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:
- Salesforce Dreamforce: Clippy’s Revenge or AI DiWhy?
- Intel’s Crazy News Week, Including A Qualcomm Acquisition?
- TMobile TBones AT&T & Verizon w/ TPriority
- HPE Gets A BofA Upgrade
- iPhone 16 Sales – Are You Not Entertained?
- Microsoft & BlackRock Sitting in a Tree
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, everyone. Welcome back to another episode of The Six Five Podcast, Saturday Morning. Sorry, we’re a little bit late. I know you’ve probably been standing by, sitting by, waiting anxiously since yesterday at 9:00 AM, only for 23 and a half hours later for us to finally show up, which is appropriate, because episode 233 is where we’re at today. It’s so good to have the chance to sit down. Pat, it was good to see you this week. We were together for part of the week, and then you went off to be really important and famous up in the Great Northwest and now you’re back. How are you doing buddy?
Patrick Moorhead: Man, I’m doing great, doing really well. Four plus hours on a plane back from Seattle is never fun, but it is nice to not be able to have to do meetings and get some work done. But no, what a week. I’m two weeks into a seven-week travel. So, I’m motivated. I think for the most part, I went to bed around 8:00 every night. I was out on the West Coast, just a stay, got three workouts in too, which super important to me, but what a week, man.
Daniel Newman: Yeah, it was a great week. We hit San Francisco. We were in for Dreamforce, and then you went up for some secret undisclosed meetings in a bunker location up in the Great Northwest. Nobody could probably figure out who you’d be meeting with if you were in the Seattle area. So, we won’t tell anybody because we’re not going to spill the secrets, because that’s why you know everything that’s going on. Congratulations on your offer to buy Intel. I don’t think it’s going to go through, but now that you and Qualcomm are both bidding for it, we’ll see who gets the win. But no, we had a busy week of tech, Pat. We had some provocative conversations and statements coming out of Dreamforce. We’ll talk about that. Intel had a whirlwind week.
You and I started the week off chatting with CEO Pat Gelsinger, and the week continued to evolve. It ended with even more rumors and gossip. Is it total horse crap? We will break that down here today. We’ll also talk about T-Mobile’s Capital Markets Day. We’re going to talk a little bit about HPE getting a surprising and very, very positive update from one of the big banks. Apple iPhone, did they crap the bed with their new iPhone 16? Were people waiting around the corner, or did they have to make fake images like some people do when they have rallies? I’m not going to say who I’m talking about. I don’t know. This is not a political show, Patrick. Then finally, we’re going to talk about, like you said, Microsoft and BlackRock sitting in a tree. What are they doing up in that tree together?
So great show, a lot to talk about. Now remember, everybody, this show is for information and entertainment purposes only. So, while we will be talking about publicly traded companies, we will be inciting excitement and thrills, trends and lines. Don’t buy stocks because of anything that Pat or I say. Not ever, don’t do it. Please, please do not let that happen in anytime. All right, Pat. So, we start our week, got up early, headed to the West Coast. We were in downtown San Francisco. The streets had been swept. The gates were up. It was pretty clean. It was Dreamforce and 45,000 people converged on the city. Marc said some provocative things. He said that Microsoft Copilot is just Clippy. Was he right? What was your takeaways?
Patrick Moorhead: Yeah, so first and foremost, the city was clean. It’s always nice to have San Francisco at least four or five blocks safe and clean. Whether it’s Marc Benioff or Xi from China, they really did a good job. Now, I think my max walk was two blocks. I don’t know what was happening in the tender line, but I never go down there. Now, listen, we all knew what the news was on Monday before we even hopped on the plane because they did their big announcement on Friday. In tech, there’s always the next new huge thing. At least for Salesforce, it was agents, an offering called Agentforce. There’s a lot of forces in the Salesforce product portfolio, services portfolio, and this is literally the next new thing. It really positioned as what AI should be.
Essentially, agents is the transaction layer that gets stuff done. It reminded me… I mean it’s not the first agent to come out. Microsoft has agents, Google has agents. If I look at what ServiceNow is trying to do, particularly for the transaction layer, while they’re not necessarily calling them agents, it’s AI to get stuff done. As we’ve talked about so many times on the show, AI in the spirit of driving efficiency increased revenue and customer stickiness. I thought the demos were very compelling. One thing that I found very provocative is that Marc Benioff said, “Hey, typically, I’ve got this thing locked two weeks out,” and he said, “We were making changes up until the night before.” I was thinking through what could this possibly be? Well, there was a gigantic Microsoft event that preceded it, where they were talking about things like Copilot for sales, things like this. I have to say yes, Dan, because the shade that Marc was throwing at Microsoft and Copilot, I had never seen that before. I think in our press and analyst Q&A, he threw out expletives, maybe four, maybe five times.
Daniel Newman: They say you’re smart if you swear more.
Patrick Moorhead: I adopt that philosophy. I’m not saying I’m smarter than most people, but I do the same effing thing. Anyways, I mean you dropped two even on the lead in. Not using the words, but the shortened-
Daniel Newman: Insinuated.
Patrick Moorhead: Yeah, PG rated ones. But essentially, he talked about Microsoft Copilot being Clippy. There was also a slide up there, that I think it was time to deploy this gigantic number for Azure AI with one financial services company. So, yeah, I think it did affect it. My takeaway is that the success of Copilot is either slowing down Salesforce deals and/or it’s making a financial impact. Dan, I did a little digging on Copilot. In the last 18 months, and this comes right out of Microsoft, Copilot customers grew 60% quarter-over-quarter. The number of people who use Copilot daily at work doubled, and then out of their earnings call, 60% of the Fortune 500 use Copilot. Copilot customers increased more than 60% QOQ, and then I think more importantly, there’s 20,30 customer stories that talk about the impact of Copilot. These weren’t just across the Copilot for productivity and 365. This was Copilot for sales, for customer service, companies like Virgin, PG&E, Amgen, Air India, Cognizant, Vodafone, Honeywell, FNB, and also citations on the time it took to implement. Of course, Microsoft is going to put low implementation days, but 25 days for a specific client to roll it out. So, it’s great to see the competitive barbs going back and forth, and it’s pretty natural. Microsoft has three plays.
It has an Infrastructure AI play, it has a Dynamics 365 AI play, it has a Copilot that again goes across everything, but it has a productivity play, and then with its Copilot toolkit, you can create your own. I think this was the main point which Marc was trying to make, which is don’t DIY your AI. I think that he has a point on that it should be easier, should be a lot easier, particularly if you’re a Salesforce customer already, and you’ve got your data aligned. You’ve done the data magic inside of Data Cloud. So, I see his point, but it’s clear that Microsoft is putting pressure on what he is trying to accomplish. I think my final comment here is on simplicity. I really like the way that Salesforce not only talks and positions on simplicity, even talking about the benefit.
I’m an ex-product and product marketing person.
So, I’m really into value proposition templates, and Marc very clearly spelled out what are the challenges that his specific customers are having, the impact that that’s causing, what’s the widget that he has, and this is Agentforce, that it’s using to solve those problems. What was the benefit to the customer and how is it different, right? Classic product management and product marketing 101, and then a description of how this works, but it’s not a bunch of marketing BS. They’re one of the few SaaS companies that actually publishes papers on their LLMs, where it shows how it was trained, what data was it trained on, and what were the weightings. So, there’s real science behind this, not a bunch of marketing BS and stuffed animals like they love to put on stage, which I find incessantly annoying as an industry analyst, but I totally get how they’ve created this cultish marketing and sales and service operations culture, how people get into this. It’s like their one show of the year and they’re going all in, baby. They put trailblazers up there. You’re in pictures and slides, I get it, but it’s annoying. It annoys me.
Daniel Newman: Yeah. Listen, first and foremost, it was a very interesting inflection. I feel vindicated in a lot of different ways. As we’ve talked incessantly, Pat, about this AI CapEx boom, we’ve continuously gone round and round about, “Where does consumption happen? When do people use AI and how?” So for me, this last second pivot that Marc Benioff had, the change, the all-in on Agentforce, we heard Jensen get up and we went to his little round table, Agentforce. Jensen was having fun, extra spicy this week. But we have a situation where people are trying to figure out how to get value from AI. I’ve said from the very beginning, it’s going to happen in software. Not just in software in terms of the DIY of having a bunch of data scientists and developers building applications using CUDA and writing to GPUs and creating custom. That stuff is happening, but for most businesses, they want the Copilot experience. This is where the debate’s coming in, is Marc’s talking about, it just doesn’t work that well. He’s talking about hallucinations.
Patrick Moorhead: Yeah.
Daniel Newman: Data being spilled all over the floor, the graph, and of course, Microsoft has the most comprehensive graph because it’s got such a giant software estate. But what Marc’s trying to say and what matches some of what we say is that when you’re a little tighter, a little narrower, and a little more specific on the data that you use, you tend to get better grounding, better accuracy, better tuning, and better outputs. Now, I’m not saying that this isn’t something that Microsoft can do with smaller language models that companies and enterprises can put together using their data and doing it in open Azure services. I think what they’re saying is the out-of-the-box, single-click experience that everybody wants is still too hard. So, that’s the conversation and the debate that we’re having. So, I mean Agentforce, to me-
Patrick Moorhead: Hey, Dan, do you think he was talking about that? Because there’s Microsoft Copilot for sales. That’s a specific product that to me competes directly with what he’s talking about here.
Daniel Newman: I think if you want my perspective, because I only know what I think he’s thinking, is that he’s using Copilot in a universal sense, because I think there are Copilots that are more… Copilot for Finance is very specific to FPNA and the data can be walled off and it can be pretty darn accurate. At the same time, when you’re using a Copilot assistant in your productivity tools and it’s looking across the entire graph, the content it creates can be pretty off from where you might want it to land on the first pass. By the way, this is the same problem I think we’re having with all large language models. It’s like search. We talk about prompt engineering. You’ve got to have the know how to make the most of it. Of course, as these models get better and smarter, it becomes less important how perfectly we script a prompt to get a pretty good answer. That’s why you and I go across different models and we play with it and we see what things come up with. That’s going to be some of what’s able to be differentiated. But in the end, I think they’re very focused on the transparency. They’re very focused on being a leader in open communications of how they’re handling these models, safety, governance. I think that’s the story they’re trying to tell.
I think it’s risky to go after Microsoft. I don’t think it’s necessarily something that will win out in the long run, but I think what they’re trying to say, and this is, I guess, where I’ll end this, because we could talk about this for hours, is the abstraction layer that I’ve said for the longest time, whether it was ServiceNow, whether it’s going to be using SAP and Oracle, whether it’s going to be on Salesforce, whether it’s going to be on Microsoft, is people are not going to use AI from 10, 15 different platforms. What they’re going to want is their data, their fabric to be universal. So, all these enterprise softwares become different database silos. These different silos become the back end and you’re going to have a limited number of front end. So, the strategy with Salesforce is the agents are this new front end. So, instead of worrying about the SaaS and the application, you go and you build these agents and a lot of those sort multiscreen RPA activities that we’ve been trying to build out for more than a decade can start to work, because now we’re taking what the promise of RPA was and we’re combining it with neural networks and reinforcement learning. So, instead of being rigid and programmed and unable to be evolved, and Pat, remember when RPA was a big thing like five, six years ago?
Patrick Moorhead: Yes.
Daniel Newman: We were talking about it all along. Who talks about it? Nobody. Because an AI powered intelligent agent has replaced RPA. The special RPA companies, the Automation Anywheres, the Bluesky or whatever, Blue Prism, UiPath, they’re all sinking right now because you can do all this stuff with agents. So, Salesforce is simplifying it, they’re putting it into a new abstraction, you get this cool generative AI builder. I spent some time with Clara Shih, the CEO of Salesforce AI. She showed me the demonstration of how this works. Build an agent, build a generative tool. By the way, Pat, you know when I talked about and eventually you’re able to talk to it and it’ll abstract a screen for you? They’re starting to get to the point now where you could tell it what you want and it will build it right in front of you to your liking. That is where I start to see AI being consumed in a really meaningful way.
Patrick Moorhead: Yeah.
Daniel Newman: All right. We’ve spent a lot of time on this topic. We could spend more because we really only covered one thing, but this was the Agentforce show. That was it. There was nothing else. Oh, by the way, Futurum Research did make it into the opening keynote. I just wanted to throw that out there.
Patrick Moorhead: Yeah, congratulations, man. As my dad would say, that’s tall cotton.
Daniel Newman: Yeah, thank you. That’s the first time Marc’s cited our data from the stage. Fun stuff. All right. So, let’s talk about Intel. I mean, I don’t even know where to start. We could go in a hundred different directions. I really want to spend more time on the gossip because I feel like you and I covered so much ground in the beginning of the week, but how about I do the quick recap of some of the big news that started the week and then let’s maybe spend some time debating this Qualcomm takeover rumor? So they had three really big pieces of the news that started the week. Remember, last week was this big board meeting. It was the everything’s on the table. There’s been a lot of really bad media takes about what’s going on. There’s been some better takes.
You and I have been really trying hard to sort through all the noise and communicate to the market what’s going on, but this week, they had three pieces of news to start off. I think for Intel in a broader perspective, this was the best three pieces of news Intel could hold for in a week. One is they had some big news about a government contract funding up to $3 billion for manufacturing of secure enclave or specialty chips for DOD. This is a big win for Foundry. It’s a big win for the company to basically show that it has locked in the relationship. This is part of what’s going to make Foundry potentially go is that secure relationship that the government wants a US-based company to be helping manufacture advanced chips. We don’t know much about what they’re going to do, what they’re actually going to make, and we probably never will. That’s part of that relationship. But it was promising just given the number, the size and what’s going on, some of the delays of other Chips Act funding, this was a positive breakthrough for the company. Second thing, a nice announcement, everybody’s been saying they need another 18A win. They had the Microsoft announcements. They got AWS. AWS is going to make an AI mesh fabric network chip. This is what I call an entree into the relationship.
They haven’t necessarily won the Graviton Inferentia and Trainium contracts yet, which could be higher volume down the line, but this is going to be an important piece of silicon that’s going to be used for an important layer in the AI stack. It’s a proof point because AWS is pretty… Pat, I always say that they are pretty methodical in their decision making. If they didn’t feel that Intel could meet the mark, they would not make this commitment. So, this was a really nice validation for the company, given everything that has gone on, the rumors about Broadcom, some of the other historic rumors about the pre-1.0 PDK chip not meeting the mark. This was a good win. They also got a specialty Xeon 6 chip on Intel 3. So, it’s a different note, but another win. So, more AWS using Intel and Foundry. Then of course, the third piece, Pat, which I don’t know if this is much good news, but probably worth noting, it was an important piece of news for the company was they made a more decisive action in terms of how they’re going to split Foundry. They’re going to create a full subsidiary. They’re going to create full governance. They’re going to have its own board of directors. It’ll likely have a CEO that’ll be appointed to it or someone that will lead the business. It will have its own ERP.
It will have what we could call a full church and state between Intel the design and the parent business and Intel’s Foundry business. I think making this move was super important just for the partners and customers, especially the fabulous. The hyperscale is probably a little different in terms of how they would be open or not to sharing IP, but if they’re serious about wanting to ever get a Qualcomm, Nvidia, and AMD, this was a much needed decision that had to be made. So, those are the big news items. That’s my take on it. Then I’ll pass it to you by saying in Friday, you went on CNBC because a rumor broke that Intel was going to be taken over by Qualcomm. I’m going to hold my take on that. I’ll let you talk and maybe come back to that one.
Patrick Moorhead: Yeah, crazy week. It started off with the two of us talking to Pat Gelsinger and ended for me doing a CNBC hit on the potential takeover. But yeah, so I’m going to not just regurgitate what I said on CNBC, but it’ll be consistent here. These types of things happen when you have any company looking at strategic options, right? You’ve got multiple investment bankers and then competitors and complementors are looking for a way to exploit the situation either through acquisitions, creating turmoil, trying to get a better deal. People see blood in the water and then they just pounce on it. I think I used the term knives out in a post covering that initial week.
So, the way that I look at this is, hey, is this real or fake, real meaning there’s actual intent, or is it just to disrupt Intel a little bit more and make them look wobbly? It could be both, to be honest. Let’s say Qualcomm has an intent, but they know, hey, if they get it, then it’s goodness because they got it. If they don’t get it, it’s good news too because that has completely disrupted Intel. You better bet if Qualcomm is making a move, Broadcom, Nvidia, ARM, there’s a lot of people who might want to go in there to disrupt the disruptor. Hey, let’s make this deal 2X the price. Then you have to look at it from a synergistic point of view. Intel, big in data center, PCs, fab capacity, small and auto, no smartphones, larger industrial edge like servers. I’m hearing your clicks, bestie.
Then on Qualcomm, big in smartphones, big in connectivity IP, 5G, Wi-Fi, Bluetooth, huge in auto, no foundry, right? They’re giving those margin dollars to TSMC. Qualcomm, very small in the data center, its data center AI inferencing and even smaller than Intel on the industrial Edge. So, you’d have to be foolish to not say that there would be synergies. If you look at the areas where they have a one-for-one overlap, it’s in PCs. Intel has 80% market share. Qualcomm has probably less than 1% and they both do WiFi chips. Beyond that, it’s super synergistic. Things I thought about after my interview, I think, I had a whopping 30 minutes to think through this before I hopped on CMDC. Maybe it was 20 minutes.
It was Qualcomm and ARM do not exactly have this incredible relationship. What if another benefit could be Qualcomm getting the X-86 and licensing it to people for them to make their own chips? That was something that popped in my head. Also, I mentioned this on CNBC with Lip-Bu Tan, but so Lip-Bu Tan, icon. We talked about him, I think, on the last show. The more I hear about this, he was exited off the board. I think he wanted to run IFS. Potentially, I would give it a 50/50 shot that Lip-Bu is part of this and maybe he wanted something like this to happen in the first place. I also heard from two very well-sourced contacts that Lip-Bu wanted to run IFS. It’s interesting, you and I will both be at GSA and Lip-Bu will be there as well.
Maybe we’re going to bump into him at the drink line and we can ask him. Probably not. No, GSA, I’m not going to do that. But anyways, yeah, there’s going to be a lot of the same players. We’re going to be at GSA next week, Dan. So, could this happen? Yes. Is it likely? No. Piece parts versus full? I mean, Qualcomm’s doing great in auto. So, I don’t think it would want to buy that. I don’t know if they could get through even buying Mobileye, but Qualcomm’s doing great and I think they’re taking share away from Mobileye right now. So, I don’t see a piece parts. My final comment on regulatory would be at first glance, it seems completely freaking crazy. If Nvidia couldn’t get ARM across the line, how on earth would this happen?
But it’s interesting on the western front versus, let’s say, China, if this could be positioned as a savior for Western Foundry and Western… I mean if Qualcomm moved all of their capacity, let’s say 14A mobile flow, let’s just say it’s a good flow and it’s good, imagining what this could do to Western Foundry. That’s the way that this thing could be packaged to the regulators. Even though there wasn’t a whole lot of overlap between even what Nvidia did and ARM, I think there’s even less overlap between what Intel and Qualcomm does. But as we’ve talked about on this show, it all comes down to how you define the markets. All right.
Daniel Newman: Yeah, I only hit it quickly because we got to keep moving. You’ve got to work out or something this morning. But I just want to say, I put my tweet out. I’m just going to read this off because I’m having a little fun with it. I said, “My 10 visceral thoughts that immediately came out following it.” I said, “Qualcomm to buy or to take over? One…” I said, “All of it? No. Two, if they wanted to, still no. Three, regulatory would be incredibly complex, also read, no. Four, maybe parts of it were of interest, PC? Auto? Five, it would certainly be a path to entering data center at scale, but… Six, still no. Seven, Mobileye, nope, not that either. Eight, design business as a whole? Leaning towards no. Nine, Qualcomm entering the Fab/Foundry biz? My take, not a chance. Ten, I could be wrong, but even still, no, not happening.” Look, I do think this was intentional. I do think actually, like you said, there probably was some real interest in parts and pieces of the business. I think if you just look back to even the Qualcomm-Broadcom deal, this is just a takeover that just has no written all over it. There’s so many competitive implications to this.
You have a company that’s trying to roll out a new architecture to scale, to create competition inside the PC business. You’re going to let them take over the biggest market shareholder of the only competitive architecture and let them wind that down, wind that up. What are they going to do with it? I mean, I could see from a revenue standpoint, but how does that even work within its own conflictive nature of saying what is good and what is not? They’ve been spending the last two years saying X-86 is not performant, it’s not as power efficient. Were they going to do with that? Are they going to tear it down? Entering the data center would be the most interesting thing, but are they really going to enter with X-86? It just seems like their whole architecture of low power.
The last thing is Qualcomm has so many of its own regulatory challenges in terms of how it does licensing. This would just feel like it would open up a whole new can of worms to another set of long-term issues with regulators around the world. I don’t see how they get out of it. I do think it’s super fun and interesting to consider. I will be trying to continue to make sense of it. By the way, Pat, I said at the end, thanks for playing. I will gladly eat crow if I end up being wrong here. I will wear a Red Bull shirt on Saturday and a Tottenham jersey on Sunday if they end up having this happen. All right. So, I know. Did you almost spit out your Agua? Is that a pre-workout?
Patrick Moorhead: Yeah, I’m doing a combo pre-workout.
Daniel Newman: Did you mix it in your coffee?
Patrick Moorhead: No, but I did slam two coffees. I mean, I did my workout. I think it ended at 7:00.
Daniel Newman: The soccer mom be drinking. So, hey, we’ve got some fast-moving topics here. We’ll get through towards the rest of this because we always drag on the big ones. So, you had a chance to go spend some time up in the Northwest. I don’t know if you saw T-Mobile. Maybe you did, maybe you didn’t. But that’s where a lot of their headquarter is, but they had a big capital markets day and that was public information. So, what’s going on there? Well, who do they T-Bone and why?
Patrick Moorhead: Yeah, so it’s interesting. As you and I were in San Francisco at Dreamforce, literally, the exact hours of Salesforce’s analyst program on Wednesday were exactly the same time. So, we weren’t able to go. You and I both got invites. We were going to talk with senior leadership there, but it didn’t happen. So, instead of that, I flew up to Seattle and Bellevue. I visited a company I can’t talk about in Bellevue, but I did very publicly say that I went to HQ to talk about that. First thing is, again, I tuned more into the T-Mobile for business than anything else up there. If you want T-Mobile consumer, my analysts, Will Townsend and Anshel Sag, have already done the breakdown. In fact, they did it onsite and it’s already published. Check it out. But a couple things. So, the company brought out a new capability called T-Priority. This is for first responders. You might be familiar with FirstNet, AT&T, Verizon, which essentially to have guaranteed communications in terms of crisis, something like 9/11, something worse than 9/11, power going out. This thing has to just work. Age of 5G, if you are familiar with it, there’s a couple modalities, I’ll call it full 5G, when you have changed the Core, you’ve changed the Edge. It’s called SA. It’s required to do all the fancy stuff. What I mean by fancy stuff is you can fractionalize the bandwidth, right? You can have certain streams that you can modulate the amount of data, the bandwidth, but also the latency. That’s called a slice. You can modulate it. New York, this wasn’t some thesis product that we’re building.
It wasn’t hey, this product is GA. This was we very much have a customer and it’s called the City of New York. This is a gigantic win over AT&T and Verizon, hence the T-Mobile T-boning with T-Priority. It’s a huge win for them. The other announcement was AI-RAN. This is essentially getting Jensen up. Jensen was there. Wow. I mean he literally just went cross town. I don’t know if he stayed in San Francisco or he chauffeured to his house in the south and then came back in, but he was there to talk about… Now a lot of things you can do with AI-RAN. Dan, in our work with Ericsson, we have discussed this a lot where first of all, energy, you can turn off the nodes based on the type of traffic and you’re predicting the type of traffic. You can also do better beamforming that interacts with the chipset on the smartphone to just make everything go faster at lower power, highest performance with the lowest latency. But this was really focused on inference with applications, right? We’ve seen GPUs on the Edge, let’s say, in Korea as it relates to doing gaming, where you’re not actually doing gaming on your PC. Most of that is going on inside of a cement bunker, whether it’s small racks of GPUs. You could just imagine leasing out this inference capability on the Edge, whether it be for cars, low latency stuff, right? Stuff you could do in your house. Smaller countries are doing this, but the larger ones just aren’t able to do this because they didn’t have the full tech.
This is a really exclamation point on the benefits of T-Mobile having a superior network. Final thing that I’m going to bring up is IntentCX. So, T-Mobile already has the highest rated customer service platform out there. What they did is they’re aligning forces with Sam Altman at OpenAI. Yes, he was on stage too talking about, and I did a lot of research on this, they’re DIY-ing their AI for customer service, exactly doing what Benioff the same day or the day before said you shouldn’t do. So, we’re going to have to see. All in all, every interaction I have with T-Mobile says that they’re not just a carrier, they’re a technology company unlike AT&T and Verizon. I know that sounds harsh. Yes, all three of them are our research clients, but the way that they’re doing this… I even showed up on a Friday afternoon at 5:00, Dan, I don’t drink a lot, but my gosh, there were 100 executives at HQ drinking IPAs and wine, it’s free, having real conversations. It just felt different. I walked outside, there was music going on in this beautiful campus outside of Bellevue. I’ll leave it there.
Daniel Newman: Yeah, you hit a lot of things. I mean, you got Jensen and Sam to show up. That’s indicative of intent in my opinion. Carriers, cool AI leaders, carriers are boring. 5G is old news. So, that to me says a lot. I really think they continue the trend line of being un-carrier. They continue the trend line of trying to be differentiated and unique. I think having that type of presentation there says a lot. I thought the interesting partnership, the OpenAI, I mean we know customer service is going to be probably the most disrupted immediately. It’s one of the most obvious immediate use cases. Nobody likes waiting on hold for long periods of time for an agent to answer the phone. Nobody like those typical pre-canned FAQ answers that you’d get from a chatbot. So, being able to bring together the capabilities of a deep learning and reinforcement network of learning of someone’s personal and account information, coupling that with generative text, and then of course, automating all that is going to be something that will deliver a great service experience. T-Mobile is all about that. So, that to me was really, really interesting. But also, like I said, I’ll just simply put, since you covered most of the actual announcements, is I think it’s just a signal of intent to be different. It’s a signal of intent that they’re not going to just go status quo. They’re going to continue to build and evolve. Heck, maybe someday T-Mobile could be worth as much as OpenAI. Sorry, I wanted to throw that out there
Patrick Moorhead: Yeah, it’s an ingest, folks. I think we talked about that last… Did we talk about that last week, this insane valuation? You had some pretty hot tweets that you put out.
Daniel Newman: Yeah, I won’t even say I’m that hot. I can’t fathom it. I just can’t understand it. Goldman Sachs or OpenAI, they’re worth the same. Okay, sure. One loses $5 billion a year and one has a license to print money. I’m not saying that someday it won’t make sense, but it feels like a Ponzi scheme for these investors that came in late. Satya put $10 billion in and got 49% of it like 18 months ago. That’s returned 15 times for Microsoft. But it’s just like a last in, first out. We all agree that these generative models, tons of competition. Anyways, I don’t want to go down that path. Interesting stuff, T-Mobile, congratulations. So, BofA gave an upgrade to HPE. We’ll just do BOA upgrades HPE. A few weeks ago, Pat, you and I, we covered HPE’s earnings. We talked about how the company had done well, really strong performance in its GreenLake business. It’s had some really sound results on the CPU side of data center. It’s been very focused on maintaining that part of the business. We’re starting to see some uptick in all of its AI services as the company did really triple down on Nvidia and found its lane and stayed in its lane. In this most recent quarter, it was one of the cleanest the company it had, seeing double-digit growth, which Pat as you and I both know and I think I even made the joke of saying, “Hey, I guess HPE’s growth is now matched SaaS growth.” So all the SaaS companies that are also growing about 10%.
While one tends to get forward revenue and EPS numbers that are much, much higher, maybe it’s time that HPE gets a little bit more credit. So, as it sits around $16 to $17 at the time, they got an upgrade and a $24 recommendation. Pat, you and I don’t set price targets. Only foolish analysts on the industry side do that, but we do see that that’s about a 30% upside from here. In my opinion, one, it’s a two-year model to get to almost 100,000 GreenLake customers based on my assessment. That’s a huge thing considering that’s a mid-double digit growth usually in the high 30s or 40% on a quarter for the revenue growth of their ARR business. I think they were one of the later to really starting to realize revenues from AI. They weren’t as early on as some of the other OEMs, but they seemed to do it a bit more methodically. They were a bit more focused on margin integrity and protection, which is something that the street seems to really like. So, the OEMs, Pat, other than Dell and this parabolic up and down thing that it’s making an experience have been a bit stagnant despite their important role moving forward. HPE is a really strong service business, has a strong ARR growth in that as well. So, I think those are the couple of things that I like. I think that’s what draw an upgrade. It’s good for HPE because you don’t see a lot… It’s not like a Nvidia or a Palantir where every other day there’s tons of headlines and tons of upgrade.
Patrick Moorhead: Yeah. Listen, this company year over year is getting a lot of respect. Strategically, you’re looking at HPE decided a while ago that it was going to lean into more value versus volume and therefore deciding to not compete head to head with Dell and Lenovo. So, what they did is they made a bunch of software acquisitions and stitched together an end-to-end cloud platform. They’re not done yet, but they just keep adding modules. Interestingly enough, it reminds me a lot of what VMware is trying to build. Then they’re crushing it on edge networking. Then when you lay over what they’re about to do with Juniper Networks, it’s really doubling and tripling down on areas that make you more money. Software makes more money than generic hardware and networking makes you more money and has higher margins than classic compute. So, what that did is that all came together, I think that came to a head here. I think what we saw also in the quarter, which oddly enough, here’s the weird part. HPE got slammed on the earnings for HPC margins, AKA AI margins, and then BofA upgrades them for a recovery in HPC and AI margins. Okay. Well, what was funny is our initial take was bravo, the market got spooked. They did the double click, had some calls of HPE to understand their margins were actually getting better. That was the weird part.
Daniel Newman: Comparatively better to others in the space.
Patrick Moorhead: Exactly, exactly. Also, we saw in the note synergies from Juniper as I talked about before, but we also saw anticipated improvements in margins due to the cost-cutting measures that weren’t directly and only coming back to the Juniper acquisition, but other types of OpEx out there. So, it’s interesting. The final note I’ll make is they talked a lot about liquid cooling. Isn’t it funny how nobody talked about liquid cooling for 20 years? It was for the National Labs, HPC nerds. Back when IBM System X, when they were doing X-86 servers, this was a thing. Mainframes used to be all water-cooled and now it’s showing up in analyst notes. I mean, heck, Dell was an early leader in X-86 immersion. I remember even working with them on research projects, three different kinds of water cooling. Then you’ve got HPE with Cray. Cray is absolutely water cooler, hence the National Lab stuff. But anyways, I just find it amazing that here we are, technology matters.
Daniel Newman: Yeah, we got 10 minutes, two topics. I got a really important breaking news. Lando Norris on the poll. Singapore, one-two. Guess who he is on the front line with? Don’t look. Don’t look.
Patrick Moorhead: Yeah, or Leclerc.
Daniel Newman: Max Verstappen.
Patrick Moorhead: No way.
Daniel Newman: It’s always tight when there’s Max-Lando front line. Lando can see this one position by the first turn like he does every single time. God, my wife looks at me this morning, and she says, “Lando’s really great at driving when no one else is on the track.” Anyways, all right. Pat, let’s talk iPhone. Yesterday morning, I think I turned on the TV and I saw Tim Cook graciously standing at the door for some Apple super fans to come in and get their first iPhone 16. But the news isn’t all good and rosy for the iPhone. What are you hearing?
Patrick Moorhead: Yeah, it was all fun and games yesterday for me. There were some ridiculous sales associates doing artificial intelligence chants, even though the really good stuff probably won’t show up for six months. Then you saw ghost town pictures and then you saw ones with maybe some lines. So, anyway, it’s all fun. But Minko essentially came out and said that the iPhone 16 sold less than the iPhone 15, down around 13% from iPhone 15 in the first weekend. How he gets his information, I have no idea, particularly the in-store from Apple. But this guy has been right more than he’s been wrong. So, maybe it’s true, but it was really a mixed bag, right? I mean iPhone 16 Pro Max, down 16%, iPhone 16 Pro, down 27%, but the iPhone 16 Plus was up 48%. Clearly showing that people want the big screen, but they don’t want to pay for the Pro or Max capabilities. So, mixed bag, but it looks like Apple’s down. I’m not surprised. It was one of the least interesting phones. I mean, I usually get a new iPhone in addition to my Samsungs every year. I’m skipping this generation. I don’t know, Dan, you’re rocking the iPhone 13 Pro like a boomer.
Daniel Newman: Pro Max, Pro Max.
Patrick Moorhead: Pro Max like a boomer. What are you going to do? What do you think?
Daniel Newman: Yeah, I’ll be heading over to the store when the iPhone 17 comes out to get it. I can’t find any value in it. I’m not a photographer and I don’t know if I want any higher resolution of those selfies we’re taking. I know you look great, but I’m aging here. But in all seriousness, I mean I’ll get around to it. There’s just nothing. I’m just not enthused. I’m not excited. It’s not changing anything for me. The biggest theme of the GlowTime event was coming soon. Well, great. When it comes, I’ll buy a phone. But right now, it’s not doing anything that really makes it worth my while. The little photo button from the 2010 Windows phone, that’s pretty cool. I mean I guess I’m glad they finally thought of it 14 years later.
Patrick Moorhead: By the way, it’s incredibly hard to use. One of the analysts at my non-disclosed advisory used it and it barely works. It’s really hard.
Daniel Newman: It’s not great. So, in the end, I think the biggest problem is the phone’s fine. It’s just the hype was so big. The hype was so big. I think there’s some analysts out there that are going to have gotten this really wrong. The one thing I think that will be right is AI will elongate the cycles for their next handful of devices because people will upgrade as they see features that become more valuable. Unlike the past where new iOS updates have been pretty incremental and consistently usable across the whole base of devices, for everybody now that’s on a 15 below the Pro and before, when they see an AI feature or capability come out from Apple Intelligence that they want to try or use, they’re going to be forced to go get the new phone. So, I think people like me that have been holdouts will eventually see something and I’m going to be like, “I want to be able to do that.”
Patrick Moorhead: I look at the quality of your pictures. Sometimes you’ve got food on your lens or something or something’s on there.
Daniel Newman: Yeah, that’s just me though. I’m a pig. It has nothing to do with the phone. The camera’s fine.
Patrick Moorhead: No, exactly. When your lens is clear, I mean I try to compare my pictures with yours and they’re not a whole lot better. My analyst, Anshel Sag, and I think one of your analysts was pretty stoked on it for prosumer. Keith loved the four microphones because he does a lot of linear video on his iPhone. He has got this amazing AI series, check it out. Also, Anshel Sag was super stoked. He’s essentially a professional photographer and he really got into the 4K 120 capture.
Daniel Newman: Like I said, a use case is a use case. For some certain people, it makes sense. I just mean as a whole, I don’t know if it changes my life. I think the way it was framed was that this was going to be this life changing breakthrough. I still have the S22, Pat. I know that there’s a 24 and it’s awesome and I think you use it. I have a Fold too. I want to get that Huawei triple fold and then I want to share all my data with China. That’s my goal, the new triple fold, and then I want to give all my data to China. That’s pretty cool. But we won’t. All right. We got one more topic. I know you got to run. Hopefully, you’re fully pumped full of NO2 and creatine at this point.
Patrick Moorhead: Gosh, this kicks in. It lasts like four hours, man. My heart-
Daniel Newman: It does, man. Does your head itch? Did you get that itchy head?
Patrick Moorhead: No, I didn’t. It’s actually Pico’s. He’s got three versions. He got itchy head.
Daniel Newman: The itchy Head, the beta-alanine.
Patrick Moorhead: He’s got two itchy heads and then one that’s not itchy head with then no stimulants.
Daniel Newman: Okay. Okay, that’s good. You got to keep your heart rate down as much as possible except to make it happen. So, listen, the last topic is about this Microsoft-BlackRock partnership, $30 billion rising to $100 billion. The goal is to invest in infrastructure for powering these data centers. Pat, rather than talking too much about this fund, I think it’s more of a theme. Yesterday, I shared a job description in a Data Center Dynamics article that talked about Amazon hiring a principal nuclear engineer for AWS. We heard about the reopening of Three Mile Island. We are hearing Larry Ellison on stage talking about nukes and building specialized nuclear power facilities to power these data centers as he talks about thousand percent increase in data centers over the next handful of years. We’ve got Nvidia hogging more power than any other company on the planet right now. Of course, we’ve got multi hundred billions of CapEx rising at fast rates for every cloud company in the world. Problem is we are running out of power. So, now we’re starting to see a new cycle, a new news cycle. The new cycle is holy crap, wind, solar is not going to get this done. We are going to need something more robust. We’re not going to do more coal and fire. We’re going to have to find a new way. The cleanest available energy, despite its historic bad press, is nuclear. Problem is in parts of the world like Germany, they’ve shut it all down. In the US here, we’ve basically not invested in a long time in any meaningful capacity.
So, we’ve got this interesting inflection now where we want AI, we’re thirsty for it, not thirsty enough to buy an iPhone 16, but we’re thirsty for more GPUs. Then Pat, of course, this also accelerates the accelerator conversation. We are accelerating our conversation about accelerators for AI because as we know, as these workloads and needs become more well understood, we can build specialty chips that are going to be more efficient for doing those specific things that we’ll use less power, but nonetheless a lot of power is needed. So, Pat, to me, this is not so much a big moment with just the BlackRock-Microsoft thing, but this is going to be like we heard about all these LLM partnerships, Anthropic and Amazon and Microsoft. We’re going to hear the next wave is going to be companies tying up major investment funds to figure out how to get more power because the next oil is not GPUs. It’s going to be enough power to power those GPUs. What do you think?
Patrick Moorhead: There’s so much here. You know what? I’m going to be late to my workout.
Daniel Newman: Yeah, so go quick so you can get to your workout.
Patrick Moorhead: Oh, I don’t want to go quick.
Daniel Newman: Go slow and tell your trainer to… Anyways, he’s not-
Patrick Moorhead: Well, I built some time in knowing that you never show up on time and we get out late. I’m just kidding.
Daniel Newman: I was right on time today.
Patrick Moorhead: I know. Please don’t show up on that. Okay, so a couple gap fillers here. China competitiveness, I think, it’s just… Is that a helicopter? Oh yeah. China competitiveness is kicking in here. China has been putting up new nukes and new coal fire like absolute crazy here. Here we are and let me give you a good example. East Grid in Virginia where AWS has its largest data centers has 3% power remaining to support more people, EVs, and data centers. There will not be new data centers being installed in a place where there’s 3% energy. Our regulatory environment is so strict that there likely won’t be any new energy put in there for five years. I very can safely say even if you put up a coal fire, you can’t drive enough power with solar that’s consistent. The challenge with solar is that it’s consistent only with the sun being out. Nothing against solar. I’m just spitting out the facts here. With what Greenpeace did and other activists did on nukes, it became a bad thing to install any new nukes out there, even though it’s literally the cleanest consistent energy that you can do. It’s amazing. Dan, were you even born when Three Mile Island almost had a meltdown? How about Chernobyl? Probably. Okay. Lawn people are probably there. Okay, I get it.
Daniel Newman: I don’t want to distract you. I know how that noise can be…
Patrick Moorhead: Yeah, I’m sorry. But yeah, I’m just struck at how little foresight that we have as a country to predict things and we just go along for the ride as corporations. Just another example where we can find ourselves just on the complete ass end of a trend. I am very inspired though by some of these companies that used to be very activist. They’ve got their ESG reports that are now fricking going all in on nukes and absolutely love that. Dan, you brought up essentially the ASIC versus GPU. Jensen Wong was quoted in this and Jensen does need a heck of a lot of power to see his growth, but I really hope that it drives the conversation on power efficiency. 100%, I’ll take this to the bank and I’ll die on this vine that ASICs are more efficient than GPUs, up to 10X efficient. GPUs to me, you can bank on for two or three generations of it. At least as it relates to TPU, even ASICs are coming out new ones every year from these folks. So, I really hope this drives the conversation about, “Why aren’t we seeing more Gaudi, Intel Gaudi? Why aren’t we seeing more Groq out there? Why aren’t we seeing more Qualcomm A-100?” I know those are primarily inference, but when it comes to Maya and TPU and Trainium, those do LLM training and LLM inference. So, I hope it drives this conversation. It’s a good conversation to have.
Daniel Newman: Yeah, I mean there have been some wins. I was cited in a press note about Groq and Aramco digital partnering 19,000 LPUs going into the Middle East to run the inference of Aramco Digital. So, we are seeing it, Pat, but our forecast has about a 20% delta in terms of how fast ASICs are going to grow versus GPUs. I actually think it’s going to get bigger than that. When you’re building bottoms up, it tends to come from data from people with less foresight. So, you got to always take a little bit of a risk top down. My assessment is the GPU CapEx investment won’t stop growing, but it might normalize more. You’ve got Maya coming online, you’ve got AWS doing their thing. You saw ByteDance, Alibaba, Meta. You just go down the list. They’re all building their own. You know that ARM’s got something up its sleeve. I don’t know. I’m suspicious that it does. What I mean by this is these companies aren’t building these to not use them. Of course, Google TPU hogs close to $7, $8 billion a year of spend on TPUs for their own use cases. Pat, this is going to happen. This is going to happen and it has to happen. By the way, it doesn’t mean there’s no cycle for continued buying of GPUs. It just means it’s going to change. We all knew the training will continue and 10 to 20 companies will train mega models. Everyone else is going to use more efficient use case specific chips that can train for a need or more importantly deliver inference for a specific workload. That’s going to happen, but Pat, what’s going to happen right now is you’re going to get on the bench. Last week, I did 285 for 14. I’d like to see you see if you put that up.
Patrick Moorhead: No, I’m not going to embarrass myself with the weights that I’m using, but I have doubled on dumbbells for chest.
Daniel Newman: This is a fun time and I’m not saying it cynically, but as a guy that’s been working out for almost 27 straight years and really doesn’t lift much more now than I did 20 years ago or actually maybe I lift less. The point though is this part where you’ve been away and you come back, dude, is so much to gain. So, keep crushing it. We are going to have a photo off of a before and after Pat. We’re going to have a Pat pack. Only 1 in 25,000 men have a real six-pack, Pat. I look forward to you being one of those 1 in 25,000. It will not be me though. I will not ever have a six-pack because my relationship with food and the gym are symbiotic. I like food just a little more than I like the gym. All right, everybody, thanks so much for joining us today. Pat, thanks for running a little bit long with us. This was episode 233. We covered a lot of ground. It was a lot of fun. Hit that subscribe button wherever it is in your world. Join us for all of our covers. Pat, we’re off to HP next week for Imagine. We’re going to be sitting down with HP executives at their big event. We’ll be bouncing around. I’m going to head out to the NetApp event. You’re going to be in the Valley or I’m going to come back to the Valley and spend some time with you watching you talking to a whole bunch of CEOs at GSA. I’m going to be at the bar waiting for Lip-Bu, so I can ask him what’s going on. But I look forward to seeing you Monday morning bright and early. But for everyone out there, thanks for starting your weekend with us. See you all soon.
Patrick Moorhead: Bye-bye.
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.
