A good Thursday morning to you, live from Berlin. This is Bloomberg Daybreak: Europe. Let's take a look at your top stories. On the brink: Bloomberg learns that Nvidia is searching for a replacement for CEO Jensen Huang as he weighs his future at the company. Shares slumping in the post-market trade. Nvidia rivals AMD and Broadcom gain on the turmoil of the chip giant, while in Asia, a broader tech rally stalls. And in Valletta, Zelenskyy arrives in Dublin for talks with EU leaders, saying political changes in the U.S. and beyond have created a window of opportunity for peace talks with Russia. Let's take a look at what is happening on the markets this morning. The real picture that we are seeing everywhere really is the reaction to the turmoil unfolding at Nvidia. You can see that Asian markets are down sharply after the increase that they had at the beginning of this week. Euro stocks up slightly, Nasdaq futures also down after the Nvidia tumble at the very end of the trading day and in post-market as well. We have a ton of news to get to this morning. Let's get started.
The Nvidia scandal that has been unfolding all week appears to be reaching a breaking point, with the company's shares tumbling post-market. It follows reports the board is preparing to oust Jensen Huang as CEO, with directors set to be meeting at this hour remotely. Let's bring in Bloomberg Tech Europe's Tom Mackenzie to bring us up to speed on all the overnight late developments.
We are watching any lines that come out of the board that is currently meeting for Nvidia, on the back of this reporting from the Wall Street Journal that they are now prepared to fire the CEO of that company. The New York Times reported that he had a second affair with one of the executives who reports to him, this person being the Vice President of Healthcare, Kimberly Powell. So additional damage for the leadership, for the leader of Nvidia. This is a crucial moment. We've seen a number of analysts now downgrade the stock. The stock is down about 30% over the last 30 days. A number of banks and brokers have come out and downgraded the stock, including the likes of Ernestine. You have the likes of Dan Ives, who is an AI bull, putting out notes saying that Jensen has created a black eye moment for himself and Nvidia, and now has created a spiderweb of complexity that Wall Street and Silicon Valley see. So this is where the focus lies.
It looks very likely, increasingly likely, that Jensen Huang will be forced out as CEO of this company. There are question marks not just when it comes to governance by the board and by executives of Nvidia in terms of what they knew about the shipment of chips into the Chinese market through companies, and there are also question marks over the Commerce Department of the United States and Howard Lutnick, who of course runs the Commerce Department. There have been reports that the Treasury and the Pentagon have tried to put pressure on the Commerce Department to restrict the shipment and the smuggling of chips into the Chinese market, and the Commerce Department essentially slow-walked that. So there are question marks for Howard Lutnick and President Trump himself. There's question marks for the administration, and certainly for the reporting that we've seen that Jensen Huang may be forced out as CEO of Nvidia.
This company has literally been built by Jensen Huang and built around him as the personality leading it. Where do they go from here? Who could potentially replace him if the board does, in fact, oust him as CEO?
There are a couple of names. There is the CFO, probably the most recognizable Nvidia executive after Jensen Huang. She appears on the earnings calls, and often in these scenarios the board goes to the CFO. The problem is that she doesn't have the technical experience and the visionary status of Jensen Huang. She's not an engineer, she is a CFO, and by all accounts has been very effective in that role. But does she have the operational and technical experience? That is something that some might question. This could be an interim role for the CFO. The other person who has been put in the spotlight runs the data center business for Nvidia, including the GPUs. He's also the person who invented this software layer that has proven so effective in getting chips aligned and has become embedded across the AI ecosystem, so he's another name in the mix, but he doesn't have the operational experience, even if he has the engineering background or the engineering experience. So there are questions around both those names.
Other names potentially outside of the ecosystem: Rene Haas, who is the CEO of Arm, formerly worked at Nvidia, and someone who oversees a complex and successful chip company, of course, in terms of chip design. He has background at Nvidia and is seen as a very successful CEO in his own right. Also potentially in the mix. None of this is official, of course. These are some of the names that could be on the docket. There is a very small pool of talent that can run a business as complicated as Nvidia. So for now, other questions about the AI ecosystem as well, given the funding that Nvidia provides as the so-called central bank of AI, the fact that it has backed dozens if not hundreds of startups in the AI ecosystem, the fact that it is working with the likes of BlackRock and KKR and Goldman Sachs on a $500 billion program to fund AI infrastructure, all of that is now in question, as well as the questions about governance and the scrutiny that this company is going to face, whoever is CEO, from the Hill and from Congress, and particularly once Democrats take their seats in the early part of next year.
Tom Mackenzie, thank you for bringing us your expertise this morning. We may be back to you throughout the hour as news unfolds.
Pretty interesting development that we see in Asia today, because we did see Asian stocks fluctuating quite a bit earlier in the session, but into the afternoon session, losses extending down about a tenth of 1%. There is that uncertainty when it comes to the leadership, not just about who might potentially take over, but the questions around the continuation of the business strategy, of the customer relationships. Those are all prompting investors to take a more cautious stance right now. So you can see that tech-heavy gauges in the region really leading losses today, with the index down about 2.6%. Now flip the board, we take a look at the tech stocks in the move, because there is a bit of a divergence that we are seeing, which is quite interesting, because we are seeing the underperformers really being the names that are relying very heavily on Nvidia, the likes of SK Hynix, TSMC, both have Nvidia as their biggest customer when it comes to sales. In fact, you are seeing them account for about 90% of sales. SK Hynix about 27%. The bright spot is it is still holding up to its gains because of the closer tie with Nvidia's direct competitor, AMD, which actually saw shares rising, along with Broadcom as well as Alphabet, as investors expect the slowdown in Nvidia growth can benefit its competitors. Flip the board at the end, another divergence we are seeing is in the tech stocks in China, because it is still about Nvidia. We are seeing the AI-related names under pressure because of the bets that the U.S. might be stepping up the restrictions around the exports of chips. However, the bright spot is in the hardware names in China, given that they may be benefiting from the push around China's self-sufficiency when it comes to tech. Back to you.
Let's get more on what the turmoil at Nvidia could mean for markets with our asset strategist on our Markets Live team. How are we seeing the tech sector beyond Nvidia reacting to these headlines?
I think there's a lot more beyond Nvidia. Nvidia is obviously going to be the major driver in the European and U.S. session, but it pays to look beyond what those implications are. After Monday's inflation print in the U.S., that was a turning point for bonds in the technical sense. The tactical rally is now unwound, and we are now mounting back toward 5% on the 10-year, and that is going to have huge implications, because not only because of the discount rate on equities, meaning the valuations are going to be lower, but also in terms of what it means for the AI-led debt financing. There are plenty of products from AI-related companies being financed at higher and higher yields, and therefore the net evaluation of the projects will be lower, which means there is going to be a longer time before investors recover their money. That is also going to be a headwind for the markets. So I think that if you put all of these together, as I've been saying for a while now, markets will hold the pause through the Anthropic IPO, but after that, the rumbles in the market tend to increase exponentially.
You're talking about these rumbles in the market. How exposed do you think investors are at this point as we watch this news unfolding this morning?
I think markets are going to be completely exposed on a lot of fronts. You simply do not have a place to hide. You are going into a session where equities are going to feel increasingly pressured for the reasons we just discussed. There are concerns about AI valuations, there is talk of a bubble, and then you have interest rates that are climbing, which is not good for bonds. So all in all, there is no place to hide, which is why I think you've got to be a bit more constructive on the dollar and also constructive on money market funds, which tend to do well in this kind of backdrop.
Ven Ram. We want to bring you some other breaking news on the front this morning. Siemens has just reported 2027 revenue at 9%-11%. They are raising their midterm view. Siemens 4Q orders at $34.77 billion, well above the estimates. Revenue also beating the estimates as well. We are going to have a lot more on Siemens from the Siemens CEO, who will be speaking to us a little bit later here in the program. Well, coming up, we will have much more on the Jensen Huang firestorm and can he survive it? We will discuss the company's future and what it means for the trillions of dollars invested in the AI trade. But first, leaders call for climate action as they look to tackle signs of waning urgency at the summit. That is all next, and this is Bloomberg.
We started talking more about tariffs and the survival of future generations. The transition began to be seen by some as a hurdle for security and the prosperity of relations. It was an inflation dome. It is more difficult to think in the catastrophe of tomorrow, but the planet can be left to the will of the hegemonic dispensation.
That was Brazilian President Lula speaking. He was among a series of leaders calling for more urgency to tackle climate risk. Antonio Guterres saying leaders have the power to limit the damage, acknowledging projections that the world can no longer stop global warming exceeding 1.5 degrees Celsius, the key target of the Paris Climate Accord. Jennifer Zabasajja is there for us. Jennifer, what have you been hearing from policymakers and business leaders at the conference today?
What we just heard from President Lula is just a taste of a number of leaders who were speaking and really lamenting the current situation, both economically and also what it has done on a climate perspective to their specific countries here at the summit. President Lula really taking the time, especially after he solidified his reelection back into the presidency, to talk about the fact that world leaders need to become more aggressive against climate change, and saying that actually a number of countries have become a bit complacent, as it were, and especially the fact that we are talking about this point in time where you were just mentioning the U.N. World Assessment is assuming and really expecting the world to overshoot that 1.5 degrees Celsius target that have been the goal and the ambition of the Paris Agreement. Now we are at a point where a number of leaders are expecting the overshoot to happen, and certainly the calls throughout the day on Wednesday are: what can we do? How can there be a collective consensus as to the actions that need to be taken to at least mitigate some of the challenges that come with that? So we heard from President Lula, we also heard from the host country, Turkish President Erdogan, and perhaps most pointedly, you were mentioning U.N. Secretary-General Guterres talking specifically about the fact that the planet is on a path to mutually assured destruction. He is just weeks away from stepping down or his term ending as Secretary-General, so using the time really to again target specifically some of the actions that have been taken not to limit fossil fuels, and calling on countries to step up their actions, step up climate finance, and also support a number of developing nations that do also need support in this act. What we are waiting for today is day two of the two-day leaders' summit. A number of other leaders will be speaking throughout the day, and we will be waiting to hear from them to perhaps join the chorus of leaders we've heard from thus far.
Jennifer, we are hearing a lot of dire warnings from leaders, but how likely do you think there could actually be any climate action?
This is really the prevailing question we've been hearing throughout the day. This is COP31. If we think about where the climate is at at this point in time, and now we are just over a decade since the Paris Agreement, many people are wondering what is the purpose of COP, what is the outcome we are likely to see? Many people still believe these do serve a purpose, and especially if you think about developing nations, I was just mentioning, require an estimated $305 billion a year by 2035 for adaptation. And so the fact that we are seeing a number of world leaders, we are seeing public sector, a number of private sector leaders are here, not as much as we've seen in past years, still it is a call to at least mobilize capital and find ways to channel that capital into the right places across the world. So many people are waiting to see, potentially we see more agreements on that front. Unlike previous COPs that we've seen in the past, it is unlikely to be any blockbuster pronouncements. Potentially, though, we do see some bit of communication as to how we implement some of the commitments that we've seen in the past. And just finally, many people are talking about, of course, the Democrats' sweeping win over the midterms last year in the U.S., which potentially adds a bit of optimism into the discussions over the climate negotiations and talks that are happening here, as of course there is also President Lula, who has also secured another win. So he, as a champion of climate action, potentially that adds another degree of optimism and perhaps progression into some of the talks that we see. But still, we are facing a climate crisis that has been compounded by the effects of conflict in the Middle East and that adding to the energy crisis, and of course this added element of the buildout of data centers and what that could potentially do. So definitely a more nuanced discussion happening here. The question is what will the outcomes be, and potentially what is the mobilization of finance that we will see over the next two weeks?
Jennifer Zabasajja for us, thank you so much. We will hear from the U.N. Secretary-General later this morning. Don't miss that interview at 10:30 U.K. time, 11:30 right here in Berlin. More on the stocks on the move as markets react to the turmoil at Nvidia. This is Bloomberg.
I think you have to hold yourself responsible. You have agency, you are the CEO of the company, you have to have high standards and expectations. And so I think the pressure of being the CEO is high, and it is supposed to be high. It should not be an easy job, it should not be a job you take for granted.
Well, that was Nvidia CEO Jensen Huang speaking to Bloomberg's Emily Chang in an interview recorded last month. You can watch the full episode out now on YouTube, Bloomberg.com, and on the Terminal. We want to look at some of the markets reacting to this breaking news story unfolding all morning. Here's a look at what is happening with U.S. chipmakers. You can see the big drop-off with Nvidia, and two of their big competitors, AMD and Broadcom, gaining after hours on this news surrounding the scandal with Jensen Huang. Let's take a look at what is happening with Asian stocks as a result of this breaking news story. You can see here some of the Asian companies: SK Hynix down, TSMC as well. Samsung Electronics, not quite as dependent on Nvidia, they are up 1.7% this morning. Let's get more of the reaction to this breaking news story and what we've been hearing from our guests here on Bloomberg regarding the scandal rocking Nvidia.
This is a freaking disaster at this point. Unfortunately, this is a story of hubris and poor governance. We are going to see this coming out in dribs for probably months. It's just too much for me, I'd rather watch the circus from outside the tent. Trump should leave with President Xi next week to make a real point of how serious we are taking this. This could actually accelerate the decoupling in terms of the two different technologies between the U.S. and China, so I think that could be a potential fundamental impact. It could lose a bit of market share and go to AMD and Broadcom.
Some of the political and business reaction unfolding around the crisis at Nvidia. Let's take some more looks at breaking news this morning. Three Q net income Hon Hai, estimate $70.26 billion, so clearly seeing 4Q revenue growing year-on-year, operating profit at $115.35 billion, also a big beat for Hon Hai. Now let's turn to some of the other corporate news we are following. Bloomberg has learned HSBC has been exploring ways to reduce its reliance on China, including Hong Kong, and give its Singapore operations more independence. The bank has confirmed it will combine its Singapore units, but says it has no further plans. We are told actions discussed include eventually establishing Singapore as a second regional base alongside Hong Kong. Coming up, we are going to have much more on the Nvidia crisis and how it is reshaping the AI race between the U.S. and China. We will discuss the geopolitical impacts ahead of President Trump's visit to Asia next week. We are going to be looking also at what is happening on markets. All of that coming up after the break, and this is Bloomberg.
Welcome back to the program, live from Berlin. This is Bloomberg Daybreak: Europe. Let's look at your top stories. Bloomberg learns that Nvidia is searching for a replacement for CEO Jensen Huang as it weighs his future at the company. Shares slumping in the post-market trade. Nvidia rivals AMD and Broadcom... stalls. Ukraine's president arrives in Dublin for talks with European leaders, saying political changes in the U.S. and beyond have created a window of opportunity for peace talks with Russia. Let's look at what's happening in markets more broadly. As we can see, Asian stocks are down this morning after the three-day rally. The markets in general across the board reacting to breaking news that we've been following all morning. Nasdaq futures down this morning. Nvidia shares falling in the post-market trade as we wait to see what the Nvidia board will do. The crisis at Nvidia escalating, with the fate of CEO Jensen Huang looking increasingly uncertain. We understand the board is working at this hour with an outside firm to identify potential CEO candidates as it... relationships. I'm joined by Anthony Stephens. How is the region treating this, especially in Taiwan?
It's accelerating as London PMs come in, and it's coalescing around the fact that this is an execution risk. Bear in mind, when the scandal first broke, Taiwan stocks were up on the back of Nvidia orders. There was so much optimism that this would just be a distraction. Local traders looked past it completely. This time around, people are paying more attention because of the likelihood he will be ousted from the company, and with him will go the strategic and mental picture around the growth map for AI, and that is at play. The vision of integrating not just the supply chain but the relationships with customers that are part of the Nvidia framework. Broadcom, Intel, Amazon and Google, they will be more niche players. No one is ready to replace the broad spectrum of applicability, and that's the concern. For Asia, it's more salient because Taiwan has beaten the Asia stock market by some bit. It's being closed rapidly by this crisis, especially under the hood where you have so many niche players in Taiwan that almost entirely depend on either Jensen Huang's direct contracts or the validation's certification provides.
