The Six Five team discusses US Investigates NVIDIA, Microsoft, OpenAI
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Transcript:
Patrick Moorhead: I am going to jump into the US investigating NVIDIA, Microsoft, and OpenAI. Here are the facts. The US government has initiated antitrust investigations into all three of them, NVIDIA, Microsoft, and OpenAI. Welcome back, Daniel. I’m just pretending like you never left and just-
Daniel Newman: I didn’t leave, my heart was with you.
Patrick Moorhead: No, no, I know that. Here’s how the government’s splitting up the work here. DOJ is focusing on NVIDIA, looking at its dominant position in supplying high-end semiconductors for AI. And if you aren’t aware of this dominant position, you must be sleeping under a freaking rock. FTC is going to take on Microsoft and OpenAI, looking at the deployment and development of these AI technologies like LLMs, like GTP 4.0 that we talked about before.
Now, this one’s super interesting. We talked about this notion of, I think I called it pre-crime before, and that’s essentially getting so far ahead of it where before any crime has been committed. My goodness, we’ve discussed what it takes to have a proper… Actually, do we even know what a proper government case is against a tech company is anymore? Which is, there should be some damage. There has been going on for a long time, and you are stifling competition.
And we literally haven’t seen any of those at this point. There hasn’t even been mudslinging from Intel and AMD talking about what companies like NVIDIA… This is pre, pre-crime. But like you said at the beginning, Dan, totally expected. Knew this was going to happen given the current administration. But man, how do you do pre, pre-crime? I have no idea.
Daniel Newman: Yeah. I think Matrix math, the ability for algorithms to detect patterns, eventually it starts to see a pattern. It’s like, I know Pat is going to connect the back to the front. I know Dan is going to go on some unnecessary rampage about the market when it’s totally inappropriate. These things we do. We do these things. Patterns can be identified. All you need is more GPUs, Pat. By the way, let’s just say that more GPUs, that’s be our new show. More GPUs is all so-
Patrick Moorhead: The more you buy, the more you save. Right? That’s what you said. Didn’t Pat Gelsinger come in and say an offshoot of that, which was like the less you spend, the more you save?
Daniel Newman: I don’t even know. What I’ll tell you, I like CEO math, it’s my favorite type of math. All right, listen, let’s move on to something a little bit more fun. Let’s talk about FTC, DOJ probes.
Patrick Moorhead: Dude, I just talked about that for seven minutes.
Daniel Newman: Did you?
Patrick Moorhead: Yes, and that’s what you were talking about. But anyways.
Daniel Newman: No, no, no. All right, we got to cut this one out. This is jet lag here. It’s in full effect. Did I change the topic or did you just run into the next topic when I was like-
Patrick Moorhead: No, no, I just ran into the next topic.
Daniel Newman: Oh my God, dude, I apologize. I came back in the room and I just missed that you’d actually changed the topic.
Patrick Moorhead: It’s okay.
Daniel Newman: Yeah, we’ll get this edited out. Look at all these people watching. They’re like, “What are these guys doing?” Hey, listen, part of the jet lag effect is that you periodically leave the world, but I came back here. Okay, let me just give them a real quick take on this one, Pat, on what’s going on. When a company grows this fast, gets this big, and becomes this market dominant in a short period of time, it is obviously and emphatically going to get attention of regulators. Remember, less than two years ago it was under a trillion in market cap. If you look at the runs that it’s taken a Microsoft or an Apple to achieve these kinds of market valuations, it’s taken decades. It’s happened on a steady yet up into the right path, but one that you could ski back down like on a bunny slope.
This one looks like a straight jump off of K2, you have your parachute. And so what goes up that fast often in markets does come down that fast. The difference here is this doesn’t feel that way. This doesn’t feel like GameStop or AMC. This isn’t a meme stock. There’s no roaring kitty. The whole world is now roaring kitty. They’re all in love with this stock, and it’s because it’s got all the right moats. It’s got margin, it’s got differentiation, it’s got stickiness inside of its user community, it’s got software stickiness. And of course it’s got all the right customers. And so, what are they going to investigate? Pat, I’m going to give you a really, really good TLDR since I zoned out and I’m zoning back in here.
Patrick Moorhead: Okay.
Daniel Newman: Zone in here is that, Pat, it’s too darn soon. It’s just too soon to make this call. We cannot possibly call a monopoly on something that’s been really a market that was created duly by a company. He created this market. There’s been GPUs, but not for what he created them for. The vision around the future of accelerated computing and Omniverse, these are new markets. Jensen said it so much, he says, “I don’t take market, I create markets.” And I love that. I really respect that a lot. Now, you do have real entrants and real competition. And this is what I said in my op-ed, I said, you have Intel and AMD both competing. So the two largest chip makers in the world… Sorry, the largest chip maker in the world, two of the largest chip makers in the world are competing with NVIDIA in this particular space.
You also have what? Every hyperscale cloud provider building an AI chip now. They’re all developing a chip. And that’s been democratized and made possible thanks to design partnerships and where we’re at with Silicon and the scale. And so you have dozens, if not more. And then you got startups, Grok and SambaNova, and these other companies building platforms. And then you’ve got traditional compute AI. I think that it’s just really early. And so, while NVIDIA… Nobody seems to have a product that can compete with them holistically, software, hardware, frameworks.
I think we need three years. I think we need three years. Now the problem is, I know regulators are going to say, Pat, is in three years their market moat and advantage could be so big and so deep and it would be impossible to turn the tide. But do you think there’s anything a regulator could do right now to turn this tide and change this direction?
Patrick Moorhead: No. No. And I think this is probably just them trying to slow the jets. Europe has put the kibosh on their innovating and regulation, US is getting jealous and they need to move forward. I’m sure that AMD and Intel are pretty happy about this, as is AWS, and maybe even Google. But it does seem just awful, awful early out there to be doing this. But as we’ve learned, it comes from market definition, and potentially the timing goes back to machine learning, which was very much a thing starting about seven or eight years ago with acceleration. But the fact that Microsoft and OpenAI got lumped in leads me to believe this is the generative AI crapshoot here.
Daniel Newman: Well, I think it’s market power. It’s the fact that they have so much market power. Microsoft’s getting looked at for more than just the size of market they have, they’re getting looked at for that inflection deal they did and how they did it. You and I talked about that at the time. We said, “I don’t know how this is going to survive scrutiny,” but maybe the hope was there wouldn’t be scrutiny. But yeah, Pat, look, there’s a lot going on here. I think everyone’s always got to be careful how much regulation they wish for though, because right now it’s NVIDIA, it’s Microsoft, it’s OpenAI, but next it could be Google. It could be Amazon. But as of right now it’ll be an interesting one to watch.
