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:
- Arm & Qualcomm Lawsuit In The Jury’s Hands
- NVIDIA Updates Robotics Chip & ReDrafter
- Chip Makers Under Trump Administration
- Google Gemini Improvements
- Micron Q1FY25 Earnings
- Is SaaS Over + AgentForce 2.0 Launch
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. It’s Friday and we are back. It is The Six Five, episode 244. Patrick Moorhead coming to us straight off the bench press. He’s looking casual. You worked out this morning, didn’t you?
Patrick Moorhead: Yeah, it wasn’t bench press, it was leg day. Did full legs and deadlift. My second time doing deadlift. That is a serious, serious activity.
Daniel Newman: It is. It’s a big one. Are you using the sissy bar or are you actually deading with the one that bruises your shins?
Patrick Moorhead: I am doing the former and kind of a combination. I think my trainer said there was Ukrainian or Bulgarian. I did two different ones depending on where I start, hitting different muscle groups.
Daniel Newman: By the way, if it makes you feel any better, I use the wimp bar as well. At this point in my life, I have no need to show bruised shins and lost shin hair anymore. When you’re young and you’re an athlete and you play sports, you pull the bar right up along your shin line and you would just scratch the crap out of it, but you’re back at it. I mean deadlifts are probably, I mean deads and all the Olympic lifts, the squats and of course, the bench and just the big multi muscle group lifts. By the way, this isn’t a lifting podcast for those that maybe just tuned in from the get go, but I’ve been documenting Pat’s health journey because it’s pretty much the only thing I talk about when I’m with him anymore. And so I’m just trying to get really into it now.
What I did this morning was I walked on the treadmill for about 20 minutes and I sadly read about the government’s supposed shut down, stocks tanking, assets falling, inflation rising. Actually, it did better today. It ended up being a little bit better. I started the day kind of depressed, Pat, I’m going to be honest, but I’m feeling a little bit more optimistic now because it’s like everything, you realize that all it takes is a moment of goodness. We got a better than expected PCE reading, which is one of the other core inflation reading, consumer ratings, and it seemed to take all the edge off. But we got a great show today. We got a lot to talk about. This is The Six Five. It’s a tech podcast, not a workout podcast, not an economics podcast, but hey, we talk about what we want because it’s our show. We get to do what we want here. That’s the beauty of it.
Patrick Moorhead: We own this show and just by the outreach of people’s reaction, they kind of like a little lifestyle stuff mixed with tech.
Daniel Newman: Yeah, I think so. I think they want to get to know you. I think, what do you always say? Pat is not a robot. I mean you are a little robotic. You really don’t open up to people-
Patrick Moorhead: See? Adam Dixon is expecting to see me to bench 400 someday. We will see.
Daniel Newman: I don’t think so, Adam. Adam, I will-
Patrick Moorhead: I did actually in college bench, I think it was 405 for one. That was with a bench shirt, that was with really horrible form and it was with one rep. So-
Daniel Newman: Dude, that doesn’t matter. If you ever did 400, I mean I feel like I’m a pretty strong guy, I never got to 400. That’s a remarkably strong push.
Patrick Moorhead: You could pop one. I mean if you’re doing 315 for five with multiple sets, I just can’t imagine you not being able, with a bench shirt, being able to do 405-
Daniel Newman: Maybe, we might get there. Actually, I really pride myself on form and at this point, dude, we’re so old, I’m going to do that, the bar would rip my throat out. Not even worth trying.
Patrick Moorhead: I have, by the way, I still have a hernia because of the benching that I did back when I was in my 20s.
Daniel Newman: Well, be careful with that. So we got a great show. We got six topics. We’re going to talk about them for probably a little longer than five minutes each, but that’s the ethos of the show, in case anybody out there forgot where the heck did The Six Five name come from? We’re going to talk about the Arm and Qualcomm lawsuit, we’re going to talk about a few little updates from NVIDIA this week. We’re going to talk about what we think is going to happen to the chip makers under the Trump administration. Google made some improvements to its Gemini products. Micron delivered its Q1 earnings. This was a big moment a lot of people were waiting on. And then we’re going to bring up a question with the launch of Agentforce 2.0 and comments made this week by CEO of Microsoft, Satya Nadella, are we racing towards the end of SaaS as we know it? It’s a great set of topics.
Now for everybody out there, remember this show is for information and entertainment purposes only. And while we are going to be talking about things that might impact stocks or prices of stocks, just note that it’s not investment advice. Don’t take anything we say and do anything in the markets because of what we are saying. Just because we have great ideas and we happen to know a lot about what’s going on doesn’t make it good financial advice. By the way, did I just say that? We know a lot about what’s going on? Do we know a lot about what’s going on, Moorhead?
Patrick Moorhead: I think we do. I mean we can talk about 70%. I got a briefing from a chip company yesterday on the juiciest of information that I just want to spill all over this channel.
Daniel Newman: Yep, don’t do it.
Patrick Moorhead: But I won’t.
Daniel Newman: Don’t do it. Don’t do it. Yeah, I’ve got some good stuff too. It just knocks around in my head. Rents space in my brain. All right, buddy. Listen, it’s been a big week. I know we’re heading into the holidays and for many people, you’re about to take off, but up in the great northeast, a court case began this week. It was Arm and Qualcomm. A lot of attention on this one, Pat. What is going on with the Arm-Qualcomm lawsuit?
Patrick Moorhead: Yeah, so you have Arm, an absolute intellectual property powerhouse. Stock is just absolutely flying since they got back on the market. You have Qualcomm, also an intellectual property powerhouse, but they also are a designer and seller of multiple chips out there. And this comes down to the Nuvia acquisition and the intellectual property around that and the price that both companies believe that they deserve to either buy it for or charge. And it comes down to you’re going to have terms called an ALA, which is an architectural license agreement, and then you have a TLA, which is a technology license agreement. And what I’m going to do is try to give both sides of the argument here. So Arm is essentially saying that Qualcomm violated Nuvia’s ALA and are integrating Nuvia’s technology into its chips without getting Arm’s approval. And it wanted Qualcomm to destroy all products that have that. Arm is also saying that, essentially this is a fact, the Nuvia ALA was at a higher royalty rate compared to Qualcomm’s current architecture license agreement and is improperly applying it to its Nuvia designs. And essentially, and this is one that is getting a lot of contention out there, Arm is saying that essentially, as ownership of the derivative designs that come off of an ALA, and that’s getting a lot of people kind of talking about that.
And it’s all about money. And Qualcomm is coming in saying, “Hey, we’re using the ALA that we have,” which is lower price, which I think goes out there until 2028, extends to Nuvia post acquisition and therefore it didn’t need a new license from Arm. And it’s also saying that, “Hey, these are custom cores that we did, which is distinct from Arm intellectual property. It’s our intellectual property,” and is saying that, “Hey, micro architecture is different from architecture of the cores itself.” And instruction sets are essentially the language that software speak. You got X86, you’ve got RISC, you’ve got MIPS, and you have Arm. And Qualcomm is saying that Arm is essentially using it to shake it down under a TLA structure, which is a lot more expensive than an ALA. So TLA is about 5%, ALA is about 1%. So, yeah, it’s in the jury right now. Gosh, what a short-
Daniel Newman: So short.
Patrick Moorhead: It was like a week-
Daniel Newman: Three days or something.
Patrick Moorhead: So question, did Qualcomm and Nuvia breach the Nuvia ALA? Are Qualcomm’s products licensed under its existing ALA with Arm or did they need a separate agreement under the TLA? By the way, both companies believe that they have each other exactly where they want. I’ve never seen… Well, no, I guess everybody digs in if they’re going to go to trial. I had expected a settlement here, but we should, in the next two weeks if not today, have a settlement.
Daniel Newman: So what’s your prognostication? I mean-
Patrick Moorhead: Dan, I take the shot every single time. This one is so, so hard for me. I think the biggest thing I think through, if I’m understanding this correctly, is the fact that Arm would actually own a derivative product that somebody had an architectural license for. Essentially, if this is the same type of contract it has with Apple, Arm actually owns the bionic cores. Or maybe I’m just confusing it in that that’s actually Arm says it’s TLA and it owns it. So, I just don’t know, Dan. I just don’t know. I’m not even going to take the shot on this one.
Daniel Newman: Yeah, it’s really hard to say. I’ve struggled. First of all, anybody that’s been through any meaningful litigation or legal process knows that it can be super unpredictable. There’s a reason that Apple settled on the doorstep heading into the last day with the Qualcomm deal. It wasn’t just because they were some level of certainty they were going to lose, whatever that outcome could be, there’s a greater amount of predictability in terms of settling and moving forward. Especially they need to work together. And I mean that’s one of the cases here, is there any circumstance in which these two companies don’t need each other? I mean it’s not like if the deal goes south that Qualcomm can just run and do this with someone else. I mean could they make a pivot to RISC-V in the future? I mean sure, but that’s a multi, multi-year process, and it can’t. And is there a situation in which Arm is bettering its shareholders or its business by not having a great relationship with Qualcomm? I don’t see that either.
So, maybe less about what each party wants. And both of us have had the chance to talk to both parties and both feel they have a great case. Both feel that they… And of course, I don’t know, I’ve never gone into a situation where two major companies are litigating something like this and they both don’t feel like they’re in the right. I have never had it happen. I’m not saying it hasn’t, but in the end, I think we know Arm’s direction is about being able to increase its royalties and especially expand when it’s adding more value. That’s a big part of what it’s trying to do. It basically is looking at the fact that this was a company, Nuvia was making server chips, or that was the idea of it. And now a lot of that technology ended up being used in PC technology that Qualcomm is doing and I think they want more proverbial dollars per device. I mean that’s what would be the outcome for them. I mean Qualcomm basically is saying, “Look, we’ve been developing under Arm forever. What’s to say what was being developed is part of the one agreement versus what was being developed under the other agreement?” And I mean that’s all speculative as well I think. And then the question is whether they used 1% or 90% of the IP, is there any level of which using any of it is acceptable? I mean I think you and I are both mature enough and grown up enough to say we’re not lawyers, but what I would say is the unpredictability of this whole thing is really substantial. I think it’ll settle. I just do. I think in the end, both parties are going to-
Patrick Moorhead: This is at the jury. So you think that they’re going to settle before the jury comes back maybe today?
Daniel Newman: I think there’s a possibility. This is a bit of a bold call, but it’s the predictability thing. I mean maybe not, maybe not. I mean if the jury does come back with something, because like I said, if one side gets a very strong ruling, why would they want to come to any compromise?
Patrick Moorhead: Well that’s why I’m asking. Literally it’s with the jury right now.
Daniel Newman: Yeah, I mean isn’t that kind of what happened with the Apple case?
Patrick Moorhead: One day. First day of testimony, Apple pulled the plug and realized that Qualcomm literally had the smoking gun. And I think they also realized that there was no way that Intel was going to come in and support them for 5G and we better become friends with Qualcomm now.
Daniel Newman: God, I don’t know, man. I’m going to take off my Esquire hat and I’m going to kind of go with you about calling the shot. I just have to imagine there’s some intense conversations going on. I just do. So much risk in just letting the cards go. I mean alternatively, you let it fall and then there’s a multi-step appeal process and that’ll take a whole bunch of time too, but it’s just-
Patrick Moorhead: Good point. Good point.
Daniel Newman: These companies need each other. That’s why I really don’t understand why they can’t… I do understand they’re both trying to accomplish, I just don’t know in the end that they’re both not creating a lot of risk for shareholders, but that’s what happens, Pat. You and I know. When you really feel you got the right side of the case, sometimes the desire to see it through is bigger than the desire to try to find a common ground. So, we’ll keep an eye on this one. It’s always fun to play the part, but we’ll see how quick it comes back. And by the way, if it comes back super quickly, that’s usually never a good thing for one party either.
Patrick Moorhead: Yeah, maybe we move to the next-
Daniel Newman: Yeah. Let’s keep going.
Patrick Moorhead: … the Six Fifteen show.
Daniel Newman: Well this was the big topic. I mean this is one of the big ones. This next one will be a little bit quicker. Yeah, let’s pop on. So it’s funny, maybe as a bit of background. I don’t know if a lot of people realize this. So we had this crazy market run up over six months and guess what stock hasn’t really gone up at all. In fact it’s down over the last six months?
Patrick Moorhead: Well, AMD.
Daniel Newman: Well, NVIDIA.
Patrick Moorhead: Yeah.
Daniel Newman: NVIDIA. So NVIDIA had this meteoric rise and then they had this split and then they rose and I mean the company became the most valuable in the world and this and that. I mean it’s still over $3 trillion. But interestingly enough, as we’ve had this melt up, this big bubble of assets, Far Coin hits a billion dollars in market cap and the HAWKTUAH coin. But I’m saying the overall market, the broadening out, the cubit company that used to be a beverage company, it hit 1.56 billion in market cap, INQ, it went to $43. I mean Inquantum, on less than $100 million of revenue. Not a bad company, actually a very interesting company. But having said that, we’ve seen this frothiness in the market. Well NVIDIA, who’s actually grown into this really low multiple, has kind of gone quiet. And I think right now it’s an interesting moment it to kind of say, what is NVIDIA up to? And we all know Blackwell is ramping, but what else is NVIDIA doing? And that’s a really interesting thing.
So we have CES coming up and it seems with some of the events and some of the stuff that NVIDIA is talking about publicly about CES that there might be some interesting news coming. But NVIDIA also pulled something out of the oven this week. It was literally Jensen doing his thing. Pat, you and I both talk a lot on this show about AI and just edge computing as a whole. Well one of the big opportunities, when you think about where we’re going to head, whether it’s small robots in factories or humanoid robots, is going to be building these powerful AI computing platforms for the edge. And so there’s been a product from NVIDIA called Jetson Orin and they released a new one that’s about 80 times more powerful now. It’s a $250 edge device, comes in eight gig, four gig versions, 1024 core, 32 tensors, just kind of running down the specs. And basically it’s used for all kinds of different edge robotics use cases.
This is a big expansion opportunity. What I’ve been saying over the last several months is NVIDIA needs to start talking about what else, what are the other ways it’s going to make money? It’s not that the data center stuff’s not amazing, it’s just, are we going to see robots? Are we going to see more energy go back into automotive? Are we going to see the next wave of personal computing, gaming, et cetera from NVIDIA? Where does the next big moat come from? And of course all this stuff really ties together. So this announcement was incremental, but when you start looking at the volume of robot, the volume of edge AI use cases, it’s another really big opportunity for revenue stream. So that came out of the oven, literally. That’s how Jensen presented it. He pulled it out of his oven and walked it out and put it on the table, this $250 device.
And really quickly, another announcement, which I think is another one from strange bedfellows, Pat, was Apple and NVIDIA announced this week something which they’re calling ReDrafter was a collaboration between Apple and NVIDIA and using a novel technique for accelerating text generation in LLMs. What they’ve basically done is worked together to make an optimized, something that’s going to be done on NVIDIA hardware using beam search and dynamic tree attention. These are kind of technical terms, but it’s really about multiple text sequences, which is beam search. So obviously every time you put a query in, there’s endless number of options of the text that can be created. Speeding that up speeds up inference, improves performance, and then obviously reducing the redundancies. That’s the dynamic tree, is that not having redundant overlaps in those expected sequences, which is the text that it is used to generate.
So basically, they’ve integrated this into NVIDIA’s tensor framework and effectively what they’ve done is make this run 2.7 times faster in generating tokens versus the way it’s done today. Probably what’s most interesting though about this whole thing to me, Pat, is just Apple has been almost obstinate about doing anything with NVIDIA. They’ve stayed away from NVIDIA, any public kind of notoriety about utilization of NVIDIA hardware. They partnered with Google to do all the work they’re planning on doing with Apple intelligence on the hardware side. And they’ve recently announced, or at least, I don’t know if it’s publicly announced by Apple, I think it was just a rumor drop, but was that Broadcom is going to be helping Apple develop its next generation AI chip. So kind of a big win. Another thing is NVIDIA has perpetually felt it’s under appreciated for what it does in inference. And so these kinds of technologies, and of course a partnership with Apple probably should be seen as a positive catalyst.
Patrick Moorhead: So, Jetson is 10 years old and a lot of people have forgotten this and there’s been a lot of market thesis about when is the edge going to take off in a monumental way? And I think that NVIDIA, over the past two quarters, even on the earnings announcements, have been dedicating a portion of the time to robotics. You accurately said that it is one of the next big things that could hit, automotive could be another one, but gosh, Qualcomm is just giving it some heavy-duty competition there and they need to move this forward. So I think this is part of the reminding people that there’s a growth. We don’t just do data center, because there will be a time when that percentage growth goes down and there might be even a time that quarter on quarter, the actual number goes down. And this is just they’re playing the long game here and investing on what is going to be the next big thing. I think this is pretty aligned with what’s happening in China with robots. And by the way, China has about 100X more robots than we do here in the United States. It’s aligned with what some of the forward-looking thinkers, like Elon Musk are driving forward. Elon will probably use his own chip, probably a derivative off of Dojo, but we will see on that.
One thing on this Apple, NVIDIA thing, Apple did announce at Reinvent that essentially they had already gone big with AWS and they flashed, they’re testing out Trainium 2, they’re using Graviton, and they’re using multiple services from AWS. So this Google, Apple thing might just be on the training side, but one thing, while we’re here, there was also an NVIDIA announcement. I mean NVIDIA continues to invest to create essentially its own hyperscaler. Some of them have been by proxy, kind of a tier two CSP, look at the investments in CoreWeave and other companies. You look at AMD’s investment in Vulture. So, the market is aligning, NVIDIA is reacting to these companies standing up their own ASICs. So really, really cool stuff.
Daniel Newman: Yeah, absolutely, Pat. And yeah, it’s interesting to kind of think the partnership on the training side, I mean ultimately it delivers better inference, but Apple’s got a lot of work to do to build these models that are going to be compelling. The early readout on intelligence is pretty meh.
Patrick Moorhead: Interesting though, Dan, they’ve actually gotten accolades on the research but they can’t seem to convert that into meeting the expectation of what Apple intelligence is supposed to be.
Daniel Newman: Yeah, I can’t actually figure it out, Pat, and this is kind of an interesting segue to the next topic, but I just can’t figure out, Apple’s almost to 4 trillion. Smartphone shipments aren’t up, their AI stuff isn’t particularly impressive so far. I mean their sales are like multi years ago right now on iPhone. I don’t understand it. I don’t get it. It’s a good company. Anyways, all right, so you had a chance, I think you went on TV Monday, you were better dressed than you were today when you did that and you went on to talk about what should people expect for chip makers under Trump? There’s been a ton of questions, Pat, is he going to be restrictive? Is he going to be accommodating? Where did you land? What do you have to say about that? What should people think and expect?
Patrick Moorhead: Yeah, so first and foremost, people need to keep in mind that Trump is always focused on negotiating the best deal he possibly can with no absolute outcomes. And he wrote the Art of the Deal right back in the 80s when I was actually in college and that really determines and shows what this guy does. We can also learn a lot from Trump administration 1.0 where he made a lot of comments, he went in and negotiated things like NATO, things like tariffs, and he put these big numbers up, there was a reaction, there was a negotiation, and then things went back to normal. The other thing I think is important for people to keep an eye on is related to chip makers. I think it’s really more about Taiwan over China, particularly when you look at TSMC’s role and how I think the Trump administration might react to that. I think at the end of the day, Trump is going to want TSMC to increase its US-based manufacturing investments. I do think it will ultimately receive the money it was promised, and I think this could prevent tariffs and reduce the impacts in companies like NVIDIA, Qualcomm, AMD, and Intel. And if the tariffs on TSMC come in, NVIDIA, AMD, Qualcomm, and even Intel and some of their products might have to raise prices, which could lead to increased costs for servers, PCs, and smartphone makers, which could ultimately be passed on to end users, which could potentially reduce demand because there’s no way there could be a 90-day pivot. It’s not like you’re making cardboard. It takes four to five years to build up the capability to do these advanced shifts.
I do think NVIDIA has resilience here, maybe less affected by tariffs because of its major customers, the hyperscalers. What are they going to do, if NVIDIA raises prices? Not buy them? I do not think that this is the case. I don’t think this will happen in the next 12 months potentially if this thing cools. And in year two, year three could be a huge issue for NVIDIA. I don’t want to ignore China though. A huge role in chip making, typically the less advanced chips, the 30 cent PMICs that keep $100,000 a car from being shipped, right? We saw this during the pandemic. Also, while we’re on China, we can never forget China’s ability its negotiating that it has, not necessarily on chips, but with manufacturing. Imagine, so it takes Foxconn a million workers to do a wave of Apple products and they could slow roll it. They could do some wackadoodle reverse tariff on that. And that will have colossal impacts on companies like Apple. Companies have done a really good job with diversifying their supply chain as Dell. Dell was one of the first ones in Trump 1.O, start heavily diversifying outside of China and even out of Taiwan. Final assembly in Mexico, Eastern Europe, Malaysia, India, places like this. So, I think it’s very important for every investor to understand, what are the supply chain diversification strategies that they have going in and doing a what if?
Daniel Newman: Yeah, I mean look, this question’s been asked to me a thousand times now and first of all, going back to our comments on Arm and Qualcomm, look, none of us know the future. We can’t predict what might happen, geopolitical, macroeconomic, there’s so many different variables that could weigh on the decision making here. I said this and I’ve said this and I keep saying this as like, Trump ran on strengthening the economy and Trump’s metrics for the economy are really twofold. His biggest is going to be the stock market, just because it’s the most obvious. It’s what gets the most news cycles. And of course, we know that he likes to be in the news and he likes to be positively reflected in the news. And the second is going to be the broadening out, making sure people feel wealthier and more prosperous. And that’s kind of the deflationary work that’s trying to be done, bringing down the costs of everyday stuff. He wants to bring down the cost of gas. He wants to say groceries are less expensive. By the way, these are hard problems because it’s not like you can just flip a switch and be like, “Oh, we’re here and we’re going to lower all this stuff.” I mean we’re seeing some of what’s going on with trying to reduce the government spending. We know Musk is playing a big part in that.
And I realize this all doesn’t have directly to do with chips, but I’m going to get back to the chips in just a moment. The overall situation with chips is kind of multifold, Pat, when they did the Chips Act, you and I kind of really I think latched onto this kind of trifecta of what was trying to be accomplished, right? Supply chain resiliency, technology leadership, and national security. This is why we needed to bring more chip making back home. We have our biggest trading partner, of course, and we work with is China, but at the same time there’s tons of complexity in the relationship with China. China wants to be the world’s leader in AI chips and AI technology and AI utilization. US has the most advanced AI design. We make the most capable chips that would be an enabler. Then there’s companies like ASML that make the machines that allow for the most advanced chips to be made. And then there’s, of course the relationship between China and Taiwan that’s extremely complicated. And then you’ve got the tariff discussion here is, what are we going to do there and how are we going to implement and utilize tariffs? Not just with China, with every country in the world to try to create a more symmetrical relationship and trading partners around the world.
So then chip makers have the challenge of what can they sell into China? Right now a lot of things are being gated and limited, so can they sell their most advanced data center chips? And the answer in most cases is no. Can you sell your most advanced equipment? No. But companies like Qualcomm have 30 plus percent of revenue in China. You have companies like Intel and AMD that have low double digit percent. NVIDIA, of course, has a big market there, and I think they’re kind of buoyed by the fact that the rest of the world is buying so much of this stuff that they don’t need that market right now. But at the same time, we also know that stuff is being shipped into other markets that is ending up in China. I think yesterday I saw a note that China’s asking NVIDIA to investigate itself. That’s how we do things here in the US. Nancy sent Jensen a note and said, that was my joke on Twitter, “Thanks for the calls. I’m doing great. Meanwhile, can you figure out why all your GPUs are ending up in China?”
And you’ve talked about this on this show, the cigarette cartons, right? I mean there’s a lot of ways, it goes through Singapore, it goes through Vietnam, it goes through the Middle East, the stuff ends up there. So there’s all these different factors as to how things end up. But in the long run, I think we want to keep our big tech companies successful. Of course, there’s these calls for breakups. I just see anything that really disrupts the Mag Seven is going to meaningfully disrupt the market. These companies, 33% of the SMP Plus is just seven companies right now. So if we take down any of these businesses and really harm our semis, harm our leading edge technology, and harm the growth of the US, it’s going to harm GDP and it’s going to harm the economy. So he’s got to walk a really tight rope to figure out how to keep this all in check. So, Pat, that’s it. That’s my entire take on what’s going to happen with chips. I think he wants to keep the economy strong, but he is going to walk a tightrope for the next four years because the geopolitical macro complexities versus growing the US economy is always going to be a balance.
All right, let’s hit the next topic. This one will be a little bit shorter I think, but a big one nonetheless. Google’s had its stops and starts, as it’s pertained to LLMs and Gemini, the first version and then they had a bunch of different releases and then they had some people call out that some of the demos weren’t… This time around, at Gemini 2.0 update, I think they did better. I think they were more cautious, they’ve been more careful, and the results so far have been really good. And this is an improvement that’s going to work on your desktop, it’s going to work on your phone. And I think so far we’ve seen some pretty impressive changes that have come with it. First of all, Pat, one of the things that everybody’s up against right now is multimodal. We’re seeing the interest and excitement enthusiasm with OpenAI and Sora. Well, Google is heading down that path with video models, of course with Gemini too, being able to handle more native image processing, audio processing, being able to do process conversion. I mean we are seeing some of the stuff Google is doing with NotebookLM as well. They’re starting to integrate all this stuff. Let’s be candid, I’m starting to see, Pat, some of these notes that Google is going to pull away and maybe OpenAI is in danger. And why is this? It’s because Google has the best video training set on the planet with YouTube. Not to say that OpenAI didn’t train its Sora model with YouTube, but they weren’t supposed to. So that’s going to be a really interesting thing there.
But I see that they’re going to be able to put these things together and be able to really drive some growth and some more positive market sentiment about Google’s play, because Google has been the third or fourth name for a while. I mean it just hasn’t been the top name in LLMs or in AI, despite its AI prowess that I often talk about with the business and the silicon layer. The other thing is we’re starting to see better integration. And this is one, again, kind of what I was just alluding to, but the integration of Google and all the other apps, all the other data, all of its other ecosystem with what it’s trying to do with LLMs is starting to come together here. So we’re seeing it in their workspace, we’re seeing it, which includes there’s documents and slides and meet, and then of course, Pat, and I’ll kind of turn it over here to you, but the benchmarks, everything just looks better. So there was a number of generation to generation benchmarks and from what I can see between one and then 1.5 and then two is that the performance of the Gemini 2.0 is meaningful and puts it much more parity with some of the other models from OpenAI and Anthropic. And so a lot of improvement in a short period of time, and I expect Google to continue to rise in this space.
Patrick Moorhead: Yeah. Google invented generative AI. They had the seminal research paper on it and somehow, they tripped three times before they brought something out that was relevant and people didn’t make fun of. I mean Bard 1.0, the demo was so bad it was removed, and you cannot find any evidence of that out there. Bard 2.0 was really horrible and it would give you responses and people said there was a lot of political motivations that went into that and they did a Mia Culpa number two, and then they went in and did Google Gemini 1.0 that had (censored) on there.
Daniel Newman: That was awkward.
Patrick Moorhead: I mean give me a break, I mean historically inaccurate stuff and then everybody made fun of them. And my posit was that this really impacted how people looked at not only the developers, all of the developers, could they really trust Google to have a service that would give them relevant advice? And I think they went about six months, nine months without doing something that everybody made fun of. And what really struck me was, again, I didn’t run these market share numbers, it’s from open router AI, but it said that market share amongst developers went from 5% in September to 50% market share last week. And by the way, let’s just say it’s going from five to 25%. That is absolutely monumental. And I think we are starting to see the shift in not only the quality, but the cost and the accuracy of the output that comes out there. Let’s not forget that Sergey, one of the co-founders, essentially came in and started working full time, coming back and motivating troops. And I love, Dan, two years ago we said, “This is going to be a marathon, not a sprint.” I’ve seen some people say that this is where Google makes their move and moves it forward. I’m not there. I think we’re going to see back and forth and competition. We also can’t forget that Microsoft is essentially the leader in all productivity data. It has a very good toehold into enterprise application data. Its Windows servers on-prem hold a tremendous amount of enterprise information. And I don’t see how Google overcomes that at this point. On the consumer side, we’ll see. I’m super impressed even doing Google searches and what these little previews kick out. It’s actually good.
Daniel Newman: It’s super sticky because people are already there.
Patrick Moorhead: I find myself on simple queries doing a little bit more on Google versus starting with Perplexity. So, I’m n equals one and probably, I’m actually signed up for the ChatGPT Pro, right? The 200 bucks a month that I’m trying out. I don’t consider myself a normal user, but at a minimum, the winds are pushing in the Google direction here.
Daniel Newman: Yeah. No, you hit it on the head. I think a lot of progress has been made. I mean, I don’t know about you. I’m getting a ton of media calls about the possible breakup and the spin of Chrome and what’s going to happen with Google and generative AI is going to completely upend search. So the question is, can Google maintain its leadership? And I mean I think the progress they’ve made, being able to put generative inside of search, it’s powerful. I mean we certainly didn’t see Bing’s ChatGPT integration move market share, it just didn’t happen. So they have a good moat, but we have seen how fast ChatGPT has grown. All right, Pat, so this is your last lead off. Micron. I mean everybody was like, “HBM to the moon.” What happened?
Patrick Moorhead: Well, stocks down 18% in a week, so something really horrible must have happened. And net net, they hit revenue, they beat on EPS, and they absolutely had a train wreck for their guide, even though Enterprise, sorry, HBM is actually to the moon. And I think what it shows is you’ve got to have a balanced portfolio of wins here. You can’t just have one win and then have a train wreck everywhere else. I always like to separate this into market driven versus self-inflicted wounds. And I think this is kind of a market driven, given that the PC market, the smartphone market is down, even though the data center number and market, their data center number was up 400% and it’s 50% revenue of the entire company. That’s a combination of HBM and of SSD. So, yeah, people got spooked and we’ve seen this characterization in the market or this reaction in the market when somebody stubs their toe. Two quarters ago, Dell margins on AI servers. We haven’t exactly seen much of anything. Like you said earlier in the show on NVIDIA, I think AMD is down for the year. So we’re having this leveling off.
On the flip side, you’ve got Broadcom, that’s a trillion dollar company based on the back of primarily its XPU. You’ve got Marvell that’s flying here. I think the company, if I have a critique of the company, company needs to talk more. They need to talk more consistently out there and they need to even talk a lot more outside of their earnings. I’ve really seen a ramp down in communications from the company in the last year and I don’t know if that’s, “Hey, we’re going to talk about something when we think we have something great,” but I think when the company doesn’t talk a whole lot out there, I think that people think that the company might be hiding something or there might be bad news and I’d like to see the company doing what it had done maybe the prior two years.
Daniel Newman: Yeah. All right. So, what are we talking about again? No, I’m kidding. So, I had a chance, I joined CNBC Squawk Asia on this one and I did definitely dig into it. You hit some of the really important points, but they went over 50% of their revenue from data center this quarter. That is a massive pivot. Now we’re seeing this playbook a little bit. It’s taking different time cycles, but like Marvell, you talked about Broadcom, but Broadcom made a really hard pivot this year in its business to these AI-based, both networking and XPU chips that has created a lot of value. Marvell made the pivot to AI-driven revenue and data center to get out of sort of its comms and network, some of its traditional core businesses and was able to really overcome it.
Now, the question is for Micron is I think everyone appreciates the HBM market. They understand it. There’s three players; Samsung, SK, and Micron. All three of them are working very fast to try to win this market. And Micron has gotten some validations for NVIDIA, which is really important in terms of growth. But having said that, I mean look, they missed their guide by a billion while still crushing HBM. So this is the bifurcation that a lot of people are struggling with. Everyone’s like, “Oh my God, it’s terrible.” No, it’s not terrible. Literally, Micron is having the same problem that every semi company has had that was outside of pure data center business. And that’s burning off inventory, dealing with pricing pressures, and the fact that the PC, I’m going to say the quiet part out loud here, Pat, the AI PC cycle has been a bust so far. It’s not a bust forever, it’s just a bust so far.
Patrick Moorhead: A total bust, man. I mean you say you’re going to deliver software in June to the general public and you still have not delivered it and it’s December 20th and I’m looking at you, Microsoft, right?
Daniel Newman: Yeah. And it’s fair. And that’s a fair thing. You and I made calls about the… I’ll take my lumps. I made calls that the second half was going to see more acceleration. I saw recent numbers that actually shipments are down on overall on PC numbers. And now you’ve got more silicon diversity, you got more choices, meaning that everyone’s unit volumes are going to take a bit of a hit there. And so what I’m saying is Micron, to have made the pivot it’s made, to be profitable, to do it all on the back of data center while basically their core business, the D-RAM business for PCs and smartphones is bleh, is actually a pretty good pivot. So the AI trade is still intact, but meanwhile the PC and smartphone business has got to get going again. That’s why I kind of look back at my comment about Apple. It’s like, what the heck? They’ve had their new phone, Apple intelligence, this, that, and the other thing, and we’re not seeing unit growth. So why is all this exuberance into Apple while PCs aren’t selling, and at the same time you see with the Micron numbers is it’s all more dependency, Marvell numbers, Broadcom numbers, Micron numbers, all dependency on this AI silicon.
Patrick Moorhead: Maybe Apple is a very safe bet.
Daniel Newman: I think so.
Patrick Moorhead: I’d be super interested to see where the trades come from. I think there’s a lot of money coming overseas to the United States and where are you going to put it that’s safe?
Daniel Newman: I think it’s a… First of all, you look at their buybacks and the amount of money they’ve spent to lower their float count, I think it’s a great bet for investors. I just mean as a whole, it’s not a bet based on innovation. It’s certainly not a bet based on-
Patrick Moorhead: They’re more of like an Apple. Sorry, they’re more like an IBM trade.
Daniel Newman: Yeah, 30 years ago, right?
Patrick Moorhead: No, well, they’re not a growth. I mean IBM is not a growth stock at this point. They’re doing a lot of stuff right, but I’m just saying they’re a safe bet, right? You’re not going to lose your butt on it.
Daniel Newman: Well, and they’ve literally lowered their float in half by buying their own stock back, which is, I mean it’s one of those things like, I mean if you can, why not? I mean it’s not a bad thing.
Patrick Moorhead: Don’t forget the stumbles. I mean they got out of the automotive market. That’s one market they’re out of. They stumbled on Vision Pro, possibly the worst product they’ve ever brought and arguably top five worst products they ever brought out.
Daniel Newman: Absolutely. So listen, we’ve got one more topic, Pat, and let’s end on a provocative note. There was kind of a big week this week right before the holiday. Salesforce brought together a lot of press media, a handful of analysts. I know we were invited. I just couldn’t get another trip out of me. My legs were done. But I did watch from afar, our team did, and I’m sure your team did as well as Agentforce 2.0 was launched. And then Satya Nadella also went on the record this week kind of making some comments about CRUD databases being used to build software and are we heading towards the end of SaaS? Which is something I think a really thoughtful, provocative analyst has been saying for some time.
Patrick Moorhead: Said it in April.
Daniel Newman: Yeah, I wasn’t talking about you. But anyways.
Patrick Moorhead: It’s always about you, Dan.
Daniel Newman: Well, I mean it’s not about me, but well, it might be about me. But the fact is that we have hit this seminal moment, Pat. We are at this massive pivot right now to agents. It’s just happening. And so we saw this major move that Marc Benioff made, you saw all of a sudden he kind of went all in. First of all, very interestingly, he went all in on this attack on Microsoft and his whole attack vector there is that this kind of Copilot everywhere thing is creating a lot of data risk. His thing is that, well, Salesforce is trusted, all the data’s in compliance, and there is no risk. I think there’s some assessment to be done there and our team’s actually doing some of that, and I’ll have to come back to a little bit more about that right now. But then the second question that’s really, are we coming to the end of SaaS as we know it? Are most of these applications that we’re using going to become deprecated databases? Is this where most of the AI is going to be consumed? Who are going to be the winners and losers in this case? And I think it’s a really interesting case. Kind of going back to what we just talked about with Gemini, Pat, and Google is, does the biggest install database, sorry, install user base end up winning in the long term because they already have the customers on the platform? And I think that’s the bet that Salesforce is making.
Look, we’re going to make a big pivot and we use Salesforce. And what I’m saying is moving to an agent-based platform that can have pre-built workflows for use cases that are high volume, that can be built right into the existing platform to lower costs, increase productivity, increase efficiency, can this be brought to scale to help? And can it be done using pretty simple reasoning, RAG techniques? And then can it be affordably implemented into the existing platform? So, Benioff went on to really talk about, I think having a thousand sales in the last quarter, really strong demand. They did go on and actually start doing customer stories, which I think is really important. And I think they’re talking about the fact that they really believe that they are the leader right now in agentic AI. I will say, Pat, kind of a couple of quick things on this one, I think there’s going to be two sort of major motions and there’s going to be a consolidation. The first major motion is companies have spent a lot of time, energy, and money on what platform they’re going to run their business on, whether it’s NetSuite, Salesforce, Dynamics, SAP, all these different platforms. Change is going to be hard here. So, I do think every one of these companies has a chance to sell agentic and generative AI capabilities right on top of their existing platform.
The second thing is going to be is, how is this monetized, Pat? Is it all about a sticky factor? Meaning adding agentic and AI capabilities in to keep customers on the platform and keep them over without really incrementally charging, which by the way, Wall Street’s going to hate? Or is this about a new incremental revenue stream for these customers that’s going to be in addition to the money that they’re spending? Second layer is going to be about simplicity and ease of use is, how much do companies need to know? If you’re a really, really large enterprise, you can put a ton of resources towards AI processes, workflows, automations, agentic. Most companies though, these platforms are where they’re looking to consume. They want to actually have a SaaS-based, SaaS-like experience. They want to have their systems of record and they want to be able to put AI on top of it to build revenue related workflows, operations workflows, projects, supply chain workflows, all these workflows. Again, and the agent, the idea is having tens or hundreds or even thousands of application-specific workers. Think of them like an ASIC, they’re like an ASIC for our chip friends out there for a specific use. And you can have thousands of these deployed for specific use cases, and then knowledge workers with deep expertise can focus on solving harder problems. This has always been the story of automation. So, long story-
Patrick Moorhead: Yeah. I know you’ve got to go to a meeting, but I want my time. If you-
Daniel Newman: You’re going to get your time, don’t worry.
Patrick Moorhead: Okay.
Daniel Newman: I’m just going to hang up. I’m going to walk out of the room. And you can just go ahead and finish the show.
Patrick Moorhead: So I think this is going to be one of the biggest conversations probably for the next two years in the enterprise. And I kind of put it up here, Daniel, with the death of the mainframe, the death of on premises infrastructure, and the death of PCs. Okay? Nothing ever dies in tech. Well, a little bit does, consolidation plays, right? We don’t have MP3 players, they got integrated into our smartphones. But very simply, the thesis says, I have a database. I put an agent around it. I give it the right authentication and identity management. And I can just query it. And you’re going to have multiple types of data in one place, either logically or physically. That can be CRM, ERP, PLM, HRM, HCM, things like that. So by the way, I love the thesis. I have talked to no less than 50 CIOs, CDOs, and systems integrators, and here is what they’re telling me. What they’re telling me is this data management problem is almost insurmountable in their mind.
Some examples they gave me said, “Hey, even if you only have one instance consolidation of SAP, the way the data is laid out in places like HANA, it is very difficult to get at that data. And then think of the identity one, we always like to use this example which says, I have a spreadsheet of how much the senior management gets paid. Not the public stuff on the case, but the non-public stuff. How do you get authentication across data and be able to query it without doing that? That is a hard thing. I asked a CIO of a technology company, how many years do you think it’ll take to pull all of the important data and put it in one place? He’s like five to six years probably. So, I love the thesis. It makes so much sense just on the practicality and the years it might take to get there-
Daniel Newman: Can AI, Pat, solve some of the data management?
Patrick Moorhead: That’s where I was going, man. Like with AWS on Q Developer, mainframe migration going from COBOL to JavaScript. But the most impressive to me was on VMware, which it’s not just moving code, right? It’s NSX environments, it’s the 800 switches that you have in VMware and AWS Q Developer can actually, and you and I grilled the VP and GM of this, not grill, but asked some very hard questions on the reality of this. And while he said, “It’s not single push button yet, but man, we see line of sight to be able to do that.” And it seems to me, and isn’t it weird, Dan, that we don’t have this AI data management cleanup stuff with agentic AI that knows the rules, that knows the corner cases? That has to be an opportunity. And wouldn’t you expect a company like Databricks or Snowflake or a Cloudera or somebody to be able to do that? Short answer is yes. So, net net, I love the thesis of it. I think at the end of the day, you’re going to see a lot more agentic AI coming through the SaaS companies than we are homegrown. And if we do, it’s going to be at the very largest of companies with the budgets to work with GSIs to pull all this stuff together. Or the magic tool comes out, generative AI, that’s like, “Here’s a push button to clean up all this SAP mess. Here’s a push button to take all of your CRM data out of Salesforce and to be able to put Copilot around that or Google agent.” So, I love this topic. I love this topic. Yeah.
Daniel Newman: Yeah, it’s a great one, Pat. And I think the companies you’ve mentioned, we’ve mentioned, I mean there’s a number of different winners potentially in this. There’s winners in the SaaS layer. We talked about the Salesforce and Microsoft, the ServiceNow, SAP, Oracle, all have a good chance to win. Then there’s the infrastructure and platform players. You talked a little about the cloud, what gets built in the cloud as a platform and then gets deployed and what gets built and consumed in the ISV’s applications? And that’s going to be a big tug of war to where application, and by the way, utilization grows because the silicon story only continues, everybody, into the future if the consumption starts to go up a lot. And this is a big part of where that consumption happens. At, great show. I gave you your minutes. I gave you enough minutes there? You had enough? You were worried I was going to hang up on you. I would never do that.
Patrick Moorhead: Well, or not pay attention. Dan, your approval, you’re kind of like my dad. I need that approval and that…
Daniel Newman: I love you, buddy. I love everybody out there that is part of our community and our show. We thank you so much for being part of The Six Five. I don’t know if we’ll be back for the holiday. We’ll be actually, Pat and I, because we don’t see each other a lot, we’ll probably be together through the holiday. We’ll be out on the mountains maybe somewhere that there’s a chance that that’s going to happen. Hit that subscribe button, join us for all of our other coverage episodes. We may see you again this year. It may not be until next year. Don’t know for sure, but for us, for the show, for The Six Five, signing out today. Have a great one, everybody.
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.
