Buckle up! The Six Five Podcast is back, and Patrick Moorhead and Daniel Newman are diving headfirst into the week’s tech news, from the latest AI showdowns to the escalating US-China trade war. Get ready for an action-packed breakdown! The handpicked topics for this week are:
- Tariff and Trade Policy Whipsaw: Analysis on the recent tariff changes and exemptions, highlighting the extreme volatility in trade policy and its immediate repercussions.
- Intel’s Strategic Moves: The podcast covers Intel’s decision to sell a majority stake in its Altera FPGA business to Silver Lake. This segment focuses on the implications of this move and the potential impact on Intel’s future competitiveness in the AI and data center markets.
- HPE and Activist Investor Involvement: Talking Elliott Management’s stake in HPE and the potential influence of this activist investor on the company’s strategy. Plus, a comparison of HPE’s performance against key competitors like Dell and Cisco gives context for understanding the investor’s motivations.
- China and Advanced Chip Sales Debate: Pat and Dan engage in a simulated debate about the complexities of selling advanced chips to China. They weigh the potential economic benefits against the inherent national security risks, considering China’s growing technological capabilities and long-term development strategies.
- Market Volatility and Banking Sector Performance: The podcast analyzes how the current policy volatility is impacting bank trading revenues. It also discusses broader market trends, including the delays in IPOs and overall M&A activity, within the context of the current economic climate.
- Predictions on Future Trade Deals: The hosts speculate on the likelihood and timing of potential upcoming trade agreements. They also discuss the increasing urgency for new deals to provide stability amid the current market conditions and to mitigate the potential for further economic disruption.
For more background on each topic, please click on the links above. Be sure to subscribe to The Six Five Pod so you never miss an episode.
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Transcript:
Daniel Newman: The dependence we have created on nations that are out of our control to make things that are absolutely critical for national defense, for the advancement of our economy. And I always say, Pat, and maybe I’ll leave it with my words, that national security is economic security and vice versa. We can’t untie those two things. And so being able to make advanced semiconductors. And by the way, you’ve said this, I’ve said this, we should repeat this because people need to hear us when we say it is. The IP, we have to have access and some level of control to the IP. Just bringing it here to be made without the IP only gets us to the current moment. It doesn’t take us into the future. We have to solve for that longer term.
Patrick Moorhead: World War II was won by supply chains of Russia and the United States.
Daniel Newman: Hey everyone. Welcome back to another episode of The Six Five Podcast, episode 258. Pat I was watching that introduction of our show and it’s funny when you’ve been through a bit of a journey, but I saw my fat rolls hanging over my belt in one of those photos and now I’m feeling really self conscious, you know, after spending the last few months trying to be less chubby, that, that intro was quite humbling. How are you doing today?
Patrick Moorhead: I’m doing well, you know, still doing rehab on the shoulder. I think we’re like month two, but I bench pressed like a hundred pounds actually more, but still way off from where I was. But I’m doing pretty well. I mean in town, you know, I did four straight weeks of travel. I think you did five. So you were traveling this week.
Daniel Newman: So it was a good week. It was a crazy week. I mean, look, there’s. The show’s gonna have a lot to cover off on and recording on kind of a quieter day. It’s Good Friday, markets are closed, so I can’t lose any more money today. You know, any sort of announcements on global trade won’t send the markets immediately into turmoil, which, that’s kind of nice, you know. But yeah, it’s been a busy week. I spent the week actually Sunday, I left on Sunday. I spent the week in New York and got back late Wednesday night and then was back on the road yesterday for some meetings. So it’s been like one of those kinds of crazy weeks. But I’m super happy that it’s Friday and always the best part of our week is capturing this show. But yeah, a lot going on. I mean, we’ve been through Whipsaw this week and I think you’ve been the media circuit. I’ve been doing the media circuit and that’s not just the TV. That’s talking to the reporters, the journalists, the vendors, the companies, our CEO friends, because everybody is kind of just still I mean, we’re, you know, we’re getting, you know, we’re a few weeks past Liberation Day, liquidation day, whatever it was and is. No deals have been made yet. Not sure that there are deals coming. We now have 245% tariffs on some goods that seem reasonable, sustainable over the long haul.
Patrick Moorhead: Syringes, though. Syringes, right. That’s 245.
Daniel Newman: Yeah, well, you know, that’s for fentanyl, so we’ve got to make sure that we keep the use down so we can’t get the syringes over here. I actually have no idea. I mean, this week, RFK came out with some new rhetoric on what caused autism. That should create a real flurry. We’ve got senators either going to rescue, you know, U.S. citizens that have been illegally deported, or we have sorry, non U.S. citizens in the U.S. that have been illegally deported. We have senators that are going to rescue them, or we have gang members that we’re trying to bring home. We don’t really know what’s going on. I mean, the chaos that is epic right now and it certainly hasn’t given you and I a light day. And for whatever reason, I can’t sleep more than three straight hours right now. It’s like, I don’t know if it’s the human growth hormone, the testosterone I’m taking, if it’s the injections of ADHD medicine, but I am really struggling to stay asleep and I’m starting to feel it a bit.
Patrick Moorhead: Bestie I feel for you, but, yeah, I lost count of how many things I’m taking to improve my body. But, Dan, I mean, you hit like, mid-40s and 40 and your sleep just declines.
Daniel Newman: Oh, man, I thought I was doing it all right. I thought I was doing that.
Patrick Moorhead: Helmet on, buddy.
Daniel Newman: I blame the mattress. I blamed all kinds of different things, but, you know, I’ve tried everything and I’m not exactly sure. So anyone out there that’s got some ideas? Daniel will take your ideas. Pat, like, you know, we’ve got a pretty broad show to cover this week. We’re going to talk kind of. The week started with a lot of tariff and exemption news with Trump on the weekend, and we went through a massive whipsaw. And there’s been a couple of other news, you know, in the investment space. We’ve seen some big money coming into some of the companies that we cover. Intel had a big announcement with Altera and then HPE. I don’t know if it’s activist investors or, you know, exactly. You know, we’ll talk a little bit about what’s going on there, but they’ve got a big investment, supposedly that sent the stock in a good direction after the stock had been in a bit of a free fall. So we’ll cover that off and then you and I have a fun flip. It’s an interesting one because we have somewhat similar and yet somewhat very differing opinions. I know last week you won The Flip. I don’t think anybody threatened to stop talking to you this week over a simulated debate that we have on the show. But hope everyone that does watch The Flip gets ahead of this a little bit right now we are literally simulating an argument. Pat and I never disagree on anything, at least not publicly. And then we’ll get into a little bit of markets, bulls and bears and what’s going on there, and then we’ll get on with our week. But let’s get, let’s get started. Pat. Last weekend now, you know, it’s probably by the time you’re listening, as it could have been a week ago, we had a major whipsaw. We had no tariff on chips and finished devices and then we had maybe some tariffs. Then we had everything getting tariffs and then we had investigations. Talk to me about the whipsaw of the last week in the tariff game for technology.
Patrick Moorhead: I mean, it is so hard to keep up on, on everything, right. And, last year, I think nine days ago, right, Chinese goods got taxed, bumped it up to 125% and then the effective terror rate, tariff rate became 145% and then, you know, basically crushed Apple stock. I did so many interviews about what this meant to Apple. One of my biggest statements was, you know, if you really incorporate and you actually believe in this right now, Apple valuation could be cut in half, right? So obviously people don’t believe what’s going on there. And then there was a temporary suspension on all tariffs except for China, keeping with the 10% baseline fentanyl tariff. And then was it Happy Monday or I even forget the day, but the Trump administration adjusted the tariff on phones and PCs and a couple other of, you know, meaningless tech, from a tech perspective, kind of meaningless things. But still, you know, 20% were, were still on, on top of that. So, yeah, it’s been pretty much pandemonium here. Probably the most meaningful thing that I’ve seen so far that comes out of the shipping industry. The big freighters out of China were upwards of 50% of those freighters that were just sitting in the ports. And you’re like, well, wait a second, we released these tariffs. Well, what we didn’t release were stuff like clothing, shoes, plumbing supplies, basically all of these little things that you don’t necessarily think about, but you’re probably buying them at Amazon and Walmart and from these small retailers. So, you know, Dan, I, you know, I don’t know exactly where this is going, but I, I do want to let you know though, a key change here. I do believe that the Trump administration, most of them are, I’ll say Donald J. Trump believes that he did make a mistake that was driven by some of his cabinet makers. And I could see one of them leaving, probably not Lutnick.
Daniel Newman: Yeah, there’s definitely some of this. You know, you heard that maybe Peter Navarro and Lutnick were going to get sidelined. And that actually came right ahead of the news about some of the technology not being tariffed. And everybody got excited over the weekend. They were thinking there was going to be a face ripping rally on Monday, maybe it was too good. And then they kind of said, no, no, no, just kidding. There’s still all the, the 10 plus 10% is still on, but not the, not the other 125%. Everyone’s like, well that’s pretty good for Apple. And you know, there’s a bit of that whole kind of art of the deal. You know, you talk about setting some really big audacious number and then coming back to a number that’s much less obtuse. So I mean, I think there was a little bit of that because in the end like Apple kind of rallied on it a little bit. But the whipsaw is really what keeps getting me. I, I mean, I don’t care what it is. And by the way, I forgot my toiletries bag when I was heading to New York, you know, and that’s a funny story, but like then I went and picked up, I picked up toothpaste and I picked up a toothbrush and I picked up deodorant. Everything was made in China. It was just kind of for the first time I kind of went back to looking at the labels really quickly. It was packaged, it was made. And so, you know, it was a, you know, my little portable toothbrush, my little, you know, travel size deodorant kit. My, it’s just like everything I buy and then like over the last few weeks you kind of look at, you know, I mean, we can argue the mechanisms of how that all happened in the first place, but sort of trying to undo 40 plus years of globalization, that happened very, very rapidly in a very short period of time. I just think there are a lot of parts that haven’t been well thought out. It’s like, what are we really trying to accomplish here? It’s like, stop stealing our ip. Okay. That’s something we should probably attack. Right.
Patrick Moorhead: It’s like, let’s focus on the stuff that we would actually want to build. Like, we don’t want to build 50 cent toothbrushes that you can buy at the airport. Actually that’s like $50 toothbrushes that you can buy at the airport. We just don’t, we don’t want to buy that stuff. We don’t, sorry. We don’t want to build that stuff. It makes absolutely no sense.
Daniel Newman: Yeah, I think, I think that’s absolutely right. I mean I keep saying like we’re not going to be screwing in the iPhones. That’s not what’s going to happen. I mean, do we need to spend multi trillion dollars to build advanced factories that can make electronics and technology in the longer term? I mean, that’s a question we could, you know, spend some time trying to understand. But those aren’t going to be factories full of people. That’s going to be the most advanced robotics and technology in the world. You know, the only people jobs are going to be created are the people digging the holes and pouring the concrete. And by the way, we might be 3D printing that stuff. So the idea that this is like this grand return of all work for the middle class and the blue collar, I just don’t know about that. I mean you look at what Elon Musk has built with these next generation gigafactories and stuff like these things are super advanced. Yes, there are people in them, but it is a fraction of the number of people required to put these things together. So again, the goals and what we’re trying to accomplish, whether it’s reducing the importing of drugs that harm U.S. citizens, whether it’s trying to stop them from stealing all our IP, we might talk about that a little bit later. But in the end the global supply chain does work. I do think in the end there will be a lot of deals made. I kind of stand by my assessment. We’re starting to hear rumblings of deals in India, we’re hearing rumblings of deals in the EU. You know, we’re hearing some, there were some inklings this week that he thinks a deal is going to get done with China. Japan seems to be on the, you know, we all kind of need each other. And I guess the only bet that continues to remain in place with him is that he believes they need us more than we need them in almost all cases, which might be true. But with China right now I don’t see a situation with all this stuff like this. We were just talking about, like how does the average citizen do better by having to absorb some of these costs of a, you know, the 50 cent toothbrush becomes a $5 toothbrush, you know, and then we’ve got all kinds of energy issues, energy and resources and minerals and, and this stuff. And it’s like, I guess maybe that’s why the Ukraine thing was so important, to get all the access to those minerals. But it’s a, it just feels like there’s going to have to be a backing off. But I wonder if that was always the plan. Make it extremely big. Everybody backs off soon. Some. And do we win? Is that a win?
Patrick Moorhead: Yeah, we do. Yeah, we definitely argue that. Hey Dan, if I could put in just one final thought.
Daniel Newman: Yeah, of course.
Patrick Moorhead: You talked about Apple, so, you know, I did spend 10, 20 years at companies that actually made products. I’ve gone through factories in China, Taiwan. I know how this game works. And I do believe there is a design that could be radically automated. We just haven’t put the investment to do that. If we can get EUV to work and if we can get Quantum to work, we sure as hell can come up with a consumer device that is primarily robotic. And I think from a national security perspective, we need to have the ability to, let’s say, build 10% of something that’s super important and then scale up to 100% if we got into a full scale war with somebody like China. So I will leave it there for my commentary.
Daniel Newman: There’s no flip on this one with that particular topic. The dependence we have created on nations that are out of our control to make things that are absolutely critical for national defense, for the advancement of our economy. And I always say, Pat, and maybe I’ll leave it with my words, that national security is economic security and vice versa. We can’t untie those two things. And so being able to make advanced semiconductors. And by the way, you’ve said this, I’ve said this, we should repeat this because people need to hear us when we say it is. The IP, we have to have access and some level of control to the IP. Just bringing it here to be made without the IP only gets us to the current moment. It doesn’t take us into the future. We have to solve for that longer term.
Patrick Moorhead: World War II was won by supply chains of Russia and the United States.
Daniel Newman: There you go. There you go. Remember when we couldn’t even get pickup trucks made for little sensors to move the seats because we couldn’t make enough lagging edge chips, let alone the leading edge stuff. But hey, we all got our iPhones, buddy. We’ve got millions and millions of people slapping those iPhones together. So let’s talk about the next thing. Pat. So Intel Lip-Bu came in. They have earnings next week. This week they announced not just that they’re going to sell the vast majority or not the vast, just the majority stake of Altera, their FPGA business, to Silver Lake. And it’s going to be a JV. They’re going to stay together, but Silver Lake will control the business. They’re going to bring in a new CEO, Raghib Hussain, I think we know him from Marvell to lead that business. Thesis, Pat, at least of mine, is that, you know, Lip-Bu is all about focus and Lip-Bu, as far as I could tell from the time we spent together, this part of the business, while I don’t think he minds owning some share of it, I think he’s going to continue to look to radically change the business, narrow it down and focus it. He understands the future is about AI and is about Intel having a competitive posture in AI and especially in data centers. And not to say that an FPGA business can’t do that or having a stake in a JV, but that I think when he looks at the criticality of raising cash, putting the company in a better situation to spend its efforts and focus on one thing or the other, I think it’s a continuation. And I think this is what I’ve said when he, you know, when I’ve heard him speak the first time actually before I even met him, was that they’re going to double down on focus. So my take on this is it’s not overly complicated. It was really that this was the move that needed to be made. Whether it’s been Mobileye, whether it’s been this, whether it’s been to spin these things out. They were already kind of going down that path anyway. But now they’ve raised some money on it and I think it’s maybe at a valuation a little lower than what some people think it should have gotten. But given his, you know, kind of first hundred days out of the box, I think it’s a smart move to show, hey, we’re going to, we’re going to do what I said. We’re going to be focused and you know, we’re going to raise capital, make sure we’re in a good position to do what we have to do. What do you kind of get on that? Was there a different take?
Patrick Moorhead: Well, first of all, the valuation is about half of what Intel bought it at. I think a lot of that was due to timing, right? Yeah, but I think the luster, well, the priority in the industry and for Intel became on GPUs and accelerators. FPGAs can do some amazing things related to AI and we’ve seen this with companies like Lattice and there’s not a single chip that’s made that’s out there that doesn’t first start with a gigantic FPGA to test it out physically. So the value is there 100%. So I agree with you. I think this deal has been out there for a while. I think prior management didn’t like the deal on the table and the offer they got. And I think Lip-Bu came in, saw what was on the table, saw the cash on hand and took it. So that’s my thought. One final comment on here is that Altera still has a wafer agreement with Intel to use its foundries which by the way, it was a foundry customer before Intel bought them.
Daniel Newman: Yeah, no, absolutely. I mean they don’t really lose a lot of the benefit they get from having access, but they did raise the capital. Of course the biggest benefit is how much cash flow it creates. If it starts to scale meaningfully and it’s creating lots of longer term cash flow now you’ve sort of cashed in, you’re going to obviously have a lower access to, to cash and you don’t have the controlling interest in the business anymore. Having said that, like I, I’ll just sort of reiterate it’s not what I would say putting the main focus on right now would be the best. It’s not what would be best with their main focus. It’s just not where Lip-Bu seems to want to focus the business. I’m going to reiterate that I think it is good that they get narrower, more focused and they raise as much capital as they can because they’re going to need it. So let’s talk a little bit about Elliot Pat. HPE has had some really good success, but the stock has sort of suffered. I think some people think it hasn’t quite met the moment with AI in terms of comparatively to say Dell, who it’s gotten a lot of attention. Even SuperMicro. CEO Antonio Neri, we talked to him in Davos. He was pretty upfront. You know, they had a mechanism and a methodology to how they wanted to approach this. They of course are doing things through Green Lake and wanting to do things as a service. They’re not necessarily trying to be just a volume player in AI. But to some extent I think the market feels maybe like it missed a bigger opportunity. It didn’t pull in as much revenue forward. It doesn’t have, by the way, they’re starting to, I think they got a, didn’t they get a big order from Tesla? But I think I read that I’ll have to double check that in the show notes. But you know, does HPE need a big backing? Does Elliot coming in change the calculus in your mind at all? Because the market liked it. I mean it saw a nice 6, 7% bump on it.
Patrick Moorhead: Yeah. So first off, I just want to jump in and just a little background. Elliot Management, they’re an investment firm. They come in and target what they call distressed securities with complex situations. Okay. They come in, they take a steak, they stir the pot. They announce that they have a stake, the stock that goes up. And then they try to go in and make changes. And you know, some of the stuff that Elliot gets behind seems to make a lot of sense. Other stuff makes absolutely no sense. So for instance, you remember, you know, 2019 they said that HP and freaking Xerox should merge. I thought that was the dumbest thing I had ever heard. You know, in 2021 they came in and took a multi billion dollar stake in Dell Technologies. And you know, whether or not it was Dell that did it based on what they recommended. But you know, VMware was spun off. You know, there’s a capital return program that was announced. I mean, they’ve hit Twitter, they’ve hit Citrix, they’ve hit SAP, they’ve hit Pinterest. Right.
Daniel Newman: They’ve done Dell and Salesforce.
Patrick Moorhead: No, yeah, I just talked about, I just talked about Dell.
Daniel Newman: Okay.
Patrick Moorhead: So yeah, they’ve hit that EMC back in 2015 which ended up EMC getting sold off to Dell for $67 billion. So you know, some of the times they hit it and some of the times they don’t. And this time, you know, they’ve gone out of their way to say, hey, take out Antonio Neri. In a very similar way that, you know, they wanted to remove Jack Dorsey from Twitter. And to me, the way you have to look at this and compare is what year from a return standpoint. Do you want to look at this? Right? I think that they talked about year, year to date. And you know, year to date, you know, HPE is down 30%, Cisco is down 5. In the same time period, Dell is down 30%. So year to date, very similar to what Dell did. If I take that out a year versus Dell, Dell’s down 26%, HPE is down 9.8. If I go out to five years, Dell is up 322%, HPE is up 60%. And then if I compare that against Cisco, HPE actually has a 2x advantage on Cisco. So it all depends on where you are looking from. And there were some discussions about this huge networking acquisition that they’re going to make, does this make sense at this point? Strategically I can’t fault HPE. Like do you want to be a super low cost volume driver where the margins are typically lower? Do you want to go full stack software capability, value add that’s the other. And strategically I like what they’re doing. I haven’t seen a lot of discussion about the strategy. So this has been more about, I think the execution, Dan.
Daniel Newman: Yeah, I saw that too. Do you know, I was just reading a quick note about it. 14 CEOs since 2022 have left companies that Elliot has taken a stake in. So you kind of mentioned the push. But I have a feeling there’s an agenda there. Activist investors is really the word that we would use to describe this. I think your zoom out was great. The zoom out of, you know, over five years, 60% is not a bad return. Having said that, we have been at this massive AI moment and I think people want more. Of course they do. They always do. And it’s probably important to note that Elliott doesn’t always get it right. Like you said, you mentioned the, you know, kind of wanting to put bad deals together.
Patrick Moorhead: What a nightmare.
Daniel Newman: And if you’ve read about the kind of activist investors and how things go, I think, you know, Michael Dell’s battle with Carl Icahn is probably one of the best in history. Is, you know, and in the end I would, you know, I don’t think it would be bad to be either of those gentlemen.
Patrick Moorhead: But I don’t know, man, the return on Carl Icahn, I mean that guy is in trouble. Michael kicked his ass all over the place. And, he’s struggling.
Daniel Newman: Well, no, that’s where I was going to land. I just mean like, you know, it’s kind of a joke, like when Elon Musk loses like $30 billion and everyone’s laughing. I’m like, you know, he still has 200 left. I mean, he’s doing okay. So. All right, buddy. This is the part where we have as much fun as anybody in the world. Pat, there’s a heck of an argument. This really probably should have been the top of the Decode, but it became The Flip because, you know, maybe you and I have a slightly different viewpoint on the topic, but this whole China H20 Nvidia thing, I mean, how much fun or pain is the world in right now as it tries to discern whether or not we can keep selling not just Nvidia, but AMD, Intel and other advanced chips into China? Let’s run The Flip. Did you win?
Patrick Moorhead: It depends if I win or lose. Like what am I supposed to be arguing here again, Dan?
Daniel Newman: Well, I mean I, I think essentially you’re arguing that we should keep selling those chips to China. That the right thing to do is to keep them with these lower powered chips that we’ve designed for their market.
Patrick Moorhead: Yeah, that’s exactly what I think we should be doing. And here’s why. Right, it’s a very simple equation here. Everything that we can sell China that’s underpowered from Nvidia, Intel and AMD is a good thing because we’re keeping money that could be used for R&D with Huawei, with SMIC to develop their own stuff. Now I do believe that the Chinese are going to develop their own stuff on their own and they will continue this. But, why fuel the fire? Now, while it’s easier for the largest folks in China to get around CUDA and use either abstraction layers or something like Pytorch. There are businesses that have used CUDA and it would be hard for them to get off, but, but not impossible. And you know, every time we think we’re going to slow down China, it never happens. I mean, look at, on the smartphone SoC, the Kirin 9000X. Right, they got cut off from TSMC and they built an advanced 5G SoC. SMIC keeps going on chips, 7 nanometer class chips, using equipment. Before a lot of these rules went into effect and even after these rules went into effect, you’ve got Chinese drones using banned US components out there. You’ve got China that continues to use US sourced FPGA’s memory RF front ends like they’ve skirted everything. And I just don’t think this is going to slow down and just puts an exclamation point, Daniel, on why we shouldn’t fund the R&D of Huawei is this latest Huawei AI Cloud Matrix 384. And even, you know, Dylan Patel over at SemiAnalysis says, hey, it’s China’s answer to Nvidia’s GB200 NVL72. What too many people are grasping on is looking at the chip itself, okay, which is, yeah, it’s not even as performant as an H100, but that’s losing the plot because as we saw from Jensen, this is a rack scale problem. And Huawei built a rack scale solution that has 2x, 2.6x lower flops per watt as a chip and as Iraq takes a lot more power. But guess who creates a third of the energy out there? It’s China, who has built 30 nukes at the same time the west has built three. It’s China who continues to build coal fire plants, generate electricity. In China, electricity is not an issue. And what they did to get the full rack performance out, and I’ll call it the fleet performance is everything is optics. You know how Jensen talked about, oh my gosh, we’re fixing to go optics here. Well, guess what? They’ve already gone full optics in a scenario where every accelerator can talk to every, every accelerator. So this is just yet another example. We should be feeding detuned G20s Mi308s and Intel Gaudy 3s right into China to keep them hooked on this, keep them hooked on CUDA.
Daniel Newman: A lot of your arguments actually make my arguments, so. I really appreciate that, Pat. But first and foremost, it’s not our job to continue to fuse fuel and fund China’s war with the United States. We are not allies with this country. This is the same country that’s been hacking our infrastructure. This is the same country that supports efforts in other parts of the world and supports the Houthis with satellite information that can be used to harm our Navy. We are in a major trade war. They are withholding energy from us. They’re withholding resources and minerals from us. And they have been unfairly doing trade with us for a long time and undoing a big part of the American economy while achieving its own global objectives and doing so very, very promptly. Now, again, this has been good for earnings and been good for Wall Street, but it hasn’t been good for our country. We talked earlier about IP. They’ve stolen everything from us. You know how many editions of software they buy from us? From any one of our vendors, they would buy one, then they would copy it and steal, seal it. That’s what they would do. Right now they’re in the process of absolutely. And reverse engineering everything we do. Whether it’s CUDA, whether it’s our chips, whether it’s our networking, whether it’s our optics. We have the technology leadership and leading the world in technology is our economic security. Does selling China a tuned down H20 chip change its resolve to build the next generation of Huawei chip or systems? Hell no. Absolutely not. They’re doing this anyway. And while the $5 billion, that’s nothing, China can make more impact than that just by impacting its own currency on a daily basis. It prints more, it can create more. Remember, these companies are not operating in a silo from China. China funds its companies. So if this is of interest to China, the reason they’re building 30 nukes while we build three is because China pays for it. So while we have $50 billion chips ACT bills that get no funding for three years, they’re moving forward.
So I just find it laughable as a whole, we can sell them these, we cannot sell them these. They’re going to move just as fast. The real question is whether or not they can actually succeed without our software. CUDA is the platform the developers build on it. Now over years, Pat, we’ve heard Microsoft can’t be successful with AI chips because they don’t have CUDA. Broadcom chips won’t work, they don’t have CUDA. Amazon, they’ll never be successful, they don’t have CUDA. Nonsense, nonsense, nonsense. Over time, the companies that have the resources to build software using higher levels of abstraction will actually do it. Absolutely do it. China will do it as well. So the question is, how fast do we enable it? Last point I’ll make. And I have a lot more. I could do it. The Flip’s got to stay short. OpenAI and Elon Musk are tweeting, X posting that they have GPUs melting, they don’t have enough capacity, and yet we are using wafer. And I know it’s not the same and I know it might be some retooling. And I know we need different memories and I know we would need more. But what if Nvidia, instead of using capacity to sell, tune down chips to China to help our enemies become more successful in the world’s most important technology that will deem the world’s economic order for the next three, three, four, five decades. What if instead we built the chips that were needed by US companies that are screaming and crying for more, more GB200’s for more Blackwell, they are ready to take more capacity. Why are we using the capacity? Why are we using wafers? Why are we using memory? Why are we using our R and D to build something special for China when we could be building and making sure great US companies have all the AI chips they need to power the future? All right, so what do we really believe, Pat, now that we’ve had that little debate? That was fun. That was fun. I actually lost my train of thought. I hope they edit that out, but maybe they should leave that in because it would be unfair if I look better in my debate while they didn’t slow me down, while. I forgot my point, by the way. I forgot my point, everybody. I had to stop there for a minute because I had another point to make. So Pat argued it really well. What do you think? Like what’s your real take on all this?
Patrick Moorhead: We should keep selling it to them regardless.
Daniel Newman: Make the money, take the money.
Patrick Moorhead: Any, any dollar that any profit that Nvidia, AMD or Intel makes on their accelerators gets fed back to those companies and not to Huawei. But you know, you made a pretty good argument about, I think the degree of R and D or at least that’s where I, I thought were, you know, there’s this moneyless, you know, bottomless money pit. But yeah, as we hand wring over checks we haven’t even written yet and the Trump administration, you know, calls the Chips Act to give away. You know, China is, you know, writing 100 billion dollar checks and printing money to keep up. You know, it’s sad. And listen I want less spending, but this is the type of spending that just makes sense.
Daniel Newman: It’s funny. It’s like I was kind of laughing because a lot of things you said kind of made my same point. In the end, I just don’t care. I mean, what I do believe though is I don’t think H20s are what they’re going to use to create weapons that are going to match our weapons with what we can build with the most advanced. But I also think to some extent it’s just super interesting to watch the whole world order change where suddenly what’s kind of the liberal elite believe that we should be enabling China and we, you know, where at the same time, like we have US based companies that literally can’t get what they need right now to build AI and there’s only so much capacity we can, we can create right now. But the other thing is like China’s, they’re going to do it. This is where I just basically say they’re going to do it either way. Like so, the question is where I really think it wasn’t so much my debate whether to sell it or not, but my real debate was like the belief that this is going to actually make them go any faster or slower. I think they’re going to go as fast as they can. They know what to stake. These guys, China’s smart. You know, we underestimate, overestimate at different times. But like, look, anyone that believes they’re not all in on building this is absolutely lost their marbles. So the real question is how much are we enabling them and how much does a handful of billions of dollars of tuned down chips? And by the way, what about all the chips they get that they shouldn’t get Pat? Like neither of us really argued this in our conversation. But like is it the H20s that are really the problem or is it all the chips that a lot of people believe? Now again, we can debate. You and I are not saying they do, but a lot of people believe and there’s a lot of evidence out there that would indicate that they don’t only have H20s over there, they have 100, they have H200, they have Blackwells, they’re getting all of the AI chips into China.
Patrick Moorhead: Yeah, there was a day that you could do that and then they started this. I like to call it side loading. And how many times have we talked? I mean this is essentially the form factor of an HGX, what we call a chip or a card. Right. And you know, you put, you know, four of them in there.
Daniel Newman: What kind of pills are those? It’s a lot of pills.
Patrick Moorhead: Yeah, this is betaine, HCI, pepsin, which is essentially to increase the acidity in my stomach.
Daniel Newman: All right. I didn’t know if that was like methylene blue or what you were doing over there, RFK.
Patrick Moorhead: I have taken methylene blue, by the way.
Daniel Newman: Is that good? Is it working?
Patrick Moorhead: I mean, it helped me. When I was in my dark days, Remember, zero energy, Pat.
Daniel Newman: Yeah, yeahI was running laps around that guy. This Pat taking me to the mat on all these debates is killing me.
Patrick Moorhead: Yeah, the low energy Pat was a lot more fun at night too.
Daniel Newman: Yeah, he was a miserable son of a. Anyway,
Patrick Moorhead: Well, in the morning.
Daniel Newman: Yeah. All right, good debate, good flip, everybody. Remember, what we post on Twitter is probably on X is probably closer to what we really believe. But these things are a lot of fun. Just be nice to people though. Stay, stay nice. You know, because in the end, like we may find we agree on some things and don’t agree on some things. That’s, that’s made the world go round for at least a couple of millennia. All right, Pat, let’s wrap up with some bulls and bears. So we’ve talked a lot about different kinds of markets here already, Pat. You know, one of the things is we had bank earnings this week and you know, You and I aren’t bank equities people. We don’t cover the market. But it’s kind of interesting, you know, these policies. The Trump whipsaw has actually been, you know, helping the banks, it seems. I mean, we’re a little early to see exactly what all the impacts are of these. But the five largest US banks pulled in $37 billion in trading revenue this quarter. First quarter. Which basically means that the lunatics in the global casino. What did Trump say? No, President Trump said no crying in the casino. Are clearly loving this policy volatility. And there must be some really strong belief in these actions. This is not one way. This is not an escalator down, this is not an elevator up. If people believe that the volatility is going to be lots of back and forth and they’re trying to make money on the trade.
Patrick Moorhead: Yeah, listen, everybody who doesn’t trade out there, anytime anything is sold, they make money. Cha ching. Anytime something is bought, which because to sell something means somebody bought it, there’s a cha ching. They’re hitting on both ends. So yeah, I mean they’re absolutely going to crush it. Right. And I think the best indicator is trading volume. Right. And trading volume is off the friggin roof. You, you know, just based on the whipsaw.
Daniel Newman: Yeah.
Patrick Moorhead: 10%, 20%, 145%, 245%. iPhones tariffed, iPhones not tariffed. MacBooks tariff, not tariffed. I mean, it’s ridiculous.
Daniel Newman: It’s funny because I don’t trade, I invest. I’m a long guy. Like, I believe in things, so I buy them. Then I hold them forever, you know, My poor wife. You know, I just, like, she’s stuck with me because I invest. I’m not a trader, but like, if you’re a trader, I mean, these kinds of markets. First of all, I read this a lot, but bear markets make a fool out of bulls and bears because, like, just when you think it’s just going straight down, you get those days like last Wednesday. But the other thing that’s really interesting, Pat, just kind of on markets, though, is while trading is going crazy, people are probably trying to make money on option volatility. Zero days, they’re on a piece of news to break and they’re in there. It’s the casino. I keep saying that because they’re like, it’s, it’s almost gambling at this point, like to an extent that I’ve never seen. But we’re also seeing something change that maybe you and I didn’t. We expected deal making to happen in a big way under the Trump administration. We expected, you know, more IPOs. You know, we’ve had a couple of IPOs, but we expected more M and A to move through. What do you think there? Because, like, Goldman Sachs is seeing their deal revenue is getting crushed right now. It’s down 22%. We saw multiple. It was Klarna. A couple of other IPOs that were supposed to happen got kicked out. And the only ones that have gone are Webull and Newsmax. And have you seen the idiotic action on those? I mean, we saw Newsmax went up like 800%. I don’t know if that’s right, but it was some dumb amount. Webull was up 365%. And then these kinds of more stable companies that were supposed to IPO are either kicking the can down the road, they’re not going to do it right now.
Patrick Moorhead: Nobody wants to do anything until they figure this out. Even if you don’t sell toothbrushes at the airport, you know, you’re at risk. So nobody wants to screw up their potential valuation. Right?
Daniel Newman: Well, I mean, it does feel like going and ringing the bell right now. I mean, gosh, I said that on a couple that happened, though, and those companies went parabolic. So I don’t know, I don’t. No crying in the casino, Pat. So, hey, as we wrap this show up today, I’m gonna play a little game here at the end. And let’s play When’s there Gonna be a Deal? So just for a little fun out there. I’m not asking you to be, you know, held accountable to this, but I think it’d be fun for our audience. So what do you think the first trade deal will be and when do you think it’ll get announced? Like, I don’t need specifics, but, like, if you had to guess a country and a date, is it going to be this week, next week? What is your take? Any guesses?
Patrick Moorhead: Something has to come out next week or you’re going to see everything just start to crumble. Because we still haven’t put, you know, 10, 20, 30% in there yet.
Daniel Newman: Yeah, I think you’re right. I think just from what I’m reading is, you know, I’ve got three on my list, on the short list that I think could. And by the way, I’m counting on markets people care about. This isn’t like some deal with Guam. Wait, is Guam a US Territory? Forget about that.
Patrick Moorhead: Bestie I gotta roll, buddy.
Daniel Newman: All right, so I’ll wrap this up, but I’m gonna say it’s probably the EU. We’re gonna get a surprise quick deal done with the EU and it might happen in the next week or two. All right, everybody, thanks so much for joining us today. This is the Six Five, episode 258. Hit that subscribe button. Be part of our community. Appreciate everybody tuning in. We’ll see you all soon. Bye now.
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.
