Podcast Summary
OCI and Hyperscalers' Customers: Oracle's Cloud Infrastructure (OCI) is a popular solution for businesses' infrastructure needs, while the hyperscalers' key customers, including major tech companies, continue to grow and become increasingly important for them.
Oracle's Cloud Infrastructure (OCI) is a comprehensive solution for businesses' infrastructure, database, application development, and AI requirements. Companies like Uber, 8x8, and Databricks Mosaic are already leveraging OCI to do more while spending less. Meanwhile, the jobs market is showing signs of weakening, with employers cutting back on pay for blue-collar hires. The trend is most pronounced in retail, where job listings have seen a nearly 56% fall in posted pay. Average wages have also shrunk in agriculture and manufacturing by about a quarter and 17%, respectively. Companies are also moving job openings to lower-cost cities or offering them as lower-paying contractor roles. In other news, two businessmen, Tark Obeyat from Saudi Arabia and Patrick Mahoney from Britain, were convicted in a Swiss criminal court for their roles in the looting of a Malaysian sovereign wealth fund, marking another sign of a global fraud. The hyperscalers' key customers, including the four major tech companies, have been growing quickly and will become even more important for them moving forward. The enterprise sector has also shown strength. Additionally, there have been allusions to sovereign AI.
Business and Politics: Business and politics can intertwine leading to corruption, deceit, and legal disputes. The 1MDB scandal involved billions stolen from a Malaysian fund, while Yelp sues Google for stifling competition, and Brazil's Supreme Court threatens to ban X over a legal representative dispute.
The world of finance and business can be fraught with corruption and deceit, as evidenced by the 1MDB scandal in Malaysia. A mastermind named Joe Lowe stole billions of dollars from the sovereign wealth fund and lived a lavish lifestyle, financing movies, paying off politicians, and partying with celebrities. The scheme was uncovered nine years ago by the Wall Street Journal, and several players have since been brought to justice, including high-ranking executives from Goldman Sachs and the Malaysian Prime Minister. However, some individuals continue to deny any wrongdoing. Meanwhile, in the tech world, Yelp has filed a lawsuit against Google, accusing the search giant of abusing its dominant position to stifle competition in local search and search ad markets. Google is vigorously defending itself against the allegations. In Brazil, the Supreme Court has threatened to ban social media company X if it does not appoint a new legal representative for the country within 24 hours, marking the latest development in an escalating dispute between the court and the company. These events highlight the complex and often contentious relationship between business, politics, and the law.
Tech and Freedom of Speech: Recent court orders led to a tech platform's closure in one country, while journalists faced conviction for seditious material in another, testing press freedoms. Nvidia's growth prospects remain optimistic due to AI's expensive processing needs and massive spending by tech companies.
There have been recent developments in the tech industry involving freedom of speech and government crackdowns. X, a tech platform, has closed its operations in a country due to a court order to remove hate speech and misinformation, but it didn't affect users' access. In Hong Kong, two former newspaper editors were convicted of publishing seditious material, marking a test of press freedoms. These journalists worked for the now-defunct Stand News, which was criticized by the government. Meanwhile, in the tech industry, Nvidia's latest quarterly results have left investors underwhelmed, but HSBC analyst Frank Lee remains optimistic about the company's growth prospects. Despite Nvidia's stock price being around $120, Lee has a price target of $145. The reason for his optimism is Nvidia's reliance on massive spending by large tech companies for its growth, as AI requires a lot of processing speed, which gets expensive. Frank Lee joins us to discuss this further. Additionally, Oracle Cloud Infrastructure (OCI) is a single platform for infrastructure, database, application development, and AI needs, allowing users to do more and spend less. Companies like Uber, 8x8, and Databricks Mosaic have upgraded to OCI.
Hyperscalers' investments in Nvidia's AI GPUs: Hyperscalers' investments in Nvidia's AI GPUs have eased concerns about sustainability and are driving significant revenue growth for Nvidia. The trend is not limited to generative AI or large language models and is expected to continue in the enterprise sector.
The strong demand for Nvidia's AI GPUs continues to be supported by hyperscalers' investments, easing concerns about the sustainability of their capital expenditures. Nvidia has been the primary beneficiary of the tech giants' spending spree, but investors expect to see a significant revenue increase as a result. The hyperscalers' efficiency gains from Nvidia's solutions and the growing importance of enterprise customers, who are purchasing more customizable AI solutions, indicate that there is already some monetization and that this trend will continue in the coming year. The hyperscalers' investments in AI GPUs are not just limited to generative AI or large language models, but also encompass various applications, making Nvidia's offerings increasingly valuable to its customers. The enterprise sector's growing importance for Nvidia is also noteworthy, as it is contributing to the company's revenue growth and expanding its customer base beyond the four major hyperscalers.
ASP increases and margin decline at Nvidia: Nvidia's ASP has risen due to spec migration and new product offerings, but margins are predicted to decline due to competition and market-friendly offerings, with full-year gross margin guidance unchanged, implying a decline in Q4.
Nvidia has experienced significant ASP (average selling price) increases over the past year, but there's a predicted slowdown in spec migration and the introduction of more market-friendly offerings, which will result in a decline in margins. Nvidia's full-year gross margin guidance was not raised, implying a decline in the fourth quarter. While investors are mainly focused on Western revenue momentum, there's a growing realization that margins cannot remain at 75%-80% indefinitely. Nvidia faces competition from established rivals like AMD and potential newcomers due to US export controls. Despite these challenges, as long as Nvidia can generate bottom-line growth, investors are likely to accept the margin decline.
AI chip market competition, Chinese market: Despite concerns over competition and decreased revenue from China, AMD poses a credible threat to hyperscalers in the AI chip market. Asian chip stocks have also seen declines, while CrowdStrike faced operational issues causing a major software bug and lowered outlook.
Despite concerns about competition in the AI market, there hasn't been significant progress from hyperscalers in developing ASIC chips, making AMD the most credible threat as a second-tier player. Additionally, China, once a significant market for tech hardware and semiconductor companies, now accounts for less than 10% of revenue, making it less important for future earnings in the video sector. However, Asian chip stocks, including SK Hynix and Samsung, have seen declines following Nvidia's tumble, and CrowdStrike's stock has taken a hit after it cut its outlook for the year following a major software bug that caused widespread computer outages. Overall, the market is facing challenges from both competition and operational issues, but the impact on specific companies may vary.
AI cost savings with OCI: Companies like Uber, 8x8, and Databricks Mosaic have reportedly saved costs by using Oracle Cloud Infrastructure (OCI) for AI needs, allowing them to do more while spending less.
Artificial Intelligence (AI) is a game-changing computer technology, but its complex nature and high processing speed requirements can lead to significant expenses. To address this challenge, companies are turning to advanced cloud platforms like Oracle Cloud Infrastructure (OCI). OCI is a versatile solution that caters to various infrastructure, database, application development, and AI needs. By upgrading to OCI, businesses like Uber, 8x8, and Databricks Mosaic have reportedly been able to do more while spending less. If you're interested in exploring the potential benefits of OCI for your organization, consider taking a free test drive at oracle.com/Wall-Street or oracle.com/Wall-Street.