Tech layoffs surge, Cisco cuts and the AI chip crunch

AI

This week, news dropped that Cisco Systems Inc. will lay off thousands of workers following lower product orders.

On the latest episode of theCUBE Podcast, theCUBE Research industry analysts John Furrier (pictured, left) and Dave Vellante (right) discussed how tech layoffs have been piling up in recent weeks, including Pure Storage Inc. letting go of as much as 4% of its workforce.

“It’s the classic case of, in order to get budget, you’ve got to cut someone. You see this in companies all the time,” Furrier said. “We talk about it all the time for companies that are bootstrapping. If I want to get that extra hit or fund that project, I’ve got to get that money from somewhere.”

The layoffs are actually working when it comes to earnings, according to Vellante. For instance, after Amazon.com Inc. Chief Executive Officer Andy Jassy made cuts, Amazon’s earnings increased.

“Meta is kicking ass. Their valuation’s now back up over a trillion,” Vellante said. “The only one that really hasn’t, Microsoft hasn’t had to as much, but Google really hasn’t gone on an austerity program.”

That raises the question of whether Google LLC might pull the trigger on such measures down the line, especially in the wake of artificial intelligence adding productivity. But given its history of developing moonshots, that doesn’t seem as likely, according to Furrier.

“Let’s say they have a project that they’re making, self-driving flying saucers, or drones, to deliver packages,” he said. “They’ll have hundreds of people working on that, and then like, OK, that’s over. They can just cut it. When they cut it, those people are gone, and they have to find jobs within the company.”

The great AI chip crunch continues

Last week, the Wall Street Journal reported that OpenAI Chief Executive Officer Sam Altman was seeking trillions of dollars for a project that would boost the world’s AI chip-building capacity. Recently, Vellante asked Ben Bajarin, CEO and principal analyst at Creative Strategies, about chip manufacturing capacity.

“He said they’re maxed out. It’s absolutely, totally maxed out. Which is good news for Intel because that could help save them,” Vellante said. “I’ve been saying this, the CHIPS Act is $50 billion. It’s just like a little tinkle in the pond.”

Altman is seeking as much as $5 trillion to $7 trillion. Meanwhile, Intel Corp. is building at least six new fabs, with CEO Pat Gelsinger saying a new advanced fab costs $30 billion to build.

“That’s $180 billion. So, he’s going to get, what $10 billion from the U.S. He’s going to get $10 billion from the EU. He’s got $20 billion. Where’s he going to get the other $100 to $120 billion? It’s not going to come out of cash flow,” Vellante said. “That’s why this really caught my attention. I mean, five trillion, and that’s what this needs to actually solve the problem.”

What’s developing is a significant problem moving forward, according to Furrier. With chips a scarce resource, it becomes a real threat to the economy and the world.

“This is why I think AI is so exciting on the one hand and scary on the other. Where does this go? Does it slow things down? And what does the entrepreneurial equation look like?” Furrier asked. “What’s the future entrepreneur look like? What does the next Bob Noyce look like, what is the Gordon Moore of the future look like?”

Cohesity CEO weighs in on Veritas acquisition

Also last week, Cohesity Inc. acquired Veritas Technologies LLC’s data protection unit, with the combined entity expected to have a valuation of $7 billion and pro forma annual revenue of $1.6 billion, according to the companies. Cohesity Chief Executive Officer Sanjay Poonen joined Vellante and Furrier on the podcast to discuss the deal.

“We’re going to create a Snowflake meets Palo Alto type of company. It’s data and security. So, who’s one of the best modern data companies? Snowflake. Maybe Databricks too, but Snowflake’s the best public company today in that space,” Poonen said. “What’s the best security company today? Palo Alto. This combination will create a leader that’s going to use AI and security to revolutionize — check this out — hundreds of exabytes.”

Given all of that, Furrier asked Poonen how to classify the company today. It would fall under the category of AI-powered data security management, according to Poonen.

“Data security management is the core category, AI power is how we differentiate,” he said. “That’s the category. Here’s the mission of the company: We protect and secure the world’s data and allow companies to get insight into that data. The largest organizations in the world rely on us for their business resilience, not just cyber resilience, all resilience. You take that category and mission, you can build a great company.”

Watch the full podcast below to find out why these industry pros were mentioned:

Jim Harbaugh, head coach of the Los Angeles Chargers
Kyle Shanahan, head coach of the San Francisco 49ers
Patrick Mahomes, quarterback for the Kansas City Chiefs
Travis Kelce, tight end for the Kansas City Chiefs
Paul Martino, founder of Bullpen Capital
Sanjay Poonen, president and CEO of Cohesity
Zeus Kerravala, founder and principal analyst at ZK Research
Andy Jassy, president and CEO at Amazon
Sam Altman, co-founder and CEO of OpenAI
Ben Bajarin, principal analyst and CEO of Creative Strategies
Pat Gelsinger, CEO of Intel
Kara Swisher, journalist
Bob Noyce, American physicist and entrepreneur
Gordon Moore, American businessman and engineer
John Chambers, CEO of JC2 Ventures
Mark Zuckerberg, CEO of Meta Platforms
Marc Benioff, chair and CEO of Salesforce
Michael Dell, chairman and CEO of Dell Technologies
Lina Khan, chair of the Federal Trade Commission
Andrew Ross Sorkin, American journalist and author
Arvind Krishna, chairman and CEO of IBM
Rob Mee, CEO of Mechanical Orchard
Bill McDermott, chairman and CEO of ServiceNow
Greg Hughes, CEO of Veritas Technologies
Patrick McCarter, managing director at the Carlyle Group
Jeff Clarke, COO and vice chairman of Dell Technologies
Arthur Lewis, president for infrastructure solutions group at Dell Technologies
Frank Slootman, chairman and CEO of Snowflake
George Kurtz, founder, president and CEO of CrowdStrike

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Photo: SiliconANGLE