Speaker 1: We're of course going to be talking about the chip
Speaker 1: design firm ARM, which has really bounced off of its
Speaker 1: lows in terms of its share price throughout the trading
Speaker 1: of today. We're currently over the last two days down
Speaker 1: by one point three percent. Coming out after the bell
Speaker 1: with its earnings tepid forecast ed was what the market
Speaker 1: seemed to be focusing in on, even though they absolutely
Speaker 1: smashed it in terms of their fiscal fourth quarter numbers
Speaker 1: and their fourth first quarter look ahead. Let's stick in
Speaker 1: to some of that caution with Renee. Has is the
Speaker 1: ARM CEO, Renee wonderful to have time with you. And look,
Speaker 1: there does seem to be a worry about your full
Speaker 1: year forecasts?
Speaker 2: Are you being cautious?
Speaker 3: Well, thanks both for having me Ed and Carroll. And
Speaker 3: we just came off a record year in terms of revenue.
Speaker 3: We were up twenty percent a little bit over twenty
Speaker 3: percent our fiscal twenty three from twenty twenty two, and
Speaker 3: we're actually forecasting even higher growth this year, north of
Speaker 3: twenty percent.
Speaker 4: And we also signaled to.
Speaker 3: The markets yesterday that in twenty five, twenty six, twenty seven,
Speaker 3: we see that growth continuing. So we have incredible visibility
Speaker 3: into our business and we're very very confident of this
Speaker 3: growth rate going forward.
Speaker 2: We're just seeing your shares actually ticking to positive territory
Speaker 2: rene up now six tenths of one percent. The underlying
Speaker 2: story is the build out in AI infrastructure. Right, we're
Speaker 2: talking about data center powered GP by GPUs. Your numbers
Speaker 2: were good. Tell me about the underlying demand, then about
Speaker 2: the long term and the addressable market you think is
Speaker 2: either intact or is not.
Speaker 3: Well. I think this AI buildout, as you describe, or
Speaker 3: maybe said another way, just expanding capacity to run these
Speaker 3: foundation models, to do more and more training, to do
Speaker 3: more and more inference. We really are only at the
Speaker 3: very beginning because when you start to think about the
Speaker 3: capabilities that this could unleash, whether it's around healthcare, pharmer research, productivity, gains,
Speaker 3: call centers, we're still in the very very early days.
Speaker 3: That all starts with having to do this level of
Speaker 3: training and inference in the cloud, but it ultimately will
Speaker 3: find itself in every single edge device, whether that's a PC,
Speaker 3: your smartphone, your car, and whether it's all those devices
Speaker 3: I've mentioned from the data center to the edge devices,
Speaker 3: they all run on ARM. So we have incredible visibility
Speaker 3: to where this is all going, which is why we're
Speaker 3: very confident.
Speaker 4: In the growth rates. They're also one of the big problems.
Speaker 3: You've got with all of these AI data centers is
Speaker 3: around energy and power, so power efficiency being so key,
Speaker 3: it's what ARM is really good at. Increasingly we're seeing
Speaker 3: the most complex applications moving to ARM and most sophisticated
Speaker 3: training ship on the planet that was just announced Grace Blackwell,
Speaker 3: well that's based on ARM.
Speaker 1: Okay, So you're managing to really think that you're going
Speaker 1: to be the server play as well as the PC play,
Speaker 1: the cell phone play, and I want to focus in
Speaker 1: on the cell phone play, Renee, because that's been where
Speaker 1: your bread and muster has been history. How are we
Speaker 1: looking from a smartphone perspective? Is the market looking strong
Speaker 1: to you? We've had many a mixed message coming from
Speaker 1: China to mod for example.
Speaker 3: Overall, what we've seen the smartphone market briefly for ARM
Speaker 3: has been quite a good growth rate in terms of royalties.
Speaker 3: Our version nine which is now being used in many
Speaker 3: of the premium mobile phones, that drives a higher royalty
Speaker 3: rate for ARM. There's also more complex CPUs that go
Speaker 3: into that that's also better.
Speaker 4: For ARM and going forward carrolling.
Speaker 3: One of the things that we're seeing, and it's not
Speaker 3: just in smartphones, is that as these AI models are
Speaker 3: moving so fast, the hardware can't keep up with the software.
Speaker 3: The software innovation is happening so quickly that by the
Speaker 3: time the hardware is ready to run those models, everyone
Speaker 3: wishes they had more performance, they had more efficiency. So
Speaker 3: what does that mean for ARM. It's driving growth in
Speaker 3: our licensing activity. People are looking to do more and
Speaker 3: more design ships faster and faster, and that's all good
Speaker 3: for us going forward. So I think going forward you're
Speaker 3: going to see more and more innovation happening, not only
Speaker 3: in the smartphones, but across all these edge devices.
Speaker 1: What's interesting in AY is it's hard to keep up
Speaker 1: with the pace of geopolitical change as well. The latest
Speaker 1: news coming that Huawei of course is not going to
Speaker 1: have access to qualcom to Intel chips. You were, of
Speaker 1: course a UK based company, but are affected by US policies.
Speaker 1: Has this impacted your business the limitations of Huawei's access
Speaker 1: to chip designed to chip technology to licenses.
Speaker 3: Yeah, So that issue that you referred to specifically was
Speaker 3: when Huawei was placed on the entity list I think
Speaker 3: twenty nineteen, twenty twenty, companies had to apply for a
Speaker 3: license to exempt them to ship to Huawei. So a
Speaker 3: number of companies asked for those licenses, they got those licenses.
Speaker 3: Now those licenses are being revoked. We don't follow in
Speaker 3: that category in any way, shape or form. We didn't
Speaker 3: apply for any licenses at the time to ship, complied
Speaker 3: with the export control as they were laid out. So
Speaker 3: there's really anne event for us in terms of what
Speaker 3: you're seeing with Qualcom and or Intel.
Speaker 2: We are speaking live to the Arms CEO, Renee has
Speaker 2: We're on the ground here at Bloomberg Tech in San Francisco.
Speaker 2: Last week, Renee Christiano and Mom was on the show
Speaker 2: telling Caroline and I, this is the year of the AIPC.
Speaker 2: You were asked about that on your earning school last
Speaker 2: night and you gave a slightly different answer. And maybe
Speaker 2: it's not the year of the AIPC more the twelve
Speaker 2: to thirty six month window. And you don't want to
Speaker 2: see just one PC supplier, you said you'd like to
Speaker 2: see two or three. What's your beef with Qualcom?
Speaker 4: Now?
Speaker 3: When I look at the PC ecosystem, one large ecosystem
Speaker 3: has already moved to ARM in a very big way.
Speaker 3: Apple is now one percent based on ARM. All the
Speaker 3: Apple silicon is based on ARM and you see amazingly
Speaker 3: good products relative to what they've delivered, fantastic battery life, performance,
Speaker 3: thin and light, no fans. When you think about the
Speaker 3: Windows market, it's a very different market. It's highly fragmented.
Speaker 3: You have lots of different players. The ecosystem matters, the
Speaker 3: channel matters, price points matter, high end gaming machines versus
Speaker 3: low end devices that are like cloud enabled. So what
Speaker 3: does all of that mean. It generally has meant that breadth,
Speaker 3: vendor choice, multiple options to provide a full scope is
Speaker 3: what matters. And what I'm hearing is over the next
Speaker 3: couple of years, the Windows ecosystem is going to be
Speaker 3: able to afford that.
Speaker 4: And I think over.
Speaker 3: The next two three years, I do believe Windows Unarmed
Speaker 3: will be real. I think you'll see multiple players, multiple
Speaker 3: price points, multiple units, and I think you'll see meaningful
Speaker 3: market share that we start to gain the kind of
Speaker 3: performance you see in the other ecosystem. I think we'll
Speaker 3: find its way into the Windows ecosystem.
Speaker 2: All Rennie, I wanted to talk about geography really quick
Speaker 2: we're here in San Francisco, right, there's a lot about
Speaker 2: Americas are in d focus on AI related chips. Are
Speaker 2: you seeing this sort of equivalent activity in Europe, for example,
Speaker 2: any of your customers outside of those markets.
Speaker 3: Yeah, well I'm in San Francisco today too, so I
Speaker 3: will see you a little bit later.
Speaker 4: But in general, I think the.
Speaker 3: Geopolitics are something that all tech CEOs are now having
Speaker 3: to figure out and work with AI models, foundation models,
Speaker 3: sovereign clouds, thinking about what level of training takes place
Speaker 3: in a country versus outside the country, where the weights sit,
Speaker 3: et cetera. That these are all the kind of things
Speaker 3: that politicians have never really had to think about in
Speaker 3: the past.
Speaker 4: So we're involved in a lot.
Speaker 3: Of those conversations, whether that's in the United States, whether
Speaker 3: that's in Europe, and really just trying to understand it
Speaker 3: because any lawmakers in all these jurisdictions are just trying
Speaker 3: to figure it all out. And as I mentioned before,
Speaker 3: as the software and models are moving so fast asked,
Speaker 3: it's difficult for everyone to keep up, But we are
Speaker 3: central to all those discussions.
Speaker 1: Renee, what's been keeping up is your valuation?
Speaker 4: Boy?
Speaker 1: I mean, do you think there's too much exuberance around
Speaker 1: AI valuations out there. Are you going to make the
Speaker 1: most of it by well, we talked to one point
Speaker 1: of listing in the UK too.
Speaker 3: Yeah, you know, I don't think about the valuations as
Speaker 3: much as I just think about the AI opportunity, which
Speaker 3: I frankly believe is undercalled in terms of just what
Speaker 3: it's going to mean relative to society and what it
Speaker 3: can do for our planet. I think again we are
Speaker 3: in very very early days in terms of the capabilities
Speaker 3: of what this can unleash for our society. Incredibly excited
Speaker 3: to be part of it. But I don't think we're
Speaker 3: part of a hype cycle at all. I think there's
Speaker 3: a lot of innovation taking place, and you know, frankly,
Speaker 3: the innovation that's taking place, any inventions that we're seeing,
Speaker 3: it's just breathtaking. So no, I don't pally viewed as
Speaker 3: a hype cycle at all.
Speaker 2: Rene hassem Ce