Intel Saves Itself; Nvidia Saves Civilization
Also Arm earnings, the Revenge of the CFO and much more
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Highlights from our Blog
Lots of earnings in this issue.
Arm put in some very good numbers. They ironed out the communications problems since the last call and beat expectations across the board. The stock is up a lot since then. Arm seems to be doing all the right things. We especially appreciate their new subscription plans which greatly lower the cost of entry for new customers, an area that we have been calling out for a long time. That being said, a big part of the jump in their stock rests on the fact that Softbank still owns 75%, and we have to think they are preparing a secondary offering to lower that stake a bit.
We remember the bygone, misty days of yore four years ago when only a 1,000 people cared about Nvidia’s earnings. Now the whole fate of the world seemed to rest on their latest quarter. Fortunately for us, those earnings were pretty good. They were so good that we even entertained the idea of exploring their prediction for the data center total addressable market (TAM) to double in the next five years, with the implication that Nvidia would pick up much of that gain. That claims sounds outlandish, but given Nvidia’s recent track record, we have to at least be open to the possibility. However, that exercise just convinced us that while Nvidia the company is in really good shape, NVDA the stock is trading on dynamics beyond the basic fundamentals.
Intel formally launched Intel Foundry last week. They have not yet disclosed the new entity’s stand alone financials, so we took a stab at modeling those out. Our model is almost certainly wrong, but when they do disclose the actual numbers, we will have a good sense of what trade-offs they made and how the unit will fare. Expect sizable losses for the forecastable future.
Intel has seemingly done the impossible and advanced five manufacturing nodes in four years. So the obvious next question is how do they afford the sixth node? The seventh? The tenth? We dug into the archives for a way to model their long term capital needs. Roughly speaking, companies can afford to keep up with Moore’s Law if their annual revenue is double the cost of a leading edge fab. Historically, every company that fell below that level dropped out of the race. If Intel can grow revenue again this year, as the Street expects, they should be safe, at least until 2028 when they risk falling back into that danger zone, highlighting the importance of bringing in external revenue via Intel Foundry.
We always caution that CFO’s should not fall into playing the role of Dr. No, denying every expense and investment. On the other hand, it is easy to see how that could start happening this year as many CFOs have to account for the costs of “AI” systems. What does the average, non-tech company have to gain from an investment in AI? More than nothing, less than changing everything.
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Semis, Hardware and Deep Tech
Groq is one of the latest generation of companies making AI accelerator ASICs. They recently unveiled a batch of performance data for their Language Processing Unit (LPUs) which seem to offer some very impressive performance gains. Dylan Patel provides some important context for these results, highlighting situations where they work well and those where they do not. Groq is also one of the latest semis companies seeking to monetize through software as a service and not only through hardware sales. So they have a lot going on, but are worth watching.
Another look at AMD’s ROCm, their answer to Nvidia’s CUDA. We have heard many good things about ROCm’s readiness in terms of features and performance. It will take more than that for it to overcome Nvidia’s significant head-start and competitive moats.
Oxide is one of the new-style private data centers opening up to tap into the AI Gold Rush, what Nvidia has taken to calling “AI Factories”. Their CTO recently wrote a post that at heart is a pitch for their service, but raises a number of legitimate issues with the state of the market. In particular, we found ourselves asking how are the economics of data centers going to change with AI, there is going to be a big shift in value capture, and not all of the possible outcomes sound that appealing.
Logitech has launched a handheld gaming device, running Valve’s Steram software store. The device is powered by a Qualcomm Snapdragon chip. A few months back, we wrote about the emergence of this category. Absent some significant changes in gaming software this will not become a major category, but we should see some more interesting devices merge this year.
As much as advanced packaging is becoming a critical competitive field for leading edge foundries, most electronics still rely on time-tested wire bonding. And the field is not sitting still with new materials and methods still coming on stream.
Networking and Wireless
The US government launched a $42 million Open RAN test bed. Our sense is that this is too little too late. ORAN will likely be around for a while, but it is unlikely to be the cure-all upon which so many people have placed their hopes.
A look at the rise and fall of Nokia, this time the culprit is they made too many phone models. We see this slightly differently. they let their manufacturing model come to dominate the company’s strategy. This disincentivized the shift to smartphones since it was such a small market in its early days. Either way, strategic lock-in creates path dependencies, and no one lives forever.
One of the challenges of “The Edge” is that its distributed nature requires a location-centric element that adds a fair amount of friction to deployments. There is a layer of intermediaries needed and these businesses do not scale the way the Cloud can. Case in point, Cloudflare just announced its Partnership program and it has dozens of small companies, most of which we are not familiar with.
Software and the Cloud
Renesas has transformed itself from sleepy jobs program to one of the most interesting semis companies in Japan, snapping up a number of companies. Most recently, they acquired electronics module design company Altium. This is not an obvious target, showing Renesas’ corporate development team is thinking creatively.
The latest reviews of Qualcomm support for Linux show signs of improvement. This is the first positive review of Qualcomm’s PC software support that we have ever seen. They still have a long way to go, but good to see they are moving in the right direction.
Diversions
“We are Living in the Golden Age of Cordless Power Tools”. Fun, because we love power tools as much as we suspect many of you do as well. But also note that the key enabler of this golden age is the availability of cheap batteries, which of course come from China.
Image by Microsoft Co-Pilot
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