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>> Bloomberg Audio Studios. Podcasts,

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>> Welcome to the Daybreak Asia podcast.

I'm Doug Krizner. Semiconductor stocks

are in focus. This is after Micron's

better than expected results.

After the US close, the memory chip

maker reported numbers for the latest

quarter above forecast. And on top of

that, Micron's outlook shattered

expectations. And in another sign of

Micron's widening profitability, the

company's adjusted gross margin more

than doubled last quarter to 84.9%.

So, look for the semis to steal the

limelight today in Asian trading. For a

closer look at market action, let's

bring in Jed Kolb Jed is portfolio

manager at Argent Capital Management.

He's on the line from St. Louis. Thank

you for being here.

The pick up on the Micron story here.

What did you glean from what the company

had to say after the bell?

>> $200 of earnings per share in calendar

2027

uh is possible for Micron. I think

that's kind of been like the the the

whisper, the optimistic case from people

who own that stock over the last month

or two. And that seemed far-fetched

there for a little bit, but gosh, as we

get closer to that um I I think they

might might be able to do it. I mean,

they reported $25 a share of earnings.

So, annualize that, that gets you to 100

in the quarter they just reported.

They're talking about $31 a share next

quarter. And

they're talking about 2027

um being even stronger than 2026. And

just really remarkable price increases,

70% roughly quarter over quarter

aggregate price increase for Micron.

That is uh I you run out of adjectives

to describe that. That's a truly

incredible. And uh you know, 84% gross

margin I think you said. I mean, that

compares to Nvidia which has one of the

highest gross margins I've ever seen in

my life for a hardware company. Nvidia's

at 74.

And uh Micron's, you know,

a thousand basis points above that. So,

really incredible results, incredible

outlook. If $200 a share is is, you

know, on the board for calendar 2027,

that places today's valuation at the

close at just a little over five times

that earnings number.

So, um

yeah, so that stock's got to go up. And

that's what we'll see tomorrow and and

it'll drag with it

um all the semi-cap equipment. Um

you know, Dell and HPE

uh maybe even Nvidia and Broadcom.

>> I'm thinking about price action that we

may see later from SK Hynix and Samsung

in the South Korean session.

And we had word recently that SK Hynix

is pursuing a US-listed uh ADR worth

more than $29 billion. I mean, does that

concern you when companies like SK Hynix

come to market to try to raise more

money in the current environment?

>> Yeah, the you know, when I when I think

of like kind of huge landmark

IPOs, uh my mind immediately goes to

Blackstone in 2007. Maybe maybe that's

um too cynical and skeptical of me, but

uh but yeah, I mean, the the capital

markets are wide open for these tech

hardware companies.

Um the fact that they're doing huge

IPOs, um

you know, SpaceX, um the model maker's

coming up and and Anthropic and OpenAI,

they're doing that because times are

good. And uh times won't always be good.

And so yeah, I think you need to you

need to view those IPOs with some some

skepticism. After all, well-informed,

big, smart shareholders are picking this

time to get some liquidity.

>> We heard from some of the big banks

after the bell today. We had the stress

test here in the US and all the big

banks passed that and so now increased

dividends, maybe some stock buyback

plans.

How are you viewing the big banks in the

US?

>> Yeah, I think financials are a bit of a

bright spot in a market that's struggled

to find bright spots out of outside of

the AI trade.

And um

and I think higher interest rates

benefits many of those banks, not all of

them, but many of them. We've seen

regional banks in the United States, the

small and mid-size ones doing pretty

well.

The bigger banks um have been joining

the party here recently after taking a

break a month or two ago.

Um the stress test results were good. I

think that was expected by investors. We

will see hefty share repurchase and and

dividend growth announcements here

coming up over the next couple weeks.

And I think generally good good earnings

results. Um higher interest rates are a

good thing for most of them and loan

growth is pretty good. I mean the US

economy is resilient and strong and

growing rapidly on the back of this data

center boom and also high high income

consumers continuing to spend with

confidence.

>> So you had a big pullback in the price

of crude oil today and that allowed

rates to come down quite a bit across

the curve, I think.

The 10-year was down nine basis points

in New York and I think more importantly

the money market is retreating a bit

from its notion of aggressive Fed

tightening this year, I think. As

recently as yesterday, that would be

Tuesday in the US. I think money markets

had priced in about 50 basis points

worth of tightening. Now that number is

40. So we've come in a little bit. How

are you viewing the Fed's role in the

current environment right now?

>> Yeah, I I struggled to

um

in envision a world where the Fed raises

interest rates prior to the midterm

elections and prior to these study

groups that um new chair Warsh has set

up. I think they'll work through several

months of of workflows related to each.

That'll buy them the time to uh get

through the midterm elections and um and

also wait and see if those declining oil

prices can uh yank down inflation

numbers enough to get us, you know, into

the low threes and and maybe just buy

them some time to to see that the tariff

impact um you know, flow through, etc.

So, yeah, I I think that this, you know,

the initial response to Warsh's um press

conference was understandable. It was a

pretty hawkish statement and um

so the market reacted to that. Now,

we're we're kind of calming down off

that a little bit. I think I think

that's a reasonable

response and and I do think we're on on

pause here, you know, at least through

November.

>> I'm wondering how you're thinking about

geopolitics and whether or not you think

we're on the other side of the curve

here in terms of the US-Iran war,

whether the worst is over and we can

begin kind of repricing inflation

expectations longer term with the idea

that we're not going to see a flare-up

again. Is Is that a reasonable

assessment or do you think that there is

some risk that the market may be

overlooking to some extent?

>> Yeah, that the market's response really

throughout has felt like kind of

complacent and and perhaps even

overconfident, overly optimistic to me.

But um I think I've been proven wrong. I

think that the market's been proven

right, you know, um oil prices never got

to that $150 a barrel level that um

industry insiders and CEOs were talking

about and fearing and saying was just a

week or two away if things don't change.

And things haven't changed and we're not

at 150. We're at half that now. And uh

so yeah, so the the the market has

sniffed this out and uh

at this point I wouldn't um I wouldn't

want to bet against the market and their

appraisal that um

we can look through this one.

>> So, when you're identifying

opportunities, are you more US-focused

right now? Are you seeing anything

offshore that looks interesting to you?

>> Yeah, it's hard to it's hard to find an

economy that's growing as dynamically as

the United States. Um so, that's where

we start and spend most of our time.

But, um but yeah, there are there are a

lot of exciting things happening in in

Asian markets. The uh AI supply chains

there are are robust, as you alluded to

earlier. So, yeah, there I think they're

good areas in in lots of places in the

world. Um Europe is is less compelling

to us at the moment.

>> One of the things that's interesting is

the relationship now between the US and

China. We had news today that Alibaba is

being accused of illicitly accessing

Anthropic's Claude model after Anthropic

decided to keep its products outside of

China, and Anthropic is

alleging that Alibaba used thousands of

fraudulent accounts to try to access

uh a number of uh pieces of information

from Claude, including software

engineering and agentic reasoning here,

as a way of trying to create a rival

chatbot at a fraction of the cost.

When you look at the competitiveness

between the US and China right now, what

do you come away with? Do you think that

there is a real risk that that China

could come away at the end of the day

being the winner, maybe? And and the US

not necessarily being in as strong a

position?

>> Yeah, I think that the United States

competitive position, especially in

model creation, um

is very strong. Yes, the Chinese are

distilling and um

um you know, creating adaptations of the

the frontier US models as quickly as

they can, but that's that's different

from genuine innovation on their own. I

think the United States leads in that

area and and has a material lead. The

Chinese are following fast and um

you know, liberally um you know,

borrowing and adapting as much as they

can. I think Anthropic is moving really

quickly. I think OpenAI is moving really

quickly. There's really strong

competition both within the United

States and globally. So uh so yeah, I

think the United States has has a lead,

but I don't think it's a comfortable

lead and um and yeah, I I wonder if the

US model makers will continue they've

been taking steps to become more and

more cautious and in um

releasing their newest best models um

you know, out into the wild. And uh you

wonder if it gets to a point where they

keep that leading model proprietary for

their own products,

um kind of shut off the API to those um

for their own competitive reasons and

also for national security reasons.

>> Most definitely. Jed, thank you so very

much for making time for us. Jed

Aberbrook there, he is portfolio manager

at Argent Capital Management on the line

[music] from St. Louis here on the

Daybreak Asia podcast.

>> [music]

>> Welcome back to the Daybreak Asia

podcast. I'm Doug Grisner. Canada is

planning to increase its military

presence in the Indo-Pacific. To that

end, the country's defense minister,

David McGuinty, met earlier this week

with his Japanese counterpart in Tokyo.

And McGuinty spoke with Bloomberg TV

host Sherry Ann about his mission.

>> Really good to have you here in the

Tokyo studio. Thank you for making the

time.

>> having me.

>> Especially since you're pretty busy. You

you brought a big big delegation. Tell

us a little bit about why now and what

that symbolizes as well.

>> Well, it's the first uh time that a

defense minister joins a trade minister

to lead such a mission. It's 300 strong,

175 organizations and companies from

every sector. About 50 of those

companies are in the defense sphere. So,

for us this is a moment where we're

continuing to build, deepen, and widen

our relationship with Japan. And also in

the context of the Indo-Pacific where

we're making similar investments,

spending the kind of time, and getting

Canada back in the groove so to speak

when the when it comes to the

Indo-Pacific.

>> Tell us a little bit about that. Do you

feel like Canada has retreated a little

bit in the past and where do you expect

to see more involvement and cooperation

with partners here?

>> Well, typically it would be

government-to-government,

military-to-military,

business-to-business, which is a big

focus right now. Canada has upped its

GDP spend on defense to over 2%

achieving the target a full 5 years

ahead of schedule. So, we're very

pleased now to get the resources that we

need to make these investments. So, we

are investing heavily in rebuilding,

rearming, rebooting our Canadian Armed

Forces. We also have a new defense

industrial strategy where we're

investing heavily in Canadian companies,

the defense sector, and we need to to do

that together with good partners like

Japan.

>> The NATO Secretary General tried to

appeal to President Trump's side when he

came to boosting their spending. It

doesn't necessarily seem to have worked.

How is your relationship with the United

States, especially military-to-military

security concerns?

>> Listen, we have a continental security

arrangement with the United States for

matters of relationship. We have NORAD,

of course, which is the only bi-national

command in the world. It works well

together, but you know, this is about

now for Canada expanding in this area

here into the Indo-Pacific. I've had

meetings and arrangements with with

folks in Indonesia, the Philippine

Minister of Defense was in Canada 2

weeks ago for the first time, Korea,

Japan, of course, Australia just sold

their over-the-horizon radar system to

Canada, the largest single defense

export in Australian history. So, Canada

is moving coherently, systematically

into the region.

>> I mean, you are sending your warships to

the Indo-Pacific for port calls to

Japan, training, as well exercises.

Is there a concern that that might be

seen negatively by China?

>> It's not new. Uh we're recalibrating our

relationship with China, but we're also,

as I say, we can do both at the same

time. We can recalibrate, but on on

defense, security, and intelligence,

we're also reaching out to like-minded,

values-driven, rules-based countries

like Japan.

And uh so far it is taking hold. People

are very receptive, welcoming Canada,

but the presence of of vessels in this

area is not not new for Canada.

>> What does recalibrating the relationship

with China mean?

>> Well, it means that we had some period

of difficulty between Chinese and

Canadian authorities. The two Michaels,

all that that uh that year several years

ago, but we're now rebooting that

relationship on different fronts, and

this is exactly where we're at. But this

mission is really really focused on

Japan, of course, because of the depth

of ability, of talent, AI research,

quantum, cryptography. This is something

we're looking at, space, maritime domain

awareness.

This There's a powerhouse here of

talent, and this is exactly what we're

looking to plug into also from a

Canadian perspective, because we know if

we actually combine our efforts here,

we're going to do much better.

>> When it comes to these exercises and

training in the region, we always see

them

very regularly, but very regularly we

also get negative reactions coming from

the likes of Beijing.

We have seen tensions increase in the

Taiwan Strait. Now with geopolitical uh

flashpoints like Ukraine, does that give

Canada also a different sense of

responsibility when it comes to

different regions?

>> Well, it would be uh it would be uh fair

to say that things have changed.

Tensions have changed. The geopolitical

has changed. Canadians are realizing now

that their geography won't necessarily

protect them. We saw, for example, in

the Middle East,

Iran deploy a missile that actually

traveled 5,000 km, when we've been told

for over two decades they had no such

missile in their arsenal. So, we

understand that that changed. We

understand the threat landscape has

changed, but we're managing our way

forward cautiously, thoughtfully. We're

building these relationships.

We're moving into the Indo-Pacific in a

way we we planned on doing so in 2017,

2018. The pandemic hit. And now that we

have more resourcing as a result of the

2% fund and we're well on the way to the

3.5% fund,

we are in a position now to do much

more.

>> Is it possible to equate the Taiwan risk

as a Ukraine risk?

>> I wouldn't say that. I would say that

it's a risk. I would say that

countries here are doing a phenomenal

job of managing their way through it.

We've got to keep talking. Most most

importantly, we've got to keep the

dialogue moving, but this mission here

is largely now about consolidating

relationships with Japanese actors in

the business, in the government, in the

in many spheres. So, this is what we're

all about here now. That's why 300

people decided to join us. It was not

really difficult. But they Here they

are. We had a major gathering last night

of 500 people including 200 Japanese

executives and leaders. I met with my my

counterpart yesterday for a full hour,

Mr. Koizumi. We had a very good

discussion about Canada-Japan Japanese

relations in this area. We're making

progress.

>> I know that you also toured some

frigates as well earlier this week. Are

there any specific defense purchase

commitments? We know that of course

Japan has lifted most of its export

restrictions when it comes to military

equipment.

>> Look, we're looking at all kinds of

options and opportunities. That's what

the business folks have been doing here

for the last two and a half days.

Japan is a powerhouse in certain sectors

sectors. We're powerhouse in other

sectors. This is about us procuring from

Japan and Japan procuring from Canada.

That's the kind of trade that we're

giving rise to in our defense industrial

strategy and I know that Japan is also

looking to see how they can accentuate

their own. That's what the minister and

I in part spoke about yesterday. So,

it's very encouraging. We're we're

like-minded. We have the same values.

We're rules-based. We believe in in the

international order. We believe in the

United Nations. We believe in in dispute

resolution. That's why we're pleased to

be here.

>> When it comes to really cooperation

between smaller nations, we have seen

the global combat air program as well

between Japan, Italy, and the UK as

well. How does Canada view such

partnerships?

>> Well, we We We We view these

opportunities to come together and pool

resources and research and capacity as a

positive thing.

Many small countries smaller countries I

would hardly classify Japan as a small

country. It's an economic powerhouse.

Our countries can come together, take

our best, our brightest, combine our

efforts, and and do well. We can do well

obviously for our people, and we can do

well in terms of our our industrial

sectors.

>> Would Canada be considering perhaps

joining that initiative?

>> Canada's benefited and interest Canada's

is monitoring it closely. It's very

interesting to see how it's going

forward. But right now we're so busy

executing on this Indo-Pacific strategy.

Um we're we're continuing to uh stay in

touch with our folks. I think we'll

we'll hear we'll talk more about it when

we get to the leader summit in NATO. I'm

looking forward to seeing my

counterparts as many of of those who

might be able to come from Italy, Japan,

and of course from the UK.

>> And of course Iran, the ongoing

negotiations will be a a key theme

there. Um

how confident are you that we'll get an

interim deal to be a permanent one?

>> remain hopeful. There's no other way to

be in my view. We have to remain

hopeful. Peace is the best outcome. Um

the alternative is never a positive one.

So I think that if we can help uh guide

along both parties in the negotiations,

encourage it, that's a good thing. But

we're also we remain available to be of

assistance in the multinational maritime

mission that is being headed up by the

Brits and the French. Canada has offered

up its its own capacity, vessels,

demining, cyber, intelligence. We'll see

how that all comes together.

>> Before I let you go, we just saw Prime

Minister Carney releasing a statement in

terms of a potential multilateral

security defense bank. Um

What do you think of that mechanism

functioning as a world bank? And is

there any traction if this initiative

were to be pushed forward?

>> is a a phenomenal opportunity for all of

our countries because the defense and

security resilience bank, the DSRB,

modeled after the World Bank in

structure, would actually provide a lot

of capital and a lot of assistance to

small and medium-sized enterprises right

here in Japan, back in Canada, in the

Philippines, all over the world. Any

member state would be able to plug and

play in the system, be able to borrow,

be able to capitalize. We need more

investment in the defense sector. This

is what this is intending to address.

>> Did you discuss this potential bank with

Japan while here and what reaction did

you get?

>> Yes, we have. We've raised it on several

occasions. I think the government here

is considering it as are other

countries, but right now we're in the in

the process of moving it along with

other jurisdictions to see if we can get

more interested.

>> That was David McGuinty, Defense

Minister for Canada, speaking with

Bloomberg TV host Sherylynn bringing you

that conversation here on the Daybreak

Asia podcast.

Thanks for listening to today's [music]

episode of the Bloomberg Daybreak Asia

edition podcast. Each weekday we look

[music] at the stories shaping markets,

finance, and geopolitics in the Asia

Pacific. You can find us on Apple,

Spotify, the Bloomberg podcast [music]

YouTube channel, or anywhere else you

listen. Join us again tomorrow for

insight on the market moves [music] from

Hong Kong to Singapore and Australia.

I'm Doug Krizner, and this is Bloomberg.