With the latest snafu of defective 13/14th gen intel CPU’s things are not looking good. So far Intel has not handled this well and likely looking at major class action lawsuits.
Intel is in a SNAFU that's far beyond just a couple of unreliable chips coming out recently.
The issue is the latest earnings report: quarterly net losses, operational losses, 15% cut in staff, diminishing CapEx (aka: less investment into future factories)... and perhaps most important/indicative of the situation... Intel is cancelling its Q4 Dividend.
IE: Intel is no longer a reliable dividend stock with reliable profits. Investors are now concerned about what Intel... as a company... is today. There's fundamental top-down strategic issues with the company that remain unresolved as of this week.
Yep. Intel is an empire in decline. It's a powerful case study in how you can have All The Money and still fuck up catastrophically. It's Ice America -- it's a bloated enemy in a crumbling castle!
There's also the looming overhead caused by all the government subsidies that Intel has been taking. Building fabs means hiring people to work in those fabs which is a huge operating expense Intel may be obligated to cover once construction completes. It would be very interesting to see the contribution agreements that Intel has signed with various governments to gain a better understanding of the scale of that future liability.
>Intel also expects to benefit from a U.S. Treasury Department Investment Tax Credit (ITC) of up to 25% on more than $100 billion in qualified investments and eligibility for federal loans up to $11 billion.
>Intel’s investments are expected to create more than 10,000 company jobs and nearly 20,000 construction jobs, and to support more than 50,000 indirect jobs with suppliers and supporting industries.
Antitrust issues aside, NVidia could acquire Intel for about 1/30th of their stock. That would result in having an end-to-end platform play like AMD/ATI, about 5x the number of employees, a tremendous number of technologies (compilers, numerical libraries, etc.), massive diversification, and actually rather better fab access in both directions.
It's unclear to me if that would help them expand and grow or if it'd be deadweight and overhead.
FWIW, I was pointing out aspects of such an acquisition, and looking for honest thoughts. I have no idea if it's a good idea or bad idea. I'm really quite divided.
Really risky play. AMD took more than a decade to recover from the ATI acquisition. There isn’t that much business integration between GPU and CPUs, it’s why Intel has always struggled mightily to develop a competitive GPU themselves, financially speaking.
I just looked it up, and I see I was backpacking the world at that time so it didn't really register. But I see it went very very wrong when the dotcom bubble burst.
In Holland we had a similar thing happen (albeit at a much smaller scale) to the company World Online. They did an IPO and their stock tumbled into nothing. The CEO sold all her shares just before the IPO and was later challenged in court (though was acquitted I believe)
It's a good point indeed. I forgot about all those (mainly due to my different focus in those days).
It didn't go very wrong for the purchasing party -- AOL:
* AOL was very, very overvalued.
* They bought a company with real worth.
* When the .com bubble popped, they were left with Time Warner.
It'd be a dead company without it. On the other hand, it did very badly by Time Warner and its investors.
There are two possibilities here:
1. AI is gold, and NVidia is leading AI.
2. AI is a bubble, and NVidia is overvalued by a factor of 10-100x.
In the case of #2, buying Intel converts funny money into real value, gives Intel engineering capability it so obviously now lacks to continue to push x86 forward, and gives NVidia engineers many, many decades of x86 R&D. In that sense, it can be thought of as a hedge on AI not succeeding (or someone overtaking NVidia in AI).
In the case of #1, it either gives NVidia huge marketing and distribution channels, an end-to-end platform play, and a bunch of supporting IP, while chaining it to an obsolete corporation with 5x the employees. It also allows NVidia to do some antitrusty things by connecting with the dominant CPU platform (e.g. making iGPU chips, and various sorts of hybrids where Intel + Nvidia work best together).
I mean, AI is a nice development. But the hype started by ChatGPT doesn't really carry over to all aspects of the industry as much as it's said to. It's really good at some things, and really sucks at some others even though it pretends to do them. It's "Gold" for the things it's good at. It's a bubble waiting to burst for the others.
PS: I wouldn't consider intel obsolete. Imagine they stopped making their CPUs and chipsets tomorrow. Society would be really really screwed. Sure there's AMD but they can't handle all that. They're managing things more traditionally, sure. But they're also in a much more settled market.
I have no idea about the future progression of AI, and anyone who claims they do is either lying to you or to themselves.
I'll also mention:
- ChatGPT was a lot smarter for the types of things I'd like to use it for before the "safety" work. The efforts to make it never say anything offensive also made it a lot dumber. I saw a paper to that effect too. Perhaps some of that was a result of optimizations to shrink the model and make it more efficient (but then I'd expect GPT-4 to be smarter).
- GPT3, which was an autocomplete, could do some things well the modern chatbot-ified models can't.
- I have a lot of practice making the models smarter by having them check their own work, vote, etc.
I have no idea how high the ceiling is. I might be a few inches away, or it might be the sky.
That's a good time to hedge.
Probably "legacy" was a better word than "obsolete." My language was sloppy.
Have you been spending too much time on wallstreetbets? This doesn't make any logical sense, a sharp increase in numbers doesn't justify taking on 24bn net debt.
It's not debt. You issue 24B in stock, and use that to pay for Intel.
If investors think it's a good idea, market cap goes up by more than 24B. If not, by less.
I am looking for honest thoughts. I have not been spending any time on wallstreetbets, and I had hoped for a good discussion of pros and cons. I have no clue if it's a good idea or bad.
I’m not an expert on either company, but as I see it NVIDIA has a massive scale of R&D that is very effective and meaningfully focused. Intel seems to be cutting a massive amount of R&D that went no where & also doesn’t seem to have a clear thesis about who they are in the future.
Generally M&A’s argument is that it’s more capitally efficient to acquire. There’s certainly a a case to be made for that here, but having seen a few engineering teams post M&A it could actually be a poison pill for NVIDIA.
I’d love to hear from other more informed people what I’m missing here.
NVidia's focused R&D efforts to improve Intel platforms.
The Intel platforms are still very, very good, and very, very hard to replicate. It took many decades of concerted optimization to get here. AMD is a little bit ahead right now, but it took many decades of R&D to get there.
Other efforts to do so -- even when x86 was much simpler -- went nowhere. Remember WinChip, MediaGX, Geode, C3, C7, Nano, 5x86, 6x86, and that whole debacle of Intel-competing products?
This is so not my home turf so this might be a really stupid question, but: I get that GPUs are all the rage now because LLMs etc., but do all those giant GPU clusters that are presumably built right now not ALSO need CPUs to run the boring non-llm stuff (like, you know, the OS for example), which should result in growing demand for Intel’s offerings…?
>@PGelsinger
>“Let your eyes look straight ahead; fix your gaze directly before you. Give careful thought to the paths for your feet and be steadfast in all your ways” Proverbs 4:25-26
Tell your friend not to worry, it was a proverb and not a prayer and he didn't start after the earnings call, he's done it weekly for a while and nobody cared till it made a juicy headline to irritate you and make you curious and click.
41 comments
[ 3.6 ms ] story [ 105 ms ] threadThe issue is the latest earnings report: quarterly net losses, operational losses, 15% cut in staff, diminishing CapEx (aka: less investment into future factories)... and perhaps most important/indicative of the situation... Intel is cancelling its Q4 Dividend.
IE: Intel is no longer a reliable dividend stock with reliable profits. Investors are now concerned about what Intel... as a company... is today. There's fundamental top-down strategic issues with the company that remain unresolved as of this week.
>Intel also expects to benefit from a U.S. Treasury Department Investment Tax Credit (ITC) of up to 25% on more than $100 billion in qualified investments and eligibility for federal loans up to $11 billion.
>Intel’s investments are expected to create more than 10,000 company jobs and nearly 20,000 construction jobs, and to support more than 50,000 indirect jobs with suppliers and supporting industries.
Yeah that didn't happen.
NVidia market cap: 2.64T
Antitrust issues aside, NVidia could acquire Intel for about 1/30th of their stock. That would result in having an end-to-end platform play like AMD/ATI, about 5x the number of employees, a tremendous number of technologies (compilers, numerical libraries, etc.), massive diversification, and actually rather better fab access in both directions.
Thoughts?
On the other hand they'd purchase the most common desktop ISA and a lot of IP. It would make so much sense.
But like the OP said, antitrust is surely why they're not even trying. They already got slammed with ARM.
FWIW, I was pointing out aspects of such an acquisition, and looking for honest thoughts. I have no idea if it's a good idea or bad idea. I'm really quite divided.
On the other hand this would be a great time for such an acquisition, before the bubble bursts.
I just looked it up, and I see I was backpacking the world at that time so it didn't really register. But I see it went very very wrong when the dotcom bubble burst.
In Holland we had a similar thing happen (albeit at a much smaller scale) to the company World Online. They did an IPO and their stock tumbled into nothing. The CEO sold all her shares just before the IPO and was later challenged in court (though was acquitted I believe)
It's a good point indeed. I forgot about all those (mainly due to my different focus in those days).
* AOL was very, very overvalued.
* They bought a company with real worth.
* When the .com bubble popped, they were left with Time Warner.
It'd be a dead company without it. On the other hand, it did very badly by Time Warner and its investors.
There are two possibilities here:
1. AI is gold, and NVidia is leading AI.
2. AI is a bubble, and NVidia is overvalued by a factor of 10-100x.
In the case of #2, buying Intel converts funny money into real value, gives Intel engineering capability it so obviously now lacks to continue to push x86 forward, and gives NVidia engineers many, many decades of x86 R&D. In that sense, it can be thought of as a hedge on AI not succeeding (or someone overtaking NVidia in AI).
In the case of #1, it either gives NVidia huge marketing and distribution channels, an end-to-end platform play, and a bunch of supporting IP, while chaining it to an obsolete corporation with 5x the employees. It also allows NVidia to do some antitrusty things by connecting with the dominant CPU platform (e.g. making iGPU chips, and various sorts of hybrids where Intel + Nvidia work best together).
I mean, AI is a nice development. But the hype started by ChatGPT doesn't really carry over to all aspects of the industry as much as it's said to. It's really good at some things, and really sucks at some others even though it pretends to do them. It's "Gold" for the things it's good at. It's a bubble waiting to burst for the others.
PS: I wouldn't consider intel obsolete. Imagine they stopped making their CPUs and chipsets tomorrow. Society would be really really screwed. Sure there's AMD but they can't handle all that. They're managing things more traditionally, sure. But they're also in a much more settled market.
I'll also mention:
- ChatGPT was a lot smarter for the types of things I'd like to use it for before the "safety" work. The efforts to make it never say anything offensive also made it a lot dumber. I saw a paper to that effect too. Perhaps some of that was a result of optimizations to shrink the model and make it more efficient (but then I'd expect GPT-4 to be smarter).
- GPT3, which was an autocomplete, could do some things well the modern chatbot-ified models can't.
- I have a lot of practice making the models smarter by having them check their own work, vote, etc.
I have no idea how high the ceiling is. I might be a few inches away, or it might be the sky.
That's a good time to hedge.
Probably "legacy" was a better word than "obsolete." My language was sloppy.
If investors think it's a good idea, market cap goes up by more than 24B. If not, by less.
I am looking for honest thoughts. I have not been spending any time on wallstreetbets, and I had hoped for a good discussion of pros and cons. I have no clue if it's a good idea or bad.
AOL / Time Warner comes to mind.
Generally M&A’s argument is that it’s more capitally efficient to acquire. There’s certainly a a case to be made for that here, but having seen a few engineering teams post M&A it could actually be a poison pill for NVIDIA.
I’d love to hear from other more informed people what I’m missing here.
NVidia's focused R&D efforts to improve Intel platforms.
The Intel platforms are still very, very good, and very, very hard to replicate. It took many decades of concerted optimization to get here. AMD is a little bit ahead right now, but it took many decades of R&D to get there.
Other efforts to do so -- even when x86 was much simpler -- went nowhere. Remember WinChip, MediaGX, Geode, C3, C7, Nano, 5x86, 6x86, and that whole debacle of Intel-competing products?
Even if it was a good idea, there's no way that it would past antitrust review in Europe and the USA.
https://x.com/PGelsinger/status/1820129317122080977
>@PGelsinger >“Let your eyes look straight ahead; fix your gaze directly before you. Give careful thought to the paths for your feet and be steadfast in all your ways” Proverbs 4:25-26