DeepSeek Rout Is Largest in Market History | Bloomberg: The Close 1/27/2025

DeepSeek Rout Is Largest in Market History | Bloomberg: The Close 1/27/2025

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♪ >> THE COUNTDOWN IS ON, EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS "THE CLOSE." ROMAINE: DEEPSEEK, DEEP SIXES THE DEEP AI TECH TRADE. LIVE FROM NEW YORK. ALIX: I GIVE YOU A LOT OF PROPS FOR BEING ABLE TO SAY THAT. WE ARE MONSTER DE-RISKING IN THE U.S. MARKET. THE S&P IS UP ALMOST TWO FULL PERCENTAGE POINTS.

WE ARE OFF THE LOW LOWS OF THE SESSION WHERE WE OPENED BUT A BRUTAL DAY. THE MONEY GOES INTO SAFE HAVENS, THE YEN, DOLLAR YEN THREE DAYS IN A ROW. THE 10 YEAR YIELD. ROMAINE: AND A HARD LESSON FOR INVESTORS

ABOUT VALUE AT RISK AND A HARDER LESSON FOR COMPANIES ABOUT IGNORING THE BLACK SWAN SLIDING INTO THEIR DM SPIRIT DEEPSEEK HAS BEEN KNOWN FOR MONTHS AND FOR AT LEAST THE LAST THREE WEEKS IT'S CHATBOT HAS SHOWN IT CAN PUNCH UP AND WORK AT A FRACTION OF THE PRICE WHICH RAISES QUESTIONS THE MONEY BEING SPENT BY TECH HEAVYWEIGHTS. NVIDIA IS THE BIGGEST BENEFICIARY OF THE CAPITAL EXPENDITURES AND ON PEACE FOR ITS BIGGEST PERCENTAGE DROP SINCE MARCH 2020. MARVELL IS HAVING ITS WORST DAYS SINCE 2001 AND ALL OF THE POWER COMPANIES ARE GETTING HAMMERED. CONSULATE -- CONSTELLATION ENERGY PLUNGING 20%. AND ANYTIME YOU SEE A MAJOR REPRICING OF A DOWNSIDE RISK, VOLATILITY SWELLS ALONG WITH IT. THE NASDAQ 100 VOLATILITY USING

ITS BIGGEST POINT JUMP AND SECOND BIGGEST DAILY POINT JUMP IN ALMOST FIVE MONTHS. ALIX: YOU CANNOT FIND MORE SUPERLATIVES. ANOTHER WAY OF LOOKING AT WHAT IS HAPPENING WITH NVIDIA. KING AT MARKET CAP LOSSES IN SINGLE NAMES AND NVIDIA RIGHT NOW AS OF 10 MINUTES AGO, THE LARGEST ON RECORD ON THE LAST KING LAST SEPTEMBER AND THAT WAS NVIDIA AGAIN AND A COUPLE ARE META AND APPLE. THE EXTENT TO WHICH WE HAVE

SEEN THE DECLINE, WE HAVE NEVER SEEN A MARKET CAP DECLINE ON A SINGLE STOCK NAME IN THE HISTORY OF THE STOCK MARKET. AND IT IS SO FAR ABOVE WHERE WE SAW THE LAST ONE AT A 280 BUT -- $280 BILLION LOSS. ROMAINE: A BIG QUESTION IS --IS THIS JUST A BLIP ON THE SCREEN? JOHN MELTON KICKS US OFF TO THE CLOSE WITH TO BELLY FUNDS -- CA BELLI FUNDS. WHEN YOU LOOK AT A SELLOFF LIKE THIS, ONE THAT SEEMS TO HAVE COME OUT OF NOWHERE, BUT WE HAVE BEEN WRITING ABOUT THIS FOR A WHILE. DOES THIS WHERE YOU?

>> THERE ARE SO MANY HEADLINES. TAKE A QUICK STEP BACK THE LAST MONTH. THE NEWS GETTING THE HEADLINES TODAY AND OVER THE WEEKEND WITH DEEPSEEK REALLY STARTED A YEAR AGO WHEN THEY RELEASED THEIR MODEL CALLED V2 WHICH INTRODUCED A LOT OF THE POTENTIAL BREAKTHROUGHS. THE BREAKTHROUGHS CAME TO FRUITION IN THE MODEL THEY REALLY STAY MONTH AGO. LAST WEEK THEY RELEASED THEIR LATEST REASONING MODEL WHICH COINCIDED WITH THE INAUGURATION. THERE HAS BEEN A LOT OF HEADLINES SINCE THEN.

MY TAKE ON DEEPSEEK IS THE ADVANCEMENTS THEY HAVE MADE ARE REAL AND SOMETHING TO PAY CLOSE ATTENTION TO IF YOU ARE AN NVIDIA SHAREHOLDER. ROMAINE: I WANT TO READ TO YOU A STATEMENT THAT NVIDIA SENT TO US SAYING IT IS AN EXCELLENT AI ADVANCEMENT. AND THEY SAY THE WORK ILLUSTRATES HOW NEW MODELS CAN BE CREATED.

BUT IT DISMISSED THE CONCERNS THAT THIS IS A NEGATIVE FOR AN NVIDIA. >> I THINK THERE IS CLEAR NEGATIVES FOR NVIDIA BUT ALSO POTENTIAL LONGER-TERM POSITIVES. ON THE NEGATIVE SIDE WHAT IS CLEAR IS DEEPSEEK HAS CREATED A WAY TO DO MORE WITH LESS. WHAT THEY HAVE DONE IS TAKEN PROFESSIONAL CERTIFICATION EXAM, LIKE I TOOK THE CFA EXAM AND THERE IS A LOT OF WAYS TO STUDY. YOU READ ALL 5000 PAGES OF THE TEXTBOOK OR YOU DO PRACTICE QUESTIONS.

WHAT DEEPSEEK DID IS WHEN THEY TRAINED THE REASONING MODEL THEY TOLD PRACTICE QUESTION APPROACH. THEY TOOK SHORTCUTS BUT CREATED SOMETHING THAT IS CAPABLE ENOUGH AND DID IT CHEAPLY. ROMAINE: I LOVE THAT ANALOGY. I DID THE PRACTICE ROUTE ALSO AND FAILED. ALIX: BUT IT IS OK. AND IT IS INTERESTING TO HEAR NVIDIA SAY DEEPSEEK WAS EXPORT COMPLIANCE. >> WITH NVIDIA THE BEST WAY IS TO NOT TRADE THE STOCK. OWN IT FOR THE LONG-TERM.

ON THE POSITIVE SIDE, WHAT COULD THIS DO FOR THE INDUSTRY MORE BROADLY IF THE COST OF AI TRAINING COMES DOWN? IT COULD MAKE THE APPLICATIONS MORE BROAD-BASED AND UNLOCK NEW POTENTIAL CUSTOMERS. THIS COULD BE GOOD FOR INNOVATION IN THE AI SPACE BROADLY WHICH WOULD BE GOOD FOR NVIDIA AND THE LONG-TERM. THE OTHER POINT I WOULD MAKE IS -- THIS IS GOOD FOR BIG TECH AS WELL SEPARATE FOR NVIDIA. GOOD FOR GOOGLE, AMAZON, COMPANIES THAT HAVE AI EMBEDDED IN THEIR P&LS.

THIS HAPPENS FROM TIME TO TIME IN TECH INVESTING, BIG TECH STOCKS GET LEFT FOR DEAD AND COME BACK. IT HAPPENED WITH MICROSOFT EUROS AGO. IT HAPPENED WITH APPLE AFTER STEVE JOBS PASSED AWAY. IT HAS HAPPENED MANY TIMES FOR GOOGLE.

AMAZON AND NETFLIX WERE NEVER GOING TO TURN A PROFIT. EXISTENTIAL QUESTIONS, AND THAT IS WHAT IS HAPPENING TODAY WITH NVIDIA. THERE ARE PLENTY OF NEAR-TERM QUESTIONS THAT THESE COMPANIES WILL HAVE TO ADDRESS THIS WEEK FOR EARNINGS. BUT I STILL SAY HOLD NVIDIA LONG-TERM. ALIX: AT THE END OF THE DAY IF WE GET INTO A WORLD WHERE WE CAN REDUCE THE COST AND YOU CANNOT CHARGE US A LOT FOR AI SERVICES.

WHO IS THAT BAD FOR? >> I WOULD SAY FIRST OF ALL IT IS PROBABLY BAD NEAR-TERM ON THE TRAINING SIDE. IT SEEMS TO NOT BE AS IMPORTANT TO INVEST MASSIVE AMOUNTS OF DOLLARS IN TRAINING TO GET THE BEST OUTPUT. DEEPSEEK IS SHOWING US THAT THERE ARE WAYS TO OPTIMIZE YOUR AI SPENDING IN A WAY THAT HASN'T BEEN DONE YET. IT IS PROBABLY BAD FOR THEM. FOR SOMEONE LIKE OPENAI AND THE MODEL COMPANIES, I THINK THIS IS SHOWING THAT THE MODELS CAN MONETIZE QUICKLY AND I THINK IT COULD BE BAD FOR THE MODEL COMPANIES.

THIS IS EVOLVING QUICKLY. BUT THAT IS WHERE I WOULD START, THE LOSERS. AND THEN THE DERIVATIVES, THE INDUSTRIALS AND POWER COMPANIES THAT WE WILL SEE HOW IT UNFOLDS.

NEAR-TERM PROBABLY FEWER MASSIVE DATA CENTERS CONSTRUCTED BUT COULD THERE BE MORE INFERENCING DATA CENTERS CONSTRUCTED? COULD THERE BE MORE AI INFRASTRUCTURE BUILT IN THAT WAY? WE WILL SEE. ROMAINE: YOU MENTIONED THE EARNINGS AND WE WILL HEAR FROM SOME OF THE HYPER SCALARS, THE BUYERS. DO YOU THINK WE WILL HEAR ANY MATERIAL CHANGE IN THE AMOUNT OF MONEY THEY HAVE COMMITTED TO THE PROJECTS? >> THAT IS ONE OF THE REALLY INTERESTING THINGS ABOUT THE LAST WEEK. THIS MODEL FROM DEEPSEEK WAS

LAUNCHED ON MONDAY. THE NEXT DAY YOU HAD THE STARGATE ANNOUNCEMENT WITH ORACLE AND WE CAN DEBATE HOW REAL IT IS BUT THE INVESTMENT PROGRAM. AND ON FRIDAY META PREANNOUNCED ITS PLANS -- ITS CAPEX PLANS. META IS GOING ALL IN ON THIS. TO ANSWER YOUR QUESTION, WILL THE COMPANIES BACKTRACK ON THE CAPEX FUNDS? I DON'T THINK SO.

I THINK IS THE INVESTMENT CYCLE FINALLY STARTING TO CREST? ROMAINE: I WANT TO ASK ABOUT THE MARKET REACTION TO META -- WHY DO YOU THINK INVESTORS WERE WARM ON META AS OPPOSED TO SOME OF THE OTHER SOFTWARE COMPANIES? >> I THINK NEAR-TERM PEOPLE TRADING DATA STOCK, THE BIG UNKNOWN THIS WEEK IS WHAT ARE THE CAPEX PLANS AND WHAT ARE THE OPEX PLANTS? -- PLANS? TODAY I THINK META IS AN INTERESTINGLY POSITIONED COMPANY. YOU HAVE COST OF INFERENCING GOING DOWN WHICH IS A DIRECT POSITIVE TO THEIR P&L. AND DEEPSEEK, THE OPEN SOURCE MODEL, META IS A BIG BET ON THAT. AND WE ARE A BIG HOLDER OF META. ALIX: GREAT TO GET THAT PERSPECTIVE. JOHN BELTON. THANK YOU SO MUCH. LET'S GET A CHECK ON VOLATILITY. AS YOU SEE THE MARKET SELLOFF YOU SEE THE VIX SPIKE.

JOINING US IS THE HEAD OF THE DERIVATIVES MARKET AT CEOE. THIS IS A DAY FOR VOLATILITY. WE ARE USED TO IT BEING LOW. HOW MUCH CAN IT RISE ESPECIALLY FOR THE NASDAQ? >> WHAT IS INTERESTING ABOUT TODAY'S SELLOFF, VOLATILITY IS HIGHER BUT IT IS STILL AN IDIOSYNCRATIC STORY ABOUT A GUY COME NVIDIA. MARKETS ARE NOT PRICING THIS TO BE A MACRO DRIVEN SELLOFF. THREE OF THE SECTORS WERE UP ON

THE DAY. HER SOMEONE OWNING VOLATILITY OR INDEX PROTECTION WHERE THE -- WHAT THEY ARE PLAYING FOR IS THE CORRELATION PICKUP IN THE MARKET. I THINK RIGHT NOW THE SET UP IS STILL FOR THIS TO BE A STOCK SPECIFIC FUNDAMENTALLY DRIVEN CORRECTION. WHEN WILL IT TURN IS THE QUESTION AND PEOPLE HAVE BEEN POSITIONING FOR A POTENTIAL FIX SPIKE MORE THAN WHAT WE SAW -- VIX SPIKE MORE THAN WHAT WE SAW TODAY. ALIX: WHERE IS THE CHEAPEST WAY TO GET PROTECTION? >> IF YOU LOOK AROUND -- VOLATILITY PICKED UP ACROSS THE BOARD. THE NON-TECH SECTORS, THAT HAS BEEN REVIVED. IF YOU LOOK AT SINGLE STOCK,

THE DIFFERENCE IS NEAR EXTREMES. AT THIS POINT IF YOU'RE LOOKING FOR GOOD VALUE, OWNING BROAD INDEX PROTECTION AND BROAD INDEX VOLATILITY STILL MAKES SENSE TO US IN THE SENSE YOU HAVE NOT GOTTEN THE CORRELATED SELLOFF THAT CAN REALLY DRIVE VOLATILITY HIGHER. ROMAINE: I'M CURIOUS ABOUT THE TIMING. THERE IS A STORY ABOUT FOLKS BITING CHEAP VOLATILITY PROTECTION LAST WEEK. AND THEN I THINK ABOUT THE EARNINGS SEASON AND THEN THINK SHOULDN'T PEOPLE DO THAT ANYWAY? ALL OF THESE BIG COMPANIES HAVE HIGH VALUATIONS AND ARE SET TO REPORT. ONE WILL SURPRISE TO THE DOWNSIDE I WOULD ASSUME. >> IN VIX OPTIONS WE HAVE BEEN SEEING A HUGE PICKUP IN CALL BUYING. AND OPTIONS BUYING THIS MONTH

HAS EXCEEDED LAST YEAR'S RECORD. AND IF YOU ARE INTERESTED IN PROTECTING AGAINST EARNINGS COME AGAINST CATALYSTS LIKE TODAY, SINGLE STOCK OPTIONS IS WHERE YOU WANT TO BE. AND SINGLE STOCK VOLATILITY TRADING AT RECORD AS A SIGN THAT PEOPLE ARE DOING THAT. ROMAINE: WHEN YOU LOOK AT SOME OF THE TRANSACTIONS ON SOME OF THE SINGLE STOCKS, DO YOU SEE PEOPLE HEDGE BY BUYING CALLS? >> IT DEPENDS ON THE NAME. IT IS -- WITH A NAME LIKE NVIDIA, YOU SEE BOTH. AND MUCH MORE ON THE PUT SIDE.

ALIX: WE DID HAVE A STORY ON THE TERMINAL SAYING WE ARE SEEING SELLING VOL RATHER THAN BUYING VOL. >> IT DEPENDS ON THE TENOR. IN VIX OPTIONS THE THEME IS BUYING. IF YOU LOOK AT S&P OPTIONS A LOT OF PEOPLE ARE STILL USING INDEX OPTIONS FOR INCOME. IF WE GET THE DIVERSITY OF USER

BASE OR USE CASES -- IT DEPENDS ON WHAT YOU'RE LOOKING AT. ALIX: AMAZINGLY ENOUGH, THERE IS ANOTHER BIG EVENT THIS WEEK WHICH IS THE FED ON WEDNESDAY. ARE INVESTORS POSITIONING FOR SOMETHING? >> THAT IS SOMETHING THAT IS A GOOD QUESTION. IF YOU LOOK AT RATES VOLATILITY. IF YOU LOOK AT THE MOVE INDEX, A COMMONLY USED METRIC, IT IS NEAR LOWE'S.

PART OF THE REASON THE MOVE INDEX IS AT LOWE'S IS BECAUSE IT IS DRIVEN BY THE FRONT END OF THE YIELD CURVE. IF YOU LOOK AT THE BACKEND OF THE YIELD CURVE, LONGER DATA BONDS WHERE THE VOLATILITY IS DRIVEN BY UNCERTAINTY OVER THE INFLATION OUTLOOK AND GROWTH OUTLOOK, VOLATILITY IS STILL ELEVATED. VIX TLT IS EXPOSED TO THE BACKEND OF THE YIELD CURVE, IT IS AT HIGHS. THE DIVERGENCE TELLS YOU THE UNCERTAINTY IS IN THE LONGER-TERM OUTLOOK.

IN TERMS OF THE FED, THE MARKET IS COMPLACENT. ROMAINE: IS A WAY TO ASSESS WHAT WE ARE -- IF WHAT WE ARE SEEING IS BASED ON GEOPOLITICAL CONCERNS? >> WITH THE NEW ADMINISTRATION, THAT HAS BEEN A HOT TOPIC. WHAT IS INTERESTING IS THAT THOSE I'VE SPOKEN TO OUR -- STILL BY MAKING SECTOR SPECIFIC BETS. BACK TO ELEVATED DISPERSION, THAT IS A THEME THAT A LOT OF PEOPLE ARE PRESSING THOUGH IT IS THAT EXTENDED LEVELS. MY CONCERN IS TARIFFS ULTIMATELY END UP HAVING OR OF A MACROECONOMIC IMPACT. ULTIMATELY HITTING THE CONSUMER AND THE U.S. CONSUMER MAKING UP 70% OF GDP

WHICH WILL HAVE A BIG MACRO IMPACT. THAT COULD TURN AWAY FROM IDIOSYNCRATIC FACTOR TO MORE OF A MACRO FACTOR AND THAT WILL HAVE A BIG IMPACT ON VOLATILITY IN THE MARKET MORE BROADLY. ROMAINE: IS THE READ COMING THROUGH THE ECONOMIC DATA OR FED MESSAGING OR THROUGH TRUMP ON TRUTH SOCIAL? >> I THINK EVERYONE -- I THINK TRUMP IS AT THE TOP OF EVERYONE'S TERMINAL. TRUMP AND THEN THE FED. ROMAINE: ALWAYS INSIGHTFUL AND WE APPRECIATE YOU STOPPING BY. A CLOSER LOOK AT THE VOLATILITY

OUT THERE ON THE DAY. SOME UPSIDE, SURPRISES. ESTEE LAUDER IS UP 1% AFTER A REPORT CROSSED THE WIRE THAT EVERCORE IS WORKING WITH ESTEE LAUDER ON A REVIEW OF THE COMPANY'S PORTFOLIO WITH BRANDS. ALIX: THIS FLIES IN THE FACE OF MY -- INVEST IN YOUR FACE THESIS. IT HAS BEEN LOSING WORK AT SHARE TO NAMES LIKE L'OREAL. THEY NEED TO FIND A WAY TO PICK BACK UP MARKET SHARE. ROMAINE:

AND THERE ARE A LOT OF ISSUES WITH CHINA. THEY RELIED ON AIRPORT SALES. AND THAT HAS BEEN AFFECTED. SOMETHING TO KEEP AN EYE ON.

IF YOU ARE LOOKING FOR A BRIGHT SPOT, CHECK OUT ESTEE LAUDER AS WE CONTINUE TO MONITOR THE SELLOFF COUNTING YOU DOWN TO THE CLOSE. WE HAVE A CONVERSATION WITH A FAMILIAR FACE IN FINANCE, BOB DIAMOND. ALIX: AND WE WILL DEEPER SEEK AND CHIP AWAY AT AMERICA'S LEAD AS THE SEMICONDUCTOR INDEX, STOCKS SLIDING 10%. WE WILL TALK ABOUT THE BROADER IMPLICATIONS OF THE SECTOR. ROMAINE: AND A FOCUS ON WHAT IS GOING ON DOWN IN WASHINGTON PARTICULARLY WITH THE AI RAISE AND A CONVERSATION WITH LIBBY CANTRILL OVER AT PIMCO.

A LOT OF GREAT GUESTS COMING UP. DON'T GO ANYWHERE. THIS IS "THE CLOSE" ON BLOOMBERG. ROMAINE: LET'S GET A VIEW FROM THE SELL SIDE. BIG MOVER IS ON THE BACK OF ANALYST EXPECTATIONS. WE WILL START WITH AN APPLE SUPPLIER, A WIRELESS CHIPMAKER GETS 40% OF ITS REVENUE FROM THE COMPANY AND IT GOT AN UPGRADE.

ACTIVIST INVESTOR A STAR BOARD AMASSED AN 8% STAKE IN THE COMPANY AND IT COULD SET QORVO UP. NEXT UP, TAKE TWO A BITE AT UBS. ANALYSTS EXPECTING THE RELEASE OF GRAND THEFT AUTO SIX TO DRIVE SENTIMENT SIMILAR TO THE STOCKS HISTORICAL OUTPERFORMANCE AHEAD OF MAJOR RELEASES. HE EXPECTS BOOKINGS, PROFITS AND FREE CASH FLOW TO REACH AN INFLECTION POINT. SHARES UP ONE PIPE ARE PRESENT.

AND FINALLY -- PULLING THE PLUG ON THE GREEN HYDROGEN COMPANY WITH A DOWNGRADE US OUT. THE WORST IS NOT OVER. HE SEES RISKS FROM POLITICAL UNCERTAINTIES THAT COULD IMPACT GOVERNMENT FUNDING. THE PRICE TARGET IS SET AT A STREET LOW. SHARES DOWN 7% ON THE DAY. THOSE ARE SOME OF OUR TOP CALLS.

WE WANT TO RETURN TO THE MAIN STORY OF THE DAY WHICH IS THE MASSIVE SELLOFF IN TECH LED BY NVIDIA. OUR NEXT TEST -- OUR NEXT GUEST ENCOURAGES INVESTORS TO MAYBE BUY THE DIP. JOINING US IS A TECHNOLOGY AND INFRASTRUCTURE ANALYST AT NEW STREET RESEARCH.

PUT THIS INTO PERSPECTIVE FOR US BECAUSE THERE IS A LOT OF TALK ABOUT DEEPSEEK. IT HAS BEEN AROUND FOR A YEAR AND IT RELEASED A MODEL A YEAR AGO. IT HAD TWO RELEASES, ONE IN DECEMBER AND ANOTHER IN EARLY JANUARY. IT SEEMS TO HAVE FINALLY CAUGHT THE ATTENTION OF U.S. INVESTORS. CAN YOU EXPLAIN WHY?

>> THANK YOU FOR HAVING ME. I WOULD SAY DEEPSEEK IS A GROUP OF EXCEPTIONALLY TALENTED INDIVIDUALS WORKING WITH LITTLE AND IT RESULTED IN IMPRESSIVE EFFICIENCY. THAT MEANS THAT FIRST, THIS FITS OUR FRAMEWORK -- MODEL FRAMEWORK ON OPTIMIZATION. THE CUTTING EDGE LIKE THE ONE DEPLOYED BY AI IS PRIMARILY FOCUSED ON UNLOCKING GROUNDBREAKING CAPABILITIES. AND YOU HAVE SMALLER PLAYERS LIKE DEEPSEEK ON THE OTHER SIDE INNOVATING THE LAGGING EDGE AND REGULATING ADVANCED FEATURES WITH FAR LESS COMPUTE.

THERE IS NOTHING OUTSIDE OF THE ORDINARY. MISTRAL INTRODUCED A CHEAPER MODEL IN 2023. FRONTIER PLAYERS OPTIMIZED THEIR OWN MODELS TO REMAIN COMPETITIVE. AND ALL OF THIS HAS A NET

POSITIVE IMPACT. THIS IS GENERATIVE GOT -- EVERY TIME THE COST OF TRANSISTORS CAME DOWN 2X WE BOUGHT MORE THAN 2X OF TRANSISTORS AND THE SAME DYNAMIC WILL PROBABLY PLAY OUT IN GENERATIVE AI. DEEPSEEK IS MORE SPECIALIZED. IT HAS SMALLER SPECIALIZED EXPERTS.

V3 WILL BE FOCUSED ON MATH AND SCIENCE WITH ITS TRAINING WHICH WILL EXPLAIN ITS ABILITY TO DO BETTER AT MATH AND SCIENCE TESTS AND ITS POOR PERFORMANCE IN GENERAL KNOWLEDGE. THE BOTTOM LINE IS THERE IS NOTHING FUNDAMENTALLY NEW. JUST A CONTINUATION. I WOULD DEFINITELY BUY THE DIP. ALIX: TWO THINGS STAND OUT, EVENTUALLY CHIPS WILL LOSE THEIR PRICING POWER AND NOW WE HAVE MORE RISK OF EXPORT CONTROLS IN RELATION TO CHINA. HOW DO YOU FACTOR THOSE IN? >> I WOULD SAY FIRST OF ALL TODAY CHINA REPRESENTS, IT HISTORICALLY REPRESENTED AROUND 20% OF NVIDIA'S DATA CENTER REVENUES. THE COMPANY HAS REPORTED THAT

IT HAS REACHED HISTORICAL LEVELS. IN THE CONTEXT OF THE COMPANY GROWING REVENUES WILL HEIGHTEN SEQUENTIALLY. IF CHINA GETS OUT OF NVIDIA'S DATA CENTER REVENUES IT WOULD NOT BE A KILLER FOR GROWTH OVER MULTIPLE QUARTERS. THAT IS THE FIRST THING TO TAKE INTO ACCOUNT.

AND IF YOU HAVE A DATA CENTER BUILDOUT OVER THE COMING YEARS, THERE ARE SO MANY DATA POINTS THAT WE CAN USE TO BUILD OUR CONVICTION THAT NVIDIA WILL STILL GROW SIGNIFICANTLY. TAKE THE SPEND FOR 2028. TAKE BROADCOM SUGGESTING HYPER SCALARS WILL EACH BUILD CLUSTERS OVER THE COMING YEARS AND THAT ALIGNS WELL WITH THE STARGATE PLANS. ROMAINE: I WANT TO ASK YOU A QUICK QUESTION BEFORE WE RUN OUT OF TIME AND IT HAS TO DO WITH THE CHIP SIDE. I KNOW WE DON'T KNOW A GREAT DEAL ABOUT HOW DEEPSEEK GOT TO WHERE IT WAS BUT THEY CLAIM THEY ARE USING LESS POWERFUL CHIPS.

IS THERE ANY SENSE THAT OTHER COMPANIES WOULD GRAVITATE AWAY FROM THE HIGH-END CHIPS THAT NVIDIA MAKES TO LESS POWERFUL CHIPS? >> I DON'T THINK WE ARE HEADING TO A WORLD WHERE WE USE LESS POWERFUL CHIPS. THE REASON IS AI SCALING. WHEN YOU LOOK AT THE RECENT ADVANCEMENTS WITH 03, IT WAS A REMARKABLE BREAKTHROUGH. THEY SHOW AN UNPRECEDENTED ABILITY TO GENERALIZE. SO YOU NEED THE MOST ADVANCED CHIPS WITH SIGNIFICANT -- COUPLED WITH ADVANCED CPUS. THAT ALL MEANS IT IS NOT BY GOING TO SMALLER CHIPS THAT WE WILL MOVE TO BETTER MODELS. SO I WOULD SAY I REALLY DO NOT

BUY THAT THESIS AT ALL. ALIX: THANK YOU SO MUCH. ANTOINE FROM NEUSE SEARCH RESEARCH -- NEWS -- BOB DIAMOND WILL JOIN US. THIS IS BLOOMBERG. ROMAINE: 3:30 P.M. HERE IN NEW YORK, THIS IS THE COUNTDOWN TO THE CLOSE. ALIX: LOOKS TO BE AN UGLY CLOSE, THE S&P UP BY 1.7%, THE NASDAQ UP BY 3.3%, IT IS ONLY DOWN TO

TENS -- TWO TENTHS. ROMAINE: HEALTH CARE STOCKS ARE UP. WE WILL SEE WHERE THE BRIGHT SPOTS WERE. THERE IS A COMPANY DOING PRETTY WELL TODAY, APPLE. ALIX: GO FIGURE, I WONDER IF THAT'S PART OF I CHATGPT OR AI GETS CHEAPER. ROMAINE:

I WILL NEVER GET AI ON MY PHONE. YOU HAVE TO OPT INTO IT. ALIX: FAIR ENOUGH. WAS ALSO INTERESTING IS THE BROADER SENSE OFM DO YOU BUY THE DIP OR IS THIS THE BEGINNING OF A BIGGER CORRECTION? WITH US IS BOB DIAMOND, GREAT TO SEE YOU. I KNOW AI IS NOT YOUR JAM IN

PARTICULAR BUT MY QUESTION I'VE BEEN THINKING ABOUT ALL DAY IS, BUY STOCKS, SELL BONDS, BY DOLLAR, DOES NOT GO AWAY IF THE AI TRADES GOES AWAY? >> I DON'T THINK THE AI TRADE IS GOING TO GO AWAY. I THINK IN MY VIEW, WE DON'T KNOW A LOT YET ABOUT THE DETAILS. IF THIS IS A COMPETITIVE, EFFICIENT, LESS EXPENSIVE ALTERNATIVE, I THINK IT'S GOOD FOR BUSINESS.

I THINK OF OUR FOCUS BEING ON THE CONSOLIDATION HAPPENING AND GOING TO HAPPEN FOR REGIONAL AND COMMUNITY BANKS, WHICH IS VERY EXCITING. ALL OF THEM NEED MORE TECHNOLOGY. ALL OF THEM ARE LOOKING AT VARIOUS METHODS OF AI. IF IN FACT THIS BRINGS IN A VERY EFFICIENT LESS EXPENSIVE ALTERNATIVE AND MORE COMPETITION, FOR BUSINESSES, NOT FOR NVIDIA OR OTHER, BUT FOR BUSINESSES, THIS IS GOOD. ALIX: IN TERMS OF THE CEO COMPETENCE, CAPITAL MARKETS WIDE OPEN -- BUT IF WE SEE THIS AI ROUTE SPREAD IN/OR CONTINUE -- AND/OR CONTINUE, DOES THAT DENT OPTIMISM? >> THIS IS A CORRECTION. THAT IS ALL YOU CAN SAVE YOUR

GOOD SOMEONE ASKED ME EARLIER TODAY, WILL THIS TRIGGER A ROAD IN THE STOCK MARKET? ONLY IF THERE WAS A ROAD WAITING TO HAPPEN -- ROUTE WAITING TO HAPPEN. I THINK IT'S A CORRECTION AT THIS POINT. THE FUNDAMENTALS FOR AI ARE IMPROVED IF THERE ARE ALTERNATIVES AND COMPETITION. ROMAINE: THE SELLOFF IS CONFINED BE EVIDENCE BROAD-BASED BUT YOU ARE NOT SEEING THE NON-TECH PLAYERS GET DRAGGED INTO THIS. IS THAT A SIGN OF A HEALTHY

MARKET? >> I THINK THE MARKET IS HEALTHY. ONE OF THE THINGS WE FORGET, GOING THROUGH THE INAUGURATION, WATCHING THE PRESS FROM DAVIS IS, -- DAVOS IS, THE ECONOMY IS IN GOOD SHAPE. 3% GDP, 3% INFLATION, UNEMPLOYMENT IS4.1%, WHICH IN ESSENCE IS FULL EMPLOYMENT. WE HAVE A GOOD ECONOMY RIGHT NOW.

FROM THE AREAS WE FOCUS ON IN INVESTING, THE CHANGE IN ATTITUDE TOWARDS THE REGULATION IS PROBABLY THE SINGLE MOST IMPORTANT THING FOR BUSINESS OWNERS AND FAMILY OFFICES AND BUSINESSES. ROMAINE: TALK ABOUT THOSE PLACES THAT YOU ARE INVESTING. WHEN I HEAR DEREGULATION COMING OUT OF WASHINGTON, WHAT IS IN YOUR PORTFOLIO STANDS TO BENEFIT FROM IT. >> THIS IS A BIT OF A SOUNDBITE, I APOLOGIZE, BUT IT'S ONE OF MY FAVORITE SOUNDBITES -- THERE'S A DOCUMENT IN GOVERNMENT CALLED THE CODE OF FEDERAL REGULATIONS.

IT IS 180,000 PAGES. WE HAVE JUST BEEN THROUGH FOUR YEARS OF GARY GENSLER AND ELIZABETH WARREN BLOCKING LOGICAL TECHNOLOGY APPROVALS AND BLOCKING LOGICAL CONSOLIDATION. COMING UP NOT NECESSARILY POSITIVE ON BANK CONSOLIDATION. JUST TO PUT THAT IN PERSPECTIVE, THEY WERE KIND OF WORRIED ABOUT THE BIG FOUR AND CONSOLIDATION IN BANKING YET WE HAVE 400,000 REGIONAL AND COMMUNITY BANKS THAT ARE IMPORTANT TO OUR ECONOMY -- AND SMALL BUSINESSES AND CONSOLIDATION WILL MAKE THEM STRONGER.

WE SHOULD BE EXCITED FOR THIS OPPORTUNITY IF WE ARE LOOKING FOR MORE COMPETITION AND DEPTH IN FINANCIAL SERVICES AND WE ARE VERY CONFIDENT THE ATTITUDE TOWARDS IMPROVING LOGICAL TRANSACTIONS OR TRANSACTIONS THAT ARE GOOD FOR BANKING AND COMPETITION WILL BE APPROVED. ALIX: HENCE THE ANIMAL SPIRIT AND U.S. EXCEPTIONALISM. ROMAINE: YOU ARE NOT GOING TO DOUBLE CHECK THAT. ALIX: WHERE WOULD YOU SEE REGIONAL TIRES -- TIE UPS? IS IT BASED ON LOCATION? WHAT DO YOU SEE? >> THERE'S A LOCATION ASPECT ONE CONSOLIDATION IS AT ITS MOST SUCCESSFUL, WHEN IT IS ABOUT COST SYNERGIES. ACQUISITIONS THAT HAPPEN WITHIN STATE MAKE A LOT OF SENSE.

IF YOU THINK ABOUT IT, THERE'S 4.5 THOUSAND BANKS IN THE U.S. ONE OF THE IMPACTS OF THE FAILURE OF SVB AND FIRST REPUBLIC REPUBLIC WAS THE REGULATORS WERE VERY FOCUSED ON THE SMALLER TYPICALLY PRIVATE COMMUNITY BANKS, WHICH FOR A DECADE AFTER DECADE HAVE HAD 10 TO 15, TO 20 PERCENT RETURN ON EQUITY. WITH A FOCUS ON INVESTING IN COMPLIANCE AND TECHNOLOGY, SO MANY OF THEM TODAY ARE TOO SMALL TO SUCCEED.

AND SO, OUR APPROACH IS TO INVEST IN REGIONAL BANKS THAT WE THINK HAVE VERY STRONG LEADERSHIP AND PROFITABILITY NEED MORE CAPITAL TO SHORE UP THE CAPITAL RATIOS OF COURSE, STAY BELOW THAT 100 THOUSAND LEVEL -- 100,000 LEVEL WHICH TRIGGERS MORE CAPITAL AND LOOK FOR OPPORTUNITIES TO ACQUIRE THE SMALLER TOO SMALL TO SUCCEED INSTITUTIONS WHERE THE COMBINATION WILL BE GOOD FOR BOTH. THE SYNERGIES ARE ABOUT COSTS, TECHNOLOGY, COMPLIANCE, REGULATION, AND IT WILL MAKE THEM STRONGER. ALIX: WHERE DOES DEI FIT INTO THAT NOW? IF YOU ARE LOOKING FOR MERGERS, IT WOULD BE DIFFERENT THAN A FEW YEARS AGO.

>> I THINK WHAT YOU AND I HAVE SEEN SINCE THE INAUGURATION IS JUST A VERY DIFFERENT ATTITUDE TOWARD THE PRIORITY OF THAT. I THINK IN TERMS OF THE BOARDS OF THE KIND OF INSTITUTIONS WE ARE LOOKING AT, THEY ARE INFERRED LEADERSHIP FROM ME -- FROM A DEI POINT OF VIEW TODAY. WE ARE STARTING UP FROM A POSITION OF STRENGTH. ROMAINE: ALWAYS GREAT TO HAVE YOU, BOB DIAMOND, FOUNDING PARTNER AND CEO OF OCULUS MARGIN -- ATLAS MERCHANT CAPITAL. AFTER THE BREAK, A CLOSER FOCUS ON THE HYPER SCALARS, TAKING A HIT , NOT QUITE AS GOOD AS THE CHIPMAKERS. WE WILL TALK ABOUT WHAT IS AILING THEM, AND COULD THIS BE A TURNAROUND IN THE FUTURE? THIS IS BLOOMBERG.

ROMAINE: TIME FOR THE STOCK OF THE HOUR. INVESTOR CONCERNS OVER DEEPSEEK, TAKING A TOLL ON HYPER SCALERS. ANURAG RANA JOINS US RIGHT NOW. LET'S START OFF YEAR WITH THE DOWN TRACK WE ARE SEEING IN THESE NAMES AND WHAT IS DRIVING THAT, WOULD THAT NOT LOWER THE COST OF ORACLE IN THESE OTHER COMPANIES OR AM I MISINTERPRETING IT? >> YOU ARE ABSOLUTELY RIGHT, AS FAR AS MICROSOFT AND AMAZON ARE CONCERNED, IN THE LONG RUN, THIS IS GOOD FOR THEM. PEOPLE ARE ASSOCIATING MICROSOFT AND OPENAI TOGETHER BUT ONE OF THE MOST IMPORTANT THINGS THAT PEOPLE MAY NOT KNOW IS MICROSOFT'S REVENUE, A LARGE PORTION OF THAT COMES FROM INFERENCING, WHEN YOU ARE USING THE APPLICATION AND WHATEVER RESULTS COME OUT OF IT NOW NOT SO MUCH FROM THE TRAINING PART OF IT, THAT'S KIND OF THE DEAL W THEY HAVE WITH OPENAI. ORACLE IS NOT OF THE SAME PAR IN TERMS OF THE MARKET SHARE IN CLOUD INFRASTRUCTURE AS AMAZON OR MICROSOFT OR GOOGLE. IT IS MUCH LOWER IN THE ORDER. THE CONTRACT THEY WERE GOING TO

GET TO BUILD A LARGE STATA CENTER, THE ANNOUNCEMENT MADE A FEW DAYS AGO HAD THE POTENTIAL TO SIGNIFICANTLY INCREASE OUR MARKET SHARE. THE BIG QUESTION IS DO WE STILL NEED TO SPEND $500 BILLION TO COME UP WITH DATA CENTERS ACROSS THE COUNTRY? THAT IS THE BIG QUESTION AT THIS POINT AND IS THE REASON ORACLE IS GETTING FAR BIGGER AHEAD THAN COLLECT LIKES OF AMAZON AND MICROSOFT. ALIX: SOME OF THE SOFTWARE GUYS LIKE WORKDAY AND SALESFORCE ARE OUTPERFORMING, WHY? >> THE SAME THING ROMAINE MENTIONED, IF THE COST OF RUNNING THE TRANSACTION GOES DOWN, THAT GOES UP. MICROSOFT'S OFFICE COPILOT PRODUCT WAS BEING SOLD AT $30 PER USER PER MONTH AND IT DID NOT HAVE MUCH OF AN ADOPTION AND THEY CHANGE THE PRICING TO A CONSUMPTION PRICING TO GET PEOPLE USED TO IT BUT IMAGINE THAT PRODUCT GOING DOWN, FOR THE SAKE OF DISCUSSION FIVE TO SEVEN DOLLARS FOR WHAT THEY CHARGE FOR TEAMS AT THIS POINT. COMPARED TO THE BASE PACKAGE. THAT WOULD HELP. WHAT YOU ARE SEEING IN THE SOFTWARE WORLD IS SOMEBODY LIKE AT SALESFORCE -- IF THE COST OF TRANSACTION GOES ON FOR THEM, YOU WILL SEE MORE PEOPLE USE THEIR AI ENHANCEMENTS, SAME THING FOR ADOBE, ETC ROMAINE: WHEN WE START TO GET THESE CONFERENCE CALLS, DO YOU THINK IT WILL ADDRESS THIS HEAD-ON, WHAT WE LEARNED TODAY ABOUT DEEPSEEK? >> THEY BETTER. THIS WILL BE THE MOST IMPORTANT

QUESTION ON EVERY TECH CALL GOING FORWARD. DOES THAT CHANGE THE CAPEX REQUIREMENT AND MARGIN STRUCTURE DOWN THE ROAD? THIS WOULD PROBABLY BE THE CENTRIC QUESTION FOR ALL CONFERENCE CALLS GOING FORWARD. ALIX: REALLY APPRECIATE IT. ALWAYS GOOD TO CATCH UP WITH YOU. ONE OF THE BEST OVER AT BLOOMBERG INTELLIGENCE. THE SECOND DERIVATIVE OF WAS GETTING HIT OUR ENERGY STOCKS, YOU'RE LOOKING AT BISTRO, THE WORST GE, THE POWER PLAYERS THAT WOULD PROVIDE FOR THE DATA CENTERS, GETTING HIT HARD. TYPICALLY UTILITIES DO WELL IN A SELLOFF. ROMAINE:

ELECTRICITY AND POWER COMPANIES ARE HAVING AN AWFUL DAY, IS THE WORST DAY SINCE 1987 , HE HAD OTHER NAMES GETTING CAUGHT UP IN ALL THIS. YOU LOOK AT THESE NUMBERS AND NVIDIA, EVERYONE IS SAYING AI IS OVER, WE ARE MOVING ON, IS THAT THE CASE? ALIX: MAYBE ON THE BATHWATER. THE POWER GUYS ARE SAYING THIS IMPLIES ANY UPLIFT HAS BEEN WASHED OUT. AI OR BUST AT THE END OF THE DAY. WE ARE 15 MINUTES UNTIL THE CLOSE OF TRADING. THE DOW IS UP AND THE EQUAL WEIGHTED INDEX ALSO PRETTY MUCH >> THESE EXISTENTIAL QUESTIONS COME UP FROM TIME TO TIME, THAT'S WHAT'S HAPPENING TODAY WITH NVIDIA .

I THINK THERE ARE PLENTY OF NEAR-TERM QUESTIONS THESE COMPANIES WILL HAVE TO ADDRESS DURING EARNINGS THIS WEEK. BUT I AM STILL A HOLDER OF NVIDIA LONG-TERM. ROMAINE: JOHN BELTON, TALKING ABOUT HIS HOLDINGS OF NVIDIA, THE STOCK DOWN 17% RIGHT NOW AS WE HEAD TOWARDS THE CLOSE. THE MAIN DRAG ON THE BROADER INDICES, INCLUDING THE NASDAQ 100 NDS AND BIG. ALIX: IF YOU WANT TO LOOK AT TECH, LOOK AT THE EQUAL FLAT ON THE DAY. CHIP PAIN, LOOKING AT ITS WORST

DAY SINCE MARCH OF 2020. THAT WAS SHUT DOWN TIME. ROMAINE: WE HAD THE OPEN 6% LOWER, AT 1.10%, NOW -- AT ONE POINT, 10%, NOW 9%, DEEPSEEK DOES NOT POSE A RISK OF SOME OF THESE COMPANIES, BUT 10% ON THE INDEX LEVEL? 20% ON THE INDIVIDUAL STOCK LEVEL? ALIX: MAY BE BATHWATER AND WOULD WE HAVE A DIFFERENT FLAVOR HERE? ALSO THE VALUATION WAS SO HIGH AND SO CROWDED, YOU HAVE TO WONDER IF FUNDS OUR MOVING THINGS AROUND AT THIS POINT. ROMAINE: LET'S BRING IT UP WITH OUR NEXT GUEST, LORI CALVASINA. HEAD OF EQUITY STRATEGY WITH RBC CAPITAL MARKETS. I WAS LOOKING AT YOUR WEEKLY

NOTE, WHICH I ASSUME WAS WRITTEN BEFORE THISDEPSEEK STUFF CAME OUT, BUT YOU TALKED ABOUT A RELATIVELY SOLID EARNINGS SEASON SO FAR AND YOU QUOTE ALL THESE COMMENTARIES WE'VE GOTTEN FROM THE CONFERENCE CALLS -- I COULD NOT HELP BUT NOTICE THOSE QUOTES INCLUDED AI IN SOME FORM OF ANOTHER. -- OR ANOTHER. DOES THAT CHANGE THE NARRATIVE AT ALL OR IS THIS A ONE-OFF THING AND THE OVERARCHING NARRATIVE IS THE SAME? >> IT'S A GREAT QUESTION. I'LL BE HONEST WITH YOU. MY TEAM AND I WERE JOKING, THERE WAS MORE AI COMMENTARY THAT CAME OUT LAST WEEK THAN THE PRIOR WEEK WHICH WAS HEAVY AND FINANCIALS AND THAT IS SOMEWHAT INTERESTING IN AND OF ITSELF. WE ARE ON THE CUSP OF GETTING THIS DELUS -- THIS DELUGE FROM COMPANIES NEXT WEEK AND THAT IS ONE WE WILL LEARN SOME THINGS. I WOULD NOT OVERREACT TO ONE DAY. THE PROBLEM WE'VE HAD, GOING

BACK THE LAST FEW QUARTERS, THE PAST YEAR, WE KEEP GOING INTO THESE REPORTING SEASONS, AND PEOPLE LOOK AT THE MAG 7 AND SAY THE VALUATIONS ARE EXTREMELY HIGH, SO WE GET THE FINANCIALS AND THINGS LOOKS PRETTY GOOD -- THINGS LOOK PRETTY GOOD THEN WE GO IN AND THERE'S ONE OR TWO OF THESE TECH COMPANIES THAT DISAPPOINTS A LITTLE BIT AND SOME VOLATILITY AND THE OTHERS ARE STRONGER, WE GO TO SEASON THE ANALYSTS GO BACK TO THE DESK AND UPDATE THE MODELS AND MAGICALLY WE SEE SOME RESILIENCE IN THOSE BIG NAMES. YOU'VE HAD THIS DECELERATION AND EARNINGS GROWTH ANTICIPATED FOR THE BIG TECH COMPANIES. BUT THEY KEEP FIGHTING BACK. THIS IS SORT OF A CHAPTER IN THAT LONGER SAGA WE HAVE BEEN GOING THROUGH FOR YEARS. I DON'T KNOW THAT IT'S TERRIBLY DIFFERENT YET. ROMAINE: YOU CAN'T GO DEEP INTO A SINGLE SOCKS BUT I WANT TO USEMETA AS AN EXAMPLE, THEY ANNOUNCED LAST WEEK ABOUT THE CAPEX SPENDING AND THE MARKET REACTION WAS DECIDEDLY POSITIVE. SIX STRAIGHT DAYS OF GAINS FOR

THE STOCK. ONCE WE GOT EARNINGS OUT OF MICROSOFT AND OTHER BIG SPENDERS, ARE YOU CONCERNED AT ALL ABOUT THE CAPEX SPEND? >> I CAN'T GO INTO ANY SINGLE NAME OR THE COMPLIANCE GODS BALLS AT ME WITH LIGHTNING BUT THE REALITY IS -- GODS WILL ZAP ME WITH LIGHTNING BUT THE REALITY IS, WE HAVE EXPANDED A BIT, LOOK AT THE TOP 10 NAMES OF THE S&P 500, IF YOU LOOK AT THE MEDIAN PE OF THE BASKET AGAINST THE REST OF THE MARKET, IT IS AN EXTREMELY EXTENDED RELATIVE VALUATION. BUT IF YOU OVERLAY LONG-TERM EARNINGS GROWTH EXPECTATIONS ON TOP OF IT, THE TWO LINES ARE MOVING TOGETHER SO THEY ARE VERY MUCH DEPENDENT ON THOSE LONGER-TERM SUPERIOR EARNINGS GROWTH OUTLOOKS.

THAT'S WHAT'S BEEN CALLED INTO QUESTION TODAY, WE WILL GET MORE COLOR FROM THESE COMPANIES BUT THERE ARE SHORT-TERM EARNINGS, HOW DOES 2025 AND 2026 LOOK? AT THE END OF THE DAY AS THE LONGER-TERM EARNINGS OUTLOOK THAT DICTATES THINGS. I THINK WE HAVE SOME DOUBTS THAT EMERGED ON THAT TODAY FOR THE BROADER COHORT BUT I DON'T THINK WE HAVE A DEFINITIVE ANSWER. WE ARE ABOUT TO HEAR FROM A LOT OF COMPANIES THAT WILL WEIGH IN. ALIX: WHAT'S THE SAFE HAVEN PLAY? USUALLY IS UTILITIES -- IT IS UTILITIES. WHAT IS MY SAFE HAVEN? >> AND A CENTRIST DATA.

YOU ARE SEEING STRENGTH I HEALTH CAREN -- STRENGTH IN HEALTH CARE AND FINANCIALS. WHAT WE HAVE HEARD SO FAR HAS FOUND A. FINANCIALS AND VALUATIONS DO NOT LOOK FANTASTIC BUT THEY STILL DO HAVE ROOM TO RUN. BANKS LOOK BETTER THAN CAPITAL MARKETS NAMES WHICH LOOK PRICIER. BUT IN GENERAL FINANCIALS JUST NEED THE ECONOMY TO KEEP ON CHUG GING, THEY ARE NOT AT THE EPICENTER OF THE POLITICAL DEBATE HAPPENING THIS YEAR. THAT'S A REASON WHY WE HAVE

BEEN ABLE TO FORGIVE THE MORE EXPENDED ABSOLUTE VALUATIONS BECAUSE YOU DON'T HAVE THOSE POLITICAL HEADWINDS COMING AND YOU STILL HAVE REASONABLE RELATIVE VALUATIONS. I LIKE THAT SECTOR TODAY. ALIX: OF ANYTHING THEY HAD DEREGULATION THAT WILL BE A HELP TO THEM AND A CATALYST. SMALL CAPS DOWN OVER 1%, WHEN DO WE BUY? >> SMALL CAPS, YOU REALLY HAVE TO WATCH THE VALUATIONA. THEY WERE UP A LITTLE BIT IN THE MORNING AND THE GRAIN, NOW THEY HAVE MOVED INTO THE RED. WE GOT TO A CROWDED OVERVALUED

POSITION. YOU ARE SEEING THE CROWDING RETURN BEFORE THE ELECTION. YOU'VE GOT THOSE FIRST-TERM TRUMP VALUATION PEAKS. WE'VE GOT TO LET THAT PLAY OUT. YOUR LONG-TERM AVERAGE

VALUATION IS AROUND 15 TIMES. I THINK THERE ARE STILL SOME HEADWINDS AT THE END OF THE FED CUTTING CYCLE BUT WE HAVE CERTAINLY GOTTEN CLOSER OVER THE LAST MONTH OR SO. ROMAINE: WE WILL LET YOU GET BACK TO WORK. APPRECIATE YOU TAKING TIME FOR US. HEAD OF U.S. EQUITY STRATEGY OVER AT RBC CAPITAL, LORI CALVASINA.

COUNTING US DOWN TO THE CLOSING BELL. A MODEST BID COMING INTO THE MARKET. THAT HAS DOWN 3% BUT OFF THE LOWS OF THE DAY. ALIX: THE S&P ALSO OFF THE LOWS. I'M INTERESTED TO SEE IF VOLATILITY CONTINUES HIGHER BECAUSE IT WAS LOWERED, THEREFORE FUNDS HAD TO BUY, EVENTS >>, THEY HAD TO SELL -- IF IT SPIKES, THEY HAD TO SETTLE. ROMAINE:

A LOT OF BIG EARNINGS , AND WE HAVE INFLATION DATA ON FRIDAY, SO THE MARKETS HAVE A LOT TO CHEW ON. WE WILL BREAK DOWN TODAY'S MARKET ACTION PIECE BY PIECE WITH OUR GLOBAL SIMULCAST NOW. >> THE CLOSING BELL. BLOOMBERG'S COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. ROMAINE: AND RIGHT NOW WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. ROMAINE BOSTICK ALIX STEEL,

TAKING YOU THROUGH THE CLOSING BELL , SCARLET FU ON THE TV STUDIO, CAROL MASSAR AND TIM STENOVEC IN THE RADIO BOOTH. I WILL CALL THIS A HISTORIC RECORD DAY BY THE NASDAQ, WITH ITS WORST DAY SINCE DECEMBER. CAROL: A LITTLE PERSPECTIVE, IS THAT NOT WHAT WE DO WELL? I KEEP LOOKING AT THE MAJOR EQUITY AVERAGES. USED TO HAVE 350 NAMES IN THE S&P THAT ARE ACTUALLY OF -- EVEN THE NASDAQ 100, MORE NAMES ARE UP DOWNTOWN. IT'S VERY TARGETED AND SPECIFIC AND THERE ARE A LOT OF QUESTIONS AS TO WHAT THE NEWS REALLY MEANS IN TERMS OF THE INVESTMENT PLAY GOING FORWARD. TIM: ONE OF THE AREAS GETTING HIT IS THE STOCKS DOWN MORE THAN 1% RIGHT NOW.

IT INCLUDES BROADCOM AND NVIDIA, DOWN DOUBLE DIGITS. SCARLET: DOES THIS NOT MAKE THE EARNINGS CALL A LOT MORE INTERESTING? WE WILL HAVE MORE INTERESTED PEOPLE LISTENING FOR HUNDREDS OF MEMBERS OF DOLLARS. ROMAINE: USUALLY A WAY TO READ THE TRANSCRIPT BUT I WILL GET ON THESE CALLS. ALIX: COMMODITIES ARE GETTING HIT

ACROSS THE BOARD. I APPRECIATE THE EQUITY MARKET HAS A TECH STORY. ROMAINE: I'M GLAD YOU BROUGHT UP COMMODITIES.

APPARENTLY WE WERE AT WAR WITH CO -- WITH COLOMBIA OR SOMETHING. THIS COULD HAVE BEEN A LOT WORSE. OR START TO THE S&P 500. STILL HOLDING AT THE 6000 LEVEL. IT IS DOWN 90 POINTS ON THE DAY. DOWN 1.4%.

THE NASDAQ COMPOSITE DOWN MORE THAN 600 POINTS, 3%. THE NASDAQ 100 DOWN 646 POINTS, 3%. THE DOW JONES INDUSTRIAL AVERAGE, UP 289 POINTS, 6/10 OF ONE PERCENT.

DOW TRANSPORTS UP 242 POINTS OR 1.5%. THE RUSSELL 2000 ON THE LEFT OF YOUR SCREEN FINISH THE DAY DOWN BY ONE PERSON -- BY 1%. FULL OF THE TERMINAL TO GET A BETTER SENSE OF MARKET SENTIMENT. CAROL: 300 NAMES OF THE UPSIDE, 252 TO THE DOWNSIDE. IF YOU LOOK AT THE NASDAQ 100, 55 NAMES HIGHER AND 46 LOWER. SCARLET: TECH IS THE BIGGEST SLICE OF THE PIE. IT'S THE HEAVIEST WEIGHT SECTOR

IN THE S&P 500. LOSING MORE THAN 5.5%. UTILITIES DOWN BY MORE THAN 2%. THE SECOND DERIVATIVE PLAY OF THE AI STORY. LOOK AT THE GAINERS HERE, LIKE CONSUMER STAPLES, HEALTH CARE, LORI JUST MENTIONED TO FINANCIALS AS A SAFE HAVEN AS WELL, GAINING AT LEAST 1%.

CAROL: APPLE, CHECK IT OUT, REPORTING ON THURSDAY, OUTPERFORMING THE BROADER TRADE, UP 3.5%. IT IS THE NUMBER FOUR GAINER AGAINST THE BROADER SELLOFF OF THE NASDAQ 100. THIS HAS BEEN UNDER PRESSURE, DOWN ABOUT 10% SINCE LATE DECEMBER. WHILE APPLE IS EXPECTED TO BE A LONG-TERM BENEFICIARY OF AI ESPECIALLY AS USERS ACCESS AT THE END OF THE IPHONE AND OTHER HARDWARE, IT HAS NOT BEEN CONTRIBUTING TO THE WAY OTHERS HAVE, BUT DEFINITELY AN OUTPERFORMER -- TO THE CAPEX THE WAY OTHERS HAVE.

BUT DEFINITELY AN OUTPERFORMER. AURO IS UP 140% AFTER INCORPORATING THE DEEPSEEK R1 LANGUAGE MODEL ON THE COATTAILS OF THE NEWS WE GOT ABOUT DEEPSEEK IN TODAY'S SESSION. AND VAIL RESORTS, ISSUED A LETTER FROM THE SHAREHOLDER ON THE COMPANY'S PERFORMANCE, CALLING IT UNACCEPTABLE . THEY CHANGE THE CON CUT THEIR DIVIDEND BY 80%. A FAIR AMOUNT OF ACTIVITY. ROMAINE: ALSO AT AT&T. -- ADD AT&T, THE BEST DAY IN MORE THAN A YEAR AFTER THE BACKUP DESIGN EARNINGS. CAROL: IT WAS A DIFFERENT PLAYED CITY.

TIM: LET'S GO TO WOULD EVERYBODY WANT TO TALK ABOUT, SHARES OF NVIDIA, THE BIGGEST DECLINE GOING BACK TO MARCH OF 2020. IT ERASED A RECORD AMOUNT OF STOCK MARKET VALUE. $589 BILLION IN VALUE. SHARES DOWN ABOUT 17%. THE SELLOFF TODAY FUELED BY INVESTOR CONCERN AROUND THE AI CHINESE STARTUP DEEPSEEK, THE LATEST MODELS ARE RELEASED LAST WEEK A SEEN AS COMPETITIVE WITH THOSE FROM OPENAI AND META-PLATFORMS. APPLE, BACK TO THE WORLD'S MOST VALUABLE COMPANY AFTER TODAY'S DECLINE, AND VIDEO COMING OUT SAYING DEEPSEK IS AN EXCELLENT ADVANCEMENT -- DEEP SEEK IS AN EXCELLENT ADVANCEMENT BE RIPLEY'S COMPANIES FALL AS A RESULT OF THIS NEWS.

BROADCOM DOWN EVENTING 4% TODAY. IT'S A KEY INGREDIENT IN THE COMPANY IS DESIGNING THEIR OWN SHIPS. THINK AMAZON AND ALPHABET. IF THERE'S LESS NEED FOR THOSE, BROADCOM IS AFFECTED. SHARES ARE DOWN DOUBLE DIGITS TODAY BY 17.4%. FINALLY THE WORST PERFORMING STOCK IN THE S&P 500 TODAY, V ITRACORP DOWN 28%.

IF YOU HAVE LESS OF A NEED FOR THE HYPER SKILL FACILITIES, WE HAVE LESS OF A NEED FOR POWER, AND THAT'S WHAT INDEPENDENT POWER PRODUCERS GOT ABSOLUTELY CRUSHED TODAY. IT WAS THE BEST PERFORMER IN THE S&P 500 LAST YEAR OF MORE THAN 260% BUT DOWN TODAY BY MORE THAN 28%. ALIX: WE WERE TALKING ABOUT THAT EARLIER, BABY WITH THE BATHWATER WHEN IT COMES TO THE DERIVATIVE PLAYS. IT'S BEEN A SOLID BID ACROSS THE CURVE, YET YIELDS ARE OFF THE LOWS OF THE SESSION. TAKE A LOOK AT THE 10 YEAR

YIELD, DOWN BY NINE BASIS POINTS. AT ONE POINT THEY WERE UP BY 13 BASIS POINTS. TOMORROW WE GET THE SEVEN YEAR, WATCH THAT AS WELL. THE FIVE-YEAR DID PRETTY WELL TODAY. SCARLET: THIS IS A BIG WEEK IN TERMS OF TECH EARNINGS, WHAT ARE YOU LOOKING FORWARD TO THE MOST? META, FRONT RUNNING THE CA PEX SPENDING, NOW THE ONUS IS ON MICROSOFT. TIM: I WAS IMPRESSED TO SEE THE STOCK REACTION TO THE ANNOUNCEMENT LATE LAST WEEK.

NORMALLY WHEN USING A CAPEX ANNOUNCEMENT GO HIGHER, THE STOCK GETS HIT BUT THEY WERE BULLISH ON THIS. META WAS DOWN AT ONE POINT TODAY, INVESTORS NOT SELLING OFF THE STOCK TODAY AS A RESULT OF WHAT WE SAW FROM DEEPSEEK. MARK ZUCKERBERG KNEW ABOUT THIS LAST WEEK EVEN WITH THE ANNOUNCEMENT OF INCREASE CAP EXPEND. DO WE SEE THESE COMPANIES PULLED BACK? ROMAINE: SHORT ANSWER WOULD BE NO. PEOPLE WERE TALKING ABOUT THIS IDEA THAT THERE'S NO WAY THAT THE TECH CEOS AND OTHER FOLKS BENEATH THEM WERE NOT AWARE OF WHAT DEESPEEK -- DEEPSEEK WAS CAPABLE OF. I WANT TO KNOW WHAT APPLE HAS TO SAY.

THEY WERE THE LAGGARD BEHIND THIS. WANTING TO ARTICULATE MORE OF AN AI STRATEGY. I FEEL LIKE FOR A VARIETY OF REASONS, IS BETTER THAT THEY DIDN'T. SCARLET: MAYBE BUT ALSO THEY HIRED A NEW HEAD OF AI. INTERESTING TO SEE THE READTHROUGH ON THAT.

TO YOUR POINT ABOUT CAPEX SPEND, THEY HAD OPEN SOURCE, IT SHOULD BE THAN A GOOD READTHROUGH FOR META. CAROL: IF THIS ULTIMATELY IS TRUE AND THERE ARE A LOT OF QUESTIONS THEIR DEVELOPMENTS, WHAT THEY FOUND OUT AND THE COSTS A SET OF AT INFLATION, IF THAT IS CHEAPER, ANYONE THAT'S BEEN DOING THE SPENT, AND WOULD WANT TO KNOW FOR META, DO YOU RETHINK YOUR SPEND? YOU WILL NOT HAVE TO SPEND THE 65 BILLION DOLLARS. IT COULD BE A PLUS FOR THE LIKES OF META AND APPLE THAT IT WILL BE A LOT OF CHEAPER -- A LOT CHEAPER ON THE CAP . SCARLET: CLEARLY THE EXPORT CONTROLS ARE WORKING BUT CHINA WAS ABLE TO GET AROUND THAT AND LOSE THE LOWER END CHIPS FROM NVIDIA TO CREATE ALL OF THIS. ROMAINE: WE WILL GET SOME EARNINGS OUT OF THE CARMAKERS, GM, TESLA AS WELL, WE ALSO TALK ABOUT SOME OF THESE CHIPS AND THE TECHNOLOGY BEING USED WITH AUTONOMOUS AND ASSISTED DRIVING AND OTHER THINGS LIKE THAT.

WE COULD GET SOME INTERESTING COMMENTARY OUT OF THOSE COMPANIES AS WELL. CAROL: IT'S ONLY MONDAY. UNBELIEVABLE. ROMAINE: IS GOING TO BE EXCITING TOMORROW UNLESS YOU HAVE TO GO TO A CONFERENCE. SCARLET: WHICH I'M LOOKING FORWARD TO FROM 10:00 TO 12:00. CAROL: THAT'S A WRAP.

WE WILL SEE YOU AGAIN SAME TIME, SAME PLACE TOMORROW. ROMAINE: AND TO CONTINUE OUR FULL AND SPECIAL COVERAGE OF THE SELLOFF IN MARKETS. A CONVERSATION UP AHEAD ABOUT THE LONG-TERM IMPLICATIONS OF THE SELLOFF ON THE BROADER CHIP SECTOR. STACY RASGON WILL BE JOINING US, SENIOR ANALYST OVER AT BERNSTEIN RESEARCH. SCARLET: WELCOME BACK TO THE CLOSE.

ROMAINE: ANOTHER WILD DAY ON WALL STREET BUT NOT QUITE FOR THE REASONS WE THOUGHT. DEEPSEEK REALLY DID RATTLE THE MARKETS. BUT IT REALLY COULD HAVE BEEN WORSE. TAKE A LOOK AT THE SCREEN. THE S&P 500 DOWN 1.5%.

THE WORST DAY SINCE JANUARY. THE NASDAQ 100 HAVING ITS WORST DAY SINCE DECEMBER. CHIP STOCKS LOOK MORE MURKY. THE PHILADELPHIA SEMICONDUCTOR INDEX, DROPPING 10% FOR ITS WORST DAY SINCE 2020.

WE TALKED ABOUT THIS IDEA OF WHETHER THE AI TRADERS OVER -- I DON'T THINK ANYONE IS SAYING THAT, BUT VALUATION HAS GOTTEN OUT OF CONTROL. THAT'S A BIG PART OF THE REASON WE SAW THE DOWNDRAFT IN NVIDIA. SCARLET: PEOPLE ARE REASSESSING THE AI FOR TODAY. NVIDIA WAS AT THE CENTER OF THE AI TRADE DOWN TODAY BY 17% BUT AT ONE POINT IT PLUNGED DOWN TO 18%. WHEN THERE A DISRUPTER IN THE AI RACE, THEY HAVE THE MOST TO LOSE. THERE WERE SOME WINNERS IN THE SPACE, SALESFORCE GAINING THERE . THESE COMPANIES SHOULD BENEFIT

FROM CHEAPER AI MODELS. THE HOMEBUILDER IS UP ALMOST 5% ON THE DAY GETTING A BOOST AFTER HOME SALES ROSE MORE THAN EXPECTED IN THE MONTH OF DECEMBER. OUR TOP STORY THIS HOUR, RISK OFF FOR AI SOCKS -- STOCKS. CONCERNS ABOUT LOFTY VALUATIONS

HAVE BEEN CIRCULATING FOR WEEKS. THE NASDAQ 100 TRAITS THAT 27 TIMES ESTIMATED EARNINGS LED BY NVIDIA'S 34 FORWARD PE. DEEPSEEK HAPPENED TO PROVIDE A CONVENIENT SPARK. WE WILL TAKE A LOOK AT WHERE THIS LEAVES THE SEMICONDUCTOR INDUSTRY IN THE FOREFRONT OF AI APPLICATIONS. ROMAINE: OUR NEXT GUEST, SAYING OUR REACTION IS NOT TO BUY INTO THE DOOMSDAY SCENARIOS CURRENTLY PLAYING OUT, WE CONTINUE TO LIKE THE AI STORIES. I WANT TO LAY OUT THE NARRATIVE. IN ORDER TO CREATE THESE MODELS AND POWER ALL THIS STUFF, YOU NEED THESE MOST ADVANCED CHIP THAT PRETTY MUCH ONLY NVIDIA WAS MAKING WITH WHATEVER PRICE TAG YOU WANT ON IT AND NVIDIA BECOMES A ROCKSTAR STOCK -- DE EPSEEK FINDS A WAY TO DO THIS FOR PEANUTS, I AM CURIOUS IF YOU CAN SQUARE THE CIRCLE BETWEEN THE PAST NARRATIVE WAS NVIDIA AND THE SUPPOSEDLY CHEAPER NARRATIVE COMING OUT OF DEEPSEEK.

>> THE NARRATIVE THAT EMERGED FRIDAY INTO THE WEEKEND WAS KIND OF, HEY, THIS CHINESE COMPANY HAS REINVENTED OPENAI FOR $5 BILLION WHICH IS NOT WHAT THEY DID. THERE'S IS ALSO SOME CONFUSION. TWO FAMILIES OF MODELS, A BASE MODEL CALLED V3 AND A REASONING MODEL THAT'S CAUSING SOME OF THE ANGST. THE V3 WAS TRAINED ON NVIDIA 800 SHIPS THAT ARE NO LONGER LEGAL TO SELL IN CHINA. THEY TRAINED EFFICIENTLY BUT

THEY TRAINED ON THOSE. THEY HAD A NUMBER OF INTERESTING INNOVATIONS. THEY ARE NOT SECRETS OR MIRACLES. EVERYONE IS WORKING ON THIS. THEY USE THAT AS THE BASE MODEL TO CREATE R1, THE PRESENTING MODEL EVERYONE IS GETTING ALL EXCITED ABOUT. I HAVE NO IDEA WHAT THEY USED TO TRAIN IT. THEY DID NOT DISCLOSE THE TRAINING REQUIREMENT . SO WE DO NOT KNOW WHAT THEY DID. THE IDEA THAT THEY SPENT $5 MILLION AND DUPLICATED EVERYTHING THAT EVERYONE IS SPENDING BILLIONS ON HIS NONSENSE -- IS NONSENSE.

THE OTHER THING, I DON'T WANT TO DISCOUNT THE MODELS, THE MODELS ARE FANTASTIC, DON'T GET ME WRONG, BUT IF YOU LOOK AT THE THINGS THEY DID, IT WAS A MIXTURE OF EXPERTS ON THE V3 BASE MODEL WHICH ENABLED THEM TO TRADE IT VERY EFFICIENTLY. NO OTHER THINGS THEY DID ARE SECRETS OR MIRACLES OR NOT UNKNOWN OR NOT BEING USED BY OTHER AI LABS OUT THERE. ROMAINE: DEEPSEEK'S A LEGITIMATE COMPANY. WE DON'T KNOW ALL THE DETAILS OF HOW THEY ARRIVED. BUT WE DO KNOW THERE IS LEGITIMACY TO THIS COMPANY. AS THEIR LEGITIMACY -- IS THERE LEGITIMACY TO THE MONEY COMING OUT OF META AND STARGATE AND SO ON, IS THAT STILL INTACT OR COULD WE SEE THESE EXECUTIVES RETHINK THAT? >> WE'LL SEE WHAT HAPPENS. I DON'T KNOW.

THINGS WILL ALWAYS BE LOVING BEING. OVER THE LONG-TERM, I DON'T THINK THIS IS A NEGATIVE. AS LONG AS YOU BELIEVE WE ARE NOT CLOSE TO THE LIMIT OF THE COMPUTE THAT WE NEED TO BRING THESE AI VISIONS INTO REALITY WHICH I THINK IS TRUE, WE ACTUALLY NEED EFFICIENCY GAINS, OTHERWISE YOU WILL NOT BE ABLE TO GET THERE. I SAID THIS ON ONE OF YOUR SISTER PROGRAMS -- YOU GO BACK TO THE HOT CHIPS CONFERENCE THAT HAPPENS IN STANFORD, BILL DUDLEY WAS TALKING, HE WAS TALKING ABOUT HOW THEY HAVE IMPROVED GPU PERFORMANCE OVER THE YEARS, IMPROVED BY SOMETHING LIKE 1000X, EFFICIENCY GAINS HAVE BEEN HAPPENING. OVER THE NEXT 10 YEARS, THEY WANT TO IMPROVE IT BY ANOTHER ONE MILLION X. THINK ABOUT THE AMOUNT OF COMPUTE REQUIRED.

WE NEED EFFICIENCY GAINS OR WE WILL NOT GET THERE. I AM A SEMI GUY SO I AM BIASED BUT I THINK COST REDUCTION IS A GOOD THING, NOT A BAD THING. MASSIVELY POSITIVE. ALIX: THIS IS WHAT INNOVATION IS SUPPOSED TO DO. SCARLET: EFFICIENCY GAINS GENERATE MORE NET DEMAND RATHER THAN LESS DEMAND. MY QUESTION TO YOU IS -- DEEPSEEK'S MODEL IS WINNING A

LOT OF PRAISE AND ENDORSEMENT, IS AI NOW A COMMODITY AND SHOULD BE PRICED LIKE ONE, AN EXPENSIVE COMMODITY BUT ONE NONETHELESS? >> DEEPSEEK, THE OTHER THING GETTING PEOPLE ANTSY IS, REMEMBER IT IS AN OPEN SOURCE MODEL AND YOU CAN DOWNLOAD IT AND RUN IT BUT THE PRICE THEIR TOKENS AT SOMETHING LIKE 120TH TO 140 IS O -- 140TH OF WHAT AI IS PRICING IT. WE DON’'T KNOW THE COSTS RELATIVE TO EVERYTHING ELSE. I ACTUALLY DO THINK HAVING CHEAPER INFRAREDS IS A GOOD THING. WHAT ULTIMATELY EVERYONE'S BEEN COMPLAINING ABOUT HIS WANT ABOUT THE RETURNS -- IS WONDERING ABOUT THE RETURNS. HOW DO YOU GET PEOPLE TO USE IT? THAT'S HOW YOU GET ADOPTION OF PROLIFERATION EVERYWHERE. IF SOME OF THESE MODELS, TO DO THE INFLUENCE, IT REQUIRES A TREMENDOUS AMOUNT OF COMPUTE. I WANT TO SEE ADOPTION AND

PROLIFERATION. SCARLET: DOES THE EXISTENCE OF DEEPSEEK'S CHEAPER AIR MODELS FORCE YOU TO LOOK AT THE GAINS FROM MICROSOFT AND META IN A DIFFERENT WAY THIS WEEK? >> WHAT I WILL BE LOOKING AT IS THE CAPEX. IN THE MIDDLE OF ALL OF THIS, YESTERDAY WE SAW -- LAST WEEK, META INCREASE THE GUIDES -- THE CAPEX GUIDES, EVEN CHINA ANNOUNCING $140 BILLION U.S. IN AN INFRASTRUCTURE PLAN. EVERYONE IS LOOKING TO SPEND MORE, NOT LESS. NOW WITH THIS DEEPSEEK, THESE ARE NOT SECRETS TO ANYBODY IN THE INDUSTRY MAKING INVESTMENT DECISIONS. THEY SEEM TO BE LOOKING TO SPEND MORE MONEY, NOT LESS MONEY. SCARLET:

APPRECIATE YOU JOINING US TODAY, STACY RASKIN, FROM BURSTING RESEARCH FOR YOUR EVENT COMING UP, WE WILL SAY ON THIS DEEPSEEK FALLOUT AND TAKE A DEEPER DIVE INTO THE WORLD OF SCARLET: CHINA'S DEEPSEEK IS AN UPENDING TECHNOLOGY AND AN EXCELLENT AI ADVANCEMENT, LET'S BRING IN DEON NICHOLAS. FORETHOUGHT TECHNOLOGIES USES AI TO CREATE AI AGENTS. GREAT TO SPEAK WITH YOU. YOU HAVE BEEN AWARE OF DEEPSEEK. READING UP ON IT. THE NEGATIVE REACTIONS OF YOU BY SURPRISE THIS MORNING. WHAT ARE INVESTORS GETTING WRONG AND MISUNDERSTANDING ABOUT THIS DEVELOPMENT? >> THANKS FOR HAVING ME, HAPPY TO BE ON THE SHOW.

ONE OF THE THINGS I THINK INVESTORS ARE BETTING ON HERE IS, FIRST OF ALL, THAT THIS ANNOUNCEMENT IS ALL ABOUT EFFICIENCY, IF THEY ARE ABLE TO ENDEAR YOU DO WHAT OPENAI DOES AT A FRACTION OF THE COST, WHAT DOES THAT MEAN FOR ALL OF THE U.S.-BASED AND ALL OF THE AI GIANTS? PEOPLE ARE EXPECTING THE COMPUTE COSTS WILL COME DOWN AND THE SECOND THING IS THE GEOPOLITICS OF IT ALL IN THE SENSE OF YOU HAVE OPENAI AND U.S.-BASED FIRMS LEADING THE RACE RIGHT NOW, WHAT HAPPENS WHEN OTHER COUNTRIES START TO CATCH UP? I THINK A LOT OF THAT IS LEADING TO THE SELLOFF IN PARTICULAR STOCK SPLIT NVIDIA AND OTHERS -- STOCKS LIKE NVIDIA AND OTHERS, AI STOCKS IN GENERAL. ROMAINE:

WHEN WE TALK ABOUT THE A RESPONSE THAT NVIDIA GAVE, BREAK THIS DOWN FOR ME, THEY SAY THAT INFERENCE REQUIRES SIGNIFICANT NUMBERS OF THEIR GPU'S AND HIGH-PERFORMANCE NETWORKS, AND WHEN WAY OR ANOTHER, YOU WILL NEED NVIDIA'S HIGH-END GPU'S, EXPLAIN WHAT INFERENCE IS. >> LOVE THAT IDEA, THAT ALL ROADS LEAD TO NVIDIA IN SOME WAY, A LOT OF ADVANCEMENTS IN THE PAST FEW YEARS IN AI IN THE COMPUTATIONAL POWER HAS COME FROM TRAINING, THESE GPD PRE-TRAINED MODELS HAVE TAKEN THE STUDY AND USE THE COMPUTE TO TRAIN. WHEN YOU HAVE ANSWER AND RESPONSE LOCATED CUSTOMER SUPPORT INQUIRY, THAT IS AND FRIENDS TIME, USUALLY IT IS -- INFERENCE TIME, USUALLY IT IS PRETTY QUICK.

NOW WITH DEEPSEEK'S R1, THEY ARE SHIFTING THE COMPUTE TO WHEN THEY ARE ANSWERING THE QUESTION, THEY ARE TAKING A LOT MORE TIME TO THINK BY QUERYING THEMSELVES THROUGH A TECHNIQUE CALLED CHAIN OF THOUGHT, IMAGINE HAVING A MONOLOGUE WITH YOURSELF, AND THAT IS WHERE THE COMPUTE IS GOING FOR THIS PLANNING AND THINKING PROCESS PRODUCING BETTER AND BETTER RESULTS TO HARDER PROBLEMS. SO COMPUTE WILL NO LONGER HAPPEN -- IT WILL STILL HAVE ANOTHER PRETRAINING LEVEL BUT IT WILL ACTUALLY SHIFT TO ALL THIS INFERENCE, THINKING AND REASONING WHICH IS BRINGING ABOUT THE AI AGENTS PHRASE WHICH IS GOING TO BE REALLY IMPORTANT. SCARLET: WHAT DOES THAT MEAN THAT DEEPSEEK WAS ABLE TO DO THIS ON NVIDIA'S LOWER END CHIPS, NOT THE HIGHER AND THAT CHINA DOESN'T HAVE ACCESS TO? >> THERE ARE EXPORT CONTROLS AND THINGS THAT WILL BE EVEN MORE CRACKED DOWN IN TERMS OF THE NEW ADMINISTRATION. I THINK WAS GOING TO HAPPEN IS A LOT OF PEOPLE THINK THIS MEANS NVIDIA -- YOU WILL NOT BE NEEDING NVIDIA CHIPS, I THINK THAT IS FALSE, WE DO NOT KNOW FROM THE PAPERS THAT THEY PUBLISHED WHAT THEY WERE TRAINING ON, WE KNOW THE FINAL RUNS OF $5 MILLION WORTH TO TRAIN THE FINAL MODEL IN TERMS OF COMPUTERS BUT THEY DID A LOT OF RESEARCH WE THE SCENES TO FIGURE OUT THE BREAKTHROUGHS THAT LED TO THIS DEEPSEEK MODEL. I DON'T BUY THAT THEY WILL BE LEVERAGING THE GREATEST WHEREVER THEY CAN OR HAVING THE ACCESS TO THE LATEST TIPS WILL NOT GIVE AN ADVANTAGE, THERE IS MORE UPSIDE THERE. ROMAINE: THE MARKET REACTION HAS RAISED TO THIS IDEA OF END USE CASE, THAT SCARED A LOT OF INVESTORS, THERE WAS SO MUCH MONEY BEING PUT ON THIS, BUT WHERE IS THE RETURN? YOUR COMPANY IS DIFFERENT BECAUSE YOU ARE FOCUSED MORE ON THE END USE TO A CERTAIN EXTENT, I'M CURIOUS AS TO WHETHER YOU ARE SEEING BUY IN TO THAT IDEA BY POTENTIAL CUSTOMERS OR POTENTIAL INVESTORS? >> HAVE ACTUALLY NEVER BEEN MORE BULLISH ON THE APPLICATION LAYER. AT FORETHOUGHT, WE ARE BUILDING

THE MOST ADVANCED AI FOR CUSTOMER SUPPORT, WHEN ALL OF THIS IS SHOWING IS THAT THE FOUNDATIONAL MODEL LAYER AND THE HARDWARE LAYER, THERE'S GOING TO BE A TON MORE COMPETITION. THE IRONY IS THAT THIS MAKES THE APPLICATION LAYER BETTER. THIS MEANS YOU NOW HAVE MODELS THAT CAN REASON AND THINK. THESE ARE THE VERY SAME CAPABILITIES THAT WE NEED TO MAKE CUSTOMER SUPPORT AND OTHER APPLICATION LEVEL AI MORE EFFECTIVE, SO WE ARE SEEING MORE AND MORE DEMAND, WE ARE RESOLVING BILLIONS OF ISSUES EVERY SINGLE MONTH AND WE THINK THAT THIS WILL CONTINUE TO TREND AND INVESTMENT SHOULD START TO HAPPEN ON THE APPLICATION LAYER MORE SO THAN ON THE FOUNDATIONAL MODEL LAYER. ROMAINE: HAVE TO LEAVE IT THERE, DEON, YOU ALWAYS MAKE IT SOUND INTELLIGENT FOR PEOPLE LIKE ME WHO DO NOT GRASP THESE CONCEPTS AS WELL. THE PRESIDENT AND COFOUNDER OVER AT FORETHOUGHT TECHNOLOGIES. WE CONTINUE OUR COVERAGE OF

WHAT'S HAPPENING IN THE TECH SPACE TODAY WITH A CLOSER LOOK AT SOME OF THE GOVERNMENT ROMAINE: LET'S GO BACK TO 2010 APPLE CEO STEVE JOBS, MAKING HIS FIRST PUBLIC APPEARANCE IN MONTHS AMID A BATTLE WITH CANCER, HE STRODE ONTO THE STAGE IN SAN FRANCISCO WEARING HIS TRADEMARK BLACK MOCK THIRD ON THAT, AND INSTEAD OF SAVING THE BEST FOR LAST AS HE WOULD NORMALLY DO, HE DECIDED LESS THAN 10 MINUTES INTO HIS 90 MINUTE PRESENTATION TO REVEAL BY THAN WHAT WAS ONE OF THE WORST KEPT SECRETS, THE INTRODUCTION OF THE APPLE IPAD, A 1.5 POUND $500 TABLET THAT JOBS CLAIMS CREATES AN ENTIRELY NEW CATEGORY OF DEVICES. IT WAS NOT THE FIRST TABLET. THIS IS APPLE WE ARE TALKING ABOUT. WITH THE IPAD WAS A BIT ODD. IN FACT, IT WAS NEARLY AS POWERFUL AS OLD PC TABLETS MICROSOFT HAD EXPERIENCED WITH IN 2000 AND THE IPAD WAS DOUBLE THE PRICE OF THE BLACK-AND-WHITE E-READERS LIKE THE KINDLE THAT WERE GROWING IN POPULARITY. POTENTIAL CUSTOMERS GRIPED THE IPAD HAD NO CAMERA, COULD NOT TAKE PHONE CALLS, ADOBE COMPLAINED IT WAS NOT SUPPORTING ITS FLASH VIDEO SOFTWARE THAT WAS USED AT THE TIME ON ALMOST 75% OF ALL WEBSITES.

AND SOME WOMEN TOOK ISSUE WITH THE IPAD'S OBLIVIOUS ASSOCIATION WITH CERTAIN HYGIENE PRODUCTS. EVEN BULLISH ANALYSTS SAID THAT APPLE CAN MANAGE TO MAYBE SELL JUST 3 MILLION OR 4 MILLION DEVICES OUT OF THE GATE IF THEY WERE LUCKY. GUESS WHAT? THE IPAD SOLD 7.3 MILLION UNITS IN THE FIRST FULL QUARTER AFTER ITS RELEASE. AND IN THE FIRST FULL FISCAL YEAR, IT SOLD MORE THAN 30 MILLION UNITS, GENERATING $19 BILLION IN REVENUE, OR ABOUT 18% OF APPLE'S TOTAL CORPORATE SALES.

THAT RIVALED THE NUMBERS FOR ITS MAC COMPUTERS WHICH WAS GENERATING ABOUT $21 BILLION IN SALES THAT YEAR. FOR ALL THE SUCCESS OF THE IPAD, ITS LAUNCH TURNED INTO A SAD FOOTNOTE FOR STEVE JOBS, WHO WOULD MAKE WHAT ENDED UP BEING HIS LAST KEYNOTE SPEECH FOR A MAJOR NEW APPLE PRODUCT INTRODUCTION. ABOUT A YEAR AFTER THE EVENT, HE WOULD TAKE ANOTHER LEAVE OF ABSENCE FOR HEALTH REASONS IN A FEW MONTHS LATER HE PASSED AWAY AT THE AGE OF 56. SCARLET: OF COURSE BEFORE HE DID SO HE DID CREATE AN ENTIRELY NEW CATEGORY WITH THE IPAD. WE HAVE SOME BREAKING NEWS ON EARNINGS. NEW CORE, THE STEELMAKER COMING

OUT WITH FOURTH-QUARTER EARNINGS-PER-SHARE $122, BEATING THE ESTIMATE HANDEDLY OF $.65 WHICH WAS THE CONSENSUS ESTIMATE. TOP LINE SALES WAS $7.08 BILLION, ANALYSTS WERE LOOKING FOR $6 BILLION. NUCOR SHARES CURRENTLY UP ABOUT

4% AFTER HOURS. LET'S GO BACK TO TECH AND AI AND TURN TO WASHINGTON. DAVID STACKS, THE FIRST-EVER AI AND CRYPTO'S ARE FOR THE WHITE HOUSE, SAID PRESIDENT TRUMP WAS RIGHT TO RESCIND THE BIDEN ORDER ON AI SAFETY SAYING IT HAMSTRUNG AMERICAN AI COMPANIES WITHOUT ASKING WHETHER CHINA WOULD DO THE SAME. WHERE DOES THE EMERGENCE OF DEEPSEEK LEAVE WASHINGTON AND WHAT DOES IT SAY ABOUT THE RESTRICTIONS PUT IN PLACE? JOINING US TO DISCUSS IS LIBBY CANTRILL. CHINA'S DEEPSEEK WAS ABLE TO USE THESE -- JENSEN HUANG EVEN SAYS THE WORK IS FULLY COMPLIANT WITH EXPORT CONTROLS. WHAT DOES THIS SAY ABOUT THE

EFFICACY OF U.S. EXPORT CONTROLS? LIBBY: THERE ARE PROBABLY MORE QUESTIONS THAN THERE ARE ANSWERS. CLEARLY NOT THE INTENDED POLICY OBJECTIVE FOR SURE AMONG POLICYMAKERS IN TERMS OF THOSE EXPORT CONTROLS. THOUGH I THINK WHAT WE HAVE SEEN WITH HUAWEI AND OTHER WORKAROUNDS IS THAT THIS IS MORE OF A POTENTIALLY LEAKY EXPORT REGIME THAN WHAT WAS INTENDED. THE BROADER QUESTION IS HOW DOES WASHINGTON PROCEED FROM HERE.

WASHINGTON HAS BEEN ON THEIR BACK FOOT REGULATION FOR BETTER OR WORSE. THERE IS A DATA PRIVACY BILL THAT HAS BEEN IN THE WORKS ON CAPITOL HILL FOR ABOUT A DECADE. I DON'T THINK ANY OPTIMISM WE ARE GOING TO SEE POLICYMAKERS GET OUT AHEAD IN TERMS OF AI OR CREATING REGULATORY FRAMEWORK OR REGULATORY CLARITY IS PROBABLY MISPLACED. SCARLET:

LIMITING ACCESS TO TECH IS A LOSING AL BECAUSE TECH IS ALWAYS EVOLVING. DOES WASHINGTON DOUBLE DOWN AND LIMIT EVEN THE LOWER END CHIPS TO CHINA? LIBBY: THAT IS CERTAINLY ON THE TABLE. WHAT WE HAVE SEEN FROM PRESIDENT TRUMP SO FAR IS A SOFTER APPROACH TO CHINA WRIT LARGE. I THINK THIS IS THE MAIN POINT. A LOT OF FOCUS ON CAPITOL HILL AMONG CAREER POLICYMAKERS IS THEY DON'T NECESSARILY WANT TO SET CHINA BACK WHAT THEY DO NOT WANT TO GIVE CHINA THE TOOLS IN ORDER TO ADVANCE, LIKE WHAT HAS HAPPENED, IN TERMS OF ADVANCING AHEAD OF THE UNITED STATES. FOR ALL INTENTS AND PURPOSES THE EXPORT PRESIDENT TRUMP CONTROLS WE SAW UNDER PRESIDENT BIDEN WILL CONTINUE. ROMAINE:

THERE HAS BEEN A LOT OF TALK ABOUT A POTENTIAL UPCOMING MEETING BETWEEN XI JINPING AND PRESIDENT TRUMP. I AM CURIOUS AS TO WHAT YOU THINK THEIR RELATIONSHIP IS GOING TO BE THESE NEXT FOUR YEARS ESPECIALLY COMPARED TO HIS FIRST TERM. LIBBY: I THINK LIKE FOR A LOT OF THINGS WITH PRESIDENT TRUMP, THERE ARE COMPETING FACTORS HERE. I THINK HE HAS A GOOD RELATIONSHIP WITH PRESIDENT XI. THERE ARE THINGS THE U.S. WANTS FROM CHINA, PARTICULARLY AS IT RELATES TO THE UKRAINE WAR. CHINA IS A CRITICAL FACTOR IN TERMS OF BRINGING SETTLEMENT TO THAT CONFLICT. THEN AGAIN THERE ARE MANY

ADVISORS WHO HAVE BEEN ADVISING TRUMP WHO FEEL LIKE CHINA DID NOT HONOR THE TERMS OF THE PHASE ONE TRADE AGREEMENT. SO WE WILL SEE. BUT I THINK FOR THE FORESEEABLE FUTURE IT IS INTERESTING THAT HE HAS NOT MOVED FORWARD AN ADDITIONAL TARIFFS OR LEVEES ON CHINA. WHAT WE ARE TELLING OUR CLIENTS AND WHAT I AM TELLING MY PORTFOLIO MANAGER GROUP IS DO NOT NECESSARILY CONFLATE THAT WITH PERMANENT INACTION. BUT THERE ARE SOME THINGS THAT WE WANT FROM CHINA AND MAYBE HE IS GOING TO HOLD THIS FIRE. ROMAINE: IN THE BROADER SENSE, HOW DO YOU THINK THE THREAT OF TARIFFS OR IMPLEMENTATION OF TARIFFS -- WE GOT A TASTE OF THAT WITH WHATEVER THE HECK HAPPENED WITH COLOMBIA OVER THE WEEKEND. BUT USING TARIFFS AS THE TELL

JOEL RATHER THAN SOMETHING ELSE. I WONDER IF WE SHOULD EXPECT ANY DISPUTE BE GET INTO WHETHER IT IS WHOEVER, THAT TARIFFS WILL BE THE FIRST WEAPON HE TRIES TO USE. LIBBY: IT UNDERSCORES PRESIDENT TRUMP'S DEEP-SEATED BELIEF THAT TARIFFS ARE MORE OF A SOLUTION THAN A PROBLEM. THIS IS WHERE THE MARKET MAY CONFUSE HOW DEEP-SEATED THIS REALITY IS THAT UNDERPINS HIS THREATS.

WILL HIS THREAT BE MORE BARK THAN BITE LIKE IT WAS YESTERDAY? FOR SURE. WILL HE BE AFRAID TO ACTUALLY BITE? I DON'T THINK SO. THIS IS WHERE THE MARKET IS GETTING OVER THEIR SKIS ANY OPTIMISM THAT JUST BECAUSE WE HAVE SEEN MORE THREATS THAN ACTUAL TARIFFS THAT, DON'T CONFUSE THAT WITH PERMANENT INACTION. OBVIOUSLY FEBRUARY 1, SATURDAY, IS THE DEADLINE HE HAS GIVEN.

THE THREATS AROUND CANADA IN PARTICULAR I THINK ARE QUITE REAL. SCARLET: ONE ABOUT WHAT PRESIDENT TRUMP SET ABOUT OIL PRICES? HE SAID HE WAS GOING TO ASK SAUDI ARABIA AND OPEC PRODUCERS TO BRING DOWN PRICES THAT WOULD PUT PRESSURE ON RUSSIA TO END THE UKRAINE WAR. WHAT LEVERS CAN THE U.S. PULL TO ACHIEVE THAT? LIBBY:

THAT DECISION IN TERMS OF WHERE OPEC IS REALLY NOT IN THE U.S.'S HANDS. HE CAN JOB OWN LIKE HE IS DOING. OF COURSE WHAT HE IS TRYING TO DO AND BY DECLARING A NATIONAL EMERGENCY AROUND ENERGY, HE IS TRYING TO HAVE A WHOLE OF GOVERNMENT APPROACH TO DECREASE ENERGY PRICES. YOU TALK TO ENERGY PRODUCERS, THE ISSUE IS WE ARE ALREADY PRODUCING RECORD LEVELS OF BOTH OIL AND NATURAL GAS. SO IN TERMS OF TWEAKING SOME OF THE RED TAPE, ROLLING BACK PERMITTING RESTRICTIONS AND WHAT HAVE YOU, PRESIDENT TRUMP CAN DO THAT. BUT IT IS ALL AROUND DOMESTIC

PRODUCTION. OF COURSE THERE IS A TIPPING POINT FOR ENERGY COMPANIES. THEY DON'T NECESSARILY WANT LOWER OIL PRICES. EVERYONE HAS AN INCENTIVE TO KEEP THOSE PRICES HIGH. I THINK IT WILL BE A BIT OF A BALANCE. IN TERMS OF THE LEVERS HE HAS

UNILATERALLY, HE IS TRYING TO PULL ALL OF THEM. ROMAINE: I AM CURIOUS OF THE STRUCTURE OF THIS ADMINISTRATION . SOME OF THE CABINET NOMINATIONS HAVE GOTTEN THROUGH, EVEN A COUPLE OF FOLKS WHO POTENTIALLY MIGHT NOT HAVE GOTTEN THROUGH LIKE PETE HEGSETH. IS HE GOING TO GET EVERYONE HE WANTED? WE STILL HAVE RFK THIS WEEK AND A BIG ONE WITH TULSI GABBARD. LIBBY: THAT IS AN OPEN QUESTION.

UNLIKE PETE HEGSETH, WHO IS A REPUBLICAN, HAD A LOT OF REPUBLICAN SUPPORT, TULSI

2025-01-30 20:32

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