Nvidia’s Rise, Intel’s Fall, and the Chips in Between — ft. Patrick Moorhead

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1:35Or what that clunking sound from your dryer is? With Thumbtack, you don't have to be a home pro. You just have to hire one. You can hire top-rated pros, see price estimates, and read reviews all on the app. Download today. Today's number, 47 million. That's how many American adults visited a haunted house last year. I used to go, true story, Ed, for Halloween as a gifted kid. And they'd say, what are you supposed to be? and I'd say, I was supposed to be a lot of things.

2:14I like that. It's good. I like it. That's good. I like it. I think that's good. It's on brand for you. Yeah, also my wife said she's going to show up at our Halloween party dressed as our sex life. But here's the thing, Ed. She didn't come. She didn't come. That's not as good. She gave me the ghost. That's not. You knew I was going to go dirty. Anyways, welcome. Yeah, exactly. Welcome to Prof G Markets. Today, we're speaking with Patrick Moorhead, founder, CEO, and chief analyst of Moore Insights and Strategy. We're going to be talking about chips. Before we get to the news, Ed, what's going on with you?

2:48What's the good word? I'm doing very well, Scott. It was good to see you last night at the Raging Moderates live event in New York. Oh, someone's a little threatened. That's right. That's right. daddy's cheating with another co-host. Oh, as I like to call her, Ed's replacement. Better Ed, better ED. That's right. That's true. That's right. Yeah. Yeah. Not quite as cocky being a little bit nicer to the dog. That's right. I thought it was great. I love the location. As you know, I love live events. I think we should do more of them. Next up, when you do another Prof G Markets event, it's what's on my agenda.

3:26Where do you want to hold it? I think we should do a live tour around the whole country. You want to do a tour? A hundred percent. We showed up in Austin and it was a smashing success. And we gave him maybe a week's notice. Yeah, 400 people, yeah. And we got to keep it, keep it going. Yeah, that's, that's your way of saying I want to get laid in a strange city. Which I got, which I got. Oh, Ed. Oh, hi, Ed. You're so smart. Oh, God. Literally, literally. Like, I don't, I, I like it to be about me and it's really bumming me out that people come towards me and make eye contact and then kind of get closer to me like maybe not and they veer to the young guy.

4:05Yeah, we got to stop that. That is not happening. Our world tour. We're going to do our world tour. Like literally, Taylor Swift will have nothing on us. All right, enough of that shit ad. Get to the headlines. Now is the time to buy. I hope you have plenty of the well-resolved. Disney announced it will name Bob Iger's successor in early 2026. The company has also tapped former Morgan Stanley CEO James Gorman as the company's next board chairman. Netflix added more than 5 million paid subscribers in the third quarter. That's up over 14 % from a year earlier. The company also beat expectations on the top and bottom lines.

4:47Shares rose 11 % following that earnings report. And finally, Hugh Hefner's son, Cooper Hefner, submitted a$100 million offer to buy the Playboy brand. If the bid is accepted, he plans to increase the brand's relevance through new licensing and media opportunities, and the stock popped 15 % on the news. Scott, your thoughts, starting with Disney's succession plan. I don't think Bob should have come back, and I think it's time for a new generation of leadership in these media companies. I don't think they understand streaming. I don't think they understand technology. It's time. And this is the way of saying this is kind of a dignified goodbye, announcing the succession strategy and giving investors comfort that they are thinking about succession and they realize that this is good governance.

5:34It's like, okay, Bob is 73. He's the first ballot Hall of Fame executive. This has been pretty much a disaster for shareholders. I think if you bought shares in Disney 10 years ago, you haven't made any money. And it's got incredible assets. So I think they want to bring in someone to figure it out. Now, they're claiming that it's going to be someone internally. They've created this Hunger Games environment where they've identified four potential successors. And the only insight it would offer is that my experience with successors is that, one, there's a bias towards outsiders because you're just more attracted to strangers.

6:10And it's easy to come across as impressive. And the more you get to know people, you just figure out that nobody's perfect. so there's a buy store that's bringing in someone new from a tech company or whatever it is they're going to do also it's better to be lucky than good and that is so they have a very talented person who is one of the four people they've identified as a potential successor running spn i would doubt it's going to be him because you want to be on top of a business that's growing about the time they're looking for the ceo because they will unfairly attribute the success or the failure of that group to the individual running it.

6:46And market dynamics trump individual performance. I think ESPN is going to have a rough road for a few years. I don't care how brilliant the person running it is. So I would imagine, if you had to guess, it'll be maybe an outsider. Although, if they've identified four people from inside, it'd be a cultural shock and really demoralizing if they brought in someone from the outside. They have said they are reviewing external candidates. The internal candidates they are reportedly considering are, I can just list them for you now. So there's the head of TV, Dana Walden. There's the head of Parks, Josh DeMara.

7:18There's the head of ESPN, as you mentioned, Jimmy Pitaro. And then there's the studio head, Alan Bergman. But they have also said that they are reviewing external candidates. And the question that I would have for you is, who would you think would be right for the job, external or internal? Well, the person they want is Ted Sarandos. But Ted's worth $10 or$20 billion now. It's not going anywhere. It's either going to be the person running the streaming network if it does well, or it's going to be the parks and the gaming. I just can't believe it'll be anyone from the movie, the traditional TV.

7:55The person running ABC is not going to run Disney. They're not going to say, oh, the business only declined 11%. The market declined 18. You're very good at what you do. It's going to be the person who shows up with surprises to the upside on their business. Right. In which case you would think that it would be, which is what my guess is, Josh Tamara, who's the head of Parks. But at the same time, having said that, you think back to 2020 when Bob Iger resigned, he passed the job on to Bob Chapek, who was the head of Parks. And then he only had two years until he was ousted. So they are in a little bit of a dilemma here.

8:32It does feel the most likely candidate is the Parks guy, but they already hired the Parks guy and it didn't work apparently. That's a fair point. Well, let's do it. If they had to choose an external candidate, who would you choose? I mean, initially two, three years ago, I thought they were going to acquire Snap and that Evan Spiegel might end up being CEO of Disney. Interesting. But I don't, you know, even as poorly or sideways as Snap has gone, it's too expensive to acquire. I think the bloom is off kind of the tech media rose, if you will. Do you have any thoughts? I think my top pick, if you had to go external, would be Neil Mohan, who's the CEO of YouTube.

9:08He kind of built YouTube into what it is today, YouTube TV and all this stuff. But to your point, you know, bringing in these tech guys feels really sexy and fun at the beginning, but you think about it over the long term. And ultimately, I think the best person for the job is someone who understands the business internally better than anyone. So I think internal candidates are always the way to go, which is why, as we've discussed, I love Nike's new pick. I love it when people go inside the company. But speaking of entertainment, we should talk about Netflix, who had a great quarter. EPS was a beat.

9:42Revenue was a beat. Huge margin expansion, highly profitable. Thoughts on this great quarter from Netflix? Yeah, revenue up 15%, profits up 41%. They saw growth in their ad tier, which I hate, but I guess it's working. But I think it's growing off a small base. Still think it was bad for the brand, but that's just me. But it did account for over half of all Netflix signups in the regions where it's available. they're just this is so at the end of world war ii the germans had can i be any older with my world war ii references seriously i'm meeting angie dickinson at the polo lounge later she and i are gonna watch johnny carson again i used to party with these cool cats in kuba i literally i'm just so old right now anyways at the end of world war ii the germans had better officers better technology better tanks but we had more gasoline for every one gallon of gasoline they had we had 38 gallons.

10:38And we just literally overwhelmed them with gasoline. And Netflix is just winning this war on gasoline. They are producing triple, quintuple the amount of content. Apple can't compete with them. And so according to Matthew Ball, Netflix delivers an average of 16 billion hours of entertainment per month versus 3.1 billion hours of Disney. So think about that. Disney has to be totally niche and focused on family because if just 20 % of Netflix content that qualifies as family, that means they're going toe-to-toe with Disney. There's just so much on Netflix I'd like to watch. And the number that always struck me is I believe their churn, their annual churn is 9%.

11:18Hulu's at 15, Max is at 17, Disney's at 21. When you have churn that is double the rate, that means they have to recreate their customer base every 12 years, whereas Disney has to recreate its entire customer base every five years, meaning they have to spend double the amount on marketing and customer acquisition costs, meaning that they have that much less to reinvest in content, which again, reduces churn if you have more content. So it's just sort of an upward spiral. Get this, Apple TV has a churn rate, an annual churn rate of 40%, meaning that if they don't market, they essentially go to zero in 30 months.

11:59They have to reinvent their customer base every two and a half years. So I believe they're running away with it. The only kind of fly in the ointment here that they will point out and that you've done a good job of pointing out is I believe Netflix's total share of streaming or viewership or video viewership in the U.S. is 7 % or 8%. And YouTube's at 10%. so while it's a different business model uh and a different brand positioning the only comparing netflix to paramount is like comparing you know michael jordan to to you know someone who plays softball for their high school team it's just not even it's not the same these guys aren't in the same league as netflix the benchmark the competition for netflix is now youtube and And it'll be interesting to see if they get more kind of into each other's business.

12:54I bought the stock at$10. That's the good news. The bad news, I sold it at$8. I want to find a time machine so I can go back in time, find me, find my ass, murder me, and then kill myself. I'd be in a fucking Gulfstream and we'd be on that tour with our big oval windows in the Gulfstream 650 ER. We can do that anyway. God. God. So frustrating. The world is our oyster. We can do it. No, it'd be better if we were having oysters on my fucking Gulfstream, Ed. We can do that too. We can do that too. It's called NetJets. I'm with FlexJet. Learn more about your boss. Anyways, go ahead. I think that's right.

13:33It's kind of a ridiculous game to be comparing to Paramount and all these other tiny streamers. If we were to come out with a bullish takeaway from this quarter from Netflix, it would be that, as you pointed out, the ad tier is actually working. And there was some debate over whether ads on Netflix were a good idea. You were critical of that strategy. But I don't think you can say that, I mean, the numbers don't really lie here. The ad tier is working. It is off a small base, 35 % quarter over quarter growth. But it accounted for more than half of the new signups to Netflix. So I think putting ads on Netflix probably was the right idea for Netflix.

14:12I'm still, I'm not a fan of this because the key, I hate to use the word storytelling. My good, good friend Will Arnett said, stop calling yourself a storyteller. He hates that word. He also hates Elon Musk. That one really got to you. I like it. He also hates Elon Musk. He and I bonded over that. He's more triggered than me. That guy, yeah, yeah, yeah. Anyway. That was a good impression. But Chanel could make a lot of money. offering, you know,$100 shoes instead of$1 ,200, I just wouldn't go there. I think it's, I don't think it's a good brand move, but anyways, I'm sticking, I'm sticking with that.

14:52Sticking by it. Okay. Well, let's end here with this news about Playboy. Cooper Hefner has been talking about how Playboy is one of the most well-known iconic brands in the world, and yet as a business, it is doing very poorly. Just question, a sort of fun question for you. if you were cooper hefner what kind of business ideas would you want to come up with i have a few myself but let's hear what you would do to sort of revamp playboy as a business there's so much talk about i've i've spent my life trying to or the majority of my professional life trying to talk about how you build great brands now and during they are i don't say the brand era is over but the sun has passed midday this brand is almost meaningless it has a lot of awareness but it basically means the magazine industry it means soft porn the lad the lad brags is that what they call maximum all that stuff came in made it sort of legitimate then the internet came in they just were caught in no man's land poorly run business run as a lifestyle business it's been a disaster for shareholders and all this notion that somehow the brand is a big deal I would do one of two things or maybe both.

16:06One, I would just cut it down to like eight people and just license the shit out of the brand and milk it. And I know that sound, I don't, I think that's a business model. It does have global awareness. They're not going to be able to raise the capital to do anything, in my opinion, in media. I think that ship has sailed. The other thing I would do if I were them, if they want to make a lot of money is I would hire the guy, the general manager from Eleven, the strip club in Miami, and I'd open four or six strip clubs in different cities around the world. Because they'd go, oh, Playboy, it's sort of dirty, but it's sort of classy a little bit.

16:44But no, I would not invest in this company. I don't understand why he's doing this. If I were them, I would try and do a deal with OnlyFans maybe, something like that. Like have a brand extension of OnlyFans, but I don't know why OnlyFans needs them. So I had some similar ideas on my list. I have... You have a list? I've got my list. All right, go for it. Premium OnlyFans competitor. Oh, there you go. Target the 20 most successful creators on OnlyFans, make them an offer they can't refuse, and then you'll just launch an offensive onto this hegemony that OnlyFans has created in the adult content space.

17:22Remember, OnlyFans is growing by around 20 to 30 % per year, did, you know, one and a half billion dollars in revenue last year. someone needs to compete with OnlyFans, and I think it could be Playboy, and it could be sort of the premium OnlyFans with Playboy branding. Second idea here is Playboy Mansions, which I would say is just strip clubs meets nightclubs meets hospitality. So open up these kind of hotel nightclub hybrids in Vegas and Miami and call it the Playboy Mansions. Very tacky, very childish, very not PC, but at least it's sort of more in line with what Playboy actually is. And that is what it is.

18:03It's a sex brand marketed to men. And the third idea would just be to start Playboy, the agency. And you just sort of tap into this growing industry of soft porn on Instagram and on TikTok. You just start signing these TikTok dancers and Instagram influencers who are making millions doing these product and brand endorsements. Again, this is not a cool or good business to be in. But I think their mistake is, to your point, thinking that they are iconic, when in reality, it is just a sex brand. It is just for, it's for horny men. That's what this brand is. Yeah. You know what? Can we just put a bullet in the brain of this fucking brand?

18:42I just, like every five years, someone talks about reinvigorating the brand. Just let it die. Put it out of its misery. I don't think any of this is good for the world in general. So I think I'm with you. Let's just let it die. Put it into hospice. We'll be right back after the break for our conversation with chips expert, Patrick Moorhead. If you're enjoying the show so far, hit follow and leave us a review on Prof G Markets.

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21:25Welcome back. Here's our conversation with Patrick Moorhead, founder, CEO, and chief strategist of Moor Insights and Strategy. Patrick, thank you very much for joining us. Thanks for having me on. I really appreciate it. I'm a fan of the show, so it's nice to be on. Off to a flying start. So we're going to get into chips today. And I want to start with some very basic, high-level questions. So my first question to you is, there are several big players in the chip industry whose names we know very well at this point. NVIDIA, AMD, TSMC, of course, all the big tech companies, they're all sort of playing some kind of role in the chip market.

22:08What we don't know quite as well is actually what those roles are, how they are interacting with each other in the chip market. So my first question to you is, What do all of these companies actually do? And what is the relationship between all of them? Yes. So the way I like to break down the chip market is you have the manufacturers, and those are the TSMCs of the world, and even Samsung. You have what I call the designers, the ones who don't own a factory, but they do the design. And these are the NVIDIAs of the world. And then there are companies who are designers and builders, and those are companies like Intel and Samsung.

22:51And then you even have companies like Arm who just sell intellectual property. And what they do is they all work together as a system. One piece of the value chain I didn't mention were software tools. As odd as it sounds, most, actually all of these semiconductors are designed using software, companies like Cadence and Synopsys. I'd love to get an overview from you on the types of chips involved here. So we hear a lot about GPUs versus CPUs, logic chips versus memory chips. What are the main differences between these chips and why is it important that we as investors know about them? I like to look at it as the continuum of programmability.

23:38So, for instance, on the left side, you have CPUs, and those are the ones we heard most about up until the NVIDIA phenomena. And essentially, they're the easiest to program, but they're also the least efficient. And then you go on the right-hand side of the scale, and you have what are called accelerators. The official term is application-specific integrated circuit or an ASIC. And then in the middle, you have things like GPUs. You have what are called FPGAs, which are programmable. And then somewhere off to the side, you have memory chips. And GPUs are really, really good at parallel tasks. uh cpus are really really good at at serial uh tasks and again like i said there's just different levels of programmability gpus can do a whole lot of things right gpus can display graphics right for for gaming uh but also as we've seen they are really good at training llms SLMs and even doing the what's called the inference of of AI particularly around those large language models so yeah there's pretty much a chip for a chip for everything you want to do so when I got out of business school in 1992 the best job you could get was to go to the work for a firm called Intel use Intel and what happened there if you can is sort of a brief history of the chip market?

25:21What went right or what went wrong for Intel and what does it say about the broader market? Yeah, so Intel actually started off as a memory company. And then, you know, they were the offshoot of Fairchild Semiconductor. And then what they did is they were popularized by making the most popular CPUs for what ended up being DOS computers. IBM chose the Intel architecture as its go-forward platform for its DOS computers, which subsequently became OS2, which then came into Windows. And yeah, I've been in and around Intel since about 1990. But what they did is they got the fast-moving start on a general-purpose CPU.

26:10Up until that point, everybody, Scott, was making their own CPUs. You had IBM, you had DEC or Digital Equipment Corporation, you had HP making its own CPUs. And what they did is they got it to this scale. And the volume for PCs then was really unprecedented. And everything was going really, really well for them, right? They were the number one semiconductor company by revenue. And then they lost the recipe, Scott, for manufacturing. Previous two CEOs ago, a gentleman named Scott Kurzanich was the CEO. And he literally said, we don't have to be the best designers because everybody's going to have to fab their chips at Intel.

27:05And what they ended up doing is turning a three-year lead into a three-year deficit. And what they had to do is they had to go in and redo all of their design, Scott. So let's say they designed for 16 cores. What they had to do is they had to reset that entire design to go to, let's say, 12 cores. So they were higher power. They were lower performance. and that gave AMD the ability to come in and take their market share. And then now, I would say for the last four years, you have this absolutely unrelenting desire for GPUs and AI, which again, in addition to AMD taking market share away from them, you have this new category.