This week on The Six Five Podcast, Patrick Moorhead and Daniel Newman are back from their travels and diving headfirst into the whirlwind of tech news! From big tech earnings and deepening trade tensions to the evolution of enterprise AI, SaaS disruption, and the shifting role of software agents, the duo breaks down what’s driving transformation across the tech landscape. The handpicked topics for this week are:
- Market and Economic Updates: Discussion of the first trade deal between the UK and US. Analysis of tariff reductions and remaining trade barriers, and the implications for tech companies and services taxes.
- Tech Company Earnings and Performance: @AMD’s strong quarterly results, particularly in the datacenter and gaming sectors. @ARM’s record-breaking quarter with $1 billion in revenue and Coherent, Lattice, and Astera Labs’ recent performances and future prospects.
- AI and Enterprise Technology Trends: @ServiceNow’s Knowledge conference highlights and strategic direction. @IBMTechnology’s IBM Think event insights and the company’s positioning in the AI market.
- Regulatory and Policy Development: Reversal of AI diffusion laws and potential implications. Debate on the effectiveness of technology export controls.
- Tech Stock Market Performance: Quick overview of tech stock performance and market reactions to earnings reports.
- The Six Five Summit Preview: Teaser of high-profile speakers and AI-focused content.
For a deeper dive into each topic, please click on the links above. Be sure to subscribe to The Six Five Pod so you never miss an episode.
Watch the episode here:
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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: You can only lose so many flips before you might want to start working on, you know, getting a little bit more educated on whatever topic.
Patrick Moorhead: Listen, you know, I mean, if it makes you feel better that, you know, you win every Flip, I’ll give that to you. I just want you to be in a good mood, Dan, okay?
Daniel Newman: That’s all it takes. All I got to be told is that I’m the best and that I win everything. And I will perpetually be a happy guy. So my ego requires no stroking whatsoever.
Daniel Newman: You think we do, Moorhead.
Patrick Moorhead: I cringe every time I hear that, we might have to change that. Of course I know what I’m talking about.
Daniel Newman: You know what you’re talking about. That’s why you are the man, the myth, the legend that is Patrick Moorhead. Hey, everybody. Welcome to The Six Five. It’s the weekly show, episode 260. It’s been a banger of a week. If you hear a little hoarseness in my voice, it’s because I woke up not feeling so good. Weird. I got sick twice in three weeks. Yeah, I. Two red eyes in a week. It’s just. I’m old now, Pat. I’m. I’m an old, crotchety, miserable son of a bee that needs to sleep. And when I don’t sleep, apparently my body starts to fight with me. But at least I made it through all the travel. I mean, I made it through all the travel. I felt fine. It’s Friday. We’re going to be great. It’s a great show. Of course you’re listening to this. It may be Monday, maybe Tuesday, but overall, I just want to say thank you, everybody, for tuning in before I kind of run through the docket, talk about what we’re going to talk about today and dive into some other news. Pat, how are you doing today? Let me guess, let me guess. You crushed it in the gym. You’re smashing a protein shake right now, and you’re doing a full side flex for everybody out there that’s watching this on video.
Patrick Moorhead: So here’s where I’m at. So I’m two and a half. Two and a half months into shoulder rehab. I gotta get surgery on an inguinal hernia, but I am moving forward. Okay. And I’m finally moving up the weights. On bench press, getting back straight there. I had three, four good workouts this week. So, yeah, I’m feeling really good. And, you know, the rest of my life or something else can be going crappy, but I knock out some great workouts. Even though my HR is abnormally low, I’m still in a great mood. And yes, thank you for the reminder. I do need to pound this protein drink.
Daniel Newman: It’s become normal in the show now. You come here a little sweaty. All worked out and buff, and then you’re pounding protein. And by the way, that stuff tastes like absolute garbage.
Patrick Moorhead: This is Owyn, not a plug only. What you need has all nine essential amino acids, BCAs. Dan, all the stuff that you tell me to consume.
Daniel Newman: They should sponsor you. And they should also tell you that it actually tastes like you’re chewing a tree. So, you know, as long as you don’t mind that, it’s great.
Patrick Moorhead: I mean, it’s unlike fair life where you are actually eating tree gum.
Daniel Newman: Yeah, but it’s so tasty.
Patrick Moorhead: I saw you pound one of those last night on the plane.
Daniel Newman: Yeah, Yeah. I mean, I was thirsty, you know, I needed some protein and it was so tasty. It tasted just like chocolate milk, like from the carton when I was a kid. Best stuff ever. Like, I mean, look, you know, we, we only live once. So we got a great show, a lot to cover. We’ll hit this in The Decode. You know, the show, new format. We got The Decode with the news. We’ve got The Flip where I beat Patrick in a debate on anything, doesn’t matter what it is. And then we hit the Bulls and Bears where we talk about what’s going on in the markets. And we will do all that today. But before we do that, we gotta do the plug because it is only a month now, a little over a month away from The Six Five Summit 2025. It’s four days. It’s like a thousand sessions. No, it’s like 50 plus sessions. We’ve got CEO of Dell, Chairman Michael Dell kicking it off, but we actually are building a heck of a lineup. There will be a lot more previewing of that coming up over the next few weeks. We hope that everybody is registering for the event. www.sixfivemedia.com/summit. We’re going to cover AI, but it’s going to be so much more. And as you know, we’ve had some of the biggest names in tech over the years. It’s been Jensen Huang, it’s been Bill McDermott, it’s been Lisa Sue from AMD. It’s been, you know, you kind of go down the list, you name who’s who of technology. They’ve been at our event. It will be that way again this year. Plus you get a whole lot of Pat and a little bit of Dan. You really just want Pat and you know, that’s just kind of how it goes. But Pat, are you excited for the summit? Are you ready? You gonna tune in four days straight?
Patrick Moorhead: I’m gonna sit there and watch every single video I did not participate in.
Daniel Newman: So we’ve gotta do that to keep up you gotta keep up. Yeah, you gotta know what’s going on. Because, you can only lose so many flips before you might want to start working on, you know, getting a little bit more educated on whatever topic.
Patrick Moorhead: Listen, you know, I mean, if it makes you feel better that, you know, you win every Flip, I’ll give that to you. I just want you to be in a good mood, Dan, okay?
Daniel Newman: That’s all it takes. All I got to be told is that I’m the best and that I win everything. And I will perpetually be a happy guy. So my ego requires no stroking whatsoever. All right, buddy, we’ve got a big show. It’s been coast to coast this week, at least for me. You know, I was at. Oh, I was at Milken. In Boston, IBM Think, and ServiceNow. Pat, you planted in Vegas for like, four days, worked out great exercise, great sleep, great meals. I’m super jealous of you. We’re going to talk a lot about what happened this week at these different events, but we had ServiceNow knowledge, we had IBM Think there was some big news in the economy and trade and tariffs and what’s going on there. So we’ll get a little bit into that and then we’re, you know, we’ll get through the rest of the docket. But, Pat, let’s just get right after it now. You spent a lot of time in Vegas at Knowledge, and like, that place was so crowded. I have to say, maybe Bill McDermott and the ServiceNow team is right. The world does work with ServiceNow.
Patrick Moorhead: Yeah, this is my. My second knowledge. We opened up a SaaS practice six years ago, and, you know, we just dove in, I hired a bunch of people. But this was just my second. And I have to tell you, the talk track for senior executives was absolutely spot on. And I refer to this as Enterprise AI nirvana. And, well, what the heck does that mean? Right? It means essentially, you know, any model, any cloud, any workflow, any vertical, any data with connectors to everything, you know you name it, right? So I love the vision. I think that the difference between this year and last year was that they increased what I call the reality bits. Okay? They put more. More meat on, on the bone. And the other thing that I thought was positive was that on the second slide that was shown in the entire keynote was about saving money, right? So many times, we go to these shows and it’s like, you know, save the world with AI, do this, transform, okay? And sometimes that just initiates a gag reflex. Okay. But I love that they went right at using ServiceNow to save money. Okay. I love that. And the other thing that I saw was this realization that to be able to afford this technology, enterprises are going to have to dial down some of the other software expenditures that they’re making. Like no longer are we talking about hey, there’s a huge payoff, you’re going to spend more. The realization has set in and there was a lot of talk about ServiceNow customers wanting their CRM, ERP, HCM provider to not do well so they could give ServiceNow more money.
Now I didn’t talk to a customer who actually said it, but I’ve got to take Bill at its word. Final thought here, here’s where I think the company is going to have to work really hard at. It came off as this is easy, right? You just go workflow by workflow. The thing about it is you connect this many workflows, it turns into kind of spaghetti, right? And you’re probably going to have to change the way that you do data integration. You’re probably gonna have to boil the ocean that requires GSI. So I think they’ve got the providers in that behind closed doors there was the candor which I appreciated. But what they’re going to need is customers telling their stories. Right? Customer stories. 1 pagers, 10 page customer case studies are great but start off with the stories, right. And then TCO studies and once ServiceNow customers see other customers diving in and you know, they did have AstraZeneca and Aptiv on stage. Aptiv, by the way, is a software company. Okay. So I don’t count them as being your classic enterprise AstraZeneca was. But anyways, this is what they’re going to have to work on to make this real because I think everybody CEOs love this. So do CXOs and then. But I think they’re probably going to lose some people at the enterprise IT level.
Daniel Newman: Yeah. So are you giving them an agenda of things they can buy from you?
Patrick Moorhead: Well, they can buy them from me or they can even buy it from you. I’m sure you didn’t do any selling at the event.
Danbiel Newmban: I’m not self interested. Remember All I got to be told is that I’m the best and that I win everything.So listen, this is a company that has been in a Massive positive transition. It was a company that really owned the CIO and the IT department for a long time in IT service management. And it’s evolved to, you know, basically wanting to be the boardroom and the key decision in how companies are going to unravel the complexities of, of AI and abstract away all these layers. You know, remember Satya talked about all these applications becoming crud databases. Well, ServiceNow is kind of raising its hand and saying we want to be a single pane of glass, a single abstraction that can build workflows that can run across all your applications. So whether it’s SAP, Oracle, Workday, Salesforce, they don’t care. You know, we’re basically going to workflow it. You’re going to talk to a single pane and a single abstraction. You’re going to be able to ask it a question. It’s going to be able to have agents deployed. I mean, this is the narrative, this is the story. This stuff doesn’t work that easy. It’s not that easy to do. If it was, we would have already seen all of those different softwares abstracted away. But having said that, that’s why they’re going from an I T, deeply entrenched company that really served that IT buyer to a company that’s really changing its whole tone and tenor to serve the boardroom. You know, one of the biggest conflicts I see is in the whole, you know, in this whole software industrial complex, we really built an era where the IT people that run these different softwares become super sticky inside these enterprises. I’m the VMware person, I’m the Salesforce person, I’m the SAP person. And we can’t possibly function without this because they’ve built an entire ecosystem. So it’s kind of an interesting juxtaposition that these companies are in right now because basically ServiceNow is saying, look, we can use agents, we can workflow all this away. Will need less software, these become more databases, it becomes super seamless. But that’ll only work if it’s sold top down. And that’s where the money savings come in. That’s where less chair swivels come in. So it’s a really interesting position, Pat, because like my take is, I think ServiceNow and actually the next company will talk about IBM or in these really interesting moments to basically win in this agent space because they’re not necessarily a single application and they’re not necessarily a single cloud. Having said that, at the same time though, there’s a lot of stickiness in how these different technologies have manifested inside these enterprises.
Patrick Moorhead: Yeah, for sure they’re going for the brass ring here Dan. You know, I mean ServiceNow, I mean from an east to west and then getting into things like CRM. I mean they are absolutely going for it and they’ve got the funding and the growth to do it. I mean how many enterprise SaaS companies are doing double digit growth? I mean there’s pockets of double digit growth like Oracle ERP, but you know you’ve got Salesforce, it’s single digit, you’ve got SAP, it’s single digit. You’ve got IBM who’s primarily a software company growing single digits. Anything double digit just shows acceleration.
Daniel Newman: Yeah, I mean they’re like the rule of 50 plus at ServiceNow and you know we’ve seen most of the big SaaS companies. I think we are heading to an era where SaaS as we know it, the consumption model, the spend model, it’s all going to change meaningfully. I think ServiceNow is in a good position but there is a lot of technical debt and sort of historics of how software has been sold into enterprises that will need to be unwound to take us to that next place. So yeah, let’s jump over to IBM. So, I know, you know it was so difficult and let me just tell you, Boston to Vegas is about as far away as you can get. I did make it up for the day. I got the chance to spend some time with you know, the Ferrari team principal. That was pretty fun. You know Fred and I are buddies now. Fred, I’ll send you another message.
Patrick Moorhead: Oh, you’re right, you’re, you’re a Ferrari guy now.
Daniel Newman: Well ,I’m not a Ferrari guy, I’m a McLaren guy. I actually told him that. There’s a really funny picture of me. They took a picture as I told him that and we’re both laughing about it. He admitted that we have a better car. He was pretty straightforward about it but you know, got to spend some time on that. But you know, also you know, was there to catch up. What’s going on, what’s the news, what’s the story? IBM is in a phase of really meaningful growth around its Generative AI business. We’ve seen you and I have talked every quarter to Jim Kavanaugh. We talk regularly with Arvind Krishna, their CEO and they’re building a multi billion dollar fast paced run rate growth business around AI. Now up front a lot of their growth has come from being a leading consulting company. Sometimes people forget that, but they were the first Pat, you remember this with you know, Watson X to build this sort of fully governed data AI platform for Generative.
Patrick Moorhead: Now they’re really turning first to GA man.
Daniel Newman: First to GA and by the way don’t get a lot of credit for it at times, but really built a platform that can be embraced. And this is something I appreciate about IBM is you know, whether it’s Red Hat, whether it’s Terraform, whether it’s Hashi, whether it’s what they’re doing with WatsonX and you know, they’re now an orchestrated platform. IBM is really a middleware layer. They really are a middleware for all of these sorts of innovations that are going on. And if they can get that messaging right, I think they sit in a really good position to say hey, because this kind of goes back to the same reason I think ServiceNow has a great story Pat is like look, do you want to do all your agentic with a single application, meaning if you, whether it’s your CRM or your ERP or your HCM, do you want to start there and build your agent workflow? Do you want to start with a single cloud where most of the clouds are designed to not necessarily work optimally together, or do you want to start with a company that’s totally agnostic to it? And I mean look, I think you and I are capable of making the case for any of those three things. And that’s the debate that a salesforce is going to have to have. That’s a debate that Google’s going to have to have. That’s a debate that IBM is going to have. IBM if not anything, it’s uniquely positioned to be the orchestration layer for agents. You think about VLM, Red Hat, their orchestrated layer. Like they can really be the company that says look, we don’t care what cloud you’re using, we don’t care what applications you’re running, build your agents with us. And that by the way was like a big takeaway. I mean they look, they announced their new Linux one. We’re going to do some work in our lab with that and tell some stories about that in the next couple of months. That was really great. They definitely did some evolution to the platform. You know, they built it, they off, they launched their new tiny model Granite 4 Tiny. But really to me what I walked away with is that IBM was early with their platform for Watson X and then we’re a little later coming out the gate talking about agents, but orchestrates a multi year old platform that really could help companies figure out how to deploy agents across their enterprise ecosystem.
Patrick Moorhead: Yeah, I didn’t attend the event but I did spend four hours kind of researching what was said and I think their message is a good one which is essentially okay, you’ve done these science projects and POCs. Now how do you operationalize this at scale? How do you integrate, how do you orchestrate with the right degrees of security and compliance and then how do you get to all that data? Right.That that is exactly what they need to be to be saying. You know, interestingly enough I thought they, they went this was a CIO message versus a CEO message like we saw at ServiceNow. But, what IBM is doing is they’re pouring this incredible amount of money into platforms that all of the biggest like the Mag 7 are covering here. So for instance, Watson X Data, right. The equivalent for Microsoft is Microsoft Fabric. Right. Watson Orchestrate and Agent Catalog. That’s Microsoft Co Pilot Studio. Right. Storage, Context Aware Storage, which is essentially a lot of the compressing the software stack that people like Bass Data get credit for. Right. Then buying data stacks. Right. Which is a very serious player when it comes to unstructured data handling. One of the things that distinguishes IBM here is their software and they don’t talk about this a lot, Dan. You can run their software on-prem on x86 servers. You can run their software in the public cloud on x86 servers. And then you could have a complete solution with IBM Linux 1 where it’s one contiguous stack. As far as I know they’re the only company with a full stack AI stack that you could run on premises. I think the other differentiator is obviously security and compliance. Right. Hence the type of customers they attract. The one question I have, just this nagging question though is new logos. I’m not saying to succeed IBM needs new logos. They just need to capture a higher market share of, of who they have. But, to me, getting new logos with new companies, what it does is it increases credibility that IBM has the juice. And that’s not something that I have seen. It could be just that I didn’t research it effectively enough. But it provides credibility. These public cloud companies show up with these new AI customers and I think it gives them a lot of credibility. And IBM is sometimes looked at as a legacy brand, a legacy tech brand. Even with all the work that Arvind and crew has done with the acquisition of Red Hat, with spinning off low growth stuff that doesn’t get looked at like technology a lot.
Daniel Newman: But 1% growth will never thrill the market and create a ton of excitement. Yeah, yeah, they did Model five. They’re modeling five which you know is not that far off from a SaaS company anymore.
Patrick Moorhead: No, you’re exactly right. That’s a great point. I think what I want to see though is I want to see new logos that hadn’t done a lot with IBM before that aren’t necessarily in this hyper regulated and what’s considered slow industries, I think that would, would help them a lot and make a lot more believers out of people.
Daniel Newman: Yeah, I would agree the challenge is to create sort of that sexy fast growth story. But I think they’re also, you know, sort of underappreciated at times. They’ve been a very reliable company performer. You know, they did well when sort of the market was much less stable. They return a lot of cash to shareholders, a lot of discipline in their operating side. The technology works pretty, pretty well. And I mean they do have a massive enterprise client. Pat, you know the first two companies we talked about here go thematic with. What I have said is like, look, whether we have a downturn, we’re going to talk a little bit about their first trade deal in a minute. But if tariffs cause a recession, enterprise AI to me is still the most bullish area of focus. Like Arvind said From the stage, 99% of enterprise data has not been touched by AI yet. Now we could argue a lot of data things on tape and in old storage aren’t all that useful. There’s a lot of weight that goes to recency and such. But enterprise AI and companies using operating leverage to create scale, we’re going to see efficiencies driven into businesses. I think this is where dollars will flow even if the overall economy takes a hit, which I’m increasingly thinking may not actually happen. So I mean, look, you know, this week we got a first deal unveiled. A very big, very important deal with a very sophisticated and important country. I’m trying to think of if that was kind of how it was portrayed. We had heard that that framework had been done, but Pat, the UK and the US announced a trade deal. Are we off? Are we good? Everything’s going forward now. No more, no more worries.
Patrick Moorhead: So I had to research this one a lot more than I needed to. I mean, the postcard said slam dunk. We’ve got this right. Mission accomplished in George Bush style. Right. And then add 10 years of war to that after the aircraft carrier. This is not a full deal. This is an incomplete deal. And what I would say is, it’s a good start. Okay. So first of all, the US agreed to reduce tariffs on 100,000 cars from 25% to 10. Okay. The US reduced it on steel and aluminum and there was reciprocal for ag, Ag Ex exports. That’s like beef and, and wheat and soybeans. Right. But what wasn’t agreed to was, first of all, there’s no removal of the 10 baseline tariff. Okay. The UK didn’t lower their food standards and quite frankly, I’m glad they didn’t because the type of food that AG Inc. pumps out is garbage. I’m glad they stood their ground on that. It wasn’t a free trade agreement. There’s still tariffs and there’s still limitations going back and forth. Now for tech, I think the most important thing is they didn’t roll back the services tax that they put on the US. So for instance, like Azure, GCP and stuff like that. I did a little digging too into the trade balance and this is going to be interesting from a good standpoint, meaning stuff that we buy that you can touch and feel were. We’re actually very similar in numbers, even though we’re, you know, 10 times the GDP and three times the population. Okay. But the interesting part is it’s this huge imbalance of services. Okay. Like, you know, management consulting, financial services and even telecoms that do business inside of the US that is where the biggest disparity is. So good start. Definitely not complete and definitely not free trade.
Daniel Newman: Oh, well, yeah. I mean, look, I don’t think we’re going to get free trade. I think this is a good start. I think we’re within a few percent now of being back to where we were heading into Liberation Day overall. We’ll talk about the markets.
Patrick Moorhead: You mean the markets.
Daniel Newman: Yeah. Do we care about anything else? Is there anything else? Bond yields. Dork. The bond yields have, you know, settled a bit. The dollar is kind of back to stasis from where it was at. You know, I was at Milken this week and got to listen to Scott Besson talk. I mean, look, there’s only two things they care about. It’s the bond market and they care about A.I. That’s it. So everything else actually the market is doing what the market does because ultimately it’s starting to see, look, we’ve been told that the shelves will be empty. I think over the next few weeks we’re going to find out if any of that was true. It doesn’t seem to be so far. I know my groceries are still in the store when I need them right now. I think that we are going to get a deal probably with Japan and India, but I don’t know if they’ll be fully fledged out over the next few weeks. I think the India deal’s super critical. I think the UK one though is more of a bellwether because Europe keeps playing this kind of hardball. So it’s interesting with the UK and you know how they Brexit it but yet still have kind of this alignment that they went first.Europe kind of keeps throwing these big. We’re gonna be all over the U. S. But look, I think in the end we’re gonna find out that this stuff was super interconnected and nobody really had this crazy unique advantage. But the one advantage the US does have is we spend money. We are the consumer. And so when everyone said that, you know, China can play the long game and us can’t and this and that, but like the bottom line is China will hurt in time if they can’t ship the goods to us. Like we’re the ones that buy it all. I’ve already heard that their factories are furloughing and laying people off and you know, they need access to our market.
And by the way, President Trump and President Xi, Xi Jinping are actually in Switzerland right now meeting. You know, I don’t know if this, I’m not a “permabull” on things, but I just think that the doomsayers are going to once again have been wrong. I think we’re going to find a balance. I think the UK was a good first example. We need to split out of The Decode and get onto The Flip. But I was going to just quickly, just one last item here in the decode is. So Sam Altman’s whole go for profit thing just took a major U turn this week. They’re not gonna change the corp to a for profit right now. And I think that like that makes like 30 of the 40 billion they just raised from Softbank no longer in play. I think it’s pretty crazy, but I wonder if that’s the musk factor. I wonder if it’s the way the company was structured, it was too hard to undo. But gosh, it feels like that Ponzi scheme. I know it’s not, but that $ 260 billion valuation, worth more than Salesforce, worth more than Servicenow, worth more than, you know, AMD. I don’t know, Pat, but it seems like that was pretty bad news.
Patrick Moorhead: Listen, the lawyers and financial geniuses will find a way to put this together and have everybody make money. I mean, if this were reality, there’d be panic in the streets, right? Everybody who gave money would essentially be losing their money. So yeah, I just think they’re going to find another way to become a profit entity. Even if it means cutting down the entire company, starting over.
Daniel Newman: They got to go public. They got to go public. They’ve got these people invested in. Now at this 260 billion dollar valuation. How do they get money back on a company that’s burning 5 billion a year?
Patrick Moorhead: I mean, they can’t go public because it has to be a profit for profit company.
Daniel Newman: That’s what I mean. They’ve got it. But I’m saying, so they’ve got to figure out how to do this. They gotta figure out how to do this. They can’t not do this. So. All right, we’re headed over to The Flip. We’re gonna actually talk a little bit about the reversal of the AI diffusion laws. You know, everybody got really excited. I think a lot of people got the interpretation of what’s happening wrong. But you know what, Pat? There were a lot of people excited that all the people that hate Donald Trump also hated Joe Biden’s AI diffusion laws. So let’s argue on that one. Let’s see whether or not that was a good decision. So you’re gonna, you’re gonna call out that this was the, the right thing to do, huh?
Patrick Moorhead: Yeah, let me know who that guy with the beard is on, on that Flip.
Daniel Newman: He was way chubbier.
Patrick Moorhead: Fat and he has a beard. Anyways, we need to get that coin changed. Yeah, so back on January 13th when this thing you know, I basically said, okay, the US government is going to be the traffic cop by country on how many of these things get sold. Ironically, the website didn’t work. And where I’m going here is that anytime you get the government engaged, things are going to come to a screeching halt. I mean, if they can’t keep their website up to actually show you what the IFR was, how do we expect them to possibly be the bean counter for how many of these GPUs I can send to Portugal. And I think that the number one, you know, while admirable and we think we can keep tech from diffusing into China, I think it’s an absolute pipe dream in the way that we’re doing it right now. I mean, based on, you know, MGX standards, essentially an Nvidia GPU is about the same size as this bottle of electrolytes. Okay. So I mean I could hide this in my backpack on the way. I mean, smuggling these things in. I mean just look at the, on what’s going on in the Middle East about how weapons and rockets get into certain countries and every one of those ships are inspected. I mean this tech is going to get in. There is actually no way to change this. So by getting rid of this, I think we’re just leaning into the realization that we can’t keep China from getting this technology. And by the way, and we’ve discussed this before, even if they do get access to the technology, what that’s really doing when you’re buying AMD, Nvidia and Intel parts, it’s locking Chinese into those ecosystems and gives not only the R&D funding to those American companies, but more importantly, it takes the funding away from the, the Chinese companies like Huawei and the new ones that are creating GPUs. And the challenge there is you get enough momentum behind the Huawei’s and you know you’re going to have this rise of foreign competitors where they have the, they have the chance even though they’re not ahead now. Right. I would say they’re still two to three years behind. But imagine them catching up where not only is it as performant, they’ve moved off Cuda, which you can do if you’re savvy enough. I mean, the hyperscalers have already moved off Cuda and you know, they’re, they’re.
Daniel Newman: They’re all you can. I’m sorry.
Patrick Moorhead: Yeah, they’re going directly to things like, things like Pytorch. It does take some time, but, but the US ones have already done this and you know, do we want something else to, to create the markets, for AMD and Intel, and Nvidia? I don’t think that we want, I mean AMD was just on Capitol Hill talking about the importance of calibrating, right this, to balance security and, and commercial interest. So, Dan, once again, I have put towards a compelling case and I want to hear what your retort is.
Daniel Newman: So I’m going to basically take a bit of a different approach to why we need to leave this in place. We already are dealing with enough uncertainty right now. These rules were already baked into the market. The expectation is that we will continue to manage the diffusion of AI technology around the world. And let’s be very clear, the Trump administration isn’t just repealing and pulling these back and doing nothing. They’re going to do it. They’re doing an investigation and they’re planning to roll out new rules. So everyone out there that saw this rollback and said, oh great, Nvidia can sell H20s into China. No, that is not what happened. The import bans or the export bans, I’m sorry for a number of things to certain places like Iran and Russia and China have not and will not change because of the pullback of these diffusion rules. The bottom line of this is that there was an important multi tier country classification. And while there may have been some debate on which countries needed to be in, we needed to make sure that one with limited capacity resources, that we were getting the right technology into the right hands of the nations that we believe are capable and going to do the right things with the diffusion of this technology. We needed to also make sure that we’re very carefully managing our adversaries. I’ve argued many times before that US selling Nvidia chips, for instance, into China does not slow down China’s resolve or its interest in building its own technology. It’s the same thing it did with Huawei and Telco infrastructure. Their goal is to make Chinese technology the norm to the world. We want to slow them down at all costs and we want to make it as difficult as possible for them to get access to the right technologies that would enable them to gain any sort of leadership in the world. In this particular category, the world is depending on the west winning and right now it’s a twofold strategy.
Yes, we need to continue innovating at scale, but we need to make sure that instead of more chips being built and specialized for China, that we’re building enough chips that OpenAI, Google and Microsoft and all the companies that are saying they don’t have enough capacity and access are getting access to the chips they need. We also need to understand that we want to be cautious in sharing information. We just saw the Stanford articles that came out about things that were happening on campus with research being taken using force, fear and other methodologies by students on our most advanced campuses. And the reason is, is because the US is leading the world in AI research. And despite the volume of AI research that might be coming out of other places, the US is the leader. We need to be careful at how openly we share this. Many CEOs and companies are talking about their books. They do want to sell into the China market, but that is not necessarily the best thing for our country for the long term economic leadership that AI can support. So these rules need to stay in place a little bit longer. We need to work with uncertainty. We need to finish our trade deals. We need to make sure that we have the leverage that we need and that we do not let more products end up in markets like China, like Iran, and like Russia through intermediaries. So tighter controls. I mean, let’s face it, Pat, they could easily set these things up to phone home and know exactly where they go. I believe there’s a reason they don’t want to do that. It’s because these companies know they still want to sell lots of volume in these markets. Whether it’s one step, two step, or three step, more rules makes it more difficult. More difficult at this point in time, when it’s about global economic and market leadership for the next multiple decades and winning the most important race in our lifetime, those rules need to be in place. I think they’re making a mistake, but hopefully when Trump pulls them back, he puts something else in place to make sure those nations don’t get access to technology that can allow them to gain market leadership.
Patrick Moorhead: You know, I’m really interested to see how we could actually track this stuff. So first thing is, you know, there’s self regulation, which means, you know, doing a KYC, know your customer. There’s this idea of phoning home. You know, there’s this idea of putting a, you know, a GPS chip on, on every. I mean, just like we see in security, there’s a way to circumvent everything. But, you know, I just, I just don’t think this is regulatable. I think at scale, Daniel, it’s regulatable. Right. And maybe that’s the only thing that matters. Like onesie twosies of this thing coming over versus 50,000, right?
Daniel Newman: Yeah.
Patrick Moorhead: Might make an end. But then again, like, how do 50,000 rocket launchers get into Gaza when every ship, every truck, every single thing gets inspected? Right.
Daniel Newman: Look at how absurd it is, though, that you have these things that are basically supercomputers that have network, you know, adapters on them and they can actually tell you where they are. But we don’t know where they are. Come on, we can find every laptop and phone on the planet and could trace it up to a second. We don’t know where these GPUs are. Come on, give me a freaking break. It’s crazy. I, like I said, I, we could regulate and manage this stuff. It’s hard. And like you said, the reason it’s hard is because these countries know it’s at stake. It’s not like, oh, we’re using these for a bunch of gaming stuff. They’re trying to build the, you know, they’re the androels. They’re trying to build the robot drone killers of the future, you know, and they’re using this technology to do it. And of course they don’t want us to know where all these things are and how they’re being used. We have no idea to this date how many GPUs were used to build DeepSeek, but we know it was a heck of a lot more than we were told. I mean, I don’t think that any, well, anybody that likes even a little bit of sanity would argue that right now. But these things could easily tell you where they are. And if they’re not being used for anything nefarious, we should have rules that basically, you know, have a limited amount of access. We don’t need to know the data and the info on it. All we want to know is where it is. So we know where these things went. Just an idea, but you know, what we’re arguing aside. Maybe that’s what I believe, maybe it’s not. But that’s the fun part of The Flip, everybody. All right, let’s wrap this thing up. Let’s go to Bulls and Bears. There’s a lot going on in the market this week.
Daniel Newman: Pat. AMD, did they crush it?
Patrick Moorhead: I mean, they absolutely rocked the house, right? I mean, on data center, right? They crushed it with not only Epic, but also instinct. I would say primarily Epic. I mean, they just kept rocking with Instinct. Client gaming. I mean, richer mix on client, they sold less processors, but their ASP skyrocketed. I think the kudos out there to JJack Huhn. Zen5 is doing great. And then on the gaming side, this 9000 series is doing really well.. And you know, the only question that I have is how many, you know, how many can, how many can they make, right? Because what happens is IBM, excuse me, AMD comes out with a rocking card and they cut supply because they’re, they’re probably not making any money. Or Nvidia, you know, makes a price cut. But the market share between the two companies, Nvidia has 80% and AMD has 20%. So they could potentially ratchet up a couple points here.
Daniel Newman: But like, you know, so I think AMD did good and I shared a couple posts on this and I had a lot, you know, like, look, they’re really good results but like, does it not kind of. It gets my craw that they’re not talking more about what’s going on with Instinct. It just feels like I know they did last quarter, they stopped sharing that number.I just think like personally they get to do what they want and they’re doing really well. We know that the hyperscalers are adopting these for inference and they’re getting some good results, Pat. But like this is like the chest thumping, pounding moment that they’re gaining, you know, shares and I feel like pulling that back was, it’s just an interesting decision to me.
Patrick Moorhead: Yeah, I mean look at the uncertainty out there with, with the way that, you know, even Microsoft, remember they kicked first half to second half and you look at the ambiguity with Blackwell and what’s going on there. One of the things that I think didn’t get discussed enough and I think people chalked it up to pull ins even though the company said that there was nothing material with the pull ins if they gained server CPU share again. Right.
Daniel Newman: Yeah, it’s been amazing.
Patrick Moorhead: Yeah, it has. Now I sometimes question how much of that is going into enterprise SaaS companies versus what I call true enterprise. But the company did talk about they’re in the top 10 telecom, aerospace and semiconductors, nine out of the top 10 car companies, seven out of the top 10 manufacturing, six out of top 10 in the Forbes 2000. Now that can mean one rack of, of gear. It just means it’s there. But AMD first and foremost is still very much a hyperscaler company secondary to a tier 2 CSP which includes enterprise SaaS and companies like Cloudflare. And they’ve got a lot of work that they need to be doing to gain more real estate as Intel becomes a factor in 2027. But I think for 2025, the remainder and for 2026 this is AMD’s ability to run up the score on, on intel in the server market. And you know, lest we forget, intel still has 75% of the PC market. Right. With a Not a vastly superior architecture or, or product.
Daniel Newman: Epic has been epic. Let’s just be very clear how well it’s gone there. I was very impressed with those results. So overall really solid. And other three letter A companies ARM had its earnings record results. You know it has the first billion dollar single quarter, $4 billion for the year, 34 growth in year on year revenue Pat. Its royalty revenue grew mid double digits. Its licensing revenue absolutely crushed it 53%. And I mean I think as far as clean quarters go, I mean look at their AI work they’re you know in terms of grace for the Grace Blackwell Grace, you know it really has become the leading CPU. I think they’re getting close to half now of all the market share in that particular space. So the cloud side, the data center side, Pat, you know, very encouraging results overall. Now they did take a bit of a whack on the guide. The guy came in really conservative with very low growth on licensing. I thought Renee Haas, I think both of us talked to Renee, managed the call very well. But after having such good results and then kind of saying we’re gonna be pretty flattish. You managed it well. But it seems like these licensing deals kind of get lumpy. You know unlike royalty which the stream the licensing was getting is a little lumpy. They had a big, maybe even some pull in was why they were up so much in the last quarter. But Pat, I mean arm, you know they seem to be really firing on all cylinders. They are valued super highly and the market really does see it as a long term growth play. But I thought it, I thought they did well. Like I said the guide was just a little, I guess a little underwhelming.
Patrick Moorhead: It’s so funny. I mean the guide was within projections. It’s just that analysts want more. They have beaten, they’ve had double beats the last four quarters. It might be five quarters. Like what do people expect? At what point are analysts just plugging in the wrong number for them? So business fundamentals are very strong. They doubled the size of the business stand in five years. And it’s one thing when you’re selling a product, when you’re selling mostly IP, that’s pretty incredible. CSS first new auto customer and CSS is essentially doing all the work aside from, you know, taking it to TSMC and spitting out a chip. It’s a product, I consider it a service. But it has incredible amounts of revenue and profit dollars and you know, there is a talk I need to follow up with this on. Do custom cores have better performance than ARM cores? That’s been my belief just based on what we’ve seen from Apple and Qualcomm. But I know there’s a lot of discussion swirling and I need to go off and do a little bit more research on that. And I know you sent me the meme about V9 slowing down because Qualcomm isn’t adopting it. I do believe that ARM with their Edge AI product did move to a V9 product. And I also think that Qualcomm not doing V9 for their current crop of SoCs that are in the market doesn’t mean that they don’t have the license for V9. I mean, you know, nobody really knows. So I think, you know, Qualcomm moving to RISC 5 for its IoT stuff where it doesn’t have a high level operating system makes sense and will likely happen. It’s really hard to do that when it comes to the smartphone, not impossible.
Daniel Newman: But ARMS forward multiple today is over 60. So when you talk about why maybe they’re tough on it, I mean it’s, it trades at a super high premium. They’re trailing 12 month PE ratio pets 162. And you compare that around that AMD’s forward is 23 right now with a 74 trailing like so some of these companies are just like when I talked about like that AI cred, in terms of whether it’s the instinct number, whether it’s arms guide, like I think it’s just being perfect because these companies are trading kind of above the average, average S P multiples at all times. So they kind of get a little bit of mean reversion when they aren’t able to basically be perfect on every part.
Patrick Moorhead: Yeah.
Daniel Newman: But it doesn’t make the business not stable. Speaking of not stable, by the way, you know we are seeing layoffs Microsoft, IBM, Oracle, a handful of other tech companies. We’re not going to drill too much into that today because we need to get to some of our quick ticks on final tickers that I want to run down with you. But it does seem that, you know, I don’t know if it’s the AI thing Pat, deflationary tech efficiency, prune to grow companies like Microsoft having great earnings and then doing layoffs. You know, any, any quick thought.
Patrick Moorhead: I have no thoughts about that. I mean given the, I’ll call it the dynamic between the strength of the company, the power of the company and the power of the employees. They’re using returning to office as a way to do some layoffs and if they don’t need the talent or are over hired or think they can get better talent, they’re, they’re trading up.
Daniel Newman: Yeah, I mean look, you know, you make money with more revenue, you make money with less costs. It’s all part of running businesses. But if you can get the productivity efficiency without the cost, you know, that’s, sometimes that’s just being prudent. A couple quick ticks, Pat. You know we had, we got briefed over the last couple weeks. You know, Coherent, Lattice, Astera. Give me the quick rundown.
Patrick Moorhead: Yeah, Coherent. The stuff that I think people are missing is the roadmap that’s coming out whether it’s 1.6 T transceiver designs, you know, showing 400g EML, that’s the basis for a 3.2T transceiver, silicon photonics. I think people are missing that. On Lattice, I don’t think people really understood the guide there. Right. Which was, well wait a second, you know, what if, what if something doesn’t happen in the marketplace. Oh, but you’re not gonna, you know, we’re being conservative but we’re sticking to our, there could be risk in inventory in the future, but we’re sticking to our quarter. What the heck does that mean? Well, it’s very clear. Comms and wireline servers are growing with the hyperscalers. You can see the upsides every day. But when it comes to industrial, they’re still depleting inventory and therefore not changing guidance. When it comes to Astera, everybody should be looking at UI link, which, sorry, UA link, which is essentially scale up, it’s the industry standard NV link. That is a multi billion dollar opportunity for the company and I don’t even think the street knows what that is like. If you’re AMD, AWS, Google, Microsoft and every startup XPU you’re going to be using, you’re going to be using UA Link.
Daniel Newman: And Astera tends to rise to prominence there. Good results. Like it was a very clean quarter. Just a couple quick ads on what you talked about with Lattice. Look, everything I could see from looking at their revenue charts, margin charts, sales bookings charts is that it looked like maybe last quarter was kind of their bottom, which is something that, you know, a lot of the chip companies that weren’t kind of pure AI plays have had a very rough couple years. Theirs looks like turning the corner. So there were some very good indicators inside of these earnings, especially the bookings to billings ratio going over one again, which means they’re, you know, booking new orders faster than they’re shipping. And now that they’re kind of past the inventory hurdle, the Coherent one, Pat just, I love that company as sort of a kind of a non-traditional thematic, as a way to play AI. I mean they’ve, you know, built this data center communications area. I mean Pat, their growth and EPS growth and margin growth. I mean I think they’re like 490 pips in margin growth this quarter. I mean just absolutely crushing it on profitability. And of course they are sort of one of a very small number of companies that can handle all these data centers to data center interconnects. So it’s a very interesting play. It’s not a name that tends to come up first and foremost when you’re thinking about it, but what I heard at Milken was an unlimited amount of funds for data center projects. Basically more capital to allocate than opportunities to allocate the capital if you’re in the data center play.
Patrick Moorhead: Interesting.
Daniel Newman: None of them know what the killer app is going to be and whether this stuff will ever be consumed. That’s what the financiers told me. They don’t care because the building is out, the infrastructure is so lucrative right now and there’s so much excitement, enthusiasm about it. All right, Moorhead, we did it. We did the show. We got it done. We’re almost on time. Just a few minutes late. I’m gonna head off and do some corporate meetings. I think next week. I don’t know. I mean there’s some possible last minute travel, but I may actually not have to leave town. I don’t think you do either, right?
Patrick Moorhead: No, I got a lot of offers, but it’s like I need a week here before we jet off. I think I’m three or four straight weeks on the road coming up.
Daniel Newman: Yeah. Well, I wish you all the best with your shoulders. I hope you get big and strong again. I want to just thank everybody out there for being part of our Six Five community. Thanks for signing up for The Six Five Summit. It’s going to be awesome. Thanks for showing us your bicep Moorhead. Here flex it again. Maybe everyone could see it.
Patrick Moorhead: Not bad. Not bad for an old guy, right?
Daniel Newman: Oh, you’re looking great, buddy. You’re looking great. Everybody out there, tell Pat he looks great @PatrickMoorhead. Tweet him. You’re looking great, buddy. For this show, for this episode, for this week. For, Six Five. It’s time to say goodbye. We’ll see you all later.
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.
