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John Furrier

Co-Founder & Co-CEO

SiliconANGLE Media, Inc.

Dave Vellante

Co-Founder & Co-CEO

SiliconANGLE Media, Inc.

On theCUBE Pod: The tech inauguration and the winners and losers of the next wave

A special theCUBE Podcast this week brought insights from theCUBE’s East Coast studio at the iconic New York Stock Exchange.It comes at a time of significant technological and political change, coinciding with the “tech inauguration” and offering plenty for theCUBE Research industry analysts John Furrier (pictured, left) and Dave Vellante (right) to explore on the latest episode of the CUBE Podcast.CUBE East at the NYSE can be variously thought of as a supernode or a super point of presence, according to Furrier. It was also the site of theCUBE’s coverage of NRF Media Week, which focused on the transformative impact of artificial intelligence in the retail sector

play_circle_outline Tech influence in government and policy

play_circle_outline NVIDIA's revenue growth and stock price

play_circle_outline Transformation of every layer of the tech stack

play_circle_outline Competition between hyperscalers and on-prem players

play_circle_outline Geopolitical Shifts Drive Israeli Tech Sector Growth and Investment Surge

play_circle_outline Change in attitude of Israeli companies towards IPOs, focus on innovation.

Info
Transcript

theCUBE Pod

John Furrier

Co-Founder & Co-CEO SiliconANGLE Media, Inc.

HOST

Dave Vellante

Co-Founder & Co-CEO SiliconANGLE Media, Inc.

HOST

SiliconANGLE Media Inc. Co-Founders and Co-CEOs John Furrier and Dave Vellante host theCUBE Pod as part of theCUBE + NYSE Wired presentation of NRF Media Week - AI Retail Leaders from the New York Stock Exchange.

explore Keep Exploring

What is the current state of tech's influence on government and policy? add

What are the factors contributing to NVIDIA's stock price growth and potential for future success, particularly in relation to demand, data, and AI growth? add

What are some examples of the various layers of the stack that are being transformed in the current technological landscape? add

What do core system vendors and infrastructure players need to do in order to compete more effectively with hyperscalers on-premises? add

What lesson can be learned from Israel's entrepreneurship success, especially in the tech market, for countries outside of the United States, like the EU and UK? add

What is the changing trend in attitude towards Israeli-based startups looking to go public, as opposed to relying solely on incubation rounds for funding? add

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theCUBE Pod

>> Hello, everyone. Welcome back to theCUBE. We are here for the special CUBE pod, I guess, Dave. I'm John Furrier, your host with Dave Vellante here at the NYSE, New York Stock Exchange. CubeEast is our new location on the East Coast. CubeEast, we call it a super node. It's a super point of presence, a super pop. Dave, great to be back here. Again, 2025, we're going to be ramping up a lot of content here.

>> Our first time together in our NYSE studio.

>> Yeah. Not too shabby. Great setup here. But really, the action in 2025 off to a fever pitch with Trump, president-elect, soon to be sworn in as president. And then, just clearly the tech scene is driving a lot of action. You're seeing Elon Musk's role. I mean, he went all in on the election. He burned the boats, as we say, to get Trump elected and buying Twitter for $65 billion. Great ROI for Elon. Richest man in the world every day. Tesla stocks up, SpaceX. I think we call that a loss leader deal with Twitter now X, but X actually a lot of right wing action on there, but it's a news outlet. The news people are still on there. So, this political tech scene is, in my career, I've never seen tech so influential in government and policy. Tech has traditionally been a outlier influencer, mostly kind of not really savvy on the politics scene, but they usually would hire firms, policy managers, and essentially that's kind of the deal. Well, it was. Now tech with the TikTok ban just recently, yesterday, and the chips ban and embargo, you're seeing a lot more influence, a lot more first party kind of relationships being developed. And what you see now is the first time we've ever seen in our lifetime tech leaders driving government. Now, if you remember when we were covering the AWS JEDI post that I wrote and uncovered the campaign against Amazon with the $10 billion contract. I did extensive analysis and reporting and my big takeaway was in the LA ... I mean, DC scene, was that why are all these lawyers making all of these decisions? Where's the tech-savvy? And the groundswell of the younger generation was clearly anti-lawyer, anti-idiot business person tech-wannabe politician. Now it's like if you're not tech-savvy, you're out.

>> Well, there's a palpable shift in public policy going on, isn't there? I mean, you had obviously Elon aligned with Trump early on. Now you've got all the rest of the tech bros aligning with Trump, Tim Cook. You got Zuck. Firms are donating to the inauguration. You got Bezos, to your point. You remember, Trump basically shifted the balance for JEDI toward Microsoft? So, you got that going. The other thing is you got Lina Khan out. You got Gary Gensler out. So, you got the sort of anti-M&A and anti-crypto person, two of those people, those regulators out. Now, whether or not the new administration is going to be anti-that, but look, I mean, these tech CEOs, they're smart. They know if you align against Trump, you might pay the price.

>> They're not dumb asses, Dave. They are with the ball. Look at Zuckerberg kissing the ring.

>> Exactly. So, why wouldn't you align with him? It's just smart business, and I think that's what's driving this. You've also got tariffs looming. You mentioned the CHIPS Act. The small, little news item the other day, but I think it's significant, is the Taiwanese government, I don't know if you saw this, is now allowing TSM, the world's single best manufacturer of advanced semiconductors, to manufacture 2 nanometer chips outside of Taiwan. Prior to this announcement, they were restricted of only doing the most advanced semiconductor manufacturing inside of Taiwan. So, that's interesting because it's a hedge on China. It's an alignment with the new administration coming in. So, they could be in line for more CHIPS Act money, and I will make a prediction right now. I think it opens up the door even further for Intel to spin out its foundry.

>> Yeah. And also, don't forget that there's been a lot of talk about Taiwan being invaded by China. So, that's also another opportunity to kind of divest the risk of China invasion of Taiwan. No one likes to talk about that, but that's the public secret everyone's talking about. They saw what happened with Hong Kong. Taiwan clearly is significant in its presence in chips. And again, AI infrastructure is going to be a big thing. And some people are saying that there's tech headwinds. I don't see it that way. I think there's some headwinds that could be temporary. I mean, look at the LA fires with those Santa Ana winds. If we see tech headwinds that look like that, that are going to ignite destruction of wealth creation, you're going to see it in chips. And I think this is why I'm really nervous about the Biden thing is that ... And NVIDIA's screaming at top of their lungs, "This is going to hurt competition." If there's a political maneuver, you will see a headwind like a Santa Ana winds with LA just burning up wealth. And I think once the government starts putting their finger on the scales, you're going to see problems. And I think clearly the Taiwan as a political entity, geography, all that goes with that, water, manufacturing. If they don't get something up and running outside of Taiwan, then that could cause some supply chain problems. And again, demand and supply chain, two major factors that we're going to see in this next 24 months of how NVIDIA and others will do. And if you look at NVIDIA's stock price, if there's a trillion dollars shifting, which you had put out a post with the research team that said that there's a trillion dollars in shift right now in the data center and connected cloud business, that demand, if that dries up, that's going to put huge pressure on NVIDIA and their stock could plummet.

>> So, tech winds, let's analyze that and see what the data says. So, first of all, we've seen a lot of these waves and when these waves occur, you always have this, what I call out with the old, in with the new. And so, you have the old stuff declines. The new stuff's not big enough yet to offset those declines. So, it creates some confusion in the market. But I mean, there are headwinds in the sense that during COVID, the IT spending, it was growing at 7, 8%, 9% a year, and as the Fed started to tighten, that went down to the low single digits, 2, 2.5%. Now, it's better. 2023 was maybe 3.5%. 2024 was maybe 4%. 2025, maybe be 5%. So, it's sort of slowly ticking up. But see, what you had here is half the customers tell us that their spending on Gen AI is stealing from other budgets. So, it's not like it's incremental. So, that is a form of a headwind. I think the second factor is people are sort of uncertain about the ROI, so they're being cautious. The flip side of that is, on the other side of the barbell, you've got $200 billion in CapEx spending going on. I think NVIDIA, ironically, is going to hit 200 billion in revenue. I think the consensus for 2026, their fiscal '26, is 170, 180 billion. I think they're going to hit 200 billion. Kind of ironic that that's the same number of the CapEx. They're obviously not getting the CapEx. The other thing, you mentioned that post that we did, the data center market is probably if you do all-in, hardware, all the gear, networking, storage, compute, data center infrastructure, power, cooling, all-in it's probably around $300 billion. NVIDIA, in just a couple of short years has gone from low single digits, mid single digits, 5, 6, 7, 8%. It's got 25% of that spend now, and we think it's going to hold that 25% for the next 10 years. And so, you're talking about a market that is today a few hundred billion and it's going to grow to well over a trillion, 1.2, 1.7, even mid-next decade could be closer to 2 trillion, John.

>> Yeah. And I think that analysis is right on. And first of all, they might even grow that. So, you're, I mean, being conservative by saying hold. But if the shift happens, the trillion dollar shift, you mentioned stealing from other budgets. When you look at the growth of data and the growth of AI capabilities, it's growing faster than the actual IT budget increases. So, that means it's got to come from somewhere. Where's that money going to come from? It's going to come from other projects. That's the shift we're talking about. We're talking about pre-existing buys and budgets, plus expansionary growth on the budget. So, if you look at the growth rates of data growth, data and AI growth, it was agentic. Those growth rates are significantly higher than the budget increases. So, Dave, just do the math. Where's it going to come from? So, it's going to come from the, I call old school IT spend, servers, networking, and storage. And it's going to go to the new architecture. We had Renen on from VAST Data. They have more money in the bank right now than what they've raised. Their revenue growth is phenomenal. They probably will go public here at the NYSE or go public at some point, or even stay private and do like a Databricks round and just get more cash. But they are so funded because they're the new architecture. This is what's going to happen. NVIDIA has proven that they can go from single-digit share, niche player, quote, "niche player," to the leader replacing Intel on the S&P 500. And what Intel was as a bellwether, as a stalwart, whatever you're going to call what Intel was in the PC revolution, we are now going through a super computing revolution and NVIDIA is the horse to catch. Clearly, they're way ahead of the pack and everyone's in their rear-view mirror. So, if the demand continues with data and AI growth, that budget has to shift there. That's the trillion dollars on the table. If they can keep their 25 and grow to say, 35, then the stock price justifies it. And Dan Ives is right, again, he called it earlier, we've been calling it earlier as well. We had that from what, 5, 6, 7 years ago, we had their percentage increasing? So, again, these are the scales right now. And if the thumb on the scales is on demand continues and there's no regulation headwind, NVIDIA flies. That's why they're going crazy right now on the whole Biden ban, because if you look at NVIDIA's statements, they're like, "It's anti-competitive." That's code words for bad move, for them. So, a lot of things are up in the air right now that could hurt NVIDIA's revenue and stock price ultimately. And that's going to come down to demand and then supply chain, both of those variables are highly sensitive to these headwinds and/or they could be artificial headwinds. I mean, we don't need to go in and regulate 18 allies and say, "You have to buy from us." I mean, and then, all kinds of licenses. I mean, it's red tape, okay? We don't want red tape, in my opinion now. You can put the curve on China, that's a whole different ballgame. And the Taiwan thing, very, very relevant.

>> I think NVIDIA and other semiconductor manufacturers' reaction to that in a sense is playing into what we were talking about earlier on the public policy. I think if they vehemently oppose it, that sends a signal to the new incoming Trump administration that what President Biden is doing is bad. So, what you should do is do the opposite. And that's what we often see when these new administrations come in. It's like, "Oh, this previous administration did this. We're going to do the opposite." And so, I think part of that was to shine a light on it. The other thing I would state, when you talk about the disruptions in the stack, every layer of the stack, you mentioned, obviously, NVIDIA, but every layer of the stack is now going to be transformed. Compute, move into clustered systems, something you've talked about a lot. Networking, ultra-low latency networking. Storage, distributed file systems. You had Renen on from VAST. That's something that they talk about a lot. And then, even the software stack, operating systems have become AI optimized and AI aware. The data stack, we've talked about that a lot. How you're harmonizing data, dealing with governance. The application stack, all these agents, agent frameworks injected into the application stack. So, every part of the stack is becoming AI optimized. And that's huge disruptions to the old guard, the old way.

>> Yeah. And again, this points out why this inflection point, this super computing revolution is an AI infrastructure gain. And if you look at the winners and losers, there will be many losers in this next wave, right? The famous quote from Pat Gelsinger, former Intel CEO, former CUBE alumni, "If you're not out in front of that next wave, you're driftwood." Meaning you're going to get pummeled by the big wave. What he means by that is that if you don't actually hit it right, we're talking about Dell, HPE, HP, PCs and servers. If they're not on the right side of this, okay? On this data center shift, they could lose out, right? NVIDIA is enabling new architectures. That's why companies like VAST are emerging. VAST came out of nowhere. They launched on theCUBE two years ago when they came out. Renen saw the wave and he was inspired by Google, Jeff Dean, and said, "I'm going to build this for this next deep learning wave." And they purpose built that architecture. It's a new architecture. So, for them, that's the key. And that's where I see this world coming. You're going to see new brands emerge out of nowhere, rocket ship up and just pop into the market, and at the expense of the incumbents who don't move fast enough.

>> So, as you well know, John, all the action is happening in the hyperscalers. The big three US hyperscalers will comprise $200 billion in revenue this year, and that's growing at 20%. And a lot of that is because of AI, as you well know, and they've got the flywheel going. But I'll say this, when you mentioned Dell and HPE and Lenovo, the core system vendors and the infrastructure players, I think they have between 12 and 18 months to figure out the gaps that they have in their portfolio, so that they can compete more effectively with the hyperscalers on-prem. Because basically what you have happening now is much of their demand is going to these sort of neo clouds, like the CoreWeaves and these alternative GPU clouds. Or, it's going into, in the case of Dell, it's going into Memphis for Elon's 200,000 GPU cluster AI machine and their super computer, if you call it that. But that's not the typical enterprise. When you think about down here in New York City, the banks, the insurance companies, the NYSE and exchanges and the like, they don't want to necessarily put everything in the cloud, but the cloud's alluring because it's got all the tools, it's got the data, it's got the databases, it's got the partnerships like Databricks and Snowflake. It's got that flywheel. It's got all the cloud security companies. So, the on-prem players have, I think, a window, maybe it's 12 to 18 months, to prove that they can A, create a cloud-like experience, that operating model, which I think they can do. But they also have to have the tooling and that AI capability, that surrounding ecosystem, that at least is good enough and can match to a certain extent the cloud, or else. We're going to see the same thing that happened before. The cloud is going to accelerate.

>> And again, companies like Dell, we've been very positive on Dell, but also a little bit of a critical analysis on Dell, Dave, is that their AI factory positioning is phenomenal. They copied that from NVIDIA last year at GTC where Jensen said, "We're the AI factory." And then Michael Dell jumped on that because it is such a good positioning for Dell because it kind of speaks to the Dell brand, what they've been selling into the IT departments and enterprises. Dell is the gold standard in the enterprise. They own that. IBM, another brand that has great standing in the enterprise. Okay, but here's the problem. The opportunity on the shift is significant, this trillion dollar shift to the data center, I call it data center and connected cloud, because we're talking about cloud operations, it's cloud, data center, edge, all one thing. But still, data center investments are coming on this shift because of the AI on-prem is proprietary and property. Okay, notwithstanding that little nuance. What's going on right now, if you look at the top companies, the VAST Data, you mentioned them, you look at AWS cloud, look at DDN. DDN just got funded by Blackstone. They called it an AI data company. Of course-

>> 300 million....

>> they don't really need the money, but they're going to grow and be a generational relevant company, and they could go public. Alex is going to be on this program tomorrow. We'll talk to them again. But again, you're clearly seeing that DDN, VAST Data, these players are serving, these are enterprise solutions. So, what's happening, we look at where the money is going. If you follow the money it's large-scale hyper-clouds, AWS. Put Meta in there because I think they're going to take some rents. We're going to get to that in a second. But AWS, Microsoft, Oracle-

>> Google. Don't forget Google....

>> Google Cloud, all these guys are going to make some serious bank. Then you've got the neo clouds, you mentioned the neo clouds. These are the GPU clouds, CoreWeave, TensorWaves of the world.

>> Genesys.

>> You're going to see these specialized large-scale systems clouds doing massive compute storage and networking that are purpose-built for use cases for customers. And then you're going to see the rise of what I call scaled enterprises, JPMorganChase. These are the enterprises that have huge IT budgets and look and walk and quack like the enterprise, hyperscalers. So, JPMorganChase and Capital Ones of the world, they are, in my opinion, they're very cloud and they're very large-scale. You're starting to see a new category of companies that are operating at such scale they have a unique perspective. We call it rarefied air. They're operating at scale. They can introduce new products with AI that will have the kind of scale that an AWS will have. So, in the enterprise specifically, you're going to see these large enterprises leverage that investment and become hyperscalers themselves just by pure gravity. And that's where the money's going to, you look at VAST, DDN, they're selling to the large-scale enterprises. Call X a hyperscaler because they're going to have large-scale AI. Elon's going to have tons of GPUs in there. He's already got them with his AI. So, xAI will be one of those. Meta will be in that category. That's where the money is. Okay? Now, the enterprise side, that's where Dell and these guys were selling to. So, they have an opportunity to get in there and the window is about 24 months. If they don't have 12 months of position, they could be driftwood. Okay? So, this is a interesting dynamic in the market and it's going to come down to how fast the AI practical solutions roll out, how the AI infrastructure rolls out. And again, it's a whole nother architecture. This is not yesterday's architecture.

>> You said follow the money. And I'll add to that. You use that metaphor, follow the data. Because to your point, JPMorganChase has petabytes of data on prem. These large companies, they're massive and they want to use that data as a competitive advantage. So, they don't necessarily want to put it in the cloud, but they will if they have to. In other words, if those on-prem players like Dell, like HPE, like Lenovo can't prove that they can create that similar experience ... And the proof points, in my view, aren't there today. That Elon is doing it because he's got that capability. The neo clouds are doing it because they've got a lot of really good, solid people. But are those enterprises in that position? Not that they don't have great people, but they are starting just now to really understand how they can leverage what they've experimented with in the cloud on prem. And it'll be interesting to see how fast ... You gave it 24 months. I was saying 12 to 18. Somewhere in there.

>> The markers will be laid down in 12 months. So, if you're Dell and you're a big systems player, if you don't have that up and running, you're going to be looking at maybe a bad year that following year. The markers will be laid down in the next 12 months and you're going to start to see the spend. The JPMorganChases, these enterprises that are on top of clouds, Capital One, JPMorganChase, these are the companies we're talking about. AWS and Google and these clouds are enabling scale for these enterprises who then become hyperscalers and industry neo clouds, Dave. So, what CoreWeave is doing for GPUs, I can see JPMorganChase being a neo cloud for the entire vertical they're in. So, I think we talked about this maybe four years ago on theCUBE at re:Invent. We said, "Hey, why wouldn't Capital One serve the entire industry, the people who were malnourished, if you will, in IT?" Because if you're in that same category and you don't have that scale, you have two choices. Build it or buy it, or you're out of business. So, if I'm in the vertical, I might have a relationship with the quote, "leader neo cloud," that might be specialized in the industry. So, industry verticals, we're hearing it with retail this week for NRF, you're hearing it in healthcare, there's going to be players in those categories that will rise up to the top and look, walk, and quack like a duck, which is a hyperscaler.

>> So, here's the-

>> And I just, if I'm in those businesses, I'm like, "Hey, I could actually expand my TAM and go down market in my own industry."

>> Right. So, here's the opportunity for the Dells of the world. If they can prove this, if they can get out the proof points, this could be a huge tailwind for them. Because about 15% of the customers that we talked to with our partner ETR, are telling us that they actually are repatriating workloads. Now, it's not an enormous, it's a small portion of the workloads, but nonetheless, there's a rebalancing going on. And there has been, John, for the last couple of years, as we know. I mean, coming out of COVID, everybody went to the cloud in COVID, but then there was that sort of rebalancing. And so, I think people really have done a good job, customers, of getting their sort of on-prem operating model act together. And the vendors have been very supportive of that. It took a long time, but now they're there. So, if they can prove that they can build that ecosystem around AI, across compute, storage, networking, and very importantly, the software stack, that's the missing piece today. All those surrounding tools. But if they can build that out with the ecosystem in the next 12 to 18 months, this could be a huge tailwind for them.

>> Yeah. And just one final point before we wrap is on the geopolitical headwinds, on the semi ban, obviously that's the big discussion. And then, you got the Chinese officials talking to Elon about maybe doing X buyout. Which by the way, I predicted on theCUBE, if you remember, many, many pods ago that Elon was posturing X to basically take over for TikTok. Looks like that actually might happen, hence all the new features and AI coming in.

>> Well, he's got good relationships in China.

>> Or, he was hedging to be the replacement for TikTok. So, now you have basically a quasi-US play against China. Again, total 3D chess game going on with China and the US and Elon. Okay, put that aside. If you look at the tech market, geopolitical, Wall Street Journal reported this morning that the signs outside the United States from a funding standpoint are strong. For example, Israel is seeing a funding increase for the first time, a 28% increase. This is in tech startups, and we had the feature here in NYSE, the cyber starts came over. Israel is really hot on defense tech. So, cybersecurity and then just overall entrepreneurship in Israel is booming, and they're fighting war at the same time. So, that is amazing data. So, if you look at Israel's data, that, to me, is a tell sign that entrepreneurship in AI will be a global phenomenon. It's going to be a global opportunity. And anything that kind of forecloses that, like BS regulation, any kind of government involvement. So, if you are in the EU or you're in London, you're in the UK and you're outside the United States, if you don't look at Israel and look at that use case, okay? You're not going to have the innovation. Okay? Israel has been aggressively entrepreneurial for many, many decades. And even in the prism of war, it's still up. So, if I'm the EU, I got to look at that and I got to say, "We have to kind of maybe change how we do things and get more entrepreneurial." So again, great news coming out of Israel. The startup ecosystem's thriving. Obviously, cybersecurity, big tailwind there, Dave. And defense tech. I mean, you want to talk about defense tech and drones and Iron Dome. I mean, they're good at it. I mean, we've interviewed many on theCUBE here from Israel startups and they know their tech. So, that's huge news.

>> And we had that cyber week here with all the cyber AI innovators, which was amazing. And I think there were probably 20 or 30 Israeli-based startups here that were incubated. And when they get incubated, it's not like a couple hundred thousand dollars, you're talking about five to $8 million seed rounds. Right? So, they're serious. And I think you're seeing a change of attitude. Israeli companies typically have not gotten to IPO, and now you're seeing several. Example of Snyk, we had Peter McKay on before, a basically Israeli-based company, but US persona. And a number of them want to go public, and I think I'm really excited about that. Wiz is another one, and that probably has an IPO in its future. And so, that really is a different sort of approach from Israeli companies, which typically just built innovation and then sold to a larger company.

>> Well, great chatting with you, Dave. And it's awesome here as we kick off day two.