The Six Five Pod | EP 273: Silicon Strategies: Government Stakes, AI Chips, and Market Volatility

On this episode of The Six Five Pod, hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The handpicked topics for this week are:

1. Intel and Government Investment: Extensive coverage of Intel's recent developments. A debate on the U.S. government stake in Intel and its implications.

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2. Chip Advancements: Discussion on China's progress in computer and chip manufacturing. Analysis of China's indigenous chip acceleration efforts.

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3. Market Dynamics and Economic Outlook: Examination of current market conditions and Fed Chair Powell's comments. Insights on potential interest rate cuts and their economic impact.

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4. Tech Earnings and Company Performance: Analysis of recent earnings from Palo Alto Networks, Zoom, and Workday. Discussion on challenges and opportunities in the SaaS market.

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5. Nvidia's Upcoming Earnings Report: Predictions and expectations for Nvidia's financial performance. Long-term outlook on Nvidia's market position and growth potential.

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6. AI and Cybersecurity Trends: Exploration of AI's role in enhancing cybersecurity measures. Discussion on Palo Alto Networks' position in securing AI infrastructure.

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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.

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Or listen to the audio here:

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.

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Daniel Newman: I love that the company has the most stable AI powered revenue stream in advertising. When you have 3.3 billion daily monthly users that are all getting AI powered garbage fed to them based on every thought and conversation they're having in the real world. Personally, I'm not a huge fan of it, but like, had anything I talk about, you know, any peptide ads I get now, I'm not joking on Facebook. Like, that's the only ads I see.

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Daniel Newman: Oh, they updated it. I like that so much better than I think we know what we're talking about. I'm actually surprised we didn't get called out on that more often. But I gotta ask you a question. Are you grumpy today? You look a little grumpy.

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Patrick Moorhead: Listen, this is my most favorite thing to do during the week. And yeah, I made the mistake of getting in and, you know, doing a hundred. A hundred emails and just seeing idiocy.

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Daniel Newman: Terrible ideas. Terrible idea to do that. Terrible idea to do anything. But you just wake up, shoot peptides, lift weights and podcast. If you can actually do that, that was your entire career, how happy would you be?

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Patrick Moorhead: I'd be very, very happy. I'm so happy. You know, I look at the life of one, I'll call it a Finance Influencer. And he lives a pretty good life, going from show to show, hops on the jet, lands in mysterious places, does a speech, right? It's pretty awesome.

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Daniel Newman: With the president, who are we talking about?

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Patrick Moorhead: A financial influencer that shall be unnamed.

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Daniel Newman: That's great, buddy. Well, you know, I only asked you that question starting out because you usually lecture me, right? As the sort of intro of our show rolls, you're like, Dan, smile and be happy and have a good attitude and don't suck today. And today, you know, we're going into the show and you're looking all crabby ass, and I feel like I, you know, want to reach through. And then, you know, I had this moment, and this is probably going to age me a little bit. Have you ever seen the movie Bad Boys?

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Patrick Moorhead: I did. It was very good.

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Daniel Newman: Will Smith, Martin Lawrence. Early days, I mean, they got worse because they did like a series, and over 30 years, they've done like 10 of them. But like, the first one, when Will Smith, the one that was kind of fun, that wrapped that, you know, Fresh Prince, that era, he didn't walk up on stage and slap people across the face, but, you know, he looks at Martin Lawrence and we don't know who's Martin Lawrence, but, you know, you and I wearing the same clothes, he looks at him, he goes, you know what the difference is between you and me? And he said, I’'ll make this look good. One of us makes this look good. It may or may not be me. All right, buddy. Anyways, we got a great show today. It's so good to be back this Friday. And by the way, I just want to, you know, stop, say a little reflection to the world. We appreciate the constant 24/7, 365 news cycle that you've created around AI. It sure has made our lives interesting. You know, Pat, there was a time when there wasn't a chip story or a, or a software story or a LLM story every week and we didn't have anything to talk about. It would have been hard to find this. We would talk about deep enterprise technology, like network back end infrastructure and God, did anybody care? I mean, I'm sure somebody cares, but you know, it's so great to be able to talk about this stuff that everybody cares about. And by the way, even our freaking grandparents, parents, if they're still around, uncles, aunts, actually know the stuff we're talking about. It's pretty cool.

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Patrick Moorhead: No, it is pretty cool. And I think I've told you this story. Ten years ago there was a top five business news outlet that told me that they weren't going to stop covering chips because it wasn't interesting and their readers didn't care. Care about it. You know, there have been a lot of memes over this. I mean before Apple crushed it with the iPhone, everybody was talking about that, that heart devices were a commodity and, and you can't make any money at them. And you know, my stance has always been you commoditize yourself as a market. And also we have to understand there are waves, right, waves of excitement, of, of things that either change people's lives and businesses and the way they operate markets and boy, when you get two hits at the same time, it's like, it's like the Hallmark moment, right? It just keeps on giving and giving and giving.

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Daniel Newman: Yeah, it's great. Every day. Speaking of every day, I'm pretty sure I saw you on CNBC every day over about a week period talking about intel. I mean, I mean I may be, you know, the Nvidia guy, but you are the intel. I'm just kidding. You are in all the chips, guy. But you were the Intel guy for the last like seven or eight days. Pat, you have been all over every media, every news, talking intel. And we're going to start there today and I'm going to come back in just a second, but I want to give everybody a little bit of what we're going to talk about. We're going to talk intel quite a bit. We're going to talk about The Chips Act. President Trump is creating all kinds of distress once again, although the markets do not care, clearly. Meta. Are they putting the brakes on? Are they not putting the brakes on AI? You know, it's funny because they're actually talking over themselves. I can't quite tell. But, you know, that's great. Keep everyone confused. That's a good way to go. And then there's some other topics we may get into related Open AI, Google, Apple. It just depends how long you and I keep talking about these few things. Then we're going to get into the flip. We're gonna have a debate. Pat also likes to debate with LLMs now. So if I pull up, we will pull Grok into this thing and then finally we're gonna get into bulls and bears because right now, as we are recording this, Fed Chair Powell is talking and he's talking about cutting interest rates. The hawk has gone dovish. We're going to get those rate cups and cuts and someone's portfolio is going to shine. And by the way, I want to do a throwback to two days ago when I said to stay calm. Rate cuts are coming. That sells off Faux fake. Are we going to get a big shakeout? It's coming. Yes. But not yet. Not yet. All right, buddy, let's get into it. We're going to talk about President Trump weighing a 10% stake. Are we, are we going to control the production? Are we going to take over production here in the US so that the government can own Intel? Is that even possible? Is that okay?

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Patrick Moorhead: Yeah, it has been kind of an Intel for the last 10 days. It's been crazy. And I wasn't on CNBC every day, but it was on CNBC, Yahoo Finance, Bloomberg, talking about, talking about this thing. And there seems to be about every two or three days something new pops up. And even though it was, I think, what, four days ago or something, the government is. Yeah. In fact, weighing, weighing a stake in investing. And it, it wouldn't be, it would be a conversion of the chips act money into equity now. They'd have to up the ante. And I think there's, there's some truth to this and I think there's also some history on this. The U.S. government has put equity investments into GM, into Chrysler, into AIG. And a lot of people don't know this in Q Tel, which is the CIA venture arm invested into Palantir and still owns, I believe, still owns shares or maybe they cashed out. And also the government took an equity stake in MP Materials, which is a rare Earth Minerals company that currently China is holding over our heads and kind of holding us hostage there. So it's not unprecedented and where I'm at in this right now is I think short term it's a good idea. Long term for the government to be owning parts of companies I think is just a bad idea. I did like that Lutnick talked about that they would not have control, they would not have decision making power. And out of the other side of my mouth I'm just going to say that if the government doesn't tip the scales a little bit, I don't think that, I think Intel Foundry has a much lower chance of getting an anchor tenant customer. In my discussions that I have had with pretty much every potential Intel Foundry customer except for Apple, they have acknowledged that the technology for the most part is there. There's some really, horror stories about what had happened in the past and there's other, other chip makers who are very loyal to TSMC.

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Daniel Newman: Right.

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Patrick Moorhead: They weren't doing very well when they were with another foundry. And then TSMC along with these companies designs kind of pulled them out of the abyss. You know there's a lot of companies who have multi, who are multi vendor. Right. RF as an example. Very much a multi vendor across Qualcomm. Qualcomm has a history of Samsung and TSMC on the front end. AP Digital Stuff. Nvidia has run silicon through Samsung. Broadcom has run silicon through Samsung. Marvell has run silicon through Samsung and even I think Intel. So there is a history of dual sources. But, the potential risk of losing, losing ground to, to the competitors makes this a very tough thing. And then you've got my final comment. It is tipping the scales. Could be Trump actually following through on his tariffs or instituting a reverse tariff on silicon from tsmc. Acknowledging that final assembly doesn't happen in the United States but typically in Mexico for AI servers and desktops and Vietnam and China and India for smartphones.

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Daniel Newman: Yeah, that's a great take. You've been all over this one. It's very simple. For me the answer is yes. By the way, TSMC had almost 49% gov. The government had almost 49% stake when it started, made a huge investment in the company, stood it up and has given billions of dollars through grants, through tax savings and through a number of different vehicles to see that TSMC became tsmc. And by the way it guaranteed its long term national security by enabling it to become tsmc. Because now basically the US Military is the Taiwan Military. Let's be very candid about what's going on here. This just has to happen. By the way, I think it makes so much more sense for the country to have non voting investments in companies they decide to back in critical industries in order to actually give a chance for the money to be returned to shareholders. Very straightforward. You mentioned that. Lutnick said it was actually one of the more profound things he said because a lot of times when he gets on TV and talks, the market tanks. He's just got away with words. I call it the. There's the Lutnick put and the best input, the best inputs. You know, the market can only go so low. Best in speech comes back up and Lutnick comes on, it tends to go down. But he was right about this one. He was absolutely right. The US needs to do this. I back it. They are going to need to tip the scales. I think you said that. Because if 14A is going to succeed they need to encourage more private investment. And by the way, this SoftBank thing sure looks juicy for ARM to make some AI chips over at Intel. Yeah, totally, I see that happening. Just, just throwing that out there.

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Patrick Moorhead: Well, a couple scenarios, right, it's either SoftBank doing their investment things like Vision Fund and they want to return. Number two, this could be the ability to pay off the promise to the Trump administration for a $100 billion investment or third, a place for Army CPUs, XPUs or whatever. It's not confirmed yet. But you have SoftBank Ampere, you have SoftBank Graph Core and you have all the stuff going on with SoftBank. And while I believe that SoftBank, sorry OpenAI, is working with Broadcom and Broadcom typically means TSMC, my spidey senses tell me that they have signed some sort of a manufacturing agreement based on a certain set of, certain set of milestones.

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Daniel Newman: Yeah, absolutely. So there's this one. This is likely going to happen and we'll talk about this a little bit more in a moment but beforehand, you know, I just want to say that, that someone always knows something. SoftBank didn't do this in my opinion without some assurances that there's a backstop because it wouldn't have been. It's not a typical MASA investment. Now MASA has ambitions to obviously expand its infrastructure capabilities. It's putting things on the books, in my opinion, that are basically ARM holding companies. But he's putting them on the softbank books to improve the financial situation of arm because ARM still does run on a fairly tight margin and the company does count on high volume royalty licensing business and it would be tough for ARM to make deals that Softbank are making and able to use to benefit ARM's long term prognosis. But nobody wants to be dependent on one or two sources. And in this case the dependence on AI is all through Nvidia and all through tsmc. And even if you don't go through Nvidia, you're dependent on tsmc. Right now TSMC is the ultimate juggernaut. It's also why we have it as their number one AI 15 company that's not a MAG 7 because basically you can't do anything without TSMC. But Pat, let's theoretically talk about this idea of converting grant money overall. Because just like the 15 sort of export tax slash subterrace that he did with these, these H200s and Mi308X's, it looks like now he's kind of saying this could work really well. And by the way, maybe we'll do it with Micron. Maybe we'll take a passive stake in TSMC. Now my first readout on this is that it's probably focused on U S companies that got grant money more so than, than, than the global and internationals. My feeling is he's gonna build parody or some sort of symmetry with those companies based on tariffs, based on what he does with 232, based on what he does through the different trade deals with those countries. But it could be global. Isn't global. Foundries got money, intel got money, Micron got money? What do you think? I mean my take is he could follow suit. He could do the same thing, by the way, with those export taxes on Broadcom and other companies as well. So you think that's a good idea? You think it's only for intel? Or are all the companies potentially going to see the US take a stake?

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Patrick Moorhead: You know, there was a lot of chatter about this going on and like all administrations, you float an idea and you see the reaction of it, right? And then you hear through Taiwanese sources that TSMC would just give the CHIPS act money back for that. And you know what's interesting is, couldn't the, couldn't the US government just buy open market shares of the company if it, if it wanted to? And if they're talking about giving back the chips act money, that kind of defeats the purpose, kind of defeats the purpose as well. So yeah, I think it's a lot of negotiating through the press at this point.

Daniel Newman: Yeah. So let's, you know, I guess I will just make one last comment. They're also talking about using some of the money to buy more critical minerals, about $2 billion of it. The biggest leverage point that China has right now is that they have a lot more Rare earth magnet. Mostly it is the big thing, but the critical minerals that we need, the APIs for pharma and all those other things, not the APIs. You're all thinking of tech nerds. We're talking about the important parts of building pharmaceuticals. So there's a lot of different ways that money could get reallocated. But I'll just say one last thought. I like the idea of a stake that has non voting that enables the country to potentially get money back as taxpayers. We should all like that. I know, like people don't like the idea because it's from President Trump and there's a lot of people that don't like President Trump. But Pat, I mean, why just give the money, like just give it to these companies? I mean, that is the most anti, sort of democratic agenda thing ever to just give the money. Except it's only okay when it is and it shouldn't be. We should try to get our money.

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Patrick Moorhead: Yeah. I mean, the CHIPS act was never a giveaway. It had clear milestones. The problem is it has had a bunch of BS in there. It was dictating the type of energy, it was dictating the type of employees. It was dictating erg, there's no repayment.

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Daniel Newman: It was how to spend it. There was no repayment. They were never. The government was never gonna see that money back.

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Patrick Moorhead: No, that's.

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Daniel Newman: That, that's right. They wanted daycares and windmills to power data centers and that.

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Patrick Moorhead: I know, I just said that.

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Daniel Newman: Okay. I thought you were saying that it was clear, like the milestones never got us money back.

Patrick Moorhead: No, there's milestones and then there were all the hoops that people had to go through. And I said ERG groups, the type of energy you use, the type of employees you hire. And that's, that's a, that's a major, that's a major issue. So, yeah, I think we're in, I think we're in violent, violent agreement here.

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Daniel Newman: Well, that's not fun.

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Patrick Moorhead: I know. Well, we'll get to the debate and then you'd be sad after I beat you.

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Daniel Newman: So we'll do that later. All right, buddy. Let's talk about Meta. Okay. I was just going to talk about in general, but so this week, all these rumors swirling, Meta's stopping spending, they're breaking up their AI teams, they're pulling back. By the way, AI is gonna, the market is gonna, gonna make a major poll. You know, China's gonna go away from us. Nvidia is going to miss their numbers. I'm joking. Nobody thinks that. But the point is, Meta got a lot of call outs that they were cutting back, slashing. Their efforts are failing. What do you think? Is that true?

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Patrick Moorhead: So I think even Meta is confused internally. But, but I, I think this would have been a, a, a no op if Sam Altman hadn't thrown out the run a bubble thing. Right? I think nobody would have even, even understood that. So you gotta get a lot of industry sources talking about that, they've halted, halted hiring. Okay? Meta AI hiring freeze. Okay. And that sounded really bad to people and it kind of aligned with the narrative of we're in a bubble and things are slowing down and the market sold off and it, you know, people went, went freaking crazy and then met his chief AI officer, basically said, we are quote, unquote, we are truly only investing more and more into Meta Super Intelligence Labs as a company. Any reporting of the contrary that is clearly mistaken. And by the way, both can be true. They could be spending like crazy. They just decided not to hire any net new, any net new people. Meta actually acknowledged that, that they've pulled, you know, that they've dialed the hiring back a bit. So this is one of the cases that, yeah, could be, they both could be true.

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Daniel Newman: Yeah. I mean, my read on it is there's a lot of different ways to spend. I do think the New York Yankees team they've built with these hundred plus million dollar deals, these Aqua hires, they've spent a fortune. There is a situation when you're building stuff like Meta is where you need some time for the digestion of all these investments. You need to put the team together, you need to see where everyone stands, you need to get all the right ideas. And I think putting a little bit of a strategic pause in the right places is not a bad idea. On the other side though, when it comes to the building, Pat, you know, we've seen the 6000 meta chip rack scale systems going into multi gigawatt facilities. I mean, the investing continues. To me, this just feels like nonsense. It's like fud. It's all fud. It's all nonsense. It's all like, look, these companies have a right and maybe Mark learned something from the whole Metaverse thing about kind of how quickly and how ambitious and how he talks about things to not scare investors away, but there's absolutely no chance they're taking their foot off the gas here. It's just, it's so improbable. Not to mention I love that the company has the most stable AI powered revenue stream in advertising. When you have 3.3 billion daily monthly users that are all getting AI powered garbage fed to them based on every thought and conversation they're having in the real world. Personally, I'm not a huge fan of it, but like, had anything I talk about, you know, any peptide ads I get now, I'm not joking on Facebook. Like, that's the only ads I see.

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Patrick Moorhead: Now I'm starting to see some weird correlation because I really don't do a lot of Google searches anymore, but I'm doing a bunch of OpenAI stuff and I don't know if there's like a. Whatever I'm doing on OpenAI, I just added something new to my regimen that I was researching through OpenAI and somehow it magically appears inside of Meta Properties.

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Daniel Newman: Yeah, just a whole bunch of nonsense. Anyway, and Andrew Wayne came out, you sent me it this morning, their CEO. It came in through. Which acquisition was that? Trying to remember. Scale. AI, I think it was Scale. Came in through scale. And basically he's now running Super Intelligence Lab. And he also said something very profound. He said, nonsense. This is absolute nonsense. Oh, wait, that's what I said. But he did say it's not true. Pat.

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Patrick Moorhead: Yeah, no, no, I don't. I read his entire quote.

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Daniel Newman: Like, yeah, you sent it to me and then I shared it and put all my good goodness on it. But by the way, I just want to thank everybody out there that has proven to me that by being thoughtless and, and just posting rather than actually putting any real thoughts out there, that I'd get much better reaction and engagement.

Patrick Moorhead: No, you're cranking up, man. You're up to almost 61,000. I'm, you know, kind of chirping behind you at 51, 000.

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Daniel Newman: Yeah, but it's just that I've absolutely stopped sharing anything thoughtful. It's done so well for me. Like, I used to write these thoughtful posts and I'd like 800 views. Go up to my roof and I jump off it. Be like, there's so much effort for nothing. Now I'm just like, Powell Rocket. 200 likes, 50,000 views. People were so stupid. Let's. Let's be. Let's do better. Let's do better, people. We can do better than this. I can do better than this. All right, one more topic, Pat. I think we have time and then we'll get into the flip. Open AI, you know, CFO got out and talked as they see selling AI infrastructure services in the future. So OpenAI is going to be Coreweave. Open AI is going to be nebulous. AI is going to be. Meta doesn't even really sell it though, do they?

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Patrick Moorhead: No. I guess I was leaning into the meme of Didn't Sam Altman say that he was going to own social media?

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Daniel Newman: Yeah. Take over everything. Right. He's going to be the media social. He's going to build a fab network, he's going to replace the iPhone.He's very ambitious. But GPT5 kind of blows. So there's some work to do, buddy. But in all seriousness, I don't know, I mean, look, it makes sense. I've always said that about Meta, by the way. Like you're spending all this building all this gigawatt and capacity. Why not, why not make some of it available unless you're using all of it? It's a nice way to monetize. I mean, AWS has proven that. Microsoft proved it. Now Google's proved it by building these businesses. I don't know why Meta might not do it, but OpenAI wants to do it. I just don't understand the economics of how they're going to do it. I mean, Cor weave's economics are terrible. They're a great growth company, but the absolute cash requirements to do this is incredible. And OpenAI is already burning cash at an unbelievably high clip, while at the same time facing competition from companies that have way higher operating leverage than them. They can invest faster, build faster, and don't need to raise money and that. They have big customer bases. OpenAI came out with a big lead and that lead is now a lot narrower. I just think this is another thing they're trying to do and that's just going to distract them from the mission of being the best frontier model in the world. That's what they should focus on. The other thing is I do think they're going to build their own chip. I do think that this could be another real opportunity for intel, by the way. And I think I could see them doing it with ARM as well, because I could see the hostility growing with, with the ambition that, that Sam has. And Jensen's sort of owning everything in the world right now. I don't know how well those two are going to do together. And TSMC is obviously very beholden to, in some ways, to Nvidia. I mean how many, how much of their co-ops goes to Nvidia right now? Pretty much all of them. 

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Patrick Moorhead: I'm going to put this one up in the nonsense category. Just complete and utter nonsense. You've got a company that can't get enough data center access and GPUs that melt. How would you ever be in the situation to sell infrastructure services? The only thing I can think of is that this would be the n minus 2, n minus 3, n minus 4 capacity that they may own already. They don't even actually own anything today. They go through Core Weave, Azure, Google and pretty much everybody else. So I think this, I put this under the absolute nonsense category as they don't even own anything at this, at this point I could see this as a potential trial balloon. Daniel, that says with all this funding they're just renting infrastructure at this point and, and they've financially come up with the we can do this on our own for a lot cheaper. And then for any depreciated non, you know, anything that's N N minus X they could potentially make some money on and be able to take advantage of the, of the depreciation. That's all I can come up with.

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Daniel Newman: Yeah, nonsense. Nonsense. Yeah. All right, let's get into the flip. Pat, you know, there's so much fud. I mean, God, last night a new one broke that Jensen stopped production of H200s. I mean the information by the way, is like clockwork. Somewhere between like five and seven business days before Nvidia earnings. During the quiet period they put out the abs. And by the way, I'm not saying nothing's been true. The mask issue was a real thing. It wasn't nearly the problem that they tried to portray it as. But they love a good hit piece during quiet periods, don't they? And Jensen laid a little bit of a smackdown with his Monday to be announcement. And then, you know, you shared another little tidbit. What'd you share? That Jensen was, was getting ahead of it.

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Patrick Moorhead: He's definitely getting ahead of it by saying that TSMC is a great stock to buy, to own right now. I mean if that, if that isn't as blatant of a we're going to crush it. I, I don't know what it is.

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Daniel Newman: Almost as much when he walked around and said Dell, remember the Dell moment when he walked around the floor and him and Michael. So Jensen, Jensen really has figured out where all the gray area exists, doesn't he, in language?

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Patrick Moorhead: I mean, he somehow can, I don't want to say manipulate Trump, but, but kind of get what he wants in, in ways. Right. He comes from, you know, 300% tariffs to, you know, almost nothing. Right. And he just seems to get along and be able to get pretty much whatever, whatever he wants anywhere all the time. He is amazing. He really is.

Daniel Newman: Well, off we go. So this one, Pat, you know, there's a lot of fud though whether Nvidia does or does not need China. So let's have this debate. Does Nvidia need China or just by the way, is it or does China need Nvidia? What should we do here? I mean, let me make sure I got that right.

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Patrick Moorhead: China needs Nvidia.

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Daniel Newman: Does China need Nvidia? Who's the four? So they fixed the coin. Okay. I've gone through an eight month transformation and become a Greek statue. And yet they made you beautiful. And I'm still a fat pig. Okay, you know what, these producers about this. And by the way, I've never grown, I've never had a beard that good ever. Like it's translucent.

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Patrick Moorhead: Okay.

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Daniel Newman: Does that coin have eyebrows on it? Because I don't have any eyebrows. I don't know if people notice that I have no eyebrows. Actually, sometimes people on AX make fun of me about that, but. All right, let's get after it. So if I was really trying to do a thorough debate, Pat, I would just say this is absolute nonsense. Drop the mic. China absolutely needs Nvidia. And it's very clear and it's very obvious and there's probably the easiest argument I can make is they are literally lining up, willing to absorb up to an 18% price hike and probably more frankly to buy 4 year old H20 technology. In the spirit of not using Huawei, its Ascend chips and its cloud matrix, which by the way, by every specification, network, throughput, memory, all have higher performance. And it comes down to something very simple. The enterprises and research, not the military, but the companies that are actually building products, services and technology, and possibly some of the defense and military have all built ecosystems that are deeply reliant on Cuda. And as they're trying to build and compete with open source and the world's largest language models and the biggest frontier models, and they want to be competing with the United States trying to do it with can. The Huawei equivalent to Nvidia is not an equivalent. It does not work. They cannot scale it, they cannot switch. Pat, we can go back to the days when people said x86 to ARM. Easy transition. It wasn't an easy transition. And it wasn't until later where it became easier. And the incentives were big. And the companies like the hyperscalers that could spend big money with big R and D teams could actually port those workloads over that, so that x86 to arm conversion could actually take place. This is even harder. So for the next foreseeable future, you're going to have Xi Jinping and China continuing to give this BS political theater to the world that they don't need H20 and they don't care about B30s. And then we will see quarter after quarter, every single one that there's a license to ship to China will get shipped to China and they will pay whatever we charge for it. China doesn't want to hear it. China doesn't want to be called behind. They can't do the lithography. They don't have all of the capabilities, they don't have an Nvidia and therefore they will continue to be dependent on them into the long and foreseeable future.

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Patrick Moorhead: Oh, Dan, you just, you're just like all the people that have come before you and just completely write off what China is capable of doing. I mean, I heard it in the 90s when they said that they couldn't build computers. You know, all they could do was do these, you know, cheap through holes. Through hole power supplies. And then they couldn't actually do PCA boards. And, there we go. Now they do more than anybody in any other country there. And, Dan, this is just another thing here. China actually doesn't need Nvidia right now. I mean, first of all, they've got indigenous chip acceleration, right? They're running the same play they've run in the US for as long as I've been in technology. Huawei, Ascend 910B. You've got cloud matrix, you've got beer and tech that are, you know, quite frankly, if, if you get them into a, into a, a full configuration, I think cloud matrix is the best you can get the performance, albeit you're sucking a lot of energy and you need a lot more space. But last time I checked, you know, China was building 10x the energy that the United States has. And if they need more space, they'll just decide where they want more space. And if there's homes there, they'll remove the homes and, and they'll they'll, they'll put people somewhere else. And you know, I know here in the US we're like hand wringing over a couple billion dollars that we're going to give, you know, our, our deep tech. But Beijing is pumping tens of billions into subsidies, ensuring domestic alternatives. I mean, BYD is a great example, right? Which is, I mean, will that, will that car company ever make money? Well, it doesn't matter, but as long as they bleed the Europeans down, as long as in their cars they bleed Americans down. The Japanese tried dumping steel in the 80s, right? And we finally got smart on this and put gigantic, gigantic tariffs on it. Side note, nip and steel actually bought, just bought all of U.S. steel. And also, you know, I keep hearing this CUDA advantage, I think, you know, CUDA related to applications that you already have. And these are specific for frameworks. Right now if you have created your application, you're hitting frameworks using models, you will have to move those over. But if you look at Colossal AI, open, BMB, things like that, it has the ability to break those out there. Heck, even, you know, let's look at the, the, the domestic hyperscalers. You got Alibaba, you got Baidu, you got 10 cents already. Already shifting workloads to homegrown chips. Like we've seen, albeit, you know, five years later with U.S. hyperscalers and you know, we've seen Nvidia shrink, I think from 30% from gosh, what was 75 to, to 50%. And it doesn't seem to have left a flesh wound just yet. So yeah, China doesn't need Nvidia chips. If anything, the US export ban just gave Beijing the perfect excuse to accelerate building its own.

Daniel Newman: Looks like a metronome. Put me to sleep with that garbage. Thank you. I want to give a round of applause to that heaping steaming pile of crap. But it was actually a pretty good argument but also wanted to say, tell the, tell the audience if you believe that heaping pile of you just told them you believe that stuff.

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Patrick Moorhead: I think, I think short term, China absolutely needs in Nvidia and, and the way that they're going to need it long term is we're gonna have to pump a ton of Nvidia GPUs in there. Get them, you know, addicted to complete the addiction to Cuda. And by the way, was it Besson or Lutnick that apparently pissed off CCP?

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Daniel Newman: Of course it was.

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Patrick Moorhead:  They didn't like, they didn't like that. So. This is just part of the negotiation. I almost don't believe anything between the US And China and China and the US until we get to a real trade deal. Right now, I think it's just very good negotiating back and forth.

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Daniel Newman: There's something funny I used to like to think that all the political banter was real. I actually think most of it's theater. I have this sneaking suspicion that when C SPAN turns off and they are like, okay, you're on a 15 minute break. They're just fat, happy, giggling with each other. Like, look at what we're doing. We're stirring up all these idiots out there. Like maybe I'm a little bit out there, but like, I'm sure some of these people really feel this way, but I think some of this is just, just socio. It's so, it's sociopathy. It's just like we're completely playing the people like we really care. We really care. Look at us up in our turrets telling you how to be. Anyways, and you know, Pat, the most obvious one to me was when all those healthcare changes got made, remember? And the healthcare, the ACA and all that stuff got created but none of the Congress wanted the plans.

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Daniel Newman: Come on man, like, like if it's good then, then you should want this, right? And if it's not, because it isn't, you don't. So anyways, all right, Pat, so that was fun. I appreciate you taking the tougher position in my opinion. Let's get after the bulls and bears today because there's a lot going on. And right as we started this show, Fed Chair Paul started, started speaking and, and all I could hear was, man, that sell off the last few days was tough. I hope you all stuck through it. Didn't sell all your positions because rate cuts became.

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Patrick Moorhead: Yeah, man, the Russell 2K is up 3%. NASDAQ 2S, P1 and a half, Dow Jones 2.

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Daniel Newman: Fire up them golden bears. I feel like we need better bulls and bears. Feel like, I mean now that we've got the coin with you being better looking, you actually know what you're talking about. In the beginning we need a roaring bull or a bear and it really depends where we're at in the market. Make it happen. Make it. Let's make that happen. All right, so let's just start there, Pat. I mean, you know, we're not economists, but we sometimes play one on tv. A lot of this stuff that's going on does all sort of, you know, equate to, to, you know, to economic stimulus. You know, we see, you know, job numbers are a little lower. We're seeing AI starting to impact jobs. I don't know if you've noticed, but housing prices, even with this higher rate for longer things that we had, didn't go down. Housing prices did not go down that much. I mean, there were some huge bubbly areas like Austin, where houses kind of normalized, but you went from 2% and 1% mortgages to 7 and 8% cars, still very expensive. You got to borrow 10%. My thesis is very simple. The average home, the average household, most of their wealth is in their home, if they have wealth, right? And if people want to move, you know, if you're going to move from a 2% interest to an 8% loan, you need to basically find a house that's like 20, 30, 40% less than the house that you already live in. And you can't. So nobody's moving. People can't buy cars because so much of their disposable income is going to go to interest. Now when you're paying a 10% loan on a $30,000 car, you're paying $3,000 a year of interest. Imagine now you take that in half, you pay 1500 a year, you give 1500 dollars back to a household. Say now you can refinance that mortgage or you can now upgrade your house because you can get into a home for a lower price. So I think this problem is like the stuff at the top end that inflation like can you afford 30 cents more for gas? Probably incrementally compared to being able to afford fifteen hundred dollars a year of more interest and ten thousand dollars of more home interest. And by the way, things like insurance and all these other things that are so expensive. So I think this is the right move. I do think we've basically put ourselves in a condition now as a society though, the only option we have is to grow. We have to grow fast because we've just created this debt spiral and there's just no way, there's no rate that we could ever set that the economy could function on at this point that could bring prices down enough to actually get us back to fiscal normalcy. You're emailing. You just. Did you even hear me? That was a full reply. You were replying and actually closing business, weren't you? You weren't. I was like on an economic diatribe and you're like Emailing and closing a deal. You probably took a deal from me.

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Patrick Moorhead: Dan for every one deal I take from you, you take about 10 for me.

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Daniel Newman: But you know me, man. You know me like I'm taking big risks and failing big too at times.

Patrick Moorhead: I don't know, I think you just hit, hit a big one though.

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Daniel Newman: A little bit of fomo. What do you think of this economy? I, I won't even, I won't even. I'll stop you from giving me a victory lap here and I'll actually ask you just what's your take on all this?

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Patrick Moorhead: There'S so many moving pieces right now. I don't think we actually know what's going on with the economy. The BIS stuff that's going on, the firings, the, the resets that go all the way back, you know, to, to Trump one and, and Biden. I mean, Dan, I don't really think we know what's going on with the economy.

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Daniel Newman: I mean the BLS is full of crap.

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Patrick Moorhead: Yeah. I mean it's either they're full of crap or whatever. The methodology, what we're making comments on, is data that's inaccurate. Like when I look at the macro view of all the credit cards. We are seeing that spending has declined, particularly on credit cards. And I think that's a, I think that's a really, that's a really big deal and I think that does sense that, you know, we have challenges. Then we've got this debt thing that's over our head and the amount to service the debt. I would like to lower interest rates, if nothing else to refactor some of that government, government debt. I would love to see even separating this from the current economic conditions. So I am a, let's take a, let's take a quarter point guy at this point and, and see what happens.

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Daniel Newman: I think that's probably right. I will agree. We should do this gradually. There's no need. I know President Trump wants a full percent. I think it's more the sentiment. We, what we sort of track the inflation impacts. The thing though is like can we get like Palantir or somebody to do that? Like a company that actually does data instead of having census forms that are filled out by your grandma about what they paid for a tomato that then get, you know, mailed back to some office and then processed over like six months. It's almost like doing evaluative reports in technology that offer two year old insights as to which ERP to buy. It doesn't even take in. It doesn't even take into consideration the fact that AI has come into play during this time. Build that. Somebody build that. Some genius there should build that. Okay, let's, let's just. You want to talk about a bubble though? So we talked about a bubble. So Open AI wants to sell $6 billion of stock. Nadella is the smartest guy ever. Do you know he's about to get 50 times return in three years on chat GPT on his OpenAI investment. He put 10 billion in for almost 50% of the company. It's going to get a $500 billion valuation. His investment in open AI is now worth almost three times in Intel.

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Patrick Moorhead: No, it is. No, it is. It is amazing. And this is probably Satya's best move aside from accelerating and doing the CapEx for Azure before the AI thing actually, actually took place. And I don't see how he loses just from an investment point of view. And you know, this is secondary. Right? It's. So that means that it's insider to have some liquidity and some sell, sell the stock here and it's still oversubscribed, which means that, you know, people want it regardless of what type of investment is and then value is determined by demand and frothiness. And I do think we're in a bubble because. And that's okay, that's not a negative. Doesn't mean that the bubble is going to burst. The bubble could deflate and, and put downstream value. I actually feel better about OpenAI the farther we get as it relates to it, its moat. And I hate to say that, you know, my personal use of certain tools in business to business applications, they have stickiness. So I think that it very well could be worth, I mean, 500 billion. Sounds rich. It's not based on anything, any fundamentals, but the value is, is based on what people are willing to pay for it.

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Daniel Newman: I was like the, you know, the apes. The Bored Ape? Yeah. Didn't you order on a Bored Ape or something at one time? Bored Ape.

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Patrick Moorhead: I did something like that. Got wiped out by NFTS people.

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Daniel Newman: That's not what we're suggesting by the way, in bubbles, there's generally some companies that are like, this is the difference from this and that 2000 thing that everybody wants to compare to is the quality of these companies is much different. These mag 7 companies, these biggest AI companies are well funded. They have incredible balance sheets. Most of them have really strong profit moats. That is not dependent on this secular trend and they're building towards this trend. You know, the Internet bubble was pretty different. While there were a few companies that were solid on solid footing like Cisco at the time, many of them the pets.coms of the era, those were not companies that look like these companies. And I think if Altman was referring to anything about calling it a bubble, it probably had more to do with the fact that there are a lot of these unicorn startups that haven't built anything. They don't have customers, they just have an idea that is getting big funding. And by the way that's always a bit of a sign of a bubble. But maybe the biggest bubble, Pat, was that the all in podcast famous SPAC  king Shamath Polyapatiya is doing another SPAC. And I think that being announced on the day of Sam Altman's comments may have been what sent them or got into a tailspin. I see, I think single handedly anything like there was a chart though of his SPACS and like all but so far are just absolute trash. I mean most of them, many of them have lost all their value. 99, 90 like everything he's brought to market has been pretty much trash with the exception of so far. And so maybe people are worried that we're back to bringing trash to the market again and selling it to the public and that that is a sign of the top. If there's any sign of the top SPAC sign it was that the SPAC boom of the 2021 timeline was the one of the biggest indicators of the beginning of the end of that rally. And so maybe it's that. All right, we've got oh one last thing. The Citron research says that open AI at 500 means Palantir's 40. Just want to call out like it's such a nonsense comparison to me as you know, to say OpenAI 500 a company that has revenue but is losing money versus Palantir which is a company that's growing at like a rule of 80 and has profits and actually has huge enterprise contracts. I just don't even think they're comparable. I'm not saying Palantir is not overpriced. I'm just saying it's not actually comparable. It would be saying like you know, ExxonMobil is only worth something because Nvidia is worth something. It's like they're not even in the same thing. It's not even in the same stratosphere. It's just a fall into my deep nonsense.

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Patrick Moorhead: Yeah. Palantir is a meme stock.

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Daniel Newman: So  I think Alex Carp is a, he's the kind of CEO that retail loves. Let's just call it that. You know, you need a CEO that's willing to come out and pound the table and tell the short sellers to stop buying cocaine to fund their shorts or whatever he did on CNBC. But they love it. They love it. And, and by the way, Jensen does the same thing. He's a, he's an absolute showman at this point and he knows how to put the show on. The difference is there's a lot of company there, There's a lot of company going on over there. Hey, Pat, let's just talk about a couple quick earnings before we get on our way this week. A couple of tech companies that we track Palo, Zoom workday, we'll see. There's a couple others that maybe we'll be able to get down to here. And then, then there's a, you know, maybe just a really quick preview on, on Nvidia if you have any comments because we'll, it'll happen between now and the next time we podcast, but I'll just hit on Palo really quickly. I mean, Paolo did the business, showed real stability. I mean, they've, they made the Cyber Arc deal. They're definitely following their platform trend line. They're growing in the right ways and I think Cyber has a great tailwind along with AI because if AI is going to continue to proliferate, we are going to need to continue to secure all the data and all the infrastructure. Paolo is one of the platforms for securing the future of, of, of the build out of AI and AI powered software. I don't know if you have anything to add on that one.

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Patrick Moorhead: Listen, I, I love this, I love this company and that it's singularly focused on a few things and a few methods. It's cloud based and it's security. It's simple.

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Daniel Newman: Right.

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Patrick Moorhead: And I think, you know, through organic and also acquisitions. I think it's an AI pick and shovel at this, at this point. And, you know, their shovels stop hackers from coming in.

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Daniel Newman: Yeah, they're doing it right. Pat, I, I tweeted something this week and I said, remember when people cared about Zoom? Do you care about Zoom?

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Patrick Moorhead: I love Zoom because the AI companion is the best note taker of anything I've ever used. So, yeah, I personally, I personally care about it and it's, it's we use it every, we use it. I use it every day. It is my de facto standard for meetings in my company.

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Daniel Newman: There you go. How'd they do?

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Patrick Moorhead: So they had a double beat and they had a great guide and they talked about AI Companion with strong adoption and their stock went up 5%. They are definitely shaking off the, you know, pandemic, pandemic label. But I think they are having challenges with their overall suit. Right. Whether it's chat, whether it's documents, whether it's whiteboarding, it's a tough value prop. They got to, they got to the dance by being singularly focused on one thing and they did it great. And it's been, it's been hard to grow.

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Daniel Newman: Yeah, I mean, I think it's a bit of a one trick pony. Feels like it will become a service that will sit inside of a platform. I think they will get either gobbled up or acquired at some point. That stock used to trade 500 bucks, it trades around 50 now. Lost 90% of its value since the peak. Still good service. This is one of those companies that just, I just don't know where the growth comes from. I don't know where scale comes from. You're talking about single digit growth now. You know, this is the, you know, stuff like AI where people go, will this continue? Now we'll put out a new forecast on AI chips and let's just say that after the boom starts to settle a little bit over the next year or two, it will not go to single digit growth. Yeah. And I think that's the difference between something that was truly a bit of a situational growth stock versus a real growth company. Let's finish off before we talk just a couple minutes of Nvidia. Just talk about Workday. I'm gonna, I'm gonna talk about, you know, I've got this thesis that SaaS is dying. Workday disagrees. And it delivered a pretty good quarter. But it did, it did put some warnings out there and it put an inline forecast and it basically got hammered. So the numbers came out good, but the guide created some consternation and they basically said there's some outside pressures. And so the outside pressures in my opinion are largely how they make a pivot to AI and how each of these SaaS companies are going to truly be able to become these agentic platforms, platforms that can work across all functions. And Workday is a special case. It has a big business around finance and human resources. But is that the sort of main primary application that businesses use and they're going to build their agentic ecosystem around or are they going to build it around something else and connect to Workday? So that's a big question I have for the market. That's a big question I'll have for the workday. But they're still performing well. So it isn't one of those cases where they're not doing well. They beat on revenue, they beat on their earnings, they had good net income, they just gave an inline guide. And people in growth markets don't want inline guides. They want beats and raises. And right now anything that doesn't raise is sort of considered to be priced beyond or overpriced. And it's going to get worse. And this whole category right now, this whole SaaS category is being rerated. It's been really beat up this year.

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Patrick Moorhead: Yeah, they're making gains in, in ERP, kind of steady with HCM. But the biggest problem with workday is they cannot eloquently describe the actual growth they're getting from AI with, with real numbers.

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Daniel Newman: Right.

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Patrick Moorhead: And listen, I love ServiceNow that most of ServiceNow's growth is from where it's entering new types of enterprise SaaS and driving workflows. Not necessarily AI, but ServiceNow's numbers are so big and so good it doesn't even matter. And if Workday's numbers were even, even higher, I think they could slide in the, and get credit for moving the, the AI needle.

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Daniel Newman: Well, there we have it. We will see. All right, Pat Nvidia reports next Wednesday. Anything to worry about?

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Patrick Moorhead: No, there's not. I mean, if you're a day trader. Yeah. I mean you either love or hate volatility. And we're going to see that thing go out. We're going to see more rumors. We're probably going to see some huge rumor over the weekend that, that ends up, you know, typically nine times out of 10, it's, it's just total nonsense. But you know, the growth expectations are high. The whisper number is, is even, even higher. But I think that they're going to do just fine. I mean, maybe there's a push out in a couple weeks. Maybe there's this, maybe they're, that, I mean, that's just missing the entire point. Point. I don't, I don't do day trade analysis. I don't, I mean, I don't do investment analysis. But what I know is that for the foreseeable future, I mean they are the, you know, 80% market share leader of, of what's driving these. These markets.

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Daniel Newman: Yeah. Not investment advice. Maybe just some investment ideas. I do that. Look, I, I think I'm gonna sound like Kramer when I say this, and this isn't investment advice, but this is a, this is my own don't trade name. You know, it's going to have some volatility, but over the long run, you ask anybody that's owned Nvidia for a handful of years. It's just whatever you make, buying it at 150 and selling it at 152 and then reentering at 160 and selling it at 161 and then re entering at 170. You know, it's like why make a dollar when you could have made 23? And then. But again, you know, there's some people who just trip over dollars picking up pennies and so this is a name that you just want to own. We see at least two to three more years of sort of clear skies and control the market before there's some pivots as XPU’s can catch more fire. But you'll have to wait for me to give a little more analysis on that later. And I still don't think Nvidia will be a bad company to own. You just start to see growth normalize a little bit. But it's going to be a beat. I mean, look, China will be sensitive to what they're doing, what the license and because they want to vet revenue, because the licenses weren't really granted before the quarter had ended. If they shipped anything, it was very small. But they did recapture all that. Write down in terms of what they're going to be able to ship and that will come. Last quarter, they didn't even need China and they still beat and so I suspect it'll be something similar. By the way, some of the rumors out there about GB 200 and 300 are that they've actually exceeded expectations. So the ramp's gone faster, they're shipping faster. And we know that if there's a company that's going to come out and surprise us. But look, bring it on, dude. I am ready for another 10s P rally. Let's, let's go. I mean, you know, maybe put a little bit into cash on this next run up maybe, but you know, maybe not. Just, just let it ride. I did one where I rode my whole portfolio down 80% and guess what, baby. Guess what, Pat. We're back, baby. Love that. Oh, this is too much fun. All right, that's it. I'm gonna let it go here, Pat. We've got real work to do. We've got annoying corporate meetings, conversations, sales calls, and customers.I love customers. Just the internal nonsense. Sometimes not so much. But let's. Let's go ahead and just say thank you to all of you for putting up with me and enjoying Pat's intelligence this week. It was a lot of fun. Tell us who wore it better and tell us who won the debate. I'd love to hear it from Patrick Moorhead. Don't at me. I don't really care anyway. Appreciate you hit that subscribe button. We'll see you all later.

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Patrick Moorhead: Bye.

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