Talking IBM & Albany NanoTech, Google Cloud, Intel, Oracle, Adobe, Plus AI

By Patrick Moorhead - December 15, 2023

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

  1. IBM and Albany NanoTech High-EUV
  2. Google Cloud AI Announcements
  3. Intel AI Event
  4. Oracle Q2 FY2024 Earnings
  5. Plus AI Updates
  6. Adobe Q4 2023 Earnings; CMA Shows Up 18 Months

For a deeper dive into each topic, please click on the links above.

Watch the episode here:

Listen to the episode on your favorite streaming platform:

Disclaimer: The Six Five Webcast 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.

Transcript:

Patrick Moorhead: Hey, The Six Five is back for our Friday episode. Dan and I are somewhat rested. I’m actually very rested. Didn’t travel at all this week. It’s amazing how it puts on that body. But Dan, you’re looking great. I think you did like three cities, two hours sleep, maybe feeling a little bit sick. I mean, what’s up dude, you look great though. Those guns are just popping in my face. I went anti-guns trying to hide my arms, but yours are just popping.

Daniel Newman: Oh buddy, thank you. Friday morning, favorite hour of the week. Every single week, every time we do it. Only weeks I don’t like are the weeks we don’t do our Friday show, Pat. Listen, I’m feeling more rested. I did get a little sick this week. I had to cancel a couple of in-persons this morning because I’d set up a 6:00 AM breakfast coming back yesterday and I had to cancel it because I actually needed to sleep, which is weird. Everyone out there, what did you send me a picture of an Android? I swear there are elements of me that are human in case you were worried. But no, I mean big week. I flew to beautiful northeast Ohio Pat, which you would know Hudson, Ohio. You know where that is? Hudson?

Patrick Moorhead: I know exactly where that is. Absolutely. That’s the really nice area.

Daniel Newman: That’s Goodyear. That’s right near Goodyear. And by the way, it’s also the Home of Tech Field Day in Gestalt It, which is the Futurum Group’s latest acquisition. Want to welcome Stephen Foskett and his awesome team to the Futurum Group. And by the way, The Six Five will be collaborating with Tech Field Day. So don’t worry, this will be good for Pat too because as Pat, you so famously like to ask, what’s in it for me?

And so there’s something in it for you more to come on that. But no, listen, I went to New York Intel. You were there too. You just did it from your home, which by the way is my favorite way to do it as well. You know what? I do like to see people. I do like taking selfies. It’s one selfie equals one research report I don’t have to write. So if I do a selfie, I don’t write a research report. In case anyone’s wondering how I do it. That’s a joke. But in all serious, I actually think the traveling is over-rotated back. Too many live events, too much in-person time. And you can get so much value at your desk watching a live stream that I think I would argue you might even get more value because you can sit there and you can be more in the command center.

Patrick Moorhead: Yeah, I got to tell you, I feel more in command when I’m doing it from afar and these are the tricks we learned during the dark two and a half years. But hey, we have a great show for you and really appreciate you tuning in. We’re going to be talking IBM and Albany NanoTech and their high EUV. We’re going to be talking Google Cloud AI announcements, which is related of course to the consumer version that they brought out last week. We’re going to talk about the Intel AI event that Dan and I talked about before, Oracle had Q2 earnings. We’re going to talk about a company that we haven’t talked about for a while. A very exciting automated trucking technology company called Plus.ai. And then Dan’s going to wrap it up talking about Adobe Q4 earnings. So in full spirits, I’m going to come in and tag myself.

Daniel Newman: Pat’s going to do the most Pat thing ever.

Patrick Moorhead: I know. Our production crew needs to know to spread this stuff out, but they didn’t.

Daniel Newman: I don’t want to say anything to the world. Pat may seem like Pat loves Pat, but Pat is a gentle teddy bear of a human being and one of my best friends.

Patrick Moorhead: That’s so nice of you. And by the way, the what’s in it for me comes right from succession. Dan and I have joked about it.

Daniel Newman: Not about you, but…

Patrick Moorhead: But it’s kind of about me. But hey, what did IBM and Albany Nano, so let me step back real quick. So most of you probably know IBM as an enterprise solution provider powerhouse. They have the full stack going all the way from quite frankly, the deepest, the hardest type of science that relates to semiconductors up through full solutions and services for Fortune 500 enterprises and big governments. They are an absolute leader in the science of what it takes to do next generation semiconductors. And you may be like, well, wait a second, Pat, it’s not the name that I think of. Well, companies like Intel, Samsung, Micron, all license technology and have collaborations with IBM. And in fact, when I was an executive at AMD, we collaborated with them on a new substrate like Silicon Insulator and new interconnects that were copper versus lead.

So what they’re doing in this announcement is they essentially rejoined forces with Albany NanoTech. And Dan, you and I visited that facility this year, it’s truly awesome. And think of this as a campus with the right scientists and the right machines to do this type of technology. And whatever intellectual property that the companies put in that they get out. But this arrangement was specifically around a 10 billion dollar investment into what’s called high-NA EUV. So we know what EUV is. Essentially, think of it as a two-story laser beam that does the etches on the wafer, which is just amazing. Because I don’t know how it works, but essentially adjoins atoms in the air and the laser spreads out what needs to be etched on the wafer. It is truly an incredible thing. So now we’re in this, again quote unquote two nanometers. And by the way, there’s not a single circuit that has a gate length of two nanometer, but that’s what we’re calling it now as the industry gets even harder.

So it’s not just EUV that you need, it’s high-EUV and with high-EUV you get more definition to make the circuits smaller. And I think the theory is is that you have to have less passes of the EUV laser in order to do the etching. So the partners in this one were IBM, Micron, Applied Materials, and Tokyo Electron. So what we’re going to see here is technology that gets created, and then slowly gets moved into production, licensed by companies using this technology. And you can do design, you can take something, this isn’t for high volume manufacturing. This doesn’t compete with TSMC and this doesn’t compete with let’s say the Columbus installation that Intel puts in, but it’s a great proof point on showing essentially another example of IBM’s full stack capability.

Daniel Newman: Yeah, Pat, and by the way, everybody should read the link. There’s a lot here. And Pat, you and I have a lot of semiconductor conversations with the Leading Business Press, Tech Press because of the expertise that our collective firms bring, but this stuff does get pretty geeky. What I hear here, by the way, and they say is there any hear here is that this is another example of IBM continuing to invest substantially and show leadership in the marketplace. As we move to these lower and lower numerical transistor, different numbers, two nanometer, 20 inch, from 18, you’re going to go down and down and down. And by the way, there’s really only a couple of companies in the world that are going to be enablers here.

So one of the things you like to always talk about, Pat, is kind of the research and development, the difference of R and D. There aren’t that many companies doing the kind of research that needs to be done, but for us to really get to the nano level of what’s going to be the future for continued efficiency and power gains, we need more investment in the research. And by the way, in case anybody’s wondering, the ability for the US and for Ally nations to stay on top of win the world’s economically defense-wise, security and privacy-wise is going to depend on us continuing to maintain leadership in process technology.

So we’ll talk about that more when we talk about Intel later. We’ll be talking about it here, there aren’t very many companies making these kinds of investments. This is a very important collective of companies that are coming together. And of course, this is another example, like I said, of where IBM, although they don’t get a lot of credit for being a semi company is doing a lot of really important things. And by the way, when you saw announcements like two nanometer, what? A year ago, two years ago now? I’m trying to remember. It feels like we did it on the show. Did we do it on the show?

Patrick Moorhead: Yeah, we did. Yeah. IBM had an announcement of them doing a two nanometer SRAM.

Daniel Newman: Yeah, I love that you quoted it. But anyways, with what is going on with EUV, what is going on with process node advancement, what is going on with the need to create next generation nodes and of course to gain and lead economic worldwide. And Pat, one more thing, I just want to say this in case anybody wondered, semiconductors will heat the world. I said that first in 2019 on MarketWatch. Sorry, it was important that I got that in on this show. Pat, I think it’s important that you spend the rest of the day finding an older published article where you said that, otherwise I will take claim to this.

Patrick Moorhead: I already fired up all my resources, Dan, like all 30 just to find this. So it’s a great use of my company resources.

Daniel Newman: As our show continues to get better, you’re going to start to see the onion of Patrick and my relationship exposed throughout these various topics. But anyways, good on IBM. It’s good to see these groups coming together, important work on the research side and we will probably hear more about this in the coming year.

Patrick Moorhead: Yeah. So let’s move to the next topic, and that is Google Cloud’s AI announcement, and no, it’s Google Cloud, not Google, because we did see some announcements on the prior week about Gemini and stuff like that, but what did Thomas Kurian have to say that was incremental here?

Daniel Newman: Well, it’s really about the integrations. What we heard about a week ago was Gemini, what we heard about this week is how it’s going to be used in Vertex Pat. How it’s going to be part of Google AI Studio, which is basically the enabler for people to be building on Google Cloud using Gemini. We’re hearing about this. You kind of just go through the last year, you’ve heard about Azure Cloud services with OpenAI. You’ve heard about everything that AWS is doing with their offerings, and very much an open approach. Well, Google is very centric to its models. Google’s approach was always about building a full stack capability, and this week he was basically focused on the integrations and being seen as clearly caught up in the market to OpenAI. By the way, are you flashing those up there?

Patrick Moorhead: Yeah, yeah. We’ve got some people coming in from Twitter. We’ve got some people coming in from LinkedIn just to say hi. That’s all. Hello, thanks for joining.

Daniel Newman: You hadn’t done that in the past. Our producers are getting cooler and cooler as it goes on.

Patrick Moorhead: Dan, we keep adding capabilities to the Six Five. And who knows, we might go live at CES 2024. Oh, we are. Okay.

Daniel Newman: So let’s kind of run this back. You’ve got AI HyperComputer, which is going to be a train and serve generative AI models. You’ve got generative AI support and Vertex with Gemini now. You do have, what I did like by the way, is I did talk about how they’re building this conducive all Google, but you did hear them talk about also being open. And this is something I think is very important. They mentioned anthropic, they mentioned Cohere. The company did do a good job. I thought yesterday, was it yesterday? It was two days ago. Thomas did mention customers, which to me is always very important that are going to be building and engaging and utilizing the overall Google Cloud stack. Pat, I did say something earlier, it was interesting. I heard the same stat from two company about unicorns. Google, 80% of unicorns are building in Google Cloud.

Ironically, 80% of unicorns are also building in the US. By the way, if there’s ever been a proof point for multi-cloud, do you not feel like that was the ultimate proof point is the answer is probably yes. You have 80% of unicorns are using multi-cloud. So what else? You have Duet Pat. So Duet, the assistant AI agents were announced. So you go up and down the stack, it really felt to me like an extension, not anything so much new, and I’d love to get your take on this Pat, but everything we heard from Thomas was my expectation, meaning the first week was about Google holistically coming to market and saying, “Here’s what we’re building as an LLM, here’s our strategy, here’s our silicon.” You and I have put some thoughts on, you wrote a great tweet on the TPU 5, doing comparatives. But overall what I expect now, it has to make its way over into the sandbox, and Google Cloud is the sandbox.

If you’re a company and you want to build applications and develop capabilities using generative AI, they have to make these models available and accessible and easy to use. So that’s really what Thomas was focused on, in my opinion, Pat. So it was more of an extension to me of the news than it was necessarily anything new. I don’t know. What did you think? Did you think it was, I guess let me ask you that. Was there anything surprising to you? To me, this all felt very expected, but I was happy to see how quickly they moved to make these things available in Google Cloud.

Patrick Moorhead: So most of this was to be expected. I did appreciate Google Cloud CEO, Thomas Kurian doing a live Q and A with the analysts. I showed up late, but I was appreciative of the time he spent. I thought it was time well spent because quite frankly, I’ll call it the consumer version of Gemini that came out didn’t land very well. There were some really good things about it. I mean, quite frankly, they’re talking about a future service that’s 25% better than what’s already in market with GPT-4. And there were some questions about the demos and the duck, the Blue Duck. I mean I think that’s what it was. And so it didn’t land very well and it also didn’t seem like there was a lot of prep time for press and analysts running up.

Daniel Newman: We talked about this last week. I think it’s actually important. What is the openness in the world to companies showing capabilities versus what’s expected? Is there any longer an acceptance Pat for companies to sort of do those, we’re in this world now where everybody’s pulling apart the threads on everything. And companies used to, I remember 20 years ago in the tech industry, there was someone behind the curtain showing the devil of what was coming. And now it’s like, is there latitude for that?

Patrick Moorhead: So Dan, I think it’s context in history. If you remember what happened in the first Google Bard introduction, it was so bad that they pulled the video down on YouTube. I was trying to look for it, because was done out of France and it was on a different time zone and I couldn’t find it. They pulled it down it was so bad. So then I think people were on high alert, I mean Apple for example, has a decent track record showing demos of what’s going to be, and then the experience ends up being that. A little bit of scrutiny but not a lot.

So context in history came in. So I think everybody was on alert for this. And I think it’s super important always to show this. These big huge companies are getting away from disclaimers at the bottom of let’s say a video, and even a claim. And even Apple is very poor at this when it makes performance claims, it doesn’t actually disclaim in the video. It disclaims maybe on their website afterwards at the very bottom. So I do think that we haven’t shifted as an industry yet to some we don’t believe anything and we can’t show vision. I really think it’s context in history, but getting back-

Daniel Newman: Thanks for that. I was just really thinking, I didn’t mean to derail you, I just really wanted to, are we entering the era where we’re going to scrutinize every demo we see now? Or do you think to your point about context, is it because they botched that first one that now every demo they do is going to get a level of scrutiny? Because Apple, like you said, they get away with everything. Nobody asks anything. You and I are the only two good people on the planet that ask questions of what Apple shows.

Patrick Moorhead: Yeah, and I’m pretty sure that that was done by Google DeepMind, which is research which you would expect this long pull. So by the way, Dan, I do like going down these ancillary topics, related topics. I don’t think we should be completely programmed to where we can’t talk about something that we think our viewers are interested in. So this was the, oh by the way, all that stuff that you saw with Gemini and TPU 5, it is going to be available to enterprises too. Like you said with Vertex, with Duet. I think the important point that was that Google Cloud CEO Thomas Kurian came out and made that message because think about if you’re an enterprise user and you’re seeing the Blue Duck, you’re seeing all this stuff. I mean I think the first article showed up on Engadget, right? Wait a second, is this enterprise-grade technology or not, and how should I relate to it?

There was something very provocative that I just want to let you know I need to do more research on. But it was running data and AI anywhere, with essentially Google’s distributed cloud. Google’s distributed cloud is essentially a hybrid offering that runs on-prem at a data center, it runs at a colo. Again, I’m looking for the company that can give me a reasonable layer cake diagram of exactly how the pieces fit together, how on-prem, how Edge and how public cloud all fit together. So I need to do the double click, but essentially what I’m reading is is that they’re putting Xon, and by the way, Google Cloud was the original hybrid offering that the name escapes me. They got away-

Daniel Newman: Anthos.

Patrick Moorhead: Sorry?

Daniel Newman: Anthos.

Patrick Moorhead: Exactly. Thank you very much. But they’re putting Xons out there, I don’t think they’re putting TPU out there, but I need to do the double click on there. This reminds me a little bit of Oracle Cloud@Customer. You have one, two, three, four, five, six seven, eight different types of implementations. And by the way, six of them are new. Modular data center, scalable multi-rack, tactical appliance, HA multi-server, high available. So anyways, I needed to double click on that. I didn’t feel like there was a lot of time spent on that and I didn’t get pre-briefed. So I’m going to ask Matt and the team to dive in and see what’s going on there. Great pod buddy. You’re hitting on all cylinders. So hey, let’s go into the next event. And this is what I think some of our guests, our live guests is the Intel AI event. Dan, you attended onsite in New York City.

Daniel Newman: Got a great selfie, which that’s all I care about, right?

Patrick Moorhead: No, I know. I mean I’ve heard some people say that the best research is selfie research. So we did it.

Daniel Newman: Self-analysis.

Patrick Moorhead: Yeah, you can check out my runup. I had a conversation with Pat Gelsinger on the runup. You can read that article on Forbes and then I probably tweeted too much, but it was a very provocative event. And I haven’t done my summary, but let me kind of net out what they did. So they announced their first AIPC, which is the core ultra. They introduced fifth generation of Xeon, same power envelope, a lot more AI performance. And by the way, I feel like this fifth gen was the fourth gen that everybody wanted in the first place, but they had to get that fourth gen out. It was two years late, but very quickly following up with fifth gen.

So I think the AIPC, Dan is going to have three chapters in this year. First phase is going to be limited apps and spreading all the AI goodness across CPU/GPU in a smaller NPU. And then maybe toward the middle of the year we’re going to see these giant NPUs, more apps. The OS will likely take better advantage of it, easier for ISVs to target and characterize because it’s going to be a fixed amount of NPU tops. And that is dramatically easier to do than trying to size, literally in the Windows world, it could be 150 different configurations. Maybe there’s 1,500 different types of configurations that you need to fit in there. And then the third phase, which might be at the very end, might be into 2025 is where it’s all going to come together. So people really need to look at this as a continuum. Intel showed up with some pretty good tops across CPU, GPU and NPU. I think the NPU is like 11 or something like that. They had a couple videos of customers that were on stage.

And anyways, I think this is kind of the, I’ll call the beginning of shipping PCs for AI, and let’s move to fifth Gen Zon that San Rivera brought out. Big performance, big TCO claims, Signal 65 didn’t validate them yet. But those were some super big numbers and I liked the fact that Google Cloud, IBM and Zoom testimonials were super supportive. Final thing, Pat G. came out, snuck out a card of Goudy three and this essentially is going to do industrial grade data center AI training and inference.

It’s an ASIC, which means it’s not a GPU, which means it’s going to be higher efficient and higher performance for a set workload, but harder to program. And the program is built into a combination of the compiler and the API. But listen, it’s good to see Intel doing this. I’m going to hold my breath until 2025 until we see an AI-optimized GPU that people still think just by what they’re buying with Nvidia and now with AMD for the data center. So I don’t know. Intel is delivering on their promises. They’re not getting any credit for AI even though their stock has gone up 63% this year alone. But it’s good to see that the execution continues.

Daniel Newman: Yeah, I had a good chat with Pat Gelsinger yesterday, a small group of analysts, and one of the things I really like about Pat is that he’s confident in what he’s doing, but he’s also okay to admit where the company has gotten things wrong. And he talked about with the Alterra acquisition for a while because he’s obviously they’re spinning off the FPGA business and he basically said, “We got it all wrong.” And now we’re going to fix it and get it right. And the thing is is there’s an opportunity there. And while this has nothing to do with the event yesterday, but I just like a CEO that can say, “Here’s what we did wrong, and this is how we’re going to fix it.” Pat, I want to spend most of the time talking about the AIPC because we only have so much time, and I want to dive in a little bit and even have a bit more of a discussion on this with you.

But so the AIPC is probably one of the most hotly contested, exciting supercycle creators in the next 12 to 24 months. And yet it still seems that when you ask questions of executives about the AIPC, no one can really tell you what you’re going to be able to do with it yet. And I’m not saying running an LLM local, I get that, okay, everybody gets that, but how many times do you need to do that? And how many LLMs are you going to need to run at the same time? And how many of the people that are going to run four LLMs at one time to do some sort of crazy graphic rendering with content and context and versus the average knowledge worker that’s just inferencing on Salesforce or copilot on Microsoft. And so I know there’s this debate and of course in semis, Pat, by the way, this is why we built Signal 65 is because claims will need to be validated, but this first generation, Meteor Lake, AIPC, Pat Gelsinger. So he’s like, “Hey, you can go to B and H down the street today and buy this.”

Is that an AIPC or is it 10 top MPU with an AIPC? Does it need to be over 25? Is it 50? When does it become an AIPC? And what does this market outlook really look like and what is the compelling killer use case that is going to drive enterprises and then consumers in droves to the store to buy an AIPC? I get that AI is cool, I get that inferencing more locally is important. But I mean, by the way, this was a question that was being asked in the audience. Gelsinger gave a good example when he talked about a Zoom meeting where you could be literally real time transcribing and getting action items versus right now when you use a Zoom tool and it gives you the summary after, but there aren’t that many use cases yet that are really well understood.

And then so this point is this battle for tops. What are we winning as consumers? And how much more are we willing to pay to get from 10 to 20 and 20 to 40? I’m just asking the question right now because I also do believe that this is cool. So you have Apple and MD what, around 17 tops in what they’ve recently announced?

Patrick Moorhead: Yeah, I don’t have it on the tip of my tongue.

Daniel Newman: But I think that’s about what Apple announced in their M3 announcement, 30 minutes super announcement, which by the way totally fit my ADD, I think Lisa mentioned 17 on the new Ryzen. And obviously Intel’s first iteration’s at 10, right?

Patrick Moorhead: 11 NPU tops in total. Yeah.

Daniel Newman: Okay, 11. Why do I have 10 in my mind? Anyway, point is-

Patrick Moorhead: I’ve been saying 10 forever. I thought it was 10 and then I got the official word that it’s 11.

Daniel Newman: That’s a trillion extra operations per second. That does matter. You’ll have to talk to Shrout. By the way, we got to bring Shrout in on these conversations sometime. Ryan Shrout’s our president of Signal 65, which is our testing, validation, benchmarking services in case anybody needs that stuff because you do. Okay, so I’m going to pause here and kick this back to you. What I think companies need to do is actually tell us at 10 and at 20 and at 40, what does the experience look like? What changes? Because otherwise Intel’s in it, has a huge advantage because they have a product, it’s shipping in the market right now and they have the best distribution in the world for their silicon.

Patrick Moorhead: So the reason that everybody’s not talking about everything openly, quite frankly, is because they want to keep it secret about those future experiences. And that’s why ISVs and OSVs aren’t talking about it. And interestingly enough, they don’t want to strand and destroy the first half of sales. I mean it’s about as economic as that. And there’s still a lot of work to be done. The way that I like to explain this, Dan, is imagine doing everything that you can do today with the cloud inside a certain parameter model, but make it more performance. It’ll be faster because you’re not going up and down to the cloud. It’s going to be more secure. You’re not passing data up and down. It’s going to be a lot more private. When I think about, there’s an interesting company called Replay that operates on the Mac now it, operates in the public cloud, their cloud or whatever IS provider they use.

But essentially it’s taking snapshots of every single thing on the screen. And think about everything on your screen, every video, every phone call, everything that you really do on your PC and uploading that to the cloud, that’s going to be a hell of a lot of data. It’s going to be slow and there are some things we just don’t want to share. And if you’re an enterprise sharing all that data, I mean, I’d love to say that Microsoft 365, more companies are using that than standard, I’ll call it on-device, Microsoft 365 and Office 365. But it’s not. Big companies are still very reticent to share all that corporate data and send that to the cloud. And if I can do what I need to do with Microsoft 365 and not have to transmit that to Microsoft, I think customers are going to like that. And I think we already see elements of hybrid architecture with Office 365 where it actually determines what’s the best way to do this grammar check, what’s the best way to do this spell check based on the quality levers of that.

The industry’s calling that hybrid AI. It’s going to take a while to get there, but that’s where the ultimate happens, where you can have your cake, you eat it too, depending on your privacy settings, your security settings, and also connectivity. And quite frankly, compute. So long-winded answer to what you asked Dan, but I think that’s my answer right now.

Daniel Newman: Just because I seeded a little bit of my time. I’m going to make one comment and then we’ll get on. We’ve got a lot of ground left to cover, but I still think there’s Intel gains a marketable advantage by the industry holding back this as a secret because they’re getting distribution, they’re getting design, they’re getting into market, they’re basically getting to set the tone because the users will drive. And by the way, I still think there’s a big market here. Someone has to tell me why the number matters in terms of everyday use cases. Like I said, we’ve always understood workstations, I’ve always understood gaming, those kinds of things. People have always understood about the power and the performance requirements. But if I’m just a knowledge worker in Salesforce and Zoom and email and telling me why a doubling tops matters is going to be valuable to make sure that you can get people. Otherwise, it’s just iPhones, iPhone 15, iPhone 16, iPhone 17, and who cares? So anyways, all right, I seed my comments.

Patrick Moorhead: Yeah, not disagreeing. I completely agree. I just think people are keeping it secret right now and what we see with Meteor Lake today, I think it’s going to be important for people to look at the applications and how the experience is better. The reality is most of, I’ll call it if we’re using copilot, most of that is right now and even on Meteor Lake is going to be done through the cloud anyways. Hey, let’s move to the next topic. Gosh, we drained a lot of time on that very important event.

Daniel Newman: Yeah, these are quicker though. I think we’re going to move quicker the rest of the way.

Patrick Moorhead: Yeah. So Dan, how did Oracle do, they keep rocking here?

Daniel Newman: Well, if you consider a beating on top and a miss on bottom as rocking, then yes they rocked. But look, Oracle is one of the most steady, stable state companies on the planet. They are what I call the value, they’re the growth end of value. They’re a company that is growing in certain areas, but of course they’re so big and their overall growth tends to be pretty conservative. But they offer div, they offer growth, they offer innovation, but they also offer stability. And so they’ve had a really good year. They’re up high double digits. Let me see here. They were up about 41% year to date on their earnings day. So not a bad investment or return, but Pat, we don’t need to spend too much time geeking out on the fundamentals. Remember, this show is for information and entertainment purposes. We do not offer any stock advice. We’re just talking about earnings as the ground source of truth. They grew 5% year-on-year, 5% Pat. And we say this is about IBM, it’s like 5%’s just never going to get anyone super excited.

But, on the other hand, as our friend Jeff Ford, we like to say, they do have a 50% growth business right now in their Oracle infrastructure for the cloud. That’s really important. What I would say is the most important parts of the earnings and the most important parts to watch are three things, infrastructure growth, SaaS growth, AI growth. So infrastructure growth, OCI grew 50%. Now remember, everyone’s like, “Oh, that’s not that good.” Well the rest of clouds growing, the big cloud providers are growing like 10 to 25. So if we’re measuring I as the same, which we’re not, that would actually mean that they’re gaining market share at twice as fast as the rate of the fastest growth of the big three. Pretty good. On the SaaS end of things, they obviously have a big SaaS portfolio, so even I break that down further, but there are two hot products, Fusion, NetSuite, both still growing mid double digits. That’s good growth. The growth of NetSuite is faster than the growth of Salesforce, straight up. So that’s a good number.

Sorry, I just heard my echo. You have to basically look at that and say, okay, so their SaaS is growing quickly in the market against the rest of the players, so that’s pretty good too. And then the third part is AI. And this part’s a little more opaque to me Pat. So the company certainly seems to have strategy around AI, but what Salesforce, Microsoft and other big software companies have done better than Oracle so far is being able to talk about specifically how they’re monetizing AI. So for Oracle right now, they’re starting to add generative AI features across their portfolio. They certainly have been doing AI for some time. They have a massive data set. So you see a big opportunity for them to do AI, but I don’t fully understand their monetization strategy. So I think if you want to see the next big runup, the growth of cloud is good, the growth of SaaS is better.

And if they could start talking about monetization strategy on their AI, I think that would be really great for their company’s long-term growth prospects. But you did hear their actually chairman, I always want to call him the CEO, but Larry Ellis did mention he expects 50% plus growth per OCI for multiple years ahead. They have a huge migration portfolio of their customers, which they have their own in-house customer base to grow. So that’s part of the reason why this is going to happen. Lastly, and Pat, this was just a fun fact that I pulled out of one of the articles about him, but did you know that OCI, that Elon Musk is running XAI on OCI? Fun fact.

Patrick Moorhead: I had no idea. That is a fun fact. I thought Elon Musk was talking about this in-house supercomputer that he built and rolled out.

Daniel Newman: Sitting in OCI, I don’t know. That was part of the announcements though.

Patrick Moorhead: You done?

Daniel Newman: Yeah, you were talking over me, but I seated the floor to you.

Patrick Moorhead: Yeah, so this is the classic, this is the difference between the way a financial analyst or an equities analyst would look at something versus an industry analyst. I’m looking for percentage growth, I’m looking for quality of customers, and then how it looks toward the future. And like you said, with IS revenue where it’s at, which is incredible at 52%. And then I look at Fusion ERP and NetSuite ERP in the 20s still, and that hadn’t stopped and I think that’s pretty darn impressive what they were able to do even as SaaS growth rates declined, the overall cloud application SaaS revenue is down as a percentage on the peak, I think it was 30%. So if I back out ERP from overall SaaS, that must mean they have a little bit of softness maybe in CRM, in marketing, something like that. But still all in all really good. And that growth rate is eye-popping.

I get back to, I was a big critic of OCI Gen one, OCI Gen two was grounds up built from the bottom up, brand new, bare metal, and it’s really good. And their pricing structure for IAS is super unique as the less differentiated offerings are priced more competitively. And then as you add features, which you would expect, but there are other cloud plays IAS plays where that’s actual reversed. But overall from an industry analyst point of view, I thought they had a good quarter and they have a bright future. If this is the bottom, this is a pretty good bottom, really fricking good.

So hey, we’re going to change the topic completely to a company that does assisted trucking technology for safety all the way from, I’ll call it an L2+ all the way up to L4 Dan, and we haven’t talked about them lately. We had a great conversation with CEO David Liu, but it’s time to get them back on here because some really interesting stuff has happened. So first of all, plus divested all Chinese operations from let’s call it western operations. And what that does is I believe is it really opens them up for the opportunity without people like the TSA getting in the way that, oh, they’re our relationship with China and I think this is really good. We saw an announcement with Luminar for AI-based assisted driving software for trucking.

We saw an announcement for Iveco on public roads in Germany. But I think the big announcement where things really start to get real is when you start bringing plus, the company, Iveco, the transport company, and then an actual customer, which is basically a drug company in Germany. I speak German, I won’t go down that, I won’t impress you all, but essentially it’s a pilot program like a-

Daniel Newman: Come on. No, no, no. Do it. Do the rest of the segment in German.

Patrick Moorhead: [German 00:42:48] Daniel.

Daniel Newman: Next time I tell people I’m classically trained in the piano, I’m waiting for someone to make me sit down and play because I did study for 14 years, but I would fumble all over myself if I had to do it public. All right, sorry, digress. Go ahead.

Patrick Moorhead: No Dan, it’s all about you. We can pause.

Daniel Newman: I want to hear you speak German. I just, I don’t know, I just like listening to you talk. Your dog’s cute. Your dog’s really cute.

Patrick Moorhead: [German 00:43:11] Daniel. Anyways, so pilot program, it’s a four way partnership. First of all, DM, this is European’s largest drugstore, real chain DSV, like I said, one of the top three freight forwarders, Iveco, they make trucks and then plus, which is the topic of this conversation. Anyways, I’m excited to see what comes out of the pilot, but imagine these four companies coming together, increasing safety for trucks. And Dan, you might know a little bit about trucks. I don’t know, just a guess.

Daniel Newman: I may or may not have grown up in the business, if that’s what you’re asking.

Patrick Moorhead: Yeah, so anyways, further momentum from, plus it’s great to see as we turn this science fiction into reality.

Yeah Pat, I did actually have a chance to chat one-on-one with David Liu a few weeks back and it’s moved really quickly. I mean look, the company’s got more focus now. I think it’s divestiture of its Chinese operation is good for the business’s ability to be successful here. I do think right now it’s funny, I had a significant Russian cybersecurity company reach out to me about doing some work and I’m like, yeah, no, right now geopolitics are a hard thing to talk about, but they are a real thing. And right now the ability to grow a business here in the United States is always going to be hampered if you have too much of your core operations tied back to China.

The trucking industry by the way, pat is incredibly important in safety and insurance in these industries are very expensive. So if you’re an operator in the space, anything you can do to reduce risk is really important. If you are a consumer of goods and services, we need safe, reliable transport on the road, moving things from place to place. And by the way, pat, no matter how much we automate and build autonomy, we will never replace trucks. We might replace drivers, but you still need wheels and motors and big, oh by the way, it could be electric motors but in big containers full of stuff to get our stuff to that Amazon warehouse. That’s the reality of the world.

This is a company that’s building product that’s available today, this is a company that’s building product that will be available in the future. And I like the fact that they’ve been very honest about what they are, right now they’re focused on assisting current drivers to do the job more safely, longer term they’re focused on of course moving towards full autonomy because that is directionally where we are moving. But you and I have ridden in the back of one of these trucks, Pat, we’ve watched the driver pull us onto a major California interstate with, he had his hands on the wheel but he didn’t really need to, and that was pretty cool. So good stuff from plus, congratulations on all the progress. Like I said, iteration can be innovation. They’re moving along and I think we’ll be back probably sometime in the first half of next year with an update.

You’re muted because you were typing I think, but I can’t hear you.

Oh my dogs were going crazy. Sorry about that folks. It’s so funny. I usually lock them out, but I’m the only one in the condo right now.

Daniel Newman: I brought my son on the show. You should bring your son on the show.

Patrick Moorhead: Yeah, my son is actually finished up with finals at Baylor and-

Daniel Newman: I didn’t mean that son. I meant your other one. The one over your right shoulder.

Patrick Moorhead: Oh, yeah, there’s actually two down there and now they’ve decided to sleep. Yeah, one’s a girl and one’s a boy. But I love them.

Daniel Newman: Sorry, I didn’t mean to confuse you about your children. You always told me your favorite child has fur.

Patrick Moorhead: Dude, don’t say that out loud. One of my kids might be watching.

Daniel Newman: They don’t watch you know that. It’s like how many of my books has my wife read? I’ve written seven books everybody, I don’t think anyone in my family has read any of them, and they always say your mom is your biggest fan. I don’t know.

Patrick Moorhead: I think I commented on the forward once and I think that might be one of your books, or maybe I missed that. I don’t know.

Daniel Newman: I think I mentioned you. You’re in there.

Patrick Moorhead: That’s so nice.

Daniel Newman: Yeah. All right.

Patrick Moorhead: Let’s wrap this up. Let’s hit one topic but two, you’re going to hit a twofer folks. Adobe Q4 earnings and the CMA decides to show up 18 months afterwards, they try to buy Figma.

Daniel Newman: So there you have it. Anyways, no I’m kidding. So Adobe had a good quarter, they beat on top, beat on bottom and then the stock got pummeled immediately in the follow-up. I haven’t looked at it in the runup since then. I’m pulling that up right now. But it got pummeled and interestingly enough, why is the question, and as we’ve said event after event after event where this has happened, it’s always the guide. So there was some softness in the guide from Adobe following what was another really great quarter. The company’s been on top of the gen AI trend. The company’s seen growth across all its businesses basically document creative and experience clouds and they’ve continued to grow and diversify, but they also did announce this CMA thing and the possibility that Figma, so it was actually funny, I was chatting on Twitter X with Ed Ludlow and he was asking the same question, Ed is the host of Bloomberg Tech and he said, “Was it the guide or was it Figma?”

And so the overall earnings by the way are really good. The question I’m kind of asking about the guide is that we’re seeing this, I don’t know if you saw Pat, but the Fed came out this week and said that we’re likely going to see interest rates cuts next year. Our GDP is really strong. Labor is still pretty tight, but there seems to be such a mixed opinion of whether or not next year is going to be a good one or not. So you’re seeing some guidance softness and I often wonder when CEOs guide down if it’s more of a play it safe strategy or if we’re really seeing that next year is going to have real softness.

I’m actually going to talk to the president of Adobe’s experience business today, I think it’s Chakravarthy, and I’ll be talking to him and I’ll get a little bit more on this Pat, but the long and short is is that right now the expectation of every business is you’re hitting your good numbers and you’re guiding up. Is the Figma thing really a big deal? I’m going to let you take that topic, Pat, but my overall opinion is that the market, I think when a deal sits this long, they start to, every month it goes, they write down the value in terms of their mind and how much it’s impacting the stock. I still think this deal gets done, but I do think the CMA is a new meaningful hurdle. So overall, that’s my take on this one.

Patrick Moorhead: I just can’t believe, well first of all, on the future of Adobe without Figma, I look at the rate and speed that they brought out things like Firefly and I look at how many people in the creative space use Adobe tools and it’s like they’re not going to be outfoxed by a startup as it relates to generative AI, right? They’ve proven that. And that should mean that should mean a lot. I know they need to show up with the dough, but sorry guys. Sorry folks, that was my dogs barking. The dog walkers are here, but that aside, Adobe has a solid future regenerative AI, they didn’t get out foxed by a startup. As it relates to Figma, for regulators to come in 18 months after should be an abomination, right? You literally can’t come up with a point of view until 18 months after it’s filed. I think there’s something wrong with that.

And once again, we have regulators that are looking to the potential future. I got to tell you, people are not trying to edit photos and videos with Figma. It’s not about that. It’s folks doing design and wireframes and experience frames for the web, a website. I mean, so nobody’s using Figma for what they would use Adobe products for and vice versa. And Adobe has basically shut down XD, which was their attempt, and they realized that it’s just not something that they’re going to be good at. I felt so strongly about this. I actually submitted a signed paper into regulators a couple weeks back voicing my opinion on, I don’t know if the audience would be interested in reading that, but maybe I’ll throw that into the show notes. I’ve never done that before, but I’m starting to… Dan, only things about the experience is things get easier and you have clarity in thought and you can draw on a lot of history, but I think I’m going to start doing this more.

I mean, why just chat about it on Twitter and maybe write some articles when I could submit my paper into the competition committees to air these types of things out?

Daniel Newman: Yeah, I am excited to hear how that goes. Pat. I guess with the EU though, the EU is probably, and in this case the CMA, which is England, so not EU, but they’re a taxing station, not necessarily a innovation station, meaning this is a group of people that are always looking for a way to tax. So if nothing else raising this now gives them a reason to later look for ways to find tax and monetize, which has been, unfortunately, I’m not trying to be hard on my European friends, it’s just no innovation going on there, but if you look at how many billions they’ve raised by taxing, sorry, fining Facebook, Google, Microsoft, Qualcomm, is there anybody that hasn’t been on the tax block over there over the last decade and it’s generally they use privacy or competition as a vehicle to raise dollars. So I don’t love it. I do think it gets done, but this is definitely a speed bump.

Patrick Moorhead: I wonder if this is a flex too, which says, “Hey, I’m not part of the EU anymore and I’m going to show how this can be done.” I think the downstream effects of what the CMA is doing, and I’ll throw the EU under the bus with the AI stuff, is that you’re going to have creators and inventors who just won’t want to invent either in those countries or for those countries and the United States needs to watch itself too.

Daniel Newman: Did you see my comments on that? AI Act? I wrote a Twitter diatribe about it. Basically, my opinion is they’re just setting up a tax scheme. I mean, no AI is being invented there. There’s nothing being done from an innovation standpoint. All they’re doing is setting a bunch of guidelines and frameworks that will later allow them to have more privacy requirements that they can ultimately drive more fines from Big tech.

Patrick Moorhead: There are a couple of companies over there. HB partnered with one of the model providers, but for the most, I mean 98%, right? It is being done outside of that region.

Daniel Newman: Yeah. Okay. Well then you know what? In fairness, let me just say that ultimately I think there’s some good intent in Europe, but the way the intent is executed is rather than using these things to build and innovate, they end up using them to fine.

Patrick Moorhead: Yeah, no, I agree. Good way to end the show on a downside here. No, I’m just kidding. No, this is good. Hey, we want to thank all of you for showing up today. We went 55 minutes, so we’re back to the 610. We appreciate you tuning in and hopefully you’ll tune into some CES 2024, SixFive live action. We’re going to have the extended crew there. Super excited about that. And if you don’t tune in again, Dan, you and I’ll probably do a show before a show or two before the holidays, but if it’s the last time we see you all, we want to appreciate. Have a great time off. We care about you. Hit that subscribe button if you like what you heard. If you have some complaints, you know where to find Dan on social media. Take care.

Patrick Moorhead
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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.