Moor Insights & Strategy Two-Week Update ending September 1, 2022

By Patrick Moorhead - September 2, 2022

I hope you all had a great couple of weeks.

Last week, I attended advisory meetings in Seattle and Zoom’s analyst day in San Jose. Steve attended Hot Chips. This week, I attended AMD’s in-person Ryzen 7000 desktop event with Anshel and several from our team virtually attended VMware Explore (Matt, Steve, Will, me).

Over the last two weeks, our MI&S team published 46 deliverables:

14 (Forbes or eWEEK) insight columns
10 MI&S blogs
19 podcasts
3 research papers

The press quoted us with 22 citations. Journalists wanted to hear about AMD, ARM, Broadcom, Fintech, HP, HPE, Intel, Lattice, Netapp, Nutanix, NVIDIA, Samsung, VMware, and Xiaomi.

MIS Quick Insights:

A.I./Machine Learning (Paul Smith-Goodson)

Important: NVIDIA ordered to halt sales to China and Russia
The US government ordered NVIDIA and AMD to stop exporting high-performance AI chips to China and Russia. NVIDIA doesn't sell products to Russia, but for the 3rd quarter, NVIDIA expected $400 million in potential sales to China.
The order covered the A100 and the new H100, DGX, or any systems with A100 or H100. The A100X and any future NVIDIA integrated circuit with I/O performance equal to or greater than thresholds equivalent to the A100 are included.
The reason given by the government is there is a risk the products could be diverted to a ‘military end use’ or ‘military end user’ in China and Russia.
According to government statistics, U.S. goods and services trade with China totaled an estimated $615.2 billion in 2020. Exports were $164.9 billion; imports were $450.4 billion. The U.S. goods and services trade deficit with China was $285.5 billion in 2020.
Of course, we can expect retaliation from China in some form.

AR/VR (Anshel Sag)

Snap’s 20% layoff is a big step backward for Snap and AR, as the company was one of the biggest trailblazers in the augmented reality space. The good thing is that many of these employees will hopefully find jobs elsewhere in the ecosystem, as many are among some of the best.
Apple is expected to use Reality as the core of its XR branding for its various products within the XR space, which I believe is a smart marketing move for the company and will likely see others follow suit or struggle to mimic.

Carrier/Wireless

I recently spent time with the city of Peach Tree Corners in Georgia. City leaders have taken an innovative approach to creating a living lab serving as a test bed for autonomous use cases and innovative IoT solutions that leverage the power of 5G. I will be capturing my insights in an upcoming Forbes article but suffice it to say; it is a model for other cities such as Austin and San Jose that are tech hubs.

Datacenter:

Storage- (Steve McDowell)
- Pure Storage is on-fire, beating analyst estimates and delivered 30% year-on-year growth, delivering a $646M Q2. That’s outstanding in a market where NetApp grew 9%, Dell’s storage business 6%, and HPE saw declines. There’s nothing wrong with those other vendor’s businesses. They’re tracking the overall enterprise market. Pure is growing revenue from recent successful expansion bets, seeing revenue from its low-end QLC-flash-based FlashArray//C and it’s new higher end offering. It’s also starting to see real benefit from its PortWorx acquisition, and investments in its as-a-service offerings are paying off.
- Dell is taking advantage of new V major updates announced by VMware to both its vShere and VSAN offerings at this past week’s VMware Explore event. vSphere 8 formalizes support for running hypervisor, networking, security, and, more critically, storage processing on DPUs (such as Nvidia’s BlueFIeld-2 devices). Dell has new VxRail configurations that will be shipping with Nvidia’s DPU technology “very soon”, as will certain upcoming Dell PowerEdge servers. vxRail also supporting VMware’s new vSAN 8 Enterprise Storage Architecture, with simplified storage for HCI and an up to 4X performance improvement with its new support for NVMe. A lot of nerdy technology here, but IT administrators will see real-world benefit from it all.
- CXL is all the rage, with the new interconnect and pooling technology dominating the recent Flash Memory Summit. It’s for good reason: CXL enables smart disaggregation. Astera Labs this week became the first to deliver CXL silicon for memory pooling, which essentially allows a pool of DRAM to be intelligently shared between multiple servers. Astera isn’t waiting for CXL 2.0. Its Leo solution runs on CXL 1.1, and runs best attached to certain AMD EPYC processors, which support some CXL 2.0 features today as part of their 1.1 implementation. This will be a huge benefit for hyperscalers in particular, as they’ll see very real cost savings. The disruption of system architecture enabled by CXL is just getting started.
Networking- (Will Townsend)
- It is widely speculated that the global network device industry may reach $40B within the next five years. I believe that much of the growth will come in the form of IoT sensors and related devices used in manufacturing. The market size estimate could be conservative given the United States' focus on bringing back offshore operations and planned investment in semiconductor fabrication plants.
Server- (Matt Kimball)
- Earnings from HPE, Pure, and Nutanix this week endcapped a strong quarter overall for the IT solutions market. All server vendors showed strong performance, indicating enterprise spending continues despite the economic uncertainty. HPE and Nutanix show that the transformations each company has undertaken are showing significant progress. Nutanix subscription revenue growth of 27% Y/Y was quite impressive. And HPE’s continued growth in the as-a-Service space shows the company executing against a strategy that is setting the company up well for competitiveness in the future state of the datacenter. Are these green shoots a result of companies spending ahead of anticipated budget reductions? The downward revision on outlooks perhaps indicates this to be the case.
- VMware’s Aria announcement is another example of the company’s ability to maintain relevance in this ever-evolving datacenter market. While bespoke offerings continue to flood the market, VMware is enabling enterprise IT organizations that single pane of glass functionality to manage their environments – from legacy virtualized infrastructure to the multiple clouds to which they deploy apps and data and consume services. Multi-cloud management is hard, but VMware is taking the right approach. And its depth of experience in the enterprise datacenter enables it to address the real-world challenges IT organizations face daily.
- Will OT and IT ever fully integrate? Or are the OT systems that drive our factories, power plants, and water treatment facilities too specialized and too “industrial” for IT organizations to fully support? Talking with several companies in the industrial edge space, I am increasingly skeptical that IT organizations will fully absorb these functions. Instead, I believe IT will view industrial edge as a customer who requires services (data analytics, etc..), and a specialized function will be formed to bridge the gap between the two. Air gapping security and connectivity, deploying analytics platforms that can ingest various data types from machines, pumps, etc.. – this is the growth opportunity. IT solutions vendors should spend more time talking with non-customers and non-IT professionals to understand these (sometimes company-specific) requirements better.
- Conversely, while there is a lot of hype around the growth of edge computing, we see a reclassification of what used to be called RoBo. IT organizations have long supported kiosks, retail, and the like. While the workloads and underlying infrastructure may have changed, IT muscle memory makes the additions of many IoT devices and sensors more familiar.

FinTech (Melody Brue)

Affirm, the buy now, pay later (BNPL) company reported FYQ4 earnings at a loss of 65 cents a share, beating revenue expectations by just under $10M. However, the company issued a downbeat outlook for the current quarter, citing economic conditions and a return to pre-pandemic e-commerce levels. During the reporting, the company said its total number of active consumers jumped 96% year-over-year to 14 million, with the number of transactions per active consumer at three, a more than 30% increase. While reacting to Wall Street, the company is doing a dance appeasing investors with language around tightening up controls on delinquencies while also beating the “honest financial products” drum. Meanwhile, it doesn’t seem like the customer is first here. The company would likely please both customers and investors with a product offering that puts consumers in a better financial position, in more control of their payments, and able to build credit and level up to additional loans rather than allowing for multiple loans with high delinquency rates and respond with tighter controls when Wall Street isn’t responding favorably. Usage of BNPL isn’t lessening; active users are increasing and spending more, so addressing the delinquency problem should be closer to the top of the funnel, not once a consumer is already in financial trouble. 1.2 California's legislature is in the process of approving a bill requiring businesses that offer crypto services to get a license similar to the New York licensing law. The state Senate and the state Assembly approved the bill this week. If signed into law by Gov. Gavin Newsom, it would mark California’s move toward stricter regulation of the crypto industry in the state. Coinbase and Ripple are among the major players with deep roots in California. While I'm in favor of regulation around crypto and consumer protections - which recent events in the space have highlighted the need for -- this bill could end up pushing some companies, and their talent and tax revenue, out of state, depending on how heavy the lift is to get licensed and the timeframe and expense of retroactively licensing. It could potentially hamper innovation in the state if the regulatory and monetary cost of operating a crypto business there is too onerous. Under the proposed bill, current crypto companies would be operating illegally in the state until licensed - the timeframe and resources of which to do so on both the company and legislative side are unclear. Legislature in the state needs to balance consumer protection and continual innovation.

IIoT and IoT (Bill Curtis)

In the wake of last week’s end-of-life announcement for Google IoT Core, many IoT solution architects are now rethinking the role of all-encompassing “horizontal” device-to-cloud frameworks. Like waking up from a nice dream, the reality of diverse, complicated IoT solutions replaces the fantasy of complete, end-to-end, off-the-shelf software and services. More architects now realize that tight coupling between the many layers of IoT solutions results in rigid software structures that are difficult to customize for specific application requirements. These costs are almost always much greater than the savings of using pre-integrated end-to-end frameworks. In Google’s words, “Since launching IoT Core, it has become clear that our customers' needs could be better served by our network of partners specializing in IoT applications and services.” Welcome to the unbundled, plug-and-play future of the IoT.
Semtech’s $1.2 billion acquisition of Sierra Wireless signals a truce in the 5G vs. LPWan battle – and perhaps the war's end. Cellular and LPWan are complementary, not competitive. LoRa and LoRaWAN have always suffered from market confusion regarding how to utilize the technology in various real-world situations. Wireless metering is a no-brainer, but LPWan is also an excellent solution for many other industrial applications. I expect Semtech to provide simple, off-the-shelf design patterns and solution bundles combining LoRa’s low power and long-range benefits with cellular’s bandwidth and coverage advantages.

Personal Computing/ Collaboration (Anshel Sag)

AMD’s Ryzen 7000 series looks to be one of the biggest leaps in the company’s CPU performance for high-end desktops in a very long time, thanks to a multitude of innovations that enable on average 13% IPC improvement as well as up to 800 MHz in clock speed increases.
Arm has sued Qualcomm, claiming that it infringed upon a license that it claims lapsed in March when it acquired Nuvia. This will not benefit either company and will only accelerate the adoption of RISC-V while competitors like Intel, AMD, and Apple get to watch.
T-Mobile has rolled out an application that leverages many new phones’ eSIM capabilities to make switching to T-Mobile even easier, so much easier that users will never have to enter a store, and they will get three months of service for free. This is a brilliant move by T-Mobile to continuously remove pain points in the wireless experience to accelerate its user growth numbers.
The 2.5 GHz auction, as expected, has only closed at 428 million dollars, which means that not many bidders participated against T-Mobile in these auctions. T-Mobile is expected to be the primary bidder for most of the 8,000 licenses, primarily in rural areas.
Reliance Jio, India’s biggest cellular operator, expects to have the majority of its new 5G Standalone network deployed by the end of next year, which is among one of the most ambitious rollout goals I have ever seen by any carrier. It has access to many different spectrum bands, so it remains to be seen what kind of speeds and coverage users will get, but it will be a huge undertaking and will open India as a market for 5G OEMs and service providers.

Quantum Computing (Paul Smith-Goodson)

Interestingly, a research team from UCLA and Harvard has developed a new technology for building quantum computers. It is based on using parts of oxygen and calcium molecules to form functional groups that can be attached to other molecules or surfaces to build qubits. The researchers believe these functional group qubits can be scaled up by attaching them to longer molecules.
- The process appears quite complex, and I believe it will likely take a decade or more of research to produce a useful product. While unique and interesting, it is also possible the technology may not be useful.
- Up until now, Baidu has primarily been an AI company. This week it made a big splash with an announcement it had developed a superconducting quantum machine, declaring that it is the world's first with fully integrated hardware, software, and applications. It also "provides access to various quantum chips via mobile app, PC, and cloud." This is nothing new. We already have cloud access for most of the existing quantum computers, and the qubit count on the Baidu machine is nothing to brag about at 10 qubits and a 36 qubit quantum computer being developed. IBM quantum already has 127 qubits available 433 qubits expected to be released by the end of this year, and an 1100 qubit machine in 2023.
  - Baidu's 10 qubits are not very impressive.

Retail Tech (Melody Brue)

Amazon has rolled out its Customer Order and Network Density Optimizer (Condor) algorithm and expects its new delivery method will help it avoid millions of miles driven this year after deploying it across the U.S. The algorithm assesses the most efficient shipping options for customer orders before they leave a fulfillment center. A pilot began in a few Amazon delivery stations in January before going live nationwide. The company plans to roll it out in other countries in the next few months. UPS and FedEx are also optimizing for miles driven to reduce carbon emissions from fuel and keep fuel costs lower. However, those programs do not appear to optimize as much for speed. Amazon’s aim here is to enable carriers to deliver more packages to more customers on time. UPS’s pilot involves holding packages as long as the service agreement allows until it can match them with another delivery to the same area. At the same time, FedEx consolidates Express and Ground routes. While e-commerce may not return to the height of the pandemic, high gas prices, inflation, and a focus on sustainability for consumers and retailers make this an attractive reason to shop online.

Security (Will Townsend)

Various federal government spending bills are circulating our nation’s capital halls. Collectively, they add up to nearly $16B. That is astounding, but it will take more than throwing money at cyber threats. The Cyber Security and Infrastructure Security Agency (CISA) will need to enlist the support of industry advisors to formulate an effective defense strategy.

Space (Paul Smith-Goodson)

Podcasts:

The G2 on 5G by Moor Insights & Strategy, with Anshel Sag and Will Townsend

DataCentric Podcast by Moor Insights & Strategy, with Matt Kimball and Steve McDowell

The Six-Five Podcast by Moor Insights & Strategy and Futurum Research, with Patrick Moorhead and Daniel Newman

Moor Insights & Strategy Podcast

Press Citations:

AMD / CNET https://www.cnet.com/tech/computing/amds-ryzen-7000-brings-29-speed-boost-to-high-end-pcs/
ARM, Qualcomm / AndroidPolice https://www.androidpolice.com/arm-qualcomm-nuvia-lawsuit/amp/ (Anshel Sag)
Broadcom / QsStudy https://qsstudy.com/why-in-the-world-would-chipmaker-broadcom-be-interested-in-vmware/
Fintech / Protocol https://www.protocol.com/newsletters/protocol-fintech/california-new-york-crypto-license (Melody Brue)
HP / Ones.Software https://ones.software/blog/2022/08/30/hp-strengthen-industry-opportunity-in-hybrid-work-solutions/
HP / SeekingAlpha https://seekingalpha.com/news/3877422-hp-dips-even-as-it-announces-it-has-closed-its-poly-acquisition ‘
HP, Poly / UCToday https://www.uctoday.com/unified-communications/a-historic-day-as-hp-completes-poly-acquisition/
HP, Poly / Dailyhostnews https://www.dailyhostnews.com/hp-completes-its-deal-with-poly
HP, Poly / Ravepubs https://www.ravepubs.com/hp-completes-acquisition-of-poly/
HP / Santacruzworks.org https://www.santacruzworks.org/news/hp-inc-finalizes-acquisition-of-poly
HPE / ItCorporate https://itcorporate.com/Resource/Detail/46084
Intel, NVIDIA, AMD / Worldtimestoday https://worldtimetodays.com/intel-challenges-nvidia-and-amd-with-a-trio-of-workstation-gpus-the-register/ (Anshel Sag)
Lattice / Businesswire https://www.businesswire.com/news/home/20220822005627/en/Lattice-to-Host-Virtual-Seminar-on-5G-Network-and-ORAN-Telecom-Security-Solutions-with-FPGAs
Lattice / NASDAQ https://www.nasdaq.com/press-release/lattice-to-host-virtual-seminar-on-5g-network-and-oran-telecom-security-solutions
Netapp / Siliconangle https://siliconangle.com/2022/08/24/netapp-shares-rise-earnings-beat-strong-outlook/ (Steve McDowell)
Nutanix, Pure Storage / SiliconAngle https://siliconangle.com/2022/08/31/nutanix-pure-storage-surprise-wall-street-solid-earnings-sending-stocks-higher/ (Steve McDowell)
NVIDIA / Fierceelectronics https://www.fierceelectronics.com/sensors/nvidia-ceo-cites-supply-chain-woes-we-will-get-through
NVIDIA / Siliconangle https://siliconangle.com/2022/08/24/nvidias-stock-falls-lower-gaming-sales-drag-revenue-guidance/
NVIDIA / TechDemand.io https://www.techdemand.io/news/it-infra-news/networking-news/nvidias-stocks-drop-revenue-forecast-falls-short/
Samsung / AndroidCentral https://www.androidcentral.com/phones/forget-galaxy-s-vs-note-samsung-future-flip-vs-fold(Anshel Sag)
Samsung / AndroidCentral https://www.androidcentral.com/phones/choosing-motorola-razr-2022-over-galaxy-z-flip-4(Anshel Sag)
VMWare / DataCenterKnowledge https://www.datacenterknowledge.com/companies/vmware-s-aria-manages-multi-cloud-single-pane (Matt Kimball)
Xiaomi / Fierceelectronics https://www.fierceelectronics.com/sensors/xiaomi-sales-fall-20-victim-weak-electronics-market

Company:

New Gear or Software We are Using and Testing that is Public Knowledge

Dell 1080P camera
HP Dragonfly G3
Samsung Watch, Fold, Flip
Valve Steam Deck

Events MI&S Plans on Attending In-Person or Virtually (New)

September
- Arm webinar, Sept 7 (Matt Kimball)
- PBC Conference, Washington DC, September 7-8 (Melody Brue)
- FinnovateFall, NYC, September 13-14 (Melody Brue)
- CyberSaint Stronger Conference, Sept 13-15 (Matt Kimball)
- IBM Z Day, Sept 15 (Steve McDowell)
- ITS World Congress, Sept 18-22, Los Angeles (Steve McDowell)
- NVIDIA GTC, Sept 19-22 (Anshel Sag, Matt Kimball, Paul Smith-Goodson)
- Intel Innovation, San Jose, Sept 26-28 (Anshel Sag, Matt Kimball, Steve McDowell, Pat Moorhead)
- Quantum Open House Event, Boulder, Sep 28 (Paul Smith-Goodson, Pat Moorhead)
- SNIA Storage Developer Conference, San Jose, Sept 28-29 (Steve McDowell)
- SuiteWorld, Las Vegas, Sep 29 (Pat Moorhead)
- MWC Americas – Las Vegas, September 29-30 (Will Townsend, Pat Moorhead)
October
- Google Cloud Next, NYC, October 11 (Patrick Moorhead)
- Cloudera event, NYC, October 12 (Patrick Moorhead)
- Dell Technologies Summit, online, Oct 12 (Matt Kimball)
- Scheider Innovation Summit, Las Vegas, October 12-13 (Steve McDowell)
- T-Mobile analyst summit, Seattle, October 13-14 (Patrick Moorhead)
- Oracle Cloud World, Las Vegas, October 16 (Matt Kimball, Patrick Moorhead, Steve McDowell)
- Open Compute Global Summit, October 18-20 (Matt Kimball, Steve McDowell)
- 5G Americas Analyst Forum – Dallas, October 19-20 (Anshel Sag, Will Townsend)
- Austin GP, Austin, October 21-24 (Patrick Moorhead)
- Lenovo IDG IAC, NYC, October 24-27 (Patrick Moorhead)
- ARM DevSummit, San Francisco, October 25-27 (Steve McDowell)
November
- Total Telecom Congress – London, November 1-2 (Will Townsend)
- Supercomputing, Dallas, November 14 (Patrick Moorhead)
- Qualcomm Tech Summit, Maui, November 15-17 (Patrick Moorhead)
- AWS re:Invent, Las Vegas, Nov 28-Dec 1 (Matt Kimball, Patrick Moorhead)
- 5G Techritory – Riga, November 29-December 1 (Will Townsend)
December
- Event, San Jose, December 5 (Patrick Moorhead)
- Marvell Analyst Day, Santa Clara, December 7 (Patrick Moorhead)
- Palo Alto Ignite – Las Vegas, December 12-15 (Steve McDowell, Will Townsend)
January
- CES 2023, Las Vegas, January 5-7 (Patrick Moorhead)

The Team

Analysts, Analysts In-Residence, Contributors

Patrick Moorhead, Founder, CEO, Chief Analyst; Broad technology coverage plus deep insights into Cloud & SaaS, Personal Computing, Semiconductors, Automotive
Bill Curtis, Analyst In-Residence, IIoT, and Deep IoT Technology
Matt Kimball, Principal Analyst, Datacenter Servers, CI, and HCI
Melody Brue, Principal Analyst, Financial Tech
Steve McDowell, Principal Analyst, Datacenter Storage, and Storage Technologies
Anshel Sag, Principal Analyst; VR, PC Gaming, Mobile Platforms
Paul Smith-Goodson, Principal Analyst; Machine Learning, A.I. and Quantum Computing
Will Townsend, Principal Analyst; Security, Carrier Services, Networking
Chris Wilder, Contributor, Security

Operations

Dan Pickens, Business Director
Paula Moorhead, Marketing Director, Website, and Social Media
Walker Pickens, Media Relations, and Writer
Zane Pickett, Office Manager, AP, AR, travel, writer
Lee LeClercq Williams, Business Associate
Nigel Church, Business Associate, Writer, Editor
Jacob Freyman, Writer, and Researcher
Connor Kenyon, Six Five Sales & Business Development

Patrick Moorhead

+ posts

Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights) in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.