ED: This is Bloomberg Tech. ASML raises its... and Jensen, long fresh on the heels of announcing plans to invest $2 billion in European deals.
We take you inside of the making of Grand Theft Auto Six, expected to be the biggest video game blockbuster of all time. Welcome to Wednesday.
We are looking at shares of ASML up 2.2%. At one point at 3.6%, at one point fell 1%.
The producer of lithography machines, manufacturing and cutting-edge chips, raised its sales outlook but is struggling to meet demand. Joining us is Sara Jacobs in Amsterdam. For ASML, it is all about capacity. They had plans to boost capacity. They are saying they are still in a place where demand is running ahead of their ability to supply. Give us the basics.
ASML out again, basically raising the low end of its annual sales forecast for 2026 because it seems to be soaring intelligence-linked demand. The CEO says he is getting customers asking for more tools every day and it has become the focus of ASML to get the capacity going.
In July, ASML said it expected about 65 units of capacity for 2026 and a 30% increase on that for 2027, investigating a further 30% increase for 2028. Today it says those plans and supply patterns won't be enough to fulfill demand from what it is getting from customers.
Now investment is going beyond 30% in 2028. That's interesting. It is hearing more from customers in terms of short-term and medium-term requirements.
ED: China is a story. There is a proposed piece of legislation to deepen export restrictions on chips to China. What did ASML have to say about China, Sarah?
China is the third largest market for ASML after South Korea and Taiwan. And then we spoke to Roger Dassen, the CFO of ASML, in a call with journalists today. He said that by introducing such restrictions, essentially, you could slow this going into China and it would increase, but not stop, what China could do with developing technology.
It might help hold technology in that regard. By preventing the ability of ASML to sell tools in China, there could be intellectual property leakage or theft.
Europe's most valuable company reporting its earnings. Customers are asking every day for more tools to meet their own needs.
Today they expect their supply will not meet the demand, at least until 2028. So it is very strong demand on their side. A lot of our discussions with our customers are now shifting beyond 2027. There is a lot of order intake for 2028 and a strong interest to place an order for 2029 and 2030.
ASML talking to customers about 2029. Let's talk with an analyst from San Pablo. It's about capacity. The market is struggling with customers asking for more. You are trying to address the capacity issue. Where can they find more capacity?
Hello. Thank you for this opportunity. These are the key points for them. It is an opportunity to increase the capacity to match strong demand. What can they do? They can optimize their production. They can release a product that will compete.
They are already receiving stronger demand for productivity. This is the reason why they are really pushing this force to increase the capacity that remains for them and for the whole chain. Not to mention, demand remains very strong.
ED: How unusual is it for ASML or anyone in the chipmaking space to already be talking to customers about 2029 or 2030?
This is something becoming common to hear from testing equipment players. We heard from many of them speaking about full capacity for 2027, still very stretched for 2028.
You have to consider that we are across an unprecedented revolution with AI employment. It is a multi-year cycle. This is something we have to look at. We have to look at 2028, at 2029, 2030, and beyond. They are implementing new initiatives that they launched with TSMC.
ED: Let's talk about ASML customers. We know who they are. High concentration: TSMC, Samsung, and Intel. Of those three, do we have a sense of who needs the lithography machines most, who is pushing ASML hardest?
What they don't provide this information. Memory makers are now running ahead of all the others. Also, advanced logic is ready for advanced chips. Again, this is something leading up to all of the main advanced chip manufacturers.
ED: Sara, it is Europe's most rated artificial intelligence company. What I found interesting in the bigger picture story about the chip equipment makers and semiconductor industry overall is ASML hit a record in June and has essentially traded sideways since. It made attempts to get to the levels but has not hit fresh records since June 30. Where is your head at with the valuation of the company now and the forward trajectory of its growth?
The decline in the price is something that also regarded most of the semiconductor plays. But, considering the strong earnings apace, now valuations look very appealing, in my view.
The stock is trading in line with the last five years' average, which, in our view, does not take into consideration properly the fact we are now in an up cycle, so the stocks should trade above the historical average. Moreover, the stock has almost closed at a historical premium that we also consider inadequate.
And on the other hand, the strong earnings and the potential for what is ahead on the share price.
ED: Let's talk about China. You heard Sarah's reporting on ASML's positioning. China's 23% of system sales. By the end of the year, it will be 20%. What outlook do you have for the ASML business in China?
The company, day-to-day, said China should account for around 20% of sales. They have been more cautious this quarter. This quarter, China performed a bit better than, for example, second quarter.
The key point on China is, as you said, this is the main reason why the stock is not expressing its full potential because investors are hearing that the implementation of the new regulatory frame could have an impact, a double-digit impact on ASML.
Maybe we lack clarity on that after the midterm elections. This could be one of the reasons why the stock is still a bit capped for the time being.
ED: Great to have you with us. Coming up, we hear from the NVIDIA CEO Jensen Huang as he announces plans to invest another $2 billion in Europe during a tour of the region. A little bit of Jensanity going on on the continent.
ED: Let's look at today's relatively big number, $21 billion, how much Japan could put behind Japan's investment pledge to the U.S., boosting American production of chips using everything from cars to communications gear.
Washington is getting a piece of the action. The U.S. government will take a 4% stake in GlobalFoundries, deepening direct investment into chipmaking. Shares of GlobalFoundries up 4%. There is a lot to understand. Bloomberg's Ian King is thankfully with us. Explain GlobalFoundries' place in the chipmaking world. This is them establishing more of a domestic footprint, right? With Japanese money.
GlobalFoundries is a TSMC-type company that concentrates on less advanced chip manufacturing but, like TSMC, tries to supply as many people as it can.
ED: $21 billion is actually not that big of a number when you think about what it takes to stand up a fab and get it online. There was a separate parallel headline about money that GlobalFoundries had received through the Biden administration that they are essentially, as I understand it, now more free to spend it on different things.
Ian: $21 billion if you are TSMC is not enough to buy even one planned. But for the kind of just GlobalFoundries specializes in, it is. It's a good chunk of money and an order of magnitude change in what they can do. Because they have the money, they can use the CHIPS Act money for other specialist projects and they are working on.
ED: This is two projects in upstate New York. This focus is on reassuring American chipmaking capacity. Are these announcements from GlobalFoundries, or in the last three years have they ramped up what they are doing domestically?
GlobalFoundries is an unusual company. They started off life as the plants of AMD bought by the government of Abu Dhabi and then they bought a semiconductor plant in Singapore and then this plant in upstate New York and now they are adding to that. The name is above the door. It is GlobalFoundries. They are riding a wave of public money being used to bring this back to the U.S.
The final element of the story is bringing it back to the U.S. with the U.S. taking a stake in GlobalFoundries. Explain that landscape. It's not just GlobalFoundries where the U.S. government has made an investment.
Ian: The obvious other one is Intel, where the Trump administration helped Intel and gave Intel more freedom and said in return the taxpayer gets a slice of the action. The president has talked up the returns that they have already realized from that investment and we are seeing an attempt to repeat that at a smaller scale here.
ED: Jensen Huang says NVIDIA is planning to announce $2 billion in European investment over the past, regarding the $8 billion in investment the chipmaker already put into the continent over the last year.
This is the beginning of AI Europe. In the last year alone, we invested $8 billion in European startups. Over the next week I will announce another $2.2 billion. We have invested tremendously in about every single layer of AI infrastructure in Europe.
For the next layer above that is investment. These will be the superstar companies of the next generation.
ED: On AI, are you frightened?
Today, demand is far greater than supply. That is because we are in the beginning of a new industrial rollout. We need to build AI infrastructure around the world. Demand is greater than supply.
Someday the two will come into balance, whether it is five years from now or seven or 10 years from now. The duration of new technology build-out, except this one requires factories, energy, and construction. There are many natural limiters that keep the industry from building too fast. Eventually, it will surely happen that demand and supply will come into balance. But you will not see that for the next several years.
That was NVIDIA's CEO Jensen Huang. Applied Materials gave a bullish outlook saying a number of factors make it harder to provide a detailed outlook. Yesterday's investor briefing was light on specifics. The Applied Materials CEO spoke with us after the event and gave a little more.
We did not give a specific forecast because it is changing so quickly. Workloads are changing quickly. All of the technologies and models are changing quickly. Picking a precise point is very challenging. However, for us, we are investing to prepare to double our output over the next two years.
ED: Initially investors were less than impressed. The stock posted the worst decline in about a month after the original, less detailed, forecast and the shares continued to slide, down 2.4% in the session, now on track for the seventh straight day of declines for Applied Materials, the longest losing streak going back to January 2024.
If ASML does patterns on the way for Applied Materials, builds actual physical material onto the chip.
Yahira: It's time for Talking Tech. Bank of America is no longer on the roster of banks working on Moonshot IPO as the China AI darling faces increased scrutiny in the U.S.
Goldman Sachs is now the only U.S. bank expected to have a role in this deal. Mark Zuckerberg said Meta had to commit to spending hundreds of billions of dollars last year on AI infrastructure before the company had any idea whether they would succeed.
This is a revealing disclosure for a company that has struggled to persuade investors to accept its ballooning expenses for AI ambitions. And the Brooklyn District Attorney's office disrupted a multinational cryptocurrency scam at a work center in Eastern Europe, capping an eight-year-long effort to stop a fraud operation that has stolen tens of millions of dollars from Americans.
ED: Coming up, a hidden recording device found inside OpenAI. The security scare at one of the world's biggest AI companies. We have the details next.
Security breach from inside OpenAI. One of the company's workers arrested and accused of planting a recording device inside a conference room at that California offices. Let's start with the details, Rachel. Everything we know to point about the incident.
