On this episode of The Six Five Webcast host Patrick Moorhead and Daniel Newman discuss the tech new stories that made headlines this week. The six handpicked topics for this week are:
- NVIDIA GTC recap
- Zoho Qntrl launch
- Dell spins off VMware
- Surface Laptop 4 updates
- Microsoft buying Nuance
- Big money for GLOBALFOUNDRIES, Groq, and Sambanova
For a deeper diver 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 podcast, 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 do not ask that you treat us as such.
Patrick Moorhead: Hi, this is Pat Moorhead with Moor Insights & Strategy. We are here for another episode of the Six Five podcast. I am here with my awesome, incredible, probably sleepy like I am, cohort in crime, podcaster, imposter … No, you’re not an imposter, Daniel Newman of Futurum Research. How are you, my friend?
Daniel Newman: Pat, Happy Friday. We are back, baby. I love Friday podcasts, especially in big weeks that had lots of tech news from Monday to Sunday. I tell you, man, it’s like I got up Monday morning and the tech world was on fire. There is so much to cover this week.
Patrick Moorhead: Were we really messaging each other at one o’clock in the morning?
Daniel Newman: We were, but we’ve got some big, big news coming up about our Six Five Summit event. I mean, this lineup is going to be off the hook. I mean, last year we had Michael Dell and Lisa Su, a number of amazing execs. We’re going to have like eight, nine of the world’s biggest tech leaders. Sorry, I can’t say more than that.
Patrick Moorhead: Don’t give too much. Don’t give too much there, Daniel, come on. It is fun.
Daniel Newman: Just plan to attend. June 14 to 18. This thing’s going to be off the chain.
Patrick Moorhead: It is going to be off the chain. If this is your first Six Five Podcast, we do six topics, five minutes each, sometimes 10 minutes each, the six 10, but-
Daniel Newman: Not today.
Patrick Moorhead: No, no, no. We’re going to fly through this. Final thing, don’t use this for investment research or to impact any of your big stock investments. This is for educational information purposes only. Daniel, let’s dive right in to the first topic. NVIDIA GTC, we had data center, we had visualization, we had automotive bonanza out there. It was pretty incredible. Why don’t you take the data center? Some data center highlights. I mean, were there 16 releases?
Daniel Newman: It was way too much to cover. Certainly too much to cover in a five-minute segment. It was an impressive event. That’s why we called it GTC the Future, this episode. I did a piece. I delved in on a couple of the big announcements that caught my attention. By the way, there were a lot. I mean, all this stuff going on with frameworks is super big, but conversational and driving the future. Let’s talk about some big, supercomputing. There was some significant updates this year to the DGX lineup, which is the SuperPOD. Then they added this Station element and this one … I mean, just to get you a handle on it, the SuperPOD, it’s 20 DGX, or A100.
It’s built on, it’s HDR networking. It’s got the new BlueField DPU, and it’s basically coming out right away, by the way, second quarter of this year. This thing is an absolute powerhouse for high-performance computing as the company continues to add the fabric, the networking, but here is something really interesting. There’s powerhouse 20 DGX, A100 system is the SuperPOD, but this new Station, Pat, was the one that really caught my attention. That was super cool.
I called it AI DCaaS. See, because we need to brand everything. I called it AI data center as a service. What they’ve essentially done is created a SuperPOD in a small form factor that can be shipped to the door of a company that’s looking to do high-performance computing on the fly. You’re talking about $150,000 computer that a company, a research lab, an institution can essentially rent, Pat. I think it’s something like nine grand a month is what it comes out to.
This is basically a powerhouse DGX tool to your door. You use it for 30 days, 60 days, 90 days, run your data, science, run your models on it, get your outputs. What I loved about it was, Pat, we’re seeing everything move into consumption, right? We’re seeing this wild pivot and shift to all these consumption economics. Now you have $150,000 machine. By the way, just to give you a sense. DGX SuperPODs, these massive machines can go up to $60 million for a single machine.
Let me just quickly get on because there’s too much here. I’m moving quickly. The other big announcement that I wanted to touch on was Grace. GPUs is what NVIDIA is known for. Training inference, but GPUs. Not anymore. We know about the Arm acquisition, but Grace, which is going to be coming out in 2023, so you got a little bit of time ahead of you. But you’re talking about an NVIDIA and Arm-based machines, so the two companies working together, and it’s a CPU, data center CPU. Trillion parameter capability.
I want everyone to understand this is not NVIDIA coming out with a CPU to compete with everyday data center, a computer that’s coming from Intel or coming from AMD. This is NVIDIA saying, “In the future, we are going to be having interactive, latency-free, human conversations with the machine and you’re going to need a powerhouse machine that has both CPU and GPU and the right network fabric, Mellanox, all the tools, BlueField.”
Bringing all of these technologies that you’re hearing about together with almost seamless connectivity. By the way, the first ones are going to be built in partnership with HPE coming out in 2023, and I believe they’re going to the Swiss National Computing Center.
Patrick Moorhead: One comment I want to make on Grace. There was a little bit of people who didn’t quite understand how Grace fit in. Don’t be confused. Grace is not a general purpose processor that competes with AMD and Intel, or even something like AWS Graviton2. It is not maximized for integer. It is maximized throughput and using shared memory between the GPU and the CPU, so don’t go there. What I’d like to do is hit on some automotive.
Essentially, NVIDIA took all of their latest and greatest components and put that into an autonomous vehicle platform called Atlan. Atlan has Grace, as Daniel talked about, also has BlueField DPU, not the latest and greatest, but essentially giving high-performance networking offload in addition to security features. I think the big thing here is over a thousand tops, which is big, big, big, big time and the company wants to scale this architecture from L2+ to L5. L5, no steering wheel and no driver.
Think of a robo taxi, think of L2+ as a step-up from today’s technology inside of the latest and greatest from Mr. Elon Musk. NVIDIA at GTC hitting on what you would expect them to hit this on, which is data center prowess, they added in networking and they also added in an upgraded CPU. By the way, this isn’t the first CPU that NVIDIA has done. NVIDIA has been doing Arm-based CPUs and automotive and what it’s doing with Nintendo for years. Don’t overplay this one.
Grace is not going to perform as well on a specking as even a 2019 AMD or Intel processor. Don’t go there. The one thing we didn’t see was a brand new graphics architecture, and it’s funny, nobody talked about that, but we did not see a brand new architecture. I don’t know exactly what that’s a signal of, but I think we’re going to talk about some NVIDIA competition at the very end of the segment.
Daniel Newman: I know we’ve got to keep moving here, but I think overall there was a lot of strength in the announcements. I felt a lot of focus move towards software, towards partnerships, frameworks. You heard some of the focuses like Clara, where you have technologies that are being used to shorten the time it takes for a model to be able to spit out a pharmaceutical-grade product.
Now, again, I’ve oversimplified it massively, but you’re talking about something that had a 10-year cycle, and now you’re adding software technology that can take these cycles down half or 80%, was actually what Jensen said. At some point, the maturity on what comes to market has to be part of the story too. I think there was a lot more of those. All right.
Patrick Moorhead: Let’s dive into Zoho. Daniel, you and I have talked about Zoho a lot here. They are a full stack enterprise SaaS provider. You think of a SaaS service that’s in the cloud and they have one and it’s fully their code and it’s fully on their hardware platform. Zoho also has different brands which live outside of the Zoho platform. They just did a launch of low-code, a tool called Qntrl.
Daniel Newman: Yeah. It’s Qntrl with a Q, and a Q-N-T-R-L. Very interesting way to approach that. Yeah. Zoho has its business operating system. It’s over 50 apps. I mean, everything, sign, collaboration, of course, CRM and ERP. They have AI tools, all kinds of tools, and really have been focused on that mid-market smaller companies, although it has definitely seen some of its products go up market.
By the way, ManageEngine, WebNMS, if you’ve heard of those, those are Zoho companies. Zoho even has a whole chip architecture development brand. They’re based in India and they’re doing some really interesting things. Qntrl is the company’s answer to workflow automation. You’re hearing a lot about RPA. Some companies like UiPath have announced a plan to go public.
You’re hearing more, Automation Anywhere made a big set of announcements with Google recently. Microsoft Power Automate has taken the world by storm. Even ServiceNow recently bought a company called Intellibot. Zoho is basically getting into the fray here. How do we customize workflows, make them simpler, more efficient, less complex? How do we help the business do better with technology using everything from AI to UI automation? Very competitive space.
You heard me mention a lot of companies, a lot of names that are in this space, but Zoho has always been in very competitive spaces. They’re in CRM, they’re in ERP. What the company I believe has an opportunity to build around though is, one, its huge Zoho ecosystem. Zoho customers need to use automation. We’re going to see more workflow automation and you need technology to do that.
Qntrl has a few key capabilities that it really focused on, but centralizing the requests from process stakeholders, ensuring compliance of processes, adding contextual workflow-centric collaboration with many stakeholders, driving towards KPIs, using automation to drive to KPIs, integrating with existing IT solutions so that companies can use these tools to take multiple stacks of IT solutions and concurrently have them work together. Here’s all the things.
Maybe the only other interesting thing of note. Well, there’s many interesting things, Pat, but the interesting thing to note too is just, it is operating as a separate business unit. That is definitely something worth pointing out, is like I said, Zoho has these different brands, but most people, if you know Zoho, you know Zoho. Overall, I thought it was a really solid launch. They’re in a good space. It’s going to be competitive.
Overall, they don’t tend to report a lot of metrics, Pat, so we’re going to probably have to wait for some analyst briefings to hear about customer adoption, but everything Zoho does seems to be well calculated. They’re in their own little bubble. They’re not overly focused on what everyone else is doing, but they’re focusing on delivering value to the customers they have.
Patrick Moorhead: Yeah. My only add around that, Daniel, is I like that this is a tool to work with other types of environments, whether it’s Box, whether it’s Office, whether it’s APIs into all of these different tools, because as you said, and I said, Zoho is really about its own platform. This gets them outside of their own platform.
Sure. You can use this inside the Zoho platform, but this is for people who might not even be a Zoho customer who are all in on Microsoft, who are all in on Google, who are all in on Box, even into SAP, into Dynamics and things like that. I’m interested to see how that business moves forward. Hey, let’s move on. I would say let’s move on to Dell spinning off VMware.
This was definitely one of the bigger Wall Street stories out there, but I’m going to just net this out. I’ve got an article on Forbes and you’ve got something on Futurum, but essentially for customers and channel partners, there isn’t going to be any changes for at least five years. Dell will still be the preferred platform and go-to-market partner for VMware and VMware will continue to be the solutions and software and likely hybrid cloud platform for Dell Tech.
What it does do is it does provide a lot of benefits to shareholders. It’s funny, Daniel, I know you spend a lot more time looking at stocks than I do, but essentially when you looked at the valuation overall, Dell Tech, that had 81% of VMware, it almost made the value of Dell Tech on its own close to zero, which was completely bizarre. What investors weren’t comfortable with was the governance and ownership structure related to Silver Lake and Michael Dell.
Essentially by splitting these companies up, it ‘unlocks’ the value as we hear on CNBC every morning, where governance and ownership structure is straight up, it’s clearer, and at least from my math and looking at the tea leaves, we could see a near doubling of Dell Tech stocks when you look at TTM EBITDA versus their competitors. I think the key is, who are the competitors on the comps? Right? It just shows the lunacy of valuation.
The other thing that I like too about this is Dell should, based on the payment that they get off the special dividend, be able to pay down enough debt to get their investment grade debt, as opposed to where they are today, which is non-investment grade debt. Dare I say junk.
Daniel Newman: Yeah. Well, they’re sitting in a B+ and they want to cross into that A grade and this does definitely help pay down a big chunk of debt. Look, from the minute this 13D was filed I could have told you this deal was going to happen. There’s a number of reasons why, but if you look, first of all, Michael Dell is an extremely crafty dealmaker. He knows how to make deals happen that don’t even look possible. The EMC deal was a great example of that nobody really saw how he would do it. He did it. Turned it into something really, really good.
The VMware deal was another similar deal, followed suit, complex. Of course, the two companies really did run very autonomous from one another. Pat Gelsinger had a lot of autonomy. He did things the way he wanted to do things. Built the company, grew it pretty regularly at 10%. Michael wanted it that way. It created distance. He was able to keep building the relationships with other OEMs, with other companies building around VMware with the cloud providers and no conflict of interest.
When you spin these two things off, I don’t see a whole lot of downside. The companies have agreed to strategically align going forward. The co-marketing and co-go-to-market that the two companies have had will continue. There isn’t a lot of lost revenue for either side, but what is gained in terms of unlocking the value from that cap structure was so good. First of all, the big shareholders, including Michael, will do very well from this deal.
The company improves its debt structure situation. VMware now can grow, the stock and grow more. It’s not held back by any sort of perceptions of its relationship in the holdings of Dell. Then Dell concurrently has been undervalued for a long time. I mean, you saw instantly it was like a 10+ percent jump that it got from this. The winning goes all around. I don’t really see where there’s much loss.
VMware is going to need to settle its CEO. It’s going to need to settle on Zane, if they’re going to keep him in the position or going to appoint someone else, which is what I think will end up happening. As of now, Pat, this was a good deal. It’s a winning deal for everyone. Nothing changes for most of the customers, but overall I think both companies can grow more and it unlocked value for the street. I think that’s where we leave it.
Patrick Moorhead: Yeah. I’d love to see a Sanjay Poonen get the nod on this, for sure. I think he’s demonstrated a lot of great stuff and it looks like the board is taking their good old time on this one. All right. Let’s move forward to the next item that is Surface Laptop 4. Surface has ended up being one of the big premium brands that has effectively gone toe to toe with Apple and MacBook and even iPad Air when you look at the Surface, like the Surface Pen capabilities and touch capabilities.
Microsoft has the marketing investment to … I wouldn’t say they’re investing as much as Apple is, but nearly as much. All the research that I’ve seen says that most people are viewing Surface equitable with the MacBook brand. Sure, you’ve got camps. You’ve got Windows people and you have Mac people. Anyways, the new Surface Laptop 4 came out. Really what this was, was getting the new chips out. Intel’s 11th generation core processor and AMD’s 4,000 series out there.
What that 4,000 brings is just raw cores, baby. You want eight cores and 16 threads in a thin and light, you got it. With 11th Gen you get a significantly improved CPU. You get a lot more AI and ML capabilities that are leveraged in applications like Adobe and you get much, much beefier graphics. All in all, I got my little grubby hands on an AMD version and I’m taking it for a spin. What I’m surprised at is I don’t hear the fan nearly as much as I did before.
One thing I forgot to say is Microsoft, and I applaud them, I’ve been riding them for like three years in my review, and everybody else in the Windows land, they were putting up what I consider were BS and somewhat misleading battery benchmarks. They were only about video playback. But to Microsoft’s credit, they’ve gone forward with a day in the life, more what normal people do. The Laptop 4 is up there like 17 to 19 hours of real playback and real use.
Man, I totally applaud them. As a plug, check out my Forbes article. I did a full comparison. Gosh, think took me a month. Full comparison of the Surface lineup versus the new Apple MacBook M1 lineup. Check it out.
Daniel Newman: Yeah. I’ve always enjoyed those pieces, Pat, that you put out. A lot of depth. I know you spent a lot of time on them. I know you’ve got some magicians in the background that aren’t just you, beating these things up, giving you feedback. Yeah. We’ll definitely put that Forbes piece in the show notes. What I can tell you, I run a lot of my life on the Surface products now. They come with me, they go with me. I sent my daughter to college with one.
I’ve been very fond of the continued development, the quality, just the physical build of these things. Definitely giving the Apple ecosystem a run for its money. I said that from the beginning. It’s the premium product in the notebook space. Definitely worth checking out. It’s been great Pat, over the last few years. We’ve seen HP. We’ve seen Lenovo. We’re seeing Microsoft. So many companies building notebooks that are really robust. That really are high quality.
Patrick Moorhead: I know.
Daniel Newman: They feel good, they look good. The backlighting doesn’t look cheap. By the way, all joking aside of the Justin Long campaign, I got to say, I do like the touch screen. I mean, you think that … I still like … You think like … I know they don’t want to cannibalize the iPad, but come on.
Patrick Moorhead: Yeah. Yeah. I’d like to see that too, but I don’t think they’re going to do it in their new design. They’re definitely going to update it because Apple essentially took the same chassis as they did before. I think that was smart for supply chain because, first of all, they might not have known how many M1s they could actually get. That’s smart given the TSMC issues out there. Also, they may have questioned at the uptake. Maybe they didn’t know what the performance was going to exactly be before it came out.
I am fully expecting Apple to update it with edge-to-edge display, more ports. I mean, one open port on the MacBook Pro M1. That’s a tough one. The other side of my mouth, I do want to give Apple a ton of credit. The M1 is a beast. If you’re using 100% native Arm applications, you will get a couple of days as long as your display is like around 30%. Kudos to Apple on that. I love competition and you love competition.
Let’s move forward, Daniel, to the next topic. Microsoft buying Nuance. My gosh, what is Microsoft doing? This is the second massive acquisition here in how long? Is this a new strategy for them?
Daniel Newman: Well, maybe they’ll close Discord next week and they can just go for … What are these? 11-figure deal of the week?
Patrick Moorhead: I know. 11 figures. Gosh, it’s crazy.
Daniel Newman: Pat, this deal kind of … Again, all the energy was around Discord. Everybody thought the next big acquisition was going to be Discord. Then all of a sudden on, I think the weekend, Bloomberg story broke about Nuance. Now, look, Nuance is not a company that hasn’t been on the radar. Apple has been looking at the company, Microsoft, there’s a series of other tech hosts. I went on CNBC. I talked about it with Brian Sullivan. It was funny. He kept asking me about all the value that someone could’ve gotten by buying this company a couple of years ago.
Well, look, crystal balls are crystal balls, but the long and short is, we had a year of healthcare trauma in this country. We are recovering from trauma in the healthcare industry. There is a massive opportunity. Microsoft just doubled its healthcare TAM from 250 billion to 500 billion because AI in healthcare is a huge opportunity. That’s what it comes down to.
Right now the entire experience of going to the doctor and getting your interaction it’s so bureaucratic. It’s so administrative. You have no ability to sit and have a conversation because all the doctor does, right, they come into the room, they ask you a couple of questions. What do they do? They turn to their machine. They get on Epic and they start punching stuff into the system, right?
Ultimately, most of your interaction is with someone at a front desk, a nurse, and then you never talk to your doctor. What if your doctor could come in, interact with you completely naturally, you talk about everything and you used AI to be able to synthesize the conversation, have that data processed to enrich, to actually get clinical information, improve outcomes, and concurrently drive a much better experience? That’s what’s going on here.
You’ve got antiquated systems that do not communicate well with each other. Now all of a sudden the cloud applications that are regulated to integrate with Cerner and Epic, start working together. You apply conversational AI. That’s exactly Nuance is doing. You put all this together and in the end you have a key alignment. You’ve got a market and a TAM opportunity. Did they overpay? Is 16 billion too … Or sorry, 19.7 when you include the debt, is that too much?
Well, if they grow from 250/300 billion in their healthcare business over the next few years, it wasn’t too much. Real quickly, Pat, because I want to leave a little oxygen on this one, but I liken it to a little bit like when IBM bought Red Hat. Everyone said 34 billion too much. The thing was, is it wasn’t just about what Red Hat was doing in Red Hat’s revenue. What it was about was it was about buying a company that can completely legitimize a market that you see as a big opportunity.
Satya was more than clear that he believes this is one of the biggest technologies, AI, in one of the biggest market opportunities, healthcare. Bringing these things together and with Microsoft behind it, you know it’s going to grow faster than it was on its own.
Patrick Moorhead: When you’re worth $2 trillion, overpaying by a billion is almost a rounding error.
Daniel Newman: It’s like you and I leaving like an extra couple of dollars on a tip. I mean, come on.
Patrick Moorhead: No, no. I know. I think the most important thing is probably the impact to OPEX. I know that CNBC was even complaining about this being too low of a price, which sometimes you can’t satisfy that crew.
Daniel Newman: Same I thought it was too much.
Patrick Moorhead: I know, no, I know. No, I think this is a good tuck-in for the company. Microsoft is a trusted provider of healthcare solutions. My brother-in-law’s a surgeon. He’s been using Nuance’s tools for, gosh, years. I mean, I don’t know, a decade or something. He just swears by it and they work for him. Not a lot of value-add there, but Daniel, you added a bunch of it and it was gone. That’s good.
Let’s go to our next topic here, is Daniel I joke around here, chips and SaaS, at the end of the day, a decade, 20 years from now, what will still be standing will be SaaS and chips. There’s no doubt about that. More chip action. First off, GlobalFoundries, Bloomberg had a piece that talked about Mubadala putting it up for an IPO for $20 billion.
I’ve talked to Tom Caulfield, CEO there, and so have you. We had him out to Six Five Summit last year and we’re going to bring him back this year.
Daniel Newman: Sure are.
Patrick Moorhead: They’re already talking about an IPO. To some people, this was a surprise, but I think the timing was great for Mubadala to float this out there. I mean, look at where we are. There was an article yesterday quoting TSMC and Intel’s Pat Gelsinger saying that we’re not going to catch up until 2023 on chip. Great, great opportunity. Then we’ve got two big AI folks, SambaNova and Groq. One hitting training and the other one hitting more inference for hundreds and millions of dollars. Pretty crazy.
Let me see, SambaNova came in at $676 million in valuation and looks like Groq raised 300 million. I’d have to dive in and see what that inferred valuation means. AI is hot. Listen, NVIDIA is a beast. They’re the great white shark of AI and ML. There’s a lot more, I think, ability for these companies to win in inference, but when it comes to training, I mean, NVIDIA just keeps moving. Net-net incredible opportunities out there. I think it shows just how much more competition we need.
Certainly the VCs are willing to dole it out. When it comes to GLOBALFOUNDRIES, it’s clear, we don’t have enough capacity. The final thing in GLOBALFOUNDRIES is, when you think about it for U.S. leadership, GLOBALFOUNDRIES has made incredible investments in their New York facilities. If you think about it based on what the administration is talking about, we could see. I’ll call them the four horsemen in the United States, GLOBALFOUNDRIES, Intel, and somebody in the Biden administration and potentially we’ll see a TSMC or a Samsung here in the U.S..
Daniel Newman: Yeah. Absolutely. We’re going to see all of that, Pat, I think the biggest theme we have is that we can talk about applications. We can talk about cloud, but underneath all of that, are chips. Chips are on fire. Semiconductors are, think about the impact it has. Think about how many new cycles it’s taking up right now. When we don’t have them, we don’t have cars, we don’t have computers, we don’t have sensors. There’re so many things that are impacted and it’s great to see innovation going on.
GLOBALFOUNDRIES, that could be a huge IPO. It could drive a ton of attention. By the way, it’s a very opportune moment for the company to consider that, just like it was a very opportune moment for Intel to come out with its strategy to bring more chip-making back here. I don’t know as much about the other two, but I did track Groq a little bit. I’ll just say deal was led by Tiger Global and D1, two really big VCs.
It had some serious partnerships. TDK, for instance, was one of the big , what you’d say a follow-on investment to it. The company’s pretty focused. It’s got some very consistent form factors and this $300 million raise put the valuation in the billions, okay? Just to be clear. It was huge. It was their series C. It was a 300 million. It’s basically going after what they believe is a 65 to a hundred billion dollar market by 2025. That’s just AI semiconductors by the way. It’s one to watch.
All these chip companies are really important right now. We started off about you can GTC the future at GTC 2021, Pat, but right behind it are a bunch of innovative companies doing really interesting things that are going to change the world.
Patrick Moorhead: Yeah. Daniel, great to start a Friday like this. I want to thank everybody for tuning in. If you like what you heard, go to YouTube and press that subscribe button. If you want to interact with us, beat us, send nasty grams, or just thank us for a good show, best place to hit us up is Twitter, but you can hit us up on LinkedIn too. That is a wrap. Thank you so much. Have a great weekend.
Daniel Newman: See ya.