The Six Five team discusses The Six Five: Latest NVIDIA DOJ Antitrust Conversations
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Transcript:
Patrick Moorhead: Yeah, so first off, the Wall Street Journal probably a month ago picked this story up, but Bloomberg came in with some new information. It was super, super popular. And I think the reason is they used the word “subpoena” in it and typically the word “subpoena” is more correlated to crime than something different. But what happened is the stock tanked. And what a lot of people said was, “Oh, my gosh, there’s this correlation.” Reality was the stock didn’t tank because of this article. It tanked because of worries about the economy. So, I just had to put that there out on the table. So, it was funny, I got a call, “Hey, can you be on CNBC in five minutes?” And I did a phone in on John Ford’s show After the Bell. And then the morning after I did a Yahoo Finance talk about it. So, let me air this out. So, first of all, a little background. I’ve been involved in tech antitrust for a long time. I was a key witness in FTC versus Intel, AMD versus Intel, and very active in the stuff that happened with World versus Qualcomm, Apple versus Qualcomm. And not that that makes me a lawyer, I’m not, but gives me at least enough-
Daniel Newman: Glad you clarify that, Pat, not a lawyer.
Patrick Moorhead: … enough experience to talk about this. I was interviewed or grilled by Intel’s lawyers for the Texas state maximum of 24 hours. But anyways, first of all, it’s not illegal to hold a monopoly. It’s legal to use monopolistic powers to harm consumers. And typically, the bar for market share market definition is important is 50% and NVIDIA has 90 plus percent of the data center GPU market and its AI, which is huge for society. So, yeah, it just sends off red flares. No surprise here at all that the DOJ is investigating NVIDIA. Now, what are some of the illegal things that I’m speaking hypothetically that could be time, which could be a, “Hey, if you buy GPU plus my networking, you can get better allocation or better price.” Retaliation, again, hypothetically, if you buy AMD, I won’t get you the samples early or ship the volumes that you want. Exclusionary rebates are also illegal. Again, hypothetically, if you go with AMD, I’m not going to give you the same pricing. Pricing has to be volume-based. That is the legal way to do it or the way you segment that.
And why don’t investors care? Because these things take 10 to 15 years. I mean, check out Microsoft, AT&T, IBM, Google, heck, Intel. Intel, literally, this thing kicked off in 2005, FTC in ’09, EU in ’09 is still fighting the penalty payment, 15 years later. So, these are infectious from a global standpoint, meaning I fully expect the EU, Japan, Taiwan, probably Australia, they get emboldened by the EU. Oh, yeah. And the CMA in the UK.
Daniel Newman: There’s a filing this week, Pat, in Texas too.
Patrick Moorhead: Oh, yeah, yeah.
Daniel Newman: Not the same but kind of related.
Patrick Moorhead: Yeah, so final points here, these do slow companies down, right? You have to have a lawyer in important meetings about pricing, about strategy, about allocation. Correspondences need to be reviewed or lawyers are copied on it. What happens is you copy a lawyer, have a lawyer in a room, it goes under attorney-client privilege, and it can’t be shared and it slows stuff down. Now, it slowed Microsoft down big time. They missed mobile. They missed social. They missed a lot of inflection points. I just don’t see that happening with NVIDIA. Jensen has command control versus a distributed management style. It’s going to slow the company down, but I don’t know, we want to argue, I did a fortune year view. It’s going to slow it down 5%, 1%. When you’re going twice the speed of the rest of the industry, I don’t know if it matters. Final comment, I was asked about the competitors AMD and its Broadcom and Intel in 25, 26, but I literally, I don’t think this has an impact on short-term particularly.
Daniel Newman: Yeah, I think the first clarification point you made was really important. You have a day when the market’s selling hard. You have a company that’s maybe seen as running too far too fast on its price. Some catch-up in terms of the overall digestion period of AI and when that’s going to really hit. And then you had it sell. It did sell faster than the Mag-Seven names. So, there was an opportunity when they were selling 2%, 3%, one and a half percent off. NVIDIA was off nine, that maybe this DOJ probe had created a bit of a selling pressure. I spent more time on that than I spent at EFA because I had so many calls.
Patrick Moorhead: Crazy, man.
Daniel Newman: Well, listen, I think what happened was back in April, I wrote a market watch op ed. I started this process. You had to see, Pat, you and I have been involved in so many of these things even just the last few years, whether it’s been Apple, Qualcomm, Samsung, Huawei, of course, the various DOJ and FTC probes across different M&A deals. And when a company’s doing this well, you just have to expect it to be scrutinized. You have a policy position right now in the government that big tech is really bad. You’re seeing they’re getting emboldened by the wins they got with Google that’s at least pushing that forward. Apple’s App Store has been consistently under pressure, probably the most realistic antitrust case that exists, although they’ve made much less progress than I think they should. One of the great quotes I heard on the All in Pod was that’s because Apple’s popular. People like Apple, so they don’t want to push as hard as say a Google where they’re pushing harder.
But here’s the thing about NVIDIA, Pat is, and I’m being candid, you and I, we like to say the word “channel checks.” We have real channel checks. We have real conversations through the channel all the way up and down from the OEMs to the distributors, service providers, and even to the enterprises that are consuming this stuff. And listen, it’s a lot of hot soup is what I’ll call it. Kind of just comments of things that you’re like, well, that could be. We don’t put a lot of things in writing or deals. You hear things about deals not being described in writing. You hear things about, “Oh, company A is going to potentially work with company B, and company A was mad about that, so they gave more product to company C.” Yeah. Nothing’s proven. I mean, this is all just wild speculation. Bottom line is, is it happening? And this was my comment in my tweet, my extended tweet was like, it could be. It absolutely could be. And now it’s on the FTC, the DOJ to actually, well first of all, Pat, do they even have a probe? Is this even going on? Because we’ve heard.
Patrick Moorhead: Well, Dan, there is a prove It always starts with investigations, whether we will call it a subpoena or a forced and everybody’s on document retention.
Daniel Newman: Yeah. You’re right. I agree with you how far this is and where it’s at, how official this has become versus sort of semi-official versus like you said, document retention versus them coming into offices and having sit down meetings, I mean, I think they’re talking to the channel. That’s my guess. I think where a lot of this is coming from is they’re talking to people who are buying it, consuming it, implementing it, and they’re trying to figure out what’s going on. And you talked about consumer hard, Pat, but the other part of antitrust that’s so important is competition. And so, you obviously, because I’ve always said along the Apple Store for instance, is the consumers aren’t harmed. They feel it’s safer, it’s more secure and it’s easy experience, but the competition has gotten smashed by it. And that’s why I’ve always said that that’s such a problem. In this particular case, it’s like, look, people that are implementing and utilizing NVIDIA, they built on it. They’ve developed on it. They like it. It’s integrated. It’s a very closed sort of architecture where everything works together.
But when you have an AMD Broadcom or an Intel or you have these homegrown options, they’re making entry really hard. And you mentioned the Intel thing, I see a lot of parallels to the Intel thing. They’re going to have 90 plus percent of the market. They’re going to lock this up in the very earliest stages of AI. And then when people say, “Hey, I want to write programming to a different piece of hardware,” they’re going to be like, “Well, it’s unfortunately it’s in a container that’s running on a piece of hardware that’s running on a thing of software that’s using a proprietary library and you can’t move this.” Or it’s going to be really expensive to move this. But Pat, I do see this continuing. It’s going to be an ongoing conversation, something that will entertain us for many, many months to go and I like this topic. It’s fun. So, we’ll keep talking about it. We’ll see where it ends up.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
