Nvidia closes in on the trillion-dollar club

This is an audio transcript of the FT News Briefing podcast episode: ‘Nvidia closes in on the trillion dollar club’

Marc Filippino
Good morning from the Financial Times. Today is Friday, May 26th, and this is your FT News Briefing.

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The US credit crunch is causing an uptick in corporate bankruptcies. And Turkish voters go back to the polls this Sunday. Plus, US chipmaker Nvidia is on track to join the $1tn club.

Tim Bradshaw
It’s a long time since I’ve read notes from big, grown-up bank analysts like Morgan Stanley that are hyperventilating quite as much as they are about Nvidia’s earnings.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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America’s credit squeeze is getting tighter and tighter, and that’s leading a lot of big US companies to take shelter in bankruptcy court. The companies might sound familiar. Vice Media and Envision Healthcare have gone the Chapter 11 route recently. Twenty-seven large debtors have filed for bankruptcy. We’re not even halfway through the year. Throughout all of last year, that number was 40. Part of the blame falls on rising interest rates because the debt these companies previously had has become more expensive more quickly than they anticipated. And the ones that are struggling sometimes can’t afford the higher interest payments.

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Turkey’s voters head to the polls for the second time in as many weeks to choose the country’s next president. Sunday’s runoff vote will determine whether incumbent Recep Tayyip Erdoğan will add to his two decades in power or if challenger Kemal Kılıçdaroğlu will take over. Here to preview the Turkish runoff is the FT’s Adam Samson. Hi, Adam.

Adam Samson
Hey, Marc. Thanks for having me.

Marc Filippino
So, Adam, remind listeners where we left off. How did the first election go back on May 14th?

Adam Samson
Yeah, so the first round of the election was a bit of a surprise. Going into it, Kemal Kılıçdaroğlu, the opposition leader, was seen as sort of in the pole position, and President Recep Tayyip Erdoğan was sort of expected to do fairly poorly, but the exact opposite happened. Neither of them had enough to get a majority because there’s a third candidate, a guy called Sinan Oğan, who also scored about 5 per cent of the vote. So now we’re going to a runoff.

Marc Filippino
Right. Because Sinan Oğan did not make it to the runoff. So where will his votes go? Do we have a sense of how this all is going to shake out?

Adam Samson
So a poll that came out yesterday showed Erdoğan in the lead with something like 52 per cent of the vote, 47 for Kılıçdaroğlu. That matches what a lot of political analysts and investors here are saying. There’s this idea that Erdoğan got a lot of momentum by gaining 49 per cent of the vote in the first round, which was five percentage points ahead of Kılıçdaroğlu. And the other thing is there’s an expectation that Erdoğan will probably get a good chunk of the votes that went to Sinan Oğan, who’s a nationalist, but has now endorsed Erdoğan. They have some similar policies as well. So it’s certainly the expectation is that there’s a decent chance Erdoğan is going to clinch it.

Marc Filippino
I guess then is it worth talking about what happens if Kılıçdaroğlu wins?

Adam Samson
I think it is worth talking about just because you never know. We saw last time that the polls can be completely wrong, and it’s unclear exactly what the voter turnout is going to be. You know, if the people who are strong supporters of Kılıçdaroğlu are going to continue turning out. You know, strong Erdoğan supporters may say, OK, you know, we’ve got this in the bag. I’m not going to show up. So I think you just, you never know.

Marc Filippino
Adam Samson covers Turkey for the FT. Thanks, Adam.

Adam Samson
Thanks very much for having me.

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Marc Filippino
Nvidia put out a sales forecast for its current quarter that shocked Wall Street. The $11bn outlook beat predictions from analysts and sent shares in the chipmaker soaring yesterday. It ended the day up a little more than 24 per cent, and the company is now on course to become the first chipmaker to be valued at more than $1tn, which would put it in the same camp as Apple, Microsoft, Amazon and Alphabet. I’m joined now by the FT’s Tim Bradshaw. He’s our global technology correspondent. Hi, Tim.

Tim Bradshaw
Hey, Marc.

Marc Filippino
So how would you describe the hype around Nvidia right now, Tim?

Tim Bradshaw
It’s a long time since I’ve read notes from big, grown-up bank analysts like Morgan Stanley that are hyperventilating quite as much as they are about Nvidia’s earnings. It’s reminiscent of Apple when the iPhone was taking off. That was the last time I can remember people getting quite this excited.

Marc Filippino
Wow, that is a huge deal. So what exactly got investors so excited from Nvidia’s earnings call on Wednesday?

Tim Bradshaw
Well, there’s a few different things going on, but the biggest is just Nvidia makes basically the only chips that can do generative artificial intelligence training that creates ChatGPT and some of the other crazy things that we’ve seen coming out over the last six months. And for a while they have been unable to make enough to satisfy the demand that they were getting. It seems like they’ve unlocked that supply problem and so now they are forecasting much bigger revenues than Wall Street was expecting.

Marc Filippino
Can you paint us a picture of how Nvidia sits in the broader spectrum of the industry, like, how does it compare to some of its closest competitors?

Tim Bradshaw
Yeah, it’s a fascinating story, really. I mean, 30 years ago they were catering to a niche audience of video games people and research scientists with these graphics chips that do one thing very well rather than everything all the time, which is what your generic Intel CPU might be doing. And until three years ago, Intel was the world’s most valuable semiconductor company. Then it was overtaken by Nvidia. The gap has now grown so much that Nvidia added more than Intel’s entire market capitalisation in a single day yesterday. The gap has just become enormous and that’s partly because of Intel having many struggles in itself. It missed the mobile boom, and it’s now looking like it might risk missing the AI boom. But Nvidia is running away with this by being focused on one very specific type of chip technology, but it’s the one chip everybody in Silicon Valley wants right now.

Marc Filippino
Tim, earlier this week Beijing banned US chipmaker Micron from certain Chinese industries. And I bring this up because recently the FT spoke to Jensen Huang, who is the CEO of Nvidia, and he said he’s worried that there could be enormous damage to the sector if it loses the China market. Was it surprising then that Nvidia’s outlook was so strong considering this concern with China?

Tim Bradshaw
I think it was probably priced in for the most part, and it doesn’t seem to be a factor that has worried Wall Street, particularly Nvidia’s stock had already doubled so far this year even before the massive move that we saw yesterday. So it’s not something that seems to be a huge concern for Wall Street, and a lot of the companies that are customers for the chips that drove this incredibly strong upgrade to its sales forecast are in Silicon Valley. So it’s not depending on the Tencents or the Baidus of the world buying its chips. It’s all going to Microsoft, Google, Amazon and Meta.

Marc Filippino
Tim Bradshaw is the FT’s global technology correspondent. Thanks, Tim.

Tim Bradshaw
Thanks a lot.

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Marc Filippino
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news. The FT News Briefing is produced by Sonja Hutson, Fiona Symon and me, Marc Filippino. Our editor is Jess Smith. We had help this week from Michela Tindera, Molly Nugent, Katie McMurran, Michael Lello and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio, and our theme song is by Metaphor Music.