This week we have a lot of corporate earnings and, as I shouldn’t have to learn anymore, surprises coming out of the White House and Elon Musk. Lots to cover!

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As always, I’m focused on three things:
1) Technology-driven change;
2) the latest in innovation and startup trends, and;
3) stock fraud.

Companies Discussed Below

Table of Contents

• Companies Discussed Below

• AMD: The House That Lisa Built

• Tesla Model Whyyyy: Demand Hits the Brakes

• From Monopoly to Mediocrity: Intel’s Fall

• Tweet O’The Week

• 📆 of Upcoming Events

AMD: The House That Lisa Built

Advanced Micro Devices (AMD: NYSE) and CEO Lisa Su enter 2025's first earnings season transformed. Where conventional wisdom once cast AMD as computing's eternal bridesmaid, the company has caught and thrown the bouquet.

Consider Q3 2024's data. Revenue doubled year-over-year to $3.5 billion, with data center operations now driving 52% of total revenue. And that’s the story: data center, data center, data center.  This shift reflects more than market momentum—it demonstrates the culmination of strategic decisions that reshaped AMD's fundamental architecture.

The acceleration in artificial intelligence computing amplifies this transformation. AMD raised its 2024 data center GPU revenue forecast from $2 billion to exceed $5 billion, propelled by widespread adoption of MI300 accelerators. Meta Platforms (META: NASDAQ) deployment of MI300X for inference on the 405B parameter Llama model validates AMD's technical prowess at scale.

The MI300X architecture reveals AMD's strategic advantage. Its 192GB high-bandwidth memory configuration proves crucial for large language model inference, delivering 30% performance gains in specific workloads compared to competing solutions. The forthcoming MI325X extends this lead, promising 20% higher inference performance versus Nvidia (NVDA: NASDAQ) H200.

Software development matches hardware innovation. ROCm 6.2 achieved 2.4x better inference performance since launch. The platform now supports over one million AI models out of the box, streamlining deployment for enterprise customers.

Cloud providers seek supply chain resilience through vendor diversification. AMD's success with Microsoft (MSFT: NASDAQ) Azure and Meta provides the validation needed for broader adoption. The financial implications manifest in AMD's data center segment, where operating margins reached 29% in Q3, generating $1 billion in operating income.

The planned acquisition of ZT Systems promises to accelerate deployment capabilities. It’s a big deal: for $4.9 billion AMD has a chance to enhance its capabilities in designing and deploying advanced data center solutions, particularly for AI applications, add ~1,000 design engineers and align its silicon and software roadmaps more closely with the needs of large cloud service providers. 

Meanwhile, competition with Intel (INTC: NASDAQ) in traditional computing segments continues to favor AMD, with the Turin processor family setting over 130 performance records.

Enterprise CTOs increasingly view AMD as a strategic technology partner rather than a component supplier. The combination of x86 CPUs, GPUs and FPGAs creates a unique position in heterogeneous computing—critical as AI workloads evolve beyond current paradigms. And its tied up with Oracle (ORCL: NASDAQ) and its promised $100 B “Stargate” bodes well for some AMD spending over the next year. 

But this quarter? Forget Deepseek: the trajectory of the AI computing market is for expansion. Our estimates say AMD will see sustained topline growth to hit $50 billion annually by 2029. AMD's annual GPU launch cadence, featuring MI350 in late 2025 and MI400 in 2026, charts a clear technical path forward. But that could still be a bumpy road every 13 weeks, which we may see with Q4 results. 

Tesla Model Whyyyy: Demand Hits the Brakes

Tesla’s (TSLA:NASDAQ)  fourth-quarter 2024 financial results were a miss. But I think the reasons aren’t well understood. The company reported total revenue of $25.7 billion, a modest 2% increase year-over-year, but below my' projections and even further below Wall Street projections. Operating income declined, contributing to a full-year net income of $8.4 billion, which was lower than anticipated. 

In terms of vehicle deliveries, Tesla achieved a record 495,570 units in Q4 2024, bringing the annual total to 1,789,226 vehicles. However, this figure represents a slight decrease from the 1.81 million vehicles delivered in 2023, marking the company’s first annual delivery decline. 

I don’t think I’m biased on this. But I have a long memory. In the past Elon has personally blocked me on Twitter and complained that I’m a “tool of the short sellers.” In truth, I’m just looking at the numbers. 

Here’s a number that’s misunderstood: EV and HEV sales are NOT falling in the US (I bought an HEV Jeep Wrangler last year and my kids LOVE it – it’s so sexy they call it “Kendall”). 

What’s really happening is Tesla sales growth is plummeting, the rest of the EV market is growing at a slowing, but strong clip. In the US, Tesla's EV portion dropped from 51% to 43% year-over-year as competitors like Ford (F:NYSE), Hyundai (HYMTF:OTCMKTS), and GM (GM:NYSE) grew deliveries at a much faster clip. 

Europe tells a similar story:

^{Source: ACEA Monthly Statistics Reports, 2024}

China is perhaps most concerning. Tesla's Q4 sales in the world's largest EV market fell 14% compared to the prior year, with share eroding from 11.8% to 8.4% as domestic players BYD (1211:HK) and NIO (NIO:NYSE) surged. Aggressive price cuts, most recently an 8% reduction in January for base Model 3 and Y trims, have pressured margins in pursuit of volume.

This isn’t just the Chinese economy. A deeper look at Tesla's economics and brand health reveals structural issues that call into question the company's long-term competitive advantage.

Start with costs. Tesla fans like to tout the company's industry-leading operating margins as evidence of superior cost discipline and more efficient manufacturing. That’s dumb. They don’t know the car business. 

A full accounting of Tesla's SG&A expenses, properly allocating costs borne by its vertically integrated sales and service network, shows a very different picture:

^{Source: SEC 10-K Filings (2023), Company Reports}

Once accounting for expenses absorbed by independent dealer networks, Tesla's all-in SG&A cost per vehicle of $4,280 comes in 17-25% higher than legacy rivals GM and Ford. The direct sales model also faces inherent service scaling challenges, with Tesla service centers averaging an unsustainable -4.2% operating margin in 2024 as customer wait times surged a reported 42% year-over-year.

Warranty and recall costs are also rising faster than revenue as Tesla aims to maintain its growth trajectory while grappling with persistent quality issues. Warranty accruals reached 3.5% of automotive revenue in 2024, a 120 basis point premium to the industry average. 

On Jan. 24, 2025, Tesla just announced a recall impacting over 1.1 million Chinese vehicles due to software defects.

Brand perception is deteriorating alongside these financial and operational strains. YouGov BrandIndex tracking shows Tesla has experienced steep year-over-year declines in purchase consideration (-4.8 points), brand reputation (-8.2 points), and quality perception (-2.1 points) across the US and Europe.

MAGA Elon Musk is not winning over NPR set – a key demographic for an expensive supposed ecologically-friendly car. This seems to be a major factor in the erosion, and it’s just starting. "We get a lot of people writing that they don't like all this," electric car maker Polestar’s CEO Michael Lohscheller told Bloomberg News last week. "It's important to listen closely to what they say. And I can tell you, a lot of people have very, very negative sentiment."

An Edmunds analysis found Tesla's share of the liberal EV buyer segment plunged by 18 points in Q4, the sharpest drop among any demographic cohort:

^{Source: Edmunds.com Buyer Insight Report, Q4 2024}

In Germany, Tesla's brand consideration fell 12.3 points sequentially following Musk's endorsement of the far-right AfD party in October. Deutsche Bank estimates the resulting boycott movement could cost the company €380M in lost Q4 revenue in Europe's largest auto market.

Even Tesla's much vaunted battery technology edge has evaporated. In Q4, the company's average pack-level cost of $121/kWh marked its first quarter without an industry price advantage after years of leadership. Capacity utilization is also trending in the wrong direction, with Fremont and Shanghai plants down -4% and -18% year-over-year respectively while Berlin lags the European average vehicle assembly time by over 15%.

And then there’s the company's massive reliance on the government. Tesla's finances are significantly propped up by a complex web of government support that extends far beyond the direct consumer tax credits for electric vehicle purchases. The company has masterfully leveraged various forms of government assistance, from the early Department of Energy loans to ongoing regulatory credits sold to other automakers, state-level factory subsidies, and local tax breaks. These subsidies have effectively masked the true operational costs of Tesla's business model, creating an artificially inflated picture of their profitability. While Tesla reported automotive gross margins above 20% for several years, these numbers were substantially boosted by regulatory credit sales, which essentially represent pure profit with zero associated costs.

Heck, in the first quarter, the company would’ve have no free cash flow at all if it wasn’t for checks from the government. 

What makes this situation particularly ironic is Elon Musk's carefully crafted public persona as a free-market champion while simultaneously being one of the most successful corporate recipients of government support. Musk has consistently pursued aggressive lobbying efforts to maintain and expand EV incentives, particularly in key markets like California and China. His public criticism of government intervention seems to apply selectively - opposing subsidies for competitors while working behind the scenes to secure billions in tax breaks and incentives for Tesla's factories in Texas, Nevada, and Berlin. This pragmatic approach to government relations reveals a striking disconnect between Musk's libertarian rhetoric and Tesla's heavy reliance on public funding to maintain its competitive advantage in the EV market.

In totality, Q4 data reveals mounting structural challenges for Tesla that transcend near-term headwinds:

• Cost advantages appear largely illusory when fully accounting for direct sales infrastructure

• Brand erosion is having a tangible impact on sales, particularly among liberal and luxury buyers

• Competition is achieving economies of scale faster than expected, eroding Tesla's battery, manufacturing, and procurement edges

• The company's vertically integrated model is ill-equipped to handle massive service and distribution needs

• Government subsidies could be a target of Elon Musk’s own government cost cutting regime. 

Tesla still talks about an innovation lead and a devoted core customer base. That’s demonstrably eroding. They talk about fantastic products: a semi, a cheaper car, a (legal) robotaxi, a robot – but those products don’t show up on time. 

 Q4 results provided the clearest evidence of a business model whose first-mover momentum is rapidly dissipating. Reactions to the quarter may speak louder than management's words. Diminished pricing power, deteriorating brand affinity, and stubborn inefficiencies suggest the Tesla story may be due for a substantial rewrite. Perhaps that begins with Q4 earnings. 

From Monopoly to Mediocrity: Intel’s Fall

Intel reported Q4 earnings, offering a stark view of a company stuck between ambition and execution. With interim leadership and an uncertain long-term strategy, the semiconductor giant faces mounting pressure. The financials offer a snapshot of its standing, but the larger questions remain: Where is Intel headed? And who will lead it there?

The search for a permanent CEO looms. Since Pat Gelsinger’s departure, Michelle Johnston Holthaus and David Zinsner have managed operations, providing stability but not necessarily direction. The foundry business—once Intel’s bold bet to reclaim process leadership—remains in flux. Will the company double down on manufacturing, or is a spinoff on the horizon? Yesterday’s earnings call offered few answers.

Intel posted Q4 revenue of $14.2 billion, beating expectations of $13.8 billion but marking a 7.5% decline year-over-year. Gross margin landed at 42.1%, slightly above forecasts but far from historical levels. The data center segment continued its slide, with revenue dropping 14%, highlighting the shift by major cloud customers toward custom AI accelerators. Meanwhile, the client computing segment showed signs of stabilization, with revenue down just 3%, hinting that the PC market’s decline may be slowing.

But the big problem is the foundry business. Again, it’s proven to be Intel’s biggest loser, burning through $24.8 million dollars every day of the fourth quarter. And it’s not getting better – on the conference call David Zinsner acting-co-CEO warned that the Foundry business would see “revenue roughly flat to down modestly quarter-over-quarter.”

Intel’s manufacturing challenges are well known. Once an industry leader, it now lags behind Taiwan Semiconductor Manufacturing Co. (TSM: NYSE) in process technology. The upcoming 18A node, slated for later this year, is a pivotal moment. Success could restore credibility; failure would amplify calls for a strategic overhaul. 

Intel remains vague on its foundry ambitions. Leadership reaffirmed a commitment to process leadership but did not clarify whether a full spinoff is under consideration. Meanwhile, competitors are surging ahead. AMD continues to gain x86 market share, while Nvidia dominates AI. Intel’s AI efforts, including its Gaudi accelerators, remain overshadowed by Nvidia’s entrenched CUDA ecosystem.

R&D spending is another flashpoint. Intel’s cost-cutting measures have stabilized margins, but its research budget as a percentage of revenue continues to shrink. The company touts efficiency gains, but skepticism persists about its ability to compete in AI and advanced packaging—critical to its future.

Intel’s relevance hinges on decisive leadership and a clear roadmap. Nvidia commands AI, AMD continues to erode x86 dominance, and the foundry business remains in question. The semiconductor industry moves fast—Intel must move faster.

Tweet O’The Week

Epistrophy In The News

So much TV this week!

I was on Schwab Network talking about Tesla’s latest problems, promises and a safety record that took a surprisingly personal turn.

On the way to the Oakland Ferry, I had great fun talking to the Bay Area’s really strong local affiliate about the importance of the DeepSeek AI shock, an analysis of the quality of the product and my suspicions about how they got there (which are starting to look prescient.)

Yahoo Finance emailed shortly before my Thursday hit saying Citizens JMP CEO Mark Lehmann would be joining me in my hit. I’ve known that guys since he was a great software analyst! What a nice surprise. It led to a great conversation about Intel, a challenged company that finds itself shockingly adrift. (The segment was published under the headline “Why this strategist says Intel is making ‘a mess’” — sure to make me friends.)

📆 of Upcoming Events

Availability This Week

I’m available all week so email or even text if you don’t hear back right away. Written reports are available to clients, with video summaries on YouTube and, of course our popular summaries of the summaries (yes, the second derivative) on Instagram and Tiktok.

I hope these notes are helpful to you. I’d love to discuss them further and, as always, comments, questions and ideas are appreciated. If you have a friend or even a frenemy whom you think might benefit from this note, have them reach out and I’ll put them on the list.