it became completely dependent on China.

Well, Nathan, Russia is using ties with North Korea to boost its war effort in Ukraine. According to South Korea's Yonhap News, North Korea has sent more than a thousand more troops to Russia this year. That's on top of the thousands deployed last year. Back in Washington, Karen, the Trump administration is making a move that could affect the next flu season. It's canceled a meeting of the Food and Drug Administration's Vaccine Advisory Committee that had been tentatively set for March 13th.

The committee was planning to discuss how to make next season's flu shot. It's usually a routine step to ensure that manufacturers have enough time to produce the proper doses. And Nathan Bloomberg News has learned U.S. health officials are reevaluating a $590 million contract for bird flu shots that the Biden administration awarded to Moderna. The review is part of a government push to examine spending on messenger RNA-based vaccines and shares of Moderna. They're down more than 4%.

Time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Michael Barr. Michael, good morning. Good morning, Karen. Hamas says it is ready to negotiate the next phase of the ceasefire in the Gaza Strip after handing over the remains of four hostages in exchange for the release of hundreds of Palestinian prisoners held by Israel. The truce is set to end this weekend. Former U.S. Deputy Assistant Secretary of Defense for the Middle East, Mick Mulroy.

Since they haven't agreed to enter into the second phase, that means the cessation of hostilities could be over and fighting could resume. And we've seen steps taken by the IDF, both mobilizing units and calling up reservists that indicate that might actually happen.

A school-aged child in Texas has died of measles. An outbreak in the state has grown to more than 120 cases. Almost all the cases are in unvaccinated patients. Epidemiologist Dr. John Brownstein. It's not just a rash. It can cause pneumonia, brain swelling, even death. We're seeing that now in Texas. It's a safe, effective vaccine, and that's the way you keep your kids safe and really the communities around you safe. It's really that simple.

Allies of former New York Governor Andrew Cuomo have formed a super PAC. It comes just days before Cuomo is expected to enter the New York mayoral race. And again, recapping, Academy Award winner Gene Hackman and his wife were found dead at their New Mexico home along with their dog. Police do not believe foul play was a factor. Hackman was 95. Global News 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg, Karen. All right, Michael Barr, thank you.

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Time now for the Bloomberg Sports Update brought to you by Tri-Estate Audi. Here's John Stashower. John, good morning. Good morning, Karen. Nixon Sixers at the Garden. The two teams had a memorable playoff series last year, but this season's been a nightmare in Philly, especially lately. They came in having lost eight in a row. We're on their way to another lopsided loss when they rallied. Sixers went from down 19 to up four, but Jalen Brunson, a big three, made a bunch of

free throws he was 15 of 16 from the line brunson finished with 34 points nicks pulled it out 110 105 at barclays looked like an upset nets led west leading oklahoma city by 15 at the half back came the thunder to win 129 121. the celtics six game win streak ended in detroit the much improved pistons won by 20. colorado avalanche four goals in the third period to beat the devils five to one in college basketball the madness

It's usually in March. We're not quite there yet, but a mad finish as Michigan State and Maryland were tied. Gillespie for three. Oh, it's gone to one.

Big Ten Network to call the Trey Holloman half-court shot for the Spartans. St. John's got 24 points of R.J. Lewis and won at Butler 76-70. The Red Storm have clinched at least a tie for the Big East regular season title. A win Saturday at the Garden over Seton Hall, and they win it outright. The NFL Players Association had their rank and file do a survey of their employers. The Dolphins got the highest grades. The Cardinals the worst when it came to team ownership. The only owner that got a grade of an F

It was the Jets, Woody Johnson, John Staschauer, Bloomberg Sports. Karen, Nathan. Coast to coast on Bloomberg Radio. Nationwide on Sirius XM. And around the world on Bloomberg.com and the Bloomberg Business App. This is Bloomberg Daybreak. Good morning. I'm Nathan Hager. The morning after NVIDIA Earnings Day. The most hotly anticipated earnings report arguably of the week, if not the month.

This morning, it seems investors are still trying to figure out how to react to it. The AI chip giant came out with a sales forecast that beat the average Wall Street estimate, but not the blowout result that a lot of investors have gotten used to over the last couple of years with this company. For more reaction, let's bring in Dan Ives, Global Head of Tech Research at Wedbush Securities. Dan, always great to talk with you, particularly about AI. Your reaction to these results from NVIDIA. Good morning. Good morning.

It's bullish. If you look at Blackwell, the next gen chip, 11 billion, that's basically three to four billion. I think most in the street were expecting even the bulls. The deep seek fears, you're not seeing it. It's smoke, no fire. I think this is one is the street digest this and the stock's green today.

The forecast for $43 billion in sales this quarter, as I mentioned, just above the average estimate. But there were some analysts who were calling for something like $48 billion or more. Does NVIDIA need to continue to produce the kinds of blowout results that investors had been getting used to?

Yeah, I actually don't think so. I think we were at that point, right, in terms of the hyper growth going from $1 trillion to $3 trillion. But now for this stock, $175, $200, you're not going to need these massive blowouts. It's actually the trajectory is so historic because they're the only game in town when it comes to these next-gen chips.

And there's only one Redfluence, Godfather, Bayi, Jensen, and Vinny. And I think you start to look at $6, $7 earnings next, you know, call it one, two years. And there's a stock that could have a two in front of it as we go into next year.

You say that NVIDIA is still the only game in town. There had been a lot of questions raised about DeepSeek. It sounds like you're putting DeepSeek on the back burner here. But how much of a threat could DeepSeek be down the line if it continues to produce an AI model that is potentially at much lower cost than NVIDIA? Yeah.

Look, DeepSeq's a great model, but so is ChatGPT and so is LAMA, and there'll be other models and they'll get cheaper. But for large-scale enterprise deployments, there's only one chip that you're using, it's NVIDIA. And I could also argue, as the models get cheaper, it's more GPU capacity. It's actually bullish for NVIDIA. So I don't view it that way, but remember...

Look, right now, everyone's trying to find a crack in the arm or AI bubble. Remember, a lot of the bears, they've missed this massive run in tech for the last three years. They're not finding it. I actually think this is the fuel for

for really the bulk is not just in NVIDIA, but really the broader AI revolution across the rest of tech, MagSav and others. So do you continue to see the hyperscalers, these big companies continuing to spend on AI the way that they have tens of billions of dollars every quarter? We've seen some companies talking about at least trying to scale back some of that capex.

Look, you have $325 billion of capbacks between, you'll call it the top six tech players. That's $100 billion increase year over year. Will that moderate going into next year? Of course. But you're essentially building out a new city.

And it starts to video, but then it goes to the hyperscales, goes to the rest of software, goes to cybersecurity, consumer data centers. And that's really where this is playing out. Look, are there certain things like Trump in terms of export controls and some other words? Of course. But the reality is, is that we're talking about once in a 40, 50 year build out. We've got NVIDIA in the pre-market trading around $132 a share. Are you adjusting your price target for NVIDIA?

175 base, 200 bull. And I ultimately think this is one where there's a lot of worries going into this. They produce flying colors in terms of coming out with this. Now you digest what this means going forward. China is going to be a player.

But ultimately, you know, NVIDIA continues to be that only game in town when it comes to next gen chips. Just 30 seconds left, Dan. How much does NVIDIA have to get past Wall Street estimates to get to that $200 bull case? Look, I think if they continue on this trajectory, especially with Blackwell,

I mean, I think you could be there in the next, you know, call it two, three quarters. But look, haters hate. That's what happens in video. They've missed every transformation on tech stock the last 20 years. They'll miss NVIDIA. We're both. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify or anywhere else you listen.

You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM Channel 121. Plus, listen coast-to-coast on the Bloomberg Business app now with Apple CarPlay and Android Auto interfaces.

And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it, in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Karen Moscow. And I'm Nathan Hager. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

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