scarlet: welcome to bloomberg markets. let's get a quick check on where things stand in equity markets, recovering from yesterday's drop. the s&p 500 at session highs, the first gain in three days. if you look at the magnificent 7, 6 out of seven members are gaining. the exception is tesla who is reporting earnings this week. chip companies are the laggards here. as a group, pretty much mixed performance, reinforcing the idea of the success of deepseek

presents a less upside for hardware companies, better for the software. yields are moving higher as treasuries give back some of yesterday's rally. a had dipped below four point 5% yesterday but they went once he begins their meeting today and will come out with their decision tomorrow. everyone will be focused on what jay powell says or how he sounds on any questions related to inflation. markets are recovering from that route in chip stocks yesterday. now wall street is questioning the world of ai investments and economics of ai investment. >> we still have not really realized what the benefits of ai are. until we see, here is a great new chatbot, personal assistant, and i am buying an iphone because it is changing my life with his personal assistant, hard to say that we have

invested enough. scarlet: that is a theme we will continue to revisit. let's get you some mid-day movers on the equity side and bring in isabel lee. isabelle: chip stocks finally seeing green on the screen. nvidia is up by 6%. marvell is up by almost 3%. yesterday was an awful day, nvidia and tumbled 17%, biggest drop since march 2022, erasing nearly $600 billion in market cap. of course that was triggered by concerns over the chinese startup deepseek. people are really questioning, did we need to spend that much to get to the sky high valuations? a bunch of companies last week increasing their cap backs. it is still a question for all of us but for now it is a day of respite. jetblue shares are also in the red, down 26%.

the company projecting higher costs for the year, higher than wall street expected. unit cost will rise as much as 7% excluding fuel. the outlook is really a setback to their plans to turn things around. the company is working to cut non-fuel unit costs. that is an important gauge of efficiency, something that we will closely look at. lastly, general motors. shares are plunging 10%. the company posted a better-than-expected profit outlook but is a concern around terror threats and that weighed on stocks. the forecast doesn't account for the potential threats that trump is risking to enact, 25 percent on canada and mexico which are crucial to the automakers supply chain. gm shares are coming out strong, after rising more than 50% since the end of 2023 through monday.

scarlet: great context on gm's recent performance. let's take a closer look at what we learn from the company. for that, we bring in our detroit bureau chief david welch. david, as isabel was telling us, investors do not like the forecast which assumes no policy changes, which raises the question, what is the value of giving and outlook when it is not seen as realistic by your audience david: trumps tariff plans are very unpredictable. he threatens them, doesn't go through with them. they could be only for certain commodities which could protect the auto industry. it is tough for any company to go out and give a forecast based on a policy that they cannot see at the moment. also the market knew the stuff was coming.

it really underscored on the earnings call with analysts, gm didn't have any detail on a plan of how to deal with these tariffs. you mentioned earlier the shares were up more than 50% last year. if you look at their upgraded guidance, it is mostly the fact that they are closing down crews as the robotaxi business. the rest is a minor upgrade. china is doing better, the u.s. market is still strong for general motors, but it is not a big year that anyone is looking at. with the run-up of the stock last year, you have jittery news over the fundamentals, this is as good as it gets so maybe there is profit taking going on and they are getting out. if you are nervous that trump is going to levy these tariffs, you would get out. gm gets 20% of its vehicles and

parts from mexico and canada. there is a pickup truck plant in each country that would be difficult to deal with. that is their most profitable product line. big run up already. scarlet: thank you for pointing all of that out. in addition to potential tariffs on goods from mexico and canada which would certainly be impactful on the bottom line, also the possibility that president trump will change the tax credits for people who buy new ev's. we know that he has rolled back cv mandate. what would that mean for general motors, which has been managing the cost of its ev business to improve profitability? david: that was another key piece on the analyst call. gm had this target of reducing their cost by two to $4 billion this year. they said if you have the removal or reduction of tax

credits that helps sell the vehicles, that means cost savings, which is primarily done through economies of scale, if that is at risk, then two to $4 billion is at risk. they said they should still be able to get to the bottom of the range, around $2 billion in savings on the tv program, should be able to get profitable on an operating basis with their ev program, but if you were an investor and you are thinking you could get $4 billion in savings from the program and you are looking at maybe $2 billion instead, that is an impact to the bottom line. a lot of things dealing with trump policy that just made investors nervous. that came through on the call. after a big run up, you will have people saying let's put our money somewhere else until we get some stability on what the administration will do, what that means for the business. scarlet: until there is more

clarity, we will sit this one out. thank you, david welch, the latest on gm. we speak about donald trump's hypothetical moves. let's turn to washington and a headline that we got this hour. the trump administration facing a lawsuit over a plan to pause a wide range of payments on federal grants and assistance, which could affect the flow of billions of dollars across the country. let's get the latest from jack fitzpatrick. not a huge surprise that you have different organizations now suing the u.s. government, nonprofit coalition, asking the d.c. federal court to block this . what do we know so far about what the trump administration has done with regard to pausing federal spending on grants and loans? jack: we know it is very broad and probably will have a significant effect. it is a pretty big memo that was sent to agencies but it was written in ways that make it clear, they basically told

federal agencies, pause all funding that could potentially be affected by any of the other executive orders. you need to pause for spending and review to see if it comports with all of these other executive orders and doing dei practices and that kind of thing. this will not affect social security spending or medicare spending, but it did not create a lot of other carveouts. there are no carveouts protecting defense contractors or nutrition aid, money that goes to state and local governments, so it is not surprising to see a lawsuit coming from nonprofits. we have already heard from several democratic senators that they have talked to states attorneys general who plan to sue. clearly there is a significant lawsuit coming over the boundaries of the president's ability to unilaterally pause federal spending. we knew that light was coming

but this is a pretty significant way for trump to pick a fight with congress. scarlet: underscores the president's strategy of being vague and broad rather than precise, letting the courts determine how it is implemented. jack: yes, some important context here. trump and his pick to be budget director, royal salute, have said for years that they think the current law that dictates the ways in which they can unilaterally pause or rescind the funds without first different to congress, they believe it is unconstitutional. they may be pushing this hard to rip off the band-aid and prompt that lawsuit and seek a better ruling from the supreme court than what is currently written into law. that is a logical way to read this memo to agencies, that will

hold up a lot of federal funding, and do so very quickly. they are going at this more with an axe than a scalpel and i'm sure they saw the legal fight coming together. scarlet: a great way of describing it. personnel is policy in who the trump administration has in place to determine all of this kind of sets out how it will be implemented. thank you so much, jack fitzpatrick, with bloomberg government. as president trump meets challenges to his agenda at home, neighbors to the north are also ready to negotiate. the liberal party leader candidate spoke to bloomberg in the last hour about her plans to work with president trump. >> i take the president very seriously. as a smart guy actually with a clear worldview. i also observed his negotiating style. what i observed, which i think everybody sees, is this is not a

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scarlet: this is bloomberg markets. i'm scarlet fu. time for the stock of the hour. starbucks is falling right now before the coffee giant reports after the closing bell today. but the company is already making headlines, announcing leadership changes aimed at improving the customer experience. responsibility for store performance and the customer solutions team. meredith will join as the chief development store officer. for more on what we may hear from starbucks, let's bring in

cristina morales, senior analyst at punto research. what do you make of these management changes which had been hinted at for a while now, bringing in two former taco bell executives. are these the kinds of changes that come up from where you sit, move the needle? cristina: it is in line with the strategy the company is trying to implement. they are focused on north american operations which have not had great quarters. they are trying to improve the customer experience, trying to improve also the time they spent before they wait for the coffee to be attended. all of these things they are implementing. now you have to enter the stores to purchase to connect to the wi-fi. all of these changes at the executive are good and aligned with this. instead of waiting for a year to see the changes, we could see

some more improvements in the following quarters. scarlet: it is still not going to happen instantaneously and comparable sales are seen dropping 44th street quarter. are you watching same-store sales closely or have you moved past that, ready to look at what roy nichols says about the upcoming quarters and years to come? cristina: you cannot pass the same-store sales numbers. we expect middle single digit drops this quarter. of course we are watching them. it is the fourth quarter trade that we see a decline in same-store sales but hopefully by the end of the year we will start to see more positive numbers. it is still the drop in the same-store sales. scarlet: thank you for clarifying that. we know that brian niccol is making changes to the in-store experience, offering ceramic

mugs for those staying, perfecting some of the coffees. all of this adds to spending. we know that those expenses have been rising over the past couple years. what is your confidence that this spending will do what it needs to do and boost sales? cristina: in an environment, strategy do not increase prices this year, you have to have improvement in these experiences so that the purchasing ticket is higher, and that will compensate the stability they will have in prices this year. also what they are trying to see is improving the performance of the customers in the afternoon that are not the morning. you have to enhance those consumers to get more profitability. scarlet: cristina morales,

senior analyst at punto research . thank you for joining us. starbucks will be reporting after the close. coming up on bloomberg markets. we are looking at nvidia trading volume surging. traders seeing the deepseek episode as a buying opportunity. what else can we learn from the ar market route that started on monday? you can see the volatility over the past 10 days above average. next up, we will hear from -- on tech. this is bloomberg. ♪

scarlet: this is bloomberg markets. i'm scarlet fu. after chinese start up deepseek shook the tech universe on monday with its lower cost ai model, nassim taleb is warning the steep selloff in nvidia

shares yesterday exposes the markets fragility. >> the story was nvidia would keep rising. now they pull back a little bit considering the risks involved in such an industry. you are building everything on the hope that people will use your chip, will use chips, and the advancement will not come from software or someone figure out a better idea or some other method. which is what happened. that is a hint of what is to come. scarlet: that was nassim taleb speaking with our own sonali basak. the reaction to deepseek it boils down to technology that challenges wall street's current understandings of the economics of ai. for more, let's bring in darila porechna, the head of protocol at autonomys.

talk about your experience with deepseek. you have it on your devices. how does it compare to what openai looks like or chatgpt? darila: of course, this has been a trend with myself and people that i work with. if there is a new model, we downloaded and try it. if it is not downloadable, we use an api. but i could download and use it as much as my computer could support. they have released a set of models and it is pretty good. one thing that stands it apart, it shows you the reasoning of how it comes up with your answer. some said that chatgpt doesn't do, same with anthropic. you can see how it comes to

certain conclusions. being free, this is a win for the end user. scarlet: the price tag grabs your attention. another thing, it requires less power, doesn't rely on as much data to train it. while answering it, uses more time and power. what are your impressions in terms of asking a question and getting a response? darila: it is a little bit slower than may be other models of comparable size. if you are not using the application that are time sensitive, if you are just chatting to get some help on writing or coding, i think it is ok. within industry margins. scarlet: what does this mean for companies like meta that has its own large language models, as well as sales force which has its ai agents? how do you see this breakthrough

affecting these companies? darila: meta has been known as supporters of open source, so they are saying deepseek is a testament to the success of open source, testament to it being the future. companies like openai that have proprietary models have been trying to justify the spending of the money and compute to train their models by saying that open source can never catch up. deepseek shows that this moat is not as big. people who bet on open source will come out of this with a clear view of the future but proprietary model developers need to reconsider their models. scarlet: what does this mean for suppliers like nvidia who have been making the high-end ai

chips, which the government has limited and restricted purchases by china? darila: export control may have turned out to be a double-edged sword. on one side, we don't know if deepseek had access to any of those nvidia chips or if they acquired some from other countries, holes that may have existed in the export control. that is one option. the other option is because of export control, they have been able to domestically produced chips that can create cutting edge models more on par with chatgpt and the other cutting edge models. for nvidia, i think the demand for them will gain back up. if those models are so accessible, a lot more people will use them, which will drive the gpu demand they have for

training. scarlet: thank you so much. the head of protocol over at autonomys. that does it for this hour of bloomberg markets. i'm scarlet fu. balance of power is up next with kaylee and you -- kailey and joe.

>> from the world of politics to the world of business, this is "balance of power."

live from washington, d.c. joe: it is time to meet the press. welcome to the faster show in politics as the trump white house prepares for its first breast briefing with a newly minted secretary at the podium. i'm joe mathieu in washington. secretary caroline levitt in the west wing in a moment, the youngest ever white house press secretary hours after donald trump called for a pausing federal grants, called again for bigger tariffs. we will bring you into the briefing room and carry this life for you. the first conversation between the secretary and reporters including those representing bloomberg. a bit of a comeback in the cards. charlie pellett has the markets for us right now. charlie: indeed seeing dip buyers come in. stocks advancing after yesterday's