Daniel Newman, Futurum Research Principal Analyst joins the Yahoo Finance Live panel to discuss the latest news that Intel CEO Bob Swan will step down in Feb.
ZACK GUZMAN: Want to continue the conversation here with our next guest. Daniel Newman is a Futurum Research Principal Analyst, and he joins us now. And Daniel, I mean, when we look at this, we were highlighting the moves there in Intel, which seems to be, you know, celebrating this change of power in the C-suite.
But when you look at VMware shares moving in the opposite direction, which I assume would be, you know, the perfect case for people who are long holders of Intel here to say, look, this is the right guy to come in, because look at the reaction on the other side. So what do you make of what Pat Gelsinger might bring to the table when he steps in?
DANIEL NEWMAN: Yeah, this is a really big moment for-- for Intel. And you bring up a great point. Not only did VMware stock fall, but last I checked, AMD saw a material decline, as well, as a response to this appointment.
Gelsinger is an engineer's engineer. He is revered within the halls of Intel. He was the first CTO of the company. And I do believe that Gelsinger is going to bring a shift to the culture, a type of technology leadership roots that the company has potentially been longing for during this sort of period of tumultuous challenging situations that have been both in terms of its production and operations, but also the reactions that it's had from investors and Wall Street.
I see him immediately focusing on getting to the front edge of that tech leadership story, getting back on the front edge of innovation, challenging AMD, Nvidia, and others that have really led in process nodes to put Intel back on the forefront. I mean, you see its multiples is, like, 10, where you're seeing Nvidia at over 90 and AMD north of 150 at its peak. And Intel, that means there's a lot of value to be extracted from the company if it can get itself back on the right road.
And it's doing a lot of things well. It's new disaggregation strategy, they call it the XPU, where they're making simpler chiplet designs. I think there will be some de-risking that Gelsinger will focus on, which was part of the fab conversation, so potentially some outsourcing.
And then, of course, a $300 billion TAM that Gelsinger is going to be able to work to address that spans much more than just computer, compute, notebooks, but also AI, networking, security, ADAS, and automotive. So it's a really promising time. And he comes in at a difficult moment, but I think Gelsinger is definitely-- could be the right person for this job.
AKIKO FUJITA: Daniel, when you talk about that de-risking, what more does that entail in terms of moves by Intel? Of course, the backdrop to all of this was that Intel faced a lot of pressure from Third Point's Dan Loeb, who said that Intel needed to shed some of its assets and potentially split off its manufacturing as well. Is that where this is all heading?
DANIEL NEWMAN: Yeah, let me be clear. First of all, Dan Loeb, the memo was-- was well-thought-out. His points about national security were well taken. But I think he's also getting a lot of credit for this move. This move has been in the making for what I would believe the rumors probably spell about five months.
I do not see the company moving or going to fab-less. I think the integrated approach, the IDM approach that the company takes, is very profitable, and it gives the company an opportunity at the high end to be more profitable, to move faster, potentially. But Gelsinger's going to have to get that right.
To your point, though, some of the de-risking might be working on an outsourced basis to have more capacity, higher yields, higher chip capacities to meet demand and to not get into situations like it has over the past few years with its 7-nanometer, 10-nanometer variance that has really set it back and has really shooken a lot of investors, which has led to the situation where we're at today. But Intel still has a really big TAM. It still has nearly 90%, if not more, of the server market share for data center, high-- a high profit part of the company's business.
Its ecosystem is still very rich. So I think the demise has been a little bit overstated, but I think the investors have rightfully been cautious and put some of their investment and energy into these other chip makers that have just been moving faster and growing faster. But I think Gelsinger really is in a good moment to come in here and change course. And by the way, as you mentioned, with what's happening with VMware stock, AMD stock right now, is a sign that the Street seems to agree with that.
ZACK GUZMAN: Yeah, no, for sure. And I'm glad you mentioned Dan Loeb maybe not-- or maybe getting too much credit here. We saw the same thing play out with his letter for Disney as well. After he sent them that letter, they made some changes in focusing in on streaming, exactly what he was calling for. Some people pointed out that those moves were also been planned for some time.
But when you think about the first thing that you would want to see done when Gelsinger comes into power at Intel in February, what's going to be the thing to watch for to say, all right, this is going well, this is exactly the direction you want to see the company move in since it is, as you said, a return back to the company?
DANIEL NEWMAN: Yeah, I want to see a cultural shake-up. I think the company had sort of started to feel a little bit like it was being challenged more and starting to accept that it was not winning in every area, as it is historically, and I think bringing that winning mentality back. Gelsinger has been delivering double-digit growth at VMware. As I mentioned, he's revered within many of the engineers in the Intel community.
And I think something he can really do is attract talent. You've seen a lot of talent flee towards Apple, Google, Qualcomm, AMD over the past few years. Having an engineering leader that is so well respected within the halls of Intel could really become a way to attract some top engineering talent.
You heard the Qualcomm-Nuvia deal took place this week, and there was speculation of other companies that were vying for that particular prize. With Gelsinger at the helm, it could be much more attractive, whether it's through acquisitions, whether it's through the hiring of some top leadership and talent and engineering.
And also bringing up the culture and the people within the company to feel confident in their tech leadership position and to really drive Intel towards wanting to be the leader, not in just historic fashion, but in the future, which is something, like I said, I feel a lot of investors have gotten a little bit foggy on or felt a little bit negative towards. But the company still sits in a good place. A few good weeks, months, and decisions could really change the course for the company.
AKIKO FUJITA: Daniel, of course, when we talk about competition in the chip space, it is a global one. And there's been a lot of concern about the power dynamics shifting, if you will, to Asia. We've got TSMC, of course, Taiwan Semiconductor, but also Samsung. The move today certainly just one company here, but do you see that dynamic shifting back to the US players? Or do you think there's too much being made of that?
DANIEL NEWMAN: I don't think it's too much. I think we're going to see fast following coming from-- from China. I mean, there's a deep partnership relationship between the US and the manufacturing that goes on at TSMC, Samsung. But US has a lot to be very bullish about when it comes to its semiconductor space.
You're looking at the likes of Intel, Qualcomm, Nvidia, AMD. And you're also looking at some of our biggest cloud providers partnering up with companies like ARM, which is UK based, but in the process of potentially finalizing the Nvidia deal. And AWS and Microsoft is now moving towards chips, Apple.
So we have a lot of players that are very well-respected high-tech companies, both traditional semis and emerging tech companies, like I mentioned, Microsoft and AWS that all playing in the space. So of course, Asia will always be competing, in some cases, fast following and shooting to surpass the US in certain spaces. But this is just one moment that gives a positive course for the US in continuing and maintaining its leadership in semiconductors.
AKIKO FUJITA: Some good context there. Daniel Newman, Futurum Research Principal Analyst, it's good to talk to you today. Appreciate you stopping by.
DANIEL NEWMAN: Thanks so much for having me.