1 00:00:02,520 --> 00:00:10,440 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is a breaking 2 00:00:10,520 --> 00:00:15,440 Speaker 1: news update from Bloomberg instant reaction and analysis from our 3 00:00:15,480 --> 00:00:19,560 Speaker 1: three thousand journalists and analysts around the world. I'm just 4 00:00:19,560 --> 00:00:22,040 Speaker 1: looking at shares of Intel and we are seeing movement there. Okay, 5 00:00:22,160 --> 00:00:24,280 Speaker 1: love up close to fifteen percent after hours. 6 00:00:24,400 --> 00:00:26,280 Speaker 2: Let's go to it. Kuntown Sabani is with us. He's 7 00:00:26,280 --> 00:00:29,680 Speaker 2: Bloomberg Intelligence senior semiconductor analyst out there in the Bloomberg 8 00:00:29,720 --> 00:00:34,200 Speaker 2: San Francisco Bureaukon John, Good to have you here. Gosh, 9 00:00:34,360 --> 00:00:37,720 Speaker 2: investors like it. Tell us what you think is? Are 10 00:00:37,720 --> 00:00:39,520 Speaker 2: they right in terms of their response? 11 00:00:41,120 --> 00:00:43,720 Speaker 3: They are? We like it too, and thankfully. I mean, 12 00:00:43,840 --> 00:00:46,920 Speaker 3: we had sort of previewed in our Intel preview that 13 00:00:47,200 --> 00:00:50,199 Speaker 3: we're expecting double digit strongbeat and rais and it did 14 00:00:50,280 --> 00:00:52,559 Speaker 3: come through, so that's great. I mean, look, we are 15 00:00:52,680 --> 00:00:58,320 Speaker 3: seeing resurgence in terms of CPU specifically servers CPU demand 16 00:00:58,840 --> 00:01:02,000 Speaker 3: due to agentic AI and infants workloads, especially in the 17 00:01:02,000 --> 00:01:06,080 Speaker 3: AI headnotes, which are the CPUs that sit alongside the GPUs. 18 00:01:07,000 --> 00:01:10,240 Speaker 3: We're also we were surprised to actually see strong PC 19 00:01:10,600 --> 00:01:14,679 Speaker 3: or client segment beats as well. There were some concerns 20 00:01:14,720 --> 00:01:18,759 Speaker 3: around the growing memory constraint and memory pricing could impact 21 00:01:18,840 --> 00:01:21,440 Speaker 3: the PC and market. So we're going to listen closely 22 00:01:21,800 --> 00:01:24,440 Speaker 3: about what they have to say about second half outlook there, 23 00:01:24,560 --> 00:01:27,600 Speaker 3: but overall really good results. The best thing stands out 24 00:01:27,680 --> 00:01:30,920 Speaker 3: is the gross margin beat. Remember Intel is supply constraint, 25 00:01:30,959 --> 00:01:33,640 Speaker 3: so this higher demand is letting them fill of factories 26 00:01:33,640 --> 00:01:35,679 Speaker 3: more and really helping with the gross margins there. 27 00:01:35,800 --> 00:01:38,680 Speaker 1: Yeah, let's go to some of these Intel shares are 28 00:01:38,720 --> 00:01:41,160 Speaker 1: up higher right now. It was up as much as 29 00:01:41,160 --> 00:01:44,759 Speaker 1: seventeen percent earlier, about fifteen percent. The company says it's 30 00:01:44,760 --> 00:01:48,280 Speaker 1: not commenting with deals on deals with external customers, it'll 31 00:01:48,280 --> 00:01:51,240 Speaker 1: increase spending on new machinery. If we take a step 32 00:01:51,280 --> 00:01:53,280 Speaker 1: back and just think about where this company is in 33 00:01:53,280 --> 00:01:57,280 Speaker 1: a transition that has been many many many years in 34 00:01:57,440 --> 00:01:59,960 Speaker 1: the making, where would you say they are in this transit. 35 00:02:02,040 --> 00:02:05,760 Speaker 3: They've been doing everything correct since Libutan took the helm. 36 00:02:06,480 --> 00:02:09,160 Speaker 3: First thing that it is normalized CAPEC spend and not 37 00:02:09,320 --> 00:02:12,320 Speaker 3: spend beyond where they didn't have orders. They have normalized 38 00:02:12,360 --> 00:02:16,040 Speaker 3: OPIC spend. Finally, now the N markets are also becoming 39 00:02:16,080 --> 00:02:18,720 Speaker 3: a tailwind for them. So it's all about execution now. 40 00:02:19,040 --> 00:02:22,359 Speaker 3: I don't look the external customers. No matter how much 41 00:02:23,400 --> 00:02:26,919 Speaker 3: nice and shiny the headlines are, that still will need work, 42 00:02:27,200 --> 00:02:29,320 Speaker 3: that still will take at least a year or two 43 00:02:29,400 --> 00:02:31,760 Speaker 3: to get baked into the estimate. So they just have 44 00:02:31,840 --> 00:02:35,760 Speaker 3: to keep executing well. Hopefully then market tailwinds continue to 45 00:02:35,760 --> 00:02:39,080 Speaker 3: stay with them, gives them good cash flow from operations. 46 00:02:39,800 --> 00:02:43,400 Speaker 2: Few other headlines eighteen A and fourteen A progress ahead 47 00:02:43,400 --> 00:02:48,400 Speaker 2: of expectations. They see PC market declining in the second half. 48 00:02:48,480 --> 00:02:52,480 Speaker 2: AI business group double digits here over year. Double digit 49 00:02:52,520 --> 00:02:58,400 Speaker 2: year over year growth for DCAI expected to continue. What 50 00:02:58,560 --> 00:03:01,320 Speaker 2: about the inference chips that everybody or the inferencing that's 51 00:03:01,360 --> 00:03:03,480 Speaker 2: going on. Where are they I mean, is that where 52 00:03:03,480 --> 00:03:05,720 Speaker 2: they need to be focusing? Are they making progress in 53 00:03:05,760 --> 00:03:06,200 Speaker 2: that area? 54 00:03:06,280 --> 00:03:09,960 Speaker 3: Should they be? I mean? So, like I said, the 55 00:03:10,000 --> 00:03:14,120 Speaker 3: inferences is definitely helping the demand at the CPU service chips, 56 00:03:14,120 --> 00:03:17,240 Speaker 3: which they have. They still have a lions share in right, 57 00:03:17,400 --> 00:03:20,480 Speaker 3: that's their bread and butter. When it comes to other 58 00:03:21,080 --> 00:03:25,160 Speaker 3: sort of accelerator chips in terms of inference, unfortunately they 59 00:03:25,160 --> 00:03:28,480 Speaker 3: don't have much traction there, but that is something that 60 00:03:28,520 --> 00:03:31,760 Speaker 3: they have been making deals. One example is the deal 61 00:03:31,800 --> 00:03:34,960 Speaker 3: with Sambonoa, and they've also announced they might be you know, 62 00:03:35,200 --> 00:03:38,360 Speaker 3: coming out with their own new accelerator chips who attack 63 00:03:38,480 --> 00:03:42,000 Speaker 3: that inference challenge. So that is something more of an 64 00:03:42,040 --> 00:03:45,880 Speaker 3: optionality upside. But definitely the strength and CPU from inference 65 00:03:45,960 --> 00:03:47,160 Speaker 3: is still helping them right now. 66 00:03:47,680 --> 00:03:50,360 Speaker 1: Just for fun, Carol, and because you can slice and 67 00:03:50,440 --> 00:03:53,040 Speaker 1: dice numbers anyway you want, you can. I went back 68 00:03:53,080 --> 00:03:55,280 Speaker 1: and looked at Intel's returns going back to the beginning 69 00:03:55,320 --> 00:03:58,040 Speaker 1: of twenty twenty five, so the beginning of last year, Yeah, 70 00:03:58,360 --> 00:04:00,360 Speaker 1: of two hundred and thirty three percent since and beating 71 00:04:00,440 --> 00:04:03,160 Speaker 1: in VideA up forty nine percent, so out performing in 72 00:04:03,240 --> 00:04:07,440 Speaker 1: video from the beginning of last year. Just just you know, look, 73 00:04:07,440 --> 00:04:09,280 Speaker 1: if you go back a few years, it would video 74 00:04:09,280 --> 00:04:10,040 Speaker 1: would destroy it. 75 00:04:10,120 --> 00:04:12,200 Speaker 2: I love that you went there, Coon John. If the 76 00:04:12,200 --> 00:04:16,320 Speaker 2: government hadn't taken their position in Intel, would it be 77 00:04:16,440 --> 00:04:19,559 Speaker 2: up so much? Would we be so enthusiastic about Intel. 78 00:04:19,560 --> 00:04:22,000 Speaker 2: Would they be having this kind of report without it? 79 00:04:23,800 --> 00:04:26,080 Speaker 3: I can't comment if what the stock would have done, 80 00:04:26,160 --> 00:04:28,560 Speaker 3: I can comment this. Look, the government taking the stake 81 00:04:28,880 --> 00:04:32,200 Speaker 3: has not impacted anything fundamental so far. Right, It's not 82 00:04:32,240 --> 00:04:34,520 Speaker 3: like the stake is driving revenues for them. It's not. 83 00:04:35,160 --> 00:04:38,679 Speaker 3: It did help in terms of liquidity, but the capex 84 00:04:38,720 --> 00:04:41,400 Speaker 3: spending was already normalized, so it's like if they didn't 85 00:04:41,400 --> 00:04:43,400 Speaker 3: get the money from government, I don't know what could 86 00:04:43,440 --> 00:04:45,359 Speaker 3: have changed so far in the business, whether it's on 87 00:04:45,400 --> 00:04:48,440 Speaker 3: the revenue line side, item or capex side of things. 88 00:04:48,520 --> 00:04:51,800 Speaker 3: So it did definitely have this help with sentiment and 89 00:04:51,880 --> 00:04:53,120 Speaker 3: morale boosting for sure. 90 00:04:55,080 --> 00:04:57,520 Speaker 2: Anything missing question on the call that you're going to 91 00:04:57,560 --> 00:04:58,640 Speaker 2: be looking at for real quickly. 92 00:04:59,680 --> 00:05:02,320 Speaker 3: I think the headline about again what the pc how 93 00:05:02,400 --> 00:05:04,560 Speaker 3: much of a weakness in PCs we expect because it 94 00:05:04,640 --> 00:05:07,080 Speaker 3: still is the biggest portion of their revenue, so they 95 00:05:07,120 --> 00:05:10,440 Speaker 3: do get definitely impacted by that weakness if it continues 96 00:05:10,480 --> 00:05:11,400 Speaker 3: to grow stronger. 97 00:05:11,520 --> 00:05:13,480 Speaker 2: All right, so appreciate it. Coon John, thanks so much, 98 00:05:13,560 --> 00:05:16,440 Speaker 2: Ku John Sabani. He's our senior semiconductor analyst at Bloomberg 99 00:05:16,440 --> 00:05:19,760 Speaker 2: Intelligence out there in our San Francisco bureau. Our next 100 00:05:19,800 --> 00:05:22,159 Speaker 2: guest usually out there in our San Francisco bureau. 101 00:05:22,440 --> 00:05:25,080 Speaker 1: He's back here from the Bloomberg Interactive Brokers studio. We're 102 00:05:25,120 --> 00:05:27,680 Speaker 1: talking about Ed Ludlow shares an Intel right now up 103 00:05:27,720 --> 00:05:31,359 Speaker 1: by more than fourteen percent, shares just surging. The company 104 00:05:31,400 --> 00:05:35,000 Speaker 1: giving the strong sales forecast for the current period, there's 105 00:05:35,040 --> 00:05:37,080 Speaker 1: the signal is that the company is beginning to benefit 106 00:05:37,120 --> 00:05:40,440 Speaker 1: from the build out of AI infrastructure. Ed Loudlow is 107 00:05:40,480 --> 00:05:43,560 Speaker 1: with us from Bloomberg Tech. Ed, you've looked at this 108 00:05:43,600 --> 00:05:46,240 Speaker 1: company for a long period of time, especially during this 109 00:05:46,279 --> 00:05:48,039 Speaker 1: turnaround over the last few months. 110 00:05:48,040 --> 00:05:48,840 Speaker 4: How's it doing well? 111 00:05:48,880 --> 00:05:48,920 Speaker 3: So? 112 00:05:49,240 --> 00:05:51,440 Speaker 4: Ian and I just had a good, pretty long phone 113 00:05:51,440 --> 00:05:54,360 Speaker 4: call with Litvu, Tan and Dave's into the CFO, and 114 00:05:54,640 --> 00:05:56,680 Speaker 4: there's that. We have a lot of answers. Actually, you know, 115 00:05:56,720 --> 00:05:59,320 Speaker 4: when there were so many headlines that hit, it's hard 116 00:05:59,360 --> 00:06:02,200 Speaker 4: to see what the real driver was. I don't obviously 117 00:06:02,240 --> 00:06:05,280 Speaker 4: the revenue guide really important, you know. For the current period. 118 00:06:05,560 --> 00:06:10,159 Speaker 4: The story is really simple. CPU demand, the Xeon server 119 00:06:10,360 --> 00:06:14,000 Speaker 4: processor is really really big, and so they are now 120 00:06:14,120 --> 00:06:17,640 Speaker 4: in what they would describe as the enviable position where 121 00:06:17,680 --> 00:06:21,920 Speaker 4: they can divert supply to feed that market. Kun Jam 122 00:06:22,080 --> 00:06:24,360 Speaker 4: was just talking about the PC market or the client market. 123 00:06:24,400 --> 00:06:26,160 Speaker 4: We can talk a little bit about that. There are 124 00:06:26,160 --> 00:06:30,240 Speaker 4: some unique factors there, but basically demand is strong, it 125 00:06:30,360 --> 00:06:33,360 Speaker 4: is growing, and they are not yet able to meet it, 126 00:06:33,480 --> 00:06:35,520 Speaker 4: and that is a good position for Intel to be in. 127 00:06:35,560 --> 00:06:36,280 Speaker 4: One thing, I would say, by. 128 00:06:36,240 --> 00:06:37,320 Speaker 2: The way, what do you want to be able to 129 00:06:37,360 --> 00:06:38,680 Speaker 2: meet it, right, you want. 130 00:06:38,560 --> 00:06:38,960 Speaker 1: To be able. 131 00:06:39,000 --> 00:06:42,359 Speaker 4: And so this was the story quarter to quarter. What 132 00:06:42,480 --> 00:06:45,240 Speaker 4: is the lipbutan effect? What does him becoming CEO and 133 00:06:45,320 --> 00:06:48,479 Speaker 4: changing how the company works actually mean. It means not 134 00:06:48,560 --> 00:06:51,160 Speaker 4: leaving any money on the table, you know, finding the 135 00:06:51,160 --> 00:06:54,440 Speaker 4: CPUs that are coming from finding the CPUs to meet 136 00:06:54,440 --> 00:06:56,240 Speaker 4: the demand that's out there. And they're doing their absolute 137 00:06:56,240 --> 00:06:58,960 Speaker 4: best for sure. Now, margins were really good in the 138 00:06:59,000 --> 00:07:03,359 Speaker 4: quarter gone first call, not against history. You know, Intel's 139 00:07:03,360 --> 00:07:05,640 Speaker 4: a company just have margins at sixty percent. Now we're 140 00:07:05,680 --> 00:07:07,919 Speaker 4: at thirty seven point five or maybe slightly beyond that 141 00:07:07,960 --> 00:07:10,840 Speaker 4: on an adjusted basis. But I think what was so 142 00:07:10,920 --> 00:07:15,200 Speaker 4: interesting is this is financial jargon. But they were honest 143 00:07:15,280 --> 00:07:17,800 Speaker 4: that that's just because revenues were higher. You know, they're 144 00:07:17,800 --> 00:07:20,320 Speaker 4: not necessarily finding the secret source yet nonprofit. 145 00:07:20,560 --> 00:07:23,920 Speaker 2: So because the demand is strong, the supply isn't there, 146 00:07:24,000 --> 00:07:24,760 Speaker 2: they can charge more. 147 00:07:24,880 --> 00:07:27,680 Speaker 4: Yeah, And so kun Jam poses a question, why I'd 148 00:07:27,680 --> 00:07:30,160 Speaker 4: like to hear more about the PC market. This is 149 00:07:30,200 --> 00:07:33,320 Speaker 4: what Intel sees in the PC market. In the first 150 00:07:33,640 --> 00:07:37,560 Speaker 4: part of this year. The PC makers, the Client group, 151 00:07:38,040 --> 00:07:41,760 Speaker 4: were able to build up supply of memory chips. Remember, 152 00:07:41,880 --> 00:07:44,680 Speaker 4: the backstory is that memory is being claimed by the 153 00:07:44,760 --> 00:07:47,360 Speaker 4: data centers. You know, it's very similar the type of 154 00:07:47,400 --> 00:07:49,400 Speaker 4: memory chip that goes into a PC that goes into 155 00:07:49,400 --> 00:07:52,560 Speaker 4: a server. The problem is is Intel sees it that 156 00:07:52,600 --> 00:07:54,320 Speaker 4: in the second half of this year they're going to 157 00:07:54,360 --> 00:07:56,600 Speaker 4: run out of that inventory of memory and they're going 158 00:07:56,640 --> 00:07:59,280 Speaker 4: to have to be buying in the market spot prices 159 00:07:59,720 --> 00:08:02,560 Speaker 4: and at as far as Intel sees it means half 160 00:08:02,560 --> 00:08:04,240 Speaker 4: and half the second half of this year, the PC 161 00:08:04,400 --> 00:08:08,000 Speaker 4: market will decline. That's the explanation. It's the behavior of 162 00:08:08,040 --> 00:08:11,560 Speaker 4: the client group itself, the PC makers and what they 163 00:08:11,600 --> 00:08:13,280 Speaker 4: have or have not been able to do in building 164 00:08:13,360 --> 00:08:15,200 Speaker 4: up inventories and supply of memory chips. 165 00:08:15,200 --> 00:08:17,240 Speaker 1: Interesting. And I want to go back to this question 166 00:08:17,240 --> 00:08:19,800 Speaker 1: that Carol asked Koon John about the US investment. 167 00:08:20,080 --> 00:08:20,560 Speaker 2: Yeah, it is. 168 00:08:20,680 --> 00:08:23,680 Speaker 1: It's just it is an interesting time for economic statecraft 169 00:08:23,720 --> 00:08:25,960 Speaker 1: in the US. I mean, we are the third largest 170 00:08:25,960 --> 00:08:30,440 Speaker 1: shareholder right before in video. Actually did the investment is 171 00:08:30,520 --> 00:08:32,520 Speaker 1: I mean, is it even a possible question to answer? 172 00:08:32,640 --> 00:08:35,800 Speaker 1: Did the US investment fundamentally change this company? 173 00:08:35,960 --> 00:08:39,720 Speaker 2: Is a big support for the CEO talked about morale. 174 00:08:40,000 --> 00:08:42,760 Speaker 4: I mean, remember that it was not the only if 175 00:08:42,800 --> 00:08:44,240 Speaker 4: you look at it from this perspective. It was not 176 00:08:44,320 --> 00:08:47,760 Speaker 4: the only balance sheet strengthening exercise that that Boo's done. 177 00:08:48,000 --> 00:08:51,400 Speaker 4: He looked at you right in Vidia, He's looked at 178 00:08:51,800 --> 00:08:54,640 Speaker 4: the private markets or looked at working with private equity 179 00:08:54,679 --> 00:08:57,160 Speaker 4: on projects. The goal was to strengthen the balance sheet 180 00:08:57,200 --> 00:08:59,480 Speaker 4: to allow them to be nimble do the things that 181 00:08:59,480 --> 00:09:02,760 Speaker 4: they wanted to do. As for US manufacturing, that's a 182 00:09:02,760 --> 00:09:05,800 Speaker 4: different story, right. They don't name their foundry customers. There's 183 00:09:05,800 --> 00:09:08,120 Speaker 4: a lot of question marks over Foundry. But what's so 184 00:09:08,160 --> 00:09:11,160 Speaker 4: interesting is I asked Lip Bhutan about Elon Musk and 185 00:09:11,200 --> 00:09:13,640 Speaker 4: I was like, last night on his own earnings call, 186 00:09:14,000 --> 00:09:16,679 Speaker 4: Elon Musk name checked you and said we will use 187 00:09:16,800 --> 00:09:20,240 Speaker 4: Intel's fourteen A process, which on paper would be the 188 00:09:20,280 --> 00:09:23,160 Speaker 4: first time anyone said that they'll use Intel's fourteen A process. 189 00:09:23,640 --> 00:09:26,160 Speaker 4: And he declined to say anything about that. He was like, 190 00:09:26,240 --> 00:09:28,160 Speaker 4: it's up to the customers to decide if they want 191 00:09:28,200 --> 00:09:30,880 Speaker 4: to talk about that. We don't comment. Put that to 192 00:09:31,000 --> 00:09:33,439 Speaker 4: one side. But what he said was, and what Dave's 193 00:09:33,440 --> 00:09:35,720 Speaker 4: insterer said is they think they'll get more out of 194 00:09:35,760 --> 00:09:38,880 Speaker 4: working with Elon Musk, then Elon Musk and his TERRORFOWD 195 00:09:38,920 --> 00:09:41,280 Speaker 4: project will get out of Intel. In other words, Elon's 196 00:09:41,280 --> 00:09:47,400 Speaker 4: really good at stuff process, eliminating barriers and inefficiency, and 197 00:09:47,640 --> 00:09:49,720 Speaker 4: that was their answer. We think we're going to really 198 00:09:49,760 --> 00:09:52,480 Speaker 4: benefit from being in this partnership with Elon Musk. He's 199 00:09:52,480 --> 00:09:53,080 Speaker 4: really good at that.