The Information's TITV
00:26:24 · Mahdi Yahya, Akash Pasricha, CJ Muse
[00:26:24] S3: we'll see what Trump does. [00:26:26] S0: Great. Bradley, want thank you for coming on. As always, that is Bradley Tusk, CEO and founder of Tusk Ventures here on TITV. Stocks are getting a boost following Democrat victories last night in the midterms, but investors remain on edge about the AI trade as tech giants pour billions into infrastructure. AMD's latest earnings offered a bit of a bright spot amid those concerns. Joining me now to discuss the markets and outlook for AI chips is CJ Muse, senior managing director and semiconductor analyst at Cantor Fitzgerald. CJ, welcome to the show. It's great to have you here. [00:26:59] S4: Yeah. Thanks for having me. [00:27:01] S0: Okay. So we're going to get to AMD in a second here, but very quickly, I mean, the market is kind of a bit bifurcated this morning in tech. You've got the hyperscalers are up, the core weaves are down, Oracle's flat. What do you make of this result broadly speaking?
00:27:01 · Akash Pasricha, CJ Muse
[00:27:01] S0: Okay. So we're going to get to AMD in a second here, but very quickly, I mean, the market is kind of a bit bifurcated this morning in tech. You've got the hyperscalers are up, the core weaves are down, Oracle's flat. What do you make of this result broadly speaking? [00:27:17] S4: Yeah. No, I think it's a flight to quality. So I think recurring revenues at the hyperscalers is attractive. I think there's a vision that if data center builds are canceled, that would be a net positive for the hyperscalers in terms of their free cash flow generation. And on the other hand, I think the view is that the amount of data centers approved within The United States is lower. Can debate to what degree. And in that sense, I think that that benefits the lead steer. So I'd kind of put Nvidia in that spot. And at the same time, it begs the question as to what the growth rate will look like for some of the neo clouds who are really requiring that build out to drive their EBITDA. [00:28:08] S0: Yeah. So what do you think happens to CapEx plans then? [00:28:13] S4: Do you [00:28:13] S0: think they change?
00:28:13 · Akash Pasricha, CJ Muse
[00:28:13] S0: think they change? [00:28:14] S4: It's a great question. I think one of the beauties of this cycle is that you started with TSMC sold out. They're under shipping by 20% broadly to their customers. They can't build enough CoWoS. We now have substrate constraints, which was really highlighted by Intel's report last week. And I would say now we have semi equipment shortages. We have shortages for golden screws like ball bearings, power, things that don't come to mind. So if we're really on this path to multi trillion dollar semiconductor market, I think that we're going to be constrained continuously. And so maybe on the margin you see a slowdown, but I still think computers is so sold out that I don't see a slowdown by any of the participants unless it's really regulatory driven. And I guess what I don't know is is there available power and or land shell outside The US that we could build? And I'd say just specifically like to Texas, yes, governor, yes, senate has moved democratic, but you know, the local legislators is is still Republican. And they've already put, you know, moratoriums and increased requirements on data center builds. And locally is really the way to think about data centers, and so they're really gonna drive the bus there. So I don't think much has changed in Texas, to be honest with you. So maybe on the margin, see some cuts, but I don't think it's gonna be broad. You know, today, I think is all about just kind of an assessment of the Blue Wave that I do think caught some people by surprise, including myself.
00:30:07 · Akash Pasricha, CJ Muse
[00:30:07] S0: So that's kind of interesting. You're saying that even despite the results, all of this was priced in and the CapEx plans, that was a reflection of them having done the math on the shortages as well. And they may have been even higher, I guess, is what you're saying, if there had not been shortages and if there had not been moratoriums. That was all baked into the numbers is what I'm hearing from you? [00:30:30] S4: Well, I think there's CapEx and then there's the stocks. I think in CapEx, you're placing orders for your accelerators, your HBM, alongside your planned gigawatt builds. And if you don't have land power shell, you're not signing up for those orders. And so the key question is, does last night cause a rethinking of those plans? I don't think that changes like the next twelve months. I would think it would change kind of beyond twelve months and thereafter. And and, you know, I would hope that cooler heads would would, you know, come to realize how important AI compute is, but that's probably the the wrong thought process for every state. But I think when you think in aggregate, I don't see a huge change. Maybe 10%, 15%, but that's just a guess. [00:31:27] S0: 10%, 15% of what? Sorry. [00:31:30] S4: Of CapEx beyond a year. [00:31:32] S0: Beyond a year. Okay. Got it. Well, I mean, that... But that's... I mean, that's... That could be significant though, you know, given given the volumes that were that were True.
00:31:32 · Akash Pasricha, CJ Muse
[00:31:32] S0: Beyond a year. Okay. Got it. Well, I mean, that... But that's... I mean, that's... That could be significant though, you know, given given the volumes that were that were True. [00:31:40] S4: However, you know, if you look at NVIDIA's stock, you know, they're gonna earn $26 in in in '28. Stock's trading eight times. So the market is already saying we don't believe these numbers. So if we actually muted the growth rate and gave further duration of the cycle, net net, that would be a huge positive for the stocks. [00:32:00] S0: Right. Right. Okay. So let's talk about AMD, speaking of chip companies. So they've reported their quarterly results last night. They forecast accelerating revenue. What else stood out to you from last night's results?
00:32:15 · CJ Muse
[00:32:15] S4: I think they talked about 80% of their revenues in calendar twenty seven led by the data center. And so it highlights robust server CPU growth and robust AI accelerator GPU growth. And so I think the market was very concerned about what their business would look like over the next two to three quarters following Intel's miss, but they had so much pent up demand. They are the number three customer at TSMC. So NVIDIA, Apple, then AMD. They are an absolute priority. Right? TSMC views Intel as a competitor. They are going to enable AMD, so they're going to get them wafers. And I do think some of the three nanometer smartphone wafers are being pushed to AMD. AMD had the foresight, you know, to think that, you know, servers could grow at least a 100% next year. And so they got in line early for substrates. And lastly, would say what could drive incremental growth next year above that 100% is that the chiplets for logic tiles are fungible. So they can convert PC, you know, logic tiles to servers, and that will give them incrementally more upside if the weakness in PCs sustains. So that would be point one. Point two is really, you know, that they're doing well on the accelerator front. Obviously, you look at the revenue number, you know, versus what NVIDIA or Broadcom's doing, it's much smaller. But but that's kind of the path where, again, computers sold out. Whoever has access to wafers at TSM is selling them. And I think that that, you know, bodes well for their business. And the last note I would say is very interestingly, AMD's server CPU business in calendar twenty seven will exceed Intel's business for the first time in history. That is a huge change statement and really highlights, I think, Lisa Su's execution and strategy at AMD and the partnership with TSM and the foresight, their designs. You know, they're doing a great job.