On this episode of The Six Five Webcast, hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The handpicked topics for this week are:
- Marvell Structera To Solve Memory Challenges For Cloud Providers
- GlobalFoundries Q2FY24 Earnings
- Google Deemed A Monopoly In DOJ Ruling
- CrowdStrike Aftermath: Microsoft Fires Back At Delta
- New Intel SVP & GM Provides Foundry Updates
- OpenAI Revolving Door Of Founders & Executives
For a deeper dive into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.
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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we ask that you do not treat us as such.
Transcript:
Daniel Newman: Hey, everybody. Good morning. Welcome back to another episode of The Six Five Podcast. Pat, I’m not going to lie. That time between when you click the button and the actual thing went live, I started multitasking again. So, hey everybody, welcome back. How are we doing this week? It’s good to see you. It is Friday morning. It is the best time of the week. The best time of every week is The Six Five time, Pat. We’re back in the chair. We’re both in Austin, Texas. We were briefly out this week, but we are enjoying a bit of an August lull, the calm before the storm. I don’t know about you, but I looked at my calendar starting in about a two weeks and it is reprehensible at best. It is horrible. It is horrifying. It is terrible. It is scary. I just want my children to know I love them, because I may not see them much in the second half of this year. Pat, how are you doing today, buddy?
Patrick Moorhead: Man, I’m doing great. It’s been nice to be home, but yeah, it’s definitely the calm before the storm. You know me, I love my calendar and I color code my calendar for travel. And wherever you see red, it means I am traveling, I’m on the move. But no, it’s been good. Just when I thought, I mean there’s no rest. But I mean I’m still working 10, 12 hour days just knocking it out. Doing a bunch of the corporate stuff, some planning proposals, stuff like that. It’s good stuff, but it was fun. Ended up, I had dinner with Jason Calacanis last night.
Daniel Newman: Who is that?
Patrick Moorhead: … resting? Yeah, who’s that?
Daniel Newman: Well, I mean, I don’t know if everyone in our community knows who that is. I mean-
Patrick Moorhead: No, first of all, he’s the world’s best moderator for all in podcasts. That’s not where he makes his money. He’s a VC and he’s got some really interesting ways that he makes investments and brings in his LPs and stuff like that. But he moved to Austin and just a friend.
Daniel Newman: Did he get red pill? Did he get red pill? I mean Austin’s not exactly, but you remember the early, because you and I are actual early fans went to the first all in Summit before it became kind of trendy.
Patrick Moorhead: Yeah, exactly.
Daniel Newman: And remember it was funny because Sacks was the red and he was the … You know what I’m saying is it’s just J Cal ending up in Texas.
Patrick Moorhead: Yeah, I mean, he’s in Texas and probably is weekly on the Jesse Watters show, so on. He’s been very clear on why he moved. He basically San Francisco got too woke. I mean he said that publicly, so that’s why he moved in and it’s super interesting the VCs that have moved here, whether it’s Joe Lonsdale, Bill Gurley, Ajay from Myth role and now Jason, it’s pretty interesting what is going on. And we had a burgeoning, is that even a word? Do people use that word or just write that word?
Daniel Newman: I don’t use that word.
Patrick Moorhead: Yeah, during .com 1.0. we had Austin Ventures and a couple other venture firms. They basically folded or worked their investments off and never re-upped. But I think you’re going to see a lot more VC work and investment going on in Austin. He also publicly talked about opening a video studio here for some stuff he’s working on. He did share with me his plans, but I am under friend DA to not give any details on that. But hey man, great show. Looking forward to it.
Daniel Newman: Look, I don’t know about you, but I was sitting at home kind of twiddling my thumbs, enjoying peace and tranquility. And then I saw you being important and famous online. So that’s kind of my life. Look, I don’t know what everyone out there has to say about this, but I spend most of my life just trying to ride your coattails. So I appreciate the chance to just kind of be led into this little world that you live in.
Patrick Moorhead: But Dan, Dan, I’ve been in therapy for 15 years, and this is where I’m supposed to say, “No, Dan, you are the famous one.”
Daniel Newman: Actually, the irony of that, because had this joke back and forth, I don’t know if all you know this, but Pat and I are pretty good friends, is that you think that’s what I want you to say, but actually what my therapy and needs are is more continued abuse. I seem to do best coming from a household where I’m told it’s never good enough, you’re say, “Yeah, Dan, you aren’t there. And by the way, there’s three more parties that I’m invited to that you’re not. Then you’re supposed to do the little Homer Simpsons. You’re supposed to do the so that I know that you know you’re doing better. But buddy, I love you man. I’m glad to see it’s going well. Look, we got a great show this week. We’ve got the typical jam, six topics back to normal, actually only one earnings.
The tech earnings boom has slowed momentarily. Now we’re going to go into what I call the earnings trickle period, where you’re going to have a handful of different earnings over the weeks. This week we’ll talk about GlobalFoundries. We will have NVIDIA in a couple of weeks. Maybe we’ll have a guest come back and talk with us again that time. But we’re at the end, I’ve put some thoughts out there on Twitter about what I think all the earnings mean. You can feel free to read it. It makes me feel good when you look at my Twitter and like the post too because that also makes me feel good when you do that. But we also are going to talk about Marvell, we’re going to talk about Google deemed a monopoly this week a little bit on CrowdStrikes’ aftermath and what’s going on because Microsoft’s been pulled into the fold now.
Intel brought in a new senior VP and GM of the Foundry business and we had a chance to hear a little bit about what’s going to happen there. And then finally, OpenAI. Is the place on fire, is it burning to the ground? I mean, it’s going to lose $5 billion this year, which apparently isn’t that much. But also, it just seems to be a revolving door of owners. But Pat, this is going to be great. So quick reminder everybody, this show is for entertainment purposes and information purposes only. So, please don’t take anything we say here as investment advice. I’m going to let you go first, because I’m not selfish and, I’m just kidding. What does your therapist say you should do about that particular comment?
Patrick Moorhead: Just thank you.
Daniel Newman: Okay, good. All right. I didn’t know if I triggered something there. That was just me being funny. Everybody, I don’t know if y’all know Pat and I are friends, best friends. In fact, we actually I think did the bestie thing before the all-in guys were besties. We were besties. I don’t mean to take credit, because I’m not going to proclaim that we have nearly the amount of viewers that they have. We try-
Patrick Moorhead: Or cash.
Daniel Newman: Not yet. We’re getting there. But what I will say is I think we were using that phrase before they were. So I want to own a little bit of credit for that. Anyways, let’s start off. Let’s get do the geekiest topic first. This is super nerdy, and Pat, this is where you tend to shine. By the way, if we’re going to stay on the all-in theme, this is the science corner. We’re going to start off with the science corner. You can be Freeberg in this case, let’s talk about Marvell and their new Structera product, which is all about solving memory challenges for cloud using CXL?
Patrick Moorhead: Yeah, let’s jump in baby. Yeah, I think sometimes you use long post warning. This is going to be a deep dive warning here. First thing I need to do is give kind of a backdrop of some things that are going on in the infrastructure world. And we know infrastructure is cool. So, CPU cores are going up, but memory bandwidth per core and per socket is going down. And what happens is you get idling, right? You’re not getting the full use of it. And it’s hard to have giant memory planes to be able to put enough memory to be able to serve those cores. And this is important in almost every application. But stuff like AI inference and in-memory databases is becoming true. And so just some examples like AMD EPYC has 256 cores, Genoa, I think the code name is Intel Sierra Forest 288 cores.
AmpereOne, they just announced, well, they announced 256 cores. So pretty crazy. The first server … I hired the first AMD product manager at AMD, one core. And that might give you an idea of how crazy that was. That was 20 years ago. So, enter a new technology that has been in the works for, gosh, five, six, seven more years called CXL, and CXL stands for Compute Express Link. And there’s different versions of it, huge consortiums that have gone in or do that. And CXL 2.0 allows memory pooling and network switching. Think of one giant planar memory surface. Think of using memory like we do storage where you can just add a ton of it in a rack. And think of there’s this memory and storage pool. Think of CXL bridging the gap between memory and flash. So you can think of memory per socket over three terabytes, memory bandwidth a hundred gigabytes per second.
Okay, I’m getting here, okay, that was the groundwork. Marvell brought out three chips across two families under the brand of Structera. Hopefully I’m saying that right. Structera A is all about scaling, compute and memory bandwidth. Some real interesting case study they did in their presentation in the press release about recommendation engines. They didn’t call out Meta or Amazon. But when you think about serving ads and serving up products for people to buy or friends to follow, that is all about a recommendation engine. You want very tight coupling between the CPU and even the inference GPU. I think of Meta and I think of Amazon here and more.
The wild part, this isn’t just an accelerator chip, it has 16 Neoverse V2 cores. That’s big cores for all those out there, 100 watts, five nanometer. Second product line is Structera X, this is all about memory capacity. There’s two versions of this, one for DDR4, one for DDR5, 30 watts. The cool part is like, “Well, why DDR4?” You can take all of your investment that you had in DDR4 in DIMMs, plop this into a Structera X-capable server, and boom, you can pool and reuse all that memory. And of course, it supports DDR5 as well. So, other players in this CXL storm, Samsung, Semi, Micron, Astera Labs, Broadcom with Retimers. It’s cooking. By the way, this is just one of these things that we sometimes take for granted, this is CXL has been in play for so many years, but it’s getting more real, folks.
Daniel Newman: Wow, that was super nerdy. But this is the area where a company like Marvell that’s really been focused on accelerated infrastructure. So, what does that mean? Well, yes, they’re one of the two XPU companies. When you’re hearing about these various companies building AI accelerators or specialty AI chips, it’s going to be the Broadcom or it’s going to be Marvell in the background. And accelerated infrastructure is going to be critical, because it’s really dealing with everything from like you just talked about, CXL memory pools and being able to get more out of your … The limited capacity and availability of high-bandwidth memory to being able to create network efficiency, power efficiency. When they’re talking about accelerated infrastructure, they’re not just talking about switching, but they’re really talking about how to maximize and create great levels of efficiencies and get the most performant infrastructure as AI is going to continue to have really challenging economics and challenging power envelopes on the entire grid, on the entire world.
So, I think you hit the technical stuff pretty well. I kind of think about it. I used a really simple analogy, fact from my earlier days in my career when I was in video compression. But the whole idea of, I don’t if you remember H.264, but the ability to take twice the quality, same amount of bandwidth, or same quality half the bandwidth. The idea though of trying to figure out how to get more out of the same amount of memory is going to be a problem that companies are going to try to solve. It sounds like that’s what CXL, that’s what they’ve been trying to do. I would say that’s interesting. This has been a bit of a stop start trend line. It’s like, we’ll hear about it a bunch and then I don’t hear about it.
I remember about two years ago, I feel like I did five or six different press interviews all about what CXL and what’s it going to do and how’s it going to change. And then I don’t feel like I’ve heard anything and then all of a sudden it’s kind of popping back up. But it makes a lot of sense right now with HBM. And of course, we know right now that this is the, we talk about the limiting factor being … CoWoS and the limiting factor being amount of process and capacity with TSMC and others. But HBM is another limiting factor of AI. It just is. You can only make so much if you don’t have enough. So, dealing with this, figuring out technologies that enable us to get more out of the bandwidth that we have, the memory that we have is going to be important. So, I’m not going to nerd out any more.
Patrick Moorhead: Oh, and by the way, it wouldn’t be Pat Moorhead without talking about the infrastructure quadrangle, or as you say, the infrastructure square. And that is, as technology moves forward we need to make sure compute, storage, memory and networking are all aligned, otherwise it’s hard to get any innovation without doing some weird things like HBM.
Daniel Newman: Yeah, it’s funny,
Patrick Moorhead: The first time you called me on that I cracked up.
Daniel Newman: Yeah, your infrastructure quadrangle. It’s like-
Patrick Moorhead: Well, where I got it, it used to be the infrastructure triangle.
Daniel Newman: Triangle.
Patrick Moorhead: And then I added one, and it couldn’t be a square, it had to be a quadrangle.
Daniel Newman: You could have been clever and called it a rhombus.
Patrick Moorhead: Yeah, I know.
Daniel Newman: Parallelogram or whatever it is. Parallelogram. I don’t know. There’s different words. I am going to go back to math. My kids are in college, they’re asking why they need calculus, but just trust me, you do. I don’t know why. Maybe if you’re going into engineering. Anyways, all right, let’s pop into the next thing, Pat. This is a little less geeky. It’s a company that does some pretty important geeky stuff when it comes to essential nodes. But GlobalFoundries had earnings, Pat, and this is kind of their earnings sort of summed up the quarter. I mean this, let me base this down. I’ve spent a lot of time sort of analyzing all the tech company earnings this quarter, but they beat on the revenue, they beat on the earnings number and then they provided what was just an okay guide. I think they were mixed. I think it was okay on revenue or it was light on earnings or one way or the other there. Hold on, let me pull up my tweet, just to verify which side of the equation that was on, but it was solid.
So yeah, the guide was basically a beat on top and they missed on the bottom. This was kind of the quarter, Pat. It was like Amazon, sort of a little bit soft guidance but had pretty good numbers. Microsoft missed on one thing with its Azure number and you go back through it. It’s like everybody had a pretty good result, but just had something that was imperfect. And in a, I don’t know if everybody remembers Monday from this week, it looked like the world was going to end in the morning. Pat was desperately trying to log onto his E-Trade account and he was trying to move in hordes of cash from his reserves into it to try to buy in what looked like Armageddon. Pat couldn’t neither log in or get the money moved. But the point was, it literally, by the way, TMI, I don’t know. I’m not sharing any more details than that, but it literally did look, I mean, that morning I was ghostly, you were trying to get online. I’m pretty sure I’d never seen you get onto a chatbot hotline to try to- But it was like 24 hours later everything’s fine. That, by the way says everything about how fast this world moves.
Patrick Moorhead: I know.
Daniel Newman: People were comparing it to 1987, like the Black Friday of-
Patrick Moorhead: Vix, Vix was like, Lehman crashed, COVID, right? Oh, and that one day we had 12 hours.
Daniel Newman: It was super, it went from 20 to almost 65. And then it’s already back at under 20 again. There was this carry trade unwinding, it was cast. Anyways, this is not a lot to do, but it was just really funny, because it just goes to show the fragility that we have in our market right now. It is super fragile. Every certain economic report, everything the Fed says. Point is, it’s kind of hard to tell right now how much of these the way market’s reacting to things. But back to GlobalFoundries, I mean look, this is a company that doesn’t get all as much attention in all the chip chat that we’ve got going on. Basically, because what they’re just doing is they’re just busy manufacturing all the chips that surround all the really super cool leading edge stuff that we use in IoT and in comms and in devices and in PCs and in compute.
And it’s just the stuff that we just can’t actually build any of this without, but it’s not three nanometer not, it tends to be everything above 14 and often much higher than that. And that’s what they like to call essential nodes. The press likes to call it lagging or older or legacy nodes, but they continue to do good work under Thomas Caulfield. Thomas has been on Six Five a few times. And by the way, Pat, just a couple segment notes. I mean they had good growth in automotive, which is interesting. We saw Qualcomm had some great automotive growth as well, but Tesla’s numbers weren’t great. So, it’s not exactly sure, but I think it’s all about more content in every vehicle, whether or not we sell, if the production number starts to really grow, that’s going to be even better for these companies.
And then of course, smart handsets are still kind of on the decline, which is interesting, because we keep hearing about this upcoming super boom cycle, which I think you and I both agree is probably more of a ’25 thing than a ’24 thing. But these are important overall. But Pat, it was a good quarter. It’s like they’re stable, steady, strong, important company, but they are really dependent on this smart mobile device. Almost half the revenue comes from that space. And so, when that starts to grow and that starts to boom, there is a very strong opportunity that GlobalFoundries growth will follow with that
Patrick Moorhead: Good stuff, man. I guess some stuff, some adders for me. What I always like to do is look at, is it a company thing? Is it a market thing? Is it somewhere else? And this is clearly a market thing. You had mentioned it, but if you look at most of the chipmakers in the embedded space, they’re not doing well. And it’s really about this massive inventory glut. If you remember, we couldn’t get 12 cent controllers for $250,000 BMWs because you couldn’t ship the radio and then everybody doubled down and went wild over buying. And whether it’s a TI, whether it’s a ON Semiconductor, whether it’s Synaptics going through that glut. And there are even consumer IoT markets that even the demand for those devices has ebbed big time. And in the enterprise the AI budgets have overcome the edge, right? The intelligent edge, call it the industrial IoT. And those went away and interest rates went up and the overall auto market went down.
I think the only autoplay that had an increase was Qualcomm, right? They’re taking share and they’re also in a lot of the newer models with self-driving, but it’s a very tough market. To make a long story longer, GlobalFoundries, they read the market, okay? IoT and comms were down. I mean, comms infrastructure has been in the dumps for a long time. I mean, look at the performance of the key infrastructure players in the telco market. There was this massive surge in 5G, advanced 5G, and then it has stalled a bit as the companies, as the carriers chew through that CapEx.
Automotive was a bright spot in the end at 10% growth, which was great. And just on the smartphone side, GlobalFoundries, it’s not about the AP, it’s about the RF that they’re engaged in. And there have been some machinations there, big time Chinese growth. I don’t believe that they are a big supplier to those RF folks that go into China. Tepid smartphone market now. And your point on AI smartphones, what I said back in January is we would start to see the beginning of it and we saw Apple’s hand in what they do and their stock popped looked pretty good. And you have to have an iPhone 15 max pro max for it to be able to work.
I still believe if Apple hits its dates, which is slipping, it looks like from September to October, we could see the beginning of that. I’m also very bullish on Qualcomm’s new APs coming out, which not only give the boost to Oryon core, but also give a big AI boost as well. So, that’ll be Qualcomm’s second generation of AI smartphones. I think China is going to absolutely devour those chips. Again, I don’t necessarily know how well GlobalFoundries is aligned for that China smartphone pop given their performance here, but we’re going to have to see.
Daniel Newman: Yeah, yeah. I mean look, that’s some good extra bits and dives on that one. By the way, that’s why you watch the show, right? Because we go where the typical coverage never does. We dive into the weeds, we get into the try-
Patrick Moorhead: The thick of it.
Daniel Newman: We get into the thick of it. I mean dude, you just did like a 15-minute diatribe on CXL. You should start writing for a Mantech.
Patrick Moorhead: I mean, I did a little research, but like you, I mean, I’ve been on advisory calls on when CXL Consortium first started. I mean, they were hitting me up for stuff and feedback and I knew all the players who were in there. And I’ve been on standards boards before, and the good, bad and the ugly of how this moves forward. And it’s funny, I go to the hyperscaler friends and they’re like, “CXL, nah.” But no, it just costs too much. Costs too much. But I think we’re going to see it at Meta and AWS.
Daniel Newman: Always can get fixed over time. Costs tend to normalize or even come down. I mean look at what’s happened to compute and memory and storage and everything else. It comes down and it gets more powerful. Anyways, what do they call it? Moorhead’s Law?
Patrick Moorhead: More Law. Yeah, there was a Moore’s law out there.
Daniel Newman: I like that, Moorhead’s Law. We start new laws on this show, everybody. You got to stick with us, it gets better. Are you not entertained? All right, let’s talk about something that’s not so geeky, but that is really, really interesting, Pat. And that is Google just faced defeat in a decision by the DOJ. What happened there? Are they a monopoly, Pat? Is Google a monopoly?
Patrick Moorhead: Well, we’re going to have a lot of those questions, but let me get the news under … U.S. federal judge basically says it’s a monopoly using its search engine in any competitive practices. And the big spotlight here was on deals that Google did to get default search. And by the way, selling defaults on devices literally goes back to when I was in the PC market. I had buttons on my keyboard that I would sell, and inside of the search engine we would get money for the default search. And that’s turned into just a gigantic business. So, numbers here, Google has about a $200 billion ad business. Google pays Apple around $20 billion a year to be the default search engine. And that’s 25% roughly of Apple’s entire services industry. And one thought I have is, who could this potentially benefit? What could be the downstream effects here?
I mean, we haven’t seen the details of exactly where this could go. And by the way, Google is appealing here, but I’ve seen people speculate that the company could get broken up. You could outlaw doing default search given how massive the company is. Microsoft had a very similar experience when it had Internet Explorer and that was implicated in anti-competitive issues with Microsoft. Microsoft almost got broken up, by the way. In fact, a judge actually said it had to be broken up and there was some negotiation that kept that back on there. But this has to be some sort of a benefit to Microsoft with Bing and maybe even perplexity and an OpenAI here. I can’t imagine if they’re not found guilty that this might impact them. And what does that do to Apple? By the way, the services revenue 25%. I mean, imagine that basically going away. Because it’s been the bright spot with Apple.
Daniel Newman: But does it go away, or is this just open up competitive bidding?
Patrick Moorhead: It opens up competitive bidding. But I got to tell you, Apple’s lead guy, I can’t believe I forget his name. Oh, Eddy Cue said you couldn’t pay him to use Microsoft.
Daniel Newman: I saw that. I saw that.
Patrick Moorhead: You couldn’t pay him to use Microsoft Bing. Well, he might have to think about spreading the love here. One thing that the DOJ did with Microsoft, and again looking at the history, this is fun being history is in the boot up of the new PC it had to give you a choice of which browser to use. And you had to embed in there a way to change your default search. And Daniel, maybe you can dive into this part, I’ve already talked too long, but is this onerous regulation or true anti-competitive nature? And we’ve got big companies paying another trillion Mag seven company all this money, which just factually, of course it limits the level of competition, but is this just because Google is better than Bing, or something like that?
Daniel Newman: Yeah, this is funny. I actually want to even take a slightly different direction here, Pat, but-
Patrick Moorhead: I’d like you to answer my question. Just kidding. No, go ahead. I’m just kidding.
Daniel Newman: Eventually I will, but I’m media trained. I don’t answer your question, I talk about what I want, that’s the deal. It’s a stupid time to actually regulate this. Search is just about to hit the absolute pivot shift inflection point of which it’s relevance. Apple’s got its new Intelligence product. Pat, you and I are, Pat, what do you search on now when you do your searching?
Patrick Moorhead: Perplexity is nine out of 10 searches that I do.
Daniel Newman: And then after that it’s some derivative of everything else that you tend to bounce between. Now again, you’re the cutting edge, you’re a leading innovator, but you are at the front edge and you are setting the trends and people are following these trend lines. And what I’m saying is we have a horde of trend lines that are about to change. We’re about to see new PCs, new smartphone devices, new search engines that are going to be developed. I mean, look, the other day I shared one that an open source, fully open source stack that used Llama, that used Grok and a bunch of other open source tools to create a search that I would say on five tries was 95% as good as I was getting out of ChatGPT. And now you see ChatGPT creating SearchGPT.
Google’s got its own challenges right now. And I mean look, the being with GPT thing did not really move the needle, it didn’t. But that’s because we haven’t really seen the inflection to which search has shifted from being something that, but as everybody starts to pick this up, Pat, as everybody starts to use these generative tools for search, these abstracts, these summaries, the regular searches we know isn’t going to be a thing. If I’m Apple, I’m looking at the whole situation and I’m basically like, “Look, I don’t really care. I want as much money as possible. We’ll sell this thing off. We’ll continue to use our giant customer platform and we’re going to make as much as we can.”
And by the way, to your point about what Apple said, they do want to deliver a good experience. That is still Apple’s thing. And I don’t know about you. I played with Bing search, I played with DuckDuckGo. I played, Google still does the best search. Now, to the point, I’m also like you, I’ve moved to Perplexity for almost everything, because I just find the outputs better for me in most cases. How long before that tail wags the dog? Meaning, we are the early, but how long before that starts to come up and then now you’ve got a whole new ecosystem? Apple’s busy building and training models and developing Apple Intelligence. And so, in the long run, I just wonder how long this is viable, period. Now, back to your question, they have to offer the best product. They have to have the best service. And to my point is, what does it really accomplished by opening the door and bringing in Microsoft? This isn’t a knock by the way. Let’s even say it’s all even. Does that suddenly make this less anti-competitive to bring the $3 trillion company in to displace the $2 trillion company? Who else has a default search engine that would provide customers at a level of experience that they’re going to expect when they’re using their iPhone? Or what is Lina Khan doing? Why is this the most important thing to spend time regulating?
Patrick Moorhead: Yeah, it’s almost like, let’s think of Qualcomm who has literally 95% share of the Android premium chip market. Does that mean that Lina Khan can come in and say to the phone makers, to Samsung, “You’re no longer allowed, Qualcomm, you’re no longer allowed to sell that many premium chips to Samsung.” And where does this thing end?
Daniel Newman: Yeah, you know what? I can’t tell you, Pat, but I just mean, this to me feels like litigating, we’re litigating history, not the future. Spend the effort and the time figuring out how to manage the generative AI tools are accurate, grounded, capable, distributed. Because search is literally going to go … Search as we know it over the next decade is going to go the way of the dodo bird. It just isn’t going to be the same. And so, if I’m Google, I’m doubling down on Gemini, trying to build a better mousetrap there, trying to make sure highest fidelity, accurate, lowest hallucination. I’m looking at the Google search business the way Hock Tan looks at any business he buys. I want to massively win the business until it’s no longer a business. But you got to believe me, search as we know it is not going to be the same in 10 years, not even in five. I mean, look how fast generative has changed your behavior. But we’re sort of technological nerds. We’re geeks, but our kids, and by the way, last thought are kids, what are they using to search right now? I mean, but-
Patrick Moorhead: TikTok.
Daniel Newman: Yeah, let’s assume they’re doing any real level of research. Don’t you think a lot of them have picked up ChatGPT though and the generative tools they’re using?
Patrick Moorhead: Yeah, I know my son has. I don’t know, I don’t think my daughters have.
Daniel Newman: Okay. Well, I know my kids in college are. My college-aged kids are definitely using those tools heavily. I mean, tools are rethinking how they teach and how to manage that, because they can’t expect kids to not use these tools to influence their outcomes. Just like when search first hit, we are at an inflection that I think people are ignoring. But like I said, Lina Khan and the whole, the DOJ, FTC, they want to win something. Just to me, this just feels like another, probably another fine, another speed bump, another case, but it’s not really feature forward as far as I’m concerned.
Patrick Moorhead: It’s interesting with these lawsuits here in the U.S., it’s almost like we have a proxy gatekeeper rule like we had what’s going on with the EU.
Daniel Newman: By the way, this may be the longest and slowest we’ve ever been getting through topics. We are really doing a specially slow job today. Hey, let’s talk about another, this is good, dude. We got three topics left and we are 40 minutes into the show. Five, geez, Louise. All right, so CrowdStrike Pat, funny, left turn, right turn. I mean, it was kind of another one of those things. Gosh, these big major world events happen and then the world just kind of forgets about them quickly. I feel like it was what, less than a month ago, there was an attempted assassination. I haven’t heard a word about that in two weeks, it’s amazing.
We talked about Kennedy for the first 40 years of my life it came up. It’s a funny world that we live in today that we just … And the CrowdStrike thing, literally a couple of weeks ago people couldn’t get out of Delta. If you were flying Delta, you could not get home. You were trapped for days and days and their systems were down and literally someone had to walk around and go terminal to terminal and update these things to get these things turned back on. Got thousands of flights canceled, half a billion dollars or more of damage. And of course, it wasn’t just the damage to Delta, it was everybody that was affected by it. It was a snowball. Now, this gets interesting though because this past week all of a sudden it’s coming back and Delta comes out, says, “We’re going to sue. There’s going to be, we need damages here.” And then CrowdStrike comes back and Microsoft comes back. And there was a letter from Microsoft that came out that talked about how they basically said, “Look, all the way up to the level of Satya Nadella we tried to help you guys. We offered one-to-one to come out and help, you declined our offer to help.”
And as you started to unpack this, you and I both wrote pieces about this. I wrote a pretty long tweet, because I don’t write articles anymore, I just tweet. But I wrote it where I was trying to break down what happened here. And what it looks like is that CrowdStrike, sorry, is that Delta has a very, very complex legacy technical estate that exists in its IT, and that they’re running a combination of different server, platform, Linux Windows. They’ve got many different tools, they’ve got distributed clouds. And the long and the short of it was, Pat, is when you have a very sort of distributed antiquated IT environment, right? Hi Clifford, when you have a-
Patrick Moorhead: That always distracts you, doesn’t it?
Daniel Newman: It always does, but thanks for throwing that up. But when you have a really, this antiquated technology estate, Pat, and something breaks, it’s probably never one thing, right? There’s a lot, it’s like a snowball of different things that ended up causing this. And the first thing that I saw is I was reading this letter, I’m thinking to myself, “Well, American Airlines was on the same and United was on the same and they had problems, but ironically, in a matter of just a few days they were able to get back up. So, what was the difference?” And so as you were kind of reading through this letter from Crowd, like you’re looking at it and you’re sort of in this environment where there was five, six, eight different technological and software and update and operating system standards being run across these states. And the fact that they couldn’t get brought up quickly blaming it on any one part becomes really, really difficult.
Now, of course, you have all the contractual things that basically says you can’t hold CrowdStrike or Microsoft harm for the damages. That’s a whole nother thing, because this is sort of what I would consider to be a above-the-fold event, more considerable in nature. But Pat, in the end it looks to me like everyone tried to help Delta. Delta didn’t want to be helped. And now, was that because they wanted to preserve their ability to litigate once the were created? Was that because they knew technologically that no Microsoft or CrowdStrike alone couldn’t come in and solve their problems? There was many things there, Pat, but what I kind of said long and short is this is going to be an interesting precedent set for how technology failures can snowball into litigation. And when a single point of failure creates a snowball of across this technology landscape that most enterprises have, full of technology debt, full of different software, Linux and Windows and different clouds, who is to blame? It’s very complicated. In the end though, I think Delta is trying to save face, but I’m not particularly optimistic that they’re going to have a good experience at court when you start unpacking what their IT environment looked like.
Patrick Moorhead: There were definitely mistakes made by CrowdStrike overall. They sent a corrupted file, which-
Daniel Newman: Totally.
Patrick Moorhead: … sent it spiraling. And customers have the ability to test stuff. And this is a classic thing that goes on in the enterprise. You don’t just send out a file to 125,000 stations without testing it first, unless it’s zero day. And these updates from CrowdStrike do come in in different flavors. And a lot of people just, even though it wasn’t zero day, they went ahead and did this. And the weird part about Microsoft is, there’s a couple of things going on there. First of all, Microsoft somehow gets implicated in crew management systems. That’s how you get the crew in the right place at the right time. This has nothing to do with a client PC that is sitting there that CrowdStrike made go away. Maybe you could stretch and say that, “Okay, flight attendants have a PC and they couldn’t use it because of this.” Maybe that’s a stretch. I mean, the reality is, and this came out in between Delta and Microsoft, that AWS and IBM and Kyndryl are actually the service providers to those flight systems.
Daniel Newman: I was trying to be nice, by the way. I wasn’t trying to call out blame, but-
Patrick Moorhead: Well, I’m just, no, this is my, “There were a mistake. Here are the facts.” And here’s come a little editorial, but this is also a little bit of fact. Every modern enterprise-grade PC in the last 10 years has the ability to go in and delete files and replace files without having to boot the PC into the operating system. And that’s through BIOS and they can do it in mass capabilities. So, I have to conclude, and I actually hope this goes to court with discovery, is I want to know, how old were those PCs that Delta has? Did they turn on this BIOS capability to be able to go in and literally automatically take out the corrupted file and put the new one in and reboot the PC? What were the procedures that were going on there? So yeah, that’s where I am. I mean, I think it is a, just to net this out, is a complete CYA by the leadership team at Delta. Cover your arse, because the board wants heads and the leadership team doesn’t want to all get fired, and who are they going to blame? And I’ll even go one step further and with Satya Nadella reaching out and nobody even responding, reaching out to the CEO on multiple times with an offer to help and think about how many times Microsoft has helped people who have issues that are in and around Windows, it borderlines negligence. Negligence.
Daniel Newman: Yeah. Well, I think, like I said, I think once the litigation decision was made or considered, it’s a preservation thing. You start to take on help and then it starts to negate the opportunity for possible damages to come in. Pat, by the way, some great comments have come in here, but the long and the short is, is that there’s some learnings here for it. There’s some learnings here for software providers. If there is any damages that will change the industry, it will cause a meaningful change in the industry going forward. And of course, Pat, this was the worst I’ve seen in a long time in terms of something that actually affected mass numbers of consumers. We’ve seen these unique one-offs inside of one company or these ransomware attacks that have been substantial. But this was a lot of, you used the word, I think it’s good. There was quite a bit of negligence that led to this. It is going to reshape some IT decisions. Hey Pat, we’ve got to move somewhat quickly. We’ve got a couple of more topics. You and I sat in. We heard from Kevin O’Buckley, the new senior vice president and general manager of Intel Foundry. I mean look, after the last couple of weeks they had … Was there anything that could be said on that call that gave you confidence? Or what was your perspective of the conversation under Kevin’s new leadership?
Patrick Moorhead: Yeah, so first off, a little bit of background on Kevin, right? Lineage, Marvell Tech. I believe I met him when I was at the last Analyst day. He ran their ASIC business. Before that he was at Vera and then before that he was VP at GlobalFoundries where he was in charge of product development. And then he was at IBM for 17 years in tech development, even sales and relationship marketing. So, his lineage is really good on this, because he’s got customer experience and he has founder experience. And this was really a meet and greet that Intel set up with the analysts that I appreciated. There was no new news brought out, even though I think the Intel press release said, what’s new? They had disclosed that information either in earnings or in disclosures beforehand. What is important though, there were some affirmations about 18A, which literally is the process that Pat Gelsinger says will give the best performance at the lowest cost.
That’s including TSMC. TSMC recently said, “We beg to differ. Heck, our three nanometer has better characteristics than 18A and our two nanometer will run circles around it in terms of performance and cost.” Those are fighting words, by the way. That’s about as much out of TSMC as you’re going to get. Two first products, one for client and one for server are powered in booting an OS. I loved the booting the OS part, because that is key. You can power on anything, but by the way, it has to boot into BIOS, then it’s to boot into operating system. That is a good sign. That doesn’t mean it’s running windows. It’s probably a variation of Linux. That’s how this works. PDK 1.0 and a PDK is what you give customers, partners and IP houses to go in and really bang on this thing and integrate your flows with theirs.
And even though the first tape-outs for the Intel products, Panther Lake and Clearwater Forest have already come out. The first external tape-outs will be, and by the way, Intel is well beyond tape-out with Panther and Clearwater. It’s booting, as I said, but the first third-party external second half of 2025, which means those first products will likely show up in the first half of 2026. It takes about a year to go from tape-out to high volumes. And then a little bit of an affirmation about the overall business IFS, and this is three, this is 18A. This is everything is at over $15 billion. That includes wafers and their packaging business. Big number, just as comparison, TSMC is 100 billion, that this is bigger than GlobalFoundries. And in the Q4 call, Intel said they’ve taped out over 75 ecosystem and customer test Chips and has 50 chips in the Foundry pipeline for ’24 and ’25, 75% is on 18A. Final comment, again, they made this announcement before, but Microsoft is a committed Intel 18A partner and my guess is that is the chip that will tape out in the first half of 25. Could be Cobalt, could be Maya. My guess is Maya, which is their data center AI accelerator. Just because of what TSMC is doing with raising their prices.
Daniel Newman: Yeah, so you hit it on the head. I mean, this wasn’t new, but it was sort of a, I like the word, reaffirmation. Look, this particular moment for Intel is complicated. I mean, Pat, I tweeted something yesterday. They’re trading it effectively at book value. They’re literally the company, if it just liquidated its assets, that’s what it’s trading at. It’s really hard to see this. This company’s a national treasure. It’s been critical to the entire development of the compute era. We’ve seen fabulous design skyrocket while Intel has struggled. The foundry business is something that the world needs. It actually needs Intel to be successful in this particular space. Yes, TSMC can do more here. Samsung can do more here. SK, they can all come here and build fabs. But it is good for the world to have a strong U.S.-based manufacturer of chips and a fab and a Foundry in chips.
So, I’ll say that. It’s good to see some of the things that you hit on overall, it’s good to see the pipeline developing. The problem is the cost and timeline to value is much different than, if you’re a fabulous design, you can get, especially now with the EA tools and all the design support arm and IP licensing, you can get to value pretty quick. That’s why you’re seeing all the hyperscalers build their own because it’s become very, very possible to do in short periods of time. And they can vertically integrate and deliver quality products and increase margin. But they do need to have these chips fabbed out. They do need to have these produced. There is three nanometers sold out for two years. Certain CoWoS sold out for multiple years.
Patrick Moorhead: Certain CoWoS not working yet.
Daniel Newman: Some of the other CoWoS isn’t working yet. We actually didn’t even really talk about it here, Pat, which is kind of funny, it didn’t make the list. But NVIDIA had a delay this week and we don’t need to. It got covered so well, maybe that’s why we didn’t have to cover it here. But the bottom line is, is that this business is hard. This business is hard. From design to output it’s very, very tricky. The amount of capital … The capital intensivity of this is exponentially more difficult than just the design side. And so, Intel’s got a tough road ahead. I think its biggest problem is that you just really have to be … You have a decade horizon to really see Foundry from a profitability standpoint. David Zinsner, I think you’ve talked to him this week. I talked to him next week. He’s been pretty candid about, it’s really the turn of the decade is where they see this thing really starting to generate profit. But again, a company like Intel can’t be betting on the short path. They have to be betting on the long, they have to. Returning to technology leadership is a big challenge in itself. That’s something Pat stood by. It’s not going to be easy, but technology leadership is one thing. The world needs more Foundry, it just does. You’ve got it TSMC and you’ve got Samsung, but Intel succeeding here is good for the world. Everything else you covered I think is pretty good. Let’s jump into the last topic, Pat. I know that was a quick pivot, but I know we’ve … By the way, this could be the record, longest you and I have ever talked, just-
Patrick Moorhead: No, we did an hour and 15 one time.
Daniel Newman: Did we? Did we really?
Patrick Moorhead: We’re only at 54 minutes.
Daniel Newman: To which I replied, “Really?” Okay, so let’s hit the last topic, Pat. Let’s talk about the toxic cesspool that is also one of the most innovative world-changing organizations, and that is OpenAI. Pat, I’ll start here, but what is going on at OpenAI? Now, Greg Brockman is leaving. You’ve seen, and he’s just one of three more senior leaders. You have John Schulman, he’s another, so two co-founders. One, Brockman is taking a leave of absence. You watch that? Leave of absence. Okay, just making sure that everybody sees that. Some people listen to the podcast. I just did quotations in case anybody didn’t see that. John Schulman, another co-founder. He’s heading to Anthropic. He’s heading to a competitor. Peter Deng, their product leader, one of their very most senior product builders is leaving.
Pat, I can’t help but think that this company has major toxicity. When this news came out, all I’m going to say is, whether it’s been … Say I’m wanting to take on Microsoft, I know he doesn’t, but he does. But he doesn’t. But he does. He’s definitely the person that funded. By the way, Pat, we didn’t talk about the billion dollar opportunity Intel had to take 30% of OpenAI. We’ll do that another time. It was, remember the coup that took place, the supposed coup, and everybody got really defensive of Sam, because he’s the genius, the founder. But you start to wonder, as you’ve seen this trickle out the door of all, and by the way, this is the third wave of sort of very influential people that have come and gone from here. You’re seeing Microsoft taking a more defensive posture, naming OpenAI as a competitor, despite the fact they basically are the largest investor and own almost half the company.
I just think there’s something going on inside. And of course, they’re not going to tell us what this is, but it seems to me that Sam has a very interesting approach that scares the crap out of people. The board that wanted to put them out. I don’t know if this is AGI-related. They’re getting closer and it’s a concern about how he might put it to use. I don’t know if it’s his desire to take on the entire chip industry and take out NVIDIA and fab all the world’s chips and manufacture them. I don’t know if it’s just some sort of other tyrannical leadership style that is not being well communicated. Pat, we had the recent thing about all the people’s deals, all their stock deals being messed with and the company trying to change terms on the deals. There was a whole shenanigan with that. But Pat, look, this is all speculation here, but something inside that company is sick. There’s something going on inside of this company to have the coolest technology on the planet, just absolute breakthrough stuff. But whether it’s the stealing of data, that whole interview that their CTO did where she notably couldn’t answer on camera, but absolutely got bedazzled, bedoozled on camera, whether it’s been this coming and going of its leaders, whether it’s been the outing of him as the CEO, whether it’s been these stock deals that got messed with and people’s disclosures that they couldn’t talk and the gag orders. What is going on inside this company? I don’t know Pat, but it’s ill, it’s ill.
Patrick Moorhead: I don’t know. And I don’t know if I care and I don’t like topics like this.
Daniel Newman: Oh, come on. Was this all my fault? I didn’t even put it on the list.
Patrick Moorhead: Huh?
Daniel Newman: I didn’t even put it on the list. You picked it.
Patrick Moorhead: Here’s where we’re at. I mean, I feel like the open source competitors are getting close enough to OpenAI capability for it to be a gigantic threat. And thanks for flashing that. Now-
Daniel Newman: I really distract you, I distract you.
Patrick Moorhead: But I think it could also be that everybody knows what’s going on inside and they look at the competitive threat and OpenAI is closed. It is a closed model, and this could be the beginning of the end potentially for OpenAI if there’s a brain drain. Because that’s all I care about. I care about architects and I care about developers. It has been a long time since that gigantic 40 and multimodal came out. I was mistaken to think that they had gotten those actually out and made it usable. Is that thing ever coming out? Could be an execution issue. This stuff just doesn’t work like they showed it. That is a potential here. But what I see is open source and closed source narrowing in right now and OpenAI has to do something and stay ahead, otherwise they’re going to rolled over by the open source folks. I don’t think Gemini is a risk at this point, just given the horrible types of responses that have come. I mean, come on, Dan. I mean, when’s the last time you started your search on Gemini?
Daniel Newman: No, I agree. I’m only laughing, because every massively profitable company in the planet is closed. It just has something that’s super closed and very proprietary. But having said that, like I told you earlier, I’m seeing things being built with open that are very powerful. And so, you’ve got this conflicting thing. But Pat, I’m going to actually say that Apple’s culture is all about closed. Microsoft has lots of closed architectures inside of in systems, and it has made a lot of money by that. Google, by the way, has always had a bit more of an open lineage, but definitely has some proprietariness and things like its algorithms that have made it incredibly powerful. I just mean OpenAI. Yes, it has been the antithesis of open, but my gosh, what a market advantage? Why would you run away if you’re a founder? And unless, I don’t think it’s, I just … I get it.
Patrick Moorhead: You are running away with some value, right? Let’s say-
Daniel Newman: Of course.
Patrick Moorhead: … your vest was four years and you stuck around for two and you’re just like, “This place is hell.”
Daniel Newman: That’s all I’m saying.
Patrick Moorhead: Yeah. I can’t work here and I am out right. Exactly go from doing open AI potential hellscape into, “Oh, I’m going to go retire.” These people are winding up at other 16-hour day shops, Morgan Stanley intern type of territory here. And so it’s not, I don’t think it’s necessarily that, there has to be something with the competitive front. Because these people jumped in. I got to tell you, I don’t think it’s for purpose. I think it’s to make a ton of cash and they would have stuck around. And if they thought that the valuation would’ve gone up astronomically and stuck, it could be hedging your bets. Hey-
Daniel Newman: They’re only going to lose 5 billion this year, from what I’m reading.
Patrick Moorhead: Yeah, I mean, Amazon lost billions too for a decade. And the market was okay with that. Heck, they even went public. I think it took them 10 years to make any money. You could fact-check me on that, but it was a long time.
Daniel Newman: Yeah, so I think we’re mostly in alignment. I just mean, I think there’s something toxic. I don’t know what it is.
Patrick Moorhead: What do you mean by toxic? Do you mean like-
Daniel Newman: I’ve studied back and culture for a long time, and I don’t think these execs are running away because they don’t believe in the tech. I think they’re running away because there’s something in the culture, there’s something about the way, the power struggle, the way the company’s evolving, the things it wants to invest in, the way it’s treated the people that helped build it. And it did start with a mission that was all about helping to democratize and bring this technology to the world. This group was not people that needed money. These people are financially, not all of them, but I’m talking about the people at the top of this org are financially well to do. The board had announced that they were very concerned about … All I’m saying, is that was a bit of a canary in the coal mine of what was about to come.
And now you’ve seen it happen the way employees have been treated. And these founders are leaving and then they’re being gagged and said, “Don’t talk about.” “Why? What are you not talking about?” And I’m not, again, not proprietary tech stuff. What’s going on inside the walls of the company that is created. And by the way, and you look at Satya and they’re building competitive products now and they’ve announced them as … There is a force of nature inside that company that wants to even take on those that have helped it become successful. Which again happens when companies get big enough. I’m just not sure they’re there yet when they’re still losing $5 billion a year. Who knows? It’s a fun topic, I know you don’t love them as much as I do. It’s all speculation.
Patrick Moorhead: You know what? I am going to talk at it. I actually liked that. That was fun. It’s so funny we’re talking about this company. It has a 100,000 employees or something. It has like 2,000 employees,
Daniel Newman: But it did change the world. They literally changed the world.
Patrick Moorhead: Yeah, no, totally. Yeah, they did. And by the way, the first smartphone was not Apple, right? The first PC was not HP. I mean, by the way, first PC was not Apple either. And historically, if you go look back, the people who started something did not own it. I mean, the first search engine was AltaVista. I worked for them. Nobody even knows what AltaVista is. It’s the name of a beer at this point. I mean, we started that. We started that market and it was DAC. It was DARPA. But history shows the first person who comes out with tech something is rarely the one that ends up leading it in the end. Zilog was the first PC processor, not Intel. Anyways, there is a trail-
Daniel Newman: Read the history of ARM, read the history of Acorn. And all I’m saying is, all these histories are fascinating. And by the way, Pat, you read history. I read history. I wish the world and most of the people read history. It would make the world such a better place.
Patrick Moorhead: I think it was lower stress levels too, like this, “Oh my gosh, what happened? And hey, back in 1960, this happened.” We tried it and it doesn’t mean we didn’t try it again, but let’s go back and realize why what we did in 1960 failed and what we can do to do that. The fall of civilization, Greece, Rome, and all of the precursors that led to their demise. Look at Western Europe and just how amazing and the growth there. And now economically, they’re not a third-world region, but they’re second world.
Daniel Newman: They’ve fallen behind. And again, this is an interesting debate, a very 180 from just talking about the tech. But a significant policy change from capitalism has created a different type of construction population and of those particular societies. Very interesting, Pat, read history, everybody, it’s not all available on TikTok. You might need to find a library, but those are available online. So anyways, it was a great show, Pat. That was a lot of fun. We only went an hour six, so it wasn’t our longest show ever, but it was on the pace. I think that had I not as the world’s greatest moderator joke kept us on track. We could have gone all day. And it’s fun to move back and forth between the geeky science corner that you did with CXL, all the way to a little speculation on what might be going on inside one of the world’s most innovative, interesting, and exciting disruptors. But Pat, for this week, we got to say goodbye to everybody. Thanks so much for tuning in. We’ll see you all soon. Share with your friends. Hit that like button.
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.
