Bloomberg TechnologyBloomberg's Ed Ludlow looks at the landscape for semiconductors as the US says its may curb AI chip exports from the likes of Nvidia and AMD over national security concerns. Plus, Nvidia's production delays may be over as Dell servers are set to ship out with the latest Blackwell chips, and more than meets the eye, the undisclosed human touch behind Tesla's Optimus robots.
From the heart where innovation, money and power Collie in Silicon Valley and beyond. This is Bloomberg Technology with Caroline Hyde and Ed loved Love.
Like from San Francisco. This is Bloomberg Technology. Tighter chip controls. Bloomberg reports the US is reviewing caps on AI chip sales to the Middle East.
From companies like in Nvidia.
Meanwhile, Dell says it's ready to ship servers with Nvideo's Blackwell AI accelerators, a sign production of the chips back on track.
We speak to a key executive, and.
Days after Tesla wild crows with its Optimus AI robops, we now know they were remotely operated by humans.
After all. We start with news that could have a.
Major impact USAI chip manufacturers, including in Nvidia. Sources tell bloom News that the Biden administration and officials have discussed capping sales of advanced AI chips to certain countries. The sources and officials are specifically focused on Persian Gulf countries that have shown a growing interest in AI data centers.
Looking at the.
Markets, these are the names that are impacted in VideA, AMD Intel. It's worth noting in that reaction that a part of the declines that if you're just joining US, have accelerated in the last thirty minutes is a really ugly earning sprint from ASML, which we'll get to momentarily. Bloombergs Ian King joins US in San Francisco. Okay, So the US is looking at some of these Middle East nations because we know they're throwing a lot of money behind AI. Previously US officials were looking at China and capping export of AI chips to them. What do we know about this latest initiative about blocking access to the accelerators.
Yeah, I mean this is obviously the key choke point, that the one thing that washing can do to really control what happens, who gets what capabilities. The concern is, as you said about China, but what will the Middle East do in terms of allowing access to these capabilities to China as on a remote basis? All kinds of considerations, all kinds of concerns. We've used export controls up until now. Now we're looking at perhaps a more broader blanket approach for our audience.
Some of the big technology sometimes they struggle to understand what it is the US is trying to prevent an AI accelerator is a high performance chip and it goes into a data center. How is it that any government can say to a company, okay, we cannot allow you to sell your best thing to any market. That's basically what they're trying to do, right.
That's exactly it.
It's trying to basically place a cap on the capabilities of a country or a company and stopping them from having the ability to develop an advanced AI model, which as we know, can have all kinds of capabilities. And once it's out there in the wild, who knows what happens with it.
Okay, let's get to the breaking news of the last thirty minutes. ASML, which is Europe's most valuable company but also a leading maker of chip equipment chip making equipment, has given us earnings and.
A pretty ugly forecast.
It has cut its gross bookings outlook for fiscal twenty five to a much more narrow range, and as we can see on the screen, it shares have reacted very negatively. What do we learn through that metric?
Yeah, I mean, bookings are really the way that a company says, hey, this is roughly what our revenue is going to be at this given point. It's a lead indicator. These machines, as we know, are absolutely enormous. They take a long time to make, so it's very much a leading indicator of demand for the whole of the industry.
Let's look at some of the other names they're impacted. So ASML makes the machines which manufacture the chips, it doesn't make the chips themselves. Why is it then that names like Nvidia and AMD Intel saw their own declines accelerate. What is it that we're learning about the sector as a whole.
A couple of things here.
One might be more ASML specific, but in general, chip equipment is as a leading indicator you buy equipment, particularly ASML's way ahead of time thinking about what you're going to be doing this time next year. But ASML's look at their customer base. Basically they have three customers. Two of those customers, some song in Intel right now, are in cutback mode. They're in trouble mode.
There is a link between the first story we covered and ASML, which is the United States along with allies, has also looked at the mechanism of controls on chip making equipment, and ASML has been at the center of that. In the context of extreme ultra violet lithography. Please take it from there and just explain why these machines are so critical and why governments want to control them.
Yeah.
I mean, you've got a production line lots of different machines made by lots of different companies Applied Materials here, Kla, ten Core here, Tokyo Electron, but the keystone piece of equipment is ASML. If you want to make an advanced tip, you need their EUV machine and they're not allowed to explort those to China because we, at least Washington doesn't want China to have that capability.
And interesting in all of.
This, and I kind of mentioned it a moment ago, this is Europe's most valuable company. They are a Dutch company with a footprint here in Silicon Valley, customers here in America. Where are they doing business principally, where are their biggest customers.
For everything advanced? I mean they have basically sixty percent of their revenue comes from Intel, Samsung and more importantly TSMC so all over the world wherever these factories are, but really concentrated in these companies that want to make the world's most advanced chips.
Bloomberg's Ian King, who leads to making up to coverage at Bloomberg, Thank you very much.
Now.
Earlier today, the US Department of Justice Deputy Attorney General Hetel Doshi spoke exclusively on Bloomberg's The Opening Trade and said this about the importance of competition.
I think that history has shown us that the considered judgment regulatory bodies and legislative bodies across the world has really been the competition fuels entrepreneurship and innovation.
In a way unlike anything else.
And that's why competition, rather than consolidation or concentration of power, is prize in both regulatory and enforcement.
Schemes across the world.
Okay, those are the top news items in tech today. Let's bring in Lisa Ericsson, head of Public Markets Group at US Bank four hundred and eighty billion dollars in assets under management. Let's get the investor analysis. Two pieces of semiconductor industry news. Right, Bloomberg reporting that the US is looking at export controls of aichips in the Middle East, and then ASML cutting it its gross bookings outlook, what is your assessment of where you want to treat the chip industry?
Right?
Now because for so long it has been the centerpiece I think for a lot of investors' attitude, at least towards the technology sector.
Lisa, Well, certainly what's going on in the chip industry and in technol in general is key for the US stock market simply because it is such a large weight and an influence not only on the capitalization and its price performance, but also in terms of a large share of the earnings drivers of what's going on in the S and P five hundred. So we do view any guidance and forward outlook coming out of the third quarter earning seasons from the technology industry as a whole, including chips, as certainly one thing.
To keep an eye on.
We are encouraged, even though we're very early in the earning season by initial reports of continued CAPEX spend both on technology in general as well as for AI related products. But again, as these earning reports continue to come out, we'll want to monitor for further impact.
You know, the reporting on the export controls for them at least you know it states quitequickly, this is the Biden administration thinking about it, and in November we have an election where the administration might change I will not ask you to comment on that reporting, but there must be an element where investors have to factor in the election as one fact or one risk in their approach to markets.
How do you approach that.
Lisa, Well, the election certainly is a toss up with the pulls and the prediction market so close. And to your point, whatever policy comes out of the election, whether it's in the president presidential race or in both houses of Congress, can make an impact on again how the economy is impacted by regulation and other issues. So we are monitoring that very closely. Obviously, right now there are some different views on where regulation may head, and so we just need to see what the outcome is. As we move forward into these next few weeks.
I guess calendar.
Fourth quarter or the month of October for earnings will be really interesting. Do you think that we'll find ourselves in the context of big tech, the mag seven in rude health or are you kind of expecting to go into this earning season braced for some signs of things tapering off, at least in the context of this US economy.
Well, certainly, if you look at the expectations for third quarter earnings contared to two Q investors actually have already adjusted for the fact that the economy and also corporate profitability and revenues are snowing. So just as an example, in the second quarter, we came in on the S and P five hundred and earnings said about eleven percent, and they're only expected to be about three point nine percent in the third quarter. That being said, three point nine percent for the third quarter is still a very solid number, and we believe that is certainly very achievable, especially since the bar for that it started earlier a few months ago at higher levels and has come down to three zero point nine percent, So that bar seems pretty reasonable and investor expectations have been dampened, so we do view it as an achievable number.
Lisa, what is the one thing that the technology investor must look at most closely in twenty twenty five.
Well, certainly again both the ongoing health of the consumering terms of demand for products, but more importantly as well, the appetite for capex is going to be important, and so again looking for that forward guidance that's coming out of these third quarter earnings reports, and also the demand and spend and proclivity for again that technology, particularly AI demand is really going to be key as we look at what's coming out of those guidance numbers.
Lisa Erickson had a public markets group at US Bank. Really great to have you on the program, Thank you very much. Let's take a quick look at shares of Apple, which touched an intra day record high in the session. Actually earlier this morning, Apple unveiled a new iPad Mini that it hopes will attract consumers to his early generatorve AI offerings. The tablet has an eight point three inch screen in Apple's a seventeen pro chip to power Apple Intelligence, which is due for release later this month. A new iPad Mini costs four hundred and ninety nine dollars for the Wi Fi.
Model and six hundred and forty nine dollars.
For the version that has a cellular connection. It goes on sale October twenty third. Now coming up on the program, Too Good to Be True a major reveal on the human touch that helped Tesla's Optimus robots appear to come to life. More on my reporting about that in just a little bit. Let's go back to SML. This is a big story. The shares in Europe are now down twelve point six percent, which I make the biggest drop intra day since two and two.
Very simple.
They only booked half the orders half the orders in the quarter the analysts were expecting. But they also lowered guidance for fiscal twenty five. They lowered the range of gross bookings, and as Ian King of Bloomberg News explained, this is a leading indicator. This is a chip equipment maker, the machines that make the chips, and it tells us looking forward that this is a sector that might be bracing for things to cool off. We will continue to track this story given the severity of that decline. ASML down twelve and a half percent. This is Bloomberg Technology. Hey, it's time for talking tech and first start Ericsson chez saw after announcing third quarter earnings beat analysts expectations. The company also announced to fifty five percent sales growth across North America. The strength thanks in part to a major partnership with AT and T.
Plus.
IBM is looking into misconduct allegations facing a top executive in China. A letter online accuses chairman Chen Zu Doong of accepting vouchers from external partners and violating the company's expense policies. IBM confirmed the letter is authentic. When reached by Bloomberg News, Chen declined to comment, and Warner Brothers discoveries Max is planning a major debut across New Asian markets. It comes as competitors like Disney and Amazon as scaling back investment in the region. Max recently launched in Japan through a partnership with a local streaming platform, and plans to launch in Australia in the first half of next year. Now, Bloomberg's learned that humans were remotely controlling some of Tesla's Optimist robot prototypes at its recent showcase.
Musk told the crowd the humanoid.
Androids would be quote the biggest product ever, but he did not disclose that they had human helpers on the night. The event was intended to generate investor buzz for upcoming products, but principally a Robotaxi. Bloomberg's Max Chafkin a Business Week and Elon Inc.
Joins me now and.
What we reported in the story Max yesterday, What sources told me is that this was kind of classic ELM. Three weeks before the event, he went to the team, the Optimist team and said I want optimists at the event, and they said, well, we don't have time to get the software ready. Teleoperation is our only option here. And now we know teleoperation was what was happening.
Yeah, I mean it does undercut some of the impact of the event, you know, looking at the way people reacted to it. You know, the optimist robots, I would say, was sort of the biggest surprise, the thing that seemed to, you know, excite the investors and attendees the most.
And as you say, ed the.
Fact that they were using teleoperation, essentially remote control. It really makes it clear that although there may be some mechanical breakthroughs here, it's not clear how far Tesla's really come on AI, which, if you remember, is the whole purpose of this whole thing.
You raise an important point, which was going into this because we reported intensely about it, the focus was Robotaxi, and on Friday, the morning after the event, the stockfell ten percent, in large part I think because there was a lack of detail about a future propriety ride hailing app.
Would you share that assessment.
Yeah, I mean, I think the problem here is that the Robotaxi story is still very much a story and nothing about the event kind of went against that. The event was held on a sound stage. I mean, you're talking about the tele operation of these Optimist robots, but you could make a similar critique about the.
Cars that were unveiled right there.
They're running on a closed course, you know, a handful of stops custom software. Not totally clear that the cars themselves were running exclusively on AI either. So again, you know, you have Elon Musk selling a vision of the future, but not necessarily showing a ton of progress in the present.
Elon Musk is often late, but as you know across many of his companies, he often does get there in the end. And that's kind of the sentiment that's been shared. So what do we think will happen with a ROBOTAXI and an Optimus spot will end.
A propriety ride hitting app go for it?
I mean, as you say, Elon Musk is often.
Late, and he's achieved a lot.
This is one area where he has not achieved as much as he said. You know, he's been promising robotaxis essentially next year for years and we saw him do it again, you know, in twenty twenty six, twenty twenty seven. You could kind of hear in his voice during the event a lot of uncertainty about when exactly this would happen. And and the problem is that or it's both a problem and an opportunity. Musk has clearly sort of swore of the company into this direction, saying that this is essentially the future of everything. It's such a big market. So I think investors are gonna are likely to give him a lot of leeway here because of course it's a big opportunity and it's Elon Musk, as you say, but nothing is nothing should be taken for granted.
Bloomberg's Max Chafkin of Elon Income Business Week, thank you very much.
So coming up here on Bloomberg Technology.
Dell is set to start shipping out servers with the newest Nvidia chips. We're going to speak with Arthur Lewis, president of Dell Infrastructure Solution Group.
Next.
This is Bloomberg Technology, all right.
In Vidia's rollout of its next gen AI black World chips begins with Dell, the largest seller of service, says they're ready to begin shipping out devices with the chip next month. The sign the production of Blackwell is back on schedule We're joined now by Arthur Lewis, President of Dell Infrastructure Solutions Group, and March has been reported and made about Blackwell a delay or no delay. I guess the starting point is to ask you, Arthur, if this was a surprise to you that you were able to adjust or pivot and then ship next month unexpectedly.
First, it's great to be back and thank you for having us on your show. No, not expect not unexpected at all. You know, we've been working on this very, very hard. If you think about, you know, the innovation that we've been delivering, you know, from you know the start of the ninety six eighty to you know what we announced at Dell Technologies World, from you know, Raxkill Infrastructure. You know, we talked about the fact that the Grace Blackwell product.
Was you know, on the roadmap and you know, would be.
Hitting for customer testing in the second half of this year with general availability coming next year. So we're just following through on the commitment that we made back at the beginning of this year.
So the last three months of the year calendar aar are going to look a lot better for Dell, now, aren't they.
Yeah, we have some really exciting products.
You know, customers are facing density and power constraints in terms of these large you know rack infrastructure. And so we have three you know, significant product announcements that we had today at OCP. You know, number one is the XC ninety seven twelve, which is the you know Grace Blackwell seventy two NVL inc form factor. This product, air cooled, is twenty five times more efficient than the H one hundreds.
But in addition to that, we're bringing density to compute.
We also announced a touring based A and D system, all direct to chip liquid cool that does.
Two amazing things.
Number One, it solves a density problem by providing twenty seven thousand cores per rack. And secondly, it's highly performed up to sixty times faster than the previous generation.
The industry, industry wide are not making margin on this. Are you going to make margin on this? And if so, how.
Yeah?
So I think you know, we showed that we were able to make margin in Q two, achieving eleven percent operating income for the.
Overall ISCHI business.
You know, our job is to remove the shroud of complexity and mystery around generative AI and deliver value to customers and we will be rewarded for that value in the Tier two CSP space as well as in the enterprise space, where we have even more opportunity to attach more of our service and storage offerings and networking offerings.
It was interesting what you're talking about there on the air cooling side. Everyone keeps asking me about liquid calling. What is the Dell position on liquid calling? Because with Blackwell, right, you were sampling the technology before you shipped it, and you must have thought a little bit about a pivot to liquid calling.
Perhaps we've been talking about liquid cooling since the beginning. You know, we have air cooling, liquid assisted cooling, rear door heat exchangers, heat capture cabinets, and direct to chip liquid cooling. You know, once you get into the one thousand TDP range, this is where directed chip liquid cooling is absolutely mandatory. But we have a wide variety of offerings that span the air cooling, the liquid assisted air cooling, the heat capture cabinet, the rear door heat exchangers, as well as the directed to chip liquid cooling. Not all environments are ready to support liquid cooling, but our portfolio is comprehensive and broad and supports all the requirements that customers have to deliver the most dense and energy efficient infrastructure in the market.
Arthur, before we let you go, give us insight into the reality of Blackwell volumes. This is small, right or is there some actual scale here to production?
Look, our volumes is you know, contemplated in the guidance that we provided at the end of Q two. If we have any date to that guidance, you know, we'll update that in Q three.
But you know, we're very.
Excited about the amount of innovation that's being driven in this space. If you think about you know, where we were at the beginning of the year, we were talking about Rack infrastructure with sixty two, yes, sixty four and seventy two GPUs. Now we're up to ninety six and one hundred and twenty a GPUs and we're talking about you know, scalable systems. I mean, think about this head seven hundred and sixty eight GPUs interwoven to operate as one system with integrated networking for maximum throughput.
It's just amazing what we're seeing.
Arthur Lewis's Dell Infrastructure Solutions Group. It's really great to have you back on the program. Thank you that does it For this edition of Bloomberg Technology, Stay tuned for special coverage ahead of an exclusive interview between former President Trump and Bloomberg Editor in chief John mickelf Wait, this is Bloomberg
