Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is a breaking
Speaker 1: news update from Bloomberg, instant reaction and analysis from our
Speaker 1: three thousand journalists and analysts around the world. We're watching
Speaker 1: a lot of different companies, but I want to home
Speaker 1: in on one, and that would be Intel shares surging
Speaker 1: in the after.
Speaker 2: Hours, building the momentum to the upside.
Speaker 1: Yeah, seven percent to the upside of right now in
Speaker 1: the after hours, little bit at the beginning trepidation I
Speaker 1: think for shareholders, but it could have to do also
Speaker 1: with some corrected numbers that we're coming back and forth
Speaker 1: over the terminal for the results. The most recent results.
Speaker 1: As you mentioned, shares what up ninety percent going into
Speaker 1: the print this year.
Speaker 2: Well, yeah, we know, like there was the US taking
Speaker 2: that position Intel specifically an equity position, and it is
Speaker 2: now the third largest investor in Intelsa. That certainly has
Speaker 2: given it a jolt, if you will, this year. But again,
Speaker 2: I think what's interesting is the company's CFO speaking in
Speaker 2: an interview. You can check out our Ian King's right
Speaker 2: through on this, but Intel saying the third quarter was
Speaker 2: stronger than it thought across the board. So yeah, server
Speaker 2: demand was a surprise positive. It feels like there's a
Speaker 2: lot of things that feel like the changes, the moves
Speaker 2: by lit Bhutan, the CEO, maybe some of it's starting
Speaker 2: to pay off.
Speaker 3: Well.
Speaker 1: I want to see what Jake Goldberg has to say
Speaker 1: about all this. He's Semiconductors and Electronics senior analyst at
Speaker 1: Seaport Research Partners. He joins us from San Francisco. Jay,
Speaker 1: good to have you. You cover a lot of these companies,
Speaker 1: including Intel. You've got a neutral rating on Intel. Just
Speaker 1: give us your first reaction to this report that shows
Speaker 1: an encouraging forecast after a rebound in the PC chip market.
Speaker 3: Yeah. I think it's an encouraging step forward for the company.
Speaker 3: They've been through some rough times, and I think the
Speaker 3: driver of this quarter's results are their new products coming
Speaker 3: on stream using their eighteen eight their new manufacturing process,
Speaker 3: as well as some help from TSMC so a bunch
Speaker 3: of new products starting to ramp into production and volume.
Speaker 3: I think that's helping a lot. And I'm most encouraged
Speaker 3: by sort of the gross margin outlook for next quarter.
Speaker 3: I haven't run through all my numbers, but it looks
Speaker 3: like it's much better than expected, which is important, not
Speaker 3: just for the financial way of that, but also it's
Speaker 3: a good indicator into how their manufacturing process is tracking.
Speaker 1: I don't well, sorry, go ahead, I don't want to
Speaker 1: get you in trouble with compliance, but can you are
Speaker 1: you going to change your outlook? You're rating on the stock.
Speaker 3: So I just upgraded it about a month ago from
Speaker 3: sell to neutral. And my concern here is more that
Speaker 3: big picture question you all were talking about earlier. As
Speaker 3: much as this quarter is good progress and we're seeing
Speaker 3: sort of tactically they're moving in the right direction, the
Speaker 3: looming question over the company is what are they going
Speaker 3: to do with the fabs. Last quarter, CEO of Bhutan said,
Speaker 3: if they don't get a customer for Intel Foundry Journal
Speaker 3: customer for Foundry, they're going to stop doing advanced manufacturing.
Speaker 3: And I think that's one of these tough analyst calls
Speaker 3: because in the near term, if they stop doing that's
Speaker 3: it removes a lot of expense numbers go way up,
Speaker 3: stock goes up. It's a near term easy thing to do,
Speaker 3: but long term it's probably really bad for the company,
Speaker 3: and it's just hard to square that sort of long
Speaker 3: term forecast multi year forecast. So I'm still on the fence.
Speaker 2: Hey, one thing I want to just point out, Jay,
Speaker 2: is that it looks like they're talking about seeing a
Speaker 2: fourth quarter adjusted gross margin of thirty six point five percent.
Speaker 2: Third quarter adjusted gross margin was forty percent against an
Speaker 2: estimate of thirty six point one percent. Is that the
Speaker 2: number you were looking for?
Speaker 3: Yeah, but there's a lot of adjustments in there, so
Speaker 3: I haven't worked them all.
Speaker 2: Okay, Okay, Hey listen, listen. This is a company that's
Speaker 2: been around for a long time. You know, you're entrenched
Speaker 2: in how you were, what you were. Different executives coming
Speaker 2: in to try and write this ship. You know, it's
Speaker 2: a big ship to turn while also facing lots of
Speaker 2: growing competition. Do you feel like it is in the
Speaker 2: right direction.
Speaker 3: I think it's too soon to tell. I really hope
Speaker 3: it's in the movement in the right direction, but it's
Speaker 3: too soon to tell. Like, what are they going to
Speaker 3: do with those fabs? Right? And you know, I've been
Speaker 3: saying for years that Intel's biggest challenge is not external
Speaker 3: competitors or customers. It's their biggest challenge is internal and
Speaker 3: fixing their culture. So that on that mark, I think
Speaker 3: this is a step forward. Lipoo, who has put it.
Speaker 3: You know, he has a plan and he's chipping away
Speaker 3: at this sort of internal problem. But they really have
Speaker 3: to readjust their worldview internally and understand that they're not
Speaker 3: the dominant player that they were for twenty years. They're
Speaker 3: they're the upstart now and they got to act like it.
Speaker 1: Jay, we spent a good portion of our program earlier
Speaker 1: talking about economic statecraft and the new role of the
Speaker 1: US government is taking in companies, the reporting around potentially
Speaker 1: investing in some of these quantum companies.
Speaker 3: We of course have of.
Speaker 1: The Intel, among the US government being among the biggest
Speaker 1: shareholders in Intel, US Steel, the Golden share there the
Speaker 1: critical minerals and mining companies that have taken investment or
Speaker 1: had interest expressed in them. From an Intel perspective, how
Speaker 1: does the US government investment change Intel.
Speaker 3: I think it is going to encourage other US chip
Speaker 3: companies to consider working with Intel Foundry, right because you know,
Speaker 3: Nvidia has already invested in it, SoftBank's invested in Intel.
Speaker 3: Now do we see Apple or Amazon or Google or
Speaker 3: one of these other potential Intel customers sign up to
Speaker 3: work with Intel Foundry take that risk? But because it
Speaker 3: could be seen as patriotic.
Speaker 1: Well, that's okay, I'm glad you said that. Do they
Speaker 1: do it because it's the right thing for their business,
Speaker 1: because it's the best option for a foundry, or is
Speaker 1: it because it shows the Trump administration that they're supporting
Speaker 1: a business that the administration has invested in.
Speaker 3: So I think it can be both, right. My view
Speaker 3: is that these companies need to work with Intel. They
Speaker 3: need to see Intel boundaries succeed because if they abandon
Speaker 3: Intel foundry today and Intel abandons it, you know entirely
Speaker 3: what happens in five years when they're you know, TSMC
Speaker 3: has an effective monopoly today, right in five years they'll
Speaker 3: have a true, actual monopoly. And that's that's going to
Speaker 3: be really challenging for all these all these companies. And
Speaker 3: so it's hard. You know, the way that companies work,
Speaker 3: they you know, they're thinking on ninety day cycles. Somebody
Speaker 3: needs to be thinking of sort of the five ten
Speaker 3: year time horizon, and maybe the government is sort of
Speaker 3: the forcing function that gets us there.
Speaker 2: You know who thinks in more than five or ten
Speaker 2: year cycles. A little country named China. They're pretty good
Speaker 2: about those long term plannings. Does Evan's some fun with you,
Speaker 2: Jay Well having said that though, you know, on the
Speaker 2: other hand, are there companies who are saying, I don't
Speaker 2: get involved with anybody who's involved in the government because
Speaker 2: just like the way the US government for a long
Speaker 2: time has been or you know, US investors been critical
Speaker 2: of you know, sovereign held entities you know, in other countries.
Speaker 2: So is there some you know, justification in that as well,
Speaker 2: or should we just assume that Intel now has a massive,
Speaker 2: you know, backup called the US government.
Speaker 3: So I think everybody's a little bit uncomfortable with the
Speaker 3: US government taking stakes in companies. Everyone I know on
Speaker 3: Wall Street, everyone I know in the valley, just a
Speaker 3: little bit uncomfortable about it, sort of ideologically, it's not
Speaker 3: something we're used to. It's clear that, you know, the
Speaker 3: US is moving towards some kind of national industrial policy.
Speaker 3: This is one way to achieve that. I'm not sure
Speaker 3: taking a stake in it is quite the right way
Speaker 3: to do it, But you know, there are merits for
Speaker 3: being a little bit more somewhere in between the government
Speaker 3: controlling everything and the government doing nothing. Maybe there's a
Speaker 3: happy medium we can find.
Speaker 2: Hey, thirty seconds on the call, or you're sitting down
Speaker 2: with Intel execs what do you want to ask them?
Speaker 3: Just quite what are you doing with foundry?
Speaker 2: Okay, that was.
Speaker 3: Great, so appreciate it.
Speaker 2: Jay Goldberg, thanks, Senior Analyst Semiconductors and Electronics at Seaport
Speaker 2: Research Partners. We're looking at Intel continuing to trade higher
Speaker 2: here in the aftermarket.