Equity Long-Short, Semiconductors, Fabricated Knowledge

Douglas O'Laughlin

Equity Long-Short, Semiconductors

Fabricated Knowledge

Learn more about the world's most important manufactured product. Meaningful insight, timely analysis, and an occasional investment idea.

Thematic (Sector/Industry)

<ul><li><a href="https://semianalysis.com/2024/12/11/scaling-laws-o1-pro-architecture-reasoning-training-infrastructure-orion-and-claude-3-5-opus-failures/" target="_blank" rel="noopener">Technological model scaling is not dead,</a> but we are clearly at a critical moment when the definitions will shift.</li><li>Pre-training, <a href="https://x.com/fchollet/status/1869051991743439028" target="_blank" rel="noopener">the original scaling law</a>, might hit its first diminishing return. The piece SemiAnalysis used the analogy that pre-training was like the end of Dennard’s law.</li><li>However, multi-core scaling led to another decade of scaling transistors. Technology progresses, just not in the same way.</li></ul>

Technological model scaling is not dead, but we are clearly at a critical moment when the definitions will shift.Pre-training, the original scaling law, might hit its first diminishing return. The piece SemiAnalysis used the analogy that pre-training was like the end of Dennard’s law.However, multi-core scaling led to another decade of scaling transistors. Technology progresses, just not in the same way.

Scaling Laws Meet Economics, but Adoption is still Accelerating

Equity Bottom-Up

Intel Corporation designs, manufactures, and sells computer components and related products.  The Company's major products include microprocessors, chipsets, embedded processors and microcontrollers, flash memory products, graphics products, network and communications products, systems management software, conferencing products, and digital imaging products.

<ul><li>If you haven’t heard the news, <a href="https://www.intc.com/news-events/press-releases/detail/1719/intel-announces-retirement-of-ceo-pat-gelsinger" target="_blank" rel="noopener">Pat Gelsinger is “retiring</a>.” The reality is this was not a retirement but a <a href="https://www.reuters.com/business/intel-ceo-pat-gelsinger-retire-2024-12-02/" target="_blank" rel="noopener">firing of Pat</a>.</li><li>His brief stint of 1386 days was surprising because not only was he the most technically competent CEO of the last few bad apples at Intel, but he was also among the shortest.</li><li>Pat has by no means been perfect, and the conference at UBS kind of showed the frustrations that the board likely had with Pat.</li></ul>

If you haven’t heard the news, Pat Gelsinger is “retiring.” The reality is this was not a retirement but a firing of Pat.His brief stint of 1386 days was surprising because not only was he the most technically competent CEO of the last few bad apples at Intel, but he was also among the shortest.Pat has by no means been perfect, and the conference at UBS kind of showed the frustrations that the board likely had with Pat.

<ul><li>This is a very light note, given time constraints. <a href="https://www.bloomberg.com/news/articles/2024-11-28/us-readies-china-chip-curbs-that-stop-short-of-earlier-proposals?embedded-checkout=true" target="_blank" rel="noopener">It's rumored that on Monday, we will have new export controls</a>, which seem to be massively light.</li><li>Importantly, they are going to exclude CXMT altogether.</li><li>History is a pretty good guide. Almost every single export restriction has led to bad returns prior, bad returns on the week off, and positive returns almost 100% of the time 6 months after for SOXX. This applies doubly to Semicap.</li></ul>

This is a very light note, given time constraints. It's rumored that on Monday, we will have new export controls, which seem to be massively light.Importantly, they are going to exclude CXMT altogether.History is a pretty good guide. Almost every single export restriction has led to bad returns prior, bad returns on the week off, and positive returns almost 100% of the time 6 months after for SOXX. This applies doubly to Semicap.

Happy Thanksgiving Semicap & Semiconductors

NVIDIA Corporation designs, develops, and markets three dimensional (3D) graphics processors and related software.  The Company's products provide interactive 3D graphics to the mainstream personal computer market.

<ul><li>Nvidia posted earnings yesterday, and guidance was light of buy-side bogeys. I’m not going to step into the mind game of bogeys here, but there are some finer points to focus on.</li><li>NVIDIA reports Q3 EPS $0.81 ex-items vs FactSet $0.75. Reports Q3: Revenue $35.08B vs FactSet $33.17B (2 billion beat like clockwork)</li><li>Q4 Guidance: Revenue $37.5B +/- 2% vs FactSet $37.09B (a bit light). GAAP and non-GAAP gross margins are expected to be 73.0% and 73.5%, respectively, +/- 50 bps. (also light)</li></ul>

Nvidia posted earnings yesterday, and guidance was light of buy-side bogeys. I’m not going to step into the mind game of bogeys here, but there are some finer points to focus on.NVIDIA reports Q3 EPS $0.81 ex-items vs FactSet $0.75. Reports Q3: Revenue $35.08B vs FactSet $33.17B (2 billion beat like clockwork)Q4 Guidance: Revenue $37.5B +/- 2% vs FactSet $37.09B (a bit light). GAAP and non-GAAP gross margins are expected to be 73.0% and 73.5%, respectively, +/- 50 bps. (also light)

NVIDIA: Waiting on Blackwell, and the Networking Question

Lattice Semiconductor Corporation designs, develops, and markets high speed programmable logic devices.  The Company's products provide electronic systems customers with quickly designed, easily configured components.  Lattice markets its products to original equipment manufacturers of communication, computing, industrial, and military systems.

<ul><li><a href="https://www.smartkarma.com/entities/entegris-inc" target="_blank" data-smartkarma-citation="entities:12493" rel="noopener">Entegris Inc (ENTG US)</a> - Memory spending is happening next year, but MSI remains weak.</li><li><a href="https://www.smartkarma.com/entities/astera-labs-inc" target="_blank" data-smartkarma-citation="entities:40921" rel="noopener">Astera Labs (ALAB US)</a> - This is now the second way to play a levered Trainium ramp, as they have extensive content with <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409" rel="noopener">Amazon.com Inc (AMZN US)</a>.</li><li><a href="https://www.smartkarma.com/entities/lattice-semiconductor-corp" target="_blank" data-smartkarma-citation="entities:7855" rel="noopener">Lattice Semiconductor (LSCC US)</a> - Standard kitchen sink; I like the stock long-term.</li></ul>

Entegris Inc (ENTG US) - Memory spending is happening next year, but MSI remains weak.Astera Labs (ALAB US) - This is now the second way to play a levered Trainium ramp, as they have extensive content with Amazon.com Inc (AMZN US).Lattice Semiconductor (LSCC US) - Standard kitchen sink; I like the stock long-term.

Earnings: ENTG, ALAB, LSCC, SITM, QCOM, MCHP, WOLF, ARM, ACLS, AAOI, ANET, LITE, COHR

I was formerly employed at a Texas firm called Bowie Capital (https://www.bowiecapital.com/), where I started out of college. There I focused on compounders and quality-focused investing and had an incredible experience that let me grow as an investor. I owe a lot to my mentor and former boss, Cory Whitaker.

From there, I became interested in semiconductors, specifically the changing story of the end of Moore’s law and what that means for semiconductor stocks. I started Fabricated Knowledge as a project to further pursue that; the rest is history.

Douglas O'Laughlin
Equity Long-Short, Semiconductors
• Fabricated Knowledge

Scaling Laws Meet Economics, but Adoption is still Accelerating

Technological model scaling is not dead, but we are clearly at a critical moment when the definitions will shift. Pre-training, the original...

Fabricated Knowledge

The Death of Intel: When Boards Fail

If you haven’t heard the news, Pat Gelsinger is “retiring.” The reality is this was not a retirement but a firing of Pat. His brief stint of 1386...

Fabricated Knowledge

Happy Thanksgiving Semicap & Semiconductors

This is a very light note, given time constraints. It's rumored that on Monday, we will have new export controls, which seem to be massively...

Fabricated Knowledge

NVIDIA: Waiting on Blackwell, and the Networking Question

Nvidia posted earnings yesterday, and guidance was light of buy-side bogeys. I’m not going to step into the mind game of bogeys here, but there...

Fabricated Knowledge

Earnings: ENTG, ALAB, LSCC, SITM, QCOM, MCHP, WOLF, ARM, ACLS, AAOI, ANET, LITE, COHR

What a week (I’m a bit late on this)! I wanted to give a quick overview of all the companies that reported last week. Lattice Semiconductor -...

Fabricated Knowledge