We are Live! Talking Cloudera, NVIDIA, IFS, Plus, Cisco, Lattice

By Patrick Moorhead - February 20, 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. NVIDIA Getting into DC AI ASIC Market?
  2. Upcoming IFS “Direct Connect” Event Preview
  3. Plus AI Open Auto Platform
  4. Cisco Q2 FY2024 Earnings
  5. Lattice Q4 FY2023 and 2023 Earnings
  6. Cloudera Elevate 2025 SKO Event

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:

Patrick Moorhead: Dan and I are back for The Six Five weekly podcast. It’s Friday, it’s 9:00 AM Central Time. It is the best hour and the best day of the week. How’s my bestie doing?

Daniel Newman: It is great to be here. I feel like Tony the Tiger this morning, I am electric. Buddy, this is the absolute favorite moment of the week, when we take on all the biggest tech news stories and we provide the analysis that everybody out there wants and needs. And buddy, honestly, it just makes me smile to wake up Friday morning and know this is what I have to do.

Patrick Moorhead: I know, it’s great. And for all the viewers out there and our fans, I did want to share with you something that I have, Dan, a little hot, okay, let’s take off the vests and-

Daniel Newman: Wait, wait.

Patrick Moorhead: Oh, oh, oh, oh. We’ve got this. That’s the second layer. Wait a second, there’s a new layer.

Daniel Newman: You must be warm in there. Is it warm in there?

Patrick Moorhead: No, AC’s blasting. Look at that, three layers of Six Five goodness. It might be a rumor, it might be the truth that I slept in my Six Five merch last night.

Daniel Newman: Six Five pajamas?

Patrick Moorhead: I don’t know, do you hear that-

Daniel Newman: We’re going to need merch. We’re going to need a swag shop, though. We’re going to need a swag shop.

Patrick Moorhead: We announced a swag shop on last week’s… Or actually, we said its a rumor, so we are officially announcing that we will have a swag shop for The Six Five fans. But hey, let’s dive in. Hey, if you’re new to The Six Five, we cover six of the best topics, most interesting topics of the week, give our opinions on it, ruminate. We do bestie talk, look in each other’s eyes sometimes. We talk about publicly traded companies too, but don’t take any of this as investment advice.

Daniel Newman: We don’t normally flirt this much up front, I got to be honest.

Patrick Moorhead: Well, I figured being a tease just doesn’t pay off.

Daniel Newman: First of all, you’re already taking clothes off on the air.

Patrick Moorhead: I was, and somebody on X asked us if we actually shared a room at Cloudera SKO, and I’m going to just say maybe. Maybe we did, maybe we didn’t.

Daniel Newman: Who are folks to judge? Maybe it’s about economic efficiencies here, Pat. It’s tough out there. You saw the inflation number was high. Inflation was high, CPI was high, PPI was high. The market, it’s gone up quite a bit. Yeah, sure, NVIDIA is the third most valuable company in the world. We’ll talk about that a little bit, but-

Patrick Moorhead: I read an article that Jensen doesn’t wear fancy watches anymore. It was an interesting article in the journal. But hey, we have an incredible show for you. We’re going to talk about NVIDIA possibly getting into the data center ASIC market, and talk about the upcoming Intel Foundry Services Direct Connect event, give a little preview, maybe stir up some rumors. We’re going to talk a little bit about the plus open AI, sorry, open auto platform. I almost did it there, AI Open, not OpenAI. Cisco had its recent earnings and so did Lattice. We’re going to chew through that, and we’re going to talk about Dan and Pat’s trip to Cloudera Elevate 2025 Sales Kickoff event. And I’m going to kick off, like I always like to, because I’m a selfish pig, NVIDIA.

Daniel Newman: I never use the word “pig”, I just generally consider you to be really selfish.

Patrick Moorhead: I mean, we are in a way, you know, everybody, it’s just the degree of selfishness.

Daniel Newman: Me, this is you. This is you, you are selfish. I very altruistic. I am selfless would be the word I would use to explain me. That’s why my children call me an “unbearably cool dad”, is because yeah, you’re not-

Patrick Moorhead: Dan, is this like the pretend normal, like you’re really not a sociopath? Like, “I’m a normal human being.”Look at me, I am a dad.”

Daniel Newman: “I’m normal.”

Patrick Moorhead: Oh, it’s so good.

Daniel Newman: Trying to relate with everybody.

Patrick Moorhead: I know, I can relate. “Come over, we will go to stuff together.”

Daniel Newman: “Let’s go to the game.”

Patrick Moorhead: Exactly. Gosh, what are we talking about again? Are we talking about-

Daniel Newman: NVIDIA getting into… I’m going to run the table on you on this one, okay?

Patrick Moorhead: Oh, no, you’re not, no, you’re not.

Daniel Newman: No. I’m going to run the table. I got like 20 questions. I’m going to make you just… I’m going to grill you on this one because you put out a post on social. It was so juicy and I felt like it didn’t get the pickup because I don’t think most people realize what you were saying. It’s too complicated. But this rumor, man, there’s a lot of implications.

Patrick Moorhead: Yeah, so let’s step back here. So NVIDIA is the data center GPU training and I think the generative AI inference king at this point, I think there was an article that said they had 95% data center market share. Probably makes sense. Maybe it’s closer to, I don’t know, 90, but it’s in the 90s. It’s big, big, big. And as we’ve talked about many times in the show, there are different ways to do training and different types of technologies and chips. And I like to look at it as kind of a barbell, right? Infinite flexibility. You have the CPU, you can run basically anything. The most efficient over here is an ASIC, which stands for application-specific integrated circuit. It does one thing and it does great. Now it’s just hard to program. And the GPU is kind of in the middle, maybe a little closer to the ASIC.

And just to confuse matters more, some people would call the GPU an ASIC, but let’s not go there. So the market right now for custom ASICs, you have Broadcom and Marvell, and then on the merchant ASIC, right, you’ve got stuff like Intel, Habana, you’ve got Groq, you’ve got Untether, companies like Untether AI, and we are seeing where it goes. Now, Dan, you and I have always talked about the AI ASIC being much more efficient and what’s going on here, but the rumor says, and this came out of Reuters, that NVIDIA is chasing the $30 billion custom ASIC market out there. And yeah, I got a little bit provocative, and Dan, you read between the lines of what I was saying, which is first of all, if this is true, totally justifies the market for data center AI ASICs, been all GPUs so far. NVIDIA already ships tiny ASIC blocks on its data center GPUs, and it’s called Tensor Cores.

And by the way, they’re Jetson platform. They have some specific, I think ASICs for convolutional network site, I forget what it’s called, DLA, maybe. If this is true, you would totally expect NVIDIA to play the CUDA compatibility software card, because right now, people are all in on GPUs, because they can get at least three generations of AI goodness out of them, if we look back historically. And naturally, if they were going to do that at, they would make this compatible with the CUDA tool set, the CUDA frameworks, and the CUDA models when it comes to generative AI. And the one thing that just popped into my head yesterday was where’s AMD in all this? AMD is a custom ASIC provider, a custom SOC provider to companies like Microsoft and Sony. It seems like they would be phenomenal in something like this, but hey, we’ll have to see what happens. I give it a 90% chance that NVIDIA gets into this custom market.

Daniel Newman: Hey, Pat, so let me interview you real quickly here, because you haven’t done a CNBC, so I’ll be CNBC, you’re going to be there. Just how hard, Pat, is it to enter the custom market?

Patrick Moorhead: Well, it’s a huge, huge commitment, and typically in any custom ASIC market, there is hundreds and hundreds of millions of R&D that you need to spend upfront before you get anything out there. Timeframe is key, too. I mean, the quickest reasonable ASIC that I’ve seen the pop out of the oven is maybe four years after inception, maybe three on a good day. Some companies will take what’s called NRE, non-recurring engineering, payments upfront. We’ve seen that for AMD. And when AMD did some of the first Microsoft and Sony ASICs or custom SOCs, they got big R&D payments that, by the way, made their gross margin… But they had to take the cost in their gross margin, which made the gross margin look low. But net margin business, it’s really good. So net-net, it’s hard, and it’s a pretty big commitment, because you’re also saying you’re going to support the software for a very long time.

Daniel Newman: Okay, two more quickies. So for companies like Marvell and Broadcom, Pat, is this an attack or is this complimentary?

Patrick Moorhead: So I think the market is so big that it would be complimentary. I don’t think this makes sense for the big hyper-scalers, just to be brutally honest. They already have a way to get custom done. I don’t know. I don’t see yet the incremental value that NVIDIA could bring over something custom, and it’s hard for me to imagine how would it be custom if NVIDIA is layering it in? It’s hard for me to kind of wrap my brain around that.

Daniel Newman: All right, well, listen, I’ve had fun interviewing you, Mr. Moorhead, thanks so much for joining CNBC.

Patrick Moorhead: Please have me on again.

Daniel Newman: Listen, there’s a couple of things too that occurred to me, but first and foremost is what you just said is look, the AI ASIC by the hyper-scalers, they’re going to go down their own route. What there is a little bit of an implication here that’s super interesting, though, is we’ve heard DGX Cloud, NVIDIA partnerships with companies like CoreWeave and others, as if you’re building competition, there is a benefit to potentially having this kind of IP and building. I also just, like I said, wonder, what’s it, about a $30 billion business, if it’s worth chasing, and how much incremental they’re going to get out of it, and where the incrementals can come from. It’s not going to be so much from the enterprise. So I have to imagine there’s some net revenue expansion coming out of this new AI data center concept, and being able to do it at scale.
But it’s going to be really interesting, Pat, because there’s a lot of speculation as to what’s going to happen next. I saw something, and this maybe transitions us really nicely to topic two, which is Intel’s IFS event that’s coming up. But Intel IFS, we’re going to have Sam Altman on the ground.

Patrick Moorhead: Yeah, do you want me to shift to the-

Daniel Newman: Yeah, let’s keep going. I did such a good job questioning you, you filled in most of the gap of what I wanted to talk about, but I was thinking maybe we could bounce over. So there’s a big Direct Connect event. This is like the mega Foundry preview. I had a chance to do a little bit of, have an upfront conversation with Intel CEO, Pat Gelsinger, processing all that right now. But I’ll share some things that I can on the record, and of course share some of my own speculation, because that’s always fun. But first and foremost, I think this is going to be a victory lap moment with the five and four, and talking about kind of the whole IDM strategy. But the pivot really quickly is going to be this is what the world is going to be interested in. Okay? The world is going to be interested in, besides the fact that you’re trying to address supply chain resiliency, trusted supply chain, and all these other items.

And we’re also, we’re going to want to see the world address the Sam Altman five to $7 trillion supposed needed investment. And we’re going to want to understand who are going to be the partners and who are going to be the companies that are going to be capable of bringing bleeding-edge process manufacturing to the West at scale. And so everything we’re doing, you got to do the math, Pat, to figure out how do you get from where we’re at, with a $52 billion investment, even with the matching for innovation and R&D, that takes it up to about 4x that in spend, up and ramp that up to what Sam Altman’s talking, about with five to seven trillion.

The reason I keep mentioning Sam, by the way, Sam is going to be on stage at this event. So this is a really big moment. Sam’s going to be there. Satya Nadella is going to be there. Gina Raimondo is going to be there. You’ve got leaders from companies, like I believe, Pat, and you shared this, like Cadence, Synopsis, a lot of IP companies are showing up. And what’s really, really interesting is to get to five to seven trillion, you’re really looking at three parts. Everyone’s kind of wondering, “Where did Sam get that number?” And it’s Foundry, it’s data center build-outs, and of course it’s power. It’s actual global infrastructure that is required to support the scale. We’re already seeing the amount of power consumption because of AI. It’s doubled, I believe is the number, in about a year’s time since we’ve rolled out. But these are very power-hungry designs. So the world wants to understand, “What’s the relationship?” I think I saw Ed Ludlow on Bloomberg shared something this morning that Sam is ready to go get US government backing to go after his chip venture.

And why am I sharing this? It’s really interesting, though, Pat. He’s showing up on stage with Intel. Intel’s got this massive Foundry project. You’ve got the commerce sector, the person that’s driving global commerce or the spend of the chips set, and they’re all sitting on stage together right around this timing, when this potential five to seven trillion spend is being… So I’m all in for the speculation here, but my take is there’s a really interesting opportunity where someone like Sam could see Intel as the right left to right partner that has everything that he needs, and obviously is also a company, what I call kind of a willing partner right now. Because, can you imagine Sam Altman validating Intel as the AI partner in terms of building his ASIC blocks? I talked to a reporter yesterday and they asked me a question, “Could there be an open AI ASIC, or like a ChatGPT?”

It’s like, “Yeah, of course.” And this is kind of where this really interesting sort of competitive stake, I saw a $1,200 price target come out for NVIDIA this morning, but does Satya, does Sam, does all these companies really want to let Intel, or sorry, NVIDIA become any more powerful in terms of how much they control the AI chips that are going to be going into market, into data centers? There’s a lot of these different powers coming together right now, these forces coming together. And I think a lot of very interesting speculation is going to come off stage. I’ll say one more thing, I seriously doubt anything of this nature is going to be announced. This is just me kind of putting together parts and pieces and saying, “Wow, Intel has been kind of accused of not hitting the AI opportunity. You’ve got the most prolific personality in the world on AI going on stage,” far enough.

I mean, do you see that thing they launched yesterday? Dude, we don’t even need to go to events anymore. Just have Dan and Pat talking about Intel IFS Day, and it’s going to create a one-minute video. Sorry, sizzle reel makers, game over. In fact, this has all been done in a year. So I’m super excited about what the implications of this are. And what I’ll say is Pat was very humble, Pat Gelsinger, big Pat was very humble. He was very excited to talk about roadmap, talk about execution, talk about packaging versus kind of way for opportunities and stuff like that. But you couldn’t help but notice just an optimism, which, given the fact that 99% of the AI chip market’s going to NVIDIA right now, what’s that optimism all about? So that’s me doing a little speculation.

Patrick Moorhead: Yeah. At this point, all we can do is speculate. I think if there’s going to be something big that’s going to be announced, it’s being kept really, really tight here. And by the way, if I look at the folks that are going to be on stage and what they represent, it’s freaking huge. You’ve got Rene Haas from ARM. You’ve got the person in charge of… I think he works for Charlie, he works Yuan Xing Lee, Central Engineering at Broadcom. We’ve got Eric Fisher from MediaTek, Jason Wang, the president of UMC, Aart de Geus, the founder and chair of Synopsys. It’s interesting they sent him and not the new CEO. The CEO of Cadence. Maybe that was the reason, because Synopsys and Cadence are big rivals. Oh, and then Synopsys, sorry, Ansys who’s being acquired by Synopsys-

Daniel Newman: Packing, design, IP. It’s crazy, Pat.

Patrick Moorhead: Yeah, and by the way, I had a couple people on X hit me up that, “What about NVIDIA?” By the way, NVIDIA is already working with IFS on RAMP-C. That’s defense contract for the United States. While I don’t know this for a fact, I believe the big packaging customer that they’re talking about is for AWS with Graviton, Trainium, and Inferentia. Again, I don’t know that, I’m going to speculate. Qualcomm, I do believe, is taking a slow role on IFS, but I do believe if AT&A works, and the White House shifts critical infrastructure, and they roll in smartphones in there, Qualcomm’s going to have to do that.

And by the way, Qualcomm is the most diversified design company out there in terms of its supply chain. They’re everywhere, and they work with every one. And I find it hard to imagine that they wouldn’t work with Intel. But the way these big deals go, the Big Kahuna deals, Dan, is you get something strategic in exchange for this. And Qualcomm is very strategic company, they know how to play this game. I mean, I’m dying to know… I mean, if Sam gets up there and Satya gets up there and just talks about milquetoast, it’s going to be seriously disappointing, particularly when Altman is out pounding the pavement on whatever the heck he’s doing between ships, and data centers, and foundries.

Daniel Newman: Yeah, like I said, did you hear what I said about Ed Ludlow? He tweeted out that Sam’s ready to go ask for funding.

Patrick Moorhead: Yeah, I saw that this morning. No source, no name, no nothing, but…

Daniel Newman: Oh, you know, I like to speculate on speculators.

Patrick Moorhead: Oh, that’s good. That’s an interesting thing to do, I guess.

Daniel Newman: Bloomberg does tend to get a scoop from time to time, but it is very interesting, and just how fast this stuff is moving. It’s just wild.

Patrick Moorhead: Yeah, totally, totally. Hey, let’s move to the next topic. And guess what, we’re going to talk more AI. Dan, it’s just all about AI at this point, isn’t it? So Plus is a platform provider, hardware and software for autonomous driving. You’re like, “Well, wait a second, we never quite heard of them before.” Well, that’s one of the reasons we’re bringing this to light. They are actually the market leader in autonomous trucking. Now, their software is very applicable to passenger cars as well. You would think… How many tons is a big truck, Dan, fully loaded–

Daniel Newman: I should know this. I don’t know this, though.

Patrick Moorhead: Anyways, it’s tens of tons, likely, probably more, because a car is only two tons. But anyways, it is, in many ways, if you can get it right for trucking, it seems like you could get it right for passenger vehicles. They cut deals, big deals with big trucking companies of Echo, retailers and things like that. But anyways, the big announcement that they had is they are going to now sell their software in modules. So they are splitting up the bundle. So if you are a tier one or an automaker and you just want, let’s say, AV functional module, or an off-board module, or a vehicle integration module, you can grab those. And then what you do, right, you connect the sensors, the actuation, computing platform, then you can integrate that all together, if you’re an OEM.

I view this move as very customer-centric. I’m very interested to see, like right now they’re on the NVIDIA computing platform. I think they will have to move in the direction where they’re compatible with Qualcomm. They’re compatible with Intel. And by the way, check out Intel just threw their hat back in the ring, not to be confused with Mobileye. Read the white paper on our website if you want more on that. And obviously, AMD has aspirations as well. And by the way, Intel would be an interesting partner, because if you remember our interview with Jack Wiest, he talked about wanting to collaborate with other ADAS software suppliers. It almost seems like a perfect combination. So there were no customers listed in the press release. I had the chance to talk with Plus CEO, David Liu, on it, and I’m going to be doing a write-up shortly, but I love it, man. Customer centricity, baby. “You want modules? We will give you modules.”

Daniel Newman: Yeah, I mean, Pat, look, you and I have both been pretty bullish on the Snapdragon platform for auto. And the reason was really the digital chassis has been all about kind of building blocks. So the original thesis of Plus was a little bit more of these kinds of complete systems, turnkey. It was really twofold. It was either kind of the augmented vehicle of “truck of today” or it was this net new future vehicle, but it was going to be ground-up built on their platform. Now they’re basically saying, “Look, we’ve got building blocks that you can put into use, and we’re going to license and sell.”

And I didn’t have the conversation you had, so I’m working off the press release. But the bottom line is I think they needed to open this up to create a bigger tamp. It’s more market. It’s an opportunity to diversify who they sell to, and take the IP that they’ve been working to build, and make it available to a broader set of customers. They’ve been out there for a while now. You and I have actually ridden in these trucks. We’ve experienced the Plus truck in San Jose. We actually drove around. And so we know what they’re doing. We know that they’re innovating. But I think the modularity gives them more flexibility in their go-to market. And I think right now that’s what they need.

For me, it’s early to see, Pat, to your point, I’d like to hear more about wins. I’d like to hear more about who’s buying this and what sort of drove this. But it’s early days. So this one’s a light one for me. I don’t have a lot to add here, Pat, but I do like to see the company continue to grow and scale. I’ve enjoyed the interactions we’ve had with David. I look forward to reading your write up. So let’s jump to Cisco.

Patrick Moorhead: Yeah, Cisco did Q2 FY 2024. They announced some layoffs. Dan, what’s going on here?

Daniel Newman: Well, so it’s kind of one of those, the devil’s in the guide. The actual results again, were good. When you say a beat on both the top and the bottom line, and they did do that. But what’s the attention drawn to? Well, the attention was drawn to a second consecutive quarter of software guide, which Pat, that’s indicative. I mean, Cisco is a bellwether of the IT industry. And when Cisco is saying they’re slowing, there is some concern.

And Pat, you and I have shared stages, and we’ve talked about this in public, and I don’t think we’ll change directions on this, is IT spend is not growing. Our data is pretty emphatic about that. So while we’ve got all this enthusiasm and excitement, what’s happening is all the budget that traditionally went to other parts of the IT stack, it’s being reallocated. And so companies that have a smaller AI play are at risk right now. And Cisco has a substantial AI play from a picks and axes standpoint. Their software growth has been meaningful. The Splunk acquisition definitely brings them deeper into that sort of “all roads go through Cisco”.

And on a really positive note, and I put this out into the Twittersphere to a pretty good reaction, is despite lowering guidance and resetting expectations to some extent, there was one data point that I just absolutely loved in the Cisco number this quarter, and that’s 50% of its business now is subscription. 50% of its revenue, and it did 12.79 billion in revenue this quarter, that means $6 billion+ in the quarter was subscription revenue. That’s a massive turn. We spent time, I think a year ago we were with Chuck Robbins at MWC, and one of the big topics of that conversation was all about the pivot. The company’s very aggressively, over the last several quarters, seen its revenue jettisoned from where it was to almost to the 50% number. So that was a number that I’ve been looking at for a long time.

You kind of go through the pieces, and it looks kind of strained everywhere. Where it was growing, it was single digits, where it was contracting, it was single digits. It wasn’t like there was a part of the business that you could look at and be like, “Oh, that was the reason that this number slowed.” It was sort of across the board. But one thing, Pat, and this is really an interesting sort of inflection as it relates to what does the market like, and job cuts, the market likes right now. And I know it seems-

Patrick Moorhead: Has the market ever not liked job cuts?

Daniel Newman: Well, so I’ve never seen it quite do as much for the stock upside as I’ve seen in the last couple of years. I mean, you look at Meta, I mean they absolutely were getting crushed because just people had started to lose faith in the company’s ability to be profitable while it was trying to innovate. Well, right now, I mean, look, these companies are coming out, they’re coming out bold and they’re making cuts. 5% is a lot, it’s over 4,000 jobs, and you never want to take these kinds of cuts and make light of them. It’s very important. These are people’s livelihoods and people’s careers, and so it’s very sad.

But, you know, CNBC shared the number, Pat, that there’s been about a 144 tech companies last just year to date, and almost 35,000 workers. So there’s this whole “everything’s great in the economy” BS. But the truth is I feel like a few companies are sort of propping the entire market up right now, and it’s almost entirely AI driven. And so every company on the planet right now that doesn’t have a strong attachment to the AI growth story is struggling. And Cisco is a great company that has a lot of AI, but still is not able to make the transition with the implementations and integrations as quickly. And it needs to reduce its cost to make sure it can deliver on its promise to its shareholders, which is always a very tough predicament to be in.

Patrick Moorhead: Yeah, I like to separate company-inflicted wounds and market-inflicted wounds. And I put this clearly in the market. The only thing I can’t fully get around is the quote, and I’ll quote Chuck here, “Customers have been taking time since the start of our fiscal ’24 to deploy elevated levels of product shipped to them in recent quarters, and this is taking longer than our initial expectations.” So basically, hardware was put in there, but them getting it up and running, which would drive more demand later, and by the way, we see this with the hyper-scalers, so I don’t fully understand that. What I 100% understand, though, is weak demand with our cable and telco and cable service provider customers. The entire industry is down with that. And Chuck said it’s going to take one to two quarters to burn down that interview.

I was super impressed with Splunk on the call. They said that expected to add $4 billion in an incremental ARR. I love this acquisition. I love cross-cloud capabilities that Cisco has been investing in, because quite frankly, regardless of whose networking and whose compute you use or where it’s at in the cloud, private cloud, on prem, they still make money on it. Some other good stuff is that Meraki, they’re seeing faster revenue growth in wireless slowing and switching. And many times that’s a precursor to what equipment has been installed. In fact, wireless orders were up 50% of deals over a million dollars sequential. I think that’s big. Other areas that aren’t necessarily reliant on the network, security and collab, they both saw double-digit growth. And probably the one thing that surprised me the most, and I really need to do the double-click on this, it said three out of the four top hyper-scalers are deploying ethernet AI fabric.

Now, they use web scale. And I’m just thinking that must be hyper-scale, but I need to go back and do that. So net, net, I think this is a momentary blip here, especially for service providers. Continue to be impressed with the cross-cloud service capabilities that aren’t necessarily reliant on the network. The company does need to figure out why that equipment took longer to install. Hey, are they mowing the lawn behind you? I’m hearing a bunch of noise.

Daniel Newman: I hear nothing.

Patrick Moorhead: Okay, that’s awesome. No, but that’s all I got, man. And hey, let’s go into Lattice Q4 and Q4 23 and overall earnings for the year. So overall, they had a miss on revenue by about 3% EPS, small beat, maybe we’d call that beat. And the forecast was about $25 million less than consensus. And you can imagine what the response was. I think they were off single digit percent.

What I did is I did a drill down into the call, Jim Anderson’s call, to go through, I’m really looking for what’s the drill-down on some future opportunities? And one of those is AI. And for the first time, the company said that they gave a revenue percentage that AI is delivering. For ’23, it was 13%, and they said they expect to double this over the next few years. I wish they would’ve said 2024, but they said, “Over the next few years,” which, “Over the next few years,” versus 2024 is tough for people to know exactly what that means. I really did enjoy, though, the drill-down of where the applications that are driving AI… So first of all, AI servers, the control management, security, and Dan, when we did the walkthrough of the AWS Silicon Lab, whose chip did we see on the main board of the Trainium and Inferentia systems?

We saw Lattice chip, and yeah, Lattice. Yeah, you’re on mute. And then I went to Azure’s Silicon Lab, and guess what I saw on their both Cobalt and Maya servers? Lattice semiconductor. So that’s what that is. AI PCs, user presence and gaze control, so somebody’s looking over your shoulder, it does it very, very… It’s programmable, but it’s also very low power on PCs from Lenovo. Probably the biggest surprise for me though was their inclusion in ADAS. So they’re doing data pre-processing, and I think I need to drill in and ask Jim what he meant by this, ADAS, a quote/unquote “monster crossover vehicles”. Don’t know exactly what that means. I don’t think he means monster trucks, but I’m pretty sure that that’s very large crossover, which was kind of cool. You had no idea. I could guess that they were involved in the pre-process, but not the actual ADAS.

Finally, software attach at 50%, and most popular is SenseAI. Just to make a long story longer, some of the Avant, which is their mid-range solution, they brought out some really good points. First revenue for Avant E is comms gateways, industrial engine controls, LIDAR applications, pretty cool. LIDAR does take a lot of processing power. The next products after Avant E are Avant G and X, driving revenue in 2024, likely toward the back half.

And finally, 90% of the target Avant customers are already customers of the overall company, which to me, leads me to believe they will have a easier chance of moving these customers up the stack, particularly given that Nexus software, which is their lower performance, lower power, is compatible with Avant. So any software that you get on Nexus, it’s compatible with Avant. I think it’s a great story here. I think the company has a great future, and quite frankly, the markets you would expect, they were dragging them down or down. Telco, down. Shocking, right? We just talked about Cisco. So anyways, market versus self-inflicted. Dan, you’re on mute.

Daniel Newman: Darn lawn mower.

Patrick Moorhead: I thought you told me you mowed your own lawn?

Daniel Newman: I am.

Patrick Moorhead: Okay, so what-

Daniel Newman: We’re talking AI.

Patrick Moorhead: It’s an automated lawn mower, I knew it.

Daniel Newman: I have, yeah, so the iRobot for my lawn.

Patrick Moorhead: So smart.

Daniel Newman: You’d have to understand, it’s true. Hey, so listen, Lattice Semi had a remarkable run of almost 12 quarters of incredible growth, beats, raises across the board. The last two quarters have been harder for the company. Now you said this, I’m going to reiterate it, not self-inflicted. Let me point out why I don’t believe it’s self-inflicted. The markets it’s in are diverse, but the markets that it focuses on are, in many cases, in what would be considered a recession or pullback at the current juncture. But you look across the year, so the quarter is great from an earnings standpoint. Everybody likes to do that, it’s a reason to create a moment for options. CBOE loves quarterly earnings. Companies mostly focus on annual runs, and they make decisions based on the company’s overall performance. 12% growth for the year, Pat, so their revenue’s double-digit growth.

Now, that’s pulled back. It was higher because of the last couple of quarters. Pat, incredible operational management of the company, 70.4% gross margin. By the way, expanded 130 basis points year on year. So better than ’22. And then, earnings per share rose by 14%. So you look at what does a company need to do? Well, you grow earnings double digits, you expand your margins substantially, and north of 70% in the semi-space, and you grow revenue double digits. And yeah, you’ve slowed down. So that’s what you’re looking at right now. You’re looking at slowing growth against year on a year over year basis, and against targets, but a very, very good overall performance. And I love how you broke down the AI opportunity. And by the way, I don’t really love how you broke down the AI opportunity, I love how they broke down the AI opportunity so you could break down the AI opportunity.

Hey, Pat, you getting hot in there? Getting a little warm. You got too many Six Five layers-

Patrick Moorhead: Ahh, ahh.

Daniel Newman: Look, I expect continued improvement. They’re in the right spaces. They’re diversified. They have a tailwind of AI and they’re not overly rotated or dependent. And plus, with the Avant opportunity, they’ve really nicely positioned themselves and scaled their TAM. They’re still growing. So yes, not fast enough, and expectations have been set high. That’s what you get for being a well-run company, Jim, Sam, and team. But we do see a lot of potential in where you’re heading. I like that you’re calling out the AI opportunity.

I’d like to think that that was my idea. I’m not sure if it actually was my idea, but I’ve been saying for a long time, companies that can quantify their AI opportunity are going to get a better reaction from the street, because people want to understand, “Can you make money from AI?” So with that in mind, Pat, let’s move on to the final topic. I wish we had a producer sitting around that could show a photo and paint a picture of two… You know, we could use Sora for this. Is it Sora? Is that what you call it?

Patrick Moorhead: Yeah.

Daniel Newman: We could use Sora and say, “Place two of the funnest, most thoughtful, most fun, kindest, fairest analysts on stage at a global sales kickoff in Miami, Florida, and have them look like they’re having a lot of fun talking about data management and AI.”

Patrick Moorhead: Hang on a second. “Beep, beep, boop, beep. Producers, can you put something up there that showed Dan and I having a ton of fun?” Maybe we can. There we go, baby. Let’s go, Dan, go.

Daniel Newman: There it is. Look at this-

Patrick Moorhead: Thank you, producers.

Daniel Newman: … plus customer interviews that we’ve done on Six Five, Pat and I have never shared a keynote stage together. We’ve both done tons of these, but we had the opportunity to head out to Hollywood, Florida, north of Miami-

Patrick Moorhead: And where is that, Dan? Where’s Miami?

Daniel Newman: North of Miami, south of Fort Lauderdale, on the beach. We might’ve taken a stroll up the beach, done some of the planning in the morning together, but no, Pat, we didn’t hold hands, but-

Patrick Moorhead: We should have.

Daniel Newman: … a really important moment for a company that has so much to bring. Now, again, you’re talking about a company with an exponentially larger amount of data under management than the likes of Databricks, Snowflake, and other sort of born on cloud. Great photos, great photos. I love it. This is also a company that has real challenges to earn the market’s respect as a high-growth data management platform that is readying the enterprise for AI. So when we were there, that’s what I was listening for. We were there to provide our outside-end perspective as analysts as to what these companies need to do to compete in the market. And of course, to better understand the opportunities that a company like Cloudera has with a true kind of born on enterprise, data center first, hybrid, multi-cloud fabric designed for compliant, governed data management that can be utilized for AI.

Seven to eight months ago, company really didn’t have much of an AI story. Under the new leadership of Charles Sansbury, CEO, and the team that he’s brought in, Mary Wells, a CMO, we’ve seen incremental and meaningful improvement in that story in just a short period of time. But there needs to be more. And that was what you and I, I believe, challenged and at the same time, shared that, “Hey, we see a lot of potential. You have all these customers.” What do they have? It’s about half of the Fortune 1,000. It was a number that Charles said. It’s a big number, though, that used , and it’s a big, big number of companies out there in that sort of multi-hundred billion plus that all trust Cloudera for data management. Having said that, a lot of challenges coming from different directions. I think they are more prepared than I’ve seen over the last three or four years.

We’ve been tracking them for… I have been tracking them over half a decade, I think you a little bit longer, more prepared to innovate. But like I said, it’s more necessary than ever before that they get their AI story quickly in market and get it right. And by the way, look out in the market for Patrick and I’s sit downs with Charles. We did a sit down with Charles, not just on stage on The Six Five, with their new chief product officer Dito, and then Abhas Ricky, their chief strategy officer, Pat. So good day, good event. Great to be on there. And buddy, great to share a stage with you. I know know your short torso made you look a little bit shorter than I did when we sat down, but it was so fun to be up there with you.

Patrick Moorhead: The camera made me look like I’d been sitting in a tanning bed for like 12 hours before.

Daniel Newman: Had you? Had you?

Patrick Moorhead: But we did take a stroll on the beach together before we had breakfast together, though.

Daniel Newman: I said, we strolled gently.

Patrick Moorhead: Yeah, so I’m going to hit on the big opportunity here. So I do want to say categorically that a data management platform that only leverages the public cloud is a dead end. It’s kind of like the same thinking 10 years ago that, “Only do the public cloud.” The reality is that you have data and you have infrastructure, heck, on mainframes on x86 servers, on prem, on private cloud, on prem, on sovereign clouds, private clouds. You also have data obviously in hyper-scaler services, and you have data that is from SaaS applications.

So data is everywhere. And if you don’t have a data management platform that scales across all those areas, it really is a dead end, and you’re putting yourself in a position that you don’t want to be as an enterprise. Cloudera’s challenge is to get that out there and sell that hard, to not only… By the way, their current customer base is gigantic. And I think the last time we checked, they have more data, enterprise data under management than any other company out there.

Daniel Newman: Definitely more than Snowbricks or Dataflake. I’m joking. I just like to combine that. So Snowflake and Databricks.

Patrick Moorhead: Yeah, and quite frankly, the opportunity with generative AI think is amplified, in that for the first time, we’re commingling data sets that have never been commingled under machine learning. Things like ERP, CRM, CX, product development data, legal data, HRM, HCM, SCM, all the buzzwords you can think of. And anytime that you move data, it’s at risk. And anytime you commingle data, particularly generative AI, you have a risk. And that data needs to be managed. And the company that’s managing pretty much all of the highly regulated industries is Cloudera. So I think this is Cloudera’s opportunity to lose or to win, depending on how you look at it. They need to get their customers talking about what they do, either on the record completely or anonymously to show others. And they need to go after born-in-the-cloud folks. So Dan, it was a great show.

Daniel Newman: Always.

Patrick Moorhead: I hope everybody agrees. I mean, so much going on. I’m looking forward to next week, not having to get on an airplane, I think. But listen, if my customers need me to be on a plane, I’ll be on a plane. But I’ve been on the road for six straight… No, five straight weeks, in an airplane. And I know, I know, I know. But on next Saturday, I get on an airplane to go to Spain.

Daniel Newman: You know what? Next, we’re going to whine about the weather, right? We’re going to ask… Wait, wait, wait, wait. Hold on. We’re going to whine about the weather. Then we’re going to see is the dinner, “Can I get in for a dinner at 4:30 PM,” and then, “Is it too early to go to bed at 8:00?” These are going to be our topics of The Six Five as we continue to age here.

Patrick Moorhead: Well, I’m there. Not really.

Daniel Newman: Oh, by the way, everybody out there, if you wonder, because everyone’s like, “Oh, you travel, you go to all these great places.” We are the most boring people you will ever meet. I can’t tell you how many… We might be fun here. We’re fun here. You got to hang out with us here. But we go to in a meeting, they’re like, “Oh, we got a party, all you can drink, open bar.” You and I go in there, we walk around-

Patrick Moorhead: Ice waters.

Daniel Newman: … say hi to the customers and we’re like, “7:30, think anyone would notice if we go to bed?”

Patrick Moorhead: No, we went to CES. Went to Las Vegas, didn’t have a single sit-down dinner and didn’t have a single drink, and I was typically in bed by 9:00 or 10:00. So no, I mean listen, when you got to grind, you got to grind, you know?

Daniel Newman: I just want to point out that we’re fun in our own way.

Patrick Moorhead: We’re unique. Oh, in other ways, we’re special.

Daniel Newman: Well, that’s where we started this show, right? We are hanging out now.

Patrick Moorhead: “I like their personalities, they have good personalities.” I love y’all. Hey, give us some feedback, give us some feedback on the pod. I’m not supposed to say the S word, right, or we get deranked?

Daniel Newman: I don’t know, join us as part of our community by hitting the button that starts with “sub” and ends with “scribe”.

Patrick Moorhead: Yeah, something like that.

Daniel Newman: We’d love to have you as part of The Six Five. And Pat, where are we next? We’re at MWC. That’s the next big-

Patrick Moorhead: Spain. I don’t know how we… And by the way, just if the audience was wondering, we’re not even on the same flights and we’re not even staying in the same hotel. I can’t believe that, man. You need to fire your entire staff. I don’t know how that happened, or-

Daniel Newman: You know what? Let me jokingly say, “Sure, I’m going to fire everybody.” We’ll see if anyone listens. Does any of the staff listen to the show?

Patrick Moorhead: If they actually listen to the podcast, we’ll see. I should ask my staff. I’m going to fire everybody on my staff, too. Let me know if anybody on my staff watches. Okay, folks, we really appreciate you. Have a great weekend. Really appreciate you. We are nothing without you. Not really, we are, but we do appreciate you.

Daniel Newman: Oh, sweet. Just say goodbye. That is dragging.

Patrick Moorhead: I’m trying.

Daniel Newman: Bye.

Patrick Moorhead: I’m trying to be a normal human. All right, take care, everybody.

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.