The Six Five Pod | EP 282: Google vs OpenAI, AWS Outages, Quantum Computing, and Tech’s Stock Market Rollercoaster

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. AI and Tech Industry Updates: OpenAI launches a new browser called Atlas. AWS experiences significant outages affecting half of the Internet. Google announces a quantum breakthrough and deals with Anthropic. 800 public figures call for a superintelligence ban.

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2. Earnings Reports and Market Analysis: Tech’s latest earnings season begins. Hosts discuss IBM, Intel, Tesla, SAP, and T-Mobile earnings.

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3. OpenAI's Atlas Browser: Pat & Dan compare the new tool to existing browser capabilities and reflect on its potential impact on Google's market dominance. They discuss the broader integration of AI-powered features in the browsing experience.

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4. AWS Outage and Infrastructure Resilience: A look at the impact on various services and applications. The hosts underscore the importance of redundancy and multi-cloud strategies, and break down AWS's handling of the situation and communication.

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5. Quantum Computing Developments: Looking at Google's Quantum Echoes algorithm breakthrough on the Willow chip. Plus, the potential applications in drug discovery and material science, and government interest in quantum investments.

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6. AI Ethics and Regulation: Public figures are urging for a superintelligence ban. Pat & Dan debate the feasibility and necessity of AI regulation, along with the societal implications of advanced AI development.

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7. Tech Earnings Deep Dive: IBM's enterprise AI and modernization focus. Intel's foundry progress and market performance. Tesla's narrative shift from cars to AI and robotics. SAP's cloud transition and AI integration, and T-Mobile's operational success and leadership changes.

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8. Industry Trends and Future Outlook: A high-level recap on AI integration in enterprise solutions, quantum computing's potential impact on various industries, and the evolving narrative around tech companies beyond traditional metrics.

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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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Patrick Moorhead: Welcome back, everybody. It is episode 282, and this is Patrick Moorhead, veteran CEO of Moor Insights and Strategy, with millennial CEO Daniel Newman. Daniel, your guns are looking great today. They're looking big. You and I are sporting the Signal 65 shirts. Got Moor Insights and Strategy. We got the Futurum group. 

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Daniel Newman: And Six Five, baby.

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Patrick Moorhead: No. Oh, and the six five. Well, I thought that was Signal Man. How do you refer to our joint ventures?

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Daniel Newman: Oh, what did I say?

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Patrick Moorhead: Offspring. Our offspring.

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Daniel Newman: They're the love child.

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Patrick Moorhead: Love child. Yes, that's right. The 65 is a love child production from Pat and Dan, as is Signal 65.

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Daniel Newman: Since we couldn't actually, you know, reproduce, this is the best we could do.

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Patrick Moorhead: It is, it is. And we even had some people jabbing us on X. They asked us if we're married or not. And, you know, I don't know, when you do sign legal documents for stuff like that, you kind of are married. And we do stay in the same hotel and, and often travel together, sometimes.

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Daniel Newman: On purpose, sometimes on accident.

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Patrick Moorhead: That's right. It is funny. Usually we make fun of each other. We're not actually being honest and serious when. Oh, it's amazing. Look who I bumped into. But we've had a couple of those coming up.

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Daniel Newman: Although that one time recently where we did actually surprise each other on the escalator where you were like, thanks for calling.

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Patrick Moorhead: It was pretty funny. You know, Daniel, I've been on the road seven out of eight weeks. Got two more to go. That'll be nine out of ten. I'm actually feeling pretty good. You know, I had a little setback with my shoulder. Had a little setback on the surgery recovery. But, you know, I'm just glad for what I have and the fact that I can come and do this for everybody today. I'm just glad to be with you bestie.

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Daniel Newman: It's good to be with you, man. 

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Patrick Moorhead: We got a lot to talk to you about today though. OpenAI did launch a browser and AWS pretty much knocked half the Internet offline. Google's touting more Quantum Breakthrough inks a deal, a mega deal, with Anthropic, which is  a big deal and they're taking equity stakes in Quantum. Actually the government did and I think 800 public figures called for a super intelligence ban. We are getting closer to Halloween, so that would make sense. And then we have a lot of earnings, right? Tech stocks started. IBM, Intel, Tesla, SAP, T Mobile. We'll hit the numbers, we'll hit the Deltas and of course the guidance. Because that's all anybody cares about when it comes to stocks. Let's dive into the details.

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Daniel Newman: Dude, some of these are real companies, right? I mean we are stocks. Not all things just because our stocks only like cos that have. They're publicly traded and have predictions. You know. We should talk about this because I just want to make sure we agree.

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Patrick Moorhead: Well, it's my general term for stocks that are going up market nonsense.

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Daniel Newman: If it's going up it's a stonk and if it's going down, it stinks.

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Patrick Moorhead: Something like that.

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Daniel Newman: Right, that's. You know, let's just. We gotta have some definitions here. Our audience, they're not gonna be able to keep up.

Patrick Moorhead: I think the audience is here to have us decode some of the top news segments. So let's dive in. OpenAI brings out its AI based browser called Atlas. Daniel, what's going on here?

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Daniel Newman: Well, you know this whole browser war is going on. Perplexity launches a browser, a comet, you know. Now Atlas, remember Sam Altman, who I often suggest is diabolical, has made his overtures that he's going to take over Foundry and fabrication of semis. He's going to take over semis, he's going to take over search, he's going to take over social media dollars.

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Patrick Moorhead: What seven trillion dollars was.

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Daniel Newman: Seven trillion dollar plan which I'm starting to wonder if he might actually be able to raise. I don't know. He's quiet. Yeah prolific there, you know. They were going to take over social. They're going to take over the future of devices with the new. Whatever device they're going to build is. They are going to be a hyperscaler. They're going to not necessarily leverage all the partners they're using for capacity. They're just going to do it themselves and eventually I'm sure he'll come back for Jensen in some way, I mean, he already did take 100 billion and then go sign deals with his two biggest competitors. But, you know, the future is all about layering agentic capabilities into a browser. I mean, as I call it, the future, to some extent, this is what I call the intermediate future. Now, the intermediate future is because we don't really believe that people are going to have that same interface experience, right? We're going to wear something, we're going to talk about something. It's going to be pervasive. But between now and then, what we need to do is look at the experiences that people are comfortable with that they understand, and then say, how do we apply agentic workflows into that? So I'm on a browser, I'm looking at a website. Can I type something into a prompt that says, you know, buy this for me, make this reservation for me, book this flight for me. You know, look up this additional information for me, do this comparative for me. And what they're trying to do is offer this. Here's a problem I see with it, Pat, is this is not actually that disruptive. First of all, they use Google technology in the background because Google owns the Internet. So adding this kind of capability on top of it still requires some of Google's proprietary technology. The second problem that I have with it is Google has largely kind of, you know, cut them off at the curve in this stuff. Like, over the last months, Google has been adding a lot of the features right into their own browsing technology. On top of that, with their enterprise work suite and everything else that they have in their own data, their own platforms, their own video, where I'm not sure that what OpenAI ended up coming out with is all that disruptive. Having said that, I think it's a neat parlor trick that you can sort of chat with your browser. I think this is the same thing as what we wanted for a long time with Siri, the ability to chat with your phone and then have it do things for you. This is what we're going to have to do, Pat, to actually get us to a point where we start to become comfortable with the idea of this more autonomous agent assistant that's living with us everywhere we go. And I think doing it in a browser is a place where people can kind of feel it, see it, experience it, and then eventually, you know. And by the way, I'll just leave one last thought. You know, remember, kind of with Alexa and Siri always seems like we've kind of had these experiences where we've kind of had the assistant doing some of the things for us. I think this is just the next, the next phase of being able to do it a little bit smarter with language, with being able to put processes and with, with workflows. But it's a step. I don't see it actually taking meaningful market share from Google though.

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Patrick Moorhead: Gosh, we don't even have to go do the flip now, right?

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Daniel Newman: We're doing a flip.

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Patrick Moorhead: Of course we are.

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Daniel Newman: Oh, what are we gonna talk about?

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Patrick Moorhead: Yeah, so I'm gonna talk about this just kind of holistically because we're, you and I are going to debate this a little bit later on what this means to Google. I did like, you know, the way that you laid it out, if I heard, heard you correctly, it's just another way to access AI, maybe a way that people are more comfortable with. So OpenAI does have its connectors already and that is basically an MCP API like connections in there, but it doesn't have connections to everything. And what this is, if you don't have that connection, it's a way without necessarily having to go to chat GPT but staying in the browser. Some of the features are already available and have been available in Microsoft Edge for forever. That's my standard browser right now. I got kind of sick of Chrome and I tried Edge because it's available on every platform and for other reasons I never really looked back. That right rail feature has been available for forever. So when it comes to bringing new capabilities that I haven't been able to do, the only potential here is agent mode. And one of the challenges here with agent mode or anything, I use a bunch of tasks inside of ChatGPT. Is it slow? Right? Like because it doesn't want to get it wrong. So what you become is this human in the loop which I like. On one hand it's not going to, you know, buy you and I tickets to Tahiti in first class that are non refundable. Right. But at least some of the early stuff that I I used with chat GPT it just took a lot longer than me just doing it like buying groceries. It took a lot longer to do that than for me to go to a grocery site and, and just pick stuff, pick my favorites and check out. It takes about five minutes and using AI it took like 15 minutes. So we'll see in the end it's another way to access an AI here. Next topic. AWS shuts down about half the Internet and applications. One of the biggest ones that I just couldn't believe was what's called 8 sleep or asleep 8 where people's beds, they couldn't cool them down. They ended up being super hot or at an incline and they couldn't. I mean, who on earth would architect a Solution, a consumer IoT solution that required the freaking cloud to do the basics. It'd be like a nest thermostat that didn't work without cloud connectivity. Right. You couldn't air condition your house, you couldn't heat your house. That was the dumbest thing that I've ever heard. Now, I'm not taking AWS off the hook. They screwed up majorly. But the one thing, the interesting thing about this is this was caused by automation, okay? And you know, I don't know if it was AI, I don't know if it was a script, something pretty basic, but to me, it kind of brought up the whole idea of the risk of anything that's automated doing, doing anything you can. I mean, it took down zoom, it took down, you know, crypto sites.

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Daniel Newman: Robin Hood was down. Like people couldn't make trades. Like people were losing their freaking minds, dude.

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Patrick Moorhead: Yeah. And then the second one, I, I gotta throw this back too. You decided as a, as a, as a vendor, or, excuse me, as a customer of AWS, to not have any resiliency. Okay? And you can do resiliency. A lot of people do. What they do is they don't limit it to Azure. They don't just do east, they do east and they do west. If something happens to the west, everything goes to the east. If something happens to the east, it goes to the west. Now it costs a lot more to do that. It's not twice as much, but it's at least 50% more expensive. So these AWS customers decided that resiliency wasn't as important as cost. So I will put it on them. Daniel, there's a lot more left in this that I've left for you.

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Daniel Newman: This is so much more a business thing than a technology thing. Like with all the automations and the networking and the complexity, this is bound to happen. This is the case for hybrid architecture, multi cloud architecture in a nutshell. The idea of depending on a single cloud at this point is relatively irrational. It's irresponsible, especially the applications that run around the world that people depend on. I mean, the bed story is kind of funny. The, you know, like I said, the story about people's, you know, accounts like traders that, you know, retail traders that could not make trades On Robinhood, I mean, you could have gotten washed out of tons of money. Like, you know, if you were in a bad position, you couldn't get out of it. I mean, it was literally. That was how big it is. Other businesses, Pat, I mean, you and I were using Zoom that day. It was completely screwed up all day long.

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Patrick Moorhead: Crazy.

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Daniel Newman: There had to be companies that couldn't process orders. You know, they couldn't. Couldn't take customers, couldn't do business. So this stuff is really important. And it was a. It was a reminder about what you said in resiliency. And by the way, like, you know, I want to give AWS some credit. I think they handled it well. I actually think they were pretty upfront. They were communicative. They kind of ate their own in it. Like, they didn't, like, try to push blame. They took responsibility. They were very proactive in communication. They put out a blog, really, describing the challenge and the problem. And by the way, I think there are some clauses now, if I'm not mistaken, Right. Aren't there some clauses, like, in the. In these things that basically you almost have to take accountability if you don't set up the right resiliency like that, you know, that they're almost recommending you have the backup of another cloud. It's like, that's where we've gotten to, is that all the clouds know that everybody's using these sort of resilient measures to have backup plans and strategies to keep things up and online. So I think, if anything here, Pat, this was a great reminder to CIOs and technology leaders and companies, startup companies, that resiliency matters. It. It's a much bigger deal than you think. We sort of take for granted that everything runs all the time. And I always laugh, Pat. It's kind of like when you, you know, lose your keys to your car. You probably never do because you're very organized guy. But I. I probably, you know, once every six months, like, really lose my key. Like, I can't find a key. My car is gonna be undrivable, right? No, of course, you. And by the way, there's. Exactly. But there's technology for that. Right? And I'm. I'm a buffoon. I'm a dumbass. I don't have it on that. My point, though, is like, suddenly you find yourself all in fixing a problem that never needed to exist in the first place.

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Patrick Moorhead: Yeah.

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Daniel Newman: And it completely consumes you because, like, that whole day, how many CIOs, CTOs, IT teams, literally their whole day Just became repurposed whatever they thought they wanted to get done. And so at that moment it's like, what did that cost your business? This is a great lesson for cyber security. It's a great lesson for your infrastructure strategy is that your business now depends. And this is why when we used to say things like every tech, every business is a tech company now, this was the personification of why people say every company is a tech company nowadays. Because when you don't have your technology, you can't run your business. And for many of us, we can't run our lives because, gosh, if we couldn't get to Netflix or do a zoom call, what would we do?

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Patrick Moorhead: Anyway, enjoy ourselves, kick back, onward.

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Daniel Newman: I don't, you know, I don't know how to do that.

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Patrick Moorhead: I know it'll catch up with you maybe, but you, you're, you're so healthy on the other side of the spectrum.

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Daniel Newman: Isn't there a peptide for that, though?

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Patrick Moorhead: There will be. Or maybe your research company will, will, will invent one. You know, the Dantide Dante. All right. Boy, we haven't talked about Quantum for a while. We've got two quantum topics today. Essentially a thing called Quantum echoes on Willow. Google says it's a huge step in real world applications for quantum computing. Real.

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Daniel Newman: You know, it's interesting, Pat, because we're all these sort of Quantum hate is all about not. You know, it's two things that people hate about Quantum. One is they feel the valuations have gone too far. And two, they don't feel that people can do practical things yet. Like they cannot comprehend the kinds of things and the things that these researchers and PhDs are doing doesn't tend to relate to the rest of the world. They're like, well, the thing can't add two numbers together because that's not really what quantum machines are designed to do. But imagine if Quantum was able to add and more capably do classical computing and add value to it. And this is the story of the Google Quantum Echoes which they call runs on their Willow chip. It basically is. They're saying it's 13,000 times faster than the most sophisticated classical computing algorithm on supercomputers. That's the stat. And the idea is that things that like HPC does for drug discovery and these are the use cases we've talked about, material sciences will be able to be performed with the support of Quantum. And you know, Pat, one of the reasons I think that this quantum thing's so interesting and we have another story about Possible investments in it is we have the security issue with Quantum, you know, being able to secure things like Bitcoin and networks. And the other thing is we have a power issue, like a lot of this whole bubble thing. And everyone's bubble theory is all about the fact that we're gonna have to spend so much money to build power infrastructure, data centers and spend so much money on chips and everything else that it's unsustainable. Well, if Quantum can enable us to run much more efficient algorithms, it actually creates much more efficient AI. And so this is really an interesting thing too, because you talk about 13,000 times faster on something like material science. This is what we're building mega clusters of GPU’s to do. Can it be done more efficiently? Now, I won't pretend for a minute to be a quantum scientist or a quantum researcher, but where I kind of continue to see opportunities and applications is always going to be the Quantum plus classical. When the two work together. And two, if we can build these algorithms that can support the applications that the average business understands, I think that's when Quantum has the opportunity to become much more practical. Google seems to keep pushing the envelope here, and it's very interesting and it's very timely. And the fact that we got this news about possible investments, which we'll talk about later.

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Patrick Moorhead: Yeah. So this algorithm says it helps measure molecular structure and molecules, and the application could be to help in drug discovery and material science, which, by the way, is just. It is a very classical Quantum discussion. Right.

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Patrick Moorhead: I become, by the way, I believe in Quantum the technology itself. I do believe that there will be probably two to three winning methodologies that multiple companies will adopt. There will be aggregators of those technologies like AWS where they've adopted four different types of topologies so they can aggregate and turn it into a service. What's different here with Google is not only do they have Google Cloud, but this is actually Google's implementation of that. And we've seen this from both Microsoft and from Google. And when this hit the GPU compute, even though it looks like it just crept up on us and went asymptotic, it had been in development. My gosh. I was at AMD and we were doing GPU compute. Now it was on stuff like super resolution, but through 200 experiments that Nvidia did, and their investment into the academic community came up with the University of Toronto being able to do image recognition. And that was a research project. Right. And then it just, it just, it went up, went up from there. Quantum will have its Moment. I mean the debate interestingly enough on commercial applicability, some say five years, some year 10, some say 10 years. But you have companies like IBM and IonQ who are already monetizing it now with some of its research. But companies like IBM and IonQ actually have real customers and are doing algorithmic work for good. I agree with you Daniel, of. In the end this will be like GPU accelerated computing and let's say you're a developer. The API that you would use to get through all the quantum difficulty are things like Qiskit. Right?

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Daniel Newman: Qiskit is an application framework. Yeah, yeah.

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Patrick Moorhead: Qiskit is kind of like an Nvidia Cuda. Don't, don't hate me tech people. I know it's not the same. I know there's differences, but that's just a layman's way to look at that. So go Google. Gosh.

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Daniel Newman: Yeah. But by the way, do you see, you know, I know we got a different quantum story, but did you see that IBM, you know, announced that they can run their error correction algorithm on commonly available AMD chips?

Patrick Moorhead: Yeah, that's, that's, that's pretty big and it absolutely was a sleeper. Nobody's talking about it makes sense. Not too many people know this, but Lisa Sue used to work for IBM and she knows Arvin quite well.

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Daniel Newman: The more you know.

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Patrick Moorhead: And the other thing is AMD CTO Mark Papermaster used to work at IBM before he went to Apple and got fired by Steve Jobs. Exactly. Hey, more Google news, Dan. I knew we'd get to some chip chippery here. I mean Google and anthropic announce a 10 billion dollar deal to use the TPU and Google Cloud. Dan, you know how many conversations I'm gonna do my victory lap now? Okay, Everybody wants to debate with me? Nobody needed a six, nobody needed XPUs. And then Google trains Gemini on its TPU and Google runs all of its SaaS applications off of the TPU. They are buying a bunch of GPUs for Google Cloud and enterprise customers who want to use that. And now we have another company, anthropic, the number two to OpenAI which by the way has almost the same revenue which is shocking because you never, you very rarely hear that are going to use TPU for Claude. This makes sense. Anthropic also uses AWS and Trainium. I don't think that, I don't see that stopping. What I do see is like OpenAI. Anthropics just needs more capacity. So here you are and you can probably get a 30 to 50% discount on using the TPU versus a GPU. You have to put a little bit extra work in but my God, if you can get a 30 to 50% discount, that is, that's pretty, pretty amazing.

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Daniel Newman: Yeah, I mean look, I've been to a Super bowl on TPU and on the XPU and our models all show this part of the AI infrastructure stack accelerating quickly. In fact more quickly than the GPUs by the end of the decade. And these are the small little breadcrumbs that the demand is real. And Google is in a whole different place than all the other XPU companies. There's so much further along they've got again, they're training their models with it, they're using it for inference and now they're commercializing it. And this was a bit, maybe the surprise was that they were going to commercialize it for other companies at this scale. The kind of idea, and this is like where I haven't been necessarily correct was I really thought XP used for internal workloads and commercially available merchant GPUs for, for the external. So internal XPU, external GPU more or less Google suddenly is more competitive with Nvidia than it used to be. It's now directly saying hey, but that's happening anyway. I mean that was, has been and will be. And again this isn't just chips, this is all cloud services. I don't know what this means for aws cause you know, AWS has written some big checks for Anthropic and I don't know what this exactly means for Trainium. I think the two arguments you could make Pat is kind of what you said, it's an all hands on deck thing and they're just getting all the capacity they can get. You know, Anthropic's been a little quiet through this process and given the fact that Anthropic is running towards like a $26 billion, maybe even up to 30 billion revenue next year. That's the same size as OpenAI folks like nobody's talking about this like when they're like oh, all the generative AI revenue is just Open AI.

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Patrick Moorhead: Well actually there's another company that's going to probably do just as much.

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Daniel Newman: Yeah, and that's, that's pretty interesting.

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Patrick Moorhead: It is, you know, a lot of the more technical crowd prefers using Anthropic. It is the choice for, for developers with Claude code, which is why you know, and it's an area that quite frankly ChatGPT hasn't made a ton of progress on. They've got Codex, they acquired a few companies to get there, but, but it's an issue. And you know, Daniel, if nothing else, what Claude represents, you know, we all talk about downstream use cases. This is a great example of a company like Anthropic who they corner a use case, which is code completion, code development, code inspection, and they're driving a boatload of revenue behind that. I've heard Jensen talk about Anthropic and them using Claude code, among others, but I think that's the biggest takeaway for me is, wow, they've got like one killer use case and they're crushing it here on revenue where OpenAI seems like it's, it's, you know, going after the world and they're at the same revenue, so it'd be interesting to see the capacity announcements. I mean, will Anthropic go on this crazy, you know, capex binge or do they just not need that? So from an investment to revenue, Anthropic is kicking Open AI's butt at this point. OpenAI wants to do everything, but we really don't know what Anthropic strategy even is. Isn't that weird? You know, there have been a lot of people poking on Anthropic for what it's doing with different states here in the United States to slow down AI and out of it. People realize that we don't even know what anthropic strategy actually is.

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Daniel Newman: Yeah, I think you hit that. You hit that pretty well. Anthropics playing a bit of more of the long game. You know, what do they say about, you know, moving in silence? You know, Dario gets out there a little bit, but he just doesn't make the same noise. But you can win in different ways. And he's kind of in silence. You know, he's just quietly building a 30 million dollar revenue business. No. Okay, that's okay.

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Patrick Moorhead: No idea.

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Daniel Newman: Gangsters move in silence and Dario doesn't talk a lot.

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Patrick Moorhead: Yeah, well, hey, Dan, you're. You're a quantum boy today. I'm going to give you another quantum topic here. The administration is talking about, uh, making investments in quantum firms. And, you know, there may even have been a denial. And then you had Rigetti, I saw, come out and say, no. We're actively having conversations.

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Daniel Newman: They're always talking. This is like, this is kind of the way media and this is the way you propel a conversation, you build a narrative. But like, my take is that quantum is essential. Okay, we can disagree on when it might be more essential and how it's being used today versus how it will be used. Experts, you know, whether it's Arvind Krishna, whether it's our friend Niccola De Masi, whether it's, you know, Google, everyone kind of believes it could be 3, 5, some say as long as 10. Jensen's flip flopped about it. But they've also made investments in quantum companies. Everybody kind of understands that at some point this is going to be absolutely critical for security. It's going to be critical for sensing things like, you know, when you hear about like radars and planes and being able, like fighter jets being able to be detected or non detected, like quantum algorithms will potentially make detect, be able to detect the undetectable things like that. That is what quantum might be able to do in the future. And so it's not if, it's when. And so the people that are sort of super negative on it either just believe it will never happen or it won't happen soon. But I tend to believe that there's a reason Google's investing, there's a reason IBM's investing and there's a reason the US government would want to invest. Like first of all, if we're truly building this sort of digital currency, we need to be able to protect it. That's for instance if you want the Department of War to be able to fight wars the way we do, winning Quantum especially versus China will be critical for us to have a lead there. And that's going to be very important as well. So does it make sense for the US Government the same way we've done with critical, you know, with the critical resources? You know, would it be the same thing with semiconductors and foundries and fabrication? Yeah, I think it is. But like I said, how far along are they? You know, there's a number like 10 million dollar investments. It's like that's like buying like 0.01% of some of these companies at their current valuation. So it doesn't seem super significant. And the last thing I'll say is, look, I continue to believe that while people call it socialism, I would always rather government invest my taxpayer dollars in something that has a potential of giving a meaningful return while protecting critical industries than doing grants and tax tax breaks for companies because those we never get anything back on, you know. But if you actually put the investment in, I mean what is intel paid back now? It's a 65% ROI since Trump, since the Trump investment of 10 into 10 stake in Intel.

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Patrick Moorhead: Good stuff man.

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Daniel Newman: Nothing else.

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Patrick Moorhead: Hey, let's go into our Doomer segment here. Hundreds of public figures, including Apple co-founder Steve Wozniak and virgins Richard Branson. Are they still working? Urge a super intelligence ban. And it was very simple. Usually these things are like 27 pages of slop. Okay. But there was a short statement on super intelligence or what we call AGI but it says we call for a prohibition on the development of super intelligence. Not lifted before there is one broad scientific consensus that it will be done safely, controllably and with too strong public buy in. You know, Daniel, I want a unicorn and I want, I want a lot. I want rainbows and I, I want, I want everything. I also don't want there to be a cataclysmic slowdown. So I think asking these questions, I think pushing on it a bit is a good thing. But quite frankly, unless you know this is like nuclear deterrence, like if China would agree on something like this, right? Then it's like, okay, well maybe we have something. But then again there's not going to be broad scientific consensus. And even more impossible is strong public buy in. Okay, I just don't think that's even a possibility here. So this is a. The next generation of doomerism. At this point I, I do like, I think we should be asking questions. And Daniel, you have said something really smart for once that I really. Just kidding, bestie that I really buy into, which is essentially. Well, wait a second. If AGI is going to basically put everybody but the CEO and the C suite out of business and the robots are going to be doing everything else, well, how are we going to pay for all this stuff? And then you have to ask the societal impact of. Here's what I know for a fact. And Daniel, you call me a boomer. I'm not a boomer. I am Gen X. But here is what I know for sure.

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Daniel Newman: You're not gonna lie, Craig, that people.

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Patrick Moorhead: Who do not have a purpose in life, people who do not have something to work on, to aspire to, we fall apart as a society. Our social programs that were designed to lift people up by their bootstraps until they could move forward have turned into basically a communist. You don't have to work and you get paid.

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Daniel Newman: Long term social safety nets.

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Patrick Moorhead: Yeah. And it just turned into a real societal issue. And when humans don't have something to, they go absolutely crazy. They get depressed, they. Things that aren't real problems become problems. And we've seen that as a. I mean you've seen the poverty figures. You've seen the global education figures. You've seen the global GDP figures. Poverty is way down. Education is way up. Lifespan, except in the United States, is way up. Technology has done some amazing things for us. But I'm okay asking the hard questions. This isn't gonna stop anything.

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Daniel Newman: Yeah, I don't. I think you hit this pretty well. I'm not gonna add much here, but I will just basically say this seems to be a perpetual gyration with these kinds of wealthy folks. Remember Musk called for this at one point too. He wanted to slow down. Seems that he only wanted to slow down until he figured out how to catch up. Caught up pretty quickly. And now he's all in this. This train is rolling, though. Like, you know, this is kind of just noise. Like these people aren't going to change this trajectory that, you know, we're going to be able to impact the speed of GDP growth substantially shorten the period. But yeah, we. We had to and still have to see how we get there with people. I mean, that's my one thing. Like, I can't yet. I can't contemplate Pat yet. All right. That's not right. I'm entirely contemplating if this stuff is so good. And again, you can argue it's not good enough yet, but like, literally every month it's better. Every day it gets better. That there are a lot of things that people do today that robots and AI will be able to do tomorrow. How quickly? Because speed is the biggest concern I have, people will evolve. We've done it for thousands of years. But if it happens fast enough, people don't have enough time. And that's even the biggest difference between AI and the Internet trend is the 7x plus speed difference of how much AI can do in such a short period of time versus how much we've been able to upskill ourselves in that same period of time. And you know what I do worry about is we get too intelligent too fast, there's going to be a lot of people to your point, Pat, without a problem. Purpose. That'll be. That'll be something to watch.

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Patrick Moorhead: It is funny. No. Why isn't anybody talking about this, like the purpose part is so doomy. It's so. No, but like in all of this doomy conversation, nobody talks about what I think you and I think will be the biggest issue, which is people lack purpose. And then we just. We just implode, you know? Yeah. Well, anyways, okay. Okay.

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Daniel Newman: Then we just end up posting on Twitter.

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Patrick Moorhead: God, that's great. Let's move along here. Let's get into the flip where we do a simulated, as Dan says, I say fake debate where we take polar opposite points of view on a very polarizing debate. Sorry. In a very nuanced conversation. So does open AI's chat GPT Atlas pose a threat to Google? Let's flip it. All right. It's gonna be a good one. I'm glad you picked this one. It's gonna be, it's gonna be a tough one. Dan believes, not really, that OpenAI's chat GPT Atlas does pose a threat to Google Chrome.

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Daniel Newman: Look, the browser is noisy, it's got a lot of issues with privacy. You know, it's, it's kind of been waiting for a disruptor for the longest period of time. And what company is better to potentially disrupt an entrenched company like Google with its Chrome than a company like OpenAI with chat GPT? Other companies like Microsoft and Firefox, Mozilla, DuckDuckGo. They haven't succeeded yet. They haven't found the right formula. But the one company that has been able to find the right formula to win market share and trust, Corolla Market, came out just absolutely racing fast. Knocked all the big tech out, all the Mag 7 out and became the biggest in a category in less than just a couple of years has been diabolical. Sam Altman and Open AI, this is a company that put something out in 2022, won the hearts and minds of our youth, our younger generation. They don't use Gemini. They're not playing with Google AI. They're all Chat GPT wake and bake, Chat GPT. You know what I'm saying? These kids in college, you say, hey, you using Gemini? No. What are you using? Open AI. Well, guess what else? They're going to use anything that open AI puts out. So even if this takes a little while and you got to string along the process, what you're going to start to see is this market share erosion in just three years, you know, they were able to go from 0 to 800 million weekly active users and they're estimating to be in the billions in just the next few years, growing to hundreds of billions of revenue. And basically what they're going to do is they're going to take what they've taught this younger generation to do with injecting prompts into everything and they're going to make the web experience and then the phone experience and then eventually the thing that's not a phone or a computer, all one ubiquitous thing. The Jony Ive deal. They're already down the path. They've already seen their revenues grow at an incredible scale. They've got a half a trillion dollar valuation. No company has ever been able to achieve this so quickly. OpenAI knows what it's doing. They know what the browser needs to be. Google's yesterday's thing Google was, you know, the thing you will use. Boomer, Google's not the thing that people like your kids are going to use. Just ask your son, ask my son what he's using at school every day. It's Chat GPT. When they go to the browser, they're going to use the Atlas browser because that is where the future lies. This one was an easy one for me. ChatGPT is going to be the first meaningful one to disrupt Google and Chrome. It's going to be the Atlas browser pretty soon. Pat. Even old farts like you and me are going to have to use it because it's just going to become the standard.

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Patrick Moorhead: Dan, you're so confused. You know, Atlas is going to attack Chrome. Kind of like Chat GPT was going to kill Google Search. Last time I checked, Google search queries are up and Google, you know, even if they were six to nine months behind with AIO overviews, have pretty much, you know, Kia I'll call it mainstream AI versus ChatGPT. And even in, you know, the number two, even in query calls to the developers is Gemini and rising rapidly. So as much as I would love to get onto the bandwagon of a company that has said that it's going to dominate chips, Foundry, social media, search, business applications and operating systems and let's not forget devices against Apple. With Johnny, I've, I mean it's, it's. When you're raising as much capital as OpenAI is trying to do, you have to put up a business case that you're going to win and everything. And listen, chrome is at 72% market share and has 90% market share in search. If you're going to go after somebody, you're going to have to go after them, you're going to have to go after the big boys here. So the other thing is just on a, I mean if you're going to be on a feature by feature basis, there's literally nothing that ChatGPT or Atlas offers that isn't available with a perplexing browser. Comment. I mean, Hack Edge has had this feature set for forever and I think once users realize that, it actually slows down what they can do out there just on day to day tasks like groceries or travel or things like that. What is interesting to me are enterprise applications that you can do through a browser. But are you going to do this on Atlas or are you going to do this on Microsoft Edge? Most enterprises have standardized on Microsoft products and I think they're going to pick Edge. So. Yeah, good try. Nice. You know there are already security nightmares of prompt injections that are being reported out there. Good luck. What do we really think?

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Daniel Newman: I win. No, I'm kidding. I. I agree with you. I wrote a Forbes article yesterday. The actual title of the article was Google's Quiet Victory. Why AI? The AI browser wars were over before they began.

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Patrick Moorhead: Oh my gosh.

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Daniel Newman: Maybe, the producers can flash that Forbes header up on the screen. But I was definitely arguing aside. I didn't believe it. But sometimes that's the job, right?

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Patrick Moorhead: Yeah. I am pretty excited about the concept of browser based agents and what I can do if I can connect the front end to the back end with a browser and I don't need a bunch of APIs. I'm pretty excited about that. But we'll see. Hey folks, let's dive into the last part of our show. Bulls and bears dive. All right, let's dive in. So much earnings. We are back tech stock earnings. Daniel, IBM, how they do. What's the significance?

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Daniel Newman: Yeah IBM. You know this was an interesting one. Did what you and I both published something thought really well darn near 10, not 10 but darn near 9% ahead of its estimates showed you know a massive 9 and a half billion dollar AI generative AI backlog saw double digit software growth, huge success with their new Z platform and then the company saw it's the ticker the tape painted red after this announcement. Hard to know. I mean it was weird because on Wednesday it was a really weird market day where the market fell hard except IBM was up actually somewhat bigly heading into the print. So I don't know if this was again kind of like selling the news. Massive expectations. It's been bouncing off. It's been a 50 day moving average consistently over the past couple of months. This has been a kind of a contrarian name at times. The company tends to do better when other names aren't doing as well. It's a real company with real AI. But look, my thematic point is this is a company that sort of stands for enterprise AI. This is a company that's looking at cheaper ways to deliver with its partnership with GROK to deliver Compute. This is a company that's built a fully compliant, governed, regulated AI platform for generative tools. This is a company that has true end to end consulting capabilities to actually help you design and implement your AI. And the numbers are moving in the right direction, Pat. I mean look, getting to the point where they're almost a 10% overall revenue growth. I don't know about you, but two years ago I said IBM like, I don't know if you'll ever get back to that. Like it just didn't seem plausible. They were a combination of declines and single digit percent growth, you know, putting off good cash, being able to continue to invest, winning big enterprise customers and building real, you know, real meaningful software solutions to make AI real in the enterprise. So I like the company here. I thought I had a good quarter and by the way it got a lot of those over the course of the day following I think it only, it was down like 20 bucks. It only ended up down like a couple. So there was also a little bit of a sale and it seems that the, you know, the, there was a bid for IBM the next day and I think people see its potential and they're buying it back up. So good result.

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Patrick Moorhead: Yeah. What I like about IBM earnings is this kind of pure enterprise AI and modernization read. You know we talk a lot about the circular investments and you know, when is, when is enterprise AI going to hit? This is about as clean, it's about as clean as it gets. And you know, the 9.5 billion is a cumulative number. Some really big, really big growth here. And yeah, came down expectations. The street wanted more, priced it up during the day and decided that yeah, that was kind of, kind of what we expected and ended up selling, ended up selling down. You know one group that you know, we talk about every once in a while. The, the IBM Z numbers were, were just absolutely huge. Right. And you know, I got to give hats off to the St. You know, Ross Mori is retiring or maybe he has already retired. So hats off to. Hats off to him and long live the mainframe, which pretty much everybody says was going to die. And as many people try to kill the mainframe, IBM keeps modernizing it, whether it's with operating systems, whether it's containerizations, application environments. I was at the F1 race on Saturday and had met with a lot of IBM clients and yeah, they were doing AI on the Z, right, right in that, that TELUM block. And it was primarily kind of risk type of things that needed to be done within the, within the transaction. But that's just a money maker. If you would have asked me 10 years ago if that would have been one of the biggest bright spots I I just would have said not a chance. So good stuff into the future. Hey Intel. You and I both had a chance to talk with Intel CEO Lip-Bu Tan and kind of get, get the, get the breakout but net net they pretty much crushed it on every single metric revenue EPS gross margin in the guide. Although when you look at the optics looked low. Everybody's got to remember that it includes doesn't include Altera anymore that has been taken out and spun off. And also on the gross margin side you've got Panther Lake coming in early and anybody who's ever you know been in products know or not even products just pay attention to this stuff. You bring a new product, your gross margins are really low right. You've got a lot of startup costs. Your yields are typically lower than you would expect. I was super, super surprised Daniel about you know a couple things. First of all that how much better than expected data center did and I think that was a head node type of thing. I interested to hear from AMD if you know they had capacity issues or something like that. I know for certain that intel when it comes to H series was the preferred head node. I believe that the preferred head node for this cycle of Blackwell is, is amd. So I'm super interested. The other part is why you know the gross margins I totally did wouldn't even factor that. I wouldn't even have, I couldn't have made that up. Intel did make some pricing adjustments that I, I think made a little bit of a difference there. But also lipu's been on a cost cutting. This is gross margin so it's cogs but it looks like that they made some real cost reductions as opposed to improving gross margin just on price. I like what I heard from LIPU related to Foundry. He seemed a lot more confident than he, than he ever had before and, and I think people picked up on that. I think the next couple months, next couple quarters will be the most important 2/4 for foundry. They're going to have to get some commitments and we will know them because you've got NRE and payments with a disclosable event. We will all know when it, when, when it happens and it will decide whether Intel is going to do 14a as an intel node or whether Intel will do 14A as a Foundry node as well. Lip-Bu was really clear with the last earnings that we don't get people to sign up. We're not going to build it out. And what that means is they're not going to invest in third party IP and they're not going to develop the tooling and capacity to, to make, make that happen. But I do think that they will. I feel better than ever that we will see first of all a big packaging customer and likely a big, big wafer customer as well.

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Daniel Newman: Yeah, it was a great print. Like this is a company though the print is not as important as the narrative. The narrative is this company has been given the right backing that it needed to get out of the hole that it had been in. It needed the US government. I told that to Pat Gelsinger consistently. Policy needed to drive the company into the future. Of course a person with the kind of background he had and the belief he had was going to believe they could teach their way out of it. But TSMC is just that damn good in my opinion. Like this was a company that needed policy on its side. It doesn't mean it cannot meet the tech moment. But I do think policy will enable them to get to 95% or something of parity and there will be a forcing function that will require some customers to build some of their chips on Intel's nodes. I think there is a customer. I think there might be even more than one. I, we didn't get any real indicator of that specifically, but there's just a sense of this in sort of the, the way it was discussed, the way 14A was discussed, the way the constant engagement with these customers has been discussed. And I think like I said, there's a lot of back chatter with the administration, with the different fabless companies and with these different deals that are being made that they're going to get some level of customer engagement for 14A. So the whole 14A is off. That was Lipo playing his cards wisely to the market and I think he executed incredibly well. Look, he made them narrower. The company's more focused. They're able to tell a story about how this CPU x86 strengthens the data center. Possibly a stronger cycle for AIPCS is coming. The refresh cycle seems to be picking up some steam. They put themselves in their own supply conundrum with decisions around Intel 7 and that they made in the past. But those were the decisions at that time that I think the company had to make. They didn't know the lifespan of these, of some of these older nodes and they didn't know the ramp time of newer nodes. They only have so many dollars to go around, so they have to make decisions. But overall I think this was a good first indicator. But, you know, the narrative is even better than the results and I think that's why the company's performing so well right now.

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Patrick Moorhead: Yeah, I looked at the press release and very rarely do I reflect, but I just couldn't believe all the stuff that they, you know, the JDA with Nvidia, the three investments. It's pretty. Him getting summoned to the White House. Pretty crazy. Hey, let's, let's speed round through the next ones here. Tesla, how'd it go, Dan? Should we care again?

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Daniel Newman: You know, Tesla's number was fine. The revenue was recorded, but some of it was pulled forward from the tax breaks. The earnings weren't great, the profit was bad. They had like a billion dollars of income from energy, which is super cool. Like, people aren't talking about that. But look, the Tesla story is not about cars. I talked to Bloomberg about it. Yeah, the Tesla story is about robots and autonomy and people are basically betting. And I heard Jim Cramer say this the other day, that Tesla, I swear to God, he said this. Tesla and Nvidia are the two most important AI companies. Again, Jim's only right 47% of the time, according to Grok. So I'm not saying the point is, is that like, their story is never about cars anymore. It's just not. Their story is about building the future of autonomy, building the future of robotics and humanoids. It's about building energy and capacity. And then of course, you get the elon ecosystem of SpaceX and the boring company and Neuralink and all the other things he's doing by investing in Tesla. And by the way, we know what the upcoming shareholder vote is. There's a very real chance Tesla will be backing Xai or will be investing in Xai. So all this is kind of coming together into this amalgamation of a company that people really believe and they give an incredible forward valuation to because they just simply believe in him. He is a performant CEO. It's incredibly provocative, he's incredibly disruptive. And the print never is going to matter as much as the story. So you go back to what I said about Intel. You put Tesla, you put Elon Musk and make him the CEO of Intel. It's probably trading for 400 a share right now. It's just the Elon effect, the Halo effect. But overall, like I said, the car business is just okay.

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Patrick Moorhead: Yeah, a couple standouts for me. They did beat on revenue, which, I think, was a bit of a surprise.

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Daniel Newman: Record, but it was a little bit of that Pat was pulled forward for the tax breaks ending, I think.

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Patrick Moorhead: Yeah, yeah. Kind of like Apple and tariffs. Yeah. The storage thing really hit me, which I think the rising cost of energy makes, that makes a lot of sense. You know, Michael Dell's son Zach created a company called Base Power that is really leaning into the notion as well. So I'm interested to see how that plays. And then you've got Nvidia that made an investment into, I think it's called Sierra, which is essentially batteries for the data center. Such an exciting space. Hey, let's jump into SAP here. It was mixed, right? Missed on revenue, they beat on eps. Investors were concerned about cloud deceleration. Again, we've got no direct AI attribution. Some good metrics. In conversation about Juul and the preface to all enterprise AI is data, they talked about its business data platform. And I'm wondering about the cloud deceleration, I think they have 400,000 customers who haven't moved to the cloud. I'm wondering if these are these smallish SAP customers that will never get there or, or have we just hit a kind of peak cloud transition or is it just executions within their customers on these transformations?

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Daniel Newman: Yeah, I think that cloud growth is pretty good. I think I continue to say I want to hear and get a much more concrete number of AI's impact on revenue. That's what I want, that's what the market wants. They're a very conservative company. They've got very stable revenues and customers, they've got some stable margins. You could see that with less revenues they could still deliver the earnings. But as a whole this is a company that's touting, you know, being kind of the future of business and enterprise AI. They are in that small group with IBM and Oracle, you know, and then some of the bigger SaaS, companies like ServiceNow and Salesforce, that they really have the chance to be the meaningful contributor survivors of this next wave of enterprise software. I think the more they can help people understand how AI is shaping that, the, the more benefit of the doubt they're going to get from the market. But having said that, sometimes when they're not talking about it's because they're not ready, the impact may not be there yet and at least not be there in a way they can specify.

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Patrick Moorhead: Yeah, hey, let's close at the show here by talking about T Mobile. A lot of stuff is going on there. You know, typically when you have a leadership transition like we see at the CEO level, Chief strategy Officer, we've got, you know, Cali is moving on and they're bringing in a new head of, of the business. But they did really well, right? A really good operational beat records bigger than anybody on postpaid phone. Fwa. So you know, and the only question was capex, is it strategic or is it, or is it tactical?

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Daniel Newman: But it's all Nvidia. Right.

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Patrick Moorhead: Sorry.

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Daniel Newman: I'm joking.

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Patrick Moorhead: Yeah, no, and I'm just curious to see, you know, what's really going on. Why, why all these, why all these changes? You know, I mean they're, they're doing pretty well.

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Daniel Newman: Yeah, I mean the results were good. They beat, you know, they had strong guidance into the future. So Pat, I mean look, this is a very stable business, stable company. But yeah, they've had another CEO changed, but they seem to do that every, every handful of years. So that'll be one of the things.

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Patrick Moorhead: You have to watch for sure. Folks, thanks for tuning in. Appreciate you, appreciate this community. Hit Dan and I up on X. We spend way too much time on it. Hit that subscribe button. Tell your friends, tell your family, tell your pets all about the show. Take care. We love you guys.

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