Speaker 1: Thank you so much for joining us for this special
Speaker 1: edition of Bloomberg Daybreak. Happy New Year, everybody, Welcome to
Speaker 1: twenty twenty five. Markets are closed for the holiday. I'm
Speaker 1: Nathan Hager coming up this hour. They are back. It's
Speaker 1: become a bit of a tradition here. Two of the
Speaker 1: most prominent tech analysts on Wall Street are with us
Speaker 1: for the entire hour, getting you ready for what's hot
Speaker 1: in high tech in twenty twenty five. So, without further introduction,
Speaker 1: we are pleased to welcome back Gene Monster, managing partner
Speaker 1: in Deepwater Asset Management, and Dan Ives, global head of
Speaker 1: Tech research at Webbush Security. So great to have the
Speaker 1: both of you back with us on this holiday. And
Speaker 1: let's kick this off if we can, with a look
Speaker 1: at artificial intelligence, because obviously this has been the maybe
Speaker 1: the biggest theme on Wall Street since chat GPT came
Speaker 1: out two years ago. So, Gene, here's what you told
Speaker 1: us this time last year about where you think we
Speaker 1: are in the AI cycle.
Speaker 2: Listen, we're in the early stages of a three to
Speaker 2: five year bull market, and I don't I wouldn't. Don't
Speaker 2: worry about the after, don't worry about the hangover At
Speaker 2: this point, I think you just embrace that this is
Speaker 2: as the substance will exceed the hype, and we've got
Speaker 2: some great years ahead of us from the market.
Speaker 1: You told us it's the third inning of the AI
Speaker 1: ball game, Jean, So where would you say we are now?
Speaker 2: I think we're probably on the fourth inning. We're still early,
Speaker 2: which seems out of touch with reality, but I think
Speaker 2: that that is how significant this transformation is going to be,
Speaker 2: and so we're definitely further along. But I still believe
Speaker 2: I talked about three to five years. I think we've
Speaker 2: still got another two good years left here. And I
Speaker 2: think that as you know, this concept of the substance
Speaker 2: exceeding the hype we are seen now with some of
Speaker 2: the hardware companies, but we really haven't seen it beyond
Speaker 2: beyond a few companies.
Speaker 3: And I just put this.
Speaker 2: This is one of the more encouraging data points is
Speaker 2: that opening up doesn't break out these numbers, but you
Speaker 2: can back into them. They're daily active users for GPT
Speaker 2: Global are around one hundred and fifty million, one hundred
Speaker 2: and fifty million. Google's daily act A search uses are
Speaker 2: two point five billion. In other words, even though we
Speaker 2: talk a lot about this. The whole train really is
Speaker 2: still in the station.
Speaker 1: So it's still early innings for you. Let's turn to you, Dan,
Speaker 1: because here's what you told us about where you think
Speaker 1: the AI boom was this time last year.
Speaker 4: I mean, I think there's a two year bull cycle.
Speaker 4: I mean at points when we get towards three thirty
Speaker 4: four am, there will be issues, especially for ones that
Speaker 4: don't actually execute. But I see it. It's an auto bond.
Speaker 1: Is it still an auto bond for you, Dan? Or
Speaker 1: are we running into speed bumps?
Speaker 5: Well, it's ten pm in this AI party that goes
Speaker 5: to four am, and I think if you see how
Speaker 5: this all played out, as Junie talked about, this is
Speaker 5: just the first step in two trillion of AI capacs.
Speaker 5: And I just went point to for every dollar spend
Speaker 5: on a video chip, we believe there's an eight to
Speaker 5: ten dollars multiplier across the rest of tech, and that
Speaker 5: speech to why we believe this is a bull market
Speaker 5: that continues to play out throughout twenty twenty five and
Speaker 5: ultimately twenty twenty six because of where this spending is
Speaker 5: and it just is starting. And that's why I always
Speaker 5: say the bears when they're in their caves in hibernation
Speaker 5: mode like the last two years, they can't find AI
Speaker 5: in the spreadsheets.
Speaker 1: But if it's still progressing, if we're still at the
Speaker 1: early innings for both of you guys, when do these
Speaker 1: companies need to show that they're getting past the early stages.
Speaker 1: I'll start with you, Gene.
Speaker 2: I think with the software company. So we've obviously seen
Speaker 2: it in the hardware, and I love that eight x multiplier.
Speaker 2: I think that you're framing in there, and I think
Speaker 2: it just it paints the picture of the scope of
Speaker 2: what's happening with hardware, and also that this year we're
Speaker 2: going to have to see some improvement in some of
Speaker 2: the software growth rates. And it doesn't need to be significant.
Speaker 2: We're talking about acceleration. In the case of like Salesforce,
Speaker 2: they grew booking this last quarter at ten percent. I
Speaker 2: thy can inch that up to twelve percent for example.
Speaker 2: I think that that would be enough. All investors need
Speaker 2: to see in twenty twenty five is just that the
Speaker 2: numbers are starting to move higher. They don't need to
Speaker 2: have These companies don't need to have breath taking breakout
Speaker 2: like we've seen with Nvidio. We just need the tie
Speaker 2: to slowly rise, and I think that the trade is
Speaker 2: going to be intact.
Speaker 1: Is that how you see it?
Speaker 2: Dan?
Speaker 1: I mean you were talking last year about an autobahn,
Speaker 1: about this sort of breakneck speed at which AI could develop.
Speaker 1: Is a slowdown going to be enough to keep investors
Speaker 1: in this?
Speaker 5: Look? I think? I mean to a Jean's talking about
Speaker 5: it's about software now is at the AI party? I
Speaker 5: mean they were behind the velvet ropes waiting to get
Speaker 5: their name on the list, and now look who's there.
Speaker 5: It's the messy of AI. Pound Teer, you you got
Speaker 5: sales force, you got service now because the use cases
Speaker 5: are happening. And that's how poll and Teer remember the
Speaker 5: hater they hated as a teenager thirteen dollar stock, now
Speaker 5: they hated as a senior citizen in eighty. Because it's
Speaker 5: just starting to play out in terms of the second
Speaker 5: third derivative, that software, that cybersecurity, that the AI infrastructure,
Speaker 5: and Christmas came early to the bulls with con out
Speaker 5: of the FTC. That means deal making finally is going
Speaker 5: to start up. Because that was a nightmare on Elm
Speaker 5: Street for tech Conn the FTC. That's over and the
Speaker 5: Trump administration. It's a goldilock scenario for the bulls, specially
Speaker 5: the AI revolution here, and it's still in nineteen ninety six.
Speaker 5: It's not nineteen ninety nine in terms of our vu
Speaker 5: how this all plays out.
Speaker 1: Talk to me a little bit, Gene about how you
Speaker 1: see the regulatory environment playing out once we get into
Speaker 1: the early days of twenty twenty five.
Speaker 2: I want to add something to what Dan just talked
Speaker 2: about in terms of the nineteen ninety six analogy, and
Speaker 2: Dan and I were around there. We were covering tech
Speaker 2: at that point and lived that just really special time
Speaker 2: in investing, and I want to just mention there's an
Speaker 2: important nuance to how the market I think plays out
Speaker 2: in twenty twenty five is that during that run from
Speaker 2: ninety six to two thousand, there were during that period
Speaker 2: there were ten pullbacks. There's twelve pullbacks from ninety five
Speaker 2: to two thousand, so ten pullbacks, so about two per
Speaker 2: year is what we saw of ten percent or greater
Speaker 2: on the Nasdaq. And I just want to anticipate joining
Speaker 2: Dan later on in twenty five and talk about this
Speaker 2: pullback in the market, like is this over? And I
Speaker 2: would just say this is is really healthy for these
Speaker 2: multi year runs to have these pullbacks, and so I'm anticipating,
Speaker 2: as I said, a couple of those. And what's going
Speaker 2: to be the piece that kind of what's the catalyst
Speaker 2: that does that. It's always hard to predict, but we're
Speaker 2: going to get those. And I still continue to believe
Speaker 2: we're going to end twenty five much higher on the
Speaker 2: NASZAQ than we started so and just quickly on the on.
Speaker 3: The on the regulatory piece.
Speaker 2: And I think that big tech has been you know,
Speaker 2: largely in the penalty box when it comes to trying
Speaker 2: to acquire and innovate around that, and my my hope,
Speaker 2: my expectation is that I think that that's going to loosen.
Speaker 2: I think we're going to see some some bigger acquisitions
Speaker 2: in twenty five, and I think it's going to be
Speaker 2: about bigger they're small companies, but they're going to have
Speaker 2: high valuations that are in the private market today, and
Speaker 2: we can talk more about those, but I think this
Speaker 2: is going to be a good year for big tech
Speaker 2: and that from that perspective, yeah.
Speaker 1: We are going to get into some of that. We
Speaker 1: are speaking with Gene Monster, the managing partner at deep
Speaker 1: Water Asset Management and Dan, Global head of Tech Research
Speaker 1: at Webbush Securities. Dan to Jean's point about the possibility
Speaker 1: of pullbacks in big tech in twenty twenty five. I mean,
Speaker 1: obviously we've seen the valuations where they are. They're sky
Speaker 1: high for a lot of people. You say, they're justified.
Speaker 1: What is the risk that we could see a little
Speaker 1: bit of choppiness as we head into the next few years.
Speaker 5: Look, and to that pointment came about this year Tokyo
Speaker 5: Black Monday, Right, I mean you had five or six
Speaker 5: other points. Some of the FED and the Bond Vijulanes
Speaker 5: come out and those create the opportunities. And I think
Speaker 5: with Trump coming in there would definitely be be some
Speaker 5: white knuckle moments with China tariff discussions, game of high
Speaker 5: stakes poker going on. Right, So there's been a lot
Speaker 5: of headline risk. But the Gene's point, that's what you
Speaker 5: tune the noise down, You focus in the winners. And
Speaker 5: again the bears that talk about valuation, that's how they
Speaker 5: missed every transformational tech nam in the last twenty years,
Speaker 5: because when you're in the right lane going thirty five
Speaker 5: miles an hour, you're not focused on paying up to
Speaker 5: the Ferrari going ninety miles an hour in the left lane.
Speaker 5: But that is ai revolution. You will have those moments
Speaker 5: and you just have your pencils writing just to play.
Speaker 2: Tell me add something to the valuation, because you're right
Speaker 2: on Dan another great point just about you know this,
Speaker 2: the bears are looking at valuation not recognizing the significance valuation.
Speaker 2: Let's just go back and use the example of what
Speaker 2: happened from ninety five to two thousand. The Nasdaq peaked
Speaker 2: at one hundred times earnings on future Right now, where
Speaker 2: what are we high twenties something like that.
Speaker 3: We're not even close now.
Speaker 2: Given the dynamic of the megacaps today that we didn't
Speaker 2: have twenty five years ago, you're not going to get
Speaker 2: one hundred multiple on the NASDAK, but you might get
Speaker 2: a fifty multiple on it. And so I think that
Speaker 2: the conversation about valuation, to me, misses the point when
Speaker 2: a paradigm shift happens and you area kicks in. Really
Speaker 2: impressive things can happen on multiple expansion.
Speaker 5: I'd say, frame what Genior said, Print that out frame it.
Speaker 5: We're going to be talking about that in a year, though.
Speaker 1: I got to ask, I mean, it's the point that
Speaker 1: I guess gets brought up every year around this when
Speaker 1: you bring in the analogy of nineteen ninety five versus now,
Speaker 1: it raises the question about whether this is going to
Speaker 1: be a repeat of the dot com boom. I mean,
Speaker 1: you both have talked about how artificial intelligence could potentially
Speaker 1: be a paradigm shift. We've seen it play out in
Speaker 1: certain ways, but other than chat GPT, cute chatbots, and
Speaker 1: you know, changes in the way people search for things online.
Speaker 1: How do we see that paradigm shift? When do we
Speaker 1: get to the point that we're going to see the
Speaker 1: kind of productivity improvements across the economy that so many
Speaker 1: of the bulls around AI have been predicting. I'll start
Speaker 1: with you, Dan, Look.
Speaker 5: That's where it's happening. Consumer is not even gonna have
Speaker 5: them for I'll say, second half twenty five, going to
Speaker 5: down in twenty six. But look what's happened in the enterprise.
Speaker 5: That's where you're seeing the cap back. That's why Jensen's
Speaker 5: the godfather of AI. That's what we're seeing across cloud.
Speaker 5: You're gonna see the paradigm change. It's already happened with
Speaker 5: the use case from the enterprise consumer that's coming still ahead.
Speaker 5: It speaks this multi year run in terms of what
Speaker 5: we're going to see in terms of Fourth Industrial Revolution, and.
Speaker 1: Your thoughts just quickly, Jane.
Speaker 3: I mean, I think it's it's starting.
Speaker 2: If you look at enterprise piece that's you listen to
Speaker 2: Benny Aff's comments from Salesforce about how he sees agents
Speaker 2: basically taking over half of the humans works. It's in medicine,
Speaker 2: we're doing experiments and projects and using AI and the
Speaker 2: investment side too, and bottom line there's massive cost saving.
Speaker 2: So I think it's actually happening more. It's just that
Speaker 2: the consumer pieces Dan said hasn't kicked in yet.
Speaker 1: And we're going to talk much more about this potential
Speaker 1: use cases for artificial intelligence and more of the hot
Speaker 1: tech trends coming into the new year as we continue
Speaker 1: on this special edition of Bloomberg Daybreak focused on Tech
Speaker 1: with Gene Munster, managing partner at Deepwater Asset Management, and
Speaker 1: Dan Ives, the global head of Tech research at web
Speaker 1: Bush Securities, with us for the full hour on this
Speaker 1: New Year's day, so stay with us. It is twenty
Speaker 1: minutes past the hour. I'm Nathan Hager, and this.
Speaker 5: Is Bloomberg.
Speaker 1: Welcome back to the special edition of Bloomberg Daybreak. I'm
Speaker 1: Nathan Hager. Markets are closed for the New Year's holiday,
Speaker 1: but it's a high tech power hour. We are speaking
Speaker 1: for the entire hour with Dan Ives, global head of
Speaker 1: Tech Research at web Securities, and Gene Munster, the managing
Speaker 1: partner at Deepwater Asset Management. Of course, we've been focused
Speaker 1: for most of the start of this show on the
Speaker 1: promise for artificial intelligence, the continued potential for investment in
Speaker 1: this sector. Want to ask you, guys, where you see
Speaker 1: winners and losers now that we are at this stage
Speaker 1: in AI development. So Dan, I'll start with you, who
Speaker 1: do you see as some of the biggest winners in
Speaker 1: AI heading into twenty five.
Speaker 5: Look, I think winners are Software is going to be
Speaker 5: a huge winner, and that's Pound Tier, That's Oracle at Salesforce,
Speaker 5: dot Com, Mango, dB, Snowflake. I mean the point is
Speaker 5: I think software is really going to be the beneficiary
Speaker 5: in twenty twenty five is the use cases build out,
Speaker 5: and I think more investors start to play second third
Speaker 5: derivatives of AI. When you will do losers, I think
Speaker 5: it's hardware. I mean, I think right now, no don't
Speaker 5: try to do actussy like a Cisco review where Cisco
Speaker 5: HP Dell. I think a lot of the core infrastructure
Speaker 5: where they're set up, it's just not a good place.
Speaker 5: They're gonna have to do M and A. But this
Speaker 5: is trending much more to software driven and i'd even
Speaker 5: say hyper scours. They're just going to try to gain
Speaker 5: more and more market share, especially with ton and they
Speaker 5: don't at the FTC.
Speaker 1: What's your view on this gene? Who do you see
Speaker 1: as the winners and losers at this stage?
Speaker 2: I think the sweet spot I would agree with you.
Speaker 2: I think the sweet spot is going to come from software.
Speaker 2: I think the hardware piece is gonna last a little
Speaker 2: bit longer. But the companies that Dan highlighted as in
Speaker 2: a troubled direction, I think that they're going to continue
Speaker 2: to be in a trouble.
Speaker 3: Basically, if you don't.
Speaker 2: Have a real hardware AI play, you're just you're just
Speaker 2: gonna die in the vine. And so I think that
Speaker 2: you know, there's still more room with UH Nvidia for example.
Speaker 2: I think that UH some of the other micron a
Speaker 2: big big sell off recently, and I think that these
Speaker 2: companies are still going to be in a good place,
Speaker 2: but the substance of the trade I think is going
Speaker 2: to shift to software. Think there's another piece that probably
Speaker 2: follows the fold. For a lot we do private investing
Speaker 2: in a couple companies. Data Bricks is getting a ton
Speaker 2: of share and you're going to hear a lot more
Speaker 2: about them. They basically help organize unstructured data FREEI training
Speaker 2: and then androll the defense tech company. I mean, if
Speaker 2: this was the last valuation was at fifteen billion, if
Speaker 2: this was a public company, it would be a Meme
Speaker 2: stock of all Meme stocks. I don't know what the
Speaker 2: valuation would be, but it would be exponentially higher. And
Speaker 2: so I think there's some really exciting things going on
Speaker 2: with those two private companies are going to be part
Speaker 2: of our everyday conversation in the year or two.
Speaker 1: In terms of the software plays, Dan, how do you
Speaker 1: see AI playing out in terms of software in terms
Speaker 1: of use cases in twenty twenty five, Look, I.
Speaker 5: Think it's going to be about the install bases, because
Speaker 5: as much as you know in video is going to
Speaker 5: clearly be a winner. Continued, I think for trillion markap
Speaker 5: along with Apple. So we get to twenty five, it's
Speaker 5: going to be about the install basis. So when you
Speaker 5: look at from Adobe to Oracle to service now to Benioff,
Speaker 5: I think the masterpiece where I see for salesforce, dot
Speaker 5: Com and of course names like Palunteer. I think the
Speaker 5: use cases it's going to be agent force what we're
Speaker 5: seeing with Salesforce, but it's going to move to marketing,
Speaker 5: to analytics to ERP. We're going to see these use
Speaker 5: cases go from spot to spot to spot, and I
Speaker 5: think that is going to be a huge part of
Speaker 5: the investing cycle as investors now focus on okay, where
Speaker 5: skate to where the puck's going? And I think that's
Speaker 5: going to create the opportunities is software. This is going
Speaker 5: to be a golden age for software as well as cybersecurity,
Speaker 5: you know, led by the Fourth Industrial Revolution.
Speaker 1: Gene, do you see some of these software cases playing
Speaker 1: out this year? Do you think that we'll see the
Speaker 1: kind of use case for artificial intelligence that you guys
Speaker 1: have been predicting over the last couple of years actually
Speaker 1: starting to come to fruition in twenty twenty five.
Speaker 2: Yes, I think that in the back half of this year,
Speaker 2: this software piece, we're going to start to see a
Speaker 2: slight increase in revenue. These tools are starting to get
Speaker 2: rolled out, and look at companies like Service now, they're
Speaker 2: already directly benefiting from this.
Speaker 3: It's going to be this year.
Speaker 2: In twenty five, it's probably going to come mostly from
Speaker 2: the megacaps. And I think you know Dan's comment about Benioff,
Speaker 2: I'll just emphasize listen to that his comments. You spoke
Speaker 2: for twenty five minutes twenty two times. He gave some
Speaker 2: statement about how transformative AI is going to be. If
Speaker 2: you take that and divide it by five, it's still
Speaker 2: going to be a I think this year is still
Speaker 2: setting up to be an acceleration in growth, and so
Speaker 2: I think we will see the substance this year. But
Speaker 2: I would just also caution people that some of the
Speaker 2: substance you're not going to see. It's not going to
Speaker 2: be obvious. It's going to be behind the scenes. It's
Speaker 2: going to be in things like improving margins as companies
Speaker 2: start to implement these at the enterprise level and start
Speaker 2: to implement just more efficient agents, and so I think
Speaker 2: that that's a different Another piece that we're going to
Speaker 2: start to see in the back half of twenty five
Speaker 2: is improving margins.
Speaker 1: Speaking with Gene Munster, the managing partner at Deepwater Asset Management,
Speaker 1: along with Dan Ives, the global head of Tech Research
Speaker 1: at Webbush Securities. With these kinds of changes, guys, there's
Speaker 1: the continued need, I think for capital investment. We've seen
Speaker 1: so much of that, particularly in some of the biggest
Speaker 1: players whose market capitalizations have grown by such leaps and bounds,
Speaker 1: not the least of which is in Nvidia. Dan, how
Speaker 1: do you you see CAPEX playing out? Is it sustainable
Speaker 1: for this kind of growth?
Speaker 5: Look? I think, and it brings up a great point
Speaker 5: and I'd be interested to hear Genes thoughts on this,
Speaker 5: as always in terms of when you compare dot com
Speaker 5: to here, because here the cat bacs, we're talking about
Speaker 5: two trillion of AI capacs. And what's amazing eye popping
Speaker 5: is sovereigns haven't even gotten into this yet. You haven't
Speaker 5: even had the rest of Fortune five hundred, Global two thousand.
Speaker 5: It's really only big tech today. So when you look
Speaker 5: at this AI cappax, I can tell you follow the
Speaker 5: yellow brick road, you follow the cap backs, because if
Speaker 5: you follow the capax, you're gonna win on these stocks,
Speaker 5: from semis to software to infrastructure, and then ultimately to
Speaker 5: the consumer piece. And to this point, you have tech
Speaker 5: companies at one point two trillion of cash in the
Speaker 5: balance sheet generating three to four hundred billion a year,
Speaker 5: as opposed when you go to dot Com and every
Speaker 5: time someone to do the scary Cisco and video comparison
Speaker 5: on the chart, those are funded by companies that were
Speaker 5: basically levered, no business models, and it goes back to
Speaker 5: that dot Com error. I'm just trying to say a
Speaker 5: much different in apples to oranges comparison. You follow the
Speaker 5: cap backs and I just want to hear Genes thoughts
Speaker 5: on this.
Speaker 2: Yeah, that's the yell bigger road, Dan, you got a
Speaker 2: great way of just illustrating things, and I'm I'm gonna
Speaker 2: play on that yellow brick road.
Speaker 3: Is that when this amount, this level of a capex happens.
Speaker 2: That's one of the reasons why I'm so confident that
Speaker 2: AI the substance is going to exceed the hype and
Speaker 2: this is going to be bigger than the Internet. Is
Speaker 2: that the just the this degree is multiple times bigger
Speaker 2: than what we saw with the Internet build out. It
Speaker 2: will be ten x, twelve x, fifteen x bigger. And
Speaker 2: when you have that kind of infrastructure in place, there's
Speaker 2: just a natural gravity that the theme starts to pull
Speaker 2: in all these different applications, and so I think that
Speaker 2: CAPEX is probably the most important factor to continue to.
Speaker 3: Gauge how well this is.
Speaker 2: Like is this going to play out at this point
Speaker 2: For those who believe that this is just going to
Speaker 2: be something more like mobile, the level of investment I
Speaker 2: think is justification that this is going to have more
Speaker 2: substance to it.
Speaker 1: But Dan, you mentioned that sovereigns haven't really gotten in
Speaker 1: on this as much as some of the bigger companies have.
Speaker 1: Raises the question about what kind of impact trade wars
Speaker 1: could have on artificial intelligence. If we get into a
Speaker 1: scenario where soon to be President Donald Trump starts putting
Speaker 1: tariffs on many of these sovereigns, could that be a
Speaker 1: hindrance to AI development?
Speaker 5: See IV, the bar's going to be worse bite. I mean,
Speaker 5: the point is, if you look at how this is
Speaker 5: all going to play out, I think you're gonna ultimately
Speaker 5: have carve outs for the likes of Tesla, Apple and
Speaker 5: allow of the chips that an video makes. And look,
Speaker 5: this is all going to be a game of high
Speaker 5: stakes poker. But when it all comes down to it,
Speaker 5: I don't think it disrupts supply chain dramatically, and I
Speaker 5: don't think it disrupts the AI revolution because look, China
Speaker 5: wants to benefit to the same extent that we're going
Speaker 5: to see here in the US. But that's the other
Speaker 5: thing when it comes to Trump administration. Trump administration is
Speaker 5: bullish for AI.
Speaker 2: The risk of these nations not investing in AI could
Speaker 2: be the end of these countries. I mean ultimately countries
Speaker 2: that are going to need an AI first approach. And
Speaker 2: so anything that happens with tariffs or any sort of
Speaker 2: economic slowdown that we may see across the globe is
Speaker 2: a small impact as a small factor relative to what
Speaker 2: needs to be invested. And so this is top of
Speaker 2: mind spending. It hasn't started. As Dan said, there's another
Speaker 2: piece that hasn't started as well, which is industrial AI,
Speaker 2: the enterprise AI all this and the concept that this
Speaker 2: is still largely big tech that's doing it. I think
Speaker 2: that again is another piece that gives me so much confidence.
Speaker 3: And sovereign is going to be there as well.
Speaker 5: So Gene Nathan say, Jane brought a great point because
Speaker 5: me and Jane have seen over the decades and decades
Speaker 5: cover an Apple China tariff supply chain retaliatory tesla. There
Speaker 5: were so many moments over the years where you could
Speaker 5: just hit in a little cave and just basically hit
Speaker 5: the eggsit button on the stocks. The point is it
Speaker 5: will create the opportunities when we sit here a year
Speaker 5: from now, and I believe text up another twenty five percent.
Speaker 5: I think sovereign's become more involved and the tariffs becomes
Speaker 5: some white knuckles, but it doesn't ruin anything.
Speaker 1: So Gene, how do you see sovereigns getting into this?
Speaker 1: What's the catalyst for sovereigns to get into the AI story.
Speaker 2: I think you have to have Notoriously governments are slow
Speaker 2: to move, and I think the catalyst is going to
Speaker 2: be when like the US and China are largely on
Speaker 2: board with that. So I think there's a competitive piece
Speaker 2: that needs to kick in as a catalyst, and I
Speaker 2: think that that probably starts sometime this year. I think
Speaker 2: that they were going to see that's one of the
Speaker 2: reasons not just the sovereigny I the catalyst is the competition,
Speaker 2: but also with industrial AI. I think that that's one
Speaker 2: of the reasons why I think that the nvidity in
Speaker 2: Nvidia trade is going to continue to be a good
Speaker 2: place to be. So it's different than consumer and enterprise,
Speaker 2: that's for sure when it comes to sovereign, but there's
Speaker 2: a lot of money to be spent there.
Speaker 3: They are just getting going.
Speaker 1: And we're going to wrap up this hour long discussion
Speaker 1: on high tech trends as this special edition of Bloomberg
Speaker 1: Daybreak continues with Gene Munster, managing partner in deep Water
Speaker 1: Asset Management and Dan Ives, the global head of Tech
Speaker 1: Research at Wedbush Security. So stay with us. It's thirty
Speaker 1: seven minutes past the hour. I'm Nathan Hager, and this
Speaker 1: is Bloomberg. Thanks again for being with us on this
Speaker 1: special holiday edition of Bloomberg Daybreak. All is quiet in
Speaker 1: markets on this New Year's Day. I'm Nathan Hager, and
Speaker 1: it's time to wrap up this special high tech roundtable.
Speaker 1: We have been spending the entire hour with Gene Munster,
Speaker 1: managing partner at deep Water Asset Management and Dan Ives,
Speaker 1: the global head of Tech Research at Webbush Securities. It's
Speaker 1: been a great discuss on where things could go with
Speaker 1: artificial intelligence. But as we close this out, guys, I
Speaker 1: want to focus in on some individual stocks, some of
Speaker 1: the biggest names that you cover on Wall Street, and
Speaker 1: I guess we'll start with one that fits the theme
Speaker 1: in Vidio. Where do you see in Vidio going gene?
Speaker 2: I think it's going higher, and I think that it
Speaker 2: is like a surprisingly inexpensive stock when you think about
Speaker 2: off of the twenty twenty six numbers. And Dan mentioned
Speaker 2: the white knuckling, and I'll tell you what a lot
Speaker 2: of investors and video investors are white knuckled over the
Speaker 2: boom and.
Speaker 3: Bust of hardware.
Speaker 2: The business was about a twenty billion dollar business before
Speaker 2: the AI training got going, and it's going to be
Speaker 2: about one hundred and fifty billion dollars next year. So
Speaker 2: I've never seen anything like this at this scale. And
Speaker 2: because of that, it just creates this concern that it
Speaker 2: can't go on.
Speaker 3: And I want to.
Speaker 2: Stress too, and video will have its day when the
Speaker 2: second derivative kicks in and slows down a little bit
Speaker 2: more than people think and the stock gets throttled.
Speaker 3: I don't think that's this year.
Speaker 2: I think this is the year where we start to
Speaker 2: reach out and video starts to reach out beyond some
Speaker 2: of the hyper scalers into some of these other markets
Speaker 2: that we're talking about, and they're another piece that is
Speaker 2: just getting kicked off.
Speaker 3: What we're seeing.
Speaker 2: Around this timescaling, this infancing time scaling that's going on
Speaker 2: in these models starting to think more Jensen talked a
Speaker 2: little bit about on their last call. But that's a
Speaker 2: whole other wave in terms of the models needing more
Speaker 2: compute capacity. And so when you put all this together,
Speaker 2: I think in Vidia's setting up to have a good year,
Speaker 2: a great year, because the expectations for calendar twenty six
Speaker 2: are going to move higher.
Speaker 1: There have been so many expectations built into this stock.
Speaker 1: You mentioned some of the need to move beyond the
Speaker 1: hyper scalers into the sovereigns. Those are things that we've
Speaker 1: been talking about when it comes to Nvidia for the
Speaker 1: last several quarters. Dan can in Nvidia sort of live
Speaker 1: up to a lot of the expectation that's been built
Speaker 1: into this stock.
Speaker 5: Look our recent Asia trip demand the supply is fifteen
Speaker 5: to one for in video chips. Three months ago it
Speaker 5: was twelve to one. It's accelerating, and that's why there's
Speaker 5: only one red phone. If you need an AI chip,
Speaker 5: it's the godfather of AI. Jensen Nvidia. I mean, you
Speaker 5: look at AMD, others that maybe you'll call it twelve
Speaker 5: eighteen months now will be there, but that they continue
Speaker 5: to be the only game in town. And I ultimately, look,
Speaker 5: you look out here, could you get to six dollars earnings?
Speaker 5: You look in one hundred and eighty two hundred dollars stock.
Speaker 5: And that's why I think this is one where any
Speaker 5: sell offs in in video. They're table pounders. You just
Speaker 5: own them.
Speaker 1: I think you've called for Nvidia to be one of
Speaker 1: the first four trillion dollar market cap stocks, is that right?
Speaker 5: Look, the first one will be Cooper Tino. They'll cut
Speaker 5: the ribbon being the first four trillion and then that
Speaker 5: exclusive club they're gonna welcome in Jensen and Video, that
Speaker 5: four trillion dollar our club, and then followed by Microsoft.
Speaker 1: Alluding to Apple with the reference to Coopertino. I know
Speaker 1: another stock that you watch very closely, Gene, what are
Speaker 1: your predictions for Apple heading into twenty twenty?
Speaker 2: I want I want Dan to go first on this one.
Speaker 3: I want to Okay again.
Speaker 5: Look, i'd say Gene and I for decades, why I
Speaker 5: respect him more than anyone on Wall Street. It's seen
Speaker 5: the farest of the trees and apples. Another one, the
Speaker 5: AI revolution, the consumer AI revolution, comes through Cooper Tina
Speaker 5: because it starts with iPhone sixteen. Apple Intelligence just rolling out,
Speaker 5: but it's a multi year China is not even going
Speaker 5: to be rolled out till April, so you start to
Speaker 5: look at this with three hundred million iPhones in a
Speaker 5: window of an upgrade opportunity, this will be the renaissance
Speaker 5: of growth for Apple. And that's why I think ultimately
Speaker 5: a year from we're looking four and a half trillion
Speaker 5: dollar mark CAAP. You know, as Apple goes through what
Speaker 5: I believe, we start to look at three twenty five,
Speaker 5: three fifty dollars. And I know Gene's talked about this
Speaker 5: a lot, but this is the moment for cooking Coupe Tina, Gene.
Speaker 2: You know, in terms of the numbers that back up
Speaker 2: that theme is that the iPhone. As the iPhone goes,
Speaker 2: so goes Apple, so goes the stock and iPhone in
Speaker 2: twenty Fiscal twenty four was flat. Fiscal twenty five, the
Speaker 2: streets looking for three percent growth. It was five percent
Speaker 2: at the end of September, So analyst expectations actually come down.
Speaker 2: And the reason they've come down is because the initial
Speaker 2: rollout of Apple Intelligence in the US has been in
Speaker 2: some eyes, underwhelming, and so the analysts bring their numbers down.
Speaker 2: For fiscal twenty six it's eight percent, so it goes
Speaker 2: zero three eight percent. They're going to beat those numbers,
Speaker 2: and I think that I love dance take on this
Speaker 2: mine is so for fiscal twenty five, the streets at
Speaker 2: three percent, I think we're probably going to be closer
Speaker 2: to five to eight percent for iPhone growth. And for
Speaker 2: fiscal twenty six that eight percent, I think it's probably
Speaker 2: closer to ten to twelve, which is like an order
Speaker 2: of magnitude outside of where I think most investors are thinking.
Speaker 2: But ultimately, I think that these features are going to
Speaker 2: drive an upgrade cycle.
Speaker 5: And I just add to gene two hundred forty million
Speaker 5: units for I Phone, which will break, you know, break
Speaker 5: a record. That's where I think they end up for
Speaker 5: fiscal twenty five. And that's why the hater they hated
Speaker 5: two trillion, despised three trillion. At four trillion, they'll be
Speaker 5: yelling from the tree tops.
Speaker 1: So does Apple get to look past vision pro some
Speaker 1: of the other products that have had to fall by
Speaker 1: the wayside, things like the Apple car Is it all
Speaker 1: about the iPhone? Can it continue to be?
Speaker 2: Gene definitely in fiscal twenty five, it's about how Apple
Speaker 2: intelligence drives iPhone growth. And like Dan was talking about,
Speaker 2: is there's also this pool from what happened in twenty
Speaker 2: twenty one iPhone was up thirty seven percent. You get
Speaker 2: that fact starting to kick in. That just boggles my
Speaker 2: mind that investors just aren't tracking to that wave that's coming.
Speaker 2: As much as Dan has talked about, its still like
Speaker 2: that light still I think largely hasn't gone on, but
Speaker 2: they get because of that opportunity. They do get a
Speaker 2: pass on Vision Pro. It's been a disappointment, it is.
Speaker 2: I think that the strategy. I think they just need
Speaker 2: to shift to doing more smart glasses AI glasses. I
Speaker 2: think that that seems that that's where the markets can evolve.
Speaker 2: I don't think we're going to see any products this
Speaker 2: year from that perspective, but I do ultimately think that
Speaker 2: that is where Apple goes. So in the midst of
Speaker 2: not having a new product category, it really is about
Speaker 2: a hardware category. It's about the software, the AI product category.
Speaker 3: In twenty twenty five, we're.
Speaker 1: Speaking with Gene Munster Managing Director deep Water Asset Management
Speaker 1: and web Bush Securities Global head of Tech Research, Dan Ives.
Speaker 1: Let's shift gears to another stock, Dan, that I know
Speaker 1: you watch very closely. Tesla. It's been on a tear
Speaker 1: since the election of President like Donald Trump, Elon Musk
Speaker 1: is very close to the President elect. Where does Tesla
Speaker 1: go in twenty twenty five? Can it continue this break
Speaker 1: neck pace?
Speaker 5: Look, it was a bet for the ages in terms
Speaker 5: of must bet on Trump, and I think it's your
Speaker 5: start because the autonomous future, that's the goal at the
Speaker 5: end of the rainbow for Tesla deliveries to be on
Speaker 5: Right now, I think that's ten percent of the story,
Speaker 5: the autonomous and AI future. I think it's worth a
Speaker 5: trillion dollars a will into the Tesla story, which I
Speaker 5: believe in a bulk case you can see a six
Speaker 5: hundred and fifty dollars stock and you look now for
Speaker 5: the cloudy kid fans a sweep the leg movement for
Speaker 5: regulatory knit to and others, and now autonomous starts to
Speaker 5: get I think a huge sort of catalyst with Trump
Speaker 5: in there and Tesla is going to be the main beneficiary.
Speaker 5: I could argue Tesla could be the best AI play
Speaker 5: out there.
Speaker 1: You agree with that Gene best Ay I play is Tesla.
Speaker 2: We definitely like it's what that company is doing is
Speaker 2: more exciting than I think the rest of the megacaps
Speaker 2: all put together. When you look at whether it's autonomy,
Speaker 2: whether they're changing how they produce vehicles, what's going on
Speaker 2: with optimists, all this puts it in that category. So
Speaker 2: super exciting, high valuation, but really exciting that I think
Speaker 2: from my perspective is that they're just slowly checking the boxes.
Speaker 2: I don't know what the stock is going to do
Speaker 2: month to month on this. I do feel it's going
Speaker 2: higher longer term because they are the most exciting company
Speaker 2: in AI and I think the just kind of put
Speaker 2: one other further point of how they turn the screws
Speaker 2: down on these trends is we just had GM back
Speaker 2: out of their autonomous program effectively, which is huge news.
Speaker 2: And then separately what's going on with Honda and Nissan.
Speaker 2: It's really noteworthy, and the car part of the business
Speaker 2: doesn't give as much attention, but it's worth noting that
Speaker 2: that relationship is evidence that the car industry is going
Speaker 2: to get turned upside down in the next decade and
Speaker 2: there are going to be brands that we've known for
Speaker 2: a long time that aren't going to be around. And
Speaker 2: my prediction is that this mashup between Nissan and Honda
Speaker 2: is going to essentially be a slow decline to both
Speaker 2: companies will be a fraction of what they are even today.
Speaker 2: And the reason for that is for what Tesla's doing,
Speaker 2: not just on the electrification side, but autonomy, and just
Speaker 2: those two companies just haven't innovated. And if you're not
Speaker 2: innovating at just a lightning speed, you're on your way
Speaker 2: to being irrelevant.
Speaker 1: In the time we have left. Guys, let's talk about
Speaker 1: some of the stocks that we haven't talked about just
Speaker 1: yet that need to be on investors radar, and I'll
Speaker 1: start with you, Dan.
Speaker 5: Look, I think it starts with Palnentier. I mean the
Speaker 5: messy of AI. I think where Carbon Poundeer have done
Speaker 5: that continues to sort of be the first piece of
Speaker 5: this software layer, and I think this is really the
Speaker 5: model that more and more companies are going to go down.
Speaker 5: And the other thing is that the amount going to
Speaker 5: be spent in the belly on AI is mind blowing.
Speaker 5: Names like Palenteer are going to continue to benefit I
Speaker 5: believe Palenteer could be the next oracle, and that's why
Speaker 5: they haters well Hated is a teenager stock. They hate
Speaker 5: is the seniorsites and continues to doing when we're topics.
Speaker 1: Gene what should be on investors radar?
Speaker 2: I think Google it's a company that is keeping up
Speaker 2: investors up at night because they don't know how perplexity
Speaker 2: or search for your GPT is going to be impacting
Speaker 2: their business longer term. But search is just such an
Speaker 2: habitual behavior. It's got to be tenex better. I don't
Speaker 2: think these other players are ten x better yet. And separately,
Speaker 2: is that Google's made a lot of progress. I think
Speaker 2: that the company still needs a fire underm don't get
Speaker 2: me wrong.
Speaker 3: I mean they've been.
Speaker 2: Asleep at the wheel here, but just in the past
Speaker 2: year made a lot of progress. And the models that
Speaker 2: they showed at the end of December, the new models
Speaker 2: that they came out with horrible name Gemini to Flash thinking.
Speaker 2: I mean, they couldn't have created a worse name for
Speaker 2: the product, but it came it's out and available for developers,
Speaker 2: and GPT is not there yet. They just announced that
Speaker 2: it's coming just on the heels of Google and that's
Speaker 2: a flip flop from a year ago. Now you see
Speaker 2: Google ahead, and I think that that's going to start
Speaker 2: to resonate with investors in twenty five.
Speaker 1: This has been a real pleasure you guys, have you
Speaker 1: on for the full hour to talk about tech trends
Speaker 1: heading into the new year, and looking forward to doing
Speaker 1: this again seeing how many pan out as we continue
Speaker 1: tracking the trajectory of the artificial intelligence trend and how
Speaker 1: it's going to play out on Wall Street. So thanks
Speaker 1: again to Gene Munster, managing partner Deepwater Asset Management for
Speaker 1: joining us on this high tech roundtable along with Dan Ives,
Speaker 1: global head of Tech Research at Webbush Securities. And we'd
Speaker 1: like to thank you as well for spending time with
Speaker 1: us on this New Year's holiday. I hope it is
Speaker 1: a healthy and prosperous twenty twenty five for all of you.
Speaker 1: I'm Nathan Hager. Stay with us. Today's top stories and
Speaker 1: global business headlines are coming up right now.