Nvidia Slides on Chip Curbs; China Open to US Dialogue
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Good morning, I'm John Tucker. And I'm Karen Moscow. Here are the stories we're following today. And Karen, futures are dropping on heels of a warning from NVIDIA. The chip giant says it's going to have to report about $5.5 billion in write-downs during the current quarter. That's because the Trump administration has barred NVIDIA from selling its H20 chip in China. And Bloomberg's Mike Shepard says the government is concerned the chip could be used in or diverted to a supercomputer in China.

And that is one of the concerns that the U.S. government has, is that in fact, by using a different package or stack of these H20 chips, and remember, the H20 chip has already been modified and scaled down for the China market, and that's owing to restrictions going back to 2022.

NVIDIA has been in the crosshairs since the Biden administration for the advanced chips it produces and sells and have been selling into the China market. And they have been looking to make sure that China doesn't get its hands on the best stuff. Bloomberg's Mike Shepard in Washington. Shares of NVIDIA right now down more than 5% in early trading.

Well, John, also adding to weakness to chip stocks this morning, a disappointing report from Dutch chip equipment maker ASML Holding. The company reported orders for the first quarter that were more than $1.1 billion less than expected. ASML is also warning that it doesn't know how to quantify the impact from recent tariff announcements, which are threatening to upend the semiconductor industry. And shares of ASML are down more than 5% in Europe.

And Karen, Tesla reportedly suspending plans to ship components from China for cybercab and semi-electric trucks in the U.S. Reuters says Elon Musk was prepared to absorb the additional costs when President Trump imposed the 34% tariff on Chinese goods, but could not do so when the tariff went beyond that. Shares of Tesla down more than 3% in early trading.

Now, John, let's get the latest on the escalating trade war between the U.S. and China. Bloomberg News has learned China wants to see a number of steps from President Trump's administration before agreeing to trade talks. That includes showing more respect by reining in disparaging remarks by members of his cabinet. Meanwhile, President Trump is calling on China to reach out for trade negotiations. And here's White House Press Secretary Caroline Leavitt. The ball is in China's court.

China needs to make a deal with us. We don't have to make a deal with them. There's no difference between China and any other country except they are much larger. And China wants what we have, what every country wants, what we have, the American consumer. Or to put it another way, they need our money.

White House Press Secretary Caroline Leavitt speaking yesterday. Sources tell Bloomberg that Beijing also wants the U.S. to appoint a point person for talks who has the president's support and can help prepare a deal that Trump and Chinese leader Xi Jinping can sign when they meet. And we have fresh economic data out of China. The economy there grew by a faster than expected.

5.4% in the first three months of the year, a surprising strength in the world's second largest economy comes as concerns mount over the potential impact of 145% U.S. tariffs on Chinese goods.

Well, John, as investors await the latest tariff developments, they will have a key speech by Jay Powell to digest. And we get a preview with Bloomberg's Michael McKee. Corporate leaders, economists, investors and Fed officials all have the same problem. Nobody knows what Donald Trump is actually going to do on tariffs. Fed Governor Chris Waller said Monday it's impossible now to forecast how the economy will develop.

which makes Fed Chairman Jay Powell's job much harder today. In his Chicago speech, the chair will attempt to reassure jittery markets that no matter what happens, the central bank will be on the job, able to raise rates if Trump's new taxes increase inflation or cut rates if they lead the economy to slow significantly.

He's said all that before, of course. It's not clear what he can add to that message today. Michael McKee, Bloomberg Radio. All right, Michael, thank you. Well, Bloomberg will bring you Jay Powell's full remarks from the Economic Club of Chicago. Coverage begins at 1.30 Wall Street time on Bloomberg Radio, Bloomberg Television, and the Bloomberg Podcast page on YouTube.

And looking over in Europe now, U.K. inflation slipped for a second straight month. Consumer prices rose just 2.6 percent in the 12 months to March. This was driven by cheaper computer games, falling fuel prices and unchanged food costs. Back here in the U.S., John, it appears the move to increase taxes for the ultra-wealthy is gaining traction among lawmakers, including Republicans. And Bloomberg's Amy Morris has more from Washington.

Republicans in the White House, the Senate and the House are considering a new tax bracket for the wealthiest Americans, with the House proposal setting a 40 percent rate for those earning $1 million or more per year. These talks are part of the effort to pay for a sweeping tax bill by the end of this year, with options including offsetting the cost of an expanded state and local tax deduction with a millionaire's bracket.

A White House official tells Bloomberg President Trump is open to the idea of a new top tax bracket, but for an income greater than a million dollars. In Washington, Amy Morris, Bloomberg Radio. All right, thanks, Amy. The government's antitrust trial seeking to break up meta-platforms, that continues today. In testimony yesterday, it was revealed seven years ago Mark Zuckerberg considered spinning off Instagram from Facebook, fearing the company might be broken up in the next five to ten years.

Well, the Federal Trade Commission is now suing Meta to break it up, alleging its acquisitions of Instagram and WhatsApp created a social media monopoly, while Meta argues it faces many competitors. And John, the White House is starting a new media policy that restricts wire services access to the president. The move blocks the traditional press pool access that serve billions of readers.

It comes after a judge ruled the White House had violated the Associated Press' free speech by banning it because it disagreed with the outlet's decision not to rename the Gulf of Mexico. The White House says it will ultimately give Press Secretary Caroline Leavitt the final say over who gets to question her boss.

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. A federal judge says she will order sworn testimony by Trump administration officials to determine if they complied with her orders to facilitate the return of Kilmar Abrego-Garcia.

The Maryland man was mistakenly deported to a notorious El Salvador prison last month. The U.S. Supreme Court ordered the Trump administration to return him, but the administration has so far refused, claiming he's in the MS-13 gang. White House spokesperson Caroline Levin. There is never going to be a world in which this is an individual who's going to live a peaceful life in Maryland because he is a foreign terrorist and a MS-13 gang member.

Abrego Garcia's attorneys deny the gang allegations and say he was never charged with a crime. Abrego Garcia's wife, Jennifer Vasquez-Sura. As we continue through Holy Week, my heart aches for my husband, who should have been here leading our Easter prayers. Instead, I find myself pleading with the Trump administration and the Bukele administration to stop playing political games.

with the life of Kilmer. Harvey Weinstein is back in a New York court as jury selection begins for his retrial on sexual assault charges. The legal representative for one of his accusers spoke outside court Tuesday, attorney Lindsey Goldbrum.

Over the next several weeks, these women will testify about these heinous acts that have been committed against them, and intimate details of their lives will come out. New York's highest court overturned Weinstein's conviction in his 2020 trial. Finally, we've lost a game show legend. And now, from Television City in Hollywood, here's your host on Gambit, Wink.

Thank you very much. Wink Martindale, host of such hit game shows as Gambit, which debuted in 1972, and Tic-Tac-Toe has died. Martindale began his career in radio. As publicist says, Martindale died after battling lymphoma for a year. Wink Martindale was 91. Global News, 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr. This is Bloomberg, Karen. All right, Michael Barr, thank you.

When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

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Time now for the Bloomberg Sports Update. Here is John Stashower. John, good morning. Good morning, Karen. Max Fried was the Yankees' big free agent signing so far as good as advertised. He's 3-0 as ERA is under 2 at the stadium. The Yanks failed to support him against Kansas City until the 6th inning infield single. Three straight walks and they had a run in and three on for Jason Dominguez. The 1-2. Line drive.

left field line. Chisholm scores. Volpe scores. They're waving home Wells. Wells scores. It's a bases clearing double for Dominguez. And the Yankees have taken a fourth

Four to lead. That was the final over the Royals. Yes, network to call. In Minnesota, Mets got home runs from both Pete Alonzo and Juan Soto. Alonzo's fifth of the season came first inning. Soto now homers in back-to-back games, but the twins scored in five straight innings, and they won 6-3. The Red Sox won 7-4 at Tampa Bay. Alex Bregman, two home runs, five hits, four RBIs. Nationals behind Jake Irvin won 3-0 to Pittsburgh. The NBA postseason is underway. A pair of wins by

home teams, Orlando by 25 over Atlanta. So the magic advance to play the Celtics. The Hawks now head home to play Friday against the winner of tonight's Miami Chicago game. The Warriors got a combined 75 points from Jimmy Butler and Steph Curry. 121 to 116 over Memphis. It'll be Golden State now against Houston.

Dallas tonight plays Sacramento. The winner plays Friday in Memphis. Devils won 5-4 in overtime at Boston. Devils finished third place in the division. They'll have a first-round playoff series with Carolina, the Islanders' last home game, a 3-1 loss to the Capitals. The Giants have the third pick of next week's draft. They are heading to Boulder to watch a private workout by Colorado quarterback Shador Sanders. John Stasch, Bloomberg Sports, Karen Jones.

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.

And among our lead stories this morning, it involves the tech sector, the Trump administration imposing new restrictions on NVIDIA chip exports to China. Let's get more on this story this morning with Kriti Gupta, host of Bloomberg Radio and TV. Joining us from our London studios, Kriti, good morning to you. Thanks for being with us. NVIDIA shares, I should say, among the most actively traded this morning, down about 5.3%. Now, NVIDIA and even TSMC were pledging

closer relationships with the Trump administration. What happened? Well, they're still kind of there. I mean, look, this is coming 24 hours after a big investment that NVIDIA had announced in the United States, and specifically in some of the southern states like Texas and Arizona, to the tune of $500 billion. But, John, to your point, the sentiment has completely taken a different tone. Now reporting a $5.5 billion hit because the U.S. is coercing

clamping down when it comes to the exports of some of NVIDIA's chips, specifically the H20 chip, which NVIDIA, by the way, has created as kind of a watered-down version of the traditional AI chip that is specifically catered to kind of circumvent and address some of the concerns from the U.S. government, first under Biden, now under Trump, and still be able to serve their Chinese clientele. But it looks like even that is coming across some pretty severe restrictions under the Trump administration.

Okay, so this clamping down even predates the Trump administration. Can we say it doesn't really have anything to do with the trade war that's taking place? It's definitely a piece of it. It feels like it. But remember, Jensen Wong has spent quite some time at Mar-a-Lago before even Donald Trump was elected. Ahead of NVIDIA. Right, ahead of NVIDIA, this announcement, to kind of make sure, like a lot of the tech CEOs are, they are on NVIDIA.

the winning side of this. That domestic investment is very much coming in that same vein. Remember, they're also choosing not to spend that $500 billion investment in Asia. That very much is a reaction function to the trade war. But this is actually one that has been happening, again, under the Biden administration. This H20 chip that Nvidia has developed is the third iteration of a chip

to circumvent government restrictions, like I said, not just under the Trump administration, but this entire effort started under the Biden administration, the CHIPS Act, and the restrictions there. This news we got, this came in a regulatory filing. It's not like it was an announcement from the Trump administration.

Yes, you're 100% right. This was a regulatory filing from Nvidia. This did not come under the Trump administration, but Nvidia going ahead and talking about a $5.5 billion hit to their bottom line. We should just mention, there are reports from other media that are suggesting about $17 billion to $18 billion worth of H20 chips that were already developed

from NVIDIA. So, the key kind of phrase that you need to keep an eye on in this filing is inventory, purchase commitments, and related reserves, because a lot of these chips have already been produced. So, it's a question of, if they don't go to China, where do they go, given that they are kind of this watered-down version? Okay, the H20 watered-down version. Again, this is a chip that specifically trains AI models.

It does. It specifically has to do with inference. And so the big concern from the Biden administration and the Trump administration has been that so much of AI is being used, not just in things like consumer electronics, like iPhones, like washing machines, but ultimately to things like military intelligence and more sophisticated technology.

Now, if the U.S. is able to export that critical piece or kind of help to that military technology to the likes of China, given the geopolitical tensions, that's where their concern lies. So, NVIDIA's solution to that was to create this chip that still helps these kind of consumer electronics and helps cater to a clientele in that space.

safe space, but isn't as advanced to the point that you can use them in military technology. And that's the difference here between the H20 chip relative to some of the other products that NVIDIA offers. You remember, like, before the trade war, one of the big concerns for investors had been AI investments, whether these were going to pay off in the long term and the capital expenditures. With respect to that, that sort of faded to the background. Isn't that a

back with us as a concern for technology? It is a little bit of a concern for technology, because remember, not so long ago, we were also talking about this big deep-seek kind of crash that had happened when it comes to the cost of innovation around AI as well. And this is where NVIDIA is kind of stuck between a rock and a hard place, because so much of that technology and that sourcing and that physical manufacturing is happening abroad because it's cheaper to happen abroad. On top of that, China has already proven they're able to come up with technology that

is almost eye to eye to what's being developed in Silicon Valley and do it at a fraction of the cost. Now, if that continues, that they are able to kind of really pull down those costs, that's a big deal because Nvidia developing those chips in the United States increases the cost of those chips.

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

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I'm Karen Moscow. I'm John Tucker. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

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