Tough times for tech as Apple AND Google face legal woes. This week on The Six Five Pod, Patrick Moorhead and Daniel Newman dissect the major developments shaping the tech landscape: From the DOJ’s challenge to Google Chrome’s search dominance and Apple’s legal battles over its app store policies. Get the expert breakdown on the implications for consumers and the future of these tech behemoths. The handpicked topics for this week are:
- Google’s Legal Challenges and Antitrust Issues: Discussion on Google’s predicament with the DOJ’s demand to sell Chrome, plus the examination of antitrust implications and the potential impact on consumer choice and competition.
- Apple’s Legal Setback and Potential Criminal Charges: Analysis of the judgment against Apple’s in the Epic lawsuit regarding app payment services. Insight into the judge’s strong stance against Apple’s non-compliance and the possible pursuit of criminal charges against its executives.
- Major Announcements from Nvidia and IBM: Overview of NVIDIA and IBM’s significant investment announcements at the White House and a discussion on what these investments could mean for U.S. tech infrastructure and global competitiveness.
- Taiwan’s Ruling on TSMC’s Chip Production: Exploration of Taiwan’s decision to keep TSMC’s leading-edge chip production local and the potential geopolitical and economic impact of this ruling for global semiconductor supply chains.
- Intel’s Foundry Day and 18A Variants: Insights into Intel’s Foundry Day announcements, including updates on 18A variants, plus a look into Intel’s strategy to attract major fabless customers and how this could affect the semiconductor industry.
- Six Five Summit Announcement: Announcement of the upcoming Six Five Summit, “AI Unleashed 2025” from June 16-19. The opening keynote will be delivered by Michael Dell, along with a lineup of other prominent speakers. Visit www.SixFiveMedia.com/summit for more information on the virtual event!
For a more 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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Disclaimer: The Six Five Pod 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: Unlike the US China is China first. Okay? The US is not US first. China is China first. If China had a product and a part and a capability that was as good as Nvidia, they wouldn’t care about Nvidia building a new specialized, tuned down piece of, you know, piece of hardware to, to, to into their market. They need it because they need it. And I’m just saying there is a certain extent that at some point in the future. Yes, maybe Nvidia will not be needed there. They’re not as close as some of these headlines are leading on.
Patrick Moorhead: The Six Five weekly show is back. We are jacked. We’re back from travel. Big week here, Dan. How are you doing, bestie?
Daniel Newman: Better than last week. I don’t know if anyone noticed that we didn’t have a show. I hope some people noticed that we didn’t have a show. But I think I tweeted something along the lines. By the way, I gotta stop calling it tweets. I don’t think tweets exist anymore. I posted something on X along the lines, if there’s nothing more humbling than spending the night praying to the porcelain gods. But my son brought home a great case of norovirus and I don’t think I’ve been knocked out that hard for about a day and a half in a long time. So I’m sorry. I missed everybody. I, I missed you. There was a lot to cover last week, but we can make it up to him, right?
Patrick Moorhead: Totally. And we’re going to make up for him on this. We’re going to cram two podcasts into one to keep at the same time. It’s great to be back. I did miss our show. I was worried about you. I pretty much, you know, I think you got sick once since I knew you and I thought you had some super DNA out there. You didn’t even get the virus.
Daniel Newman: I’m not that.
Patrick Moorhead: I’m not going to say the P or the C word to get us flagged, but you just never got sick there. So it is true. Dan is not actually a robot. He did. He can get sick. But listen, we got a great show for you. I hope you like the new format here. We like the new format. It allows us to hit the topics that we like the way that we want it. We’ve got The Decode where we go in and pick apart the biggest news of the week. We might even go into last week a little then we hit The Flip where Dan and I do a counterpoint on topics and positions that we don’t necessarily believe but it makes for really good entertainment. And then we finalized the show talking about markets, Bulls and Bears. And it was earnings week this week and last week we got a lot of stuff to talk about. So let’s jump into The Decode. All right Dan, first topic here: Google is on the hot seat in a lot of different places. But the DOJ had some new news that came out. You know, they need to sell Chrome. Right. Which just seems pretty wild here. Looks like OpenAI is interested in buying Chrome. What’s going on here? Is this just day to day tech giants being attacked for being big and successful?
Daniel Newman: Yeah, we may even talk more about this in some ways in The Flip path, but this is a wild one. I think you and I have talked a lot about this on our shows in the past, but kind of like that antitrust has hit this inflection, right. Historically in the Ma Bell era, antitrust was all about, you know, sort of, you know, driving competition and also protecting consumers. And these things were somewhat mutually exclusive, you know, but now they’re not. And so Google is in this interesting predicament. They certainly have done a job for the DOJ of showing that maybe Google, you know, we’re seeing the same with Meta, have done some things to try to reduce competition that maybe do deserve some attention. But at the same time it’s a big company doing big company stuff, building products that people love, connecting experiences across a platform. And as you actually try to unravel these things, I think the consumer somewhat takes it in the chin. It’s like, yes, potentially maybe we’d have more competition. And the other thing I can’t help but think about is like, so you’re going to have Chrome split off Chrome, which is, by the way, you know, Chromium Core. I think Edge is built on Chromium, by the way, the Microsoft browser. And you’re going to give it to OpenAI? So what are we going to trade monopolies for? So you’re going to give one technology that’s being used by a company to another so they can also abuse it. And so that’s why I kind of bring up the point about where we need to go with antitrust. Because if it’s about creating more competition, I don’t know that all of a sudden flipping Chrome or having Google share all of its ad data with rivals necessarily solves the problem that you’re going to have big companies creating these really deep, meaningful, integrated experiences popping up with a bunch of new competitors.Pat, like, I don’t know if you use, what do you use Firefox still or what are you on over there?
Patrick Moorhead: I’ve been on Edge for a couple years, Dan, and not just on Edge like I’m nervous, but using Microsoft Edge..
Daniel Newman: Both, right? So, I mean, look, I think it’s interesting because I’ve talked to a bunch of press about this. I’m sure you have too. It’s like I just don’t see a solution where they break it up and it doesn’t –it’s not like aliens. It doesn’t just come back together as a bigger, badder version of something. So I think it’s happening. I think there’s going to be some remedies. I think it’s going to be more financial. And like I said, I think unwinding this. God, it’s going to be a disaster.
Patrick Moorhead: Yeah. You know, Apple got hit with this epic. And not epic, like epic, like big. But they lost big time.
Daniel Newman: This past week, right?
Patrick Moorhead: Yeah. Violation of the 2021 injunction basically around the ability for app providers to use outside app payment services. And what Apple did is instead of complying, they put a 27% commission on it and then put wording that, you know, you have to be an idiot to actually click on that link. The discovery material was awesome. There were discussions about Apple executives, you know, saying, oh my gosh, we should amp up the wording so nobody wants to click on that link. And I couldn’t believe it. And probably the biggest thing is, was the wording that this judge laid out. Right. You know, let me, let me quote. Apple’s ongoing efforts to obstruct competition will not be accepted. This is an injunction, not a negotiation. Once a party willingly ignores a court order, there are no second chances, quote, unquote. Judge Yvonne Gonzalez Rogers. And here’s the final thing I’ll put out there is they are actually seeking criminal charges against Apple executives for not complying with this ruling.
Daniel Newman: I mean it was damning though. I mean it was basically like I was reading some of that, the VP of Finance and this is like what white collar crime looks like. We’re gonna basically just abuse the system. And I know this started with talking Google, but I mean right now it is kind of in the crosshairs. These big tech companies. But the difference is some of these are like complete mal intent, right Pat? Like you’re talking about where they ignored it. They basically could decide to basically act criminally potentially. And then the other is like we built a product that’s super sticky and gives us a crazy advantage. And then like the deal with Samsung to put Gemini on, on these, these phones for instance, like you’re buying sort of eyeballs in market share but like when does that become monopolistic?
Patrick Moorhead: Yeah, it’s good conversation. We’re gonna hit it more in The Flip. So yeah, I’m not being the world’s best moderator. Hey, let’s hit the second topic. We saw this in some of the previous weeks where technology companies or companies in general would go to the White House and make these major announcements out there. We saw both Nvidia and IBM make some pretty big announcements out there. And it’s interesting. I’m always looking for what they announce? What is the time frame, what are they going to actually spend the money on? And then how does that compare to what they were already going to spend? We’ve had this conversation with Apple, we had this conversation about a couple other companies that made some, some big numbers. But essentially let’s start off with IBM. 150 billion dollar investment over five years. Quantum computing, mainframe manufacturing and R & D. I mean that, that number is absolutely mind numbing. I mean they do spend a ton on R and D and under IBM CEO, they’ve, they’ve amped that up significantly. A lot of this or all of this investment looks to be around the Poughkeepsie, New York Hudson Valley area, which Dan, you and I have traveled to, many times. I was really impressed by the size of the number. Got no idea how it actually translates to what they were already going to spend.
Daniel Newman: Well, I think right now there’s a bit of collection going on. Right. Did you work out this morning? Are you just chugging protein?
Patrick Moorhead: Yeah, I’m chugging protein. I was pretty rushed. You know, I’ve got so many handicaps now. I got a bum shoulder, I got an inguinal hernia that I’ve got to get surgery for. So it’s like this limited amount but, I hit legs without doing squats or deads. Right. That’s kind of boring.
Daniel Newman: But you’re, you’re smashing the protein because you hit the weights.
Patrick Moorhead: I did. No, I smashed the protein every day. Yeah, Dan, I’ve got to get 170. And I did change my diet though. They pulled down the fat, they amped up the carbs, believe it or not. Yeah.
Daniel Newman: Energy’s got to come from somewhere. Sorry, I fell off. But like, but basically I think we’re on this marching parade right now. Because it’s in X’s of trillions now. And the point is a couple of things. I think part of the administration’s goal is to sort of steady the nerves of the market, that these companies are willing pharmaceutical companies, manufacturing companies, technology companies. I think part of it is tech diffusion right now. Right. Like whether that’s been TSMC, which was one of the early commits. And we’ll talk more about that here. IBM being more of a slightly different type of research org, but bringing more investment here. Jensen got up at the White House, told stories. Should have pulled the mic down, by the way. The mic was covering his face. It was funny. But I thought he did a nice job. Supercomputers will be built here in the United States because right now I think there’s. It sort of. Isn’t it kind of interesting how it started like Howard Lutnick talking about bringing back people to screw in iPhones here. And I feel like the conversation is evolving a little bit to more like we want to build the most advanced robotics manufacturing facilities. We want to kind of get off the hyper dependence on Asia for all the finished goods and manufacturing and key elements and minerals and things. It does feel like it’s starting to come together a little bit, though. I’m not saying your point, like we’re getting back to.
Patrick Moorhead: We’re getting back to sanity where we realize we don’t want to do tennis shoes and underwear. We want to build stuff that makes sense for our country. And listen, I’ve talked to people who have direct access to Trump on a weekly basis and they tell me that Trump brings in warring parties to get two sides of the view. And then Trump picked Navarro and then he realized that, that it was the wrong choice and that Lutnick was right all along. And what they’re trying to do is unwind some of the.. I’ll call it the stupid ___. That was said and done, including Vance’s brain dead peasant comment about Chinese manufacturing. Like, you cannot be this stupid. But he was when he said that. So.
Daniel Newman: Was it Lutnick or Bessent, that he’s kind of gotten behind? Just curious.
Patrick Moorhead: Oh, sorry, sorry, sorry. Lutnick or Bessent. I don’t know. Probably Bessent. And thanks.
Daniel Newman: Because it was kind of like Navarro Lutnick with stupid board with a dumb equation.
Patrick Moorhead: Yeah.
Daniel Newman: Completely set the whole thing ablaze. And then you’re right. Cooler Heads of Bessent, who I think is doing the China negotiation because. I’m more making sure even for my own sanity, since you had that kind of close to Trump interaction.
Patrick Moorhead: Yeah, that’s good by the way the interesting stuff about the Nvidia thing is most, most of what Nvidia announced is already in TSMC’s announcement. Right. Because if you look at 500 billion over four years, TSMC, Foxconn, Wistron, Amcor and Spill. So TSMC makes the wafers. Amcor and Spill do the packaging. And Wishtron and Foxconn are, I believe, probably doing L11 assembly. The only question for me, and I’ll be very impressed if we do this, is PCA and PCB. Well, actually PCB doesn’t matter. PCA is actually putting the chips on those green boards that go into these racks. Then it’ll be like, wow, US manufacturing is back. Now Nvidia can do this. When you have the margin structure they have, which I think average margin is what Corporate margins are 76% Dan, on the gross or in there somewhere. I know there was talk about it declining, but my main point is here, big number, double counting. I still need to figure out if they’re doing PCAs number. More because it’s cool. And there’s not a lot of PCAs done in the United States anymore, aside from national defense with companies like Jabil.
Daniel Newman: By the way, our team put together this really interesting tariff watch report that had a cogs impact by the vendor. So you can actually see we built a barometer. Maybe the producers can sort of flash that up, you know, from AMD to Western digital whose cogs are most impacted. The qualcomms, Nvidia’s broadcoms, AMDs, Pat very little impact to their cogs. Yeah, tariffs but some of them are getting hit a lot harder.
Patrick Moorhead: Exactly. Let’s move to the next topic. Dan, I’m going to tap you on this. Taiwan has ruled by law that TSMCs, the finest wine out there, is N as compared to N minus 1. Bleeding edge needs to first start in Taiwan. Why is this? Is this Silicon shield? Is this just like making Taiwan great again with jobs? Right, but their version of it. What’s going on here, Dan?
Daniel Newman: Make, you know, Taiwan’s not a vowel, so it just screws up. You can’t call it mataga, or something like that.
Patrick Moorhead: But you did try and I appreciate the valiant effort there.
Daniel Newman: Interesting. Pat, I still want to say n minus 1, maybe think of it this way. If Pat’s the world’s best moderator and I’m the world’s second best moderator, I’m in minus one. Right. I mean, that’s how we think about it. But I think it’s pretty straightforward. Funny. It’s actually incredibly convoluted. That’s a better way to explain it. Taiwan, first of all, is dependent on the world to help defend it. A large part of why Taiwan and the whole world defends Taiwan from China is because Taiwan leads the world in semiconductor manufacturing and most of the leading edge chips are made there. There is diffusion here. So the diffusion is bringing the most innovative R and D here. You and I have talked about it on the show a few times over the last month or two. Will TSMC bring its most advanced nodes here? One and then two? Will they bring R and D centers here, enough meaningful R & D centers here to actually maintain, in the event that something happened in Taiwan, in the event that, you know, they needed to continue. And the bottom line is Taiwan, it’s a national security risk. It is a national security risk to Taiwan to basically completely diffuse its best innovation to the west without having a whole bunch of security assurances that I’m not sure were there from a negotiating standpoint.
Patrick Moorhead: Yeah.
Daniel Newman: So basically I think what we’re going to get is Taiwan’s going to use this as a bargaining chip in any future negotiation. Where we’ll land on that, I don’t know. But they absolutely cannot play that card. Sorry, they cannot bring the end here without having that card played and having a very significant and long term commitment from the world to defend it. And it also gives it a whole bunch of economic advantages to have that differentiation bringing in here might take some of those economic advantages away to the island.
Patrick Moorhead: Yeah, Dan, it’s interesting. If nothing else, I hope this stokes the conversation. The whole foundry conversation where it’s okay. Foundries do two things. They make transistor IPs and they make stuff. Okay. They make wafers. And okay, maybe a third is packaging. But even TSMC doesn’t do all its own packaging. The key part there is that if Taiwan were to be invaded and cut off, time would stand still in the United States. Right. TSMC could only. There would be no more new nodes because all of those engineers that do the transistor and I think TSMC CEO cited, I think 10,000 of those people in Taiwan and then you have more implementers in the United States of that intellectual property. Time stands still an interesting, I don’t know, I thought through this and I’ve talked to some pretty higher level people up in the foundry economics and they said hey Pat, if I look at TSMC Leading Edge Foundry and Intel Leading Edge Foundry, most of that equipment is the same make and model in terms of what they do, right? Whether it’s, you know, Lam Research, KLA 10, you know, it’s pretty much not the same and you’re putting a different recipe through. You might have different bells and knobs and whistles or you could hypothetically run an Intel process on TSMC equipment. So I just hope it matures the conversation because right now it’s, it’s pretty, it’s pretty dumb.
So hey, let’s, let’s move forward to the final Decode topic and that is Intel’s Foundry day, which they called Direct Connect. This was Intel Foundry’s event to come out and give updates on customers. I heard that Jensen Huang showed up and gave full commitment. No, I’m just kidding. That is not what this event was about. But it was to show right, a humble intel. What’s the word that Lip-Bu Tan used? You know, basically under commit and over deliver. So we’re not going to see Intel be making what boisterous claims out there. But let me decode this, right? We saw Intel 18A which, listen, you and I have always said is in progress. At that point, we never Babe Ruth it because you never can do this, but it’s on track. And what we did see though is we saw more 18A variants, right? We saw more details in 18AP, we knew that existed but they’re expecting another 8% performance per watt improvement. Broader market. But it’s design rule compatible with 18A. And what I’m hearing in the industry is 18AP is really what the Foundry customers want as opposed to intel when it comes to things like Panther Lake. What was new though was this thing called 18APT which supports direct 3D where you could actually have vertical die stacking and a couple other fancy packaging types of implementations. And this to me spells like chiplet goodness.
Daniel Newman: But what we want right away is an announcement for a wafer deal.
Patrick Moorhead: Yeah they have some but it’s not an, I call it the anchor tenant. Yeah, they don’t have an anchor tenant for Foundry aside from the Intel design team.
Daniel Newman: And I feel like that is such a drag. It’s like the boat anchor pulling forward because the tech looks so promising. And, you know, I kind of said something earlier this week, like, it’s been too quiet about Intel while we’re busy talking about TSMC and Nvidia and building here and doing this. It’s like right here in our own backyard, we’ve got a company that wants to build leading Edge chips in the United States, and yet we can’t come up with a policy slash financial circumstance, slash collaboration that really creates the lucrative environment for our biggest fabulous designers to just say, yes, we’re going all in. And, again, there’s risk, right? There’s a lot of risk. We’re seeing it even with the GB3 hundreds and some of the things that Nvidia are pulling back on from a modularity standpoint to make sure that these things just work. And that’s all TSMC. Now you take it over to Intel. Like you said, it’s not like a direct port, like, oh, we’re just gonna flip it over across the street and start building these things. Yeah, but like, man, I just feel like the whole trajectory of Intel’s business changes when one of these big fablesses just say, like, Qualcomm comes out and says, we’re gonna do a big volume of our next Snapdragon Leading Edge phone part with Intel. It just changes everything.
Patrick Moorhead: Oh, Dan, you’re 100. Right. And that would never happen. And I like to think of it like the baseball analogy. Like, you gotta get some singles, you gotta get some doubles. And, you know, I gotta give, you know, Kevin credit. Like, he knows that. I don’t think this was necessarily the way that Pat Gelsinger explained it to everybody. So the expectation was that you were going to see Jensen pop out with a leather coat. And he even addressed this at GTC where he said, I would have had to have made that decision three years ago. Which, by the way, three years ago, like, Intel was having a hard time getting 10 7 out. Right. Like, and you’re gonna bank on this new process with a new like, so, so anyways, it makes sense. The two other things I’ll leave it here that I thought were important were details on 14A. Right. 14A is likely going to be the chip that you would see a Qualcomm or an Apple.
Daniel Newman: I mentioned that since it was the 14A event.
Patrick Moorhead: Yeah, no , sorry I missed that. I was probably doing my email at the time. But, I see you look down when I’m talking.
Daniel Newman: I’m texting right now. Just keep going.
Patrick Moorhead: But they introduced a couple new features and you can read this up on your own, but Turbo cells. I don’t know why they renamed Power via Power Direct. Maybe they were being sued by somebody. But it’s an improved BSP technology. Some question over when does high NA EUV come in?
Daniel Newman: I’m just gonna ask that. I heard it’s getting kicked down a little further. Yeah.
Patrick Moorhead: Yeah it’s like they didn’t say it was included. They didn’t say it was included in 14A. It could be in there. Maybe it’s 14AP. Who knows. But TSMC too,they came out interestingly enough, I think the day of Direct connect and said we’re not doing this for 2 nanometer. And their next follow on process.
Daniel Newman: So they’re sending all the machines to China. That’s how the Huawei Ascend already got to be better than Vera Rubin. Can I just, can I just really.
Patrick Moorhead: Quickly please go on a rant right now.
Daniel Newman: Hypothesis like, yeah, I’m hearing There’s a new H20 coming. Like a new, even more tuned out H20.
Patrick Moorhead: Right, right.
Daniel Newman: Can anybody just explain to me in very simple terms, Huawei is about to ship at volume a chip that’s as good as the H100, which is better than the H20. A little different memory profile, but mostly better. And they have this great software, you know, I kind of joke a can that’s got it. And by not shipping H20s, we had instantly turned over the market leadership to Huawei and Huawei would win. But at the same time I’m hearing a new H20 would go into China and it would sell really well. So does anyone see how these two things make absolutely no sense? Like if Huawei is going to already be ramping and building and delivering a great product of its own, that’s going to be China made, China controlled. Why in the world would they want an even more tuned down chip? This chess game is just mind boggling.
Patrick Moorhead: It’s how much work you want to do for the Huawei ASIC versus you already have code that’s screaming on GPUs and all the layers that, and I don’t know if you were being serious or not.
Daniel Newman: Extra sarcastic.
Patrick Moorhead: And the other thing I want to point out about the new cloud matrix architecture, it’s not about the performance of the chip. That, by the way, is quite static compared to its predecessor, the 910B. It’s all about networking, right? It’s point to point. And I don’t know if it’s CPO or just optical connection, but it’s all about that. Each accelerator can talk to every accelerator. Okay. And if you have enough power, you have enough space, forget density. Throw that out the window. If you have the power. Yeah, you, you can, you can do it.
Daniel Newman: China has done incredibly well building its power profile, its energy profile out to be able to suck up three times more power and still get things done.
Patrick Moorhead: Yeah.
Daniel Newman: I just mean the end. If these aren’t actually hurdles, if the software is not a hurdle, if their hardware can be, you know, systematized and brought to scale, if they can de-risk themselves, which China is unlike the US China is China first. Okay? The US is not US first. China is China first. If China had a product and a part and a capability that was as good as Nvidia, they wouldn’t care about Nvidia building a new specialized, tuned down piece of, you know, piece of hardware to, to, to into their market. They need it because they need it. And I’m just saying there is a certain extent that at some point in the future. Yes, maybe Nvidia will not be needed there. They’re not as close as some of these headlines are leading on, that’s all. I, I just, it’s, it’s further away. Nvidia is stickier than most want to admit. The same beef I have about why the Broadcom parts or the Marvell parts or the AMD parts aren’t getting more saturation is because Nvidia is just freaking sticky. It just is.
Daniel Newman: Rant over, rant over. You wanna, you wanna fight now? You want to get into a public firefight?
Patrick Moorhead: No, we did that this morning.
Daniel Newman: Oh, yeah, that was, that was offline. I’m not gonna send the photos.
Patrick Moorhead: I just want to let everybody know that Dan and I, in any relationship, there will be conflict. And Dan and I do have conflict. And then we hug it out. We might even kiss.
Daniel Newman: On the cheek. In case anyone’s wondering, but I typically make him try to out bench me. And I said, look, any amount you want me to put up, pay whatever, you know, in this relationship, partnership, if you want to renegotiate our terms, if you take me on the bench, you can have whatever you want.
Patrick Moorhead: And by the way, I agreed to it. But I shifted the conversation not on weight, but on percentage improvement. I’m pretty sure I’m ahead.
Daniel Newman: You can’t take 40 years off and then use a metric like that.
Patrick Moorhead: Can’t I? I just did. All right, folks, let’s jump into The Flip where Dan and I argue both sides of a topic, but we do not necessarily agree with any of them. Let’s dive in.
Daniel Newman: Fair. Fair.
Patrick Moorhead: All right, we are done with the decode topics. Hopefully we decoded everything important to you. But let’s jump into the flip where Dan and I argue both sides of an argument and even not necessarily agree with any of our positions. Please don’t tweet at us. Please see the mice text on the bottom left. And today we are going to discuss and debate whether AI is consolidating into a big tech oligopoly. That was the word of the week and last week and needs regulation. So let’s Flip that coin. All right, Daniel, you are the regulator. You are for regulation of big tech. Bring it on.
Daniel Newman: You know me, Pat. I am a firm believer that regulation of tech is very important. I think the more regulation, the better. The bigger and more influence the government has over the way private businesses run, the better the economy will work out. Sarcasm aside, we already talked about it on the show. We’ve come to a resolution here. When companies like Apple and Google and Amazon and Microsoft are given carte blanche to take advantage of their strength, size, scale and operating leverage, guess what? They absolutely do. Documentation shows right now, the Apple executives, when they had the chance to take advantage, they did. Do you think it will be any different with AI? AI is just another frontier to create more of the same behavior. Whether it’s been social, whether it’s been mobile, whether it’s been advertising, whether it’s the cloud, software and applications. When these companies get sticky, they continue to raise prices. They continue to make it difficult to eject from what they’re doing. And they will absolutely find a way to use that data to gain unfair advantages in the market. It’s been proven in Europe, it’s been proven in Asia. It’s been proven in South America. It’s been proven here in the US Judges have tried and failed. And what’s happened is that these companies just keep getting bigger. It’s more unfair. We have less competition. We have companies coming up with new creative and strategic ways to buy people out by only buying parts or pieces of their business or just partnering and then shutting things down and basically taking out every bit of competition as it pops up. It wasn’t just Apple. You’ve got documentation of Mark Zuckerberg and Meta even acknowledging that he had gotten too big and that it was probably important to maybe break these things up before it got to be an even bigger problem and they lost the plot of what they were as a company because their big powerful platform was going to get too sticky and it was going to be unbreakable at a later phase, which he expected it probably would need to be broken up with AI being just another driver and it’s going to take even more cost, more expense, more investment. It just isn’t possible. We are going to shut out all the small companies. No one’s going to be able to join this fight.
Who, OpenAI? OpenAI has had to raise hundreds of billions of dollars in valuation and tens of billions of dollars in revenue to create a competitive product. And you’re already seeing companies like Google coming up with ways to embed their AI into their search, which has already been considered a monopoly, or embedding AI into their, into, into their own device with the Android. They are burying it in this stuff. They are making it impossible for new companies to come up. Meta just launched its AI. This is what they’re going to do. They’re going to make it untouchable, unaccessible, too much capital required and at some point it’s going to be unbreakable. Regulation needs to start now and we need more of it.
Patrick Moorhead: That’s a pretty compelling argument Dan, but my gosh, it’s it, you know, it’s wrong and particularly wrong when it comes to AI. If you look at this, the cost and complexity of even doing a frontier AI model, it requires not only scale of the tech behemoths, but also requires collaboration between them. I think LLAMA is the best example where you have Meta creating Llama and then being leveraged by AWS, by Google Cloud, by all of these giant tech players to be able to increase innovation in an open industry standard type of way and regulation would just stifle that innovation. And also on global competitiveness, I mean there’s nobody in China trying to throttle Huawei and all the large companies like Alibaba with Quinn over there and for us to do a couple of things. First of all, if we would restrict the collaboration between the giant companies related to AI and we would reduce these large companies’ ability to make investments, you know, to, to make sure that, I don’t know, companies like Anthropic can do, can do better. I mean, is this really who we’re trying to protect here? And, and let’s, let’s not forget, you know, what do we call OpenAI? They’re a freaking startup and somehow OpenAI gets hundreds and billions of dollars in Capex to be an innovator. And I think this just shows that the way that we are doing things here makes sense. I mean, can you imagine if OpenAI didn’t have its collaboration with Microsoft? I mean, what would it do if there were a tight connection there? I guess it would be arm’s length and Satya would be overjoyed to go in and spend $80 billion in CapEx. Right, based on a handshake. But no, Microsoft has ownership in OpenAI, the nonprofit, of course. Hardy. And this is the way that things work. There would be no way without ownership of Microsoft, ownership of AI, that that deal would get on the ground. And if that deal doesn’t get off the ground, who is OpenAI going to start doing their service with? I mean, I guess they could have started it off with the CoreWeaves of the world, but. And that’s kind of where they’re headed. But there’s no way they could have gotten where they are without that. So Dan, this was a good conversation and we will let our listeners determine who won. But you know, the reality is I think you and I are both not for regulation.
Daniel Newman: I would say very, very limited is where I would sit. I do agree about the illegal and criminal stuff. We should try to probably slow that down where possible, but I just think we would crush innovation. And right now as we’re fighting the war, I think you and I agree that AI is the next frontier of economic global leadership. Our biggest tech companies, we don’t fund. The government doesn’t fund innovation here. So our tech companies are funding the innovation that keeps the US in a market leadership position.
Patrick Moorhead: Yeah, that’s great stuff. Hey, let’s go into the final segment of our show. And that is market madness. Bulls and Bears. It has been two weeks of earnings. Let’s let this rip. All right, Dan, so we had Apple, Amazon, Microsoft, Qualcomm, ServiceNow, SAP and more get out there and announce earnings. And the big question in everybody’s minds was going to be first and foremost tariffs and how that would impact not only the current quarter, but more importantly, the guidance. Okay. And then the second question would be when it comes to the potential recession, which by the way, we’re not in now, but how would these companies react to recessionary pressures? Typically consumers play like Apple, advertising like Meta. And Dan, I’m gonna kick it off with you. I mean there’s a lot of companies to talk about here but maybe we, maybe we keep this broad and we kind of interject these companies here.
Daniel Newman: There’s so many. Right. I think maybe the theme even makes a little bit of sense here. Like I, I think if anyone’s followed my, my, my posts which I get about half as many people to read as you and mine, you, you’ve had.
Patrick Moorhead: A few, you’ve had some bangers out.
Daniel Newman: When I’m, when I’m snarking on China I see that I get a lot of attention but you know one of my themes coming into this is enterprise AI will crush. And like if you want to kind of understand we’re seeing it like SAP had really good numbers. IBM, you know they got a little bit banged up but really had good numbers. ServiceNow, really, really good numbers. We saw the cloud providers, the enterprise, you know, so parsing out the cloud parts, Alphabet, Meta, Microsoft and Amazon all really strong either at their, at their estimates, above their estimates. And that’s because I’ve said this for the longest time Pat, and I’ve heard this from some of the big CEOs and they’ve told me this is enterprise AI doesn’t slow down because of this. The companies that are going to keep spending CapEx so we heard CapEx reiterations or increases actually increasing CapEx and an AI demand. I mean Microsoft probably had the best earnings of anyone. And I actually went on Fox Business and I said Microsoft stands alone in the Mag 7. Why does it stand alone? Very little tariff risk. All enterprise, mostly all enterprise. Very little shipped goods, you know, other than a small part of that PC business. And basically the AI consumption and build out is going and what do they get 16% now? I mean they’re seeing that number ramping and ramping and ramping and they’re building on infrastructure, they’re expanding in Europe. I don’t know Pat. So my big theme of this is like look, if you’re worried about all the macro, if you’re worried about a recession, tech is deflationary. Enterprises are going to go big on AI. The biggest enterprises have operating leverage and they’re going to see this as an opportunity to actually scale their business. So I like all those companies I just mentioned, felt really good about the big clouds, felt really good about the enterprise AI software companies.
Patrick Moorhead: Yeah, I’m going to just go down the list here. So I did some CNBC, Yahoo Finance, talked to Apple, Microsoft, sorry, Apple, ServiceNow, IBM and then hopped on and talked about Qualcomm, you know Apple I think, you know they actually did a forecast out there for iPhone which I couldn’t believe it. And they had to because investors are absolutely crawling all over them. Super low risk. They are not a growth stock. They’re a safety stock out there and they do a ton of share buybacks which so from a capital return standpoint they’re really good. Amazon with AWS I focus on that. Although the percentage growth in cloud was a smaller percent than Azure they do have a much larger base. It does look like even with that that Azure grew more. The interesting part about Azure in the commentary was that it wasn’t all about AI. It was going from on-prem to cloud infrastructure. Got a lot more research to do to figure that out. Microsoft was a frickin masterpiece in what they delivered strong on everything. They were down in client. I don’t think investors care about that right now. Qualcomm continues to show their diversity play, diversification play. They got a hit for what looked like a light forecast but ironically and I use these terms on Yahoo Finance, they split the goal posts. They were right in the middle of what the expectations were. They just weren’t far enough to the right. Okay. Which was I think the 10.33 ServiceNow. What a juggernaut man. Not only are they growing in AI but they’re growing without AI and that’s what I think is the biggest thing. You and I are headed out to their conference next week. SAP cloud juggernaut. They crushed it. IBM just to close on that. They had a freaking great quarter and then they had a really good forecast. But the problem is they talked about consulting contracts being whacked by the DOGE team which I think was.
Daniel Newman: That was it. I was trying to remember 20.
Patrick Moorhead: Like a 1% impact but emotions took over, fear took over and, and even though the federal group is such a small percentage of their stock took a 6 6% decline.
Daniel Newman: So yeah, it’s interesting. Just one other point Pat. There was another real kind of bright spot. There was no crazy pull forward on the iPhone. Like I said, you and I are not, you know, we’re not Apple fanboys. But there was some major concern that Apple might have a good quarter but only because there was a big surge of buying ahead of tariff wasn’t the case. Qualcomm, you know they got hammered because of the midpoint of their Guide versus the expectation. Like they raised their guidance. I mean like this is a company with a ton of market opaqueness because of what’s going on with China. That premium smartphone tier, Pat, like, because I know we kind of hit hard on enterprise AI, but that premium smartphone tier is really resilient. And you know, I think when I was on Bloomberg I talked about this, but basically people and their phones there, this is not an area where people are sacrificing, you know, at the high end, like they’re getting their new phone. One other thing too, by the way, and you and I don’t talk about this too often, but man, the ad juggernaut like, like Meta, Google, Amazon, Amazon’s got a 56 billion dollar ads business now. I mean, incredible how, they’re building these different businesses all at one time. But you know, I thought if there was some consumer weakness, because we keep hearing like consumers or small business weakness, you would have seen that. Because ads, even though they’re the big companies, most of the ads are placed by smaller businesses and it doesn’t seem like they’re pulling back. So I guess the 150% expense, more expensive $2 item from Shein. I guess because remember a $2 item is now $3.25. I understand economically that is a tax. But did people ever know what this crap cost anyway? I mean like two to three. I don’t know that the person that was paying two wouldn’t pay three. I think when you’re talking about, we’re talking about a car that was. Yeah, go ahead.
Patrick Moorhead: No, I’m sorry, no, no, go ahead. You know where the issue is? It’s where that plastic injected molding part which was a hundred dollars becomes $200, right. That you have to put in and make the assembly. And it’s probably more CNC than plastic injection molding, but you get the point, right? And that’s where the fear is. But, but you know what, it’s less about tech. And when, when Trump pulled down PC and smartphone tariffs, you know, you’re still paying 10% but, but he pulled those down, those were exempt. That made a huge difference. One thing I want to give Apple credit for is that 50% of manufacturing of US iPhones is in India. And that was in sharp contrast to eight years ago where Tim Cook had said that these could only be done in China. He talked about designers, mechanical engineers probably, and he would have a football field full of them in China and a room full in The United States or someplace like that. But magically you can now do this in, in, in India. It took a while. I’d give them credit. Here’s one caution that I want to give to investors though is, most of the sub assemblies that go into an iPhone are still being done in China. China exports them to India. India converts them into an iPhone. The administration could potentially and maybe for national security or they think they’re skirting the essence of the ruling, change that. Right. If you look at USMCA in Mexico, there are very specific rules for conversion that apply to servers.
Right. As an example where there’s a lot of L10 done or L9 done in Mexico and all the PCA stuff. So you know, if the PCAs aren’t being done in India, does this count? If the LEDs or the displays are not done in India, does it count as really coming from India or is this just a method to skirt regulations so something for investors to look at. So Dan, I think this was a great segment here. Hopefully you all got value and a great show. One thing I do want to point out is that we have our Six Five Summit coming in. The theme is AI Unleashed. It’s June 16th, through the 19th. We have Michael Dell doing the kickoff and hats off to Michael. I think he just got bumped up a notch in terms of the richest men in the world. I think he sits at number 10 at around a hundred billion dollars. He kicked off our first summit six years ago and he’s kicking this one off. And we have some amazing guests that are going to be plugged in for day openers. We have different tracks but check it out at www.SixFiveMedia.com/summit. We’re going to flash that up on the screen so you can get in there. But we have some great speakers, some great topics for you and we hope you can tune in.
Daniel Newman: Yeah, we’ve come a long way. Pat. Remember the first time it was basically Michael recording a two minute introduction on his iPhone or whatever phone he’s using. This time we’re going to have an extensive sit down with him in person. But this is all on demand. It’s a world class lineup of speakers. We’ve had the biggest, best. Jensen’s been on, Michael’s been here, Lisa Sue’s been here, Octan, Arvin, I mean this is the show where we bring the biggest and the best. I can’t wait to bring on this instantiation pot. It’s going to be another great year.
Patrick Moorhead: Yeah, it really is. Hey, next week Dan and I will be at Service Now I think Dan will also be at IBM Think. I will be monitoring IBM Think from afar. But I want to thank you for tuning in. Hit that subscribe button. Give us feedback. Give us feedback on the topics. Give us feedback on the format. Give feedback to me on how slow I talk versus Dan. But with that said, have a. Have a great week and you take care. 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.
