Business Breakdowns

Intel: Cyclical Recovery or Secular Demise? - [Business Breakdowns, EP.149]

Feb 14, 2024

Todd Ahlsten, CIO of Parnassus Investments and a semiconductor expert, delves into Intel's tumultuous journey. He discusses how Intel's shift from memory to logic chips under Andy Grove shaped its legacy. The conversation highlights missed opportunities in mobile markets and AI advancements. Ahlsten analyzes the cyclical nature of the semiconductor industry and outlines Intel's struggles and potential paths to recovery. He emphasizes the importance of strategic leadership and evolving consumer demands in navigating Intel's future in a competitive landscape.

01:06:37

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Todd Ahlsten

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Quick takeaways

Intel is focusing on reclaiming process technology leadership and splitting the company into design and foundry divisions in order to regain market share and reduce costs.

Intel has potential opportunities for success and future profitability by focusing on process technology leadership, stabilizing market share, and reducing costs, and leveraging assets such as Mobileye and their programmable solutions and mask writing businesses.

The CPU and GPU market dynamics are shaped by a concentrated buyer base, with major AI players driving demand, and Intel needs to improve its software stack and competitiveness to make a significant impact in the AI space.

Deep dives

Intel's history and recent challenges

Intel, once an iconic name in the semiconductor industry, has faced significant challenges in recent years. They missed the boat on opportunities in the mobile market and failed to adopt key technologies such as EUV. As a result, they've experienced a decline in market share, especially in the PC and server markets. With declining monopolies and lower return on capital, Intel has lost its iconic status and is playing catch-up to competitors like AMD and NVIDIA. However, there is hope for a turnaround under the leadership of CEO Pat Gelsinger, who is aggressively focusing on reclaiming process technology leadership and splitting the company into design and foundry divisions.

Diversification and Monetization in AI and Technology Investment

01:28

Innovating Software for Efficient Model Training

01:15

Longer Tech Cycle Outlook

01:32

Understanding Long-Term Profit Potential

01:15

Intro

2min

The Rise and Fall of Intel: An Industry Insight

5min

The Cycles of Semiconductor Industry Evolution

9min

Intel's Path to Recovery

22min

Future CPU Demand and AI Integration

5min

Navigating the Semiconductor Landscape

21min

Understanding Semiconductor Turnarounds and Investment Patience

3min

This is Matt Reustle. Today, we are breaking down Intel. In the late 80s, a newly appointed CEO, Andy Grove, pivoted to exit memory chips and focus on logic chips. They were the leading edge chip designer, but Intel missed out on the mobile market and EUV technology as technology shifted. Now they're left playing catch up and falling from their iconic status.

To cover Intel, I am joined by Todd Ahlsten, CIO of Parnassus Investments. Todd started covering semiconductors in the mid-nineties and has since lived through eight cycles in the sector. We look at what separates secular changes from cyclical ones, and Todd helps outline what went wrong, what is changing today, and what we can monitor as this progresses. Please enjoy this breakdown of Intel.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes:

(00:00:00) Welcome to Business Breakdowns

(00:04:32) Introduction to Intel's History and Current Challenges

(00:10:45) Intel's Missed Opportunities and Current State

(00:12:02) Intel's Strategy for Recovery

(00:18:30) Tracking Intel's Progress

(00:21:43) Understanding Intel's Profit Pools and Future Potential

(00:29:21) The Future of GPU and CPU Markets

(00:34:34) The Future of Intel's GPU Space

(00:35:49) Recovering Intel's CPU Business

(00:44:21) The Geopolitical Dynamics Impacting Intel

(00:48:25) Competition Landscape: NVIDIA and AMD

(00:52:28) Intel's Diverse Portfolio: Mobileye, Altera, and More

(00:56:09) Risks and Challenges for Intel

(00:59:17) Intel's Role in the Semiconductor Cycle

(01:05:47) Lessons from Intel's Business Model

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Business Breakdowns

Intel: Cyclical Recovery or Secular Demise? - [Business Breakdowns, EP.149]

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Intel's history and recent challenges

Intel's plan for recovery

The potential for success and future profitability

Monetizing AI Businesses and Market Opportunities

The Buyer Base and Suppliers in the CPU and GPU Market

Diversification and Monetization in AI and Technology Investment

Innovating Software for Efficient Model Training

Longer Tech Cycle Outlook

Understanding Long-Term Profit Potential

Remember Everything You Learn from Podcasts