Speaker 1: Bloomberg Audio Studios, podcasts, radio News.
Speaker 2: A really good morning for big tech following big results
Speaker 2: and the latest earnings reports. Both Microsoft and Meta platforms
Speaker 2: are surging pre market after results suggesting the arms race
Speaker 2: and artificial intelligence spending maybe starting to pay off. Joining
Speaker 2: us now as someone who's been sounding the drumbeat on
Speaker 2: the promise of AI, Dan Ives, Global head of Tech
Speaker 2: Research at Webbush Securities, you must be feeling really good
Speaker 2: this morning, Dan, and I want to start right off
Speaker 2: with your latest note on Microsoft. You're raising your price
Speaker 2: target on the stock to six twenty five. Microsoft's already
Speaker 2: poised to become another four trillion dollar company this morning.
Speaker 2: What gets Microsoft to five trillion in your view? Good morning?
Speaker 1: Yeah, good morning. Look Neat, I mean me and you
Speaker 1: have pub us for years. I think this is a
Speaker 1: watershed moment, not just from Microsoft, from Meta and what
Speaker 1: it means for big when it comes to the AI
Speaker 1: revolution hitting its next stage or growth. Look Microsoft, I
Speaker 1: believe Microsoft and Nvidia will be five trillion dollars mark
Speaker 1: caps in twenty twenty six. We are just starting this
Speaker 1: next stage of the AI revolution.
Speaker 2: We saw thirty nine percent sales jump in particular for
Speaker 2: Azure Cloud. A big piece of this as well is
Speaker 2: that kind of growth sustainable, those kinds of solid double
Speaker 2: digit sales returns.
Speaker 1: Look, these are jaw dropping numbers. I mean when you
Speaker 1: think about cloud and even some of the strength that
Speaker 1: we are expecting coming in, it's one where enterprises are
Speaker 1: lining up with Microsoft given what we're seeing in AI. Now,
Speaker 1: Look will that eventually moderate? Of course, what this essentially
Speaker 1: means is Microsoft is almost creating another company within Microsoft
Speaker 1: in terms of AI that I believe right now, you know,
Speaker 1: they're kind of leading the race when it comes to cloud,
Speaker 1: ahead of Amazon of course, you know Google.
Speaker 2: In terms of what enterprise customers are getting out of
Speaker 2: that race. Of course, we've seen the strides they've made
Speaker 2: with Microsoft Copilot. What other use cases do you see
Speaker 2: Microsoft putting out there for a broader market?
Speaker 1: Look, I think it's across verticals. I mean, that's why
Speaker 1: you're seeing customers lining up. And look at Microsoft there
Speaker 1: now for cap backs. Originally you're an eighty billion, now
Speaker 1: you're one hundred and twenty million. So as they're expanding,
Speaker 1: as you saw Alphabet do the same thing, this arms
Speaker 1: race is just starting. But I said, like, look, this
Speaker 1: is a scottis shop for a quarter from Microsoft. But
Speaker 1: it's not the end. It's actually the beginning of the second, third,
Speaker 1: fourth derivatives playing out for AI. And that's bullish for tech.
Speaker 2: So do you see Microsoft sort of building a moat
Speaker 2: around what it's doing with A or could some of
Speaker 2: its competitors chip away at what they're doing?
Speaker 1: Yeah, we don't muse as a zero some game, and
Speaker 1: that's why we're bullish on Amazon and Google, and of
Speaker 1: course you do akud Oracle as well, But on the
Speaker 1: enterprise that's their backyard. That's where they dominate. And I
Speaker 1: think the Della and Microsoft they're playing almost another game
Speaker 1: now than everyone else, and that's what you're seeing in
Speaker 1: these numbers execution flawless. They obviously will get wet in
Speaker 1: the velvet ropes to the fortrinion dollar markp Cloud with
Speaker 1: the media, but it's just the beginning in terms of
Speaker 1: the next stage of cloud and AI growth.
Speaker 2: In terms of what we're seeing out of meta platforms
Speaker 2: as well, Dan, I wonder what you make of this
Speaker 2: personal intelligence or personal super intelligence strategy that Mark Zuckerberg's
Speaker 2: putting out there with his AI vision.
Speaker 1: I mean, that's how you're going to get to a
Speaker 1: four digit stock because I think Zuckerberg right now wartimes, see, yeah,
Speaker 1: focused on really going to full sort of end to
Speaker 1: end when it comes to the consumer AI revolution. What's
Speaker 1: amazing about these numbers is just the advertising growth, even
Speaker 1: the lack of spend there. I mean, this is a
Speaker 1: company that's transforming right in front of us, and they
Speaker 1: are going to be front and center asm modernization when
Speaker 1: it comes to the consumer piece of AI.
Speaker 2: I love that you call it a lack of spend.
Speaker 2: I mean, we've seen him putting out, you know, one
Speaker 2: hundred plus million dollars pay packages for some of these
Speaker 2: people that he's poached from other companies to join a
Speaker 2: super intelligence team. He's talking about sixty six to seventy
Speaker 2: two billion dollars in AI spend. Is that the kind
Speaker 2: of level that investors can stomach?
Speaker 1: Look, eventually it will moderate, okay, But but if you
Speaker 1: look at even just from an investment perspective, in advertising,
Speaker 1: you just forget about some of those pay packages. I mean,
Speaker 1: what they're what you're seeing on the advertising and growth
Speaker 1: is really impressed and in terms of like what they're
Speaker 1: spending there in capax and they're different we're seeing in
Speaker 1: big tech. Look, this is an arms race, and no
Speaker 1: tech company wants to be on the outside looking in.
Speaker 1: And that's what's so impressive about what met is doing,
Speaker 1: what Microsoft's doing solid Alphabet and I think you'll see
Speaker 1: what Amazon as well. I mean that this is but
Speaker 1: it's not just about Max seven. It will spread to
Speaker 1: the rest of tech. Well.
Speaker 2: In our last minute or so, let's get to the
Speaker 2: companies that we are going to be hearing from after
Speaker 2: the bell today. You mentioned Amazon, We're going to hear
Speaker 2: from Apple as well. It seems like Apple has been
Speaker 2: kind of falling behind in terms of where they're going
Speaker 2: with AI.
Speaker 1: Yeah. Man, I think that's been the frustration. Right, you
Speaker 1: have the biggest install based in the world. They need
Speaker 1: you know, I continue to bleed perplexity is the acquisition
Speaker 1: they need to make. It's not going to happen internally,
Speaker 1: but but I think when it choose is to look
Speaker 1: at Amazon, you can say Amazon a year ago nowhere
Speaker 1: now aggressively focus on the AWS and mod tide and
Speaker 1: when it comes to a top burn cloud. Because we're
Speaker 1: talking about what's going to be a tech bullmarker for
Speaker 1: the next few years, biggest tech theme we've seen the
Speaker 1: last forty to fifty years to fourth indust Revolution. Apple
Speaker 1: can't be on the outside looking in.
Speaker 2: Just quickly you've called for Apple to buy Perplexity and
Speaker 2: take its AI out from in house. Do you see
Speaker 2: Tim Cook leaning that way toward an acquis inquisitive stance.
Speaker 1: Look, they've never done acquisitions really before outside beets, but
Speaker 1: times are changing. You can't be on a park bench
Speaker 1: drinking lemonade while the AI revolution passes you.
Speaker 2: Bai, appreciate the thoughts as always, Dan, thanks for coming
Speaker 2: on early. That's Dan Ives, Global head of Tech Research
Speaker 2: at Webbush Securities.