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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is a breaking news update from Bloomberg.

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Speaker 3: Instant reaction and analysis from our three thousand journalists and

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Speaker 3: analysts around the world. Here's how in King Ian King,

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Speaker 3: who's been covering this company and this sector for many years,

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Speaker 3: put it. Intel delivered a surprisingly strong revenue forecast for

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Speaker 3: the current period, indicating that a surge and data center

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Speaker 3: spending is helping fuel the chip makers turn around. The

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Speaker 3: outlook underscores Intel's gains with data center customers, which are

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Speaker 3: clamoring for chips to satisfy demand for AI computing. Sales

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Speaker 3: in that segment sort fifty nine percent last quarter, more

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Speaker 3: than double the pace of Intel's overall.

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Speaker 1: Right now, chief executive officer, the bhutans and the CPU

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Speaker 1: is taking off in data centers. All right, let's get

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Speaker 1: to it back with us. As of course, Man Deep

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Speaker 1: seeingh with our Bloomberg intelligence team. He oversees is tech

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Speaker 1: research here, Global tech research for our intelligence team. This

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Speaker 1: looks like a really strong report.

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Speaker 4: It is, and it's led by something we all expected.

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Speaker 4: Data centers. You know, that's where you are seeing the demand.

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Speaker 4: We saw that in UH Google's results yesterday and UH Look,

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Speaker 4: the CPU side is something that Intel has had a monopoly.

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Speaker 2: Over the years.

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Speaker 4: They obviously lost the plot, but now, uh, they seem

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Speaker 4: to be coming back. The only thing I'm not very

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Speaker 4: sure about is how it translates into sustainable demand because

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Speaker 4: everyone else is also making CPUs, whether it's in media,

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Speaker 4: whether it's Google, uh, you know, even the likes of AMDs,

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Speaker 4: they're all focused on CPUs. So Intel is not a

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Speaker 4: monopoly that it used to be. And that's where the

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Speaker 4: sustainable expectations going.

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Speaker 2: In the quarter were really low. So they did beat that.

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Speaker 3: So then why are why are people buying Intels rather

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Speaker 3: than AMDs or in videos like what if this is?

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Speaker 5: Is it a commodity? This part of the business.

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Speaker 4: So if you're just looking for a CPU, Intel still

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Speaker 4: has that foundry where they make the most CPUs, and

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Speaker 4: it makes sense for anybody to go to Intel if

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Speaker 4: you're looking for systems, which is what Google said. They're

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Speaker 4: selling TPU systems now, right. A TPU system has got

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Speaker 4: an accelerator, it's got CPU, it's got networking, it's got everything.

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Speaker 4: That's what all these companies are doing with their data

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Speaker 4: centers now because they're selling a complete system where CPU

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Speaker 4: is one of the building blocks. Intel is not selling

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Speaker 4: you a system, They're just selling you a chip.

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Speaker 2: Kind of says to me.

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Speaker 1: Not a great business plan, is it. So how do

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Speaker 1: you make sense whether or not.

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Speaker 4: I think it's too early to compare Intel to the

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Speaker 4: like Sofa and Video or you know what Google told

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Speaker 4: us with their TPU systems. It's still a very early

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Speaker 4: stage opportunity for Intel. On the data center side, again,

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Speaker 4: expectations were really rock bottom. So they came out they

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Speaker 4: beat that data center number by seven hundred million. Great,

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Speaker 4: But if I look at the sustainability of what you

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Speaker 4: Google plans to do or what Nvidia plans to do,

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Speaker 4: Intel is not in that category yet. And that's where

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Speaker 4: you need for them to execute much better on the

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Speaker 4: data center side, in terms of having a GPU, having

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Speaker 4: more on the networking side, having a system's play, which

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Speaker 4: is what we are hearing from AMD. By the way,

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Speaker 4: That's what AMD is after, That's what Broadcom is after.

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Speaker 4: So I'm not ready to put Intel in that basket

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Speaker 4: of companies that have systems.

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Speaker 2: Opperately, they need to get there.

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Speaker 4: I think it's a big challenge. I mean, you have

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Speaker 4: to remember Intel underperformed for a period of five six

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Speaker 4: years where they just had things going down. So for

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Speaker 4: them to come back, it's going to take a while.

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Speaker 4: I mean the foundery side is where they could get

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Speaker 4: help from the US government's stake, and you know there

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Speaker 4: could they could land more customers in terms of founder usage.

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Speaker 4: But in terms of again comparing them to someone like Nvidia,

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Speaker 4: we are far off.

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Speaker 5: From should we compare them to in video?

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Speaker 4: I mean, Nvidia is making their own CPUs, and Nvidia

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Speaker 4: will tell you they already generate up to twenty billion

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Speaker 4: dollars by selling CPUs as part of their system. So

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Speaker 4: Intel has Nvidia has already surpassed Intel in terms of,

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Speaker 4: you know, the CPU side of that equation. So what to.

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Speaker 1: Tim's question or Tim's point, man deep like, what is

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Speaker 1: again the role of Intel in the future in the

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Speaker 1: world of semiconductors. There's still value there, there's still a

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Speaker 1: good business there.

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Speaker 4: Yeah, So think of it as traditional data centers versus

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Speaker 4: AI data centers.

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Speaker 2: For all the traditional data centers, Intel.

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Speaker 4: Is great because they have those servers that companies were

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Speaker 4: using that they need to refresh and now Intel has

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Speaker 4: the ability to give them the latest servers that, by

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Speaker 4: the way, you need latest CPU servers to run these

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Speaker 4: agentic workloads. So when you deploy AI so far it

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Speaker 4: was just training for inferencing, you need CPUs and that's

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Speaker 4: where if an enterprise is looking to refresh their old servers,

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Speaker 4: they'll go for Intel. They won't buy in video systems

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Speaker 4: because you don't need to do that for your traditional

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Speaker 4: data centers. You buy Nvidia systems for your AI data centers,

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Speaker 4: which need a lot more power, which have different specs altogether.

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Speaker 1: So who's their biggest competitor then in that particular universe?

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Speaker 2: Amd?

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Speaker 4: Yeah, okay, but AMD just talked about how they are

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Speaker 4: focused on that system's opportunity to so everyone realizes the

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Speaker 4: larger opportunity is a data centers, it's not your traditional

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Speaker 4: data centers. So that's where the sustainability of this growth.

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Speaker 4: I mean, we are coming off a very low base.

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Speaker 4: So yeah, they grew, you know whatever, sixty percent, that's great,

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Speaker 4: But can you sustain eighty percent type growth that Nvidia

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Speaker 4: has shown they can.

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Speaker 2: Over a period of time? And that's the real question here.

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Speaker 5: So this business that.

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Speaker 1: Seems to be kind of unique to Intel for those

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Speaker 1: who are kind of doing upgrades right on their data

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Speaker 1: centers for inferencing. I mean, at some point does that

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Speaker 1: go away and people are more focused on the bigger

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Speaker 1: data centers or no companies are going to need it.

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Speaker 4: You need more compute. The question is how much is

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Speaker 4: Nvidia going to sell in terms of CPUs versus how

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Speaker 4: much opportunity is left for Intel as a standalone CPU provider,

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Speaker 4: because remember Nvidia is bundling everything. Google TPUs are bundling

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Speaker 4: everything and saying CPUs are just one component of agentic workloads. Yeah,

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Speaker 4: so why would enterprises keep buying from Intel where they

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Speaker 4: have to get other components from other providers.

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Speaker 3: The stock is up, I mean, this was the best

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Speaker 3: perform sorry, the third best performing stock in the S

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Speaker 3: and P five hundred, Yeah, in the first half of

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Speaker 3: the year. But this month it's just gotten crushed. And

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Speaker 3: part of that has had to do with just how

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Speaker 3: how much it's run high. I mean, this was a

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Speaker 3: stock that was on June twenty second at one hundred

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Speaker 3: and forty one dollars per share. Now it's at about

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Speaker 3: one hundred dollars a share. As of the clothes if

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Speaker 3: you're take into account to move high right now, it's

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Speaker 3: at about one hundred and.

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Speaker 5: Eleven dollars per share.

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Speaker 3: What was the weakness this month that had investors thinking that, Okay,

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Speaker 3: the bar is actually pretty low for this report.

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Speaker 4: Expectations overall semis as a complex, I think corrected. People

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Speaker 4: took a lot of profits. We even saw the memory

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Speaker 4: names go down, so I don't think there was anything

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Speaker 4: unique to Intel over there. But with that being said,

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Speaker 4: things have come back on the semi side, you know,

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Speaker 4: very quick we had. It feels like we had somewhat

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Speaker 4: of a correction and then things rebounded fairly quickly. And

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Speaker 4: the Google report with them raising capex, I'm expecting every

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Speaker 4: hyperscaler will raise capex, will get what all the semiconductor

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Speaker 4: names will catch a bit because of the capex increase.

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Speaker 3: Okay, you mentioned Alphabet, and we're supposed to be talking

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Speaker 3: about Intel right now, but you mentioned Alphabet, so we'll

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Speaker 3: go there.

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Speaker 5: Alphabet just got crushed today.

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Speaker 2: Why because they're raising their capex.

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Speaker 5: But raising capex is good.

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Speaker 4: It's good for the semiconductor companies, not for someone like Alphabet.

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Speaker 3: Right in the past, it's sometimes been good for a

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Speaker 3: company like Alphabet because it indicates demand and you know,

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Speaker 3: when they spend that money, they will to build infrastructure.

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Speaker 3: That infrastructure will be used and generate revel.

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Speaker 4: Yeah, and they are showing that in their cloud segment.

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Speaker 4: We talked about how fast it's growing eighty two percent.

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Speaker 4: But market will always get nervous when you are talking

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Speaker 4: these big numbers. I mean, we are talking about trillion

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Speaker 4: dollars in capex by these five big hyperscalers next year.

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Speaker 4: That's a twenty twenty seven consensus number.

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Speaker 1: Can we say? Because I think people think about the

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Speaker 1: spend on AI and the build kind of akin to

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Speaker 1: building out you know, energy markets. Right, It's it's expensive

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Speaker 1: to do this stuff and you have to think about

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Speaker 1: the longer term trend. But have the tech sector been

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Speaker 1: burned enough like the oil patch?

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Speaker 2: Yeah?

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Speaker 1: I mean semiconductors certainly have seen the booms and bus

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Speaker 1: they haven't.

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Speaker 4: I mean you drew the comparison to the energy markets

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Speaker 4: and the oil market. Those are regulated companies. Imagine after

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Speaker 4: all this spend. Yeah, if these companies became regulated and

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Speaker 4: guess what, you can't really maximize your profits anymore, that

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Speaker 4: would be very interesting, you know. So there's always that

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Speaker 4: risk with these large ended models. The government may decide

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Speaker 4: these two companies are too powerful in terms of the

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Speaker 4: models they have developed, they need to you know, limit

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Speaker 4: their hold and that's a big risk it comes to

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Speaker 4: those copecks.

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Speaker 1: With we already have a government that's looking at the

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Speaker 1: power usage and thinking about what their responsibility is. Right,

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Speaker 1: some of the tech companies in terms of data centers, I.

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Speaker 3: Want to bring in Ad Ludlow, the host of Bloomberg Tech.

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Speaker 3: You're standing by in San Francisco and you spoke to

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Speaker 3: Dave Sisner, the Intel CFO. You also spoke to lit Bhutan,

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Speaker 3: the CEO of Intel, along with Ian King and some

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Speaker 3: reporting on the terminal. What did you learn from them

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Speaker 3: in their commentary that sort of adds to what we

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Speaker 3: heard in terms of numbers from this quarter.

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Speaker 6: Yeah, I mean this is a CPU story, right. There's

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Speaker 6: just very high data center demand for CPU and that

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Speaker 6: is the game that Intel's in. It's the part of

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Speaker 6: the AI story that they have been able to get

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Speaker 6: and hold onto. And you know, right now, Intel's in

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Speaker 6: a position where it's doing everything it can to improve

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Speaker 6: its production. You know, they are in a place where

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Speaker 6: demand for their CPUs in the data center server context

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Speaker 6: is outpacing their improving supply. So they're doing a better job.

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Speaker 6: But they're still leaving a bit of money on the

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Speaker 6: t able because they just cannot meet one hundred percent

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Speaker 6: of the orders that are being placed. That is, as

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Speaker 6: lit Boo put it, a good problem to have. But

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Speaker 6: right now, if you look at the aftermarket trade completely

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Speaker 6: in line what Mandi it's been outlining as well. It

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Speaker 6: is the capital expenditure story. Once again, it's kind of

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Speaker 6: moving the needle.

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Speaker 1: Here because people have to buy and they have to

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Speaker 1: buy from Intel.

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Speaker 4: Is that it? But Intel has the foundry capacity to

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Speaker 4: produce that. So if they're complaining about supply, Yeah, to me,

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Speaker 4: that's surprising.

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Speaker 2: You've got all the fabs.

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Speaker 4: You're not going to TSMC to make those CPUs, right,

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Speaker 4: So I'm a little surprised there.

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Speaker 1: What would be the question then you would be asking

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Speaker 1: LiPo like.

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Speaker 4: Why is there way for shortages for your own CPUs?

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Speaker 4: Like you have the foundries that are based here in

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Speaker 4: the US, why can't you ramp them up faster to

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Speaker 4: meet the demand that you see?

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Speaker 5: What do it? Just ramp it up? Come on, though, you.

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Speaker 1: Know, as we continue to go through these numbers, what

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Speaker 1: else is jumping out for you?

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Speaker 5: Yeah?

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Speaker 6: Well, just on and Deep's point, I think you know

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Speaker 6: a quarter ago when I spoke to Libby on the phone,

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Speaker 6: he was very honest that they had not been doing

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Speaker 6: a good job, like they were not very good at

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Speaker 6: building their own products, and that is a problem. And

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Speaker 6: I think what he's saying now is that that's getting better.

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Speaker 6: They are improving their own supply, but they're not yet

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Speaker 6: that they yet, you know, it's a process. I think

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Speaker 6: the other thing as well, you know, with Intel, you

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Speaker 6: know the foundry business, we still don't have anything concrete

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Speaker 6: on which technology companies around the world are customers of

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Speaker 6: Intel for foundry and their latest processes. But if you

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Speaker 6: think about the capex guide, So what Dave's into the

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Speaker 6: CFO told me is that capex this year will now

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Speaker 6: be higher about twenty billion dollars. The previous guide was

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Speaker 6: about eighteen and it would also represent your on year

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Speaker 6: capex growth. But he also absolutely underscored that lit Bhutan

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Speaker 6: is a very cautious guy. He does not employee capital

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Speaker 6: and improve or increase capex unless he's sure he's going

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Speaker 6: to get a return on it. And so that's what

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Speaker 6: they're trying to argue for now that they see demand

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Speaker 6: enough where they're willing to spend on the tooling side, specifically,

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Speaker 6: not the space side, to increase that capacity because they

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Speaker 6: think they have the customer customer demand there.

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Speaker 5: But man deep.

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Speaker 3: But you know, as Ian King has reminded us over

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Speaker 3: and over again, this stuff can be cyclical, and Intel

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Speaker 3: has learned the hard way that the investments don't always

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Speaker 3: pay off. They have a do they have to tell

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Speaker 3: investors a different story that this time, we know that

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Speaker 3: where we're spending the money is the right place to

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Speaker 3: spend the money.

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Speaker 2: I mean, right now, I think.

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Speaker 3: Or is everybody's just throwing money at everything and it's fine.

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Speaker 4: Everyone realizes the demand is huge. And you know, if

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Speaker 4: there's one common thread across all the narratives we hear

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Speaker 4: is the demand for our strips supply. So why would

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Speaker 4: you not be doubling down at this time, especially for

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Speaker 4: something where you had a monopoly in the past, until

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Speaker 4: there is a product related reason, Like I said, you know,

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Speaker 4: if it's a systems aspect where you know companies are

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Speaker 4: not going to buy CPUs from you because they want

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Speaker 4: more systems level the type of product, then I understand.

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Speaker 4: But without that, I see no reason why they wouldn't

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Speaker 4: be aggressive on Kapex just because there is demand and

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Speaker 4: they have the FABS.

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Speaker 1: Well, I love low. I mean the Bhutan being cautious

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Speaker 1: and careful. Might that be a you know, not as downfall,

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Speaker 1: I'm not going to say that, but problematic when if

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Speaker 1: the demand is there, as we're just talking about with

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Speaker 1: men deep, you know, you want to spend to kind

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Speaker 1: of make sure you don't miss out on that.

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Speaker 6: Yeah, I mean they again are going on the data

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Speaker 6: they have available, which is customer demand. You know, they

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Speaker 6: have this line Intel which is so consistent on which

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Speaker 6: is like when a customer signs up to use our

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Speaker 6: latest chip making process, we don't announce it. We leave

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Speaker 6: it to the customer. Problem for them is none of

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Speaker 6: the customers have announced it. All they'll say is that

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Speaker 6: they signed loads of deals, loads of LTA's they call

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Speaker 6: them in the first six months of this year and

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Speaker 6: they were like, okay, so we have the deals. That

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Speaker 6: gives us confidence to invest. I think, you know, I

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Speaker 6: think we'll learn more overnight. Right, all of the cell

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Speaker 6: side notes will come out, whatever questions get asked on

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Speaker 6: the call give you a sense of the psychology of

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Speaker 6: where the cell size at. But it is astonishing that

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Speaker 6: the stock's up twelve percent in after hours, given it

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Speaker 6: was up one hundred and seventy two percent going into

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Speaker 6: today's close, It's like, but it.

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Speaker 5: Got to eat up. But ed it was at what

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Speaker 5: over one thirty a few weeks ago?

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Speaker 6: It was or so in the last year, right, I mean,

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Speaker 6: you know, one week a market does not make the

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Speaker 6: pro session of market doesn't make. But you know, to answer,

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Speaker 6: you know, there was a point in history where Intel

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Speaker 6: was the absolute best at this, Yeah, and they had

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Speaker 6: sixty percent margins. They're not near that, right, There's still

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Speaker 6: like a lot of stuff to fix here, and I

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Speaker 6: don't think they're saying that they're close of that. They're

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Speaker 6: just saying that they're making progress.

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Speaker 1: Final thoughts as we wrap up from you, Mandy, I

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Speaker 1: mean I would like to see a backlog number alluded

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Speaker 1: to LTA's.

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Speaker 4: Like with Micron, they signed ltas, but they also gave

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Speaker 4: visibility into pricing and how much that backlog is in

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Speaker 4: terms of those ltas. So if Intel really has that

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Speaker 4: sort of visibility with their customers the ltas, then they

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Speaker 4: should give a backlog number so that Street can model that.

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Speaker 4: You know, Okay, this is how CPUs will ramp up

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Speaker 4: to me. Really, it's about sustainability of growth here once

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Speaker 4: the numbers get normalized, because we are coming off a

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Speaker 4: really low base here.

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Speaker 1: Now that's a really good point, right, you got to

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Speaker 1: think about where we're coming from.

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Speaker 5: Ed.

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Speaker 4: Final thought.

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Speaker 6: Just that you know, they'll be pushed on giving more

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Speaker 6: detail on customers. Something that did not come up, and

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Speaker 6: I really, you know, I think it's interesting is you know,

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Speaker 6: we haven't discussed terror fab and the partnership that's in

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Speaker 6: place with Musk, and you know, it's unlike Litboo just

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Speaker 6: kind of talk openly about that. But I would say

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Speaker 6: that ASML got asked about it, and last night Musk

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Speaker 6: was name checking Micron all over the place, so it

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Speaker 6: could come up. And to me, that's you know, Musk

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Speaker 6: is news and there we go.

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Speaker 1: Nah, it never makes news. Good stuff. Guys, Hey, thank

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Speaker 1: you so much. Of course, our Ed lolo out there

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Speaker 1: in San Francisco. He is host of Bloomberg Tech and

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Speaker 1: our man Deep sing right here.

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Speaker 4: In our studio.

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Speaker 1: He's a Bloomberg Intelligence Global Head of Technology Research. You guys,

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Speaker 1: thank you, thank you,