Talking Intel, Oracle & Palantir, Groq, Apple, Rubrik, Tesla

By Patrick Moorhead - April 9, 2024

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. Intel Breaks Out Product and Foundry Reporting
  2. Oracle-Palantir Partnership
  3. Groq Developer and App Milestones
  4. Apple Getting Into Home Robots After Bailing on Cars?
  5. Rubrik Files S-1 To Go Public
  6. Are EVs or Tesla Stalling? Or is China Winning?

For a deeper dive into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.

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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:

Daniel Newman: Hey everybody, it’s Saturday. I know it’s not Friday, and we are back with another episode of The Six Five podcast this Saturday morning, like I said. Yep, yep. You can check your watch, check your calendar, check your time. It’s because I was on the road yesterday, but it wasn’t for a Six Five. I was on the road with my amazing middle daughter. Well, she’s actually my middle child. She’s my second daughter up at BU, not Boston. Sorry, northerners. This is the real BU, the one that wins national championships in basketball, Baylor University.

Although not this year, Pat and I forced you to have to wait till Saturday to do the pod. So thank you so much for being flexible with me and thank you everybody out there for waiting for us. But Pat, how you doing this morning, by the way? I’m going to lose the hat because everybody wants to see my beautiful head and I kind of look like a gangster with that hat on because it’s like one of those youthful hats that everyone wears, but my daughter said it looks way cooler on you than those old man dad hats with the straps in the back.

Patrick Moorhead: Yeah. Dan, I missed your forehead for the last two minutes You’ve been talking, but-

Daniel Newman: It was only a minute. It was only a minute.

Patrick Moorhead: Yeah. I mean whether we do this at Friday morning, Saturday morning, I mean we’re actually ahead of schedule if you bump us a day, I’m kind of a glass half full guy. Just the fact we’re doing this on a Saturday, I just know people appreciate that.

Daniel Newman: Well, dude, listen. I mean sometimes you have to make sacrifices for the people you love and so there’s many people I love involved in The Six Five and first and foremost, it’s you, my bestie the one I love the most in my business world. Sure we cut that out correctly because that could be taken out of context, but we got a good show. It’s been kind of an interesting week, Pat. It wasn’t a huge news week. There’s not any earnings this week that really we felt the need to speak of. There’s a lot going on out there. It’s been a weird sort of week in the economy. The market sort of took a dump this week and then we got this really, really robust economic data on jobs, which is really weird because all the created jobs were basically part-time. California went to $20 an hour wages for fast food workers, and now all the fast food franchisees are firing people and laying people off like crazy.

Pat, I feel a little bit like if I can just do a 20 second rant, I feel a little duped because these jobs numbers keep coming out and then, I don’t know if you’ve noticed this, but there’s this revision thing that keeps happening. So we come out with these great job numbers and then a month or two later we come out with a revision and it turns out they’re not such great numbers. Can you imagine if… Because you and I, we’re not economists, but we talk about this a lot, can you imagine if you and I were reporting our company or if the tech industry like NVIDIA comes out with its numbers and they’re like, “Oh, we had this massive billions of dollars of growth.” And they come out 30 days later and they’re like, “Just kidding. We didn’t grow at all. We actually shrunk this quarter.” But no, only in government, only in agencies can we report that way,

Patrick Moorhead: You know Dan, yeah, the jobs numbers look fishy and after wiffing it, I don’t know, is this the sixth downward revision? I mean it is getting close to the election and yeah, it’s kind of funny how that happened.

Daniel Newman: Well I read it was only 6,000 negative full-time jobs, so it was all part-time jobs, and then all the headlines are like, “It’s great.” And then we get these revisions and no one talks about them. I’m not trying to get all weird on the show because I know we’re a tech show, but it was like all these things intertwine. We talk about this, the strength of the economy, the chips, China, US. This does impact the tech industry in a big way. So I’m reading this stuff this morning and going down the Twitter, X rabbit hole of all this stuff and I’m like, “Oh my gosh, I hope people pay attention.” That’s all I’m going to say. I hope people are paying attention, but we got a great show today. We’re going to talk… This was a really big week for Intel and we’ll talk about their new breakout of their products and foundry business.

We’re going to talk about new partnership that’s going on with Oracle and Palantir. Groq made some big milestones, kind of made a business shift. I don’t know if everybody saw Jonathan Ross’s tweet this week, Apple ditches cars and now they’re going to build humanoid robots and put them in our house. That seems like a great plan, Tim Cook. We’re going to talk a little bit about Rubrik, which filed an S-1 to go public and Pat analyzed it and so did Gemini 1.5 and Gemini Pro did that in 1.5 seconds. So our job is screwed, and then what’s going on with EV’s, Pat? The Tesla numbers were poopy and then Reuters came out with some rumors and now what’s going on with the business and Elon was snarky as ever on Twitter.

Got to love that, Pat. So real quickly, just everybody out there you heard we’re talking about the economy, we’re talking about public companies. This show is for information and entertainment purposes only, and while we will be talking about publicly traded companies, please don’t take anything we say as investment advice. Pat, I think our biggest, longest, most in-depth topic of the day is going to be our first topic. It’s our mega topic. It’s Intel. They’ve made a big shift. They had a big announcement this week. What’d they talk about?

Patrick Moorhead: Yeah, so a little background here. Intel is what is called an IDM, an integrated device manufacturer. What that means is it designs parts and it builds parts. And a few years back when Pat Gelsinger announced that he was coming back, before that, there was a lot of discussion about will Intel stay in the chip building business. There was a lot of people who said split it, that would be the best route, just outsource everything to companies like TSMC and Samsung. I thought short term that was a laughable idea because if you’re not using common tools and there’s weakness on the design side, then you’re going to have some big issues. We saw what happened to GlobalFoundries when AMD spun off and the second that AMD was able to better deal GlobalFoundries and went to TSMC and GlobalFoundries got out of the leading edge.

So rewind, Intel is making hundreds of billions of dollars in investment. Some of that is shared investment between private and public, and this re-segmentation was to help the financial community better do comps, which is, let’s separate the design and product company from the chip building and packaging company, and that would allow you to compare the Intel foundry to companies like TSMC and GlobalFoundries and the design company, a better comparison to NVIDIA and AMD and net-net, the market reaction was not positive as demonstrated by the stock price. It was a difficult week. We saw the Dow go down 500 points, biggest loss in a long time, but I want to talk about what happened. There was some sentiment that talked about, first of all, the media coverage was all about this $7 billion loss and the projected losses into the future, and that really influences the retail investors and I think Intel came in, they didn’t reiterate guidance, which I think weighed heavily on the company now.

The company was in the quiet period and there was some… And whether we want to talk about it as being a miscommunication or misunderstanding that Intel CEO Pat Gelsinger walked back some previous commitments on technology and financial timelines around 18A. Okay, so I think my three key messages are A, factually there were no changes to the financial commitments that I’m aware of, and the other thing I think that’s important is to reinforce that the numbers and the guidance were very conservative for Intel. I mean, there’s so many ways that this could be a much bigger business. I think the final thing is even breaking even has the capability to, at least what I’ve been reading and researching is enabling the company to unlock an extra 200 billion in market cap just by breaking even.

Daniel Newman: Yeah, Pat. Well listen, I’m going to make that even simpler for people out there to understand why that is the case. Long story short, Intel because of its IDM strategy is being assessed completely differently. In fact, the fact its manufacturing capabilities are being even valued at possibly negative or zero at best at this point. So if you kind of look at the new reporting structure, what they basically want to say is we have one business that looks like TSMC. We have another business that looks like AMD. Now, again, I’m really oversimplifying that because they’re not the same, but they are. They have a fabless business that buys wafers at market price just the way all these other fabless chip makers do. And then they have a foundry that’s like TSMC that makes chips for other companies. It just so happens they make them for Intel as well.

Both those companies have value, and if they’re creating cash flow driving EBITDA and net income earnings per share, they both have value, but right now they’ve all been locked up inside this one operating set of books. So if all of a sudden they can say, “Hey, look, we’ve got this business that creates billions and billions of dollars of income as a fabless.” There’s value in that. And if you look at the multiples, the forward multiples at companies, whether it’s Marvell, whether it’s Lattice, whether it’s AMD, whether it’s Qualcomm, what they’re able to get versus what Intel’s gotten because Intel’s been blended down and then almost given a negative valuation to the manufacturing part of its business over time. On the other end, you got a business like TSMC that’s also highly valued for what it’s able to offer to the market, and if they can get to break even now, what happens is you can start to value the products part of the business and then you zero out instead of products plus some negative that’s being associated with this manufacturing.

So that’s what’s going on here. It’s going to take some time, and I think the market was somewhat jolted a bit by how long it’s going to take, and even though I think the company’s been very forward about how long it’s going to take, I don’t think people fully digested it and now that they saw just how poorly the foundry has performed in the near term, and again, I want to be very clear, you cannot stand up a foundry with the cost. It is so capital intensive and get to market and start making money very quickly, especially at the leading edge. By the way, there’s a reason no one’s doing this. I mean, this is incredibly capital intensive. You have an entire world that is somewhat got the rug pulled over their eyes about Taiwan in the fact that they do not see any threat to if China was to invade or something, an earthquake, I don’t know, happened in Taiwan and all of a sudden we couldn’t manufacture chips, but that we really need a Western foundry that does the seven and below at scale.

And so Intel has raised its hand and should be given some commendment for they’ve done for the risk they’re taking and the investment that they’re making, and by 2030, what they’re basically saying is this will be a revenue profit generator. Well is a revenue generator now, a profit generator for the company and it can bring returns to investors. I guess the only other thing I’ll say, Pat, and you hit it pretty hard, is that I think that the market needs to give some value but also give some runway to Intel to accomplish what they’re trying to do. I also think long and short, we’re going to need a chip act too. I don’t think the government’s serious about… I don’t think they’re serious enough. I know 52 billion sounds like a lot, but I’m pretty sure there was a line item for a zoo somewhere in Nebraska that got 28 billion in the latest multi trillion dollar budget.

Yes, I’m kidding. Yes, I’m being sarcastic, but we spend more than that on things that have nothing to do with us every single day. We run a trillion dollar deficit a quarter in this country. We spent 52 billion on the most fundamental critical technology that’s going to shape the next multiple decades in the economy and defense and technology leadership. So get it right, US government get it right, world. Intel is doing the right things. It is hard. This is a very hard thing to do, and I do think they’re making the right steps, but if you’re a short-term investor trying to get a return, I don’t think this is going to be a play for a lot of them. It’s going to take some time because this business isn’t going to start making money for probably at least four or five years and-

Patrick Moorhead: My biggest frustration, Dan, was people who really don’t understand how this works. I mean, you have to lay down tens, 20, 50, 100 billion dollar. That’s three to four years before you generate a single cent in revenue. And as a foundry, you have to get into these perpetual nodes that last for 15 years. So yeah, just the ignorance is frustrating.

Daniel Newman: I think it’s a combination of ignorance and fast money, Pat, and I mean right now you can throw a buck into some meme coin in crypto and get 8000% return, or you can put money into a company like Intel that’s building fundamental technology for the world and not only developing it, but also now manufacturing it for other companies that are building fundamental technology for the world. And it might not drive you a return and it hasn’t driven a return. I mean, that’s the truth. You look back and people have worked there 20 years and their options are underwater. I mean, that is the problem that investors have, and so they have to unlock this value, Pat. They have to unlock it.

Patrick Moorhead: Dan, do you want to take this Facebook question?

Daniel Newman: No, I think my answer is no. I think that one is if you’ve listened to Gina Raimondo and you listen… The federal government of the United States sees this technology as fundamental, foundational, and critical. They’ve called the company a national treasure. They actually can’t fail. We have banks too big to fail, and we’ll bail them out when they make bad bets and bad loans. This is not a bad bet. Now, the ability to execute is going to be a question for some time, Pat, but that’s my take. What’s yours?

Patrick Moorhead: Yeah. My take is similar in that there would be a potential if foundry is a massive success, that it gets split off as its own company, and that’s a possibility. I’m very optimistic on what I’m seeing about 18A on the high performance computing, and by the way, that’s PCs, servers, AI data center chips. I need to see some feedback on 14A from the mobile companies because this model will not work without volume and volume comes through mobile, not PCs.

Daniel Newman: That’s a good point. Look at where ARM got its volume. I mean it’s a different-

Patrick Moorhead: Well, it’s foundry economics. But yeah, it depends. It helps on IP, but you can’t operate and notice the plus plus on wafer cost on 14A. They’re saying it’s going to be the best. The only way they get there is to sign up an Apple or a Qualcomm.

Daniel Newman: Yeah, the packaging, though, Pat, we didn’t say much about it, but the packaging capabilities are robust and they’re very innovative on packaging. That’s where they’ve been doing a lot of their winning so far. And the EDA partnerships are really only in their infancy, which is another thing that’s coming, that comes at 18A, right? That’s actually where they flag that on their…

Patrick Moorhead: Yeah. Listen, I love packaging. TSMC, high performance computing, it’s 10% of their revenue. I like it. It’s good for Intel, but they’ve got to hit it on the wafers. Wow. We did spend 15 minutes on this topic, didn’t we?

Daniel Newman: Yeah, well, no because I did my whole little rant about blah blah 10:00. I said this would be the longest one. I don’t think we’re going to hit this much time on anything else, Pat, let’s go to the next topic. Let’s talk about a new partnership that’s taking place between Oracle and Palantir. The interesting thing, Pat about Oracle and Palantir, which maybe kind of fits somewhat nicely with my early… Is they are very focused on Western interests. These are two companies, Alex Karp, the CEO of Palantir has been criticized and even has seen employees leave for his outspoken support of Israel. We know we’re in a very complicated global moment right now in Gaza and what’s going on there. Oracle and Larry Ellison’s always been very supportive to Western interest. If you remember when TikTok was originally potentially being spun off, it was Oracle that was actually potentially going to take over, move all the data into their US data centers.

They obviously are very supportive on the database side, they’ve got massive government contracts with almost every government institution. They are the database of the US and most of the West. Of course, SAP has got a lot of Europe to be very, very clear. But another company that talks about foundry is Palantir, but Palantir’s not talking about foundry in the ways that we’re talking about it with data centers. They’re talking about it with cloud and workloads and applications all being brought into a common ecosystem.

And so what they basically are doing is they’re moving some of their, “Foundry” workloads to Oracle and that they’re going to make their Gotham and AI platforms deployable across Oracle’s distributed cloud. I think this is really important from a security defense and intelligence standpoint to win those customers. Oracle has shown a lot of strength there. They’ve got global relationships with regionals, with other big data center companies so they’re able to offer the regionality that you need that some of the other big cloud providers offer, but also offer it within the context of Oracle security and privacy and data commitments.

The way they position themselves, Pat, is that they are the hyper scale that is basically able to do AI and cloud for government anywhere in the world. So that is how they’re positioning themselves. And for those that aren’t following Palantir closely, Palantir is a analytics and AI platform that basically had come to market as the platform for defense. That is their position in the market. Now, their analytics tools are very powerful and could be used for a lot of other things, Pat, but that is what they came to market. That is how they’ve differentiated, and I think there’s been a lot of enthusiasm about the company, albeit it has been somewhat controversial. I don’t know if you remember their CEO recently talking about short sellers, short selling his stock so they could buy their coke. That’s a true story, everybody. It happened, it was on CNBC. But you know what?

I like controversial. I like CEOs that are willing to say what’s on their mind. I like the fact that they’re willing to be ambitious and aggressive. And by the way, the CEO now, the CTO and chairman of Oracle has never been one to mince words about what he thinks about the competition and what they’re doing. So basically Pat, long and short, what you have is two companies that have long staked themselves on being very, very capable to support federal interest, defense interest and offer their technologies to come together to give new capabilities with the defense industry in mind. But of course, it’ll also be something that I think will drip into commercial. It’ll drip into a broader government and it won’t just be for defense, but sovereign cloud’s a real thing, Pat, and this is addressing some of that sovereign cloud requirement.

Patrick Moorhead: Yeah, great analysis, Dan. So I want to read this paragraph that was headlined in CEO, Alex Karp right after a video he did. “The dominant nation states and companies that define our way of life will be the ones that get software and use of data right. Getting this right is a requirement to preserve our way of life, enable society to thrive beyond a few dominant organizations. I.E. countries.” So yeah, it’s defense, it’s government. They’re getting into increasingly into healthcare, National Institutes of Health as an example. I think culture on partnerships have to work, and I believe that the culture between Oracle and Palantir is perfect. OCI Gen 1 was not good. It was uncompetitive, it was overpriced, it was bad. OCI Gen 2 is very competitive.

In fact, they’ve got a really interesting pricing model versus AWS, where Oracle price is very low for entry level base infrastructure, whereas AWS prices it higher and AWS’s add-ons are lower. Where OCI’s add-ons are higher priced. So it’s a really interesting pricing model. I’ve said this before, their version of sovereign cloud and on-prem cloud is the absolute easiest to understand. It’s essentially take what was in the cloud and put it on-prem, put a chain link fence around it, run every Oracle app on it, including database and do it as a service. And then sovereign, right? They’re very clear about locations, badged employees in that country. It’s just very simple as opposed to the other cloud providers have a little harder time explaining that. So to me, it’s a good match. It’s very straightforward.

Daniel Newman: All right, that one’s good, Pat, by the way, I love the language I was looking up the way Palantir describes its foundry, it says, “It integrates the semantic, kinetic, and dynamic elements of your business.” I’m going to need to go back to college. All right, let’s run down the next topic. Pat, you and I both, I think we’re both investors in Groq. Let’s put that up front on this, but the company has come out of its shell and it’s had just some really explosive moments over the last couple quarters. Got a really nice readout on the all-in, made some big acquisitions, but also Pat we’re seeing some big milestones.

Patrick Moorhead: So Chamath Palihapitiya is an investor. He rarely talks about his investments, but he’s super excited about this one and I think it’s for good reason. And that is the LPU, which is essentially the chip that Groq has is very performant versus NVIDIA GPUs and Dan, we have debated ASICs and their pluses and their minuses. And the trick with an ASIC-based accelerator is if you can put a software layer, I call it the magic API, so you can get two to three generations out of your chip, NVIDIA’s got a really good TCO equation because everybody knows that you’ll get, again, two or three generations of something out of the chip today and in the future. A perfect example is that GPT was trained on the predecessor to the A100, not the H100 or even the A100. So with that said, big news, they have 70,000 developers and 19,000 applications on their cloud, and their cloud is basically… This was an acquisition of Definitive IO, CEO Sunny Madra was out there, very quick acquisition here.

But what this acquisition did, it enables, it lights up the capability for developers to go in and not just test workloads, but use them to train and infer workloads. Now long term, you want to stand this up on an on-prem cloud or something, let’s say in a Colo at Equinix. But Dan and I, you and I are always looking for the… We know AMD with its GPU is competitive. Intel in 2025 with Falcon Shores, with a little bit of ASIC juice involved is a next player, but which ASIC is going to make things happen, right? Intel Gaudi, LPU. So exciting stuff and exciting progress by the company.

Daniel Newman: Yeah, I think I saw Jonathan Ross share something, I don’t know if it was on on LinkedIn or Twitter, I’ll have to find the link to it, but where he basically said “We’re not selling chips any more except specifically to some government defense requirements.” And he’s going to focus 100% on this cloud capability with that acquisition, the company is really starting to stand up and make this extraordinarily accessible to developers. And you saw the numbers from Sonny Madra, 70,000 developers now are developing 19,000 apps the Groq cloud. Pat, I mean, it’s an incredible bit of progress and the need for alternatives, I understand that NVIDIA is an incredibly powerful company that builds great stuff. I think we can all agree on that. I just think the idea that it’s zero sum. We’ve got this weird world where everybody thinks everything’s zero sum now. It’s going to be all one or nobody. Look, AMD is going to take a part of the market with their GPUs.

The cloud providers are going to build homegrown silicon that are going to be powerful and usable for certain workloads. We’re going to see CPUs on Xeon. Pat, I shared something yesterday about a company that’s with AMX and Xeon you can do a whole lot of inference on A CPU and we will see a lot of inference being done on a CPU. Pat and Groq has built something that’s very specialized. Now the company continues to talk about it can do more than language, but what they’re doing is they’re basically making it extensible. They’re making it available, and they’ve shown that they can make it extremely performant. And so we knew that from the beginning, Pat, there was a reason that both of us felt this was investible when we got involved in it and we continue to cheer for it. But also I think the market needs to pay attention.

There was a time, I think both of us were concerned that Groq’s future was going to be challenged, but in the last few months they’ve come out swinging with innovation. They seem to be refocused, repurposed, and the market is finding and identifying their technology and we’re hearing a lot more about it. And that kind of buzz is good. And by the way, frothy, frothy valuations in AI right now. I mean, look, I shared something the other day. I think one company in eight weeks went from a $300 million round to a $2 billion valuation on the same company without creating any additional revenue. VCs are back, the froth is back. I know we had a little bit of a sell off this week. Crypto bros are back. The money is flowing in, the AI exuberance is here. But the nice thing about Groq, Pat, is this isn’t exuberance, it’s a real company, real technology.

It’s foundational and it’s in a space that needs more competitors, chip makers. So that is where we are at, Pat. So let’s jump to Apple. The headlines were all over. “Shelves Car Product, Develops Humanoid Robot Product.” Pat, look, this one’s kind of a little bit of a fun topic. It’s a little less… It’s not as geeky as the Palantir stuff. It’s not as technical as the Intel stuff, but it is a great question mark and Pat, the topic is almost like, what the heck is Apple doing? They’re being sued by everyone on the planet.

It’s a pile on moment. Apparently the Xiaomis, we didn’t talk about this on the pod, Pat, but we’ve seen Xiaomi come out with what looks to be a pretty nice car. Now again, there’s questions about its safety, but basically phone makers in China are like, “We can do that. We’re going to make a car.” And basically now they’ve taken chips and an operating system and put wheels and electric motors around it and they’re creating a car that looks a heck of a lot like a Porsche Taycan in my opinion. And they’re selling them for like 30 grand US. Now again, that’s not fully loaded, and this is all speculation right now of how much this will be available, but the long story long is what the heck is happening in Apple that they abandoned their plan after all these years. They’ve disassembled the team. I think they let close to 1000 people go that were part of the car project and now the rumor is they’re going to get into humanoid robots.

Pat, I also shared something last night that Alibaba is going to get into delivering packages with rockets. This is a real thing. I mean, what a world we live in right now because getting your dog food next day isn’t soon enough, so I need it delivered on a rocket. So there’s not a lot of details about this kind of home bot, but we know that Amazon had a $1,600 Astro bot and it can deliver snacks and patrol the home, keep security. But what I’m not really quite sure about is this even a real thing? Is this a rumor? I mean, they’ve got an advanced tabletop home device that uses robotics to move a display around. So that’s a starting point. But the way they’re kind of picturing this thing and they’re showing this thing is it’s like a walking like a Boston Dynamics robot that’s going to be walking around your house.

Is it going to be cooking you dinner doing your chores? Can it take my puppy out by the way? Because this puppy needs to go out like every 15 minutes. I don’t know, Pat, I just think this is super interesting and a smart display on some sort of mobile that’s going to roam around your house. Did the Astro get legs? I know our guy Panos Panay is over at Amazon now and I trust with his innovation it’s going to advance the device’s business, Pat. But let me just kind of flip the topic. They always say talk about what you want to talk about rather than what you’re being asked. This robot thing feels like a rumor to me.

It almost feels like an April Fool’s joke, but it came after April Fool’s day. And if they are going to develop a robot, the dancing robots Tesla’s putting out and everyone else is putting out, are they really ditching the car? Are they ditching their plan? Are they going to continue to roll out overpriced headgear and humanoid robots and rolling machines around their house? What the heck is Apple doing? And by the way, this created a lot of interest and hype, but they’re still saying this probably a few years if not several years away from actually being something we would see in anybody’s home.

Patrick Moorhead: So having presented to boards of directors and run various elements of corporate strategy for large companies in my past, I will tell you that in your strategic long range plan, you’re coming up with some big long-term bets and what you’re going to invest in and what you’re not for growth. And I think this is probably one thing in the slide deck of the potential five things that Apple could do. Now strategically, they’re a little hamstrung in that they’re going to have a really hard time buying any company. We saw Amazon get shut down with Roomba, and then you have to look at core competencies. Now, Apple is very good at convincing consumers that it is safe. And if you think about a robot coming in and doing your laundry, being a roving security camera, delivering messages or food to your kids and stuff like that, trust is going to be paramount.

And that’s what I think Apple would be very, very good at. On the mechanical side, the company has demonstrated it is exceptionally well at miniaturization and things like smartphone and Apple Watch. But when it comes to motors, arms, rotating arms, the companies that have been doing that for 10 years are companies like Amazon. You have Amazon that’s been doing this forever. I mean, Dan, you and I went to one of their distribution centers, we saw those orange robots driving around on the ground. You’ve got robotic arms doing things. You have something called Proteus. And remember the containerized storage robots where the pick pack and shipper didn’t walk around the warehouse, the tray came to you, to the picker.

And then of course you mentioned Astro. And again, I don’t know how that’s doing commercially, but you also have the Ring Always Home flying camera that Amazon runs as well. So that is a company that I think has much bigger potential to pull this off. And as much as we’d like to attack Amazon for, we can’t trust you because for this or that reason, they’re actually one of the most trusted consumer brands behind Apple, which is interesting. Then there’s Tesla that has Optimus that they’re putting big investments in, and I don’t believe any date that Elon puts out after his cross country full self driving-

Daniel Newman: Only five years late, it’s going to happen.

Patrick Moorhead: But anyways, he’s claiming that Optimus will go into his manufacturing facilities in the next three years. So anyways, I think there’s a lot of pluses of why Apple could be good at this, but if they can’t get really good at mechanical and wheels at arms and things like that and they’re going to get shut down from buying maybe a mid-sized company, it’s going to be very difficult. But what is crystal clear is Apple’s growth potential is murky. You can find a way to do low-cost smartphones, but they’ve been flirting with SC forever. New iPads continue to get pushed back because like the PC market, people don’t feel like they have a reason. Maybe the AI tablet will be a big driver. Maybe the AI smartphone will be a driver, but net-net it’s super murky.

Daniel Newman: Yeah, I mean, like I said, this was a little bit of fun, very speculative. It is interesting. Every company’s kind of competing and Pat, I wasn’t kidding about the Baba thing. So everyone out there checked that out, they want to launch rockets to drop packages off.

Patrick Moorhead: Oh I saw that. Yeah, my research for this one, that popped up.

Daniel Newman: Yeah, I mean again, we want to keep everybody on the front foot as surprising and innovative as possible. It’s good these companies are competing to disrupt and Pat, you and I have been in those Amazon factories and watched the robotics work where they work for picking and packing and shipping. I mean there’s some really interesting applications. I’m just, I don’t know. The humanoid robot thing, it’s probably coming. It’ll probably be driven by people buying their spouses in the future. It’ll be the next version of the mail order spouse, my robot. I mean not everybody has a bestie that they want to hang out with all the time.

Patrick Moorhead: Well we’re getting there-

Daniel Newman: All right listen…

Patrick Moorhead: Are we getting married anytime soon? I hope so.

Daniel Newman: We haven’t shown since Connor’s wedding, the potential when we put that little place setting on there. By the way, we’re in the same shirt. Look at that. Look at us. Connor called that in the chat. Look at that Connor. All right, let’s go to the next topic. There is an… Pat, there’s been very little IPO activity in enterprise software for some time. Rubrik, Bipul Sinha, our friends over there were advisors over there. They filed an S-1 to go public.

Patrick Moorhead: Yeah, they did. And it’s pretty exciting. Like you said, it’s a clear message that the IPO market is getting better and one company coming out doesn’t make a trend, we saw Reddit go out. There’s even rumors of Cerberus putting together potential filing soon. So I’m thinking we’re back on that front. There’s estimates that put the company at around $7 billion of value and gross margins, the S-1 showed that they look pretty good. It’s 77% up from 70%. The revenue based revenue, I know I was reading was a little bit of a concern, but Dan, as we’ve seen moving from licenses to SaaS, there is a rocky process to go and drive ARR. So there is no free cash flow, right? For 2023, it was negative 15 billion. The company’s not making money, which by the way, it’s been a while since I’ve seen a company come out and list when they had net income so this is no different.

Now I think the company is hitting at the right time too. When you look at all of the AI related data investments, Dan, you and I both have came early to the conclusion that data management and part of that data protection and data security and resiliency is going to be a key part of any company’s ability to put together a proper AI strategy. And that’s the business that Rubrik is essentially in, which is to back that up, to protect that data and when somebody does come in, nefarious folks come in and try to destroy the data, getting that data back and online very quickly. So congratulations to Bipul and the senior management team at the company.

Daniel Newman: Yeah, Pat, it’s really interesting because there’s not a ton to cover. I like that you called that out. I do not understand. I cannot for the life of me understand this kind of continued propensity to put companies out as public companies that don’t make money. So that’s my criticism. It’s nothing against Rubrik, it’s just the sort of standard that it’s become. Pat, you and I have had some interesting conversations about valuation over the years and it’s really hard. I do understand companies grow and they grow into it and you need liquidity and liquidity enables scale. And scale creates massive valuated companies and that’s how VCs get their returns. And I mean that’s what has to happen. And I mean the growth there, the 47% year-on-year growth is impressive. You want to know what was more impressive to me though, was the fact that in 1.5 seconds, Gemini Pro was able to create a Rubrik S-1 analysis that had a –

Patrick Moorhead: You love that man, don’t you?

Daniel Newman: I do. I want to talk about that, only because you did such a good job of covering it. I just wanted to talk about whether or not the equities analyst, the junior analyst, the junior wood choppers over at the big banks that come up and spend weeks and weeks digging out data to figure out how to position an IPO or an investment to their community can do that. Now I do want to call out the fact that I was publicly critical about the fact that… Publicly critical about the fact that I thought the recommendations that the system actually made were pretty amateur. So while it did come up with a pretty good swat, the recommendations are where I think the money is to be made. That’s why companies trust people like you to advise them. They can do this background stuff, they can do the search, they can find the basics, but then what do you do?

So the long story short, Pat, is I do believe this is a growing field data protection. I do believe things like RAG will be beneficial from having the access to all the data we heard what Cohesity is doing. We know that Rubrik’s doing something similar. I think Bipul and his team made a really nice pivot on cybersecurity and not being over-focused on just the data protection part. I think cybersecurity will be maybe the second most important trend line behind AI because as AI enables more scale of data, it also creates a whole lot of threats across the market space. Pat, I think people are longing for enterprise software IPOs, I’m betting you, this thing will be heavily oversubscribed. The value will come out a lot higher and I like it a lot better than Reddit. If you want my market comparative to the most recent cool IPO, I like it a lot better than Reddit.

I like this space. It’ll be interesting by the way to watch the Rubrik and kind of this whole Cohesity, Veritas comparison because Rubrik’s coming out going public, getting big liquidity, trying to go fast to market. Cohesity and Veritas are going to get a little bit bigger, more density, and then my guess is the IPO will follow that. So that’ll be something to watch somewhat critically Pat. But yeah, I mean look-

Patrick Moorhead: Isn’t it crazy how much excitement there is in this part of the market? I mean, let’s not forget about Commvault, Veeam, what Dell is doing in these spaces as well. It’s super interesting and I can’t help, but I do think that these are great standalone businesses, but I also think that companies like Dell seem like acquiring a Rubrik or a Cohesity would make a whole lot of sense. I know Dell has things like backup and restore and some resiliency features, but what I don’t think anybody’s picked up on is the fact that all of this data from different data sources, literally whether it’s HRM, HCM, ERP, Outlook, it’s all going in to these solutions and it’s like, well, while the data’s there, why don’t we activate this using generative AI?

And we saw features from Cohesity and Rubrik to do that, and by the way, the data is already secure. Now the usability of that data based on security posture and who should have access to this, it’s not an end-to-end data platform. But wow, Dan, imagine all the data is in there to begin with and query it and I think it’s kind of this Trojan horse. You combine that with RAG and you’ve got something that’s pretty big.

Daniel Newman: Absolutely. And by the way, I had meant to mention this and just since we’re talking IPOs, and you’d mentioned about Apple earlier making acquisitions and you just mentioned something else about Dell making big acquisitions. Isn’t it interesting the whole inflection AI deal? We’re not going to dive into this right now, but just as a kind of a little mini sidebar, Pat, that did we just see right under our nose of brand new structure for doing an acquisition that requires no regulatory approval? I don’t know, I don’t know what happened there. Anyways, I’m sure if that doesn’t meet any scrutiny we could see a whole lot more of the, we’re just going to invest in all the people.

Patrick Moorhead: Exactly.

Daniel Newman: And we’ll license all the IP and we don’t own anything. All right, so let’s go to the last topic, Pat. We talked a little bit about the Tesla robots, but let’s talk about Tesla vehicles. A couple things going on this week was a big week because there was some delivery and production numbers that came out. The company produced some big numbers but delivered well below expectations. Stock got hammered. Questions are coming is Tesla… Is it the end of days for Tesla. Are people losing interest in EVs? By the way, everybody loves to hate Elon Musk and I just want to point out did he not share something, I think I shared it with you this week and I wish I could dig it up. Okay, I really do wish I could dig it up quickly for you, but I can’t. But I can remember what I shared with you. It was something along the lines of Twitter having just best numbers it’s ever had. You’re not going to make me go back and answer that are you?

Patrick Moorhead: No, no, I just want to flash it up. It just came through and we stopped talking about that. I wanted to give-

Daniel Newman: It’s fairly different technology. I mean you’re talking an analytics platform versus a data protection platform, but there was a nice article, I’ll put it in the show notes that our team actually put out about the Rubrik filing and then we also were covered in the media quite a bit, so we’ll put some links in the show notes for everybody out there. So anyways, by the way, I just mentioned that X is having all time high engagement on the platform. Again, nobody’s reporting this, who would report it, right? It’s like, but Pat, I got to tell you, I wake up, I have to check Twitter, X, I probably look at it like 400 times a day and I think every other app on my phone, it’s like once, twice maybe messages and email a little bit more.

I love the platform. It’s amazing for getting real time information. I don’t know where else you would go, but whether I’m checking F1 EPL scores or I want to know what’s going on in tech, nowhere better to go. Tesla by the way, numbers are off, demand is down. They had to lower prices to blow out a growing number of Model 3 and Y that hit the streets. There is something going on. And by the way, this isn’t just Tesla. The whole sort of demand and this whole EVs are going to take over the world in the next few years seems to be somewhat stalling out. I’ve been watching on some of the Twitter’s and press about Ford Mustang Machs. A year ago they were going at 10-20K over list. Dealers are blowing these things out at 20K in some cases below list and offering finance rates that are lower than the 10 year right now yield to try to get people to buy these things.

I think people are frustrated and struggling with infrastructure. I know we’re seeing some charging infrastructure going into place, Pat, but if you have range anxiety and you actually drive anywhere far, but the long and the short question is, is Tesla hitting the end hitting peak? Has their growth stalled? I think it has stalled a little bit, but it also is interesting because I mentioned the Xiaomi thing and the lower price and some of the interest coming around that and Tesla is supposed to have a Model 2 coming and they’re also supposed to be doing robotic taxis. Two big initiatives going on at the same time. The Model 2 is supposed to come at a low price. And did you see, I don’t know if you saw Reuters put out a note that basically got heavily shared and tweeted that Musk was scrapping his plans for the Model 2.

Musk came out with a reply to one of them, I think it was the zero hedge tweet that basically said Reuters is lying again. So there’s a big conflict going on. There’s a war in the media. Musk is basically building probably one of the most viewed platforms on the planet for media and information. Then you got this war with the broader press that are trying to constantly challenge Musk in everything he does. Definitely not interested in seeing him being successful, but the numbers are also showing some consternation in the marketplace around EVs. Do we need a lower price one Pat? Do we need a Model 2 in the twenties? Is that even achievable? I feel like it costs me 20 grand to go to the grocery store right now and just get food for the house, let alone to buy a car. So if he can actually get a Model 2 that’s going to be sub 30K, that’ll be crazy.

Having said that, I think winning the autonomy race is more important than coming out with a 20K, 25K Model 2 vehicle. And so I do think, and I could see maybe some prioritization right now on the Model 2, sorry, flip that prioritization on the robotic taxi. He has made this FSD a big thing. He did talk this week about licensing self-drive to other vehicle makers. Very interesting. Could he be putting more focus there, slowing down on the production. He’s now making, right-hand vehicles, he’s doing all kinds of things. I don’t think they’re in trouble.

I think it’s short term. I think we’re in a bit of a lull. I think I’m going to end where I started Pat and I’m going to pass it back to you. I think the numbers we get fed about where the economy’s at versus where it’s actually at are not the same. I don’t think we’re as strong as people want us to believe. I think there’s a lot of revisions going on in the data. I think people are a little bit more nervous. Interest rates are still high, they’re not spending as fast and that of course is going to impact the car industry. But I do think electrification isn’t picking up quite as fast as people want for vehicles. At least people that want to see us go all electric in the near term.

Patrick Moorhead: I have two things to bring up. First thing are interest rates on new cars. The first thing is, so the typical credit score in the United States is around 700.

Daniel Newman: It’s pretty good.

Patrick Moorhead: Do you know what the interest rate for a car, if you have a 700?

Daniel Newman: 8.5.

Patrick Moorhead: 12.65% is the-

Daniel Newman: Come on!

Patrick Moorhead: As of-

Daniel Newman: Really?

Patrick Moorhead: … Today. And you know what? If you’re 699, it’s 17.84%.

Daniel Newman: We’re in the wrong business, dude.

Patrick Moorhead: It is absolutely ridiculous. So that’s one point I do think that’s weighing on Tesla in the United States and in China there’s a whole heck of a lot of competition and there is a freaking price war going on. And with all that capital expenditure that the company has made in China with a factory, they have to sell stuff out. So their slinging mud and they’re in the mud with the Chinese manufacturers. The only way that Tesla gets out of that mess is first of all bleeding the competitors but also robotic manufacturing. And that’s where I think Optimus comes into play and those people who are looking for EVs and not necessarily the self-driving capabilities, there is a lot of competition that’s out there right now. The combination of EV plus the level of safety that Tesla brings to the table is unparalleled.

There’s a full self-driving capability that’s out there in beta, but it’s not even necessarily… I mean it’s not approved and multiple people aren’t looking at that right now. So lots of things going on. I think there’s a lot of Elon. We hate Elon out there. As you said in the run-up but more competition, interest rates. Interest rates sucks. Tesla needs to come out with their next hurrah and I think you mentioned too, which is Robotaxi plus this Model 2, which will be manufactured here in our awesome Austin, Texas. If I were on my other porch on the other side, you might even be able to get a glimpse of-

Daniel Newman: And everybody, that’s not a fake background. That’s the way Pat lives.

Patrick Moorhead: Oh, come on now, Dusty, yeah.

Daniel Newman: Good looking background, man. That’s a dream for me and most Tesla Model 3 owners. By the way, the Model 3, they did also offer huge discounts, but you do realize I’m a bit of a car guy, everybody. So if you get 0% interest, Pat, it’s $16.67 cents per thousand on a five-year note. So if you have a $30,000 car, it’s like 500 something bucks a month or something like around 500 bucks at 16% on a $30,000 car you’ve added like…

Patrick Moorhead: You saw the meme of that lady talking about her $3,000 a month monthly bill for her car.

Daniel Newman: Dude, you’re adding almost $6,000 a year of interest.

Patrick Moorhead: No, I mean think about it-

Daniel Newman: You’re at $500 a month with another $500 a month of interest. So you just doubled the payment for the same vehicle. People are going… Okay, inflation is a problem people and interest rates of 16% to buy a freaking car.

Patrick Moorhead: We go back where food was priced five years ago, there’s not a single measurement that says we aren’t up 25%. And you think of the typical American family trying to pay for food. We’ve seen that energy in California, electricity is up, what, 50%. I mean-

Daniel Newman: How are we getting 3%?

Patrick Moorhead: What’s that?

Daniel Newman: Where’s the 3% number come from?

Patrick Moorhead: It’s a joke, that’s year over year. But what that doesn’t bring into account that real wages are stagnant. If real wages are stagnant and inflation went up one year, 12%, then seven and then three, you can stack all of those increases and look back. And that’s very frustrating for me. And I feel like I’m not in this elitist type of thing, but it’s such an elitist type of point of view to forget about the increases over the last five years. That’s what’s devastating to Americans. And people are like, “Gosh, inflation is tame. And why do people still think the economy sucks?” They can’t afford cars. Food is expensive. Electricity and gas are still more expensive. Actually, I need to go back and look at gas. Electricity is in certain states and my gosh, there are certain insurers in California who are pulling out saying that properties are uninsurable and what happens when competition pulls out of anything, average insurance rates for homes are going up.

Daniel Newman: I got an idea. If we just raise rates on just the really rich people, we can solve everything.

Patrick Moorhead: That solves everything, dude.

Daniel Newman: Everything.

Patrick Moorhead: France increased it taxes on the super wealthy people and guess what they did? They freaking left the country.

Daniel Newman: I know, I know. And by the way, I realize there’s a little bit of additional Saturday sarcasm and sardonic sort of coverage here from Pat and I, But I think when I’m just reading it, like I said, too much doom scrolling my friend. But I mean you did see… I’m starting to see the list populating California of all the fast food, how many jobs are being cut.

Patrick Moorhead: Yeah.

Daniel Newman: You can’t… So now we’re going to have either the choices that have been created are $6 cheeseburgers from McDonald’s or $20 wait. These companies can’t function. So we’re creating… And by the way, that extra couple bucks that you’ve given does not enable them to afford the $6 burgers. You don’t create enough wage growth to create the ability to buy stuff. We’re going to end up looking like Argentina if we keep this up. I know, I know. That’s depressing.

Let’s end on a good note. You and I are heading off tomorrow. We’re going to head to Intel Vision. We’re going to be talking, we’re going to get the Intel’s vision, which we talked quite a bit about at the beginning, at the head of the show. We’re going to hear more about it. We’re going to be sharing more. We’re going to be sitting down with a number of leaders while we’re there and some of it will be out there for you on The Six Five. And then Pat, we’re heading to Google Cloud next in Las Vegas, by the way, left San Francisco. I don’t know why they would’ve done that.

Patrick Moorhead: Well I think they said it had nothing to do with the crime-

Daniel Newman: Of course.

Patrick Moorhead: … And everything to do with-

Daniel Newman: They needed a bigger venue. They needed a bigger venue.

Patrick Moorhead: Yeah, because Salesforce’s conference Dreamforce is so small.

Daniel Newman: Well, what do we know? What do we know, Pat? We’re just tech guys. We’re not economists, we’re not politicians. We’re just speculating here and there. Having a little fun. Don’t fall out the window. All right buddy, great show a lot of fun on this Saturday morning. Tomorrow morning, Max Verstappen and Sergio Perez will line up on the front row at the grid-

Patrick Moorhead: Tonight.

Daniel Newman: … In Japan.

Patrick Moorhead: Tonight.

Daniel Newman: Oh it’s tonight here. Guess who’s right behind him, Pat.

Patrick Moorhead: Who?

Daniel Newman: Lando Norris number three.

Patrick Moorhead: Lando baby.

Daniel Newman: Come on, McLaren. Let’s go Arsenal, let’s go Six Five. Thanks everybody for tuning in. See, when it’s my show, I get to do shout outs to all of my important teams. Pat, you go enjoy breakfast. Don’t go do some nuclear fusion crap. Let’s just have some fun. Let’s talk tech. Let’s stick around all you out there. We appreciate you being part of The Six Five community, but we got to go. We’ll see you all later.

Patrick Moorhead

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.