On this episode of The Six Five Webcast, hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The handpicked topics for this week are:
- Davos 2024
- Samsung Unpacked
- TSMC Earnings
- IBM Acquires Advanced’s Application Modernization Assets
- Synopsys Acquisition of ANSYS
- Intel and DigitalBridge
For a deeper dive into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.
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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we ask that you do not treat us as such.
Transcript:
Patrick Moorhead: The Six Five is back, and we got through 200 episodes without being canceled. We first want to appreciate all of our audience tuning in. Dan, it feels more like episode 1,000, but I guess when you put all the Six Five videos we’ve done together. But no, I mean, we have to celebrate milestones and 200 is a big milestone. How’re you doing, bestie?
Daniel Newman: Yeah, I don’t think that many. I think we’re probably in 1% now in terms of podcasts that have survived, 200 episodes, and probably more than a thousand in entirety, if you count all the interviews and on the floors. On the floors… On the roads, in the booths, insiders, Six Five summits. Man, we’ve done it. And by the way, why do we start the show? I mean, yeah, let’s point out that we didn’t get canceled. There’s a no assholery rule around here on the show, and so we’re winning. We’re winning.
Patrick Moorhead: I don’t know. I might say asshole stuff or to kick off the explicit meter, but listen, I’m just glad to be here with my bestie. And normally, do this on a Friday, but you were coming back from Zurich, man, it’s great to see you. I think you’ve been on the road for two weeks, right?
Daniel Newman: Yeah. I was home one night. And two weeks, 16 days gone before I actually resettled myself at home and it was nice to sleep in my own bed. It was great to be on the road though. I mean, you got a lot done. Man, was I productive. Good way to start the year. A lot of selfie research being done. Got to have a lot of great meetings. And frankly, just a new experience for me. So yeah, it was a good start to the year, Pat. We’ve made 200. We’re 22 days into the year, buddy. Before we blink our eyes, you realize it’s going to be like May. We’re going to be like, “Holy crap.”
Patrick Moorhead: A lot of work to be done between now and then, but a lot of great topics. We’ve got a great show for you today. We are talking about Davos. Dan went there to give a big group hug to his eco-friendly friends over there. I’m just kidding.
Daniel Newman: Ouch, ouch, ouch, ouch.
Patrick Moorhead: Oh, is it Samsung Unpacked? TSMC, the bellwether and foundries, did earnings or inner earnings. IBM made an acquisition. We’ve got Synopsys making a big play for ANSYS. And then finally, we’ve got Intel doing some interesting stuff with AI and DigitalBridge. Dan, I’m going to kick it over to you, my friend. Davos 2024, man, I got to tell you, I was making fun of you at the beginning, but then I started to see all these meetings with important people and kind of the quality of the videos that you were cranking out there, and I’m like, “I think I need to go next year.” So tell us about it. What is it-
Daniel Newman: First of all, I just want to point out, I absolutely crushed it. I was fantastic all week. No, but, there’s kind of this dueling priorities that goes on with Davos. And there’s the irony and there’s the comical tweets that are shared of the lines of private jets that arrive so that a bunch of the world’s diplomats, leaders, CEOs, can all get together and talk about how others can lower their carbon emissions. And the irony is not lost on me, but it’s also one of the most important platforms on an annual basis for people to come together and talk about the things that really matter. And getting people that steer the world, whether that’s policymakers, whether that’s elected officials, whether that’s top CEOs, agencies, and having the chance to hear from so many at one time doesn’t happen often.
And so getting all these folks on the ground in one place and having the chance to sit down and meet, it was a great experience. Now, total noob, first time there, was joined by our comms chief, Nati Katz, who kind of handled my arrangement. There’s lots of different levels of access. I had the least of the legitimate access. So I was definitely a first timer, but had some really terrific opportunities to talk to so many people and run into so many people, run down the street, walk in past Paul Ryan. I ran past John Carey. I ran past… Just kind of everywhere you go. I was in line waiting to get into one of the hotels and ran into Christian Klein, SAP CEO, just kind of standing there waiting in the same line as I was, which was great, a chance to catch up. And this was kind of everywhere. So the first thing is it’s just an absolute incredible density of high profile people, both professional, and policy, and government and bringing them all together.
And it’s also in terms of the density of meetings. I had 40 in five days. I had 40 in-person get together, did about a dozen different sit-downs, videos. Had a great conversation with IBM CEO, Arvind Krishna, sat down with Tom Siebel, sat down with Gary Steele with Splunk all on video, sat down with a 28-year veteran of Checkpoint, one of the leaders of the World Economic Forum cybersecurity policy, Dorit Dor from Israel.
So very diverse set of people. Hung out with our buddy, Matt Zelinsky. Great to see Matt, always sporting a great suit. Traveled 5,500 miles to hang out with someone that lives 10 minutes down the street from me. But then like I said, it was every day. And then there was so many more get togethers. The Qualcomm nightcap was an absolute banger. We had the top heads of state. You walk in Mark Benioff, 6’8″ standing to your left, and then you had the CEO of Erickson on your right. You had Enrique Lores, HP CEO, and then Christiano. You had the owner of Manchester United in the room, one of the world’s biggest Premier League clubs. And this is just kind of what it was.
So what was the theme of the event though, okay? Now that I’m done mentioning all the important people. And by the way, this is just a tag. You walk on, it was everywhere. That was just kind of what it was. But the theme this year was surprisingly, sustainability… No, I’m just kidding. The theme was AI. So what are we talking about this year? The talk of the town of course, was AI. And it was about trust in AI. It was about responsibility in AI. It was about how do we implement safely, securely, meaningfully, and economically viably AI for government, for business, for security, for privacy. And that was the focal point.
Now, there were other topics that stayed in. And I said sustainability, this is still an in vogue topic of concern, but it was secondary. And that’s the thing is every year, there’s kind of a core topic and a secondary and third. And this year, really the central focus. You walk up and down the promenade, AI, you walk throughout Congress, AI. It was AI everywhere, front and center, no surprise. But the conversations that were going on were much bigger. It was all about how do we implement it, how do we secure it? How do we build global technology leadership? How do we protect it from being misused and put into the wrong hands? And that was such a great discussion point.
Pat, next year, I’m absolutely going to go back. I hope you’ll come with me. We got to bring The Six Five and put it on the ground. And I’ll say it’s a mix. It’s a good event to do some video, but it’s also just a tremendous event for having the chance to sit down and talk, and have really meaningful and important conversations about the things that are influencing our world. And Pat, we are right in the center of it. Whether it’s silicon, supply chain, AI, this is where it happens. This is where it’s talked about.
I was a bit of a skeptic, not as skeptical as you, so I still got on the plane. But next year, I think you’re going to have to come with me. So we’ll have to load up our private jet, the new Falcon 10X that we bought with 16 seats. We got to bring our whole delegates. It’s like when I saw Eric Schmidt walking down the street, I was standing there. Eric Schmidt from Google, he had about a 28-person delegation following him, all carrying boards and talking, and eared and wired in. But great time. Check out some of my videos I documented. I’ll have more videos publishing over the next few days. Some great content, great interactions, great conversations worth doing.
Patrick Moorhead: So I had a question for you. Does everybody bring their own photographer with them? Does everybody have an entourage? Because what I noticed is in some of your pictures, is you were having what looked like intimate conversations, but professional photos. But everybody had them, right? I saw a lot of the CEOs that we interact with had taking pictures as well.
Daniel Newman: I had an entourage. I’m just kidding. I wanted to document it, the experience. And obviously, we’re doing video, so had the chance. There were a lot of camera crews. There was a lot of people with camera crews. There was a lot of camera crews at every event taking photos. It wasn’t everyone though, Pat, but there was a lot of hand waving, guilty in this case. But for me, like I said, with what I do, it was really important for us to be able to capture these interactions. So it was a good investment. But yeah, there was no shortage of crews running down the street and people like me walking and talking on camera about what’s going on. I don’t think there’s a more densely attended event of high influence people in a year at this scale. Meaning, there’s like the Sun Valley kind of conferences and stuff, but this is unique.
Patrick Moorhead: Yeah. I have absolutely nothing to add because I didn’t attend Davos.
Daniel Newman: Well, the news documented it pretty well for me. It was a little bit more about just sharing the experience, which again, for my link, I shared some video on Twitter where you can kind of see the action behind the scenes.
Patrick Moorhead: Well, I felt like there was a… What’s the right way to put this? Less dreaming and bad commentary at this Davos than at the prior ones. Right? Like an energy policy that absolutely makes no sense for anybody. Right? It seemed more thoughtful discussion and I feel like most of the tech executives spent most of their time talking about AI, and which I think that that could have been valuable. And sometimes meeting face-to-face with these CEOs like we do, you get some sort of a deeper idea or sense of where they’re coming from.
So yeah, maybe I’ll go next year, Dan. But instead of going to Davos this year, I went to Samsung Unpacked where we saw the new S25 and Galaxy AI brought out. And that was an incredible… I felt like it was an incredible good use of time on a lot of different angles. So in a very similar fashion that we saw the AI PC rolled out at CES, we saw the AI smartphone, the first generation AI smartphone roll out and be brought to you by Samsung. And like the AI PC, most of the AI-ness or a good part of it is brought to you by the cloud. And in this case, it’s brought to you by Google Cloud.
The really good news, what I really liked about what Samsung rolled out is it showed clear on-device AI where it’s hitting that Qualcomm NPU to be able to do… And a great example of it was real time translation. So Dan, let’s say you speak Spanish and I speak English, we’re having a phone call and it is automatically translating that into your language of choice. Now, Google attempted this about five years ago with a little headphone, and it just never worked. And the other thing that was cool was kind of the real time messaging that was used where you can use multilingual. And I also like the ability to maybe make something more professional, or be more funny, or talk like a pirate. I think those types of viral things exactly, will get used all day long.
And we also saw AI move over into photography, generative AI move over into photography. And I believe this is leveraging Google technology where you can erase shadows, erase reflections, where it’s actually asking you what it recommends you do, as opposed to you having to go in and move a bunch of settings out, or there to just be, I’ll call it auto-magic. There’s also a feature that was integrated from Google called, circle to search. So imagine taking out your pen and no matter what contents you’re looking at, you will circle it on the screen. You can do that with a pen, which is really good for Samsung devices as you know, but also with your finger, it gives you an instant generative AI type of bard response. And what it does is it essentially takes two or three steps out of the process that you would normally go about, try to get insights on kind of what you’re looking at, whether it’s text, whether it’s a video or whether it’s a photo.
So more Samsung on-device stuff was AI and notes. So pen to text, transcripts and summaries of those notes, which I just thought was really, really solid. So yeah, it’s interesting. Probably one of my favorite tweets out there or pieces of content, which really solidifies this on-device AI is that the S25 has a toggle that says, process data only on a device. And that’s like wow, it really brings it to home and I really think it’s going to help educating, whether it’s in a smartphone or whether it’s on PC, the user interaction and the black and white lines between whether it’s on device or it’s driven out by the cloud. Final comment on this Samsung, it’s a gorgeous device. They gave me one to use. It’s titanium violet. I’d hate to put a case on this thing because it looks so incredible. So far so good, I’ve got all my data on the device. And who knows, maybe I’m going to write a review on it coming up.
Daniel Newman: So do I get one or what? Let’s see it. Do you have it with you? It’s kind of this cool lavendery color, right?
Patrick Moorhead: Yeah. I left it home. I don’t have a case on it. I don’t want to bring it around, to be honest with you, because I don’t trust myself.
Daniel Newman: Yeah, it looked great. By the way, your selfie research looked pretty good there. I saw some of that. And of course, the Qualcomm team was pretty in effect because a lot of partnership there around the newest Snapdragon platforms and the new Samsung. This is kind of the same kickback to you. I wasn’t there, so I don’t have a lot to add to this one, Pat. But the phone looks great. I saw the usual suspects of analyst folks that apparently had gotten their hands on one, all showing off. And I felt a little jealous because I get a little FOMO when I don’t get the new toys. So have your people call my people, let’s make this happen.
Patrick Moorhead: Totally. I think maybe next year, Samsung needs to have their conference, their announcement at Davos, right?
Daniel Newman: I mean, didn’t they know I was there? I mean, geez.
Patrick Moorhead: I don’t know, Dan. All right. Let’s move to the next topic. TSMC earnings, bellwether of foundries. And in many cases, the chip industry. Dan, did they crush it or what?
Daniel Newman: It sounded so sarcasm, sarcastic though. Look, there’s two sides of the story. Did they beat? Yes, they did. Did they crush it? It depends what you’re comparing it to. Because if it’s to a year ago, no, they didn’t. So yes, on the top line, they outperformed. And then of course, you always got to do the translation between currencies, Taiwanese currency and US. But they did beat it on the top and the bottom, but their revenue is actually down one and a half percent on a year-over-year basis. But sequentially, revenue is going in the right direction. Why is this important? Well, the semiconductor industry as a whole, has been in a pretty long tail slide in most areas that aren’t AI. And of course, TSMC has been propped up a bit. They are early often an important partner in many of the AI architectures, especially as you move towards five, and they have a very strong ramp to three. And it seems that they’re even ahead on interest around two, which is some of what was exposed in the earnings call.
The company basically, did point out the global complexity. But a couple of interesting things, Pat, is one, they saw their HPC and smartphone now generated close to 90% of their revenue. So just those two categories. In the last quarter, this supports a lot of what we’re hearing, Pat, but IOT dropped almost half in quarter over quarter. So huge fall, as we saw the consumer IOT business drop in a really big way. Here’s another really interesting part, Pat, is 72% of their revenue is North America and only 11% is China. So that’s a surprisingly large distribution of revenue coming from the US, and that shows just the strength and dependency that the company has for US-based chip design or fabless design companies, Pat. The 3 nanometer ramp is happening faster than five from a revenue standpoint and that is even despite pricing discrepancies.
So overall, Pat, what I am taking away from this is that we have likely and kind of following the CEOs that we’ve talked to, that bottoming out of the inventory has happened. There’s an optimism going forward into the future quarters about strength, now that inventory supplies are going to need to be refilled. Of course, TSMC sees this early because they get order flow ahead. They’re one of the earliest as demand starts to pop up. And so that restocking demand is expected to pick up. But being very, very clear, AI again, seems to be the biggest beneficiary. They have a strong ramp on their 3 nanometer node and they’re strongly positioned to continue to support AI growth. And with all these things happening at the same time, it does look fairly optimistic for TSMC. The only thing I would say is the company did announce or has announced that its 2 nanometer mass production is expected in 2025. So we’re only a year out now from seeing three go to two, and from that being entering its mass production phase.
So a couple of predictions I have. One is smartphones and mobile devices. PCs are going to pick up in a big way in this year. The AI PC in the second half. I think I know a guy that did a big presentation at CES and said, “There’s a super cycle coming in the second half.” I think TSMC agrees and so do I. It doesn’t mean we’re not still going to be facing another challenging macroeconomic year, but silicon semiconductors are going to eat the world. They’ll continue to eat the world. Companies will find efficiency and productivity gains with the help of AI. That means more investment in AI. And long and short, Sam Altman is going to build all the factories anyway. So TSMC is in big trouble when that starts in 2026. That was a joke. Maybe, I don’t know. I can’t tell for sure. But it is kind of fun to think that Sam’s going to get into the business of chip manufacturing.
Patrick Moorhead: Oh my God, I forgot to put that on here.
Daniel Newman: I have to think though. I know. I squeezed it in so you could comment on it. I have to think though that when he says, to build a network of fabs, maybe he meant to create an open relationship with some different manufacturers and create a network of fabs and use Arm and Synopsys, and maybe Intel and these different companies, to help him build capacity with some level of commitment that might be required on his part. Do you think he’s going to really get into the full IDM or is he more thinking fabless chip design with a network of fabs around the world? I don’t know. It was hard to read the way it was presented, but it was really fun to think Sam Altman’s going to be spending his next few years flying around the world building semiconductor manufacturing facilities.
Patrick Moorhead: So I think three things could make sense, and I air this out on X this weekend. What could make sense is for him to pull dollars together to build an ASIC that anybody who runs an open AI process would be able to take advantage of this and it’d be the most efficient. So you get the ASIC advantage over the GPU, and then you get an ASIC that is built for a GPT6 or something like this, now you’re talking. And maybe they could give some price reductions to those people who might want to go in with them on it. Or OpenAI or some affiliated business ends up selling these and the investors could take part of the profit.
The other thing that could make sense along with that ASIC is to do what Apple does, which is to take CapEx to either get bleeding edge or leading edge. And I think if you applied some bleeding edge CapEx for the training, and then potentially, some leading edge for the inference chip, let’s just say there are two different chips, yeah, you might have something. I mean, listen, if Sam was going to create an IDM, he’d first have to be a designer, which he’s not. And secondly, he’d have to have access to high EUV, which would be pretty darn expensive. So again, I don’t see too much there, but we’ll see. I mean, Sam Altman’s kind of like an Elon Musk guy without the science, but a business guy. And if anybody could figure out something that’s interesting, it’s him. Dan, you’re quite the biz dev guy. You should give him a jingle and ask him about that.
Daniel Newman: I’ll call him. Yeah, no.
Patrick Moorhead: No. Okay. By the way, back to TSMC, I mean, the thing that really blew me away, 50% of their revenue is leading and bleeding. By the way, I have to put asterisk. There’s no 3 nanometer transistor width here. 3 nanometers is 15% and 5 nanometer was 35% of the revenue. It does annoy the heck out of me that a high performance computing or HPC is PC, plus data center. Come on, man, break that apart here folks. Make it a little easier for people to know what’s going on. But all in all, looks pretty good. I want to add one final thing. TSMC did delay its $40 billion chip project in Arizona for another year, saying that it is waiting for US grants. I’ll say that’s probably a half-truth. They are behind and they don’t know how to actually get American workers to come in and do what they need to do, even though companies like Intel, and GlobalFoundries, and Micron have figured that out. So let’s move to the next topic here that has nothing to do with semiconductors, but has everything to do with application modernization. IBM makes an acquisition.
Daniel Newman: Yeah, so there we go. I think it was maybe late last week, IBM made its first acquisition of 2024. Made 35 last year. So that’s interesting is we always focus on the mega acquisitions, but IBM is one of the companies that historically makes dozens of tuck-ins that help them with important parts of their business. Last year, observability was a big focus. This year, the company’s starting off with app and mainframe modernization. And the company’s been very successful continuously with its Z cycles, the Z mainframe, and the mainframe still run large swaths of the most important industries on the planet, healthcare and financial services, government agencies depend on. Of course, there are some limiting factors to mainframes and companies have had to think about how do they build and modernize to be able to run critical workloads securely on a mainframe, but maybe have hybrid integration and modernization to cloud to be able to take advantage of new AI technologies, or to have the ability to keep up with technology capabilities.
And so with CEOs prioritizing modernization, IBM knows that it needs to be able to handle the continuum. It’ll continue to sell Z and it’s a very successful, very high margin, super profitable part of the company, but it also has to be able to use and support through its consulting business, mainframe and modernizing mainframe. And so basically, they’re acquiring a business called advanced, not a household name by any means. And the idea is to support mainframe modernization journeys. And so this will be a business that will run in the consulting business unit and it will be very focused on basically, not forcing companies to choose the either/or. It’s not about whether to use mainframe or cloud, it’s about mainframe and cloud. And that’s all about what IBM has been. It’s AI or it’s hybrid cloud, plus AI. Well, being able to use the mainframe for certain needs, and then being able to use hybrid cloud capabilities for certain needs is very important to IBM’s strategy. That’s what they’re doing here with this advanced acquisition.
The other thing that’s important to note is it’s going to be very complimentary to the company’s IBM watsonx Code Assistant for Z. And so this was basically a set of tools that have been developed to give mainframe modernization a more simplified, streamlined set of options to standardize… And this is a lot of words, but standardize the modernization across three things. It’s across hardware, software, and services. And so putting together what they’ve built with the watsonX Code Assistant for Z is to basically end-to-end developer life cycles, application discovery analysis, refactoring and converting code. So these things are all going to work better. And so now basically, you’re adding more consulting and capabilities.
An interesting thing is some of this capability with stuff that I think Kyndryl did. And so it’s kind of interesting to see as things spin off, and then things start to come back in. I’m sure it’s a leaner, meaner organization, very focused, much smaller. Short story here, there were no details on financials. The deal is probably not big enough to warrant that. They expect it to close with some certain conditions being met, I think next quarter. So IBM, I believe, is going to deliver earnings this week. So we’ll hear from the company how it’s doing, how watsonx is performing. We’re entering another earnings cycle, Pat, which means another wave of earning conversations on The Six Five. I know we’re going to keep doing those in ’24. I know we’ll see. I know people want to hear about that from us. But yeah, pretty straightforward. Important topic, Pat. You and I cover this area a lot because a lot of businesses transformation still runs on a mainframe with the cloud, with AI, with containers, and, and, and IBM is addressing that here.
Patrick Moorhead: Yeah. So most people who think they know the mainframe, don’t actually know the mainframe. I know for the first five years of more insights and strategy, I pretty much wrote off the mainframe, but that’s because I was naive and kind of sucked into the world of X86. Now, I did spend five years in and around the IBM mainframe world when I was at NCR working in financial systems, but to IBM’s credit, it keeps chugging. And in fact, there’s more workloads being done on the mainframe every year, not by number, but in terms of NIPS and computing each year. And it’s up into the right.
And when you get into the super cycle of the mainframe replacement and you see the financials that hits IBM, and then a couple quarters later, you see the impact on services, you get a much better appreciation for what they can do. And mainframe modernization is not always a code for getting the application off the mainframe. It can be refactoring an application and putting and containerizing it. Dan, I know you had brought up Red Hat. It can be modernizing the code where the person who wrote the application maybe in COBOL is not alive anymore, has been retired for 25 years. And you want to move that to let’s say, a more modern language or even a higher level language that you can work with an IDE. Yeah, it is interesting. Kyndryl versus IBM Mainframe Consulting on here, I kind of view Kyndryl as kind of a vertical play and I look at this IBM Consulting as kind of a horizontal play. But I could be wrong, but I’m probably not. Okay.
Daniel Newman: I mean, are you ever? I don’t know, sometimes-
Patrick Moorhead: I am wrong. I am wrong on the less important stuff. I feel like my hit rate on things like the hybrid cloud have been pretty good. So hey, let’s move into back into chipville here. Synopsys is making a giant acquisition of ANSYS here. Obviously, what needs to be approved here, but I think this one is incredibly interesting here, because what it does is it connects the world of electronic design automation in semiconductors, which is what Synopsys does, which essentially is using software to create either silicon IP blocks, doing an entire SOC for it. It’s pretty incredible. And then you sprinkle on AI for stuff like validation, where instead of having 200 engineers doing validation the old-fashioned way like we did 20 years ago, the AI would do it on its own. And there’s also design support. Right? What can the AI, what did it learn about the best design methodologies? Now, Synopsys is very clear that it doesn’t kind of merge data. So one chip maker’s IP doesn’t bleed over into another.
That was ANSYS. Think of ANSYS as a company that essentially does simulations in the physical world. And that could be a server rack, it could be the design of a car. I mean, on their website, there are literally hundreds of examples out there. And just for fun, I was thinking, “Hey, how would AWS use the assets of these combined companies?” So they could use it to design a chiplet, and then the Graviton SOC, the PCA board, the rack, the server, the fleet of servers, an entire data center, they can essentially with these tools, create. And in this world where we’re losing gains from Moore’s Law, but we have to keep cranking out the innovations, there has to be a push on another type of innovation. So these interconnected links closely coupled designs come together. And I could see this for cars. I could see this for data centers like we talked about. I could see this for specialized silicon and building materials. I mean, go on ANSYS website if you already know what Synopsys does, and you can get an idea of this.
By the way, Cadence bought a fluid dynamics company. They’re the big competitor of Synopsys. So it’s interesting to see the two of these becoming what I thought they would become about five years ago, is they could become the new power players here.
Daniel Newman: Do you think there’s any regulatory here, Pat? There’s some speculation, just because of this new category, sort of design software. And I mean, this is a massive tie-up, right? I mean, it’s how much… What’s that?
Patrick Moorhead: 35 billion.
Daniel Newman: I’m not talking about the size of the deal though, but the number of companies that play in this space with the importance around AI chip. It didn’t even occur to me that these two… This is the same size deal as the Xilinx deal. Isn’t it?
Patrick Moorhead: Huge. Yeah, yeah, exactly when it closed. Right. And it’s funny, Dan, every time I think about the pre-crazy laws on antitrust, I remember it’s kind of Looney Tunes right now. So you have to think about now what could people do as opposed to exerting monopoly powers? Forget the fact that these two companies do completely different things. So it gets down to all. It gets down to market definition. Right? We could have another Figma. Heck, Figma and Adobe are in two separate markets doing two different things and it still got stymied. So yeah, could get held up particularly in-
Daniel Newman: Well, it’s interesting, right? Because one sort of makes the tools to design the chips and the other kind of has software that can evaluate the systems where these chips are placed. And together though, the capability of these two companies could really… Again, I’m optimistic the deal will get done. It’s just interesting because as we know AI will… This goes back to the Davos theme, but the Davos theme is that effectively, AI is going to be the economy and the national defense. We used to talk about why we needed chips act, was the economic supply chain resiliency, national defense and technology leadership. Well, those that can design the most sophisticated chips, they have the tools and technology to design and build the most capable, lowest power, highest performing AI chips will run the world.
That’s a little bit grandeur, but it’s also kind of what’s happening. So it’s an incredibly visionary tie up. And I had the chance to have Sassine Ghazi on a pod with me last week, making markets, a Six Five media production. And we had the chance to talk about… This was right before this was announced and just the direction that Synopsys was heading. And a lot of people don’t realize, but Synopsys is a bit of a juggernaut. I mean, they have an incredibly comprehensive set of tools for chip design. They have a burgeoning and growing IP portfolio. I think they’re number two only to Arm, which a lot of people don’t realize. And of course, their growth has absolutely out clipped the market because when people changed focus on chip type, it didn’t affect Synopsys that much. They’ve just continued to grow very profitably, very successfully.
And within its new leadership, it’s drawn in some really great new talent. Now with ANSYS, this becomes a really big company. I mean, really, really big organization that is now going to be sort of centerpiece. NVIDIA, and AMD, and Qualcomm and everyone, they’re all going to be using these companies for what they’re going to be doing, and the packing and stacking that they’re going to be doing with the silicon and the designs going forward.
So it’s a really exciting tie up, but it is interesting because it didn’t even occur to me. I was just reading an article before we started on Reuters where they actually said, “This could actually be susceptible to some policy scrutiny.” I’m like, “It didn’t even occur to me. Really, they’re going to tie up a bunch of tools and software and design?” I mean, this is hardly the Arm and video tie up, but it is interesting to think it could happen. Like I said, my gut says it goes through. Very, very smart buy, expensive, but not that expensive. And if the bet is that AI and those that can build the most sophisticated AI chips is going to rule the world, then what do they say? It’s kind of like a Super Bowl, all roads lead to… In this case, all roads will lead to this new Synopsys and ANSYS tie up. It’s pretty exciting stuff about.
Patrick Moorhead: Let’s get into our next topic, which is also AI related.
Daniel Newman: Come on. You didn’t like stacking and packing, dude? They even get a stop or a call-out. Geez.
Patrick Moorhead: God, man.
Daniel Newman: Come on, I’m leaving.
Patrick Moorhead: Intel and DigitalBridge announced the formation of an AI company called, Articul8. Dan, what is this? I didn’t get briefed on this. I did see the press release across, but can you parse through here?
Daniel Newman: It seems like a bit of an accelerator, Pat. I didn’t get it either. Our team wrote a research note. We’ll put it in the link. It basically was created with the IP that was developed at Intel and the companies are going to be working together to… Actually, it’s kind of scaled demand for enterprise workloads. And by the way, this isn’t technology-agnostic, meaning hardware-agnostic tie up. Meaning, these things aren’t being tried and tested on Intel Silicon, but it’s not only for Intel Silicon. And so there’s an investment arm in this. So Digital Ventures, that’s the venture initiative of DigitalBridge, was the lead investor, but there was a bunch of other investors that came into this, Fin Capital, Mindset, Communitas. So just so you know, this is a bigger group and it’s all about GenAI. It’s all about the fact that the expectation is that GenAI is going to scale substantially in how it’s going to be incorporated into workflows. And that basically building turnkey GenAI software platforms, speed, security, efficiency, and coming together and doing so. And optimizing it on Intel to test and show that it can be done.
Now, there was some early testing of the software that was done with BCG, another kind of well-known consulting organization. They’ve worked together to scale the platform. They’ve worked with enterprise customers, they focused on the big industries. So fin service, telecommunication, I believe they also work even in the semiconductor industry. And so effectively, this independent company, which is kind of interesting, I don’t know if this is a Gelsinger thing, but he does like to kind of create these subsidiaries and partnerships he’s done it with… He did it with the Mobilize spinoff. He’s doing it now with the FPGA spinoff. This is another sort of co-invested partner strategy. But I think what it is it’s like a proof of concept environment for Intel’s hardware. It’s the company’s ability to bring an ecosystem together to build software, which is a big proof point for the company, to scale the adoption of generative AI, and to do so kind of outside of the walls of the Intel org, but to do so with Intel still being front and center.
And so effectively, it’s an AI platform, customer data training, inference, security, and gives the customer the ability to deploy these GenAI workloads and cloud, on-prem in a hybrid environment and to do so in an open ecosystem. So Pat, I don’t know if we didn’t get briefed because it’s kind of a footnote type of announcement, but it seems pretty big to me and it seems like an important proof point as Intel is really trying to make sure it inserts itself in a meaningful way, into this GenAI conversation.
Patrick Moorhead: Listen, I probably got invited, but I was skiing in Aspen on January 3rd.
Daniel Newman: Yeah, yeah. It’d be fair that we say that. We might’ve both been in transit when this was going on.
Patrick Moorhead: Yeah. So there’s a lot of ways that Intel could have taken this. Right? One thing says, “Oh hey, there’s no value. Let’s shut this down.” The second way is to open source it, offer it to everybody and maybe put it into Linux Foundation or something like that. And the third way is to do what they did, which is to spin it off as its own company. So obviously, the company thinks the mission and what the company does absolutely has value and described as a full stack, vertically optimized generative AI platform that goes across cloud, on-prem or hybrid. Right? That’s almost too good to be true. Almost nobody has figured that out yet. So it seems like there’s value. And I had a quote from CEO, Pat Gelsinger, which means that this is pretty important here. But Pat obviously, sees this better on its own than sitting inside of Intel.
Daniel Newman: Yeah, he makes a lot of wise calls. I’m kind of watching and learning what’s going to happen here. Want a little more detail, maybe a little more specificity on kind of what these partnerships entail, what they’re going to build, what they’re going to deliver. But it sounds to me like this is about pairing up the complexities of hardware, software, service relationships, and delivering GenAI at scale. And it’s something that I know it’s very top of mind to Pat and to Intel. So good stuff, Pat.
Patrick Moorhead: Yeah. My final commentary is, I think I remember now a conversation about Intel getting into this business themself, which it appears that they’re not going to do that and what comes out of the backend is Articul8. So it’s going to be an interesting thing to watch. And the companies I would expect to get on this would be some of the largest companies out there. Interestingly enough, Articul8 does have some customers listed on their website. One of them is obviously, BCG like you said, but also a company called Uptick, and the other one, which is Scripps, which interesting. We’ll watch this and talk about this in The Six Five in our respective more insights and strategy, and Futurum Group assets, reading, writing, and arithmetic. But hey, I want to thank everybody for tuning in to this episode. We appreciate you hanging in there with us for 200 episodes. Dan and I both think this is very important. We have missed very few of these over the past, I guess since 2019, Dan. Is that correct?
Daniel Newman: It’s all about commitment. I swear. There’s a reason most podcasts don’t make it past episode five or six. So 200 a feat, we should have a candlelight dinner together and celebrate maybe…
Patrick Moorhead: Only if we can hold hands, Dan.
Daniel Newman: I never–
Patrick Moorhead: Are you in for that?
Daniel Newman: I will always hold your hand.
Patrick Moorhead: Hey, if you like what you heard here, the banter between Dan and I, or maybe even you walked away with some insights here, hit that subscribe button. We appreciate you. Have a great one. And we will see you in four days.
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.
