Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: A special edition of Single Best Idea. It has been
Speaker 2: life changing. There are two groups of people, those that
Speaker 2: are in technology and those that are not. And maybe
Speaker 2: you're in technology through individual stock ownership. Maybe you're looking
Speaker 2: at a Bentley this weekend off your Nvidia purchases, or
Speaker 2: maybe not. Maybe in your four oh one K you've
Speaker 2: got a tech overweight or a tech nonweight. But in
Speaker 2: America there's exactly two groups of people. Long ago, in
Speaker 2: far away, there was a guy in a normal business
Speaker 2: suit at Webbush. Long ago in far away, there was
Speaker 2: a guy up in Minnesota with Piper Jeffrey holding court
Speaker 2: on technology. Some of us took notes, and some of
Speaker 2: us got very lucky by believing in what Dan Eyes
Speaker 2: and Gene Munster said. This is the highlight of the
Speaker 2: summer on technology. Bloomberg Daybreak are Nathan Hager with Ives
Speaker 2: and Munster.
Speaker 1: Thank you so much for joining us for this special
Speaker 1: edition of Bloomberg Daybreak. US markets are closed for the
Speaker 1: Independence Day holiday. I'm Nathan Hager coming up this hour.
Speaker 1: They correctly predicted the artificial intelligence boom that led to
Speaker 1: record highs for several tech companies this year. Now they're
Speaker 1: back to assess whether this high tech bull has more
Speaker 1: room to run or whether it's headed into bubble territory.
Speaker 1: Joining us for the entire hour, our Gene Munster, managing
Speaker 1: partner at Deepwater Asset Management, and web Bush Security, senior
Speaker 1: equity research Channalyist Dan ives gentlemen, thanks once again for
Speaker 1: joining us for this special roundtable discussion on all things tech.
Speaker 1: And Dan, I want to start with you because you
Speaker 1: really have been out front on the bull case for
Speaker 1: AI over the last well really a couple of years now.
Speaker 1: So here's what you had to tell us around this
Speaker 1: time last fourth of July.
Speaker 3: My opinion, it's a fourth Industrial Revolution that's playing out
Speaker 3: in front of our eyes. We believe this is the
Speaker 3: start of a new tech bull market, and which is
Speaker 3: why we think second half of the year tech could
Speaker 3: be up fifteen, potentially twenty percent in a much broader
Speaker 3: rally because of what's happening from a growth perspective. I
Speaker 3: think it's ais tip of the iceberg.
Speaker 1: And since then, the Magnificent seven stocks tracked by Bloomberg
Speaker 1: are up fifty five zero percent on the total return.
Speaker 1: Where Dan can these megacap tech names keep up that
Speaker 1: kind of momentum.
Speaker 3: Look, it's nine pm. Still in this party, this AI
Speaker 3: party that I believe goes to four am. I mean,
Speaker 3: this is the start of a two year tech cycle
Speaker 3: because it's something where it's the multiplier for every dollar
Speaker 3: spent on nvidio chip, there's an eight to ten multiplier
Speaker 3: across software, across infrastructure, across the rest of that. That's
Speaker 3: why this is a nineteen ninety five movement, not a
Speaker 3: ninety nine nine movement. Get out the popcorn, we shoe
Speaker 3: detect bile market continues.
Speaker 1: So let's bring you in on this, Gene. Here's what
Speaker 1: you had to tell us about big text potential this
Speaker 1: time last year.
Speaker 4: There's gonna be some ebbs and flows in terms of
Speaker 4: the stocks in the near term, but I think that
Speaker 4: it will ultimately meet, exceed, will comfortably exceed all of
Speaker 4: the hype. And the hype is just intense. I mean,
Speaker 4: this universal optimism around it seems hard to believe, but
Speaker 4: I think it is. There is substance behind it.
Speaker 1: One year later, Gene is the substance still backing up
Speaker 1: the hype.
Speaker 4: It is, and that's the part that Dan and I
Speaker 4: keep a close eye on. As every quarter and in
Speaker 4: the middle the quarters, tracking how these companies are doing.
Speaker 4: Is it ultimately exceeding meeting disappointing to what those bars
Speaker 4: are and it's so far it's just been exceeding really
Speaker 4: across the board in vidious numbers. Of course, is the
Speaker 4: bell weather. Dan talks about the chips piece, that being
Speaker 4: the front end of it and that multiplier effect, But
Speaker 4: that's where I'm focused heavily on, is just what's going
Speaker 4: on the hardware side. Micron had exceeded estimates guided inline
Speaker 4: for the for the September core for their August quarter,
Speaker 4: which in AI world that may be viewed as a
Speaker 4: slight disappointment, but it did include an acceleration in revenue growth,
Speaker 4: so it's going from eighty two to ninety percent. So, Nathan,
Speaker 4: this is all intact, and my view that the substance
Speaker 4: will exceed the hype continues to be confirmed as we progress.
Speaker 1: Well, let's talk a little bit more about in video
Speaker 1: because obviously there's been so much attention on the AI chip. Darling, Dan,
Speaker 1: You've called Jensen Wong the CEO, the godfather of AI.
Speaker 1: But godfathers often have targets on their backs. I mean,
Speaker 1: how big a target is in video right now. When
Speaker 1: it comes to the overall chip space.
Speaker 3: Look, they're a target, but it's their world and everyone
Speaker 3: else's paying rent In terms of where we are, I mean,
Speaker 3: they're chips, they're GPUs and we've seen this across the
Speaker 3: you know, across the board in our trips to Asia.
Speaker 3: It's the new oil, the new gold, and at the
Speaker 3: top of the mountain it's the godfather of AI. Jensen
Speaker 3: and Nvidia. In that mount rushmore of AI along with
Speaker 3: the Della and others that want to join. But this
Speaker 3: is they're miles ahead of the competition. It'll ebb and
Speaker 3: flow a year from now. I think we're looking at
Speaker 3: three four trillion dollar markaps Apple, Microsoft and Nvidia, And
Speaker 3: as Jeans talked about throughout the year, it's far through
Speaker 3: the trees. You don't get too caught up with sometimes
Speaker 3: the gyrations we tweet quarter quarter it's where this is
Speaker 3: all going.
Speaker 1: Well, we have seen gyrations just in recent weeks since
Speaker 1: the ten for one stock split for in Vidia gene.
Speaker 1: Where do you see in Nvidia going at this point?
Speaker 4: I mean, that's exactly it. This is just gyrations and
Speaker 4: it's I believe it's going higher. I think it could
Speaker 4: go materially higher. And it comes to a basic question
Speaker 4: that investors have to ask themselves, and it's do you
Speaker 4: believe if you believe that we're in currently a generative
Speaker 4: AI inspired world it hasn't really taken impact on most
Speaker 4: of our lives, but a generative AI inspired world. And
Speaker 4: if you believe that eventually that leads to artificial general intelligence,
Speaker 4: which is a light year ahead of genitive AI. And
Speaker 4: if you believe that superintelligence is somewhere on the horizon
Speaker 4: five to ten twenty years on the horizon, if you
Speaker 4: believe that that is the future, which I hold those
Speaker 4: then and video is going a lot higher in video
Speaker 4: if AI works, in Vidia has to work.
Speaker 1: Speaking with Gene Munster, the managing partner at Deepwater Asset Management,
Speaker 1: and Dan Ives, senior equity research analyst at web Bust Securities,
Speaker 1: joining us in studio, Gene is joining us via zoom, Dan,
Speaker 1: where do you see the trajectory for in video? I mean,
Speaker 1: you've talked a lot about how the run seems like
Speaker 1: it has legs. What turns in video from the kind
Speaker 1: of growth that we've seen over the last several months
Speaker 1: to something of more stability.
Speaker 3: I mean, the use cases are just starting, so when
Speaker 3: you look a numbers, the street is still behind where
Speaker 3: the demand and where numbers actually go. So we could
Speaker 3: go through intra court people saying in type and stock
Speaker 3: sell off, but it all comes down to demand, and
Speaker 3: we are still in from baseball perspective, we're in the
Speaker 3: top of the second, bottom of the first in terms
Speaker 3: of where this is all heading, and they're the only
Speaker 3: show in town in terms of those chips. That's why
Speaker 3: I believe this is one where they continue to defy
Speaker 3: show numbers that I think are jaw droppers, and now
Speaker 3: the second, third, fourth derivatives hit across the rest of tech.
Speaker 1: Well, when it comes to that demand piece, Gene, I mean,
Speaker 1: can in Vidia meet the kind of demand that we've
Speaker 1: seen from a lot of its enterprise customers. Can the
Speaker 1: suppliers that in Vidia relies on meet that kind of demand?
Speaker 4: The best thing, the answer to simple answer is no,
Speaker 4: because everything that Dan's talking about that this early innings
Speaker 4: and we're just starting to build this infrastructure. Despite the
Speaker 4: breathtaking growth that Nvidia has had, we're just still early
Speaker 4: and we're going to see a whole new class. It
Speaker 4: has been the hyperscalers. We're going to see a whole
Speaker 4: new class of enterprisers. There's be industrial AI, there'll be
Speaker 4: sovereign AI from countries, and so they will start to
Speaker 4: be buying these chips, and ultimately I think it will
Speaker 4: be very difficult for TSM to keep up with in
Speaker 4: Vidia's demand. It's a great thing for investors because of course,
Speaker 4: when they have good numbers and they say we can't
Speaker 4: keep up, that allows investors to kind of continue to
Speaker 4: maintain a lot of their optimism. And so I think
Speaker 4: it's actually okay that it'll be fine for the stocks
Speaker 4: that in Vidia can't keep up with this demand. And
Speaker 4: I had a question for Dan, and you know, when
Speaker 4: I think about this kind of evolution and what's going
Speaker 4: on now is generative AI, and then how would you
Speaker 4: I describe there's a light year gap between generative AI
Speaker 4: and general intelligence because this is where you and I
Speaker 4: we're focused. The reason why we're not worried about quarters
Speaker 4: is worth thinking two three years down the road. And
Speaker 4: how do you think about that piece of it, the
Speaker 4: general intelligence piece of it, relative or just in terms
Speaker 4: of the the applications that could present themselves and the
Speaker 4: opportunity for wealth creation around.
Speaker 3: Yeah, it's a great question. And look, Gene, I think
Speaker 3: from everything, all the work we've done around the world,
Speaker 3: we think about sixty percent of data that's never been
Speaker 3: able to be cracked or used by enterprises and ultimately
Speaker 3: by consumers is now going to get unlocked. And you're
Speaker 3: going to have on the consumer side hundreds of apps
Speaker 3: while them through Apple. That is how most consumers are
Speaker 3: going to interact with AI in a way that they
Speaker 3: couldn't even imagine today. Enterprise is the same thing. As
Speaker 3: much as it's scary sci fi twenty first century, I
Speaker 3: think the reality is is that enterprises are finding massive
Speaker 3: use cases ROI, and that's why we believe there's a
Speaker 3: lot of these companies ten hours in earnings could be
Speaker 3: fourteen to fifteen.
Speaker 1: In terms of the advances that we could see. It
Speaker 1: raises a lot of questions when you talk about a
Speaker 1: leap from the kind of large language models that we're
Speaker 1: seeing now to this general intelligence. It raises the questions
Speaker 1: about whether artificial intelligence is advancing too fast for companies
Speaker 1: and people to keep up with the moral questions as well.
Speaker 1: I wonder how Gene, you think about some of those
Speaker 1: questions As a lot of these big tech companies do
Speaker 1: try to get to some of these massive leaps that
Speaker 1: used to be science fiction, but do seem like they're
Speaker 1: becoming that much closer to science fact.
Speaker 4: Yeah, the numbers are supporting it, just in terms of
Speaker 4: the breath taking expansion and intelligence of these models. Just
Speaker 4: to put some perspective around it, open AIGPT three had
Speaker 4: about one hundred and twenty billion parameters. They haven't given
Speaker 4: the numbers for four to oh, but it's estimated to
Speaker 4: be about a trillion. And that's kind of a simple
Speaker 4: way to think about how smart the model is is
Speaker 4: to look at the number of parameters. Think of this
Speaker 4: as it's over a period of a year, it's getting
Speaker 4: going almost a ten x improvement and intelligence. So this
Speaker 4: these are kind of growth curves that are that just
Speaker 4: we haven't seen makes the Internet growth look JV and
Speaker 4: I think when it comes to the pauses, Dan and
Speaker 4: I have talked about the benefits the benefits for companies
Speaker 4: to continue to build into this, and I think it's
Speaker 4: I appreciate your point about how can this be? You know,
Speaker 4: what are the negative sides? And I would just my
Speaker 4: view is this you can debate a lot of angles
Speaker 4: around how can this be negative or positive? I think
Speaker 4: the one piece that cannot be debated is it's going
Speaker 4: to get harder for people to distinguish what is truth
Speaker 4: and fiction and all the ramifications around that. I think
Speaker 4: you can You're going to see more tribalism. I think
Speaker 4: people just because you're going to get progressively easier to
Speaker 4: get fed what you want to hear. And so I
Speaker 4: think that that sides the most actually concerning part of
Speaker 4: me and just think about like global stability is just
Speaker 4: how AI is going to be used to influence how
Speaker 4: people think. I'm not worried about robots shooting people up
Speaker 4: or anything like that. I think it's this is just
Speaker 4: about how AI influences how we think.
Speaker 2: Now.
Speaker 1: I want to get deeper into those questions as we
Speaker 1: get deeper into the program. But Dan, just to close
Speaker 1: out this segment, I mean, we've seen these massive multiples
Speaker 1: for in Nvidia and other companies like it in terms
Speaker 1: of you know, the levels the valuations that they're trading at.
Speaker 1: Is that a new normal? These kinds of massive priced
Speaker 1: earnings ratios that we're seeing for companies like in Vidio.
Speaker 3: I mean, that's been what we've talked about it's a
Speaker 3: new normal. I think how many have missed this. They
Speaker 3: go back to their historical DCF spreadsheets while they're in
Speaker 3: their hibernation monas bears it's a new error.
Speaker 1: And we'll continue this roundtable discussion with Dan Ives of
Speaker 1: Webbush and Gene Munster of Deepwater Asset. Is this special
Speaker 1: fourth of July edition of Bloomberg Daybreak continues. It's twenty
Speaker 1: minutes past the hour. I'm Nathan, and this is Bloomberg.
Speaker 1: Welcome back to this special edition of Bloomberg Daybreak. I'm
Speaker 1: Nathan Hager. US markets are closed for the fourth of July,
Speaker 1: but we're breaking out the fireworks for a high tech
Speaker 1: power hour. We're back with Dan Ives, senior equity research
Speaker 1: analystic web Bush Securities, and deep Water Asset Management's managing
Speaker 1: partner Gene Munster. And guys. We've been talking a lot
Speaker 1: about Nvidia for obvious reasons. I want to get into
Speaker 1: some other names, though, with exposure to the AI space,
Speaker 1: there has been a lot of talk about Tesla as
Speaker 1: a potential AI play. Dan, I know you've been bullish
Speaker 1: on this stock for quite some time. How important is
Speaker 1: artificial intelligence going to be? Though? When it comes to
Speaker 1: Tesla's longer term growth.
Speaker 3: It's the wingepin to the bull case. Because I've never
Speaker 3: viewed Tesla as an auto company, as a car company.
Speaker 3: I viewed a disruptive tech and when we I think
Speaker 3: about autonomous and FSD, even when some of the things
Speaker 3: that are happening in China the next five, eight, ten years,
Speaker 3: the biggest bowl case for Tesla is I could argue
Speaker 3: it's probably the most undervalued AI name in the market
Speaker 3: relative to use cases. That's what we're focused on. It
Speaker 3: it's very easy to focus on, Okay, they missed deliveries
Speaker 3: by x amount, that's far as through the trees. We
Speaker 3: were focused on AI, FSD, autonomous and I know gene
Speaker 3: Is does a ton of work here, a ton of
Speaker 3: great work in terms of autonomous FSD, and I think
Speaker 3: this to me is a new it's really going to
Speaker 3: be in transformation that we see in the auto industry.
Speaker 1: Well, gene Is that central to how you see Tesla
Speaker 1: right now. I mean, there have been a lot of
Speaker 1: promises over the years from Elon Musk about how the
Speaker 1: data that Tesla's been able to collect from drivers over
Speaker 1: the years is going to feed into artificial intelligence potentially.
Speaker 1: Do you see that paying off anytime soon.
Speaker 2: I do.
Speaker 4: I think it's going to pay off faster than what
Speaker 4: people expect. I think we're going to have a GPT
Speaker 4: moment when it comes to autonomy and you look at
Speaker 4: the broader auto space. This has kind of been a
Speaker 4: surprising year where there's been more investment. Late last year
Speaker 4: we saw companies pairing back, some of the big auto
Speaker 4: paying back in their investment in autonomy. We've seen more
Speaker 4: increases this year from some of the traditional ones. But
Speaker 4: that said, Tesla still is far and above making the
Speaker 4: most investments in this and really, as Dan mentioned, this
Speaker 4: is really the central opportunity to invest in Teslas around
Speaker 4: what they're going to do with autonomy and what I
Speaker 4: think is beyond So Nathan, I think it's going to
Speaker 4: come earlier than what we think. My prediction is that
Speaker 4: if you're probably seven eight years old today, you're never
Speaker 4: going to have the need to drive a car, So
Speaker 4: I think within the next five years. I think it
Speaker 4: could be as early as two or three years. The
Speaker 4: legislation piece is going to be the big one holding
Speaker 4: this up, and then one other piece to the Tesla
Speaker 4: AI story. We're gonna hear more about it obviously on
Speaker 4: August eighth when they show their three new vehicles, and
Speaker 4: if us he's going to be a big part of
Speaker 4: that lineup. But one other piece is related to Optimists,
Speaker 4: and it's almost like, I don't know how you feel
Speaker 4: about this, Dan, about when you talk about Optimists with investors,
Speaker 4: it is if there's a sense like you almost lose
Speaker 4: credibility to say that it has real potential because it
Speaker 4: just seems so far far down the road. If something
Speaker 4: good happens in Optimists, the stock doesn't move. But I
Speaker 4: think that's another big piece. I love your take, Dan,
Speaker 4: just on like, is Optimists something that an investors should
Speaker 4: care about today?
Speaker 3: Yeah, exactly Jane's point. If I bring that up in
Speaker 3: an investor meeting, it's like the laughter just starts, Well,
Speaker 3: how could you even talk about that?
Speaker 2: Yeah?
Speaker 1: I mean because a lot of the thing is that,
Speaker 1: you know, there have been a lot of promises over
Speaker 1: the years for Elon Musk that autonomous is going to
Speaker 1: pay off, There's going to be a robo taxi. Obviously
Speaker 1: there's the August eighth unveil that we're expecting, but there's
Speaker 1: been a lot of expectation over the years and not
Speaker 1: as much payoff arguably that many investors might be looking for.
Speaker 3: But I would I'd agree, but also disagree, because the
Speaker 3: point is there was a point where if you said
Speaker 3: Tesla's going to be producing a million units per year exactly,
Speaker 3: and Gene remembers, they'd be like, wow, you must drank
Speaker 3: a lot of rose or had a good Friday night.
Speaker 3: And now we're coast to two million, and look at
Speaker 3: profitability when in today how much free cash are the
Speaker 3: general relative to when they were losing money?
Speaker 1: Now you could argue that maybe I'm looking at the
Speaker 1: trees for the forest here. But you know, there has
Speaker 1: been some reporting from Bloomberg Green in recent weeks that
Speaker 1: Tesla looks like it's on track to lose you know
Speaker 1: something that's been a bragging point for several years, it's
Speaker 1: electric vehicle market majority in the US. Gene just to
Speaker 1: that point about Tesla as its base business of electric
Speaker 1: vehicle manufacture, how much is it at risk of letting
Speaker 1: the competition eat into its market share?
Speaker 4: I think competitions in a much worse spot than people
Speaker 4: understand right now. And I mentioned some of the step
Speaker 4: forwards that some of these traditional autels have made around
Speaker 4: FSD in the past six months. But if you look
Speaker 4: at collectively what they've done over the past year, absent
Speaker 4: what Volkswagen's recent investment in Rivian, they've taken five steps back.
Speaker 4: They want to protect, largely protect their gas business, and
Speaker 4: making an electric car is different than making a gas car.
Speaker 4: This is the difference between making a lawnmower and a supercomputer.
Speaker 4: And I think that what you will see is, even
Speaker 4: though there's been some improvements in market share here and there,
Speaker 4: their ability to scale at a profitable rate is going
Speaker 4: to be challenging, and ultimately, I think it's a catch
Speaker 4: twenty two. I think Tesla is going to end up
Speaker 4: with twenty twenty five percent market share of cars in
Speaker 4: the US. It's down from where it's at today, but
Speaker 4: that is unprecedented kind of market share. One in four
Speaker 4: cars to be Tesla. But I think the reason why
Speaker 4: is it will be the best car for the best price,
Speaker 4: given the features, and I don't think other car companies
Speaker 4: are going to be able to largely keep up.
Speaker 1: You're talking about total market share, not just evis.
Speaker 4: Total market share correct. I think that twenty twenty five
Speaker 4: percent is I'm talking ten years down the road here,
Speaker 4: but I think that that is something again because they
Speaker 4: can scale at a profit way. The consumer brand matters
Speaker 4: and cars a lot, but ultimately they want the best value.
Speaker 1: Speaking with Genemunster of deep Water Asset Management and Dan
Speaker 1: Ives of web Bush Securities, and just to wrap things
Speaker 1: up a little bit on Tesla, Dan, do you feel
Speaker 1: like the company is back on track with Elon Musk
Speaker 1: after all the rigmarole around x formerly Twitter, the pay package,
Speaker 1: the reincorporation, all those questions that when Elon Musk's way,
Speaker 1: is Elon Musk still the guy for this company?
Speaker 3: I mean, look, Tesla's must Musk is Tesla. So that's
Speaker 3: why everything that in terms of that twilight zoning that
Speaker 3: we saw in Delaware with the com package, even though
Speaker 3: shareholders approved it. The point is that we're not talking
Speaker 3: about Tesla being a trillion two trillion dollar markap without Musk.
Speaker 3: I mean, you're talking about what i'd argue Meyer and
Speaker 3: day Albert Einstein of course has flaws, has issues. We
Speaker 3: all know it in terms of what comes with Musk.
Speaker 3: But when you look at autonomous, you look at when
Speaker 3: you actually go through the factories, when you go through Austin,
Speaker 3: you go through Freemont. You're in Nevaden, you see the
Speaker 3: actual battery factor. You go to China, you have a
Speaker 3: different perspective what they've been able to do, and then
Speaker 3: you look at all these other EV players that have fallen.
Speaker 3: It's a graveyard. Because they talk a game, big game,
Speaker 3: but as Gene said perfectly, the reality is so much
Speaker 3: more difficult. And I think even in Detroit they figured
Speaker 3: out with Marry and what Farley's seen as well, how
Speaker 3: hard is to produce evs profitably.
Speaker 1: I want to shift to another company that both of
Speaker 1: you follow very closely, that is Apple, and just to
Speaker 1: stick with the artificial intelligence theme as well, we've got
Speaker 1: Apple Intelligence rolled out at the latest Worldwide Developers Conference. Gene,
Speaker 1: I know you follow this company very closely. Is Apple
Speaker 1: back on track when it comes to AI?
Speaker 4: They are, And this is just going to be the
Speaker 4: sleeper AI story of the next three to five years.
Speaker 4: And the AI piece isn't going to start impacting, probably
Speaker 4: start until the December quarter. The streets having some nice improvements,
Speaker 4: going from three four or five percent year VIA revenue
Speaker 4: growth in the next few quarters seven percent next year. I
Speaker 4: think that number is going to be closer to ten
Speaker 4: percent plus revenue growth for twenty twenty for calendar twenty five,
Speaker 4: So I think that effectively. And Dan, I've seen your
Speaker 4: work on this. I think you've been just on just
Speaker 4: as this is the best consumer facing AI company. I
Speaker 4: think that's the language that you've used. I agree with that.
Speaker 4: I think that when you think about AI, a lot
Speaker 4: of the attention goes to Nvidio kind of on the
Speaker 4: build side. When it comes to consumer AI, Apple is
Speaker 4: best positioned, I think, to bring hardware, software services. It's
Speaker 4: their taglines. But it's true too, nobody brings it better
Speaker 4: together better. What that means is the average person who
Speaker 4: today has little exposure to AI will have a lot
Speaker 4: of exposure as this gets weaved into the fabric of
Speaker 4: Apple's products, and that's a revenue opportunity for app.
Speaker 3: And I'd say that was a drop the mic type
Speaker 3: what Gene just said. And I know Gene talks about
Speaker 3: like twenty percent, right, twenty percent of the world, like
Speaker 3: consumers will interact with AI through Apple, through through an
Speaker 3: Apple device. And it's so true because when you look
Speaker 3: at what they did with WWDC, if the initial reaction
Speaker 3: member moose in the street, they can't see forest through trees. Right,
Speaker 3: they've missed Apple from five hundred billion to three trillion,
Speaker 3: they'll miss it three to four trillion. Oh, I didn't
Speaker 3: see anything big Yet you have savants like Gene, and
Speaker 3: then I file in terms of like the way I
Speaker 3: view to be in there, I'm like, this is it?
Speaker 2: This?
Speaker 3: Because every consumer AI is now goes through Coopertino and Apple.
Speaker 3: And guess what that means. That's gonna be a whole
Speaker 3: other renaissance going terms the AI driven upgrade cycle on iPhone,
Speaker 3: but also services those applications hundreds and hundreds that are
Speaker 3: gonna be built. That's for consumers.
Speaker 2: So do you see how long?
Speaker 4: How long does it take for as soon as they
Speaker 4: turn on Apple Intelligence and these new phones come out,
Speaker 4: how long does it take for the kind of the
Speaker 4: word of mouth like people handing their phones to someone
Speaker 4: else and showing the generative features on it? How long
Speaker 4: do you think it takes to start to accelerate the
Speaker 4: iPhone growth?
Speaker 3: Well, I think it's gonna be quick. Think I think
Speaker 3: it's actually gonna be within the cycle even going into
Speaker 3: holiday season. But neither I'd say what Gene's talking about.
Speaker 3: Let's say me and Gene are at dinner in the
Speaker 3: six to one to two. Okay, Okay, We're sitting there
Speaker 3: and Gene show me his new iPhone sixteen is all
Speaker 3: these and I'm like, oh, how do I? Oh? No,
Speaker 3: I can't do that if I have an iPhone fourteen
Speaker 3: or an iPhone thirteen. So this is going to catalyze
Speaker 3: the beginning of an AI driven supercycle.
Speaker 1: How does that play out into some of Apple's smartphone
Speaker 1: competitors like Samsung, Apple.
Speaker 3: Plays chess, they play checkers. Because it goes back to
Speaker 3: two point two billion iOS devices one point five billion iPhones.
Speaker 3: I mean, that's the difference between Apple and everyone else.
Speaker 3: And I pose a question of Gene. Gene, what's your
Speaker 3: view of when everyone goes to you or the Apple
Speaker 3: they're late to the game, like they're late on AI.
Speaker 3: They've missed it. So what would you say to.
Speaker 4: That AI hasn't even started? How can you be late
Speaker 4: to something that hasn't started? And when I now define
Speaker 4: that is that typical person has heard probably heard about AI,
Speaker 4: but actually doesn't use it. The reason why open Ai
Speaker 4: is giving away this incredibly intelligent model by the world's
Speaker 4: smartest foundation model for Apple is because the power of
Speaker 4: their distribution, and that piece is just that is a
Speaker 4: tsunami that's getting unleashed that Apple has just been waiting
Speaker 4: to turn onto the market, and so my sense is
Speaker 4: that time is in the Apple's favor. They waited, they
Speaker 4: put together the right lineup for AI, and now they're
Speaker 4: going to get a chance for everyday people to experience it.
Speaker 1: And we're going to get more into where we are
Speaker 1: in this artificial intelligence cycle. As we wrap up this
Speaker 1: hour long big tech roundtable with Gene Monster of Deepwater
Speaker 1: Asset Management and Dan Ives of web Bush Securities, as
Speaker 1: the special edition of Bloomberg Daybreak continues thirty seven minutes
Speaker 1: past the hour, I'm Nathan Hager, and this is bloom Brown.
Speaker 1: Welcome back to this special edition of Bloomberg Daybreak. I'm
Speaker 1: Nathan Hager. US markets are closed for the fourth of
Speaker 1: July holiday and it's time to close out this special
Speaker 1: high tech roundtable. We have been spending the entire hour
Speaker 1: with Gene Munster, managing partner in Deepwater Asset Management and
Speaker 1: Wedbush Security senior equity research analyst Dan Ives. And Dan,
Speaker 1: I want to pick up on a point that Jane
Speaker 1: made at the end of the last segment that you know,
Speaker 1: we're still at the start of this artificial intelligence boom,
Speaker 1: and how can companies be left behind if we're just
Speaker 1: at the start of it. Do you see companies that
Speaker 1: could be left behind in the aim?
Speaker 3: I think many. I mean I've met with many companies
Speaker 3: They'll say AI thirty times in an hour, and I
Speaker 3: leave the the meeting being like, oh, it's gonna be
Speaker 3: a rough road. So the point is like, it's about
Speaker 3: the technology, the software engineers, the install base, your sales execution.
Speaker 3: I mean, look, if someone told you Dell was an
Speaker 3: AI place six months ago, you say, no way, what
Speaker 3: could oracle? So the stronger are gonna get stronger when
Speaker 3: the losers are going to be a glad The niche
Speaker 3: players squeezed out of sales cycles don't have the scale
Speaker 3: lead to the game lose software engineers. AI engineers are rare,
Speaker 3: right in terms of where we are today. So I
Speaker 3: do think this is gonna be one like strong gets stronger,
Speaker 3: And that's just the reality.
Speaker 1: What do you see things gene? Are there companies that
Speaker 1: could be left behind?
Speaker 4: I think that most companies will have a benefit, but yes,
Speaker 4: there'll be companies that will get left behind. They won't
Speaker 4: be able to keep up. And I think that what
Speaker 4: we've seen is that in the hardware world that is
Speaker 4: where all the action is today. The software software companies,
Speaker 4: the big software companies are based flat. They're down a
Speaker 4: few percent this year, which is remarkable compared to the
Speaker 4: hardware which is up called average fifty percent. So I
Speaker 4: think where the companies get left behind is this up
Speaker 4: and coming class. And at deep Water we focus on
Speaker 4: we have the benefit of doing both public and private.
Speaker 4: And on the private side there is these anointed AI
Speaker 4: companies some of them some of them everyone's heard of
Speaker 4: open ai and Xai, but there's other ones that people
Speaker 4: haven't heard of, like Data Bricks and Andril. And I
Speaker 4: think that there is going to be a class that's
Speaker 4: going to go public in twenty five, twenty six, twenty
Speaker 4: seven that is going to challenge some of the software
Speaker 4: companies that have had great businesses for the last fifteen years.
Speaker 4: And so I think I don't have the these three
Speaker 4: companies are going to be at risk, but I would
Speaker 4: just point out this. I think that the private software
Speaker 4: opportunity around AI is going to be headlines in twenty five,
Speaker 4: twenty six, and twenty.
Speaker 1: Seven speaking of headlines. When we have this kind of
Speaker 1: ma massive run in the stocks and a lot of
Speaker 1: these companies that we talk about day in and day out,
Speaker 1: there's been a lot of regulatory scrutiny as well. I'm
Speaker 1: thinking particularly about a lot of the action that's been
Speaker 1: happening in the European Union when it comes to Apple, now,
Speaker 1: Meta platforms, Dan. Is that a potential risk, potential head
Speaker 1: risk for some of these companies. The idea of regulatory scrutiny.
Speaker 3: Look, I think right now, regulatory is in a mini
Speaker 3: van going fifty five miles an hour in the right lane,
Speaker 3: and in the left lane is the technology in the
Speaker 3: Bugatti going one hundred miles an hour? The point is regulatory.
Speaker 3: I view it as more background there every look the certainties.
Speaker 3: When you wake up coffee, you're gonna get deleyed on
Speaker 3: some mass transportation train plane and the EU is going
Speaker 3: to find a big tech player. So the point is
Speaker 3: this is I think the streets almost become immune and
Speaker 3: I don't see that it spoils the AI party, which
Speaker 3: I believe. It's still nine pm and it goes to
Speaker 3: four am. Geane, do you think Europe just falls so
Speaker 3: far behind us? Asia other parts of the world because
Speaker 3: of this regulatory.
Speaker 4: I think that at the highest level, Yes, I think
Speaker 4: that their restrictive policies are going to have an impact.
Speaker 4: You need to be embracing these and so I do
Speaker 4: think that there's risk what the EU is doing as
Speaker 4: risk beyond what the regulators understand, and so my general
Speaker 4: sense is that they need to make some changes. It's
Speaker 4: not going to happen. I love your analogy about things
Speaker 4: you can depend on in life. Yes, the EU finding
Speaker 4: some going after some big tech company, and I would
Speaker 4: just add one other piece just around this. It's just
Speaker 4: a chess match. And the reason why, just to put
Speaker 4: another point on what Dan said, the reason why invest
Speaker 4: don't care is because they understand that these big tech
Speaker 4: companies can find ways to get around any of the regulations,
Speaker 4: effectively dampening what their potential penalties are. And so I'm
Speaker 4: more confident that big tech can figure it out and
Speaker 4: get around these hurdles.
Speaker 1: Well, what should investors be worried about when it comes
Speaker 1: to the growth that we've seen in AI companies gene Well.
Speaker 4: This is one of the bizarre parts of this piece.
Speaker 4: And Dan and I were around during the Internet bubble,
Speaker 4: and the analogy. I'd say the thing that when I
Speaker 4: get asked like what's most concerning, it's around how it's
Speaker 4: going to impact how we think and how we feel
Speaker 4: about each other. I talked about that earlier. But from
Speaker 4: the standpoint of what's concerning to stop this, I think
Speaker 4: the only things would be something around availability of power
Speaker 4: and maybe something around Taiwan. But beyond the ad this
Speaker 4: is this rocket is going to take off, and I'm
Speaker 4: I always embrace like identifying what the real risk is,
Speaker 4: and they're pretty distant this is going to happen.
Speaker 1: We're speaking with Gene Munster, managing partner Deepwater Asset Management,
Speaker 1: and Dan Ives's senior equity research analyst at web Bush Securities.
Speaker 1: You're talking about it as a nine pm and a
Speaker 1: four am party, Dan, but do you see any potential
Speaker 1: risks to the AI run. Could we be driving these
Speaker 1: companies up into an asset bubble?
Speaker 3: I mean, I think there's a two year bull cycle.
Speaker 3: I mean at points when we get towards three thirty
Speaker 3: four am, there will be issues, especially for ones that
Speaker 3: don't actually execute, but I see it it's an auto bond.
Speaker 3: We'll have some issues with quarters and air pockets and
Speaker 3: worries and bears that have been negative and tech philist
Speaker 3: you know since two thousand and nine, come out again
Speaker 3: saying that this is a bubble. The reality is it's
Speaker 3: a Fourth Industrial Revolution plan out and some look, some
Speaker 3: are gonna look at this party from the outside and
Speaker 3: they'll be like, you know what, I'm just gonna eat
Speaker 3: ice cream in my room. Guess what, let's meet at
Speaker 3: six am for breakfast. I'll go to the party, they go,
Speaker 3: and who had the better night? And the point is,
Speaker 3: I think as it all plays out, that's it. This
Speaker 3: is a tech bowl marker. You could deny it, the
Speaker 3: multiplier impacts. Just starting with Godfather of Ai Jensen a video.
Speaker 1: Just to carry over the analogy. What's the risk of
Speaker 1: a six am hangover?
Speaker 3: First of all, there's after parties at five and six am,
Speaker 3: and then even in those you'll have some that fall
Speaker 3: by the wayside. But if you focus on the winners
Speaker 3: and keep the thesis again, we're gonna be talking about
Speaker 3: four trillion, five trillion dollar mark aps Nazdak twenty twenty two,
Speaker 3: twenty five K over the next three four five years.
Speaker 1: In my opinion, is that something that you agree with Gene.
Speaker 4: Yes, I mean, I like Dan's party analogy is much
Speaker 4: more of my baseball analogies. But I'm at the third
Speaker 4: inning of this, and we think we're in the early
Speaker 4: stages of a three to five year bull market, and
Speaker 4: I don't I wouldn't. Don't worry about the after don't
Speaker 4: worry about the hangover. At this point, I think you
Speaker 4: just embrace that this is as the substance will exceed
Speaker 4: the hype and we've got some great years ahead of
Speaker 4: us from the market.
Speaker 2: Now.
Speaker 1: Obviously we've been talking a lot about the Magnificent seven
Speaker 1: stocks and VideA leading the way in lots of aspects.
Speaker 1: But as we close out this our guys, let's talk
Speaker 1: a little bit about some of the names that maybe
Speaker 1: you'd advise investors to steer clear of entirely. Start with you, Gene, Well.
Speaker 4: This is one that I've had talk about in the past.
Speaker 4: I've been wrong. I'm gonna stick with it. It's Netflix.
Speaker 4: It's a bigger company, and it's one that has a
Speaker 4: benefit to AI, but it's not like a true AI company.
Speaker 4: It's content, and I think that there is a shift
Speaker 4: going on in content to the creator economy. Let's think
Speaker 4: of it as what's happened in YouTube and TikTok multiplied
Speaker 4: by many times, and I think Hollywood's going to get disrupted.
Speaker 4: I think companies like Netflix are going to get disrupted,
Speaker 4: and I think that it's just not that exciting of
Speaker 4: a story on top of it interesting.
Speaker 1: What's your view on where the entertainment industry is going down?
Speaker 3: I mean, look, I think you could play the scary
Speaker 3: sort of angle we saw with some of the Hollywood
Speaker 3: strikes in terms of how it's going to impact negatively.
Speaker 3: I actually think it's going to create sub industries and
Speaker 3: companies that are massively successful streaming. There is a revolution
Speaker 3: going on. It's content driven, and you're going to see
Speaker 3: more and more entertainment companies, applications going to be built
Speaker 3: on top of watching sports, watching entertainment, gonna be able
Speaker 3: to go into a movie, whether it's a vision pro
Speaker 3: or others that you'll be bringing in. The point is this,
Speaker 3: things are gonna be happening over the coming years that
Speaker 3: you never would have imagined today, and there's gonna be
Speaker 3: winners from that and losers. And I think that's something
Speaker 3: as it all plays out. That's why you listen to
Speaker 3: people like Gene because they don't get nerve on quarters.
Speaker 3: They don't all of a sudden like so many others,
Speaker 3: just follow the herd and go negative. That the farest
Speaker 3: through the trees. That's why if Gene was a pilot,
Speaker 3: I'd be I'd be in three a drinking cabernet. I
Speaker 3: feel I'm pretty comfortable watching Netflix over.
Speaker 1: There in first class. What about winners, dan Ives, what
Speaker 1: what are your biggest names that you're looking at to
Speaker 1: really do well in the long term.
Speaker 3: I think the MESSI of AI pounteer front and center.
Speaker 3: I think names like service Now Oracle with the renaissance
Speaker 3: of growth. I look at names like Mango, dB you know,
Speaker 3: and then of course Microsoft being one of our top picks.
Speaker 3: I think what's gonna happen is in software and even
Speaker 3: cybersecurity themes that CrowdStrike, Z scale pow out. Though there's
Speaker 3: gonna be a massive talent in terms of these AI
Speaker 3: driven workloads as the Batanga ten from send me to software.
Speaker 1: Of course, uh, we know your coverage of Apple and
Speaker 1: some of the other big cap tech names. Geene, what
Speaker 1: are some of your biggest winners As we think farther
Speaker 1: ahead into where we could be in this tech cycle.
Speaker 4: Apple is going to surprise people over the next few years.
Speaker 4: I think Tesla is going to surprise people around these
Speaker 4: variant vehicles that they're going to come up with. And
Speaker 4: I think there's gonna be some legs to Optimus on
Speaker 4: the where else, as I mentioned, spent a lot of
Speaker 4: time on the private side. I think companies like Xai
Speaker 4: are gonna be one of the anointed foundation models. Data Bricks,
Speaker 4: I think is another company I mentioned Andrew before. This
Speaker 4: is kind of the future of defense tech. And well,
Speaker 4: those three are difficult to invest in today, they soon
Speaker 4: in matter of a few years, will be public.
Speaker 1: Really appreciate having you both on to take this longer
Speaker 1: term view in an hour long roundtable discussion on this
Speaker 1: massive bull run that we continue to see in the
Speaker 1: tech space. Thanks to both of you for being with
Speaker 1: us Web Bush Security Senior Equity research channalyst Dan Ives
Speaker 1: along with Gene Munster, managing partner at Deepwater Asset Management,
Speaker 1: spending the entire hour with us on this special edition
Speaker 1: of Bloomberg Daybreak.
Speaker 2: So there's Dan Ives and Gene Munster with Nathan Haggard.
Speaker 2: Look for Bloomberg Daybreak way too early in the morning,
Speaker 2: and then of course look for Bloomberg surveillance on YouTube,
Speaker 2: on Apple car play, on Android Auto, and on Apple podcast.
Speaker 2: So special edition of single Best I You