Daybreak Weekend: Nvidia Earnings, Europe Airlines, Japan GDP

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Bloomberg Audio Studios. Podcasts, Radio News. This is Bloomberg Daybreak Week weekend. our global look at the top stories in the coming week from our daybreak anchors all around the world. Straight ahead on the program, a look ahead to earnings from chip giant invidia, along with some of the biggest U.S. retailers. I'm John Tucker Carlson in New York. I'm Caroline Hepke here in London, where we're looking at the upcoming earnings test for Europe's low-cost airlines. I'm Doug Krasner looking at whether Japan's economy will show improvement in the first quarter.

That's all straight ahead on Bloomberg Daybreak Weekend. on Bloomberg 1130 New York, Bloomberg 991, Washington, D.C., Bloomberg 929, Boston, DAB Digital Radio London, SiriusXM-121, and Around the World on Bloomberg Radio.com and the Bloomberg business app. And good day to everybody. I'm John Tucker Carlson. Let's start today's program with the company founded in a Denny's restaurant in East San Jose, California. California, Wednesday after the close of regular trading, the biggest company, NVIDIA, opening its books to investors. Let's get a preview and walk you through all the details. We're joined by Bloomberg Technology co-anchor Ed Ledlow. Ed, I've got to start with a China question.

Which of NVIDIA's future results are going to reflect purchases from China? Nobody knows. That is the great... That's why we bring you on board, Ed. That is the great mystery and mystique of NVIDIA. because, you know, for all the headlines and the discussion of what Nvidia can or cannot sell to Chinese companies, you know, with Jensen Huang alongside President Trump in China, there's a big misunderstanding of how it actually works.

So like the US government will say, we have approved Nvidia to sell a certain generation of chip to a certain group of Chinese companies. Great, fantastic. And Jensen Huang will go on stage, as he's done many times in 2026 so far, and say, good news guys, like we have orders from Chinese companies for the H-200, which is the generation of chip that permitted to sell. Really good, like real orders. And so as a result of those orders, we're going to ramp up. We're going to go to our suppliers, make sure that we have those chips. But nobody actually knows if China's okay with this. And, you know, it's really interesting

because to his credit, Jensomang has always been really consistent with me when I've discussed it with him. when they negotiate this stuff, they don't actually themselves negotiate with the Chinese government. If Chinese tech companies are allowed to buy their chips, they will. They'll place orders. And that, we should infer from that, means that the Chinese government said it was okay. And so the only way of knowing is if it shows up on the income statement. That's the joy of covering earnings and public companies. It's either there in black and white or it's not. Yeah, you know, it's kind of hard for me when I, go home in the afternoon's ed to pass some place that doesn't have a data center under

construction. What's the, where's the growth going to come from for Nvidia? Is it those data centers that are popping up seemingly everywhere? Well, look, I really want to have some fun and make this like just digestible for the audience. All you need to know is that wherever it's coming from, the Nvidia numbers are really big. You know, this story, you mentioned Denny's, right? in April 1993, when this company was found in Denny's, I was less than a year.

And for most of the company's initial history, it made chips that powered video games consoles. And no one really kept being honest. Those were like the GPUs we could, right? Yeah, GPU, the origin of the GPU, the graphics processing unit, is that it's very good at running multiple computations at the same time, which for the layman means when you're playing a video game, all those pixels appear on the screen. You know, that's what its origin was.

Now, fast forward to present day, you know, they are still growing revenues at near to 80% year on year. You know, actually what we'll see is revenue growth accelerate into this quarter. Their margins are at 75%. Like margins at 75% for a company that sells chips. It's just bonkers. It's just nuts. That's all you need to know. And they do it with massive profits and cash generation.

And so in this quarter, that's not changing. But here's the, to answer your actual question, where does it all come from? It's still the big cloud computing companies, what we call hyperscalers, that account for more than 50% of those revenues. But that's why the timing of earnings is really interesting. You know, if you're a real nerd like me, you look at the calendar and you're like, oh, wow, Nvidia reports earnings May 20th. But the reason that I stress that is that all of Nvidia's biggest customers have already done earnings

and they've told us how much they're going to spend on chips this year. So it all is kind of logical, and it all results in Nvidia winning, frankly. Is it still safe to say Nvidia pretty much has a near monopoly in this field? Yeah. Well, just to make sure that we're covered and I adhere to my own and Bloomberg's high standards, a technical monopoly is where you have more than 70% market share. And what's happening in AI right now is a very big shift from a period of time where all the computers, and we're talking about computers, right? GPUs, clusters, data centers,

what you're talking about is absolutely ginormous computers. Until this point, what those computers were largely doing was training the models, taking really vast volumes of data and training models on that data. Now people are using them. They're running the models either through prompts that generate a text response. It can be an image response. That's what we call inference. And when we get to that inference phase, Nvidia looks over its shoulder a little bit more because there are more custom silicon. Different cow companies have their own chips. There are other chips on the market that would claim to be better than invidias in that sense. But there's not yet any evidence that they've sort of had their market dominance chipped away at by any of these

would-bees. You're going to pour over those earnings as they come across. Wednesday after the close of regular trading. All right, thanks to Bloomberg Technology co-ank Ed Ludlow. Let's take a look now at some of the stocks making news in the week ahead. I'm John Tucker Carlson, along with Isabel Lee, the Bloomberg Cross Asset Reporter. The parade of earnings continues, and we're going to start with the biggest retailer in the world. Walmart. What's the expectation there? Walmart, ticker WMT, earnings will be on May 21st. That's a Thursday, which I checked right before we came on, because you said we had to know the day. It's Thursday. 7 a.m. E.T.

earnings call is 8 a.m. So early wake up if you really want to know more about Walmart. Revenue expected the consensus estimates is $748 billion. Adjusted deluded EPS, $2.993. And deluded EPS, $2.993. So I could bore you with the numbers. But key themes to watch definitely market share gains. We know Walmart is positioned to benefit from its value and convenience proposition

with sustained e-commerce momentum. Maybe not in New York. I really can't relate whenever I talk about Walmart. I would love to go to one. I've never been to one. Oh, my gosh. They're not around here. I think I may have been to one or maybe I'm making it up.

Which makes us more than qualified to talk about them. It's a once-in-a-lifetime thing for me. I would love to go to a while. You and I can go on a field trip. There we go. There we go. We can expense it. Now, when I talk about Walmart, I said the world's largest retailer, but it's

It's also the world's largest grocery chain, too, right? It is. A lot of people shopped there. So according to Jennifer Bartis Huss of Bloomberg Intelligence, she's going to be looking at online profitability. They're going to see whether e-commerce margins have improved same-star sales, annual revenue gains of 4 to 5% are anticipated. And, of course, you're going to see consumer health.

I mean, we have all heard this. Yeah, this is kind of a bellwether in terms of economic performance for, do I dare say, the lower-end consumer? Yes. So you're going to see that. And we've heard time and again in all the radio shows, the K-shaped economy. I just read again, I know today that travel is going to see heightened K-shaped economy. And I thought, obviously, I mean, the higher income will be in private jets.

And I will be in economy. You know, so. Okay. Let's move on. This is one store I have been in. I actually bought an Anderson window there. It was expensive. But I'm talking Home Depot.

One of the things I'm seeing more and more at Home Depot, more and more like professionals, carpenters, whatever, show up. And it's not just people like bozos like me. So, okay, Home Depot ticker is HD. You are not a bozo. But I think Home Depot is a kind of place that you're welcome. I think it's the kind of place that you just have what you, if you need something, it's there. Because I go to Home Depot, guess for what? Plans.

Really? Yeah, they have plants. See, you never notice because that's not what you need. I never noticed the carpentry because I live in a tiny New York apartment. But Home Depot is also going to report earnings. May 19. That's a Tuesday. Oh, this is even earlier.

The release will be at 6 a.m. ET. Earnings call will be 9 a.m. So you can have breakfast in between. Revenue expected is $178 billion. Adjusted diluted EPS is $16.31. Gap diluted EP. He has $15.98, and net earnings $16 billion. So, again, key themes to watch your also consumer confidence.

I mean, uncertainty around inflation and job security has really, I guess, deterred people from making large home improvements? Why will you remodel your kitchen when you think you're going to be paid off? Well, the other thing is the mortgage rates and, what, the 10 year going up, the 30 year, the long bond, that was hovering right around 5% with the latest economic figures. That feeds through mortgage rates, home expenses. 100%. That's a great point.

And I think another key theme to watch is we have management indicating they've learned to manage tariff. So we'll see how that plays out. I feel like tariff, we kind of forgot about it. When I say forgot, like new headlines have kind of dominated the market, but it's still very alive and well. Okay. Let's finish up with the last stock on your list. And I'm just hoping there's some intersection between. artificial intelligence, and John Deere.

I mean, they're building all these data centers everywhere. They are. And Deer makes stuff that you can build data centers with, like, tractors and stuff like that. I guess, yeah, that's true, actually. You're poo-pooing my idea. No, that's true. Ticker is DE. They have earnings also made 21 Thursday, 6 a.m.

Earnings call is 10 a.m., so you get a longer breakfast in between. Net sales is estimated to be $41 billion, total revenue $47 billion. dollars, net income $4.8 billion, et cetera. So they're expected to post a better than expected full year 2026 results. Again, to your point, it's driven by maybe agricultural equipment makers and the momentum in building construction. Well, you know, the farmer, you know, we call it Farmageddon. What's happening on the farms right now?

Well, yeah, no, it's been a very difficult time, especially with the tariffs and the planting season. So, you know, again, dear something of a bellwether for the Uva's economy. Yeah. Tariff also, you're right, is a key risk in used inventory overhang because there's an elevated used tractor inventories which continue to weigh a new equipment, demand, and pricing. I guess where do you store these things? They're so gigantic. And they're, trust me, they're expensive too.

I can imagine. I know from firsthand experience. Wow. Isabelle, thank you for showing up today. Appreciate it. Isabel Lee is our Bloomberg cross-asset reporter. Coming up on Bloomberg Daybreak weekend, we're going to take a look at the upcoming earnings test for Europe's low-cost airlines.

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This is Bloomberg Daybreak Week, and our global look ahead of the top stories for investors in the coming week. I'm John Tucker Carlson in New York. Up later in the program, we're going to look ahead to some key economic. data in Japan. But first, Europe's largest low-cost airlines report earnings in the coming days. And this comes against a backdrop of rising uncertainty and jet fuel costs driven by the war on Iran. Let's get more now from Bloomberg Daybreak Europe anchor Caroline Hepker. John, we will get into an uncertain airline business as we approach peak travel season here in Europe. Willie Walsh, the industry veteran, the Director General of the International Air Transport Association, has warned recently

that airlines can't keep absorbing the additional cost that they're seeing. The war in Iran, which began in February, has upended the industry. London's Heathrow Airport, one of the major hubs in Europe reported a drop in passenger numbers in April of 5.3% from a year earlier. That's down to 6.7 million passengers as the Middle East War has disrupted global air travel. The airport's CEO called it, though, a short-term disrupt. Now Bloomberg Intelligence forecasts that the big European carriers like IAG and Air France KLM are going to see their fuel costs go up by 27%. For Lufthansa, that figure is 22% for 2026. So creating a big challenge for profitability.

Others cast doubt on the risk of jet fuel shortages seeing them as an excuse to cut unprofitable flights. Of the low-cost carriers reporting in the next week or so, Ryanair is relatively well protected by fuel hedging, but it remains exposed to potential supply disruptions and pressure on consumer spending. EasyJet, meanwhile, has warned that the war in the Middle East will widen its first half loss and weigh on summer demand. Overall, investors will be watching very closely for further cuts to full year guidance. for both of these airlines. Well, joining us now as Danny Lee, aviation and transport reporter based in Asia. Danny, good to speak to you.

How much is air travel currently being affected by the impact of wars? Well, Caroline, the airline industry is grappling with more than doubling in fuel costs and the counting of that cost is resulting in multiples of billions and higher fuel bills. And right now, we've, in a fraction of that be reported by the airline industry through at least one month of

earnings that has filtered through. But it's now into the second and the third quarter where we're seeing the volatility and the surge and jet fuel costs, which is absolutely wrecking airline balance sheets across the piece. And in particular, when you see airlines grappling with higher fuel costs, they are now thinking about how they can mitigate those losses, in particular having to cut the number of flights they operate because simply there are flights out there which are just not profitable. So there is a balance to be bought between operating profitably and being generally conservative in how they approach this ongoing war we have seen stretching into almost three months now. And this is a challenge for airlines. How do they grapple with a surge and fuel costs?

And when they have to pass on, the airlines have to pass on the costs onto customers. how much are passengers willing to bear? And this is a challenge for airlines to figure out and particularly if you're low-cost carrier where you are trying to stimulate demand with lower prices, all of a sudden those prices become a lot higher. Yeah. So then what do we expect to hear from Ryanair

and EasyJet in terms of their results because they are obviously the big low-cost carriers in Europe? Yeah, EasyJet has already braced investors for bad news. So the UK low-cost carrier expects a headline loss between 540 to 560 million pounds. It tends to be the weaker period, those first six months of the year. And it's the earnings period which captures only a month of the Iran War. But so far, the airline says it has added 25 million pounds to its fuel bill.

So as that volatility in Jeff does settle down a little bit, it's still going to be more than counting the cost. That doubling of cost of pressure is only going to be felt in the later quarters. And I think it's that kind of clarity from CEO, Kenton Jarvis, which will be able to understand just what impact the Iran war is having on the likes of the locals carriers and EasyJet in particular because they just cannot pass on the full amount of higher jet fuel costs onto price sensitive passengers. So I think the key question is how much is that down arrow story going to extend into its kind of, forecasts in future and how will it be able to recoup as much of the fares as it can. Clearly, airlines are not able to do that so much in the near term, but it's towards a later end of the year that they will be able to. As for Rainer, it will post its full-year earnings,

and it has already guided towards a very healthy profit of tax of €2.3 billion, but Ryan has been cautious in the large about its full-year targets, and whether its fiscal year ahead will change materially in terms of how it's thinking about demand, the amount of flights it operates, and even being able to carry as many passengers as it can. However, just like with EasyJet, Rainer, they may well be beneficiaries from the war in as much as the fact that passengers may not choose to fly longer haul because of the costs and because of various other risk factors and may stick to Europe. So this could still be an upside momentum. when people think about booking their travels this summer and beyond.

Yes, I think that's really interesting. I mean, consumers in many parts of the world are under a lot of pressure, aren't they? So what do you think the airlines are going to say about summer bookings as, you know, consumers are facing petrol prices, inflation, affecting lots of goods that they might be buying, including holidays? Well, the airline industry, by and large, has seen that level of things. demand keep up with pace. And so airlines are seeing booking levels largely about the same. However, EasyJet has warned that the conflict situation has resulted in a kind of denting of

bookings momentum. So they are seeing a little bit of a hit, EasyJet. And I think the question is, does that continue? So that'll be very key for the CEO, Kenton Jarvis, to spell out, but also So that kind of elasticity really, the ability for customers to be willing to pay more for airfares. Because ultimately, the higher oil prices doesn't just affect airfares. It affects a whole facet of the economy and for households from goods to services, particularly into the shopping baskets. So that extra cost is coming everywhere. And I think people will be thinking about what do they prioritize in spending in the near term. What is the state of jet fuel supplies?

Are the shortages real? Are they particularly affecting Europe? I know where you are in Asia. It's been a very pointed issue. Yeah, the jet fuel shortage is still alive and real issue. We've heard a lot from airlines talking about being covered in jet fuel needs for March, April, May into June. but there is limited visibility and given the Straits of Hormuz

is still largely locked to an extent a key critical waterway there's been a lot of scrambling to find alternative sources particularly from the US. We haven't really heard too much more in terms of deep concerns that airlines have. We already have seen airlines start to cut schedules

just to make sure that where there are more challenged airports where fuel supply may be a question, they will focus on higher priority bookings and airports where there is bigger business. I don't think we've seen too much more in terms of shortage concerns out there, but as we get into the peak summer season, that dynamic may start to change a little bit more,

but clearly Europe and Asia are the big areas to watch when it comes to fuel availability because of the reliance of the imports of jet fuel. What about the cost of flying? We know that consumers are thinking about this. If you look at surveys of consumers, what are we actually seeing in terms of ticket prices? Well, ticket prices are going up by and large. Some industry surveys point to a doubling of airfares. And even in the recent months, so into May and June, that fair airfare is about 50,000.

50% higher than from last year because of what we have seen with the around more impact on jet fuel prices, on the disruption in demand because of the impact in the Middle East. So there is seemingly a tendency that airfares will stay higher for longer, not great, but at the same time, airlines still feel fairly optimistic in the near to longer term or midterm about passengers still willing to travel that. level of demand out there. And so therefore, we are still seeing airlines looking at expansion. And so therefore, that level of expansion will feed into stimulating more bookings. However, there is still that challenge of filling those flights at those relatively higher prices. And I think airlines are still going to be grappling with that level of price sensitivity

overall because at some point, passengers will say we're not going to be paying this price and whether they try to look for a cheaper alternative or just not fly. fly at all or delay their travel, it remains a big question as we move into the latter part of a year. What do you think might come out of this energy kind of impact? Do you think there'll be fewer airlines, fewer routes? So is that too simplistic? There may well be a consolidation. We are already seeing consolidation. That has been the case pre-war, particularly in Europe, Asia and in the US. but as the cost of offline becomes more expensive for airlines, we have already seen the likes of Spirit Airlines go down.

Will there be others? It's still too early to tell to see which airlines may not survive at this stage, but there is a very much concerted effort to see airlines which have a better war chest, who are better capitalized, are looking at taking advantage of weaker airmen, airlines and as a result, we may see consolidation. We may see some trimming as a result, but I think airlines overall, where they have the opportunity to make money and it still does, and they can have that overall connectivity within their network of flights, they will all stick around and overall, that level of competition will become even more intense as

their stronger airlines look to become even stronger. Danny, very interesting. Thank you so much for your time. Dali Lee is aviation and transport reporter here at Bloomberg based in Asia. My thanks to him. And of course, we'll have more coverage of Ryanair's results due on the 18th of May and EasyJet's earnings on the 21st of May on Bloomberg Radio and across our platforms. I'm Caroline Hepka here in London. You can catch us every weekday morning for Bloomberg daybreak. You're beginning at 6 a.m. in London. That's 1 a.m. on Wall Street. John. All right. Thanks, Caroline. And coming up on Bloomberg Daybreak weekend, and a look ahead to a GDP reading for Japan. I'm John Tucker Carlson, and this is Bloomberg.

Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions, buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks. on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S&P 500. Or if my cash balance goes above $20,000, move the excess into my direct

index. You approve the workflow and your agent handles the risk. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market.

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your business loan may be issued by On-Dec or Celtic Bank. On-Dec does not lend in North Dakota all loans and amounts subject to lender approval. Okay, not so fun fact. Autoimmune skin conditions are actually on the rise. Cases are climbing nearly 20% every year. I know. Terrible opener for a podcast ad. But here's the thing.

I'm Holly Fry and our skin exists precisely because of stats like that. Because more people than ever are living with conditions like psoriasis and hydrodinitis superativa. And most of them are doing it alone, without answers, without community, without anyone to tell them what the is actually going on. You know, not that many people knew about it, and I felt kind of alone. Like, am I an outcast? That's where we come in. We talk doctors.

We talk appointments that are, well, a disappointment. We talk about the flare-ups and the breakthroughs. Then we dive deep into the wild, occasionally gross, always fascinating history of how humans have tried to understand our skin over the centuries. Spoiler alert, we did not always get it right. Listen to Season 3 of Our Skin, a personal discovery podcast on the IHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

This is Bloomberg Daybreak Weekend, our global look ahead of the top stories for investors in the coming week. I'm John Tucker Carlson in New York. We go to Japan next, where the economy is expected to rebound in the first quarter. And for more, let's go to Bloomberg's Doug Krzner, the host of the Daybreak Asia podcast. Thanks, John. The Japanese economy is expected to have grown at an annual rate of around 1.8% in the first quarter. Now, this will be a preliminary reading, and if it were to hold, that would make for a second consecutive quarter of economic expansion in Japan. To help us understand the dynamics at play, let's bring in Bloomberg's Paul Jackson. Paul is EcoGov for Japan and Korea. He is the team leader joining from the Japanese capital. Thank you, sir, for joining us. One of the things that we have to touch, and I think, to begin with, is the fact that the war in Iran is having a great deal of impact on the Japanese economy right now. Now, we know that it began in late February. So the impact on Q1 will be limited only felt for the month of March.

Obviously, this is very much as oil story, which leads us to inflation. Even before the war, can we agree, Paul, that Japan was dealing with much higher inflation and a stubbornly weak currency? is a big reason why? I think the inflation story in Japan that's been taking place over the last three or four years has been a generational change for the nation. And then you have another war emerging starting. Obviously, we had the Ukraine war a few years back. The start of that launched a wave of inflation.

And the latest war is going to do the same. and, you know, those higher oil prices, we're already seeing the impact of that on, like, producer prices. We recently had data showing 4.9% increase there. That's been the highest in, like, three or four years there. So that means inflation is going to be heating up, and the Bank of Japan has already revised up its forecasts on that expectation. So to go back to the GDP report, private consumption accounts for roughly 55% of domestic output in Japan. When you talk about higher prices, do you think it's going to have held back private consumption? I think this is really one of the key points of examining Japan's economy at the moment.

It's this new concept of inflation prices going up and can consumers adjust to that. And we have seen gradual strengthening of consumption as people get used to the idea that prices can go up. You don't have to put everything on hold because of a bit of inflation. But, Doug, the overall picture is that that consumption part of the economy is still on the weak side. It's still on the limp side. And we're expecting probably one of the weakest readings in recent quarters on the consumption side. still positive, but this is not the kind of figure that's showing that Japanese consumers are totally on board with inflation. They've got it and they're spending again. That is not the

case at the moment. So give me a sense of how the export economy performed in Q1. Obviously, we have the U.S. tariffs. The auto-related industries in Japan have been affected by that. and then there has been, can we call it a deterioration of diplomatic relations between Tokyo and Beijing, and that may have weighed on the tourism industry a bit? Yeah, that's right. We've got all those issues weighing on trade. So you would expect that the figures don't look too good. But actually, the figures have been looking pretty good, pretty strong.

And the reason for that is this global surge in demand related to. AI. And I think if you look at exports out of Japan in March, they're up nearly 12% and largely fueled by 30% growth in chip exports. And we're seeing in countries all through Asia this trend, I mean, especially over in South Korea, just, you know, large gains in the tech sector and chips as economies look to feed this incredible surge of demand. which you could say is kind of masking, you know, larger problems lurking in the global economy and in Japan too. So what was the role that the government may have played in Q1 when we think of public investment? Was there a lot of government, a lot of fiscal spending?

Well, I think we've got, in terms of reacting to the inflation story, which is now we're going to see elevated energy prices through this war. that the government has taking action to subsidize energy, and this is going to lead to more spending. So I think really, rather than looking at Q1, it's kind of looking ahead, this is a big question mark hanging over Prime Minister Takaichi's administration, because she's kind of put a marker out there saying, we're not going to run Japan in the same way as before.

we're not going to have like extra budget after extra budget as she tries to reassure markets that her kind of expansionary approach to fiscal policy isn't going to buckle yields, buckle the bond markets and scare everyone. The problem she's going to have is that if you subsidize energy, you are going to run out of reserve funds, which mean at some point she may have to have an early, extra budget and that's going to be a very bad look for her and could spook markets going ahead but so far they're standing firm saying no extra budget is needed but that is a point to be watching over the coming

months so as we're looking ahead just a bit i know that a lot of our conversation has focused on q1 GDP but let's look ahead given the fact that you mentioned uh pPI in the latest reading was the highest, I think, since 2023. So obviously everything fueling this inflation narrative. Does that necessarily mean that the Bank of Japan is at risk of being behind the curve in terms of tightening? And will we necessarily see a rate hike in June? Well, we've just had Treasury Secretary Scott Bessent in Tokyo. And he's one of the leading voices out there saying that the Bank of certainly is at risk of falling behind the curve. And I think the takeaway from his meeting with officials here is he kept reemphasizing

the message that the fundamentals of Japan's economy are strong. So what's the takeaway from that, Doug? Well, if you've got a pretty positive GDP reading, you've got American officials honing in on Japan's strong at the moment. all this points to the idea that, hey, you should raise your interest rates and you should get on with it. And I think if you look at market expectations, you will see that more than 3, there's more than a 75% chance of a rate height coming in June. And just recently we saw one of the more centrist board members on the Bank of Japan board saying that we should raise rates as soon as possible, as long as there's no clear sign of weakness in the economy.

So has that been discounted? Do you think by the currency with a yen right around 158 against the greenback? Does the foreign exchange anticipate a move in June? And I'm wondering if the market is already adjusting to that notion, maybe more is necessary to strengthen the currency a bit? I think you're right, Doug, to point out this vulnerability in the in the yen. As we know, Japan has intervened, and this could be multiple times. We're looking at, you know, over $60 billion worth of intervention so far by our estimates. So they have been

trying to prop up the yen. So the hope would be that if you raise the interest rates in June and you give a hawkish signal about potential further rates to come, that the yen bears might start to back off at that point. But I think there is a big question mark hanging over how convinced investors will be that that's the direction we're heading in. Paul, we'll leave it there. Thank you so very much. Bloomberg's Paul Jackson, team leader for eco-gov coverage for Japan and the Koreas. We go to earnings news next in China, where last week, Twin Tech leaders, Alibaba and Tencent reported revenue well below estimates. Baba recorded its first operating. law since 2021 and Tencent reported its slowest pace of revenue growth in over a year. Even so,

Alibaba's cloud revenue growth accelerated and margins expanded. This helped to fuel optimism for returns from Baba's investments in AI. And that's where we begin our conversation with Eleanor Leung. Eleanor is head of Asia Telecom and Internet Research at CLSA. She spoke with Bloomberg's Yvonne Mann and David Inglace. I think my first question is comparing the to market seems to be happier with Alibaba than it is with 10 cent, relatively, of course. It has been, though, from much of this year, right? Yes, correct.

We are entering a very exciting moment of the AI era that moving away from model training and to actual application. And to P monetization is a lot easier compared to C. That's why what get people excited is the AI cloud, which Baba is better position for the AI cloud compared to 10 cents. So I think last port of result on Alibaba, the management, given a very bullish guidance on their cloud growth. So the external cloud revenue already accelerated to 40% year-year-year growth in the last quarter.

They expect that we'll further a salary with noticeable margin expansion. They're so bullish because they think that AI revenue is going to be able to grow at a triple-digit and contribute more than 50% of the cloud revenue in one year's time. That is driven by MAS, model as a service, which ramping up very quickly. in China, which including agenetic applications such as coding, productivity, generative video tools for the enterprises and they are willing to pay and they have a chance to raise prices now because we are not just model training, which is a commoditized service, but now we are able to differentiate in capability or we're able to raise prices there.

So that is driving their cloud growth and the company expect to achieve 100 billion USD revenue with 20% margin. in five years time. Run us for some of those numbers, right? I was looking through that. So they said 10 billion RMB in terms of AI intelligence services revenue, right? So that's by June. 30 billion by the end of the year. Are those tall orders, you think?

Or do you think they'll be easily, easily they can surpass these numbers? I think they can surpass the numbers. Because the demand in China is very high. The bottom actually is the cheap supplies. Right now is that the supply is, demand is far great compared to the price. As you know, that China has a chip constraint because we cannot buy a lot of the Nvidia chip.

But luckily, starting this year, the domestic chip supplies that picking up. So we expect the token in China is going to up four times this year in China, but over 70% is inference chip demand, and China is going to go 100% self-sufficient in domestic inference chip. So that will help to support the growth.

And you're also seeing that China, doesn't really have a SaaS industry in the past, meaning that when these agendasic applications come through, people jump onto it. That was Eleanor Leung, head of Asia Telecom and Internet Research at CLSA. I'm Doug Krizzner. You can catch us weekdays for the Daybreak Asia podcast.

It's available wherever you get your podcast. John? And that does it for this edition of Bloomberg Daybreak weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm John Tucker Carlson and stay with us. Top Stories, Global Business Headlines coming up right now.

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