34. Broadcom & VMware in the Red Zone, Cloud AI Wars - Who Will Win?

hello everyone welcome to the qod I'm John furry with Dave Volante our weekly podcast where we riff and talk about the hottest stories in technology Silicon Valley Enterprise and emerging Tech tons of stuff going on uh Dave we break down P's doing great we got a lot of comments last week on the whole is is really position I thought we'd kind of set it straight up and and to the point a lot of people kind of come into that position now but this has been a very busy week in the technology scene obviously it's been 10 days since the Israeli War and the Fallout from our last pod was uh interesting a lot of support I think we made the right call in terms of how to position it it's a human conflict and and uh there's not a lot of solutions being thrown around a lot of people bitching and moaning and it's just a terrible situation so it continues to to to go on and um it's uh my heart our hearts go out to all the folks there and uh a lot of people are scared you know people we work with getting emails you know they're not in a good place and uh you know let's let's hope they can get inclusion and and destabilize the situation it's hard to see an easy solution you know I I mean I I listen to the Allin pod guy guys after um after our pod last weekend and they were like yeah two-state solution is the only answer it's like two-state solution is very difficult now I mean there was a time perhaps when that would have been easier but it's not it's not so simple as oh yeah let's just do a two-state solution so and and there so much has to happen before even that can be contemplated and you know Israel's going in basically hand toand combat and it's it's just just it's just not going to be people are scared I mean can you imagine living there it's like I got to do a zoom call and have a normal life and have a family and you're wonder if you're going to be defending yourself there war going on it's just it's incredible time and um you know it's just it's just you know fingers cross and the best we could do is shout our position you know and this whole two sides thing I mean look this I I'm not I'm totally call on people trying to play down the middle here there's only one side it's anti-terrorism and the fact of the matter is whether you're Palestinian Palestinian or Israeli it doesn't matter and what happened in Israel was a terrorist attack period full stop and that's bottom line and anyone who's trying to justify and create this you got to choose is ridiculous so that's kind of my my take on it and I really don't want to get into it I'm not an expert in politics but you know we'll do our best as silic an angle to help where we can talk to Israeli companies startups help them if they need funding or amplification a lot of companies are in rounds of funding their staffs are being called away to War I mean imagine if you're was really company date you know your staff has got to go either get called into service or or they're offending for their life and it's just incredible time and I've never experienced it personally except you know when when our country got attacked at 911 by terrorists what I felt there um I can only imagine what's going on there so yeah mean a lot of our clients were called up and and I think this is very much like 911 and I thought Biden made some good comments when he said look don't you know we learned a lot we made a lot of mistakes after 911 um it's different situation obviously completely different situation but there are similarities I just I just don't see yeah terrorism terrorism is Terrorism and is absolutely unacceptable um and requires a response because if you don't respond then they just escalate that's so true the flip side of that is there's just no easy answer you know even even look at we never should have gone into Iraq but even if we didn't go into Iraq you know we might have been Meed in Afghanistan for a long time who knows maybe we could have got Osama earlier but it's just it's it's it's like George Bush the Elder said it's really if you don't have an exit strategy you know it's it's scary thing when you go in well you know I don't know what's the exit strategy is to wipe out Hamas and and what does that mean and it's just it's there's no easy solution it's just terrible our hearts go out to people and interesting they got you know one of the tech on the tech side I never seen anything like this before in my life one of the um Infamous uh event organizers who started it started entrepreneur started it years ago web Summit Patty Cosgrave he got slammed hardcore um by making some I guess side choosing comments or insensitive comments early on and they tried to walk it back and he went on a massive he just imploded um and he had no IDE he didn't read the room at all and apparently websummit he's got an event in uh in in the Middle East and he's getting paid a lot of money like 30 million or plus around there to go to an event and um in in you know where everyone goes for cash VC so like the the blood money if you will so a lot of VCS were saying I will not support you I'm not I'm canceling my trip people who were Israeli startups that were AI startups are saying hey you know um you know or from um on our on our for supercloud our keynote speaker from um on the AI startup he basically he was a keynote speaker he said I'm not coming because he's holding the Middle East they look at as a Peola massive boycott almost blacklisted Dave that's how fast that went down so you know there's there was a major drama there it was inside baseball where you had VC's first first round Capital um and you had entrepreneurs all over the world because they were insensitive the fact that it was a killing that was a terrorist attack he was trying to play like oh it's not it's a two they tried to play the old classic narrative when it was reality was not the same so the Israelis kind of freaked out and it was just terrible and and it's just again he stepped on himself but let you know we got to move on our lives we're going to do our best again for the folks listening our hearts are out there and we're going to do our best I even floated the idea of you know helping start a VC fund for these startups Dave you know anything we can do with our silicon angle any startup needs to get some help we'll do some PSAs let us know we'll do whatever we can to help um you know get the human humanization back and and anti the anti-terrorist kind of wiped off the face um okay so big news going on going this week um broadcom VMware starting to come to a finality there the the high level merger um is happening broadcom takeover um you got the US China AI chip export ban potentially coming Nvidia and Intel two huge aims kind of positioning themselves we wrote this up on Silicon angle to um control export to China okay um misinformation War big story in the New York Times headline around the whole Hospital bombing that didn't happen it was a a frocket that they're they were using on site they claimed it was an Israeli hit sparked a huge misinformation what's the role of media of course you know we know Tech we know media so we have an opinion I'm gonna that's going to be my rant for today but you know you know these these Hamas terrorists used the hospitals as human Shields so what happened was the a missile blew up they kind of blamed it on these railies New York Times ran a headline to that effect called a strike then they walked it back and said a blast and then they said something like they had to watered down completely so we'll talk about that in one of the segments misinformation role of media and in times of Crisis like a war where the media impact could trigger biases and whatnot so it's a huge conversation um we got supercloud next week AI models looking good the VC Market's changing Carter reported that since January 5 143 startups have shut down so far the Cyber Security Act and stuff and the big earnings are coming out next we the big cloud guys so Tech Innovations here you did a big report on the sixth data platform which was killer uh and we got the big J of AI event here in pelto so we got a lot to talk about so welcome to Cod 34 so so your broadcom comment so CH looks like China's trying to hold it up right that's that's the big news that that China might SC try to Scuttle the deal at the last minute so there we go right more more delays I mean you remember you remember when when Dell was AC acquired EMC China required if I recall China required like a fiveyear separation between Dell sales and marketing um and they had other restrictions on there as well um I don't remember the specifics but they threw in these sort of last minute you know no merger for you unless you do this and so there may be something similar with broadcom or maybe it's just like retaliatory because of the no chips for you act yeah and so I I think it's a complete paper tiger so to speak you know this is I don't think it's gonna happen I mean the Nar I mean look for me I've got some sources inside the company here's what I'm hearing first of all broadcom has according to sources and this has been publicly reported either on slack Channel or whatever so it's a a number that's out there at an all hands meeting last Monday Hawk tan said that they're going to lay off 800 marketers okay are going to be let go and they're going to focus on their core stdc and look for synergies on the upside well if you look and count so this is kind of what I'm reporting if you look and count the number of Market at VMware they don't have that many okay so I then do a follow up on some of my sources inside the company and it basically is is that what you got here is that broadcom is not looking at his takeover for VMware hwan is saying that he's going to integrate VMware to reshape broadcom so it's basically a high level merger I won't say of equals because broadcom's clearly in charge but broadcom is clearly now signaling publicly that VMware will reshape what the new broadcom will look like so you know I think we nailed it in a VMware Explorer when our narrative on our summary was it's the closing of the chapter of VMware to the new chapter of broadcom plus VMware where broadcom never really nailed it on software they had CA they got semantic but with the VMware and you pointed this out on one of your breaking analysis this is the crown jewel of software so so you know um the word coming out of the VMware community and some of the the Insiders at broadcom are telling me is that our Narrative of chips to apps is absolutely the key and if you look at um the chip to all the AI conversations we're going to have next week and this came out of our previews coming up to it is that all action on inference and training is at the chip level and the cost of what it takes to do the inferences and as you look at the small language models emerging the chips are going to be more important and we pointed this out early on when it first happened you and I like that's it's a conspiracy theory that the that broadcom's actually thinking chips to VMware maybe they just want the cash flow and so I think we might be right and and you brought up EMC if you remember Dave when VMware was bought by EMC you said it's the steel of the centuries the best deal ever remember that you were very vocal on that oh my God 600 million $630 million for VMware it was a it was a song Joe Tui was a genius but think about EMC at that time what happened to the company they had a storage shops were good not great declining new markets are emerging they bought VMware to help them sell and re refactor storage broadcom is buying VMware in my opinion this is going to be the story I think it's going to come out of this is that to help them sell more chips for the machine learning and AI workloads Absolut and the security side so you got security machine learning and AI VMware will absolutely be the broadcom stalking horse to establish their chips for those workloads and and and look at the trends all of it's on premises and in the cloud so even if Amazon and Azure stock up on chips and silicon VMware and broadcom could own the Enterprise on premises and Edge so you know it's I know it's very nuanced but this is interesting the new broadcom is a thing and it's not the old broadcom or them swallowing up VMware if if the numbers of 800 layoffs are true that means broadcom's getting laid off too and I hear rumors there's a new CMO coming out that's going to be announced um for VMware so it's not going to be someone from VMware or someone from broadcom someone net new so I think broadcom and Hawk Tanner looking this as a a as a new entity a new Co well of broadcom so I I think the China thing will be just a sideshow well we'll see I mean China's like I said probably just retaliating for you know the lack of high-end chips and all the tensions but but think about it this way that after the VMware acquisition about 50% of broadcom's Revenue is going to be software I mean this is a a chips company of course they bought CA um but but yeah half the business will be software now to your other point you know about that sort of hardware and software integration I guess is what you're alluding to that would be a huge pivot for broad comp because generally it runs itself as a collection of whatever 17 or 20 or 23 different business divisions yeah it tends not to allow one division to draft off the success of another Division and rely on that division's performance they tend to be very independent in terms of being able to hit their targets so but having said that you know there's some really good examples hardware and software integration over the years I mean look at Apple you look at Larry Ellison with Oracle when after they bought sun and did engineered systems bye-bye HP you know ux remember it was Oracle and HP with a gold standard and then once Oracle botson forget it they were just engineering and by the way they absolutely destroyed everybody on the planet uh I was talking to some you know it was it was a long long time ago so they could they could spill the beans but it was it was a story of a company that was competing against Oracle and uh and Oracle came in with exadata and it was a longtime customer of this of this uh of this company and like years and years and years and years loyal customer and they sat down with the executive and said hey good to see you um we're dumping you and and the the the the the vendor said well wait a minute we've had 15 years together you got to give us one shot he goes okay we'll give you a shot and they gave him a shot and Oracle just smoked them because because of the engineered system and ex so that's an example of hardware and software coming together and then Tesla is another example the software defined car so there are examples and so maybe broadc comps thinking we could bring the hardware and software together that would be a major major pivot for the company it's absolutely the case I think you you just pointed out the key to this and you know I remember you know you and I got I won't say laughed at but people were like poo pooing my conspiracy the theory that broadcom actually had a master plan here if you look at look at what's happening with the enterprise we just put a post on Silicon angle Paul Gillan wrote a great article on um um the um on premises action on on cloud if you go look at if you look at Sil angle right now the article is still up there still featured I believe um I know that's the David stom one Paul Gillan he's one of the top top posts here let me pull it up here yeah Paul Gillan does some great work he he basically said all the actions going on premise uh for machine learning and AI so if you look at that and that's true if you look at all the stuff we've been digging in on the AI side this is a generational Shi for the Entre wait wait wait what's he saying because I don't I don't know if I buy that John I I see it's mixed I see it kind of mix 5050 but I mean righ action frankly is in the cloud right now but he's specifically talking about um generative AI right so let me pull this up that's a good point but look the cloud is already w we' kind of look we've been shouting from the mountain toop you know okay developers you know one in the cloud the cloud next chance super Cloud's happening which we can still do more of that but the developer side of it is all Next Generation what's interesting is a new generation of it coming around the corner which is what gillan's pointing out and I think this is where I think VMware and broadcom might have a genius situation here is that that the on premise it's cheaper to do a lot of the stuff on premise with Hardware this could be a boon for say dell Technologies um this could be um I'm I'm actually chatting with Veron over there now I'm talking about this because I want to get some more stories out there this could be a complete reset for Dell another generational shift because you know the old generation of PCS and servers got decimated by the cloud okay ai ai model training rekindles interest in on premises infrastructure yeah for sure because people people don't want their their IP leaking into the cloud and and number one number two is the data is on Prem or not not all the data but there is data on Prem so bring AI to the data and by the way the survey data shows that it's about 50/50 where where that AI work is going to occur um but having said all that all the good shit's in the cloud well well to find good I mean right now I'm talking about llms all the you know all the all the Bedrock just went you know GA vertex AI open AI not really Dave not really I mean like the power law that is yeah the large language models are in there but if you look at the uptake from a development standpoint people getting killed on costs right so um David strum just wrote a story how companies are scrambling to keep control of their private data from AI models if you look at Amazon's top message for Bedrock it's all about VPC and managing all the data so this what's happening is is that yeah the large language models on the cloud by the way Amazon has anthropic that's not theirs they have Titan open AI is not even a cloud that's not Azure that's also um open AI Azure has piece of it there so that's kind of there's not a lot there's not a lot of good in the cloud right now Rel wait wa so let me let me let me be clear if you're open Ai and you have access to gpus you can stick them in your data center in Ohio and they're doing that and they're kicking ass and there's a lot of action there building you know training very large language models on Prem no question I agree but if you are a financial institution or a manufacturer or a health care company you're still doing you definitely want that on premises you do but today they're mostly doing experimentation in the cloud summarizing text helping write code the basic stuff that we're doing with chaty BT because its early days in order to get the infrastructure the hardware and the software the llm capabilities and the gpus on Prem to actually do what you want to do with that existing data so right now there's a lot of experimentation going on but your point actually actually I don't think you're accurate on that I think to your point blending two things to your point about the power law people definitely want to do stuff on Prem but it's the data suggests it's not happening in a broad-based way yet other than other than typical chat GPT type of workload it's happening on a major way so here's what's happening so the data that you're looking at is survey data from Enterprise buyers so that's that's measuring production workload so you know unless you have other data that that I don't have or you don't you don't see some of the data that I'm getting which is more developer Trends everyone doing stuff with AI and and some of them the data is small so if you're talking about massive pedabytes you're not going to be doing that with you know whether it's retrieval technology the rag they call it or vectorizing with embeddings or doing kind of indexing you you you at best can do what they call an AI wrapper and you call it chpt that's not that's not AI Dave that's basically like that's not real AI That's like I have content I'm going to throw it into llm like open Ai and I'm going to put that as a wrapper around my data and make can do things that's called a rap AI wrapper that's one use case the other use case that's emerging aggressively in the experimentation that's almost going to production is the idea of AI native AI native is when you actually take your data create not NLP but you create embeddings you got tokens you got a context window when you look at that I just read a paper from data bricks this week this stuff can be done on a Dell server on your desktop okay and and by the way if you put in the cloud that's going to pay the cloud for the money when you can do it on premise so there is a model saying you can take some of the large language models that are kind of be small wal Garden distributed data sets and still apply um technology to them it's not just GPU it's inferencing too which is compute so you know it's complicated but I guess what i' would say is that the on premise is a safer bet because everyone who's in the cloud is reporting that their inference costs are getting killed especially if their models get bigger so dumping a knowledge base that's got pedabytes in the cloud you're looking at a major bill and that's the blocker and that's the blocker right now so so I I I I agree but it's still still most of the work is training that's happening in the cloud and I agree with you we and we've written about this over time the dominant workload is going to be Ai inferencing and I think it's going to be at the Edge by the way and I think it's going to happen on on very attractive P power per watt performance per watt systems which are going to be dominated by arm you know but that's very diffuse right now I mean it's it's not when you say when you say all the work's being done in the cloud big that that's don't what you talk about AWS Azure or open AI as its own cloud so you're bringing up a good point so there's a lot of activity going on a lot of experimentation going on by by everybody and most of that's happening in the cloud today there's also big training going on so there's big big models being trained like open Ai and they're not not necessarily doing that in the cloud I agree with you um and then but the I agree also the real opportunity is AI inferencing at the edge and I think that's going to largely be done on Arm based processors system on chip my my point on the whole broadcom getting circling back to V we're a little tangent there in AI which you know there's different perspectives depending how you look at it if you're looking at it from your perspective from a buyer data or from a development data you're gonna see no I'm just saying Dell and HP right now are not making a lot of money on on on gen servers because and they will there no because no one's call them saying they don't have a solution but they right smart they're smart they will and as a result most of the action right now is in the cloud because you can go to the cloud and you can play with this or you get G you get a bunch of gpus and you put them on Prem but most people can't do that today that's all I'm saying yeah okay so yeah I appreciate that what I'm trying to Circle back to is the broadcom's bet on the Enterprise with VMware because when they bought when they made the intention to buy VMware the whole point was let's get it on premises because that's an on-prem let's get the data center that data that data center Paradigm is perfect for AI and machine learning on premise okay and as we always said the data center is a fat Edge but the point is is that this could be a genius strike by broadcom because they're not gonna be able to compete at scale they probably be a supplier to them at some level but what they can own is the chips and the software on the company side of the AI because if you believe the power law that we put out which you know you do because you did we put it out together um then there'll be a a smaller set of language models or Foundation models that are going to be I guess World Gardens of data and and it's proven in AI today in today's state-ofthe-art that the the higher the quality of the data the better the AI so what you see in the large language models with the proprietary layers on like open Ai and and cohere and anthropic and stability Ai and all those guys they they they're the open they're everything that's where the hallucinations are the DAT is not as clean as it could be for say a specific domain so the vertical nature of the data is going to imply that there's going to be tons of data sets that have to integrate together and so this is the opportunity that I think you brought up with the edge inferencing at the edge also has to include models because the whole you know move the compute to the data Concepts was pre- Ai and generative AI so now if you add generative AI you have to not only move compute to the data but have compute at the data right and so there's so much going on that could be innovated with the chips set so again EMC bought VMware to make storage better I think broadcom bought VMware to make the chips better for the machine learning Ai workloads and security so you know I think it could be look like at a genius move if the the data coming in from the open source world as well as these developers is that you can train a model and do inference on stuff on small with small compute and gpus while leveraging the cloud for their cost structure for training so in other words it's rather than training my own data I'll just go to the big model who already have the training done so it's going to be a completely different Paradigm around how people do software and that's what's going to come out at supercloud 4 next week I think we're going to end up validating a lot of the broadcom moves as well as the things you brought up around AI because everyone's pointing to the fact that the economic model of AI has to improve otherwise it won't get to production and the production blocker is the combination of the right capabil ities and costs um and so what's the size of the model does it should it be big should it be small should be a collection of small models that's what's going to come out daveid I think at the end of the day it's the silicon and the apps which powered by data yeah so there's a lot of examples that we can point to today of AI inferencing happening at the edge I mean just every time you do face recognition right um that's an example um what test is doing in in its cars uh with its neural processing unit and its Arm based system is an example and there are others I for supercloud 4 we have a the CEO of SEMA AI coming on they're doing a system on chip uh basically not trying to compete with Nvidia and gpus but rather they're doing kind of Robotics and they're doing hardware and software integration something that we just talked about a little earlier where where they're basically build these AI machines on Robotics and drones I think that's going to in in factories I think that's going to be an absolutely enormous Market the chip content alone uh in that market today is like 40 billion that's just the chip content let alone all the other value ad on top of that and so and within within by the end of the decade it's going to be five to 10 times that 40 billion and again that's just the chip content so so think about layering in all the other components of the value chain you it's it's a it's a it's a trillion Doll Market and I think that the economics of that market are going to they're already I would argue but they are going to find their way back into the Enterprise with you know arm-based processors and you know people talk about other know Alternatives like Risk 5 Etc which I'm all all wonderful but volume wins volume is the killer app in semiconductors I I think I think you're right on I think the other thing that's coming out is that you're going to start to see specialized silicon come out where um you have use cases that need certain things right and so you know one of the things that's come up on the super cloud 4 preview is the the CTO I was talking the CTO from box he said it's like coffee and um you can either get flavored coffee or you can get like the the Starbucks and you know phills or pets right um and it's like and it's like coffe is like that you got the big Brands and you got flavored coffee he says the other side of the coin is like wine like name a winery that that you like there there's all kinds of wine you can buy depends on your taste so his point was with AI and chips that in the the relationship between power horsepower performance throughput and AI is going to come down to either one of those directions so that's kind of the conversation in the Silicon Valley circles is is that is it wine or is it coffee because in wine can you think of a major major prants not as obvious as say coffee is like the big Brands Starbucks you know pets whatever Dunkin Donuts phills from the west coast and then if you want flavored coffee you can you do whatever you want um so AI is going to have a lot of these specialisms to it so I me think about like um these areas that have domain expertise why would you want to pollute data if you have clean data in a vert say you're in healthcare or say a vertical the data specifically in the vertical will be directly related to that domain very clean very precise very organic why would you want to like blend that in with other data to make it more diluted because that won't be more powerful for AI so I think the chip thing is going to be very important conversation like when do you use it arm OB is going to win the edge what's the core chips that are going to offload say compute or gpus that's that's my question um well I think there's a lot of wasted Les going on today in the data center doing things like networking networking management Storage storage management they're being done by general purpose processors and those going to be done by specialized processors that again I think they're going to be highly efficient processors many of of them are going to be arm-based processors embedded inside of these storage arrays or or networking systems that are going to be dedicated to those specialized tasks and and as well there's going to be accelerated Computing workload Lo s that are going to require a very wide spectrum of gpus and specialized processors and uh you know first of all I think nvidia's got you know an awesome lead I do think they build a mode up with their with their architecture and their software architecture but I do think there will be Alternatives I mean Intel's KN just going to sit still and other competitors are going to come out and you're going to have all these startups and most of them are going to fail but still some will make it and there will be you know alternatives to do especially that that inferencing and some of the lowcost work and some of that specialized work but I think in general it's going to be dominated by a couple of architectures and it could be somewhat more fragmented than the x86 Market was you know AMD is going to have their Solutions and Intel will have their Solutions and clearly Nvidia but yeah it's still going to be a handful it's going to be an oligopoly in terms of chips in terms of you know who really dominates and then of course you're going to have a lot of specialized design chips like you have today with Qualcomm and you know I'm really interested to hear what you think about the SEMA AI um you know very I think Forward Thinking company and again who knows who's going to make it um but there's a lot of VC money going in and a lot of people trying to sort of disarm the the the Monopoly essentially that that n Nvidia is building I think I think there's gonna be an interesting action so that's a great point about the um it's come up a lot in my supercloud previews and and preparing for next week is that the the game is on it's definitely a shift it's not and it's not even compared to crypto people like oh crypto is a hyped I think you know I've debated this on the Pod before crypto or blockchain is an infrastructure shift that distribution is going to happen the the thing about this this AI wave that's coming out is that clearly it's gonna be applications and I was down on this whole you know um AI wrapper or just wrapping GPT around data I think that's going to be a viable category I'll tell you why I saw an analogy um on the web on Twitter Tren Griffin he's a old time worked at with maau on maau Communications back in the Telecom days he's a telecom guy knows his Telecom early school he had he had a he had he had a conversation we were having around how Telecom the internet and the NSF in 1995 laid out all the plumbing for the internet the connectivity um and which created the internet okay NF NFS 1995 that created the worldwide web which is a collection of sites websites became the application for the web right search engines helped you find more websites so if you look at that Dynamic of Telecom or the connectivity that empowered the web the web put that together connectivity Telecom plus the web worldwide web it's a fabric created websites that to me is what AI rappers are right now websites are things that sit on top of the existing infrastructure that allowed for the internet and then the Pix and shovels came with that that became the web boom and the bubble that came as everyone knows is the dotom bubble the web would not have happened if NFS grants didn't lay down all that fiber and that fiber made everything happen so that enabler made it happen with AI our supercloud narrative essentially is that this the the hyperscalers have set the table for large scale AI because they have more horses power they have more compute they have more ability to do development so you got the combination of Open Source Nvidia gpus CPUs power Cloud enables what the AI piece hence open AI so now you got what's the application of AI and that's kind of where we're at now and I think what the web and it kind of points to our debate of was the web the inflection point that looks more like AI I think this validates at least in my opinion are my thesis or our thesis together that said the web is the most accurate with the AI is because the early days of the web had the same kind of clunkiness to it Dave where's the money going to be made in fact Jim Clark who invented the browser was quoted saying on on his tweet on the tweet that uh Griffin wrote If you look at Jim Clark said this is what Jim Clark the founder of the browser said in 1994 what I Rec quote what I recognized after talking to Mark andrees who invented the browser as a student at at in University Illinois the Mosaic browser was the PC was to compute was talking no what I recognized after talking to Mark Andre was that the web was to networks in 1994 what the PC was to Computing in 1982 of course I knew what the internet was but I hadn't thought about what the implications were in terms of its growth rate in other words it was Tiny Dave tiny so I think a lot of people going to look squint through the analysis and see probably a deadcat balance relative to the performance of the of the earnings but it's still like way early on this and I think this is why I'm in belief that this is a generational shift at the developer level at the infrastructure level so supercloud is going to power super apps which are Ai deriven and that's why your your sixth generation data post is was interesting to me um and there's all this conversation around that and and think about it you know just the story's been running about how um you know par and Iceberg are going to change the data warehouse market we're doing a big report on that Rob stret is doing that right so you know that's that and then CA has Got U statistics that say 543 startups have shut down since 2023 okay the failure of the startups pre-bubble means that the transition's happening because from those ashes everyone knows when startups fail that creates the fertilizer for the next batch and that's what's going to happen so the six data platform whatever that that is six seven eight above is going to probably create startups because data bricks of sowl can't hold on to the lead so I think super cloud as a substrate is going to power the infrastructure for of AI so that you're going to see the large language models you're going to see tools come out picks and shovels and then what the website was for an app you're going to see these AI apps emerge and you're going to be very very fast so you know I thought that analogy kind of points to what we're going to squint through on the earnings coming up next week on on that so again was the web more important than say the mobile format well so what I the way I look at it is I see this new AI wave as like the PC wave from a productivity standpoint it was personal productivity we all started using PCS we all got our own PCS and it had this it created this massive productivity boom and I think it's like the internet in that everybody's going to to be able to take advantage of it it's going to be one of these Rising Tides lifts All Ships types of thing because you remember with the internet you know we all thought oh well Yahoo and you mean the you mean the web not the internet yeah I'm using I am using internet and web interchangeably but yes the web absolutely uh but of course ran on the internet but so but but yeah it was Telecom I'm just being a historian no no it's a good good clarification but to the point you were able to get over the- toop providers you were able to get you know startups like eBay and Amazon you were able to see companies like Dell uh create go from you know mail order to to internet order and so every company so to me this AI wave is like both the personal productivity impact of the PC and the transformative you know industry Paradigm Shift of the web and the internet exactly and and by the way I totally agree and that's why I think it's a bigger INF ction Point than than either of them individually because and maybe combined because it brings the best best of both productivity that's why I wanted to bring that up because remember we had that big debate where we were yelling no no you're wrong about the web and you said internet which one John I can't remember so so so it was a debate we had about this one topic and this is why this Telecom thing is an interesting debate because it's the telecom companies that lay down in fact Tren Griffin worked for Craig mcau who built like internet services and internet services were proprietary so if you remember that back in the day I think it was called Next link okay they had all these uh Telecom well the telecom companies were like the AT&T and the phone companies and they had it laid all this fiber down they were building basically proprietary services like terminals that had it wasn't stand it was the web the worldwide web that created the HTML and HTTP standard which created websites the standardization and the combination of the network of the internet made the web kind of grow that's your point so again what I realized was is that we were we were both kind of argu about the same thing which is yeah we have the same position it was telecoms the pipes right and the web was the standards that enabled the websites and then from the websites you had search engines from the we you had eBay then you had other other native web apps come out and I think that's what AI is happening now you got AI rappers which I call webites you're leveraging the best of AI CH say chat GPT or open Ai and taking data like we're doing with vector embeds and making it better um and then you start using these embeddings for retrieval now you start getting into AI native type Services more picks and shovels are coming online to help developers hence the functionality is going to increase radically and that's the same progression that the web had and you add in your PC argument about productivity you're already starting to see productivity I saw a developer online today you know shouting from the Twitter Mountaintop saying oh my God I can't believe I just did this open source project in like three weekends and and it's a huge success he was part-time working on the weekends and he hit a home run why because it was easier he could do it produc productivity is up so this is an un this is a first generation problem that I we've never seen before and it's an opportunity that's being solved so you know I think that that's the key point and again that's kind of a it's not really a rant it's more of a uh an an Awakening validation for us is saying with supercloud 4 next week the generative AI conversations are going to be very Broad and targeted around these areas so I mean I'm pumped looking at some of the early interviews Dave from supercloud 4 that should be a mustat must listen to event we have so many people lined up for that well um and we got some great people coming in studio John um live so as always you know looking forward to that and next week's a big earnings week right I mean it's all the cloud earnings um yeah let's get let's get into this so next week you got Amazon Microsoft Google report their Q3 earnings okay obviously the focus is going to be on the cloud platforms ads Azure and Google Cloud Dave you got data on this we've been debating we just had a little bit of a mini debate on you know what the AI will look like and is it good or bad I'm saying it's it's okay that the earnings aren't popping in because it's not a lot of production that's going to come out of our supercloud 4 but there's a lot of Buzz around these companies especially the forerunners you know um Amazon's getting you going to bring up the Fitzy thing but Amazon got hammered even jasse got hammered um on that but you know you got compute power and gpus were constrained they're costly is there is it cautionary is it a cautionary tale right now um hype is there what's the buying cycle what what is what are you what are you expecting I'll give you some interesting stats so I've been covering this since probably 203 2014 trying to do quarterly estimates for the first time uh ever in q1 2023 the sequential growth of the big four clouds AWS Azure gcp and Alibaba did not grow so for instance 2021 uh sorry 2022 q1 33 billion then went to 34 billion this is sequential quarterly uh revenue for the big four then to 35 billion then the big jump in Q4 2022 to almost 42 billion and then q1 it declined to to 40 billion first time ever that we didn't see a sequential uh uptick in the quarter and then a grew to 40 billion 41 billion is the forecast for Q3 so I have AWS growth basically flat to up a little bit in Q3 I got Azure basically flat at 27% I got Google kind of in the 26 27% range and I got alib Bab you know pretty low because they're going through a lot of transitions but I have really growth rates accelerating in Q4 so my expectation is Q4 is really where you start to see measurable impacts of AI for the cloud vendor so I got AWS popping up to 14% then then Azure 28 that's up from 12 last quarter right correct right so I don't think you're gonna have a huge incremental impact this quarter because look I mean look at AWS just really made uh the Bedrock capabilities and Titan generally available so it's not why it's not going to hit I don't think Revenue in a big way um and so and even you know Microsoft's been conservative on its guidance as has Google so we'll see if you know if there's any me meaningful measurable impact in Q3 we'd better see it in Q4 or this AI hype is going to run out of steam yeah I I I think well first of all that's great analysis by the way you were right on your market share you should publish that more on a chart so I can publish on Twitter and and threads I will I'll publish it after they announce next week I I'll I'll update it and I by the way I always say this is what I forecast this is what came in I was right here or I was wrong there yeah if if you're listening to this you we got the best Mo we got the best data out there on this stuff other people throwing in you know junky data but let let me just tell you what I think is going to come out of the earnings and this is going to be what I would squint through if I was the stock analyst at the end of the day if you're a cloud player you got to look at the infrastructure this is an IAS game back to square one Dave if you're a cloud provider if you're Amazon you got to nail the infrastructure Solutions everybody's concerned about costs and their data privacy and their data security because their data is now the IP again you brought this up on your data platform post you just wrote on your breaking analysis um it's right on from my research and from my analysis everything's pointing to democratization of data the data world that we knew is over the data world that was 10 years ago oil's the new thing and there's going to be a bunch of refineries that's over everything about data Theory data bases is over it's a whole new layer going on now level going on now data is going to change the script will be flipped the assumptions will be tested and you're going to start to see that and what and this is why I like Rob stretch's analysis that you're doing with him on this whole snowflake data bricks D DBT happening event happened this idea that SQL is the Lang language SQL stands for structured query language well guess what Dave what's the hottest thing in AI right now I'll give you a clue the letter L's in them language large language models SQL could be the llm the lingua franaqua of data and it is I think you're going to see AI totally take SQL to the next level and you're going to start see machines talk to machines at a layer with data now what's interesting is that okay that sounds like fantasy if you look at what happened at data brics's event they said we're going to make everything Iceberg and paret support if you just take that one step further imagine that some entrepreneur can get in the game and be democratized and be in the same business potentially with the big players with this open Level Playing Field so all they got to do is change their formatting and they're in business with the open data model so I think open sourcing the data is going to be a big Trend and whichever infrastructure can power this trend that's going to be the model the model support So Amazon Azure Google have to nail the best speeds and feeds at the Silicon level and at the GPU and compute level and then the second thing in AI is how do the models all work together this is your power law right and finally which AI works best with developers helping be co-pilot code developers this is going to change how users interact with information how software is generated and ultimately what areas can be reduced from a waste standpoint heavy lifting the toil that's going to be the action whoever whichever company can do that in the earnings their numbers will go through the roof because it's all set in the table right now it's all about Beach head position not about numbers I don't I'm not judging the cloud right now the cloud providers by their earnings numbers on how much they they've gotten out of their AI because if they try to squeeze the monetization too early Dave that's the wrong signal now like to see some numbers obviously if this is some adoption but I'm not expecting exponential growth because they it's it's I I don't think it's getable I mean if if I'm Azure and I'm AWS and Google I'm going to lay down the best hardware on the table which is performance and enable the data center or edges to be highly productive I think that's where you're right when we were talking about ear about the edge and kind of all working together in the cloud it's a cloud operating model with AI now as the new I would say Tailwind for how data is going to be managed that's that's to me the squint through the data how do you look at the numbers and I'm not expecting them to do a lot of data performance on the earnings yeah I mean I I I again I agree with you I don't think Q3 you're going to see a lot of you know AI in in the data you know the big question I have is are people going to switch clouds and Cloud providers you know to get to AI I mean we could argue that Google has better AI or you could argue that Microsoft and open AI have better AI I don't know do they I I don't know we we're using them all right well I mean every single company has those big hyperscalers all have been hiring machine learning Talent okay ai's been around for a while every company we've been doing AI forever okay well they what they mean is they've been dealing with data and machine learning machine learning isn't genitor of AI so you we talk about the genitor of AI as you pointed out as as entropy kicks in from our friend at IBM yeah Jeff Jonas Jonas he he points out it's been around for a while but the advances around generative AI is what everyone's going crazy about and that's why I'm excited by the whole Vector database discussion because that's pointing out at these new kinds of ways to do embeddings which essentially how do you handle data sets and I think you know words that were once taboo like proprietary old Gardens are coming back in vogus if you look if you look at the top conversations we're having in in the in Silicon Valley and in the AI world right now it's the word proprietary models they call O they call open AI the proprietary models they're actually open because they happen to be owned by them but it's the internet that they've they've kind of crawled so if you look at the companies that that are doing AI they're treating their data sets as walled Gardens because they don't want to leak them have IP leakage right that's the conversation we've been having don't let your data leak into the llms well guess what they're doing they're creating wall Gardens of their data that's proprietary intellectual property so right so that's actually a good thing that's a feature not a bug well but again this is what I'm getting to so as I started to say our Engineers are playing around with all these llms you know you ask them hey how's how's llama 2 looking llama 2 is looking pretty good but you know open AI tools are good but you know the they just getting hands on um some of the stuff in in Amazon that's gone GA and they they look pretty good and so it's like it's like remember when we and we still we're testing all the it's like it's like we're coding HTML by hand like hey how's that new thing yeah but remember you remember how we've we've tested every translation in NLP translation out there and we've been doing this for years we know which ones are good bad what they're good for what they're bad for you know trans transcription translation some are good some are B we and so am I gonna really um I've invested in AWS it's it's let's say 75% of my cloud estate is AWS or if I'm a Microsoft shop you know 50 60 70% of my my my workloads are running on Microsoft and because I love their collaboration and their tools or whatever am I really going to switch am I going to say okay now I'm going to Google because they got a little bit better AI I certainly don't see it in the spending numbers yet you know um they certainly talk a good game they're marketing it you got Fitzy throwing you know all his all his FUD at Amazon uh but you know do you really see Amazon as you know they the data shows them losing a little bit of ground in come down in in Market presence a little bit of ground you know lost a little bit of of ground momentum still really good frankly it's better than Google's you know and and Microsoft is ubiquitous so but are you really gonna switch clouds and go through that I mean gonna be a good reason to to do that you're gonna maybe add on some stuff but my I guess my point is this Amazon has built up a massive installed base of of cloud customers as has Azure I just don't see those guys pitching picking up their tent and and leaving I just don't think it's that easy or that attractive to do so well I think that's exactly the right point the question about the data is can you move the data so let's take data let's take something that's really going in the weeds vector embeddings vector databas is all the rage we know that a vector database has embeddings that work for the vectors so you can't switch vendors there but if your data set small you just move your data over and reindex it so that that's easy unless you consolidate the vector database because it's going to become a feature of a database even even but the question is the question is consolidating means just throwing away your old ineds and creating new ones on the new one that means moving your data consolidating it but if you got pedabytes of data you're that's hard to do it's going to cost you so I think the big switching cost is going to come down to how big is the data set what's the cost on the workload for the training and INF inference dollars that's why everything's going to come down to can people code it what's it easy to code for my developers and use for my users what what's the cost to move data around and what's the cost for the hardware to use it that's what's going to come down it's classic kind of it Dave it's like what's the throughput what's the first token in what's the context window what's the cost of ownership I think we're gonna we're moving into an era of a generational shift of it and that's why I think it's a huge opportunity for the old incomers like Dell HP who have Hardware that could sit as a on a stacked up on a rack in a room okay there's your test bed for your programming and then when it's done you move move the to the cloud so I mean or you build your own like open AI did or or have your own data center I I don't know what the answer is but it's an opportunity and I think it's too early to tell uh on that piece but from the cloud standpoint let's see what let's the war is on right the cloud Wars are here um and I expect reinvent to to flex hard uh and reinvent we'll see what they got yeah well like like we've said before they got the last word right because reinvent is the last Conference of the year and you know it's going to be good you know they're going to have a good story I mean when is when is when is reinvent ever the bed I mean it hasn't it's always really good I mean jasse was always a high point Adam's you know got his own style he's really good too I just you know every reinvent the messaging is strong the fire hose of announcements I mean you know it's been a long time it's been a number of years and so you know maybe it gets a little bit old but it's still really really good it's still one of the best conferences out there so I expect it's going to be you know a really strong showing uh and you know Fitzy stuff is just all fud he's he's just a Microsoft Fanboy well we got I don't know if you got a hard stop but it's almost I do I got I got a hard stop I got like a like a cement hard stop that right now all right this is over Dave uh we didn't get to our rant section but we'll get to it next week I want to Riff on the uh in the one minute we have left my rant next week will be around the news information um and around the war that's it's a huge red flag that um I think this is going to change how the Press is done and also the whole uh VC Mark start startup Market's changing so we'll hit that next time so check supercloud next week I'll see you out here in pelto for uh episode 35 maybe you're gonna hang around you're gonna head back um for the next episode there what's your flight no I'm I'm there for the week I'm flying out

2023-10-26 04:36

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