The Six Five Pod | EP 276: Decoding Tech Giants: From Apple's Pivot to Oracle's AI Surge

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. Apple Event and AI Strategy: Analysis of Apple's recent product launch event and a debate on Apple's apparent pivot away from a focus on AI. Comparison of Apple's strategy to competitors in the AI space.

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2. Tech Earnings and Market Reactions: Breakdown of Oracle's earnings and stock surge. Analysis of Adobe's performance and AI revenue. Examination of Synopsys's challenges and future outlook.

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3. AI Industry Developments: OpenAI and Microsoft's evolving partnership structure. ASML's investment in Mistral AI and the European tech landscape. Discussion on Apple's strategy to maintain user trust while lagging in AI. Debate on the long-term implications of Apple's current approach.

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4. Chip Industry Dynamics: Analysis of Broadcom's potential chip development for OpenAI. Examination of Intel's organizational changes and market challenges.

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5. Future of AI and Device Integration: Speculation on the evolution of AI assistants and device ecosystems. Discussion on the potential impact of AI on job markets and company strategies. A comparison of tech company valuations and growth potential and an analysis of market reactions to earnings reports and future projections.

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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:

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Disclaimer: The Six Five Pod is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we ask that you do not treat us as such.

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Daniel Newman: As a consumer, I use Apple. So when I say stuff like that online or I go on CNBC. And I criticize the launch. People will be like, I bet you. Tweeted that from an Apple phone. And I'm like, yeah, I know. And I fly American Airlines too, but it doesn't mean I'm going to invest in the stock. You know, it's like it's not doing what I need it to do right now. When you have companies like Nevius that can go up 50% a day, Oracle can go up 30% in a day. I don't want a company that's not even able to keep up with the S and P.

Patrick Moorhead: Welcome to the Six Five Pod. Here we are broadcasting from different coasts. Daniel is in New York City and I'm sitting here in a hotel in San Jose.

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Daniel Newman: Dark out, huh?

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Patrick Moorhead: It's dark out and you know you've already been up and oh, you have light. That's amazing. How about that?

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Daniel Newman: I gotta figure this out because the light just came in right as we kicked here. Camera's gonna crush me, but I'm gonna move a little bit here to try to get this a little better. There we go. A little better. We're gonna have to work with it this week, buddy. I'm in a hotel that's about 6ft by 7ft. If I move, I'm going to be on the bed and if I move two steps further, I'm going to be outside the door. This hotel room is literally a closet.

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Patrick Moorhead: Yeah, it totally is. Yeah. You've been all over the place. Europe, Austin, New York City. I was just in Austin and in San Jose. I can't tell you what I'm doing out here, who I may or may not have had dinner with last night and who I'm meeting at 11am but it's going to be a good one. And I wish I could tell you but I, but I just can't.

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Daniel Newman: Probably one of those CEOs on the watch that's saying I need you right now.

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Patrick Moorhead: That's good. You know, I was looking at that video and I'm always wondering, hey, at what point should we take out the fat Pat picks? And then that I realized some of the fat Pat picks are with the most famous tech people out there, like Jensen. Right. So. So I don't know. Well, we'll see. We just need to get it. I mean we do have some pretty incredible CEOs on the show and, and L1s. But yeah, we're just gonna have to work harder to get a more famous tech CEO so we can replace that. But I do appreciate it. Do we know what we're talking about? You know, I don't know. Versus yes, of course we know what we're talking about. I love that.

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Daniel Newman: Yeah, think you said. I think what we did was what you had said before, but it was super. It lacked the confidence that I know you have when, when you're shit posting on social media. And so of course you know what you're talking about. There's a reason that you're having top secret meetings with very, very important CEOs gallivanting around the country. It's because you're, you're a boss, right? And everybody out there, you know this. Pat's a boss. You know, like I didn't say a beep boss but. And look at it. You're happy and it's like six in the morning and you're, you're potting because it's because you care about the community, you care about the people that tune in every week.

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Patrick Moorhead: I do, Daniel, and I missed a few which I regret, you know, when I was on doing stuff like vacation or getting surgery. But that probably wouldn't have been, wouldn't have been a good podcast. But we do have a great show for you today. A lot of stuff going on, a lot of Apple announcements, a lot of AI news. I mean it just keeps going and going and going. And you know, just when you think that enterprise SaaS with AI is put in the corner and is about to die, companies pump out some decent earnings and to give us a little bit of hope for the downstream value and, and for that market. So why don't we dive into the decode foreign decodes. The segment, we decode the top tech news of the week. Try to separate the noise from the signal or the signal from the noise. Let's jump in. Smartphone aficionado and 20 to 30% market share leader globally. 49 here in the United States. Apple did their big event. Daniel, was it the most amazing event that Apple has ever had or just a lot of non AI fluff?

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Daniel Newman: Well, I think it was the best Apple event that Apple has had in a while because Apple went completely back to just being Apple. It was a. This is our newest device. It's the thinnest, it's the lightest, it's the most durable, it has the longest battery life. We've made a 10% improvement in the clock speed on the GPU at 20% on the CPU. It's, you know, it's Apple being Apple. I mean, look, I, I think I asked a question. I said, what happened to Apple intelligence? Like it literally did not get mentioned. It's crazy how something can be the biggest creator of a super cycle. And it literally went, it's gone. It doesn't exist anymore. It's in the ethers. But look, I have two sides of this, Pat. As a consumer, I use Apple. So when I say stuff like that online or I go on CNBC. And I criticize the launch. People will be like, I bet you.

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Patrick Moorhead: Tweeted that from an Apple phone.

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Daniel Newman: And I'm like, yeah, I know. And I fly American Airlines too, but it doesn't mean I'm going to invest in the stock. You know, it's like it's not doing what I need it to do right now. When you have companies like Nevius that can go up 50% a day, Oracle can go up 30% in a day. I don't want a company that's not even able to keep up with the S and P. So that's my take on where they sit. But let me just talk about a couple things I like. I like the stuff they're doing on the watch. I mean, I've become an, you know me, I flipped. You've completely turned me into a health nut. I don't monitor my stress. That one I've stayed away from. But everything else that I said I wouldn't do, I'm doing now. My steps, my sleep, my hrv. I wear the watch. I know, Pat, you win. Except I'm not doing stress. Never going to monitor it. I know when I'm stressed, I don't need anything to tell me. Um, but otherwise, I've really grown to like the feature. And by the way, you know me, I was like a watch snob. And now I wear only the Apple watch. So I've completely gone away from my, you know, my, my Swiss timepieces and I focused on the health of it. And, and I really enjoyed Apple for that. I like that it's doing things like trying to monitor hypertension. I like that it's, you know, continuing to become more durable, that it lasts longer. I know you said something online like, oh, you know, I've never run out of battery. You know, I use the Ultra and I have to kind of, you know, I have to put it on the charger every day, so it's, it's somewhere in between. So if a little bit more battery life, probably great, because when I'm on the road, I hate having to charge it. I know. So, so there's that. The, the other thing I liked was the AirPods, the translation thing. I mean, again, this is not a new feature. I think Qualcomm announced something like six years ago that it was doing with a partner to actually do real time translation on these devices. But what Apple will do, and this is what Apple does, is they'll make it mainstream. It'll go in volume. And Pat, when you and I travel around the world. The idea that we could have those in our ear, we're in Taiwan or we're in Europe and we can just talk to whoever and they can talk back and we can instantly understand that that is really game changing. It's pretty cool technology. It's just not new. I want everyone to know that something like this is not new but they're going to make it commercial and they're going to make it easily accessible to people. The last thing I'll mention is the iPhone. The air was weird to me and here's why it's weird to me. It's the thinnest, lightest device for 80% of the device and then up at the top of it it's got this fat notch and, and, and I'm like, you know, I just don't get it, you know, because to me it's like first of all, if you're going to put it in a case, it's going to look super weird or it's going to have like it's going to get even thicker up at that top part. And you know, again it sits on a table, it's not going to sit flat. Is it going to slide on the table? And I just don't understand because there's not enough price difference to go with it over the pro, which I think has, you know, the newest processing and the fastest processing and it's gonna, you know, I just like, I get the obsession but I don't like that. It just felt so old to me. And the last thing is like, you know, everyone else is doing like foldables and rollables and like they're just getting around to like thinner again. I don't know. So there's my take, there's my read, some cool incremental technology but man, if I'm an investor, I'm looking elsewhere right now. I just can't get excited about what they're doing.

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Patrick Moorhead: Yeah, that was probably the best readout on an Apple event that I've ever heard from you, Daniel. So I'm going to fill in some gaps here. And overall, I mean really nothing earth shattering. Some useful incremental improvements over iPhone AirPod and watch predecessors. That's what has made Apple great the last five years. They've really done nothing. Swing you around the room. They're trying to create better devices and experiences to drive up services revenue. The iPhone air is interesting. Daniel, I totally agree with you. We had people debating is it thinner than the iPhone 6? No, it's not. Look at that fricking camera bump, people. Gosh, Apple shills will die on that vine. It's hilarious. We don't know the battery life yet. There are some theories around it based on milliamp hours and they said it would perform like the iPhone 16 Pro. I think it is. If that's, you know, not too big of a trade off, then we would expect some cannibalization. This is what nobody understands too. IPhone Air. I mean, at least in my sphere on X, where, where I spend way too much time, it's, gosh, should I get the iPhone air or, or the max, right, folks, $200 difference. That is an ASP decline. An ASP loser. Okay, now if the thesis is to pick up more Android, well, okay, I guess you're gonna do the full size S25 against the air, or you're going to do the S25 Edge, which I do know is a hundred dollars more for 256 and then $20 more for 512. Okay, that's a theory, but we're gonna have to see how that goes. I, I would, I would posit that it's going to be a decline in Apple ASP’s and more cannibalization than picking up Android.

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Daniel Newman: But by the way, by the way, is the Apple Air thinner than the. Because the Samsungs are so thin, they're so sleek. Like, I haven't done a comparison, but is it actually thinner than the thin Samsungs?

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Patrick Moorhead: It is until you add the camera module.

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Daniel Newman: Okay. But then it, then it's like it's shaped like Gru. Have you ever seen Despicable Me? Like, you know, like wide. It shaped the way you and I want to be in the gym. It's got that nice triangular physique. It gets thin at the bottom, but it's very wide in the shoulders. Right? I mean. Yeah, I don't get it. I don't get that.

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Patrick Moorhead: Yeah.

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Daniel Newman: You know, it still sits in your pocket. It's thick at the top.

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Patrick Moorhead: Yeah. You know, the performance claims on the new processors inside of the phones were pretty awesome. But, but it's like, what are you gonna do with that performance? You suck at AI. You're not doing anything.

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Daniel Newman: So other people's AI, you know, when you're using Chat, GBT and Gemini.

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Patrick Moorhead: No, seriously, like, what's the, what's the adder? There's. I have always said that when Apple gets that, the two remaining big features that watches and devices have to do in real time is blood pressure and glucose monitoring. Right. I was super excited when I saw the Apple Watch hypertension. And then it's like wah, wah over an extended period of time it'll tell you if you have it. It won't give you anything real time like I, I do once a week like and I, I have it. I know I have it. Tell me if I'm in range. Give me a number. Could be the FDA, it could be Apple. But I think we're all getting excited about, listen, I'm excited that people who don't know they have hypertension will find that they have hypertension. I'm less excited about hypertension management.

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Daniel Newman: Maybe it'll give you a readout and help prescribe pharma to you. They could really tie this all together.

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Patrick Moorhead: I mean I'm already taking it, I'm already unfortunately still taking it. It's one of the dangling chads in my health journey.

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Daniel Newman: I'm joking. You know the goal is to get rid of all that garbage.

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Patrick Moorhead: Yeah, yeah. We also saw AirPods 3 which added heartbeat, heart heart rate monitoring which I view as a vehicle to get more people paying for Apple health and getting them into the lock in scenario in there. I'm interested to see if it helps me at all. And listen, not, not everybody has an Apple watch, right? So if they add these it could be, could, could be an ice adder. I ordered two AirPod 3s just based on the improved claimed 2x ANC. So two final things. It looks like they're accelerating the use of their own modem and don't confuse that with rf. And it also they're claiming this, this end chip for W, Wi Fi and Bluetooth. Does this mean Avago is out? It likely does not. It could be an Avago Broadcom license but I need to dig more into that. So big event, a lot to talk about. Let's go into Microsoft news here. Right. We had OpenAI and Microsoft come out with some convoluted type of announcement. You've got Nebius signing a deal, stock skyrockets, but pretty interesting stuff. None nonetheless. So essentially one of the big dangling chads to investors and employees at OpenAI is is this a non profit which it was set up as and this is why Elon put his money in or is this a for profit and Microsoft held some of the cards. OpenAI held some of the cards and you needed Microsoft's approval to do any of this. What is coming out and rumored is that there is an Elo, not rumored, there's an Loi. OpenAI made an announcement there that said that they were able to do a non-binding MOU for the next phase, the partnership. So, you know, I think this is probably more paperwork than, than anything else, but I'm sure Microsoft got some of what it wanted and, and OpenAI obviously is getting what it wanted. Check out my ex. I pumped in the agreement and asked it to create an image of what this look looks like. And as I was looking at it, right, there's four blocks. You got Microsoft, OpenAI, the nonprofit, OpenAI, the global LLC and the LP, and then OpenAI PBC, which is the public benefit Corporation. It reminded me of that Spider man meme where they're all pointing at each other on what it pumped out. But I usually don't describe my brilliance, but I thought it was pretty funny.

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Daniel Newman: You are pretty funny. This is about creating some definition in something that lacked definition. So the deal was something like a 49 profit share. The problem was there's no profits. And you know, late. Just this last week, OpenAI put a forecast out. Next five years, I think it's going to burn like, you know, some couple hundred billion dollars of cash. I got to look back at the exact number, not have it memorized, but it's an obscene amount of money. And so here's the problem: Microsoft benefits bigly when OpenAI turns profitable ahead of their AGI, which is another sort of lacking definition in their current agreement. But as OpenAI's valuation continues to appreciate substantially, Microsoft doesn't necessarily directly benefit. Now on the other side of this though, Microsoft sort of has them totally covered. Because if you're an investor and you're trying to keep pumping up these rounds and these valuations and you're looking at the discount cash flow model, you're basically saying, wait a minute, so when this company starts making profit, we're going to have to give Microsoft half of it. How are we ever going to get our money back? So, so basically I think they had to come to some rational conclusion of, okay, how do we convert what you have to something new? How do you free us from your chain so we can actually continue to raise ridiculous money at ridiculous valuations to keep pushing this thing forward. Because if we don't, you're going to lose your money, we're going to lose our money, we're going to get passed up by these other labs that are moving faster, that have better operating leverage, that have a bigger advantage to continue to pump dollars in, by the way, that don't need outside money. Meta Google, Amazon, they can all do it on their own. And so I think the deal was something along the lines of turning their $11 billion of money, cash that Microsoft pumped in early, into about $100 billion of equity in this next $500 billion round. I think that's kind of what they're looking to do. This will sort of, you know, again, it gives, it gives the company, you know, what is that about a 20% total equity position still being a huge share of this thing. But it definitely kind of de shackles OpenAI. And this was the other thing was he had to get Microsoft to okay the idea of the conversion. The conversion had to happen. Somebody had to do that. I think this is where they'll finally get the support. And so a lot of moving pieces here, but I think it was a way for both companies to kind, kind of come to the best outcome, see their investments appreciate and free the shackles. As you know, we're seeing increasingly, OpenAI's lead is not as definitive. And so the certainty of its long term success is not as definitive either.

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Patrick Moorhead: Yeah, it's crazy how much open AI has been in the news. I mean, it makes sense. And like I told you this, I was, you know, probably 90, Perplexity, 10% ChatGPT. And then I would try other models probably every two weeks to see the results I would get. And then I flipped it. Right. I'm doing OpenAI with memory, with tasks and it's pretty, pretty incredible. So a lot of OpenAI stuff. Last week, another one, Dan, like Oracle and OpenAI signed this gigantic deal and maybe we can hold the earnings ramifications for bulls and bears and then we're looking at Broadcom making a chip for OpenAI.

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Daniel Newman: Yeah, I mean, there's that. And then also, you know, crammed in here is a massive commitment from Microsoft to invest what, 17, $18 billion with Nebius. So there, what do we, what am I hearing here? Endless demand for capacity, a huge run up of inference. Oracle is becoming the inference cloud here and then of course, more and more custom chips. So what's going to end up happening? I don't know. I get this weird feeling though. There's an OpenAI Broadcom arm chip. I said this, you know, it's going to come out, it's going to be the inference chip. They're going to spend the $10 billion developing this, this custom chip and then they're going to run them in Oracle's cloud and then Oracle is going to deliver what, 300 billion of inference for OpenAI over the next five years based on this projection and forecast, there's about $10 billion of added CapEx in the new forecast which kind of directly looks like it attributed it attributes to these, these chips that they're going to build. But Pat, it's all this big circle. It's so interesting how much sort of inter industry paper is moving around kind of, you know, I think the more sort of conflicted word at times can be round tripping that's going on in this business right now where you've got, you know, chip companies and cloud companies and software companies all sort of doing these massive agreements. You know, like you said, we can talk about the stock, you know, implications but it's interesting to see a five year out forecast for, you know, a cloud company in terms of its expected utilization and capacity. But God, the market absolutely loved that. But Pat, it was just OpenAI doing the business. They're making big investments, they're making big commitments. I still don't know why this last segment was so important. Like where is all the money going to come from? First of all, like Oracle's going to need to raise money to build out its infrastructure. Open AI is going to have to raise a ton of money. But I mean, I guess Larry got a little wealthier so the move worked. I mean Larry got some wealth. I mean he could, he could fund this whole thing himself now. I mean the richest man in the world just passed up, passed up Elon. I mean the two of them, he's going to own CNN, they're going to own Twitter. They're going to, I mean they're just, they're going after it. Pretty soon the oligarchy will be fully intact.

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Patrick Moorhead: That's so funny, Daniel. Yeah, that giant deal, the Oracle OpenAI deal doesn't even mean that it's exclusive for Microsoft. Right. I'm very, very interested to see the details of the deal and how this rolls out, but we'll save the rest of the financial conversation for the Bulls and Bears. You know, the OpenAI and Broadcom thing is super interesting. Is this based on a rumor or, or did Hawk actually announce or say that this is going to happen?

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Daniel Newman: I think it was said in the Broadcom earnings call. So yeah, that was part of why Broadcom went parabolic. I mean I know a guy that has been absolutely banging on Broadcom and saying that, you know, XPU’s dude. Yeah, well I mean I, I talk about, for the risk of forecastings. I will take the risk to Forecast five years out. By the way, did you see this week? You know my number was 583 on the 2029 number. Did you know Goldman Sachs printed their number this week, updated their forecast. Their number was 581.

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Patrick Moorhead: Cool.

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Daniel Newman: I think Goldman Sachs is copying us.

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Patrick Moorhead: I think they are.

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Daniel Newman: I mean I think.

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Patrick Moorhead: Who's us?

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Daniel Newman: Well, kudos to Ray my lead semi analyst Ray and, and Chad Houston who built that forecast. I can't take any credit because I would have said it was like 3 trillion and got myself in all kinds of trouble. But they did the real math where they actually did all the capacity and the build out and the energy and, and reverse engineered it and it's turning out to be pretty damn good. But it's nice to see, you know, a little company like Goldman recognizing the work that Futurum's doing.

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Patrick Moorhead: Yeah, I'm super interested to see what Broadcom is cooking up here. I mean Broadcom is perfectly capable of XPUs. They could create a CPU, they could create a blend architecture as well. So many people are just anti XPU. They're going to die in the vine of gpu. And my point this week was actually, God, I think I had 50,000 people look at this banger which was when you have 95% market share by one company with one architecture, you're gonna have alternatives. And I think based on the stake of what's happening out there and the expense and the profit dollars, I think the hyperscalers are gonna keep trying until, I don't know, they run out of money. Right, but let's just say every one of these designs is 300 to $500 million. That's how big the money is that they could potentially amortize across this.

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Daniel Newman: Yeah, you and I are fully aligned. This is an and not an or. I think Hock said it well. He kind of said look, the biggest companies in the world are going to go XPU and by the way these same biggest companies that sell to millions of enterprises are going to sell gpu like the, the big enterprise, even the biggest like enterprises and all the customers are going to consume AI. A lot of them are going to do it on Nvidia or AMD on a platform like that. But basically all these companies that want to vertically integrate are going to go and they're going to have an XPU. There's enough market for both. It's a silly argument when people try to make it zero sum. I, I will, I will die on the vine talking about this Pat. But look Yeah, I mean the market in five years for GPUs is still four times bigger, but XPUs will be over $100 billion, which like a year ago they were like 10 for AI. So it's going to grow really, really fast and everyone's going to do it. I mean, it was leaked in a meeting yesterday. There was a leaked meeting that said that they're going to, you know, Microsoft bad. There was a meeting that was leaked. It was leaked. By the way, You know why that meeting got leaked? Because I guess I was listening on CNBC about this this morning. It wasn't about that. It was kind of a town hall and there were a lot of Microsoft people that were really complaining about the culture of the company. They were grilling Satya about all the layoffs and the AI and the impact on jobs and what was he going to do to correct the culture? He's asking people to come back into the office and work, you know, and a lot of people's feelings are getting hurt about, you know, the idea that, you know, their jobs could be in danger. So I think that was why people were recording it. And I think what the, the, the Mustafa stuff, the Solyman stuff, I think that was a side effect. I think people wanted to, to, to hear what Satya's answer was and they were sharing that with the press because, you know, that's the kind of world we live in now.

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Patrick Moorhead: Yeah, it's crazy. I appreciate you clarifying that and I know that you hate.

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Daniel Newman: I accidentally heard it on a treadmill at 4am this morning when I was working out. I wasn't on that show by the way. Like, yeah, you know, they don't invite me anymore. Apparently when I was in Squawk Europe they asked me which my favorite one was and I told them it was Squawk Europe. So I guess what box. The truth is I think one time I. Anyway, I won't even tell the whole truth, but that, you know, that was my first CNBC show was Squawk Box.

Patrick Moorhead: Yeah, it was, it's crazy stuff. Hey, let's move into a little bit more chip chippery here. Intel has announced a leadership update out there and my gosh, a lot of interesting stuff, came out of that. I think you and I both weighed in on this, but DCG, the data center group, a gentleman named Kevor Kachichian, Ex Qualcomm, uh, nxp, uh, and uh, and arm, uh, boy that the leadership there has been a revolving door. Right? You had Naveen Chinoy, you had Diane Bryant, you had the, the current CEO at Nokia. I mean it has been an absolute.

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Daniel Newman: Justin Hotard.

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Patrick Moorhead: Yeah, Justin. Yeah, Justin Hotard. It's been an absolute revolving door. And you know when your arch rival AMD is racking up 50, 60, 70% market share at hyperscalers and x86 and you've got AW pulling in 50% of their capacity on ARM based processors and Graviton, you, you have definitely lost the plot. I've never seen a keyboard. I've had a ton of people reach out to me and, and, and give me, give me their points of view on them. I'm really interested to see what kind of background in data center and also if he doesn't have background in data center, how his background helps Xeon in, in the future. Maybe it's you know I thought it would have been kind of semi custom but Lip-Bu brought in a gentleman named Srini Iyengar to run central engineering. There was a call out for a new custom silicon business. Sereni comes from Cadence. So you've got Lip-Bu bringing in his folks. J.J. Jim Johnson was appointed CCG. He's been there for a long time. A 40 year veteran. They gave him the try before you buy. He was running the division already when MJ got the chief Product officer role or CEO of products. And you know he did the,on the job interview. Looks like he won the big prize. Naga who was peers with Kevin O. Buckley now is the, you know, used to be a tuna box that reported in the Lip-Bu and, and now it's Naga and Kevin reports to him. Kind of scratching my head on this one just because I thought that the company was trying to eliminate layers and it looks like they've added a layer. But you know, maybe it was just too many direct reports for, for Lip-Bu. MJ Michelle Johnson Holton House. Leaving the company I think is a huge loss. Customers trust her. They trust her more than anybody at Intel right now. And I think it's a major loss but not, not, not unexpected. Right? She was CEO of products and then she was put as, you know, put aside as, as an advisor and she did resign. She was not fired. Go in and look at item 5.02. I think that's an 8k or a 10q. Anyways, I looked it up and you know basically said that she resigned based on, for good reason which was okay, her job doesn't exist anymore. She's gonna be, she is going to show up to guarantee you as president of A large company or, you know, at least a number, a strong number two, or even a CEO of a, a smaller company. And I'm sure, I mean, I've had CEOs of major corporations reach out to me and ask me about her. So she's going to do just fine.

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Daniel Newman: Yeah, you covered this pretty well. The company, it's narrower, it's more focused. It's basically got a couple of real big initiatives. It's got to get AI Data center right, it's got to get Foundry right. Client is the most dependable part of the business, has to execute there, try to protect the market share that it has. Liu is probably figuring out who he believes he can trust and who he can put into these roles, and he's appointing people accordingly. But, you know, everything with me and intel right now is about proof. I'll see it when the numbers show up. Until then, to me, this is just, it's just a lot of moving chairs around until we start to see the results. This deal made with the government was needed, necessary to support its interests. They've got that in, you know, put in the rear view. They are sort of a. I won't say they've been guaranteed, but they've been, you know, as the mob would say, they've been made in some capacity. And now, you know, it needs to trans. It needs to, you know, transition into meaningful results. So I don't have a lot more to add than that, Pat.

Patrick Moorhead: Yeah. I'm looking forward to someday meeting one on one with Lip-Bu.

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Daniel Newman: That would be pretty cool if you ever got that ask.

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Patrick Moorhead: I know, you know, you and I have both done, you know, you and I and LIPU and a few handlers, but I have yet to go kind of mono E mono and go toe to toe, you know, ask him the real questions. No filter. Yeah, exactly. Hey, let's go into our last decode topic here. ASML, EUV King invests in, I don't know, the number 27th ranked AI company. Mistral. AI. What is going on here?

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Daniel Newman: Look, it was a, it was, in my opinion, this is Europe back in Europe. Mistral is a European company. ASML is a European company. The innovation on the continent is, let's say, somewhere between not good and embarrassing. ASML is the absolute prize of Europe when it comes to being the company that basically controls a massive part of the silicon supply chain. On the other side of this, though, when it comes to AI models, Mistral is an interesting company. It's actually one that people think Apple should buy. A lot of said Perplexity. Perplexity would be more of an advertisement for the company's AI strategy. Mistral could be more strategic for its approach to these smaller models that can be run on device or that can be used for different applications, business enterprise. So to me it was really strength recognizing strength in a very limited market. And ASML is playing the game that a lot of other massive chip and technology giants have been, which is playing as venture backers of interesting companies. And again, this is sort of solidifying the straw. It's solidifying the thesis of smaller models and it's solidifying an interest to have a little bit more European, you know, blood in the AI game. And so that's, that's what I see as, as it's, I don't have much more to this one Pat, but I think, you know, it's great for Mistral and you know, I think ASML this is a, it's a positive bet on it on the continent, it's a positive bet on small models.

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Patrick Moorhead: Yeah, I think from a financial perspective, I don't know, I'm still torn on this. Like I totally get it from the nationalistic perspective. Let's have everything in one place. I think the funny part though is you can get better open source models than Mistral AI provides out there. I guess you need somebody to keep improving upon them and you know, they got a discount on the acquisition and I think that, sorry, the float and I think that they probably have some ideas that the different federal governments inside of the EU are going to use Mistral. And if that's the case then it's probably, probably a good investment.

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Daniel Newman: It does models for sovereign, you know.

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Patrick Moorhead: Yeah, that's, that's exactly right. And it does point out though just the absolute miss the European miss on tech that I think was definitely decelerated by the. Let's over regulate everything. And one of the big topics, I know for me when I was out at Davos with you was this affirmation that we took this thing too far and we need to, we need to wind this back. But then you look at the taxation of some of these countries where you know, you're looking at 57% overall taxes. Like why would you ever, if you're gonna, you know, you want to be a billionaire or you want to spin off corporate profits, would you ever come into a scenario where you're just not going to make any money? So anyways, interesting stuff. My gosh, isn't it funny? Like we talked about in the decode section, we only talked about AI and then Apple, right? And it to me.

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Daniel Newman: Does Apple have an iPad?

Patrick Moorhead: I mean it just shows the gap, just even more Anyways, a good topic.

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Daniel Newman: You don't get Apple, Pat.

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Patrick Moorhead: I know you don't get it. I know. No, I just, I, I don't, it's, it's sad. Hey, let's jump into the next segment of our show which we call The Flip, where we argue. Have a fake argument. Take simulated, simulated, simulated articles. Sorry, simulated debate. Taking very polarizing positions. Let's dive in. Should and guess what? Should Apple pivot away from AI Apple Intelligence toward hardware brilliance or is it a sign that it's falling behind? Let's dive in. Hey, looks like I won or lost. I guess I'm going to be debating that. It's absolutely brilliant. So Apple moving away from Apple intelligence is absolutely brilliant for a couple reasons. If you look at just one of the reasons why people keep going back to Apple, it's because of trust, okay? And you have to give the company credit that even though it's absolutely lost in AI and the valuation of the company has been flogging, even though you could argue that it is the number one consumer company out there with the number one brand, right? What they can't do is they can't, they can't destroy that, okay? So what they're doing is just absolutely brilliant. And the other thing, the other reason it's brilliant is because, and we've discussed this on the show before, is timing, right? Like when do they actually have to bring in the best on device AI, when they can have Cloud AI through OpenAI ChatGPT or Perplexity or somebody like that. And there's really not something to compare it against somebody who's gaining market share, who's winning users by nailing on device AI. I think you and I are both very optimistic about device AI, but really the heat is cloud based AI, which Apple is available to do anything on. And you know, they're finding new ways to increase their revenue and profits through increased vertical integration with modems, with wi Fi, with Bluetooth. I think the number of Apple chips in that iPhone Air is 14, which is absolutely an amazing accomplishment. So yeah, they're sticking to their knitting until the technology gets better, maybe until a competitor actually starts taking market share away from them. So I think it's a, I think the pivot's a brilliant move.

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Daniel Newman: Daniel. Yeah, I agree with you that they're sticking to their knitting and I'll agree with you that it's because they don't know how to do AI. They've clearly lost their best researchers. They're leaving and fleeing because they know the future is going to be elsewhere. It's not going to be at Apple. Apple trades at 29 times forward earnings. So does Nvidia. If I was putting a dollar to work right now, who would I be betting on? And the silly people will say, well, Apple has 2.2 billion install users. That's great. But you know what? What device companies trade at, you know, 15 times, not 29 times. So Apple might be two times too expensive right now for a company that can't do AI, but its valuation up to this point has been formed on the fact that there was an expectation that they were A, going to be able to make this pivot and B, they were going to be able to do so with those 2.2 billion. What I saw was basically a cowering, a climbing back into their turtle shell, a running away from their vision, and basically a full admittance in public of absolute failure, catastrophic failure in this particular category. And sure, I've made the argument in public that they have the longest Runway out of any company to get AI, right? But the fact that they actually just quit on it, and you had bulls all over the market talking about Apple intelligence, guess what? It sucked. And then it sucked some more. And now you know what Apple's solution has been? We're going to go to Google and we're going to stick Gemini on the phones. We're going to go to OpenAI, we're going to stick to ChatGPT. What happens when the handset and the device are no longer the future? Qualcomm gets it. It's moving into xr, it's moving into devices that are not handsets. It's in fact talking less and less about it. And what does Apple do? It doubles and triples down on the past. Yeah, Well, I guess if you like the strategy of companies like Blockbuster, Kodak and you like BlackBerry, then you should like Apple and that would be a great investment for your future. But if you actually see where this is all going, and you know that there's a future where us and our assistants are going to basically be robotically intertwined in a simulate, in a fully sim, you know, a singular environment, then you realize that right now this may be the most expensive Apple will ever be and ever can be. And the only super cycle that might come is that one more cycle, because about every four years they happen to get one out of just sheer luck of people refreshing their devices. But it has nothing to do with innovation and just everything to do with the fact that people's iPhone 12s and 13s have batteries that last about long enough for them to take a dump and then they have to go and charge their phones again. So they're going to get a new one. To me, it's a failure. It's catastrophic. It's existential. They fixed this. They cannot abandon AI. It's over.

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Patrick Moorhead: Rover.

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Daniel Newman: Apple shat the bed. It's all over the bed.

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Patrick Moorhead: Wow. Wow. That's pretty good. So I think we probably agree with each other here, but it is sad to see a company like Apple just, just, just not be able to figure it out. Because if there's one company who should be able to figure it out, it's this company. And yeah, dude, I mean, but how.

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Daniel Newman: Do you just climb back in your shell and pretend it didn't happen? I mean, how do you literally not even talk about it? Was it even mentioned?

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Patrick Moorhead: It was, it was. There were two or three features that were brought up, but it did not have its own, did not have its own segment.

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Daniel Newman: I mean, God.

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Patrick Moorhead: And the people who actually understand Apple are saying that, well, you know, this is the hardware event, not the software event. And it's like, folks, we're talking about experiences here. Is Apple an experienced company and is Apple Intelligence part of the experience? They did point out a few features, but, you know, there's just nothing amazing. This was absolutely hardware, Hardware first. It's all they had to bring.

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Daniel Newman: Yeah, well, it is what it was, but it was not the most amazing, life changing, game changing. It literally felt like an Apple event from 10 years ago. Yeah, that's what it felt like to me. You know, like I said, I give the Runway. They can still get this right. They may be kind of climbing into a bit of a dark hole, figuring out their plans and going forward. They did lose some of the heads of their AI lab to other companies.

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Patrick Moorhead: Like a weekly, weekly occurrence, you know.

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Daniel Newman: So, you know, I, I guess my point is like, you know, Qualcomm trades at 13 times forward and has actual innovation and autonomy and robotics. I know we're not, they're not exactly the same. Qualcomm provides the chips that other people put in. But I'm just saying, like, if you're looking at betting at who can make a pivot right now, I'm just like, you know, what do, what do, what is an HP trade at? What is a Dell trade out? Because that's what they're becoming is a hardware company. It's like we're a hardware company. Like, we're the coolest one. So maybe there's a premium on that. But it's not that, you know, they don't have an Nvidia growth path. They don't have a, you know, that anyway. So if I'm putting a dollar.

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Patrick Moorhead: Let me ask you this, does that, how much does that matter if they're pricing, if they're priced within range. And I think you're, your point is, is that Nvidia with a. But is it the forward PE or the PE?

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Daniel Newman: It's a forward pe. The forward PE and Nvidia are the same right now, which is crazy to me. And by the way, their 4PE is higher than Google by a lot. Even after Google got its sort of break and went up like Google was at 20. I mean, I'm just saying, like, you know, there's a lot of doubt around the future of how they're going to innovate. And yet, you know, it's a safety net. It's a div stock. You know, they're going to spend hundreds of billions buying it back, which provides some safety for institutions. But these are the least innovative things you can do. This is what old companies do to preserve value, not what innovative companies do to create value.

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Patrick Moorhead: Yeah.

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Daniel Newman: And so again, I'm, I'm just, I, maybe I don't understand Apple, but I don't understand Apple. So we'll just leave it at that. We got 10 minutes and I got to run. You got to run. So we got to get through a couple of quick. Let's get through a couple quickly. You, you say it. Let's go.

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Patrick Moorhead: Let's have it at bulls and bears. Yeah, there you go. There you go. All right, Daniel, we're going to cover some overall prints from the government, you know, the data that nobody agrees with. And then let's launch into Oracle, Adobe synopsis, and maybe a little bit of TSMC.

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Daniel Newman: Yeah, we'll go real quick here, Pat, because I think we covered a lot of this subtly, but basically inflation is just not showing up. Last month we had a crazy high PPI print. Everyone thought, oh, maybe here come the tariffs. And then this month it was really, really low on the producers. And then CPI came in right exactly where it was supposed to be. So guess what, folks, we're getting rate cuts. And guess what's happened, by the way, in the Fed. The Fed has pivoted, I think, Inflation at 3% is the new 2%. And I think that jobs is what everyone's really concerned about. And yes, I understand. I say AI is taking jobs. You want to argue with me? I talk to CEOs. You probably don't. Maybe you do, I don't know. But I'm telling you right now, AI is coming for most of our jobs. Most of our jobs. And so we're seeing job cuts, we're seeing more difficulty for young people to get employed. We're seeing, you know, jobs being reduced in companies of more experienced people where AI can make an impact. And of course, some of this is just about continuing to meet growth and earnings requirements. It's not all one thing. But you can be sure that companies looking into the future are looking at where AI can replace jobs. So we're seeing, by the way, that the jobs being created are far fewer. And by the way, the trust in data got another big fat smack in the face. Pat, when we got 911, almost a million jobs were revised down in the last 12 months, meaning we were just being fed loads of dog crap by the government once again to sort of create a narrative. It's so sad. Right now you just can't trust. And this isn't an administrative thing. It's not the previous and the current. It's like, I just don't know what's going on, Pat, can we get Palantir or SAP or someone in there to do this work instead of whoever's doing this work? Because this should be easier to figure out. But anyhow, rate cuts are coming. I don't know if we're gonna get a big one, but I think we're gonna get several of them. And I think this will be good for the average household that's spending a lot on, on mortgage, a lot on car payments, a lot on credit card debt if they can see those interest rates come down.

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Patrick Moorhead: Yeah, I don't think we're going to see anything over the top in interest rates for the, I think we'll see.

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Daniel Newman: A quarter, a quarter, a quarter or maybe three or four times and then it'll probably pause. I know. Mr. I know, I know. President Trump wants like 4%. You know, he's got to refinance the debt. He's got to refinance a lot of real estate, I think.

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Patrick Moorhead: No, I mean, and, and you have to ask yourself, what does it mean to the consumer? Right? What does it mean to the 30 year mortgage? And that's where it can make a difference. Huge. I, you know, I'm on I, I do feel like, you know, whether it's AI taking jobs or, you know, and it's, it's weird. I think, you know, people are bringing up the immigration thing. I mean, shouldn't we have more Americans at work if we're deporting a lot.

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Daniel Newman: Of people and immigrating less? Unless the Americans don't want to do those jobs or they aren't needed.

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Patrick Moorhead: True, that's exactly right. But listen, let's, let's dive into earnings real quick. Oracle, a multi decade old company aged 34% just based on an absolute banger.

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Daniel Newman: On a double miss though, by the way.

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Patrick Moorhead: No, I know, I know, I know. A miss and a miss and then, oh by the way, we're gonna go out for four years. I think it tallied up to about $450 billion of business which we talked about a little bit earlier. It's likely, it's likely open AI. It will be Open AI. It could probably and likely is xai and I think there is some pass through from Microsoft that isn't OpenAI as well. But what a gutsy move. There's a lot of controversy about this one and you know, you had highlighted a little bit of it earlier which is where are they going to get the money from? I was on CNBC and Yahoo Finance and I brought up the margin issue. The margins today on OCI are really good. But will the margins be the same? By the way, the margins are pretty close to what AWS can crank out, which is absolutely impressive. Will they be able to crank those types of margins out? I'm sure that we'll hear about those margins maybe at the next financial analyst day. Will they help people model that? And by the way, just because it could be passed through from Microsoft doesn't mean it's bad business either. Because if you buy into this, how much money can I make from token generation? It could be more of a time to market than something on cost. But again, an absolutely amazing story, Larry. Richest man in America in, in one day again. What a crazy story.

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Daniel Newman: Yeah, absolutely, Pat. I mean you get 30%, hundreds, billions of equity value growth on a miss. But this is all about the future. It just goes to show more and more no one cares what you just did. Everybody cares what you are going to do. You know, we always say things like what happened? A beat, beat and a, you know, and a confirmation of guide or reiterative guidance. Nothing. It's got to be a beat. You got to beat. You got a raise. And by the way, not just a raise. You got to really raise and this was a really big raise. Now again, there's a lot of dependence on a number of others to make sure that this ends up coming to fruition, Pat. But this has them growing and becoming, you know, the size of Google Cloud and catching up to Amazon. I mean, it's an incredible amount of revenue, but it is, you know, it's a lot of customer density. People complain about that with Nvidia. Are they going to complain about it here? But you know, if you were long, and I was screaming when the network was 70 bucks about this company being, you know, if you were long, congratulations, you've had a good week. If you were long, Oracle and Nebbyous, you had a heck of a good week. So by the way, I'll just show you this. I mean, I'm not even over there yet, Pat, but The IonQ is up 17 this morning on their investor day stuff. I'm missing whatever happened to be said, but the stock's up eight bucks this morning. So our friend Nicolo CEO over there is. He's having a good day, probably better than we are.

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Patrick Moorhead: Yeah, maybe you shouldn't have sold. Anyways, let's, let's go in. Adobe earnings skyrocketed. A beat beat, triple beat, maybe even a quadruple beat the way the forecast was parsed. I mean, is this AI magic, Daniel, or is this what it is?

Daniel Newman: It's a reiteration that the pivot to SaaS and this whole sass is dead narrative isn't, you know, it isn't uniformly true across all of SaaS. Now I've said a third to half of SaaS companies may not exist within the next few years. It's really not the Adobes and Microsoft's and Salesforces that I'm talking about. It's a lot of these sort of feature companies that have created, you know, vertical specific product use lines, line of business SaaS, products that can easily be featured out. It also shows to me that there's a stickiness of these companies that have been deeply entrenched and are being utilized by tons of businesses where they can get AI into the products they can implement and meaningfully continue to maintain revenue. I do think the next few years could be a bit choppy. They're going to have to get their narrative right. They've got to tie all their products and businesses together. I think they need to be a little, a little bit more horizontal, a little bit less segmented than they've historically been. But look, it was a good result. It was, you know, they kind of hit it on all sides. And I, you know, I think that the market needs to re rate. They've rerated everything down a lot. I think they need to have a more realistic timeline about some of these bigger, stickier SaaS companies and their ability to pivot to AI.

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Patrick Moorhead: Yeah, I think this $250 million in AI ARR plus the quadruple beat is what took them over the top. The number isn't gigantic, but at least it's a number. And how many times, Daniel, have we said with Adobe, my gosh, you need to be more, more transparent with AI. And I think it wasn't about transparency or, or maybe it was, it was about that the numbers weren't good. Right. Every PDF that I open as an example, I'm not a creator and I don't run a marketing workflow, but man, I, I open up a PDF and it's just, it's not a great experience and it's not giving me the answers. I export PDFs and ingest them into ChatGPT. But hey, let's dive into synopsis. Wow. Down at some point, 40%. Okay. And it was, it was, it was just an absolute challenging quarter and an even more challenging guide. And three things really happen here. First off, China was turned off by the bis. The BIS turned on China and some customers just, just didn't turn it back on. And some of them, you know, and I had asked these questions, well, who did they go to? Well, they put some of their chip projects on hold. There are local equivalents, but you just can't replace Synopsys with the combination of the EDA tools and, and the IP. The other thing was Intel Foundry 18A. There had to be a price to pay. And intel was writing checks to Synopsys and they would have received more checks from customers who went through Synopsys, but it just didn't come to fruition. Third one is that hyperscalers needed a little bit more handholding on their designs. Took longer. I call this a time for revenue challenge. I think that, you know, the company did talk about what they were going to do in the future, how to decouple some of the IP to make it easier for clients to move forward with this. I think China is a little bit of a head scratcher. We're gonna have to see where that goes in the future.

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Daniel Newman: China revenue will come back. They need it. Maybe, maybe little bits and parts. The intel thing was a tough situation. Probably should have guided that a little bit earlier and smarter, but I think they needed to maintain the valuation. Heading into Ansys, I don't think they wanted to create any doubt around how that thing was done and valued. So it was sort of a. It was a loss they had to take later for a win that they got just recently. And Pat, I think the custom AI stuff is going to get them a tailwind. You know, the way ARM has been able to do CSS and increase margins, I think Synopsys has their own dose of margin expansion and of course, with physical AI on the Ansys Synopsys complete offering. So top to bottom, I like it. I know we're, we're crushing on the clock here, so I'm gonna, I'm gonna go with, you know, it was a rewrite and, you know, if you wanted to get in cheaper, you know, for the investors that are listening to this, that was your chance. I think. I think it will, it will roll from here, though, because it's a very critical technology company to this industry.

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Patrick Moorhead: Yeah. Hey, I want to thank everybody for tuning in. Tune into Dan and I social media 24/7. Primarily on X, a little bit on LinkedIn and IV.

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Daniel Newman: Hate LinkedIn. I want you to know that. I hate it. I really hate it.

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Patrick Moorhead: No, it's the worst. I even do a little bit of stuff on Instagram these days.

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Daniel Newman: Yeah, I've been noticing that you've been looking good, getting steady, putting out those videos. I think I might start Tik tocking, but I think it's just going to be mostly shirtless picks at this point.

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Patrick Moorhead: Yeah, I mean, I'm looking forward to the Only dance, so give us enough for the next show. So, hey, thanks everybody for tuning in. Thanks for being part of the community. Give us feedback here on X. That would be the best place. If you want to give it to us, hit that subscribe button and have a great week.

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