Business Breakdowns
Episode 149 Intel: Cyclical Recovery or Secular Demise?
Business Breakdowns

Episode 149: Intel: Cyclical Recovery or Secular Demise?

Business Breakdowns

Episode 149

Intel: Cyclical Recovery or Secular Demise?

Todd Ahlsten is the CIO of Parnassus Investments. We cover his framework for distinguishing cyclical fluctuations from structural shifts, the missed opportunities that define much of Intel's recent history, and how AI and geopolitics are driving the company's latest reinvention.

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(00:00:15) - (First question) - Todd’s key takeaways from his involvement in the semiconductor industry over the decades

(00:02:27) - How the current industry cycle differs from past cycles

(00:04:26) - Intel’s current positioning in the industry considering its historical reputation

(00:08:21) - The key missteps that led to the challenges facing Intel

(00:11:56) - The crucial milestones assessing the success of Intel’s rebuild 

(00:15:24) - The current landscape of profit pools within the semiconductor business

(00:19:25) - Looking at how the CPU, GPU and foundry segments’ margin profiles differ

(00:22:20) - Differences between the CPU and GPU cycles

(00:25:04) - How more consolidation in the GPU market can be achieved

(00:26:03) - Potential incentivisation to diversify Intel and NVIDIA servers and chips

(00:27:46) - The extent to which major players like Google, Meta and Microsoft rely on external players in the industry and potential impacts on Intel’s growth

(00:29:29) - Intel’s plan to regain share and grow its CPU business

(00:31:49) - Signs of stabilization in Intel’s CPU market share and confidence in Pat Gelsinger’s leadership

(00:33:26) - Anticipated trend in CPU demand due to integration of AI-powered CPUs

(00:36:34) - Developments with Gaudi’s software component and the goal of making the training process more cost-effective

(00:38:02) - How Todd perceives the geopolitical dynamics surrounding Intel

(00:42:04) - Factors and developments from competitors that Todd fears

(00:44:32) - Comparing ownership of NVIDIA and Intel to niche companies in the ecosystem

(00:45:47) - Potential opportunities for Intel

(00:49:50) - Potential risks that Todd believes Intel face

(00:52:58) - Whether Todd expects this cycle duration to differ from previous cycles

(00:54:35) - The differences in semiconductor cycles based on drivers like demand drop-offs and macroeconomic factors compared to oversupply

(00:56:30) - Whether Todd believes there will be a drop-off in spending or if sustained high spending is the new normal   

(00:59:31) - Lessons learned from Intel that can be applied to other businesses

Intel: Cyclical Recovery or Secular Demise?

Introduction

Matt
This is Matt Reustle. And today, we are breaking down Intel. To cover Intel, I was joined by Todd Ahlsten, CIO of Parnassus Investments. Todd started covering semiconductors in the mid-'90s and has since lived through eight cycles in the sector. So we made sure to cover the characteristics of how to separate secular changes from cyclical changes, which is all the more important considering Intel's history.

We could have easily spent an hour covering that background of Intel, the backstory, but let's set the table with an overly simplistic storyline right here. In the late '80s, a newly appointed CEO, Andy Grove, made the pivot to exit memory chips and focus on logic chips. The result was Intel stickers on what felt like every laptop and desktop I ever touched in the '90s and 2000s. They were the leading-edge chip designer. But things shifted.

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