Nvidia Eyes China Expansion, ServiceTitan's Big IPO | Bloomberg Technology

Market Volatility and AI Competition

• Adobe's stock has dropped due to a disappointing annual sales outlook, with investors fearing the start of AI competition, making it the worst performer in the Nasdaq 100, with its worst day since March (1m21s).
• Nvidia is pushing back against anxiety that it may be pulling back from China, despite US trade curbs, and is instead expanding its research capabilities in China, adding hundreds of staff (2m0s).
• Nvidia is continuing to deliver products and services into China and is growing its employee base in the country from 3000 to 4000 by the end of the year, with a focus on expanding in the autonomous driving area (2m32s).
• The company is investing in the Chinese market, particularly in growth areas like automobiles, despite not being able to sell its most advanced AI chips into China due to export controls (3m3s).
• The Chinese government has been supportive of new technologies, and the EV market is booming, with domestic players like Huawei moving aggressively into the space (3m27s).
• Nvidia is forging relationships with important companies in China and expanding its headcount, signaling its support for the Chinese market (3m46s).
• Nvidia's CEO, Jen-Hsun Huang, has been vocal about his desire to sell as much as he can into the Chinese market, provided that regulations come around, and is investing with a view to the long-term (4m9s).
• The move is seen as a positive one from a business perspective, despite the uncertainty weighing over US-China relations (4m17s).

Nvidia's China Strategy

• Tensions between Washington and Beijing have been escalating, with both Democrats and Republicans agreeing on the need to get tougher on China, a shift from 10 years ago when companies were investing in China due to strong relations between the two countries (4m47s).
• Nvidia wants to position itself to capitalize on the Chinese market if it opens up, but currently, it cannot sell its highest-end chips there and instead sells them to hyperscalers like Microsoft, OpenAI, Google, and Amazon (5m9s).

China's Economic Outlook and Investment Opportunities

• China has been signaling further stimulus measures to maintain economic growth and stability, with the US and China having different economic outlooks (5m36s).
• According to Marta Norton, Chief Investment Strategist, China's big tech companies have strong competitors, balance sheets, and shareholder friendliness, but low valuations, making them attractive for investment despite headwinds on the geopolitical and economic fronts (6m4s).
• Norton suggests that investors should consider exposure to China, but not pile all their assets there, as there is a margin of safety that can cover the risks, and valuations are more attractive compared to the US (6m49s).

US Market Valuation Concerns

• In contrast, the US market, particularly companies like Nvidia, have high valuations, with Nvidia trading at 47 times future earnings, leaving a small margin for error (7m3s).
• Norton notes that the valuation argument is not there in the US, with estimated earnings for 2024 being around 40, above the five-year average, making it harder for companies to surprise investors on the upside (7m40s).

Big Tech Antitrust and Regulation

• The antitrust and regulation considerations around big tech companies, including Alphabet, have been an overhang for these companies, but are now becoming more prominent (8m34s).
• There are still unknowns and challenges for companies navigating antitrust and taking steps to address these issues, with the outcome not yet clear (8m54s).
• Marta, who oversees $57 billion in management, believes it is hard to step away from the MAG Seven, as they represent a large part of the overall market, with a third of every dollar in the S&P 500 going to these names (9m28s).
• However, Marta notes that these companies are keying off a high, with not as much margin of safety, leading to a modest underweight recommendation for some of these MAG Seven names (9m46s).

Investment Strategies and Market Outlook

• To balance this, Marta suggests adding small-cap areas with relative value and tailwinds, such as potential Trump tax policy or lower rates over the next year (10m6s).
• Marta expects rates to be lower, but not to the same degree as previously thought, and recommends a balanced approach to asset classes, with fixed income trading yields being attractive but expecting moderate returns on the equity side (10m52s).
• Caroline mentions that Nvidia's 100% increase is not expected to be repeated, and the conversation moves on to ServiceTitan's IPO, which is expected to jump after pricing above the range (11m14s).

ServiceTitan's IPO and Growth

• ServiceTitan's founders, Ara Mahdessian and Vahe Kuzoyan, discuss their company's IPO and how their platform provides a "business in a box" solution for trades businesses, solving problems they saw their immigrant fathers face as contractors (13m10s).
• The founders express excitement about the IPO and its importance for the industry they serve, celebrating the hard work of youth contractors who serve their communities (12m38s).
• ServiceTitan, a company serving over 100,000 contractors, has gone public with a valuation of around $7 billion, which is expected to increase at the open (13m39s).
• The company's founders, Ara and Vahe, remain majority shareholders from a voting perspective, giving them control over the company (14m25s).
• The funds raised from the IPO will primarily be used to continue evolving the product and ensuring the industry is not left behind from a technology perspective (14m45s).
• ServiceTitan's mission is to build the operating system for the trades, and the company is already utilizing AI-based products to optimize marketing, automate scheduling and dispatching, and improve service levels for its customers (14m34s).
• The company's customer base is expected to continue thriving despite macroeconomic situations, as the work they do is critical and essential (16m57s).
• ServiceTitan's client base is composed of unsung heroes who provide critical services to their communities, and the company aims to continue serving them in the future (17m18s).
• Goldman Sachs, Morgan Stanley, Wells Fargo, Citigroup, and 10 other banks have worked on the IPO deal, and the company is grateful for their partnership throughout the process (17m27s).
• The company's founders are focused on delivering success for their customers and creating opportunities for them, rather than worrying about the potential for investors to exit or change their investor base (16m12s).
• ServiceTitan CEO Ara Mahdessian stated that having trusted people around the table has been great for the company, and they are focused on building a generational business in the long-term, rather than being concerned about the current stock price (17m52s).
• Mahdessian mentioned that ServiceTitan is grateful to be cash flow positive and has been for the past few quarters, which puts them in control of their destiny and allows them to continue investing in the success of their customers (18m15s).

Tech News and Developments

• Google and Samsung have unveiled a joint push into mixed reality, introducing a headset and glasses version of Android to rival Apple and others, which will allow companies to design devices and take advantage of the latest AI advances (19m16s).
• China's Instagram-style app, WeMock, is on track to double profits in 2024 ahead of a potential IPO, after gaining popularity among younger Chinese users during the pandemic, partly at the expense of Alibaba and JD.com (19m40s).
• Meta has donated $1 million to Donald Trump's inaugural fund as part of an effort to build a positive relationship with the administration, which is seen as a symbolic gesture rather than a significant financial contribution (19m59s).
• Meta's move is a continuation of Mark Zuckerberg's efforts to build a relationship with Trump, including a phone call and dinner at Mar-a-Lago, in an attempt to curry favor and potentially influence tech regulation (20m30s).
• The relationship between Zuckerberg and Trump has changed significantly since the 2020 election, when Trump suggested he would put Zuckerberg in jail, and now Zuckerberg may be trying to build a favorable pathway for Meta's AI products and the metaverse (21m27s).
• The impact of Meta's donation on employees is unclear, but it is seen as a smart business move by Mark Zuckerberg, who is trying to navigate an unpredictable relationship with Trump (22m15s).

Market Performance and Investor Activity

• The Nasdaq is coming off record highs, with Bitcoin up 0.3% at $102,000, and a new activist investor is coming on board to reinvigorate the crypto market (23m8s).

Klarna's AI-Driven Transformation

• Klarna is using AI to save itself and its customers money, and the company's CEO, Sebastian Siemiatkowski, believes AI can already do all the jobs humans are asked to do, it's just a matter of how it's used (24m28s).
• Klarna has stopped hiring and has reduced its workforce from 4,500 to 3,500, but the company plans to give some of the improvements from AI to its employees in the form of increased salaries and equity (25m23s).
• The benefits of AI are being felt across the company, with a core group of 200 employees who have learned to apply it practically, and it's being used for various purposes such as generating images, videos, and marketing materials (26m14s).
• Klarna has filed confidentially with the SEC, but the company has seen an increase in revenue, with a small loss, and productivity gains are expected to help with profitability (26m56s).
• The company has a healthy margin in its US and European businesses, and growth in these areas is expected to help with profitability (27m13s).
• There is a major shift going on away from credit cards, with credit card sales up 11% during Black Friday, and Klarna is looking to capitalize on this trend in the US, where there is $1.3 trillion in credit card debt (27m30s).
• Klarna's business model has saved consumers over $2 billion in interest repayments by providing a healthier alternative to credit cards, which could pose a threat to credit card companies (28m11s).
• The new administration in the U.S. may be supportive of Klarna's expansion, with Trump previously suggesting a 10% cap on credit card fees, and Bernie Sanders also advocating for regulation (28m37s).
• In European markets, there is a 20% cap on interest rates, whereas in the U.S., the average interest rate on credit cards is 24% (28m54s).
• Klarna aims to become a bank in the U.S. and is willing to invest $1 billion to accelerate licensing applications (29m10s).
• The company believes that increasing competition is a better way to reduce the cost to society than capping interest rates (29m32s).
• The European approach to regulating AI is different from the U.S., with Europe wanting to regulate before understanding what to regulate, whereas the U.S. prefers to let it play out and see if regulation is needed (30m9s).
• Sebastian Siemiatkowski, Klarna's CEO, thinks that some rules are helpful, but overregulation could hinder innovation (30m21s).
• A suggested rule in Brussels is to make it legally obligatory to disclose whether a person is communicating with a human or AI on screen (30m44s).
• Sebastian Siemiatkowski believes that allowing innovation and pushing the envelope is essential for the development of AI (31m3s).

Walmart's Financial Services Ambitions

• Walmart is seeking to push into the financial services sector, which could pose a threat to traditional banks (31m28s).

ServiceTitan's IPO and Market Impact

• ServiceTitan's IPO is expected to be a significant event in 2025, with the company having a valuation of $2.5 billion and 3 million monthly active users (31m16s).
• Nina Achadjian, Index Ventures partner, thinks that ServiceTitan's IPO could be a sign of things to come in 2025, with strong businesses getting a good exit (32m51s).
• ServiceTitan's journey to going public started with a mission-driven set of co-founders who built the business to solve a problem their dads had, and the company is now bringing cutting-edge technology, including AI, to industries that were previously forgotten by technology (33m54s).
• The market ServiceTitan operates in is enormous and is one of the backbones of America (33m55s).

Future of AI and Identity in 2025

• Identity will be very important in 2025, with the rise of AI agents, and companies like Persona, which started doing KYC for crypto companies, will be used by leading-edge AI companies to verify user identities (34m38s).
• The valuations of AI-adjacent businesses are still high, but 2025 will be about showing the return on investment (ROI) of investing in and buying AI (35m31s).
• Companies that have industry-specific AI solutions will have a front-row seat to demonstrate how they have embedded AI into their value proposition for their end customers, generating revenue or saving costs (35m47s).
• The future of AI investments will be about solving customer problems and finding foundational models that have been incredible, with a focus on the bottom-up approach (36m22s).

Nvidia's Potential Hong Kong Listing

• Nvidia is considering a second listing in Hong Kong and is speaking to prospective advisors that could help it raise more than $1 billion (37m9s).

Political and Economic Developments

• President-elect Trump has expressed his opposition to the EV mandate, calling it a disaster, but the Lucid CEO believes that Trump could be a tailwind for autos (37m29s).
• Elon Musk has become the first person in the world to reach a net worth of $400 billion, with his net worth boosted by $50 billion after Tesla's shares rallied to all-time highs (38m12s).

Adobe's Stock Decline and AI Challenges

• Adobe's shares have fallen 10% due to a weaker sales outlook, disappointing investors (38m26s).
• Adobe's shares have significantly dropped after the company posted disappointing sales forecasts, largely due to rising competition from AI startups, resulting in a $30 billion loss in market cap (38m56s).
• The company is struggling to capitalize on AI adoption, and investors are anxious about the potential disruption to Adobe's business model, particularly with the emergence of newer, lightweight tools that could reduce the need for Photoshop licenses (39m24s).
• Adobe is developing its own photo and video models, but the competitive market is causing concern among investors and customers, who are questioning whether the company's subscription-based model will be sustainable (39m50s).
• The company has stated that it is optimizing its products and user base before increasing prices, but investors are skeptical about Adobe's ability to achieve pricing leverage in the future (40m11s).
• There appears to be a disconnect between customers, who report being satisfied with Adobe's products, and investors, who remain anxious about the company's prospects (40m39s).
• Adobe's general thesis is that customers want AI tools that are integrated into their existing products, such as Photoshop, rather than standalone AI plug-ins (40m51s).
• The company's creative software business is less likely to be disrupted by AI, as users have invested significant time and data into Adobe's products, making it harder to switch to alternative solutions (41m12s).

Nvidia's Q4 Earnings and Outlook

• Nvidia is set to announce its fourth-quarter results, with investors hoping to see outperformance in the company's stock, driven by strong demand for its networking chips, particularly in the AI sector (41m39s).
• Nvidia's stock rallied after news that the company would be working closer with Apple, and investors are expecting a strong fourth quarter, driven by the seasonal iPhone ramp and growth in AI revenues (41m46s).
• The company's non-AI chip business is expected to turn the corner, and investors will be focusing on two key AI metrics: the first-quarter outlook and a new full-year fiscal AI guide (42m9s).
• Nvidia's customer base is diverse, with 40% of revenue coming from software and the rest from chips, and the company is expanding its customer base, driven primarily by one large customer, with a second customer ramping up in 2025 (42m42s).

Intel's Performance and Strategic Moves

• Intel's shares will be closely watched, with a 1.5% higher guide anticipated, and the company's CFO has announced plans to take its Mobilized unit public, with a big reduction in ownership expected over time (43m21s).