Generate's Investment Specialist Greg Smith joined Mike Hosking on ZB to talk about the latest billion-dollar partnership in the AI world.
Listen to the 24 September 2025 recording from The Mike Hosking Breakfast on Newstalk ZB here:
Or read the transcript below:
From Generate Greg Smith, Good morning to you.
Good morning to you Mike.
What does 100 billion buy you? Hey, it's a lot of money.
It buys you bit in AI I suppose. That's obviously this is the latest deal. It's pretty huge, isn't it? So Nvidia investing in Chat GPT owner Open AI. So underscores the booming demand we're seeing here for AI tools and the computing power needed to run them. So we're talking 10 gigawatts of power here. Just as a comparison, that's the entire peak electricity demand of New York City.
So Nvidia investing 10 billion initially, they've got about 55 billion in the bank so they're pretty well equipped there. They said it's a giant project. It's actually going to be as much as 5 million of their high-powered chips. So it's about double the revenue in terms of the impact there. So the actual impact the partnership on the top line is going to be greater than the investment itself. So it's going to be tens of billions of dollars of these products. Shares were actually weaker overnight but obviously they are the world's most valuable company. They want to make sure they stay the AI darling.
So there had been some suggestions that Open AI was cosying up to Broadcom and their chips. So that's watered that down a bit and obviously also aligns of Nvidia positioning itself as the champion of technology infrastructure. And of course, they, they recently invested 5 billion in Intel and it has proved to be just an hors d’oeuvre. For Open AI, they're the world's largest startup for, for what it's worth. They said that's going to lead to new AI breakthroughs. They see compute infrastructure as the basis of the future economy. So some pretty big calls there.
But I suppose you have some questions here, Mike, about the sustainability of what we're seeing. And you're sort of almost getting an inner circle of AI tech names investing in each other. And yeah, Nvidia initial investment is actually more than Open AI's annual revenue. So, So obviously that's a little bit like the late 1990s. You know, I'll give you a bunch of cash and you can buy my tech kit – the numbers are just a lot bigger. But is it a repeat? We’ll have to see. But yeah, some pretty big numbers.
OK, PMI in the UK and US, I'm looking at the headline. Both went backwards?
Yeah, that's right. So tariffs are cited as the main cause of sharply higher costs in in the US and also weakening demand. It also actually reducing the ability for firms to raise prices. So largest rise in factory inventory level levels in the history of the PMI survey in the US. So that gives you a bit of a sighter there and the UK tariffs also had an impact, but also a bit of a loss of momentum here, this November budget. Job losses rose, particularly in the manufacturing sector. And prices they actually rose at the smallest rate since the pandemic. But slightly better story in Europe, Mike, the composite PMI came in at 51.2 sets up slightly on August. That's the 9th month of expansion.
Wasn't all bon temps, France saw activity declined from 13 consecutive months, so obviously discontent on the government there.
Down under in Australia that eased as well in terms of the PMI to 52.1, that was down sharply from 55.5. Tariffs again having an impact. Business optimism lowest in a year, but price inflation, job growth was steady. But let's have some good news. OECD they’re out, that's saying everything is resilient. They expect global growth of 3.2% this year. So that's up from 2.9 what they forecast in June 2026, unchanged at 2.9%. So it's a bit of a slowdown. They did hear a caveat this, Mike. The full impact of tariffs are yet to be felt. So, but yeah, certainly they've lifted those great forecasts. So things are looking better for now. But they also did flag a weakening jobs market in the US, which sounds familiar.
Yes, it does. Which brings us to Rhode Island. And Jerome. Did he did he say anything profound?
Pretty much reiterated that, there's the dual mandate, there's an increasing balance tilted towards a slowing jobs market and that's pretty much what they put for their first rate cut in 2025. He did mention that word stagflation, but markets didn't react too much and he just reassured that things weren't anything like that they were in the 70s or the 80s. So we have to see there. But yeah, pressure for rate cuts continues to grow. Just earlier in the day. Michelle Bowman, she's actually a Trump appointee on the Fed, she said they have to move quicker and they're getting behind the curve. So obviously we saw last week there's a bit of divergence in what officials are seeing. But markets are pricing and two more rate cuts this year.
Give me some numbers.
So the S&P 500 is eased back from record highs. So it's down .7% 6650. Dow softened.2 percent 46268. NASDAQ down .9 percent 22591. Footsie 100 flat, 9223 and Nikkei that was closed for a holiday in Japan. ASX 200 .4% 8845. NZX50 we're flat 13136. Gold having have a strong session 32 bucks higher 3779 an ounce. Oil up $1, 63.24. Currencies - US down .2%. against the Kiwi we are 58.6. The Kiwi is weaker against the pound as well, down .2 percent 43.3. We're weaker against the Yen, down .3 percent 86.4. And against the Australian dollar we're also down .2%. Lucky if you're Australian travelling coming over it's 88.8.
What a joke. OK Greg go well, I appreciate it Greg. So I mean, he's the messenger. I shouldn't shoot him. Greg Smith out of Generate Wealth and Kiwi Saver specialists.