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 --> 00:00:19,720 Speaker 1: three thousand journalists and analysts around the world. We're watching 4 00:00:19,800 --> 00:00:22,000 Speaker 1: a lot of different companies, but I want to home 5 00:00:22,040 --> 00:00:24,160 Speaker 1: in on one, and that would be Intel shares surging 6 00:00:24,400 --> 00:00:25,040 Speaker 1: in the after. 7 00:00:24,840 --> 00:00:26,800 Speaker 2: Hours, building the momentum to the upside. 8 00:00:27,000 --> 00:00:29,000 Speaker 1: Yeah, seven percent to the upside of right now in 9 00:00:29,040 --> 00:00:32,519 Speaker 1: the after hours, little bit at the beginning trepidation I 10 00:00:32,520 --> 00:00:35,200 Speaker 1: think for shareholders, but it could have to do also 11 00:00:35,280 --> 00:00:38,360 Speaker 1: with some corrected numbers that we're coming back and forth 12 00:00:38,400 --> 00:00:42,280 Speaker 1: over the terminal for the results. The most recent results. 13 00:00:42,280 --> 00:00:44,720 Speaker 1: As you mentioned, shares what up ninety percent going into 14 00:00:44,720 --> 00:00:45,440 Speaker 1: the print this year. 15 00:00:45,560 --> 00:00:47,560 Speaker 2: Well, yeah, we know, like there was the US taking 16 00:00:47,640 --> 00:00:51,839 Speaker 2: that position Intel specifically an equity position, and it is 17 00:00:51,880 --> 00:00:54,639 Speaker 2: now the third largest investor in Intelsa. That certainly has 18 00:00:54,640 --> 00:00:59,320 Speaker 2: given it a jolt, if you will, this year. But again, 19 00:00:59,440 --> 00:01:02,560 Speaker 2: I think what's interesting is the company's CFO speaking in 20 00:01:02,600 --> 00:01:04,560 Speaker 2: an interview. You can check out our Ian King's right 21 00:01:04,600 --> 00:01:07,200 Speaker 2: through on this, but Intel saying the third quarter was 22 00:01:07,240 --> 00:01:12,320 Speaker 2: stronger than it thought across the board. So yeah, server 23 00:01:12,480 --> 00:01:14,920 Speaker 2: demand was a surprise positive. It feels like there's a 24 00:01:14,959 --> 00:01:18,240 Speaker 2: lot of things that feel like the changes, the moves 25 00:01:18,920 --> 00:01:21,559 Speaker 2: by lit Bhutan, the CEO, maybe some of it's starting 26 00:01:21,560 --> 00:01:22,040 Speaker 2: to pay off. 27 00:01:22,080 --> 00:01:22,160 Speaker 3: Well. 28 00:01:22,200 --> 00:01:24,040 Speaker 1: I want to see what Jake Goldberg has to say 29 00:01:24,080 --> 00:01:28,520 Speaker 1: about all this. He's Semiconductors and Electronics senior analyst at 30 00:01:28,560 --> 00:01:32,319 Speaker 1: Seaport Research Partners. He joins us from San Francisco. Jay, 31 00:01:32,400 --> 00:01:34,479 Speaker 1: good to have you. You cover a lot of these companies, 32 00:01:34,520 --> 00:01:38,000 Speaker 1: including Intel. You've got a neutral rating on Intel. Just 33 00:01:38,040 --> 00:01:41,720 Speaker 1: give us your first reaction to this report that shows 34 00:01:42,120 --> 00:01:45,960 Speaker 1: an encouraging forecast after a rebound in the PC chip market. 35 00:01:47,040 --> 00:01:50,600 Speaker 3: Yeah. I think it's an encouraging step forward for the company. 36 00:01:50,640 --> 00:01:54,520 Speaker 3: They've been through some rough times, and I think the 37 00:01:55,040 --> 00:01:58,240 Speaker 3: driver of this quarter's results are their new products coming 38 00:01:58,280 --> 00:02:02,480 Speaker 3: on stream using their eighteen eight their new manufacturing process, 39 00:02:03,160 --> 00:02:05,320 Speaker 3: as well as some help from TSMC so a bunch 40 00:02:05,320 --> 00:02:08,000 Speaker 3: of new products starting to ramp into production and volume. 41 00:02:08,360 --> 00:02:11,080 Speaker 3: I think that's helping a lot. And I'm most encouraged 42 00:02:11,120 --> 00:02:13,359 Speaker 3: by sort of the gross margin outlook for next quarter. 43 00:02:13,560 --> 00:02:15,120 Speaker 3: I haven't run through all my numbers, but it looks 44 00:02:15,120 --> 00:02:17,960 Speaker 3: like it's much better than expected, which is important, not 45 00:02:18,000 --> 00:02:20,600 Speaker 3: just for the financial way of that, but also it's 46 00:02:20,639 --> 00:02:24,560 Speaker 3: a good indicator into how their manufacturing process is tracking. 47 00:02:24,840 --> 00:02:27,280 Speaker 1: I don't well, sorry, go ahead, I don't want to 48 00:02:27,280 --> 00:02:30,520 Speaker 1: get you in trouble with compliance, but can you are 49 00:02:30,520 --> 00:02:35,000 Speaker 1: you going to change your outlook? You're rating on the stock. 50 00:02:34,800 --> 00:02:37,520 Speaker 3: So I just upgraded it about a month ago from 51 00:02:37,600 --> 00:02:41,600 Speaker 3: sell to neutral. And my concern here is more that 52 00:02:41,720 --> 00:02:46,000 Speaker 3: big picture question you all were talking about earlier. As 53 00:02:46,080 --> 00:02:48,280 Speaker 3: much as this quarter is good progress and we're seeing 54 00:02:48,440 --> 00:02:51,440 Speaker 3: sort of tactically they're moving in the right direction, the 55 00:02:51,480 --> 00:02:53,880 Speaker 3: looming question over the company is what are they going 56 00:02:53,960 --> 00:02:57,320 Speaker 3: to do with the fabs. Last quarter, CEO of Bhutan said, 57 00:02:57,400 --> 00:03:00,280 Speaker 3: if they don't get a customer for Intel Foundry Journal 58 00:03:00,320 --> 00:03:04,680 Speaker 3: customer for Foundry, they're going to stop doing advanced manufacturing. 59 00:03:05,200 --> 00:03:07,840 Speaker 3: And I think that's one of these tough analyst calls 60 00:03:07,840 --> 00:03:10,080 Speaker 3: because in the near term, if they stop doing that's 61 00:03:10,200 --> 00:03:12,560 Speaker 3: it removes a lot of expense numbers go way up, 62 00:03:12,840 --> 00:03:15,600 Speaker 3: stock goes up. It's a near term easy thing to do, 63 00:03:16,040 --> 00:03:18,040 Speaker 3: but long term it's probably really bad for the company, 64 00:03:18,040 --> 00:03:19,880 Speaker 3: and it's just hard to square that sort of long 65 00:03:19,960 --> 00:03:24,760 Speaker 3: term forecast multi year forecast. So I'm still on the fence. 66 00:03:25,080 --> 00:03:27,320 Speaker 2: Hey, one thing I want to just point out, Jay, 67 00:03:27,480 --> 00:03:30,520 Speaker 2: is that it looks like they're talking about seeing a 68 00:03:30,680 --> 00:03:35,480 Speaker 2: fourth quarter adjusted gross margin of thirty six point five percent. 69 00:03:35,800 --> 00:03:39,360 Speaker 2: Third quarter adjusted gross margin was forty percent against an 70 00:03:39,480 --> 00:03:41,520 Speaker 2: estimate of thirty six point one percent. Is that the 71 00:03:41,600 --> 00:03:42,600 Speaker 2: number you were looking for? 72 00:03:43,520 --> 00:03:45,160 Speaker 3: Yeah, but there's a lot of adjustments in there, so 73 00:03:45,160 --> 00:03:46,120 Speaker 3: I haven't worked them all. 74 00:03:46,360 --> 00:03:50,840 Speaker 2: Okay, Okay, Hey listen, listen. This is a company that's 75 00:03:50,840 --> 00:03:54,360 Speaker 2: been around for a long time. You know, you're entrenched 76 00:03:54,400 --> 00:03:58,360 Speaker 2: in how you were, what you were. Different executives coming 77 00:03:58,400 --> 00:04:01,640 Speaker 2: in to try and write this ship. You know, it's 78 00:04:01,680 --> 00:04:04,760 Speaker 2: a big ship to turn while also facing lots of 79 00:04:04,800 --> 00:04:07,920 Speaker 2: growing competition. Do you feel like it is in the 80 00:04:08,000 --> 00:04:08,680 Speaker 2: right direction. 81 00:04:10,440 --> 00:04:12,600 Speaker 3: I think it's too soon to tell. I really hope 82 00:04:12,640 --> 00:04:14,200 Speaker 3: it's in the movement in the right direction, but it's 83 00:04:14,240 --> 00:04:16,280 Speaker 3: too soon to tell. Like, what are they going to 84 00:04:16,320 --> 00:04:19,000 Speaker 3: do with those fabs? Right? And you know, I've been 85 00:04:19,000 --> 00:04:22,480 Speaker 3: saying for years that Intel's biggest challenge is not external 86 00:04:22,560 --> 00:04:25,560 Speaker 3: competitors or customers. It's their biggest challenge is internal and 87 00:04:25,600 --> 00:04:28,800 Speaker 3: fixing their culture. So that on that mark, I think 88 00:04:28,920 --> 00:04:32,320 Speaker 3: this is a step forward. Lipoo, who has put it. 89 00:04:32,440 --> 00:04:35,000 Speaker 3: You know, he has a plan and he's chipping away 90 00:04:35,000 --> 00:04:37,279 Speaker 3: at this sort of internal problem. But they really have 91 00:04:37,400 --> 00:04:40,479 Speaker 3: to readjust their worldview internally and understand that they're not 92 00:04:40,520 --> 00:04:43,800 Speaker 3: the dominant player that they were for twenty years. They're 93 00:04:43,880 --> 00:04:45,720 Speaker 3: they're the upstart now and they got to act like it. 94 00:04:46,160 --> 00:04:48,560 Speaker 1: Jay, we spent a good portion of our program earlier 95 00:04:48,600 --> 00:04:51,320 Speaker 1: talking about economic statecraft and the new role of the 96 00:04:51,440 --> 00:04:56,240 Speaker 1: US government is taking in companies, the reporting around potentially 97 00:04:56,480 --> 00:04:58,960 Speaker 1: investing in some of these quantum companies. 98 00:04:59,200 --> 00:05:00,280 Speaker 3: We of course have of. 99 00:05:00,200 --> 00:05:03,400 Speaker 1: The Intel, among the US government being among the biggest 100 00:05:03,400 --> 00:05:08,560 Speaker 1: shareholders in Intel, US Steel, the Golden share there the 101 00:05:08,720 --> 00:05:12,680 Speaker 1: critical minerals and mining companies that have taken investment or 102 00:05:12,760 --> 00:05:16,960 Speaker 1: had interest expressed in them. From an Intel perspective, how 103 00:05:16,960 --> 00:05:19,440 Speaker 1: does the US government investment change Intel. 104 00:05:21,440 --> 00:05:24,640 Speaker 3: I think it is going to encourage other US chip 105 00:05:24,640 --> 00:05:30,120 Speaker 3: companies to consider working with Intel Foundry, right because you know, 106 00:05:30,240 --> 00:05:33,320 Speaker 3: Nvidia has already invested in it, SoftBank's invested in Intel. 107 00:05:33,839 --> 00:05:36,120 Speaker 3: Now do we see Apple or Amazon or Google or 108 00:05:36,120 --> 00:05:39,159 Speaker 3: one of these other potential Intel customers sign up to 109 00:05:39,320 --> 00:05:42,800 Speaker 3: work with Intel Foundry take that risk? But because it 110 00:05:42,960 --> 00:05:44,800 Speaker 3: could be seen as patriotic. 111 00:05:44,480 --> 00:05:46,120 Speaker 1: Well, that's okay, I'm glad you said that. Do they 112 00:05:46,160 --> 00:05:48,720 Speaker 1: do it because it's the right thing for their business, 113 00:05:48,720 --> 00:05:51,880 Speaker 1: because it's the best option for a foundry, or is 114 00:05:51,880 --> 00:05:55,120 Speaker 1: it because it shows the Trump administration that they're supporting 115 00:05:55,120 --> 00:05:57,920 Speaker 1: a business that the administration has invested in. 116 00:05:58,880 --> 00:06:01,640 Speaker 3: So I think it can be both, right. My view 117 00:06:01,720 --> 00:06:04,600 Speaker 3: is that these companies need to work with Intel. They 118 00:06:04,640 --> 00:06:08,360 Speaker 3: need to see Intel boundaries succeed because if they abandon 119 00:06:08,400 --> 00:06:11,520 Speaker 3: Intel foundry today and Intel abandons it, you know entirely 120 00:06:12,000 --> 00:06:14,760 Speaker 3: what happens in five years when they're you know, TSMC 121 00:06:14,800 --> 00:06:18,080 Speaker 3: has an effective monopoly today, right in five years they'll 122 00:06:18,080 --> 00:06:21,320 Speaker 3: have a true, actual monopoly. And that's that's going to 123 00:06:21,360 --> 00:06:23,520 Speaker 3: be really challenging for all these all these companies. And 124 00:06:23,560 --> 00:06:26,280 Speaker 3: so it's hard. You know, the way that companies work, 125 00:06:26,320 --> 00:06:29,120 Speaker 3: they you know, they're thinking on ninety day cycles. Somebody 126 00:06:29,120 --> 00:06:30,640 Speaker 3: needs to be thinking of sort of the five ten 127 00:06:30,720 --> 00:06:34,880 Speaker 3: year time horizon, and maybe the government is sort of 128 00:06:34,880 --> 00:06:36,400 Speaker 3: the forcing function that gets us there. 129 00:06:36,520 --> 00:06:39,520 Speaker 2: You know who thinks in more than five or ten 130 00:06:39,920 --> 00:06:43,000 Speaker 2: year cycles. A little country named China. They're pretty good 131 00:06:43,000 --> 00:06:46,400 Speaker 2: about those long term plannings. Does Evan's some fun with you, 132 00:06:46,480 --> 00:06:49,560 Speaker 2: Jay Well having said that though, you know, on the 133 00:06:49,600 --> 00:06:52,120 Speaker 2: other hand, are there companies who are saying, I don't 134 00:06:52,160 --> 00:06:54,880 Speaker 2: get involved with anybody who's involved in the government because 135 00:06:54,960 --> 00:06:57,800 Speaker 2: just like the way the US government for a long 136 00:06:57,839 --> 00:07:00,760 Speaker 2: time has been or you know, US investors been critical 137 00:07:01,320 --> 00:07:05,800 Speaker 2: of you know, sovereign held entities you know, in other countries. 138 00:07:05,839 --> 00:07:09,800 Speaker 2: So is there some you know, justification in that as well, 139 00:07:09,920 --> 00:07:13,480 Speaker 2: or should we just assume that Intel now has a massive, 140 00:07:14,360 --> 00:07:18,239 Speaker 2: you know, backup called the US government. 141 00:07:19,400 --> 00:07:22,600 Speaker 3: So I think everybody's a little bit uncomfortable with the 142 00:07:22,680 --> 00:07:25,680 Speaker 3: US government taking stakes in companies. Everyone I know on 143 00:07:25,720 --> 00:07:27,760 Speaker 3: Wall Street, everyone I know in the valley, just a 144 00:07:27,800 --> 00:07:31,000 Speaker 3: little bit uncomfortable about it, sort of ideologically, it's not 145 00:07:31,040 --> 00:07:35,200 Speaker 3: something we're used to. It's clear that, you know, the 146 00:07:35,320 --> 00:07:39,600 Speaker 3: US is moving towards some kind of national industrial policy. 147 00:07:40,400 --> 00:07:42,880 Speaker 3: This is one way to achieve that. I'm not sure 148 00:07:42,960 --> 00:07:44,640 Speaker 3: taking a stake in it is quite the right way 149 00:07:44,640 --> 00:07:48,320 Speaker 3: to do it, But you know, there are merits for 150 00:07:48,680 --> 00:07:51,080 Speaker 3: being a little bit more somewhere in between the government 151 00:07:51,080 --> 00:07:53,680 Speaker 3: controlling everything and the government doing nothing. Maybe there's a 152 00:07:53,680 --> 00:07:54,760 Speaker 3: happy medium we can find. 153 00:07:54,960 --> 00:07:57,760 Speaker 2: Hey, thirty seconds on the call, or you're sitting down 154 00:07:57,840 --> 00:07:59,640 Speaker 2: with Intel execs what do you want to ask them? 155 00:07:59,680 --> 00:08:02,800 Speaker 3: Just quite what are you doing with foundry? 156 00:08:03,560 --> 00:08:04,760 Speaker 2: Okay, that was. 157 00:08:04,760 --> 00:08:06,480 Speaker 3: Great, so appreciate it. 158 00:08:06,560 --> 00:08:09,880 Speaker 2: Jay Goldberg, thanks, Senior Analyst Semiconductors and Electronics at Seaport 159 00:08:09,920 --> 00:08:13,640 Speaker 2: Research Partners. We're looking at Intel continuing to trade higher 160 00:08:13,680 --> 00:08:14,920 Speaker 2: here in the aftermarket.