WEBVTT - Apple, Amazon, and Intel Earnings; Intel CEO Pat Gelsinger 0:00:02.440 --> 0:00:05.439 Good morning, and welcome to the Bloomberg Daybreak Asia podcast. 0:00:05.600 --> 0:00:08.200 I'm Doug Prisner. Here are the stories we're following today. 0:00:09.600 --> 0:00:13.200 I'm Charlie Peloton for Doug Prisoner. This week Stateside, we 0:00:13.320 --> 0:00:16.000 got a number of big tech earnings from the likes 0:00:16.000 --> 0:00:19.960 of Apple, Amazon, and Intel. We'll hear from Intel CEO 0:00:20.079 --> 0:00:23.760 Pat Gelsinger later in the program, but first up reaction 0:00:23.920 --> 0:00:29.680 from ALFREDA Jonker, client portfolio manager at Alfinity Investment Management. 0:00:30.160 --> 0:00:34.960 She spoke with Bloomberg's Sherry On and Annabelle Droolers at. 0:00:34.800 --> 0:00:37.239 A time when we got those more disappointing outlooks when 0:00:37.280 --> 0:00:39.760 it came to Meta and Microsoft as well. Yet when 0:00:39.760 --> 0:00:42.879 it comes to your top picks, Apple is one of 0:00:42.880 --> 0:00:43.480 them for you. 0:00:44.080 --> 0:00:47.640 Yes. If you look at the results from the start 0:00:47.680 --> 0:00:49.880 of the reporting season up to now, it has really 0:00:49.920 --> 0:00:52.559 been a bit of a mixed reporting season overall for 0:00:52.640 --> 0:00:56.520 all the tech stocks. If you think back at the start, 0:00:56.600 --> 0:01:00.279 we had a few misses, something like a Kitence with 0:01:00.320 --> 0:01:04.399 a good result this morning, Microsoft as well as Apple, 0:01:04.520 --> 0:01:08.240 probably a little bit below what the market was hoping for. 0:01:08.319 --> 0:01:11.520 You've discussed China, but also I think it's all about 0:01:11.520 --> 0:01:13.959 the outlook statements. I think the key point to make 0:01:14.000 --> 0:01:16.760 here is that these step giants are still coming through 0:01:16.800 --> 0:01:20.759 with really really strong earnings growth and strong revenue growth. 0:01:21.280 --> 0:01:23.960 The shock and awe of the AI trade is just 0:01:24.240 --> 0:01:27.399 probably over now. They are not surprised about thirty forty 0:01:27.400 --> 0:01:30.840 percent anymore as they did before. So yes, they've done 0:01:30.880 --> 0:01:33.080 a great job, and yes, some of the areas are 0:01:33.080 --> 0:01:36.840 still doing very well, particularly some of the businesses like 0:01:36.920 --> 0:01:39.560 Microsoft has got a range of different businesses that they 0:01:39.640 --> 0:01:43.760 can generate revenue from an AI, but we have started 0:01:43.800 --> 0:01:46.919 to see a little bit of capacity constraint and also 0:01:47.040 --> 0:01:51.800 impacting particularly on the cloud business side. But taking that 0:01:51.960 --> 0:01:55.200 all into account, majority of what the market is focused 0:01:55.200 --> 0:01:57.720 on is really the outlook statement, and that is where 0:01:57.800 --> 0:02:01.240 Amazon as well as Alphabet has come out probably better 0:02:01.280 --> 0:02:04.680 than expected guidance for the next quarter. And then Apple, 0:02:05.280 --> 0:02:09.679 where they generally generate thirty five percent of total financial 0:02:09.720 --> 0:02:12.680 hairs sales in the fourth quarter, that was a little 0:02:12.680 --> 0:02:16.280 bit softer, and if you take that into account with 0:02:16.919 --> 0:02:20.160 just releasing their Apple Intelligence, there are a number of 0:02:20.240 --> 0:02:23.200 questions that we need to work through and understand how 0:02:23.240 --> 0:02:26.800 long there's sort of short is it the shorter term 0:02:27.040 --> 0:02:30.080 problem or is there a little bit more in this 0:02:31.240 --> 0:02:34.400 later on? So yes, we will be taking it into account. 0:02:34.600 --> 0:02:37.840 We have been taking profits in this area over the 0:02:37.919 --> 0:02:41.359 last sort of year to date, we've taken a lot 0:02:41.360 --> 0:02:46.080 of profit out of Nvidia, Microsoft, Alphabet, so it's not 0:02:46.160 --> 0:02:48.320 the huge position that it used to be, but we 0:02:48.360 --> 0:02:50.640 still believe there is space work in that portfolio. 0:02:51.080 --> 0:02:54.280 So then how are you thinking about your framing around this. 0:02:54.400 --> 0:02:56.520 Are you still looking at sort of the picks and shovels. 0:02:56.520 --> 0:02:58.680 I notice you say capacity constraint and that makes me 0:02:58.720 --> 0:03:01.399 think of Microsoft for instance this week. Are you still 0:03:01.440 --> 0:03:02.960 in that part of it or are you going more 0:03:03.000 --> 0:03:04.720 into the application side instead. 0:03:05.360 --> 0:03:07.760 Yes, I think if you take a look back at 0:03:07.800 --> 0:03:10.440 what we saw during the Internet phase, it was very 0:03:10.520 --> 0:03:16.680 much semiconductors first, then infrastructure, then you have the software 0:03:16.680 --> 0:03:19.280 and services at the top. So we definitely have been 0:03:19.360 --> 0:03:22.320 exposed to sort of all through those different stages. But 0:03:22.440 --> 0:03:26.480 now we do believe that you know, it's probably worthwhile 0:03:26.840 --> 0:03:30.400 having a player in each of those games, but not 0:03:30.560 --> 0:03:33.480 have two or three players in each of those different stages. 0:03:33.880 --> 0:03:37.760 So we at is probably more adding to the infrastructure side. So, 0:03:37.920 --> 0:03:40.480 as I mentioned, Apple sits right there in the middle 0:03:40.800 --> 0:03:46.480 with their devices, but also something like Microsoft can still 0:03:46.520 --> 0:03:49.520 play in the sort of software and services that sits 0:03:49.560 --> 0:03:52.880 on top, as well as Amazon and Alphabet. So that 0:03:53.000 --> 0:03:54.920 is what we are currently looking for. We're looking for 0:03:54.960 --> 0:03:59.200 companies that can generate revenues out of each of those 0:03:59.200 --> 0:04:02.520 different phases. And in video the reason why we keep 0:04:02.520 --> 0:04:05.320 on holding it and we have been cutting back quite 0:04:05.320 --> 0:04:08.200 a bit given the valuation expansion. But if you look 0:04:08.240 --> 0:04:12.360 at the capital that these big mega hyperscalis of spending. 0:04:12.480 --> 0:04:15.680 We've heard earlier that they will just continue to spend 0:04:15.760 --> 0:04:19.080 even more next year. That's very positive for in VideA. 0:04:19.560 --> 0:04:23.120 We just need to understand exactly what's going on with capacity. 0:04:23.640 --> 0:04:26.679 So far, all the news that we've heard from Gensen 0:04:26.680 --> 0:04:29.640 has been that there is a massive demand for their 0:04:29.720 --> 0:04:33.960 new Blackbell trips. We will be doing a lot of work. 0:04:34.440 --> 0:04:37.800 Our analysts have been on the ground doing trips understanding 0:04:37.839 --> 0:04:40.760 that sort of back end to get a better sense 0:04:40.839 --> 0:04:43.240 of the capacity. For now, we don't think it is 0:04:43.279 --> 0:04:46.080 a huge problem, but we could potentially see not just 0:04:46.200 --> 0:04:48.919 in video but also for the likes of Microsoft, that 0:04:49.120 --> 0:04:51.760 some of those revenues could be postponed a little bit 0:04:51.800 --> 0:04:55.880 into next year rather than into the fourth quarter this year, 0:04:56.120 --> 0:04:58.400 so a bit of a delayed potentially for some of 0:04:58.440 --> 0:05:00.960 these revenue gen rating companies. 0:05:01.120 --> 0:05:03.320 I'm a little bit concerned about the savings rate because 0:05:03.320 --> 0:05:06.039 when we talked about the broader markets, we always thought 0:05:06.080 --> 0:05:09.640 there was a little bit of buffer despite the downside 0:05:09.640 --> 0:05:12.000 and the pressure that we could see from uncertainty in 0:05:12.080 --> 0:05:15.599 politics to your politics and so forth. Is this going 0:05:15.640 --> 0:05:18.800 to be an issue going forward for the US markets is? 0:05:18.880 --> 0:05:21.640 I think what you have seen currently clearly the data 0:05:21.720 --> 0:05:26.800 points coming through, like the GDP growth rate, even just 0:05:26.800 --> 0:05:30.360 the consumer numbers are tested. I consumer spending, even housing 0:05:30.920 --> 0:05:34.080 started to come through actually a little bit better than expected. 0:05:34.200 --> 0:05:37.440 So what we are seeing overall for the economy is 0:05:37.440 --> 0:05:41.919 probably an economy that's doing okay. And that's why we 0:05:42.040 --> 0:05:45.760 are not expecting that a hard landing or recession, but 0:05:46.240 --> 0:05:49.000 a software landing. I think the important thing to point 0:05:49.040 --> 0:05:51.560 out here is that the interest rate market is clearly 0:05:51.600 --> 0:05:55.320 not necessarily believing the indust rate cutting cycle with the 0:05:55.400 --> 0:05:58.200 market is sort of forecasting at the moment, and that 0:05:58.320 --> 0:06:01.640 could be a very important point to look out for. 0:06:02.160 --> 0:06:04.680 So on the consumer and the saving rate, yes, that 0:06:04.800 --> 0:06:07.360 is something that we do watch. I think the saving 0:06:07.440 --> 0:06:11.080 rate relative to where we've come from and relative to 0:06:11.120 --> 0:06:14.440 other countries, and the US is actually still relatively okay. 0:06:16.120 --> 0:06:16.760 But from a. 0:06:16.800 --> 0:06:21.560 Consumer's spending perspective, we have been pretty cautious on the 0:06:21.600 --> 0:06:24.720 consumer overall, and even the current reporting season, what you 0:06:24.760 --> 0:06:28.440 are seeing is quite a bifacated market where the lower 0:06:28.520 --> 0:06:32.159 end is definitely still struggling. Dollar stores not necessarily doing well. 0:06:32.440 --> 0:06:36.240 You stop, continue to see the down training happening, you know, 0:06:36.320 --> 0:06:38.680 eating at home, those sort of things. But then on 0:06:38.720 --> 0:06:41.640 the upper end you have segments that is doing quite well, 0:06:42.360 --> 0:06:45.560 so that sort of higher end consumer. But on the 0:06:45.560 --> 0:06:48.839 other hand, you also have luxury really struggling on the 0:06:48.880 --> 0:06:51.400 back of a week of China. So for the US 0:06:51.440 --> 0:06:55.280 economy itself, for us, the important thing really to understand 0:06:55.360 --> 0:06:59.159 here is what is happening to inflation and what's happening 0:06:59.200 --> 0:07:03.200 to the interest train outlook statement an interstate outlook in general, 0:07:03.360 --> 0:07:06.600 because if we do get a Trump win, for example, 0:07:06.920 --> 0:07:11.800 huge tariffs necessarily doesn't mean a positive outlook for the 0:07:11.840 --> 0:07:15.720 economy or for the interest rate outlook. So there's a 0:07:15.720 --> 0:07:18.200 lot that's that you currently need to bear in mind 0:07:18.240 --> 0:07:19.240 when you think about the. 0:07:19.560 --> 0:07:22.200 Macro outlook and Alfred, I mean, I think to your 0:07:22.200 --> 0:07:25.600 point around around the luxury end, and that China risk 0:07:26.320 --> 0:07:28.600 essay Lauder was a perfect example of that overnight, the 0:07:28.600 --> 0:07:31.200 biggest drop ever really for the company after they withdrew 0:07:31.240 --> 0:07:34.600 their China guidance. But you speak about sort of that 0:07:34.800 --> 0:07:37.720 that rally perhaps broadening out, how are you thinking about 0:07:37.720 --> 0:07:40.720 positioning then, given we do have that risk of rate 0:07:40.800 --> 0:07:43.800 staying elevator going into twenty twenty five if Trump does 0:07:43.840 --> 0:07:45.200 indeed return to the White House. 0:07:45.560 --> 0:07:48.520 Yes, So what we have been seeing of late is 0:07:48.600 --> 0:07:51.560 definitely sort of a resurgence of some of the sectors 0:07:51.560 --> 0:07:53.840 that's actually been in a deep position over the last 0:07:53.840 --> 0:07:56.400 two years. So if you think back over the last 0:07:56.440 --> 0:07:59.080 two years, we've actually been in an earnings upgrade cycle 0:07:59.160 --> 0:08:04.040 for the overall mark. We've had consecutive months of the 0:08:04.080 --> 0:08:06.160 market running more so than what we've had for many, 0:08:06.200 --> 0:08:10.360 many years. But you have actually seen that sort of 0:08:10.480 --> 0:08:15.760 underlying earnings trajectory. It's been eighteen months of positive earnings. 0:08:15.800 --> 0:08:17.880 But what we have seen of late is that sort 0:08:17.920 --> 0:08:20.680 of starting to falter. It's still positive, but not nearly 0:08:20.720 --> 0:08:22.720 as good as we want to see. And you have 0:08:22.800 --> 0:08:26.040 seen the broadening out from just tech stocks driving performance 0:08:26.080 --> 0:08:29.560 and earnings and where we are focusing on those sticktors, 0:08:29.720 --> 0:08:34.040 for example financials, it's starting to see earning growth come through, 0:08:34.640 --> 0:08:36.600 particularly capital markets opening up. 0:08:37.280 --> 0:08:38.800 Unfortunately, got to leave it there, but that was our 0:08:38.880 --> 0:08:42.920 Freddie Younger, client portfolio manager at Alffinity Investment Management. 0:08:42.840 --> 0:08:47.160 Coming up a conversation with Intel CEO Pat Gelsinger. I'm 0:08:47.280 --> 0:08:59.959 Charlie Palatan. This is Bloomberg. I'm Charlie Palette. Doug Prisoner 0:09:00.200 --> 0:09:03.319 is off. This week we go next to Intel, which 0:09:03.400 --> 0:09:07.440 surged in late US trading on optimism about a turnaround 0:09:07.720 --> 0:09:11.120 and for more we hear from CEO Pat Gelsinger. Here 0:09:11.160 --> 0:09:14.240 he is in conversation with Bloomberg's Ed Ludlow. 0:09:14.559 --> 0:09:17.120 Pat, thank you for your time in the quarter gone. 0:09:17.120 --> 0:09:20.239 We were just talking about how you made painful decisions 0:09:20.280 --> 0:09:23.520 and those showed up as impairment charges and were reflected 0:09:23.559 --> 0:09:26.280 on the bottom line. To start, Could I ask if 0:09:26.320 --> 0:09:29.080 that's it now that those actions are taken and you 0:09:29.160 --> 0:09:31.559 now have line of sight on what you want to do, 0:09:31.679 --> 0:09:34.200 or if there will be more sort of restructure to come. 0:09:34.800 --> 0:09:38.120 Yeah, we worked very hard this quarter to get this 0:09:38.280 --> 0:09:43.360 done and the people actions, the restructuring charges you'll largely 0:09:43.400 --> 0:09:46.920 finished this quarter, so it was a challenging quarter that way, 0:09:47.280 --> 0:09:50.560 but to also deliver better than expect the results if 0:09:50.600 --> 0:09:54.040 we eliminate those one time charges and to take our 0:09:54.040 --> 0:09:56.679 guidance up for Q four. I'm very proud of our 0:09:56.679 --> 0:09:58.839 team being able to do both of those this quarter. 0:09:58.920 --> 0:10:02.319 Some of the most difficult restructuring charges maybe in the 0:10:02.360 --> 0:10:06.040 history of Intel since our memory microprocessor decision almost forty 0:10:06.120 --> 0:10:09.600 years ago. Getting that done and still beating results and 0:10:09.600 --> 0:10:13.240 taking the guide up, this was a very significant quarter 0:10:13.320 --> 0:10:17.640 for our team to execute. Very proud of their discipline results. 0:10:17.960 --> 0:10:21.000 Pat the investor base of cheering you. I'm going on 0:10:21.040 --> 0:10:23.720 the reaction of your stock in after hours, but a 0:10:23.760 --> 0:10:25.840 lot of that does seem to be a focus on 0:10:25.840 --> 0:10:28.320 what you were guiding to in the final three months 0:10:28.320 --> 0:10:31.440 of this year, away from sort of the financials and numbers. 0:10:31.480 --> 0:10:34.280 Could you talk a little bit about the product business 0:10:34.320 --> 0:10:37.439 and the foundry business that gave you some confidence in 0:10:37.440 --> 0:10:38.160 that guide. 0:10:38.320 --> 0:10:40.600 Yeah, and if we take it apart a little bit, 0:10:40.640 --> 0:10:45.079 the client business. We've launched our lunar Lake product, the 0:10:45.120 --> 0:10:50.240 second generation of our AIPC, and the AIPC category very solid. 0:10:50.320 --> 0:10:53.840 We'll be launching the commercial version of that into a 0:10:54.480 --> 0:10:57.800 good market. We believe next year for a Windows refresh, 0:10:57.920 --> 0:11:01.280 a corporate refresh cycle, and we start to see more 0:11:01.320 --> 0:11:05.400 strength in the AIPC category overall, with strong set of 0:11:05.559 --> 0:11:09.560 use cases and ISVs bringing new software into the marketplace. 0:11:09.640 --> 0:11:12.760 So we feel good about the client business Data center 0:11:12.880 --> 0:11:15.920 quarter on quarter a little bit better than people forecast 0:11:15.960 --> 0:11:19.440 for that business, and a stronger product line with our 0:11:19.600 --> 0:11:23.600 Xeon six products now starting to ram, you know. And 0:11:23.640 --> 0:11:27.160 finally on the Intel foundry quarter and quarter growth in 0:11:27.200 --> 0:11:31.320 that area, and a strong pipeline of external customers. We 0:11:31.360 --> 0:11:35.679 announced Amazon and two other AT and A customers, some 0:11:35.840 --> 0:11:39.440 additional advanced packaging customers. So we're starting to see that 0:11:39.559 --> 0:11:43.520 business come to life. And that's a long term business 0:11:43.559 --> 0:11:46.880 because when people move designs, it takes several years for 0:11:47.040 --> 0:11:49.760 major designs to move into our foundry. So we've been 0:11:49.800 --> 0:11:52.080 at it now a couple of years, and we're starting 0:11:52.080 --> 0:11:55.559 to see the results of those hard work and getting 0:11:55.600 --> 0:11:58.440 back to competitive process technology with AT and A. So 0:11:58.800 --> 0:12:01.520 a very good quarter of operational results. 0:12:01.760 --> 0:12:03.760 Pat We have a question from our audience, and that 0:12:03.880 --> 0:12:07.240 question comes from Clem DeLong, who's the CEO and founder 0:12:07.240 --> 0:12:09.880 of hugging face, and he makes the point that on 0:12:09.920 --> 0:12:14.319 his platform there are many more smaller models now available, 0:12:14.679 --> 0:12:16.720 and it's leading him to have a question for you 0:12:17.120 --> 0:12:21.280 about Intel's place in the on device trend we're seeing 0:12:21.280 --> 0:12:23.880 with AI and how you're going to enable more on 0:12:23.960 --> 0:12:25.080 device AI use. 0:12:25.480 --> 0:12:28.720 Well, thank you, clem, A great question and a hugging face. 0:12:28.800 --> 0:12:31.280 A great company, and you know, as you think about 0:12:31.320 --> 0:12:33.640 these models, you know, we do see it moving from 0:12:33.679 --> 0:12:37.280 the training phase of you know, trillions of parameters to 0:12:37.360 --> 0:12:40.600 the inferencing phase. And exactly like the question says, in 0:12:40.640 --> 0:12:44.000 that inferencing phase, more of that will happen on prem 0:12:44.280 --> 0:12:47.440 for data center customers, and many of those smaller models 0:12:47.480 --> 0:12:51.480 will be retrained with enterprise's own data. A lot of 0:12:51.559 --> 0:12:54.280 those will just run on Zeon. We don't need a 0:12:54.320 --> 0:12:58.960 special accelerator, or it'll be Zeon plus an accelerator. But 0:12:59.280 --> 0:13:03.640 also then the edge use cases and AIPC use cases. 0:13:04.080 --> 0:13:04.160 Ed. 0:13:04.280 --> 0:13:06.880 I call it the three laws of the edge. Right, 0:13:06.920 --> 0:13:09.480 the laws of physics, right, the speed of light. If 0:13:09.520 --> 0:13:11.320 I have to go to the cloud, I had time. 0:13:11.640 --> 0:13:14.679 Your second law is the law of economics, right, it's 0:13:14.760 --> 0:13:18.040 cheaper to run on my device. And finally, the laws 0:13:18.040 --> 0:13:21.320 of the land, my data on my device in my 0:13:21.480 --> 0:13:24.040 data center. So we see it moving from a cloud 0:13:24.160 --> 0:13:27.600 training world to an edge and on prem world for 0:13:27.679 --> 0:13:28.800 inferencing for the future. 0:13:29.360 --> 0:13:32.160 I therefore have to ask you about Goudi. Your AI 0:13:32.320 --> 0:13:34.960 accelerator did not get the traction that you'd hoped, and 0:13:35.000 --> 0:13:38.120 you won't be making the outline target of five hundred 0:13:38.120 --> 0:13:41.320 million dollars in sales for this fiscal year or calendar year. 0:13:41.800 --> 0:13:45.120 Why is it a use case issue that the data 0:13:45.120 --> 0:13:47.959 center operators aren't looking at it or something else. 0:13:48.400 --> 0:13:51.120 Yeah, two factors that we pointed out. One is is 0:13:51.160 --> 0:13:53.640 that now we have Goudi three coming out, so there's 0:13:53.679 --> 0:13:57.760 more enthusiasm for the next generation product that we're just 0:13:57.840 --> 0:14:00.920 starting to ramp now. The second one is the software 0:14:01.280 --> 0:14:04.280 and the software use cases. The AI world has moved 0:14:04.559 --> 0:14:09.400 very rapidly and innovating very quickly, and the robustness and 0:14:09.440 --> 0:14:13.000 the completeness of the Gaudy software stack hasn't been as great. 0:14:13.440 --> 0:14:17.760 And it's an accelerator, not a full reprogrammable GPU, so 0:14:17.800 --> 0:14:21.120 that makes some of the software porting and optimizations a 0:14:21.160 --> 0:14:24.600 bit more difficult. Obviously, as we get more of that 0:14:24.720 --> 0:14:29.000 running on Gaudy, we solve the software products. But secondly 0:14:29.040 --> 0:14:32.600 then it's also to move to a complete GPU capability, 0:14:32.720 --> 0:14:36.080 which we'll be doing out in time, and that development 0:14:36.080 --> 0:14:38.240 effort is also well underway. So we feel we have 0:14:38.240 --> 0:14:40.960 a solid position. The world is coming to more on 0:14:41.120 --> 0:14:44.960 prem and enterprise use cases. Like the last question ask 0:14:45.280 --> 0:14:49.200 and GOUTI three good early indications from the marketplace and 0:14:49.240 --> 0:14:50.480 its success as we ramp it. 0:14:50.520 --> 0:14:55.080 In twenty five, Pat Bloomberg's reported that on and Qualcom, 0:14:55.160 --> 0:14:59.080 two of your peers are interested in buying some or 0:14:59.200 --> 0:15:02.480 part of in Intel. Can you confirm whether or not 0:15:02.520 --> 0:15:05.640 you received a formal offer from them or anyone else, 0:15:05.800 --> 0:15:08.360 and what Intel's consideration of them would be. 0:15:09.080 --> 0:15:13.360 Yeah, And obviously there's been rumors and churn in the industry, 0:15:13.600 --> 0:15:16.440 and I think all of that just indicates how important 0:15:16.640 --> 0:15:21.720 Intel is to the Intel into the industry structure and semiconductors, 0:15:21.760 --> 0:15:25.080 and how important those supply chains are for the world. 0:15:25.520 --> 0:15:28.960 We don't view any of these rumors as particularly emeritus. 0:15:29.120 --> 0:15:33.760 We laid out a strategy, we reaffirmed that with our 0:15:33.760 --> 0:15:37.360 board of directors, and obviously as we've taken these steps 0:15:37.800 --> 0:15:40.960 this quarter and restructuring and getting our costs where they 0:15:41.000 --> 0:15:43.880 need to be we have the capacity to go on 0:15:43.960 --> 0:15:48.760 the journey that we've laid out to produce sustainable profitability 0:15:49.000 --> 0:15:52.000 and results to shareholder return. So with that, you know, 0:15:52.040 --> 0:15:54.720 I'm committed, the team's committed, We have the board support 0:15:54.800 --> 0:15:57.520 for the strategy that we've laid out, and Q three 0:15:57.560 --> 0:15:59.120 shows that's exactly what we're going to do. 0:16:00.080 --> 0:16:03.760 Trying to help our audience understand Intel's historic and current 0:16:03.800 --> 0:16:06.800 business right the products, but also foundry. And what you 0:16:06.880 --> 0:16:09.920 said was that twenty twenty six is when those third 0:16:09.960 --> 0:16:13.080 party customers start to show up. But could you just 0:16:13.240 --> 0:16:16.120 outline the path to that what you want to hold 0:16:16.160 --> 0:16:19.400 yourself to for next year in developing that business as 0:16:19.440 --> 0:16:20.840 a sort of standalone unit. 0:16:21.520 --> 0:16:24.560 Yeah, and it's a great question ed, and clearly we've 0:16:24.600 --> 0:16:27.720 started to see that already emerge. And even this quarter 0:16:27.800 --> 0:16:32.280 we saw quarter and quarter growth of the external foundry business, 0:16:32.680 --> 0:16:35.960 largely driven by some of those early packaging design wins. 0:16:35.960 --> 0:16:39.240 So these advanced packages are sort of a faster on ramp, 0:16:39.520 --> 0:16:43.680 but ultimately it's becoming a wafer foundry for the industry. 0:16:43.880 --> 0:16:47.400 And as we said, you three major design wins this quarter, 0:16:47.640 --> 0:16:50.880 you know, one with Amazon and two other compute use cases, 0:16:50.920 --> 0:16:53.320 so we'll be updating, you know, the market as we 0:16:53.360 --> 0:16:56.760 win more of those customers and describing the lifetime deal 0:16:56.880 --> 0:17:00.360 value of those to the marketplace as well, give some 0:17:00.400 --> 0:17:04.919 of those breadcrumbs along the way. But it takes a 0:17:04.920 --> 0:17:07.480 couple of years for people to move these designs, a 0:17:07.560 --> 0:17:09.760 year to design it, a year to bring it into 0:17:09.840 --> 0:17:14.000 production until it starts to ramp in the marketplace. So 0:17:14.160 --> 0:17:17.399 key milestones for eighteen A that customers are now beginning 0:17:17.440 --> 0:17:22.920 those design cycles, the design tools, the design libraries are 0:17:22.960 --> 0:17:26.440 being moved over to eighteen A, but it really isn't 0:17:26.520 --> 0:17:29.680 until twenty six that those results start to really help 0:17:29.720 --> 0:17:32.800 Intel's products, and then twenty six twenty seven until we 0:17:32.880 --> 0:17:36.199 start to see meaningful volumes externally. 0:17:36.119 --> 0:17:38.920 That were just days away from an election in this country. 0:17:39.359 --> 0:17:42.439 And I'm particularly interested in your assessment and planning for 0:17:42.480 --> 0:17:45.560 what might happen to the CHIPSAC programs. Of course, I 0:17:45.600 --> 0:17:48.200 don't expect you to know what will happen in the election. 0:17:48.960 --> 0:17:51.800 You do not have a crystal ball. But former President 0:17:51.880 --> 0:17:56.120 Trump has kind of made disparaging remarks about President Biden's 0:17:56.160 --> 0:17:58.280 economic agenda. How are you planning for that? 0:17:58.359 --> 0:17:58.679 Please? 0:17:59.200 --> 0:18:02.320 Yeah, And I'd say maybe three different perspectives. Number One, 0:18:02.359 --> 0:18:05.439 the Chips Act was a bipartisan act and with that 0:18:05.600 --> 0:18:08.520 strong support from both sides of the aisle, you know, 0:18:08.640 --> 0:18:11.359 and with that, we believe the importance of that in 0:18:11.480 --> 0:18:16.240 terms of industrial policy. The semiconductor industry is well supported 0:18:16.880 --> 0:18:22.240 by Congress and both parties. Second, we are disappointed by 0:18:22.560 --> 0:18:26.479 how long and how slow the dispensing of funds has 0:18:26.600 --> 0:18:30.280 been and well over two years at this point. I've 0:18:30.320 --> 0:18:33.800 invested thirty billion in capital and we've seen zero dollars 0:18:33.840 --> 0:18:36.240 of the Chips grants at this point. So we do 0:18:36.280 --> 0:18:38.879 believe that that has been too slow, and we're somewhat 0:18:38.920 --> 0:18:41.480 frustrated by that, and we've taken that out of our 0:18:41.520 --> 0:18:45.600 financials for this year. That said, there's also the investment 0:18:45.640 --> 0:18:48.240 tax credit that we are seeing, and it is much 0:18:48.400 --> 0:18:51.080 larger than the grant portion of the Chips Act, and 0:18:51.119 --> 0:18:54.400 that is now law, and that will be beneficial. But clearly, 0:18:54.440 --> 0:18:58.280 I think whoever wins the election, the importance of this industry, 0:18:58.359 --> 0:19:02.159 the importance of rebuilding this supply chain of manufacturing is 0:19:02.200 --> 0:19:06.000 well supported. And Intel as a designer, R and D 0:19:06.560 --> 0:19:09.840 and manufacturer is unique in the United States and in 0:19:09.920 --> 0:19:12.600 the overall structure of the industry, and we expect the 0:19:12.600 --> 0:19:17.560 broad support rate of the administration regardless which party wins. 0:19:17.840 --> 0:19:21.399 As a result, Pat two quarters ago, your CFO told 0:19:21.440 --> 0:19:24.800 me you were two over indexed to CPU, and we 0:19:24.920 --> 0:19:28.080 know what happened with Goudi. You made painful decisions in 0:19:28.080 --> 0:19:31.480 the court to gone reduce headcount by sixteen five hundred. 0:19:32.000 --> 0:19:34.719 Do you now have the plan in place and are 0:19:34.760 --> 0:19:36.800 you confident from here? 0:19:37.320 --> 0:19:39.600 Yeah. We laid out a clean sheet program that we 0:19:39.640 --> 0:19:42.600 went through to really benchmark the business. We took a 0:19:42.640 --> 0:19:47.280 conservative view of the funding plan, as we call it internally, 0:19:47.600 --> 0:19:50.119 saying you know, we're taking a modest growth outlook and 0:19:50.160 --> 0:19:54.520 we're building our cost structure to that very modest outlook. 0:19:54.760 --> 0:19:57.159 But we've also built now a lot of optionality to 0:19:57.240 --> 0:19:59.640 scale up into the business. We have a shell ahead, 0:20:00.320 --> 0:20:04.880 we have capacity that we can scale into if necessary, 0:20:05.240 --> 0:20:10.240 and we've made a smaller, more efficient Nimbore company that 0:20:10.480 --> 0:20:15.240 is able to execute with more agility and speed as well. 0:20:15.400 --> 0:20:17.760 So we feel like we're now well set up for 0:20:17.840 --> 0:20:21.399 the future. This was a challenging quarter for me for 0:20:21.480 --> 0:20:23.639 the company, but we feel like we're well set up 0:20:23.640 --> 0:20:27.000 for the future and the good operational results that exceeded 0:20:27.040 --> 0:20:30.440 the markets expectations and the increased guidance for Q four. 0:20:30.720 --> 0:20:33.000 We feel like we're now in a very solid position. 0:20:33.320 --> 0:20:36.159 Intel CEO Pat Gelsinger, thank you for joining us here. 0:20:36.400 --> 0:20:40.159 For more on the Intel story, we turned to Marabelle Lopez, 0:20:40.280 --> 0:20:44.840 founder and principal analyst at Lopez Research. She spoke with Bloomberg, 0:20:44.960 --> 0:20:47.240 Sherryon and Annabelle Droolers. 0:20:48.200 --> 0:20:51.160 I'm curious for your reaction on the share price today 0:20:51.200 --> 0:20:53.840 because is it telling you that investors are really believing 0:20:53.880 --> 0:20:56.719 that that turnaround plan is taking shape or is it 0:20:56.760 --> 0:20:59.920 more just relief and a relief rally that's coming through 0:21:00.080 --> 0:21:02.040 that the numbers weren't as bad as what we'd seen 0:21:02.080 --> 0:21:02.920 in last quarters. 0:21:03.440 --> 0:21:05.960 I think the turnaround plan was quite clear from the start. 0:21:06.080 --> 0:21:08.920 There was obviously a significant issue with the turnaround plan 0:21:09.200 --> 0:21:12.359 last quarter that really put into question the ability for 0:21:12.400 --> 0:21:15.320 them to execute. This quarter, we actually saw some really 0:21:15.359 --> 0:21:18.200 strong guidance around what's going to happen with the AIPT, 0:21:18.359 --> 0:21:20.600 which is really important for them in a very competitive 0:21:20.640 --> 0:21:25.720 market for Intel. We also saw wonderful news from AWS 0:21:25.840 --> 0:21:28.600 on the foundry bid, and if you look at a 0:21:28.600 --> 0:21:32.720 company like AWS investing in Intel from the foundry business 0:21:32.760 --> 0:21:35.119 that actually says that they've done some testing and they 0:21:35.119 --> 0:21:37.320 have confidence that that foundry business. 0:21:37.000 --> 0:21:37.880 Could work for them. 0:21:38.119 --> 0:21:39.959 But I think if you put those two things together, 0:21:40.359 --> 0:21:42.720 you're starting to see a path where there could be 0:21:42.760 --> 0:21:45.640 a return of Intel into the market in a more 0:21:45.720 --> 0:21:50.040 meaningful way, so less distressing news, more optimism about the 0:21:50.080 --> 0:21:53.000 future opportunities Intel has over the come in three years. 0:21:53.520 --> 0:21:56.240 And which party is sort of more optimistic about, because 0:21:56.520 --> 0:21:58.920 we just heard there about the outlook for Gaudi three 0:21:59.000 --> 0:22:01.199 for instance, that side or is it more on the 0:22:01.200 --> 0:22:01.880 foundry side. 0:22:01.920 --> 0:22:02.960 Do you think so? 0:22:03.080 --> 0:22:05.439 I think the foundry side is actually incredibly important for 0:22:05.520 --> 0:22:08.120 Intel because it's really a new revenue stream. I think 0:22:08.160 --> 0:22:11.359 what we're seeing in the GPU market is that's a 0:22:11.480 --> 0:22:15.600