Call me crazy but I think long term (10 years +) the Intel strategy of fabricating chips domestically is the correct choice. There's a ton of geopolitical pressure in this direction. The US simply doesn't want to be dependent on Taiwan for chips, for obvious reasons.
Intel knows this and is trying to become the TSMC of the west. And frankly they're the only ones that can pull it off. I'd be surprised if 10 years from now the majority of their revenue comes from selling processors rather than fabricating them for AMD, NVIDIA, etc. Why compete when there's plenty of steak for everyone?
You may very well be right, but it's a bit much to say that's Intel's explicit strategy. In the past 12 years the main thing Intel has done is make poor long term choices: going big on mobile too late, SSDs taking off but not for Intel, whatever is gong on with 10nm.
Saying they're committed to fabricating in the US while they are, for the first time, relying on other companies to make chips for them over seas... right now their domestic fabrication may internally be viewed as a blunder.
Sure it could pan out for them but it's a crap shoot. Maybe those blunders were just all bad leadership which Intel has recovered from, only time will tell.
The modern 'nanometer system' is nothing more than a bizarre versioning scheme (specifically its usually the 'major' portion of a semver), and you wouldn't be able to identify a physical thing to measure to compare different fabs.
Intel wouldn't have been competitive if they were still on their own 14nm process.
Like it or not, "10nm" is the official label for Intel's most pronounced and prolonged fuck-up since the Pentium 4 dead-end. The fact that node names have little to do with node geometry is irrelevant here (nobody's trying to compare competing process nodes on the basis of nominal size); what matters is that Intel didn't finish moving their CPUs past 14nm until last year. Their recent and long-term inability to ship a functional and profitable new process across all CPU product segments combined with their inability to adjust their CPU design roadmap to account for their fab problems is highly relevant to any discussion of their future prospects, even if the discussion makes use of Intel's technically inaccurate nomenclature.
Most of the failure you're stating there predates current leadership to be fair. It's difficult to see BK as anything other than a massive failure, betting the farm on alternative growth engines whilst failing on the core mission.
Reminds me of Facebook actually - if you tell the people who build your core product that they're lame, they're goign to leave, and your core business will fail.
Spot on. Any large country that's NOT desperately building up fab facilities within the country right now is playing with fire. This stuff is the new oil. Insane how little of our modern life works without chips.
Computer chips are in general a reliable hardware, and top-of-the-line CPUs are in general way more powerful than needed, so there is no need for cutting-edge manufacturing and also an embargo won't halt existing activities.
Simpler/embedded processors seem to be a generic product that can be manufactured by many countries, hindering embargo efforts.
Are chips more critical for a country than e.g. food? because many countries are not nutritionally self-sufficient.
Strategic risks such as war, invasions, sanctions, etc. have to be dealt with on a decadal basis.
You have to ask: what's the current reality, and what's the trend?
The trend is pretty clear: our world is going to depend more on computers, not less. You have to prepare for a world where drones have replaced your fighter jets, where every citizen has a smartphone, and where your financial system will collapse without working computers and servers.
CPU factories seem to cost hundreds of billions of dollars - beyond the capabilities of most nation-states. I wonder if this will cause a trend towards reducing requirements (e.g. pushing important infrastructure to rely on simpler chips) as keeping up with the technology will drain a country's resources.
> The trend is pretty clear: our world is going to depend more on computers, not less. You have to prepare for a world where drones have replaced your fighter jets, where every citizen has a smartphone, and where your financial system will collapse without working computers and servers.
I think this is completely wrong. Oil is compustible, at the end of the day you don't need a crazy supply chain to make use of it, just to make it. You couldd have 99% of a working supply chian for advanced eletronics, you're still fucked. It's far more fragile than oil.
They seem to prefer dividend payouts rather than capex on new fabs[1]. Combined with them moving to FCF loss - I think that what you described here may be imaginary at best.
Given what they said in the last earnings call, a slow IBM-like death seems more likely.
It's not a bad bet, if you're losing market leadership through poor execution then getting the government to prop you up as a backstop to the bogeyman seems a reasonable tactic.
Being nimble is preferred. In the long run you can vertically and horizontally intergrate every available business and infrasture. It will save cost assuming those businesses are relevant. In the short-run you burnt out before those business "expired" or fall out of trend. The trick here is to have the right integration at the moment and expand in the market direction that favors it. Is like friendster and myspace too early to boom. Is like every other zoom-like businesses too late. The west has too high labor cost and seriously shortage of engineers. Countries in Asia like China, Taiwan, and SK churned out engineers like the women studies undergraduate in the west. The business environment in Asia will simply edge out the west. Remember solyndra? Remember GE? Remember Kodak? Upcoming is Tesla. There are so many Asian side EV coming in now.
Sort of depends on whether Intel catches up with TSMC or if TSMC just extends their lead over them.
It seems pretty clear that most firms will just go where the bang/buck is (especially ones like AMD and Nvidia where performance is top priority) irrespective of geopolitics. If intel can't attract the right clients then it might make their extra fab capacity in the US economically tricky to maintain.
Unless China's clearly stated policy that recognizes Taiwan as a part of China changes, it isn't really a black swan event.
It's more like an increasingly active volcano. It might not blow up tomorrow, but if you deliberately built a house on its edges, it would be hard to sympathize with you when it finally does go kaput.
That assumes the only possible way the China-Taiwan issue can be resolved is some kind of event that would disrupt the production, ie. war or at least blockade of Taiwan.
Not the person you're replying to, but if I ran a chip business (or a country with a lot of military/economic tech dependent on chips-- IE most countries), it would certainly be something you'd want to de-risk if you could. Sure it's not the only possible outcome. But it's a realistic outcome, and one that has a ton of downside if it happens.
If I'm running a country or a multibillion dollar business, I'd certainly not want to leave my future wellbeing to the good sense of two powers with a gigantic historical axe to grind.
Not if you’re partially valuing your position in the stock as an option on that black swan event.
If you think there’s a X% chance of this happening, and that this event will be the catalyst for intel’s value appreciating by Y% of TSMC’s market cap, you can value the opportunity cost of investing in intel in the interim as a (dividend-paying) insurance premium covering your TSMC position.
If it never comes to pass, at least you earned a dividend. If you think Intel’s valuation has hit a trough, it’s both a good investment and a lot cheaper than a put option.
Your first para is correct but this doesn’t mean that Intel will become the TSMC of the west.
Doing so needs not only huge amounts of investment but a massive change in the business model and by all accounts culture. Neither of these are a given at all.
Given that we might be on the verge of war with China over Taiwan because Nancy wants to sip a frosty marg in Taipei, this isn't exactly sticking your neck out too far lol
I had invested in AMD when Lisa Su took over as CEO. I had been keeping tabs on the company for some time. Unfortunately I needed money to cover my basic living expenses and had to sell all my shares about a year later. Even at the time, it was painful because I had spent a lot of time researching AMD and I was very optimistic about Lisa Su based on her background and her tenacity.
I could have made maybe 20x on my investment... Still, I don't feel regret. You can only regret things if you had a choice and I know that there's no way I could have avoided selling those shares.
I was in on AMD at $9. The hype was so real between Nvidia and AMD that I got cold feet and sold (for a decent profit). Never in my wildest dreams would I have thought it would be here. I'd be retired.
Exactly. I experimented with options some time ago. My conclusion was that they're not good for profiting from long term growth. Sometimes the company may be improving in terms of fundamentals but its stock price could be flat or even going down for an entire year.
You would be wasting a lot of money on premiums as your options expire worthless for several quarters in a row.
Options require one to have detailed, short term information about the company and one needs to be able to predict the outcome of specific financial reports - This is almost impossible to do unless you spend a lot of time studying the company's operations in detail.
I find shares superior if you just want to invest in fundamentals; you rely more on your reasoning skills to try to figure out if those fundamentals will lead to more profits down the line.
Buying and holding shares isn't as data-driven as doing so with options. With options, you're competing against AI trading algorithms which have massive amounts of data.
A new player could step in and take on Intel. Maybe the owners of ARM wise up and get into the manufacturing arena.
People made it big on AMD and Nvidia because they got lucky by owning the players who profited from the shakeup that cloud computing and ML brought to the industry. If you told someone 15 years ago that companies would be buying clusters of Nvidia GPUs for $100s of thousands of bucks, I doubt many people would believe it.
Intel certainly isn't a bad buy right now. Lots of things could happen and the industry will certainly look a lot different in 20 years. I can see a path where they manage to out-maneuver everyone else, but I think it's just as likely that they go the way of other major players.
So I'm very much in camp AMD. But, market cap has proven over and over again to be kind of bogus. E.g. do we really think Tesla is actually worth more than the rest of the top 10 or so automakers?
The top ten automakers have huge amounts of debt and pension liabilities. Tesla has neither. None of them are making profitable EVs at scale. Tesla has been hitting their goal of growing at 50% per year for a decade and plans to continue until they are making 20 million cars a year in 2030. Their gross margin on cars is the highest in the industry.
The next 5 years are critical for the existing players and many will shrink dramatically or go bankrupt. People already know this and that is why there is a bill in Congress that is a stealth bailout of the domestic auto industry with a $7500 tax credit on cars that have just $750 worth of batteries in them.
> They have a completely different sales model, so it's apples to oranges. Most OEMs wholesale cars to dealers, of course those margins will be smaller.
Well yes, but they've been successful with this sales model, and sell cars all the same, so that makes them more valuable in comparison.
There are a lot of costs to operating a service center and managing customer deliveries that aren't necessarily considered in gross margins for Tesla whereas they are considered in the case of a traditional automaker in a dealership model. I wouldn't be surprised if Tesla still has an advantage compared to manufacturer+dealer but we won't learn that from comparing vehicle margins directly.
There's also a lot of super weird dealer kickbacks behind the scenes that can make gross margin misleading for traditional autos, probably in Tesla's favor.
Anecdotally, we bought a Tesla a few years ago and it was awesome. Just buy it online, walk up, unlocks with your phone, and drive away. My spouse (a very socially anxious person who despises car dealerships) loved it and said if it made sense, she would never buy a car anywhere else. Granted, the same experience is rolling out for traditional cars (carvana, carmax, etc).
> >Their gross margin on cars is the highest in the industry.
> They have a completely different sales model, so it's apples to oranges. Most OEMs wholesale cars to dealers, of course those margins will be smaller.
This is the crux of the innovator dilemma - that their dealer sales model was a moat to prevent new entrants, and it could be their lodestone as well, preventing them from actually being able to compete with Tesla (since shifting from that will likely prove to be difficult/impossible).
Doesn't hurt Tesla that dealers are notoriously unpopular with customers.
I never got the impression that Big Car wanted to maintain the dealer franchise laws. I thought that was something the dealers themselves buy from state representatives.
You know that this whole game is about profits, right? If "of course" TSLA's margins are higher, "of course" their market cap will be higher.
And yes, investors are aware that this is a function of market segment. It's also a function of vertical integration, manufacturing prowess, unions, and retirees.
> debt because they run huge financing departments
Debt isn't the right metric to focus on, but the fundamental point is that if legacy auto perfectly executes a pivot, they get to keep their cash flows, while if TSLA keeps up the status quo, they expand their cash flows.
There will be a lot of stranded assets and failures to pivot in the legacy auto sector. Investors know it and the market caps got carpet bombed to reflect it. TSLA's didn't.
> Base rate fallacy, extrapolated into infinity
> Tesla, since they are still a rounding error
Do you not see the connection? Not only can we extrapolate, we can extrapolate far more precisely than usual because we already know the size and shape of the market they are expanding into. Usually these models take the form "TSLA grows 50% yoy until they top out at 1/3 of non-China auto sales" or something, and these are the models that back the current valuations. Optimistic? Sure, but not nearly as optimistic as "base rate fallacy, extrapolated to infinity." Lol.
> Base rate fallacy, extrapolated into infinity, sure.
You only need to extrapolate Tesla's existing revenue and growth out for five years to make them the biggest automaker in history, though.
Clearly, yes, it's going to stop somewhere. But a first principles argument like yours is running out of room. It made sense a few years back when they were still popular-but-tiny. At this point, the median expectation pretty much has to be that Tesla will be the dominant vehicle manufacturer globally for the next decade or three.
They delivered ~925,000 cars in 2021 with just two factories. That is about 2% of global sales. Maybe a small player (wouldn't say tiny, tiny at this point) in 2021 but they are ramping up production at two factories completed this year and building a large expansion to the Shanghai plant. They will likely produce ~1.4 million cars in 2022 and north of 2 million in 2023. Where they peak out is not clear of course but at least 6 million cars per year from existing sites can be expected.
I doubt that Tesla can continue to grow 50% YoY as soon as 2023. The Model S, X, and Y are extremely expensive compared to the competition.
I’m in the market for an electric SUV right now. The Kia EV6 and Hyundai Ioniq 5 both seem legitimately better than the Model Y, and they are substantially less expensive.
The Model Y AWD Long Range is $68,000. The Ioniq 5 SEL is $52,000. Tesla has historically never had to compete on price, but those days are ending. Either Tesla will lower their prices and their margins, or they will suffer lower sales. Competing on price is the future Tesla desperately wanted to avoid, but Tesla has not been able to scale fast enough to avoid it.
Good luck to Tesla shareholders. It’s a car company that the market is valuing as if it were a high growth tech startup.
I did find the fit and finish of the S class decidedly poorer compared to the Mercedes EQS. Tesla simply does not have the craftsmanship capability to build something truly luxurious like Mercedes.
The one model 3 I've driven had the left rear door not aligning with the car's body when closed. It's hard to trust Tesla's manufacturing when you see that.
Tesla has a 20% margin and are still bringing online many measures to drastically reduce their costs. The complexity reduction in the upcoming Model Y's with dual gigacasts and batteries is massive. If they have to compete on price, they will. They know price competition is coming and are planning for it. Mass market was in their long term plan from day one. But they won't lower their price until they're forced too. Too soon would just leave money on the table like Hyundai is.
But for now they are competing quite well against the Ioniq 5. Dealerships are now taking reservations for 2025 models of the Ioniq 5. Many people would rather pay an extra $16,000 than wait over 2 years.
I don't think Tesla is overvalued. Some (but not all) of the traditional manufacturers are undervalued. Which ones, though, that's the hard question.
>Tesla has a 20% margin and are still bringing online many measures to drastically reduce their costs.
Hard to take this seriously when Tesla has raised their prices multiple times over the past 18 months. Their margins aren't increasing, just their prices.
Tesla's valuation is roughly $800,000 per car they shipped last year. Compare this to Ford, which is roughly $30,000. Quick googling shows Ford has $138B on total debt, a market cap of $60B and produced almost 2M cars. Tesla still has $30B in debt.
When you start looking at assets, it gets more interesting. Tesla's assets are ~$68B. Ford's $257B.
You can't just magically produce more cars. You need more people, more batteries, more factories and other significant capital expenditure.
My point is that "growth" is used as an excuse for Tesla's valuation but any look at comparative numbers should show you it's way out of whack compared to any auto maker. And as the F150 shows, Tesla's dominance of the EV market isn't as sticky as it would need to be to justify that valuation.
I dont think they can continue to grow at that rate and preserve their gross margin. The high end part of the market isnt large enough to sustain 20m cars a year. To give you an idea, for scale, the two largest producers made 10m each in 2019 roughly respectively - and those two are VW and Toyota. I cannot see in any way for Tesla to displace that many units and maintain their margins at the level they have them.
The big three domestic manufacturers largely shed their pension liabilities to the UAW when they last went (or nearly went in the case of Ford) bankrupt in 2008.
I heard the same arguments when Apple had a hit with the iPhone. The high end of the market is saturated, and soon the competition would bring down the prices. But the price of the iPhone continued to go up. It never stopped going up. Because it continued to offer more and more value.
People already see some value in Teslas self-driving technology. And that value will continue to go up for a long time.
> I heard the same arguments when Apple had a hit with the iPhone. The high end of the market is saturated, and soon the competition would bring down the prices. But the price of the iPhone continued to go up. It never stopped going up. Because it continued to offer more and more value.
The most expensive iPhone kept getting more expensive but for almost it's entire history there has been a <$450 iPhone despite inflation and the overall rising average purchase price of a smartphone.
Apple doesn't compete in the ultra-budget space but pretty much from the get-go Apple has been competing on price and value with older models, the 5c, the SE line, the XR, etc.
For reference, iPhone 1 released at $715 2022 dollars compared to the $400 SE available now.
>> People already see some value in Teslas self-driving technology. And that value will continue to go up for a long time. Up to the point where you tell your car "Hey, go get me a pizza".
You are aware that real self driving(L5) is not possible without some AI breakthroughs, right? All the promises you see from Elon are just pure BS. Your tesla has issues seeing a big truck straight in front of the driver lane so you can forget the "Hey, go get me a pizza" command.
I can't really see many reasons to buy a Tesla except its propulsion technology (i.e. big batteries). I doubt that's enough to compare it with the iPhone which was really more about software than hardware. Tesla software/user experience is not significantly better than a dumb car with carplay or just an ipad fixed on board. The only way for Tesla to win more market share is for the competition to ignore/defy the wanna be EV consumers.
> Tesla software/user experience is not significantly better than a dumb car with carplay or just an ipad fixed on boar
That's only part of it. It also includes the prestige and social cache. Once upon a time, apple was the same. Me, i don't care, but all the fancy ppl around me, the multi generational wealthy and boomers, can't get enough Teslas. That desire for luxury may wax like apple... or the coming recession may sponch it.
Tesla still has an "early adopter" and tech aura(IMHO). I wouldn't say it's seen as luxury in Europe. I believe they sell well in Europe because they have the best batteries/range and little competition. I believe once (if) Mercedes and the other brands ramp up production on their electric cars Tesla will have a very hard time competing. They have to deliver either better tech or better value(price). They cannot compete on "luxury" or brand. Tesla itself markets as a tech company (to investors and everyone else). It sells the first move advantage(i.e. battery tech, economy of scale)
"Prestige" in regards to Tesla appears to be regional at best. Nobody I know (including myself) even considers Tesla at its price range due to competition (Mercedes, Audi, Porsche) completely outclassing it in terms of design and features, which is an important factor here in Europe. Tesla largely appears to be a footnote when it comes to EV choices in this part of the world.
There are several differences.
1) Apple has massive platform benefits. phoneOS, macOS, watchOS, tvOS devices all work really well together. If you buy into 1 part of the ecosystem, the incremental value of switching another device to an Apple device is really high.
2) The high end in cars and phones are 2 orders of magnitude different. Spending a few hundred dollars more to buy into the high end for a smartphone is a stretch many consumers can make. Spending a few tens of thousands of dollars more to buy into the car high end is not a stretch many consumers can make. Heck, you could buy a new high end smartphone with the amount you pay every 2 months for a shitty car.
3) Apple's devices are the best in class in nearly every measure, especially build quality. Tesla is still far behind its competitors in build quality.
This is not an argument against Tesla. It's an argument cautioning against comparing Tesla to Apple. Heck, it's an argument cautioning comparing any company today or in the history of companies to Apple.
Huge difference between $500 extra and $20,000 extra. Most working people can sacrifice and afford the 500. Most literally have no way of affording a Tesla.
>and maintain their margins at the level they have them.
Tesla's margins shrunk quite a bit last earnings report, so I agree. Selling high-end cars in a niche market is easier than selling 20 million cars annually (which no one has ever done before).
I'm skeptical that anyone can make 20m cars a year. It also doesnt surprise me that Teslas margins have shrank, I think the price of their vehicles is rendered somewhat inelastic because of the preorder-purchase contract system they use. The vehicle price is more or less fixed at the time of order based on my understanding, and while they can retroactively increase prices, it will likely result in abandonment of the order.
> I'm skeptical that anyone can make 20m cars a year.
There's just over 30m seconds in a year, that's a car every second and a half. That seems like it would take a lot of assembly lines to pull off ignoring other constraints.
On the other hand, at 184.8″ for a model 3, that's like a stream of them bumper to bumper leaving a single assembly line at 6.65 Mph for the entire year. Viewed in that light, maybe it doesn't take that many assembly lines to reach a speed at which this would be achievable, ignoring other very important constraints. (Or maybe I made a mistake in my math.)
The level of market displacement is pretty huge - its not clear to me that its possible for that to happen. The market for vehicles is pretty inelastic, like, you cant grow your way there in an organic way.
I agree, I was trying to examine how plausible it was from a very simplistic model, which is why I said "ignoring other very important constraints". It sounded implausible on the face of it, as it might require cars to be leaving the assembly line at freeway speeds, but it wasn't quite that bad in reality. There are plenty of other things which make it very unlikely/implausible though, such as market demand, as you note.
The real criticism of Tesla is that there are about 65m cars sold per year now globally.
If every one of those cars has $10k of profit (way too high, but for arguments sake), that’s $650bn of profit per year.
When a single company with less than 1% share of sales has a market cap higher than the entire theoretical annual profits of an industry, that implies an insane amount of speculation (about things like Robo taxis and insurance, etc)
The bill the commenter was mentioning is currently in the Senate and hasn't been voted on yet. It would bring back the $7,500 credit for any EV that is built in the U.S. and removes the 200,000 limit. The bill also changes the mechanics of the credit so that it is applied immediately off the purchase price rather than a tax credit whenever you file. It also allows for up to a $4,000 credit on used EV's.
> $7,500 credit for any EV that is built in the U.S
> It also allows for up to a $4,000 credit on used EV's.
I can't wait for the eventual headline about how dealerships would sell cars to themselves so they could resell them and pocket an extra $4k.
I have no doubt that story will happen and come out, I'm just wondering whether it will be during or after it's common, and how widespread the abuse will be, given that even if there are provisions to prevent that, some enterprising fraudsters will find a way.
Dealerships are collectively, very powerful groups. This would not the be first time they've convinced Congress to dump money into their pockets with such schemes. CARS Act comes to mind.
The outrage will come, but dealerships will have bled every dollar they can before anything is done. And the same people voting for the bill will come out next year campaigning against such corruption and stupidity by the government.
Federal tax credit for EVs will remain at $7,500
Tax credit cap for automakers after they hit 200,000 EVs sold is eliminated, making GM, Tesla and Toyota once again eligible
The language in the bill indicates that the tax credit would be implemented at the point of sale instead of on taxes at the end of the fiscal year
In order to get the full credit, the EV must be assembled in North America, the majority of battery components need to come from North America, and contain a certain percentage of minerals from countries with free trade agreements with the US
Includes a new federal tax credit of $4,000 for used EVs
Includes zero-emission vans, SUVs, and trucks with MSRPs up to $80,000
Electric sedans priced up to $55,000 MSRP also qualify
The full electric vehicle tax credit will be available to individuals reporting adjusted gross incomes of $150,000 or less, or $300,000 for joint filers
I think GP is referring to the Climate Bill being debated in Congress this month where the 200k limit would be lifted and an additional $4k tax credit given to used EV purchases.
The P/E for Tesla suggest it is going to take decades(at the peak, over a century) for that valuation to make sense.
Even if it grows to the point that it destroys all other automakers and become a monopoly, it's still too high. You can only sell so many cars.
The valuation seems to be taking into account that Tesla is not only about cars, but also artificial intelligence, which would allow it to expand to other markets(taxis, maybe even military).
Huh, Tesla P/E is 107, so it'd require about a 5X growth in income to reach a sane P/E. If it keeps growing at 80% p.a., that'll take about 3 years. 4 years at 50% growth. And a 5X increase isn't unreasable, that's still under 10% market share.
If Tesla does make 20 million cars that sell for an average of $50k and have net margins of 20%, their annual revenue would be $200 billion. If at that point they have the same PE as Apple has now (~25), that would be a market cap of $5 trillion. That would be a 6x gain from today just on regular auto sales. If the only side project that works out is Full Self Driving (which is the major focus of Tesla and occupies most of Musk's Tesla time) comes to pass, double that revenue would not be unreasonable. There are many things that could go wrong, but lots up possible upside.
> If Tesla does make 20 million cars that sell for an average of $50k and have net margins of 20%, their annual revenue would be $200 billion
And if they make a hundred trillion cars and sell each for 50$, they will be even richer. But both of these assumptions are absurd, so why discuss them?
There is no market for selling 20M $50k cars every year, especially of the same make.
The key is Full Self Driving. Elon Musk has stated that without it, Tesla won't grow like they are planning. Who know if it is possible, but I think Tesla has the best chance with their access to top talent, no spending limits at this point, and a leader that is willing to put and keep the cars out on the road even with the bad PR of the inevitable crashes and deaths. Full Self Driving will save so many lives.
> The top ten automakers have .. pension liabilities.
I don't think this part is true. I haven't heard of company pensions being a thing outside of US. I doubt VW, Toyota or Daimler have any pension liabilities at all, barring their US subsidiaries.
> None of them are making profitable EVs at scale.
Is the f150 lightning not profitable for Ford? I looked just now and can't find any information (maybe have to wait until next fiscal year?). Their costs for that line are lower than most other automakers because they share so many parts and design elements with the ICE f150.
I don't think Ford has released this information yet, and it's really too soon to judge either way, considering manufacturing issues and price instability. The Mach-E went from very profitable, to a losser basically overnight as battery prices skyrocketed.
At this point, battery manufacturing is EV manufacturing. Battery costs are such a large percentage of overall costs that the entire margin of a vehicle can evaporate at the whims of a supplier.
I think we need to wait and see how SKBlueOval does before we can really judge Ford's EV performance.
Tesla's only claim to profitability is government-enforced carbon compensation laws. Tesla is basically a greenwashing insurance that masquerades as a real automaker, don't get fooled.
It's cheaper to to provide that government-enforced carbon compensation than it is to provide the massive amounts of subsidies and tax credits that oil companies get.
In other words, the government actually saves money every time someone buys an electric vehicle.
Oil companies get massive subsidies. And Tesla's survival is dependent on green subsidies.
There's an easy (and I'd daresay, correct) solution there. Not subsidizing oil and reducing green subsidies. Unfortunately, it's not politically palatable.
> Yes we do, that's literally what a marketcap is.
I mean in theory. In practice:
- You have to use a very specialised definition of "we". Specifically, it's what people think, weighted by how much money they control. So wealthy people have an outsized say in market cap. Controllers of hedge funds, pension funds, etc an even more outsized say.
- People's pricing can be based on how they expect other people to price the stock in the future rather than how much they think it is truly worth based on the fundamentals of the business. If someone's price is based on this, then it is no longer a reflection of how much they think it's worth.
Shorting is much more risky than buying stocks. Compare:
1) I'm confident that in the long term, company X will grow in value. I invest $1000 and will wait however long it will take, 10 or more years. I risk these $1000 only, but can earn multiple of it.
2) I'm confident that in the long term, company Y will decrease in value. I can short it with $1000, however either I risk much more than $1000 or I can't set the timeframe (because of forced liquidation). I also can't earn more than $1000. In the long term, I'm also exposed to inflation. Effectively, it's possible to short only in a short timescale, which is super risky.
The two betting options are very asymmetric, which IMHO favors overvaluation of certain hyped stocks, since there's no reasonable (not extremely risky) way to bet against them.
The timing aspect is still brutal, though. Market can stay irrational for a very long time, and prove you totally right but totally broke if it waits until after your puts expire.
Not exactly, because you need to look at depth of market as well. If I find one idiot to buy 1 share of my stock (out of a trillion) for $1, that doesn't mean I really have a $1T market cap.
> Every i vestor from Warren Buffet to my dog strongly advises against shorting
If you are not sophisticated enough to take a short position, you are probably not sophisticated enough to buy a specific equity. This is true of essentially everyone who does not invest professionally, including myself.
You might be surprised to learn that ‘Equity Market Cap’ is not the only variable in the full equation which states a company’s value!
When you discover the second variable, you might also discover that Tesla’s ‘Equity Market Cap’ makes a lot more sense vis a vis the other top auto manufacturers based on the scale of that other variable in the valuation equation for those other companies.
I think market cap is a bit misleading. Enterprise value (market cap + net debt) is a more consistent valuation measure.
The house analogy is a helpful one. Let's say I buy a million dollar house but I only have $100K of equity in it so far. My market cap is $100K and my debt is $900K. I'd argue that the house is still worth a million dollars.
This is important here since Tesla has much less debt vs. the rest of the auto industry.
Market cap should take into consideration debt and all other valuation variables of a company. It’s literally what people are saying the company is worth. If you subtract debt from market cap to get the value of a company you’ll be subtracting debt twice.
Your house analogy and the way you explained it does not make sense to me. Since market cap is what the market is saying a company is worth, it isn’t right to equate that to the “$100k of equity” in your example house. It’s more correct to equate it to the $1 million value the house has.
Market cap isn't saying what the 'company' is worth. It's a measure of the equity portion of the ownership of the company. It excludes the debt portion of the ownership.
Right now GM has an enterprise value of $130B. That means it's expected to spit out $130B of cash over its lifetime (discounted to a present day value). But the market cap is only $50B. Meaning $80B of that future cash will go to GM's lenders.
It of course feels super counter-intuitive to add debt (which feels like it should be a negative) to the valuation. But I always felt the house analogy gives an intuitive everyday example.
This is implicit when understanding market cap. Market cap means yes, a certain number of people willing to buy Tesla believe it is worth the combined cap of the next 10 auto makers. It doesn't matter if that is right or wrong, all that matters is that stock traders believe it. If they didn't, the stock wouldn't be that price. That is literally how the stock market / market cap works: if someone will buy it at that price, that is what it is worth.
We can all offer our armchair theories about Tesla's actual worth, but until traders start to move en masse, that is what it is worth right now.
I think you are asking a different question: will Tesla be more profitable than the other 10 manufacturers in the long run? Because right now they are not. Personally. I don't think they will ever scale to a commodity car as long as Elon is at the helm. I don't think he has the attention span to make a mass produced car, his ego likes doing something novel and he likes luxury. To make profit like the top 10, Tesla has to become a commoner car. I don't think he can pull off an iPhone move, Tesla may always just be a Mac.
I know several people that bought Tesla stock in the last 3 years, and I know for sure that none of them think about it in terms of being worth more than most of the other companies or combined. They bought the stock because they like the cars, see the cars often, and most importantly, they think the stock will rise and make them money.
They don't know how many outstanding shares there are, what the market cap is relative to others, or even care about profit ratio is. They just think it's going up.
Yes, he sold his seven or so mansions in California when he moved to Texas last year, and claimed to go possession free living in a $50k tiny house.
First off, one would have to assume he suddenly swore of luxury after seven mansions. Perhaps. He does say a lot of dumb stuff when he's stoned that he ends up trying to hide later on (e.g., submarine scandal).
Second, he doesn't seem to spend too much time in his tiny house:
Third, where does he keep all those tuxedos he keeps showing up wearing at exclusive events for billionaires?
Fourth, he's got like 10 kids and multiple wives. And he keeps getting women pregnant. That's literally a luxury.
Maybe we have different definitions. Sure, he owns a cheap house this year that he seems to not live in, but cavorting with other billionaires and treating women like breeding stock and throwing cash at offspring so you don't have to bother raising them doesn't really strike me as living a lean life.
* Yes, something is worth what someone is willing to pay. But we know Mr market is temperamental and irrational, so really what I'm saying is, in the long term / low pass filtered version, do we really think Tesla is worth more than the next 10.
* Re anecdotes in which market cap is correct - this doesn't prove anything. E.g. a random number would be correct some of the time also.
It's not a really fair comparison. AMD just passed Intel not because it's value is particularly inflated but because Intel's price is falling faster. AMD's Price to earnings is around 35 or so, unlike Tesla's over 100.
Furthermore AMD's revenue is about a quarter of Intel's, given that AMD market share has been growing the past few years and they appear to be capable to continue growing it's not unreasonable to bet that in the next say 5 years they are going to have better returns than Intel.
> market cap has proven over and over again to be kind of bogus
how do you know when a competitor with a high market is failing? when its market cap... er, goes down. i.e. market cap is the best measure we have of a company's future prospects. What you are seeing over and over is that the future is unpredictable.
You should use enterprise value (mkt cap + debt - cash), not market cap for that type of comparison. It takes into account the fact that most other car companies are levered but not Tesla. Shows Tesla still very big (overvalued IMO) but not by the same ridiculous margin.
That idea seems to be ignoring the fact that other brands just haven't made EVs yet. People want Telsas now because, for a long time, they were the only good EVs on the market. As other companies are now rolling out their first EVs, Tesla's market cap will surly go down.
I've also heard the argument that Tesla's network of chargers brings more value, but...there will also be more competitors in that space in the near future (and today).
So, it seems shortsighted to believe that "market cap" is going to remain as high as it is today.
The idea that other companies are now rolling out their first EVs is complete nonsense. The argument 'competition is coming' I have been hearing since 2014.
There are many EV that came out that most people don't know much about since they were not produced in large numbers.
And we should also consider that the battery space is running into material shortages and Tesla had the longest to prepare for that and are the largest buyer of battery materials/batteries on the plant.
Other companies might want to sell more EV, but they will literally not be able to.
You moved the goalpost. What the market cap will be tomorrow is a different question than what is it worth right now. Shares of TSLA are trading at the market price right now. Tomorrow the price and market cap may be different, but it will still be the price sellers will sell and buyers buy.
There is no true value set by Buddha, Buffet, Robinhood, or ML.
The less literal reading of OPs statements is that Tesla is overvalued & will at some point in the future face correction down to a value more in line with their sales/profit potential.
I have no horse in the game (no Tesla nor any other automotive stocks) but we’ve definitely seen companies being massively overvalued in the past and then face fierce correction - AOL was once worth $222 billion and later (not even that much later) sold for less than 1% of that.
We’ve been hearing that for at least 4 years at this point. Along with scenarios where Volkswagen or Ford is going to teach Tesla how things really work. I’m not persuaded.
First, my understanding is that Tesla has a night and day lead in battery sourcing.
Second, Tesla doesn’t have the legacy costs that the others do.
Also, at this point, Tesla is still selling cars faster than they can build them. Even if demand weakens, they may still be at max output.
> First, my understanding is that Tesla has a night and day lead in battery sourcing.
They have a factory where Panasonic employees come in and make batteries for them (a little glib, but not that far off), but aside from that they really don't have some secret sauce that we know about. They are putting CATL batteries in their cars just like everyone else and they don't have any mining or refining operational unlike BYD. Their battery research and production is massively behind schedule and the future of the Model 3, Y, and Cybertruck all depend on volume 4680 production which is behind at Panasonic as well.
Ford has the supply for 400,000 EVs lined up between now and 2024 and Volkswagen has the supply to outproduce Tesla in 2024. BYD is already producing more PHEV/BEV than Tesla, and if there is a solid-state breakthrough it won't be happening at Tesla.
First of, Tesla is buying massively from Panasonic, LG and CATL. They are also doing their own batteries in addition to that. The production of that is behind schedule, but not that far, and I can believe how little credit Tesla is getting for literally turning into a battery company over just a few years. Their batteries are gone give them a huge advantage in margin.
> depend on volume 4680 production which is behind at Panasonic as well
Tesla 4680 have nothing to do with Panasonic. Panasonic is also gone make 4680 format cells for Tesla, but those are totally different and have nothing to do with the cells currently shipping from Texas.
> Ford has the supply for 400,000 EVs lined up
Tesla makes that many in less then 6 month. And there is a large difference between signing a supply agreement and actually getting it. The lithium industry had scaling problems and pretty much all expert suggest a shortage is coming.
For Ford to get all those materials, it requires a huge number of supply expedition projects to go correctly and that is not at all guaranteed.
For until a few years ago didn't even believe that had to worry about batteries or battery materials at all. And since then they have done a 180 and try to tell everybody how EV focused and smart they are, when in-fact they are behind the curve.
> Volkswagen has the supply to outproduce Tesla in 2024
Not sure where you got this from, but its false.
> BYD is already producing more PHEV/BEV than Tesla
Nice that you snuck PHEV in-there. But yeah BYD is a great company, but their cars are mostly China only.
> if there is a solid-state breakthrough it won't be happening at Tesla.
Solid stage or rather what people actually mean by that, lithium anodes, is not inherently superior to silicon anodes. Andt Tesla has some of the most interesting research in that direction.
Also solid state will not really be relevant in the BEV space for many years to come.
> First of, Tesla is buying massively from Panasonic, LG and CATL.
i.e. competing with everyone else for the same pie
> I can believe how little credit Tesla is getting for literally turning into a battery company over just a few years. Their batteries are gone give them a huge advantage in margin.
Probably because they aren't a very good battery company yet. they haven't even started mining or refining their own lithium, and they have yet to volume produce their own chemistry.
> Tesla makes that many in less then 6 month. And there is a large difference between signing a supply agreement and actually getting it. The lithium industry had scaling problems and pretty much all expert suggest a shortage is coming.
Tesla will have the exact same problem given they have no mining or refining operations. Even if their volume production goes well they will be fighting over the same lithium as everyone else.
> For Ford to get all those materials, it requires a huge number of supply expedition projects to go correctly and that is not at all guaranteed.
My understanding is that those supplies are pretty much entirely from 3rd party suppliers and don't include their in-house battery production which is slated to start later. But hey, maybe they lied to investors about the supply and if so they will pay the price.
> Not sure where you got this from, but its false.
> i.e. competing with everyone else for the same pie
i.e. being a Top 2 most important costumer of every major battery company.
> they haven't even started mining or refining their own lithium
Almost no battery company does that.
> Bloomberg Intelligence
They apparently disagree with most other people who look at that space. I'm willing to bet 5000$ even odds with you if you on whether VW outsells Tesla in terms of BEV by 2024.
> I will believe it when I see anything from battery day 2020 materialize.
Many things are already in the 4680 cells and you seem to believe all those solid state companies who have never achieved anything.
Even aside from all of that, I was just reacting to the overly simplified “well by definition they’re worth what the market says they are so there’s nothing to discuss beyond it”.
The stock market is routinely “mistaken” and stocks get overhyped and then crash down later (or vice versa). It’s not some omniscient deity that’s never wrong (except in a very literal and impractical way of looking at it).
Yes, people think Tesla is more valuable than the other car markets combined. I honestly don't see the ICE manufacturers really having an edge when it comes to the future of transportation. If anything, I see them having a huge liability - that is a large workforce to reskill, pensions to pay, antiquitated plants to upgrade/maintain, old supply chains to wind down, new supply chains to wind up - if anything, newer entrants into the electric vehicle racket have an advantage.
LOL, it's Tesla that is way behind in manufacturing. They had trouble hitting their production targets, and they still have quality problems. Toyota/Volkswagen etc will have zero trouble switching their production lines to electric cars, and when they do they will manufacture cheaper, faster, and better.
> old supply chains to wind down, new supply chains to wind up
Again, advantage at putting together supply chains is with traditional manufacturers, because of their experience.
EDIT: Tesla seems to have problems even hiring workers for their factory in Berlin, never heard of any German manufacturer having similar problem.
Maybe some people think that, but sometimes people are deluded or simply are investing based on the greater fool theory.
The latter reason means that even the market as a whole might not actually believe in the current market cap, in the long term.
I'm personally super skeptical of this market cap. I've been renting a Tesla Model 3 the last couple weeks. It's an awesome car that I would recommend to anyone. When you first drive it you can appreciate what a good job Tesla have done to make it feel like a car from the future. But at the end of the day it's a car. It's got lots of small flaws too, and the self-driving features have scared the shit out of me due to errors they made more than a few times already.
Based on this experience it seems completely implausible that Tesla will be able to keep up this "car from the future" experience for very long. How? They're not a leader in self driving, and even if they were, why would they remain so indefinitely? What other innovations would justify this image? People will get used to electric vehicles very quickly, that won't feel new anymore before long.
I think you are overestimating the rationality of car customers. Legacy car companies have been pulling a slight of hand for years. Build an aspirational dynamic brand that delivers compromised products that hurt the customer. People will become financially and emotionally invested and then you have them. The long lasting metal seal can be replaced with plastic. Safe emissions can be replaced with a defeat device. And practical small cars can be replaced with city cars that are too small for a stroller/pram. Brilliant!
> I honestly don't see the ICE manufacturers really having an edge when it comes to the future of transportation.
I honestly don't see that it's difficult for ICE manufacturers to compete in the EV space. We're seeing most ICE companies at least dipping their toes into the EV space, and in some cases they're going all in (Hyundai/Kia, VW, for example) and offering strong alternatives to Tesla.
I think they still have a significant lead in actual production manufacturing engineering. It's one of the primary things they do, and have some of the best minds in the world for it. I think Tesla can catch up, but right now Tesla has a very outmoded plant itself, its a former GM plant built in the 60's and rebuilt for NUMI in the 80's. While they're building new ones, a majority of the big three's plants date from 1980-2005, and are newer in structure.
If you talk about how cars are built, all auto manufactures seem to follow the same basic model to build cars, robotic welded bodies, a mix of manual and robotic paint and a moving assembly line to put the rest on - everyone does it the same way with some minor variations. Similarly Toyotas JIT supply system is used the world over by all auto manufacturers because it improves the balance sheet.
Unless Tesla figures out how to manufacture cars with much lower carbon emissions (I mean, the manufacturing of the cars themselves), Tesla is not going to fare that much better than the legacies.
The reason the other automakers are valued so low is because their long-term growth prospects are negative. The market does not think Ford and GM will be dominant players in 20 years when cars are half software
> AMD reports fiscal second-quarter earnings on Tuesday, when investors will be watching to see if it is facing the same macroeconomic challenges as Intel as PC sales drop around the world.
Intel revenue fell 7% (YOY) in Q1 and 22% in Q2. AMD revenue grew 71% in Q1. Something tells me they aren't facing the same macroeconomic challenges.
Sarcasm doesn't translate well online, I meant that Intel's problems don't seem to be macroeconomic when AMD is seeing high growth (it's not just grabbing Intel's marketshare, they also saw big growth in custom silicon and embedded).
Sure it is. Intel's failure to deliver much in the last decade has become a macroeconomic drag, since demand has shifted to competitors with limited manufacturing capacity -- look at the impact on chip shortages on cars, for example.
It's creating different challenges for AMD and Intel though.
I suspect they were going to have a quarterly loss, or close to, no matter what so jammed as much future/high potential loss into that single quarter as they could as well.
Now that they appear not to have a dominant position (Samsung sells more chips! AMD is worth more!) this will blunt some opposition to the juicy handouts just passed by the US Congress and may cause some opposition to any attention the newly awake antitrust division might direct to them.
Intel isn't in a near death position like Apple was, they are rather in a more extreme version of Microsoft's directionless drift and sag in the second half of the Balmer era. And like Microsoft, Intel has a lot of resources available to use to get back to the top of the dogpile. Like Microsoft they've been squandering those resources for years, but perhaps this symbolic milestone will cause them to finally feel the tang of fear.
Otherwise they'll continue to float around on residual habits, like GE.
I wouldn’t ascribe this quarter’s woes to some grand machinations. Intel’s situation really does seem that bad and they’re years from recovering (if they do)
Standard practice in a turnaround is that if a loss is unavoidable anyway, you might as well make it as bad as possible (i.e. jam future bad news into it).
But as you point out I am not privy to Intel's actual practice here and haven't bothered to read the 10-Q.
>> as much future/high potential loss into that single quarter as they could as well
But Pat mentioned in the earnings call that they expect the next quarter to be even worse and are expecting (but in reality `hoping`) that they see turnaround in the final quarter. So by this account, they need more than one quarter to jam the potential losses.
I remember the first computer that I ever built (it was cheaper to do it yourself back at the dawn of globalization).
I used an AMD 386 rather than an Intel 386. Simply for the youthful reasons that I liked AMD's logo better, and I've always tended to root for the underdog.
I'm not much of a PC gamer, and so I haven't built a machine from scratch or thought much about individual components in decades. But there's a small flicker of my teenage self way down in there, pumping his fist and giving a cheer.
I've been rooting for Intel's AVX512 instruction set for some time, because I really think its a great technology. But with Zen3/4 on the way with rumored AVX512, and with Intel's most recent decisions to cut AVX512 from 12th gen Core-i7 processors, its hard to find an advantage for Intel right now.
Intel supports DDR5 a few months earlier than AMD, and Intel is doing some smart things with CXL and I/O space rather than CPU space. The new big.LITTLE design is interesting, but the loss of AVX512 is pretty big (and Intel really should fix that IMO).
Just to clarify, Zen 3 has been out since November 2020. (Zen 3+ earlier this year.)
Zen 4 is not yet formally announced (at least not the full technical details), so presumably that's what you mean.
Intel's biggest remaining advantage is if you want a laptop with Thunderbolt. It should theoretically be available on AMD laptops, but I don't know if any have become available yet.
EDIT: See below, Zen 4 is announced but not yet available, so performance and final details are pending (including models, performance, etc.)
I have a bit of that root for the underdog mentality too, but my support of AMD in the last few years has been due in large part for their Linux support.
Not having to worry about 3D drivers working on a kernel update is such a nice thing.
Of course, when I started, Linux was very much the underdog, and not on billions of devices.
> my support of AMD in the last few years has been due in large part for their Linux support.
> Not having to worry about 3D drivers working on a kernel update is such a nice thing.
Intel does a pretty good job of kernel GPU drivers too, I thought? Their network card drivers aren't bad either. And they usually support FreeBSD as well as Linux, although sometimes Linux support comes much earlier than FreeBSD.
I didn't switch to AMD until the Athlon XP 1700+ came out. I've stuck with them for desktop builds, mostly, except a few budget "Intel Gxxx" cpus, while I stuck with Intel for laptop purchases until the Ryzen 4xxx chips came out.
I've switched between Nvidia and ATI/AMD a lot over the years.
If Intel becomes the underdog (against the AMD and Apple titans), I guess I'll have to hope they put out good products :)
Different generation - my first build was an Athlon 64, and my only AMD build to date (of maybe 5 or 6 machines over 20 years). Loved the struggle of being x64 when it was still so new to consumers.
Mine was a cyrix "pentium compatible". I miss having 3 players in the game. I believe they got bought by Transmeta, back when Linus Torvalds was employed by them.
Cyrix was bought by Via (via National Semiconductor) and rolled into their Isaiah architecture along with Centaur's architecture. That was then used in Nano[1]. It is now being used in Chinese co-developed and fabbed x86 options[2].
The rest of their technology was bought by AMD and used in it's MediaGX/Geode chips[3].
It was $1.86/share Oct/Nov 2012, quite a rally if you ask me. I think it was still $1.66/share sometimes in '15.
From Nov 2012 (that was after Bulldozer), it run to $153/share on 19th Nov '21 – that's 8255,38%!
I remember vividly back in 2002 studying the newly established 'FT Deutschland' (FT's German Edition) when being in Germany, that FT Deutschland brought an profound article talking about AMD's imminent impact of success (and how it's going to hit INTC hard) with the then-new Thoroughbred-Athlons – I should've invested as I felt something was up.
I bought at $5 and sold at 15 thinking I was so clever.
Then I bought at 80 and held through 160, now it's at 96.
I'm a long term bull on AMD, but I think the rocket left the atmosphere already. To me it's a blue chip. Intel nor AMD will ever go out of business, unless and until x86 itself dies and neither can pivot. AMD has a lock on consoles, it is the only competitor to Intel in x86, it basically can't go out of business.
Cloud vendors have been increasingly pushing their own chips. It's hard to see AMD having any pricing power in the long run, unless their chips are significantly better than what big tech can create on their own
The Gigacorps have done this, some of them. I have more interest in the ARM argument than in the "custom chip" argument, unless Amazon and co. decide to retail their processors.
Consoles, most OEMs, and all non-gigacorps will be buying off-the-shelf processors.
I'm pretty sure cloud and enterprise sales make up the bulk of their revenue and growth. Not consumer.
That being said there's likely still a few years of runway left for their growth. Even if cloud vendors don't push their own chips aggressively, they can use it as leverage to cut into AMD margins.
I don't see how ARM is an argument. AMD will easily be able to create competitive arm processors, there just wasn't a strong financial incentive to do it before
I hate to say it, but a leader who lives in fear of this is what Intel needed to stay ahead. Andy Grove believed and lived in fear of monopoly power ... since then CEOs at Intel have lacked that conviction.
This trope needs to be put to rest. Brian Krzanich was a tech insider and Intel fared poorly under him. The current CEO is as much of an insider, and it's still doing poorly under him.
An exception to the trope doesn't "put it to rest," except of course for that exception.
For Intel the interim CFO made CEO was actually executing a strategy that might have worked. I was pretty sure Gelsinger would be a catastrophic mistake because he wasn't a fabrication guy (but maybe they couldn't hire one?) and I'm sad to see this playing out. His strategy depends on one difficult to impossible, and one impossible thing: regain the ability to move to new nodes on a very fast time scale and change the corporate culture to accommodate foundry customers without buying such a company.
By now without having heard of mass firings of incompetent managers but plenty of reports it's still a snake pit or clown show if you prefer, and the latest capex decrease of $4 billion says nothing good. Even if the latter is just that they can't buy the machines they need.
While I'm at it, how well is their 10 nm now Intel 7 node at shipping parts? That was when Intel's decades of bad top level technical management snared their crown jewel.
Unsurprised to be honest. I have access to a few HPC resource in various HPC center, all the the newer clusters (from ~2yrs) are using AMD EPYC CPUs. These are traditionally the market for Intel. Landscape doesn't look good for Intel.
While I'll admit that Intel's made several missteps recently and AMD has closed in, the reality is that they pad their numbers using pipeline and microarchitecture tricks to get higher raw stats that don't translate to real-world performance. Intel's tends to be a bit more expensive for the same "tier" with lower listed performance numbers but better performance. That's because AMD has consistently done shit like using shorter pipelines and rampant pipeline flushing. They have used sacrificing cycles to get the raw benchmark numbers to justify someone "saving money for more power". Intel's made a lot of mistakes recently, but I trust their chips to perform at the price point they're sold at. A quality AMD processor or GPU performance-wise is equal in price to their counterparts in Intel and Nvidia.
I'm not anti-AMD at all. I want competition in the marketplace, but their historical approach to this where they cut costs and use tricks to generate raw numbers makes it really hard to support them. "Consoles and gaming computers featuring them are selling like hotcakes!" Yeah because companies are looking to sell units at the highest profit margin.
I think the elite tier of this competition is a solid one, and I'm constantly watching to see what each company's pushing out. That being said, I think it's widely known that Intel's products in their low to mid-tier offerings are superior.
I'm not a hardware engineer so I have to ask, how is using "shorter pipelines" supposed to be illegitimate? Just because Intel may do better at the workloads you have in mind, that doesn't mean that AMD's approach doesn't do better in other (legitimate) workloads.
Pentium 4 and Bulldozer both had (very) long pipelines and look how they turned out. Long pipelines certainly doesn't fundamentally equal better real-world performance, short pipelines != better benchmarks. It depends on the combination of architectural decisions considered together, right?
You're going to have to expand on this concept a bit to convince people that these design decisions are a deliberate attempt to cheat the benchmarks, throwing out lingo doesn't quite suffice.
It's not that I think that shorter pipelines are a bad thing when implemented properly, but historically, AMD used that as a way to match or beat Intel on raw benchmark numbers. A shorter pipeline and pipeline flushing when ops hang or whatever means you get more operations per cycle on paper. If there's an issue, they'd just say "fuck it" and flush the pipeline and run it back, and because it's shorter, the pipeline is full and progressing fairly quick. That leads to higher benchmark scores for inferior hardware or stats that the average casual gamer or enthusiast sees. That leads to sales.
As I said, Intel's not perfect and I don't hate AMD. I want the best possible products. I just feel like market share isn't a great indicator of quality here. Threadripper and top tier AMD products are on the same level as Intel's products, but I personally tend to trust Intel's performance at the price point far more in real world situations. It was the worst kept secret in tech for years that AMD was gaming raw numbers at lower price points to sell units.
Gonna be real. This is all just my take on it, and I could be wrong or biased. I know they're not the same as they were 10 years ago and produce legitimate contenders at the top level. I just don't trust their low to mid-tier products.
The devil is in the details, just looking at revenue won't reveal the full picture.
- DCAI, revenue down 16%, operating income down 90%
- NEX, revenue up 11%, operating income down 60%
- AXG and IFS are operating loss
- Only mobile has rev and op income up
And the CEO has clearly mentioned next quarter will be even worse and then they expect things to improve; not sure about the improve part though. CFO clearly mentions restructuring charges in Q3. Add all of this up and it tells a different story.
I'm curious how the crypto crash and general recession will impact AMD. When crypto prices come down, the demand for GPUs also crashes. AMD makes a lot of money from graphics cards.
But revenue isn't a meaningful number here. Market cap should be today's value of expected future profit, not future revenue. So: What's Intel's profit? What's AMD's?
Revenue is "real" - it's the value of what Intel is actually selling.
Market cap is a guess - whether it's justified or not will be proven by actual revenue in the future. A 3x revenue difference is a nontrivial gap, especially when AMD would have to take over the entire processor market to reach the kind of revenue Intel is currently making (or make huge strides in GPU - either way)
Intel was once known for its memory. Then it became known for its CPUs. I expect that they will pivot at least once more, this time to something which will supersede GPUs for ML workloads. This is, of course, very uncertain which is reflected in the size of my long position
They most likely won't be a third time lucky. They had to pivot after their first 10nm delay but their monopoly in server CPU allowed them to keep pumping money despite manufacturing delays. Meanwhile, that gave AMD a chance to catch up which they not only did but outperformed them. One can claim that it's easy to say in hindsight, but that's the hallmark of great leadership which they haven't had since Grove's retirement.
Now Intel have lost that money making division so much so that all the fanfare of regaining manufacturing leadership has been defused with the announcement of reduction of 4bn in capex and still a focus on shareholder dividend. Intel will need some financial engineering and a split of manufacturing and design shouldn't be surprising. And this won't be some smart timely pivot, but a forced split.
Does AMD outsource all their fabrication now, or do they still run any of their own fabs? If they outsource everything to TSMC then this market cap lead could quickly reverse if hostilities break out in Asia.
AMD hasn't had their own fabs since they were spun off as a separate company, Global Foundries. They still use GF for some things, like the I/O dies on their recent chips.
“The original headline to this story mistakenly stated that it was the first time AMD had passed Intel in market cap. In fact, it happened before in Feb. 2022.”
I think this may be the top out for AMD at least in terms of market share and revenue. The next gen of ARM and RISC-V is the future, especially if they as well can apply chipsets to their CPUs as well.
Intel knows this and is trying to become the TSMC of the west. And frankly they're the only ones that can pull it off. I'd be surprised if 10 years from now the majority of their revenue comes from selling processors rather than fabricating them for AMD, NVIDIA, etc. Why compete when there's plenty of steak for everyone?