Breaking Analysis with Dave Vellante

On February 19th of this year, Barron’s dropped an article declaring Oracle a cloud giant and explained why the stock was a buy. Investors took notice and the stock ran up 18% over the next 9 trading days and peaked on March 9th, the day before the company announced its latest earnings. The company beat consensus earnings on both top line and EPS last quarter. But Investors didn’t like Oracle’s tepid guidance and the stock pulled back..but is still well above its pre-Barron’s article price. 

When a piece of digital art sells for $69.3M, more than has ever been paid for works by Guaguin or Salvador Dali, making its creator the third most expensive living artist in the world, one can’t help but take notice and ask: “What is going on?” The latest craze around NFTs may feel a bit bubblicious, but it’s yet another sign that the digital age is now fully upon us.

Microsoft CEO Satya Nadella sees a different future for cloud computing over the coming decade. In his Microsoft Ignite keynote, he laid out the five attributes that will define the cloud in the next ten years. His vision is a cloud platform that is decentralized, ubiquitous, intelligent, sensing and trusted. One that actually tantalizes the senses and levels the playing field between consumers and creators by placing tools in the hands of more people around the world.

SaaS companies have been some of the strongest performers in this COVID era. They finally took a bit of a breather this month but they remain generally well-positioned for the next several years with their predictable models and cloud platforms. Meanwhile, the demise of on-prem legacy players from COVID shock seems to have been overstated, in part because of the return of the laptop, and, in the case of Oracle, what some see as a cloud play 

UiPath’s recent $750M raise at a $35B valuation underscores investor enthusiasm for robotic process automation. And why not? The pandemic has fueled a surge in automation as organizations re-tool their operations and prepare for a post-COVID environment. But reasonable people are asking - is this market getting overheated.

Top security pros indicate that the Solar Winds hack, on top of the pandemic, have further heightened a change in how they think about security. Not only must CISOs secure an increasingly distributed workforce and network infrastructure, but they now must be wary of software code coming from reputable vendors, including the very patches designed to protect them against cyber attacks. 

Background provided by https://www.storyblocks.com/

There are four A players in the IaaS / PaaS hyperscale cloud services space. AWS, Azure, Alibaba and Alphabet. In our view, these four have the resources, momentum and stamina to outperform all others...indefinitely. Combined, we believe these companies will generate more than $115B in 2021 IaaS and Paas revenue. That’s a substantial chunk of market opportunity that is growing in the mid 30% range this year.

Tech spending is poised to rebound as the economy re-opens in 2021. CIOs and IT buyers expect a 4% increase in 2021 spending and we believe the number will actually be higher-- in the 6-7% range. Drivers are: continued fine-tuning of and investment in digital strategies-- e.g. cloud, security, AI, data, and automation. Application modernization initiatives continue to attract attention. We also expect more support with work from home demand - e.g. laptops. We’re even seeing pent up demand for data center infrastructure. 

The major risk to this scenario remains the pace of reopening. However even if there are speed bumps to the vaccine rollout and herd immunity, we believe tech spending will grow at least 2 points faster than GDP, currently forecast at 4.1 percent.

The next 10 years of cloud will differ dramatically from the past decade. The future will bring a much more data-centric, real time, intelligent, hyper-decentralized cloud that will comprise on-prem, hybrid, cross-cloud & edge workloads. With a services layer that abstracts the complexity of the underlying infrastructure.

This was a key takeaway of the guests from theCUBE on cloud, a virtual event hosted by SiliconANGLE and theCUBE, which brought together CEOs, CIOs, data practitioners, technologists, cloud experts, analysts and opinion leaders to unpack the future of cloud computing.

When it comes to silicon manufacturing, volume is king. The core issue Intel faces is it has lost the volume game, forever. Incoming CEO Pat Gelsinger faces seemingly difficult decisions. On the one hand, he could take some logical steps to shore up the company’s execution, outsource a portion of its manufacturing & make incremental changes. On the other hand, Gelsinger could make much more dramatic moves, shed its vertically integrated heritage & transform Intel into a leading designer of chips for emerging multi-trillion dollar markets.
We believe that Intel actually has no choice. It must create a deep partnership (e.g. JV) with a manufacturer that covets a bigger presence on U.S. soil, outsource production & focus Intel’s resources on design.