Speaker 1: Thanks for joining us for this special holiday edition of
Speaker 1: Bloomberg Daybreak. I'm Nathan Hager. The US stock market is
Speaker 1: closed for the fourth of July. Coming up this hour,
Speaker 1: we have a high tech treat for you. If you've
Speaker 1: been invested in technology stocks this year, it has been
Speaker 1: quite the rewarding twenty twenty three. The Nasdaq by far
Speaker 1: has been the best performer of the three major indexes
Speaker 1: this year, but can the rally in tech last We'll
Speaker 1: spend the entire hour looking at what's ahead for the sector,
Speaker 1: including the mania surrounding artificial intelligence, with two of the
Speaker 1: best on Wall Street. Gene Munster, the managing partner at
Speaker 1: Deepwater Asset Management, is with us along with wet Bush
Speaker 1: Securities senior equity analyst Dan Ives a tech roundtable for
Speaker 1: the entire hour. Dan and Jean, it is great to
Speaker 1: have you both with us. Dan, I want to start
Speaker 1: with you because you got a lot of traction with
Speaker 1: the note last week on the outlook for tech stocks
Speaker 1: in the second half. Tell us more about why you
Speaker 1: think the AI frenzy is more than just type look.
Speaker 2: And it's great to be here, you know, with you
Speaker 2: in Gene talking tech because in my opinion, it's a
Speaker 2: fourth Industrial revolution that's playing out in front of our eyes.
Speaker 2: We believe this is the start of a new tech
Speaker 2: bull market, and which is why we think second half
Speaker 2: of the year tech could be up fifteen, potentially twenty
Speaker 2: percent in a much broader rally because of what's happening
Speaker 2: from a growth perspective, I think it's ais tip of
Speaker 2: the iceberg. We're seeing a stabilizing it spend environment, and
Speaker 2: I believe this is something in our opinion that's the
Speaker 2: only thing that's comparative is nineteen ninety five Internet moment
Speaker 2: in two thousand and seven Apple iPhone.
Speaker 1: You know, it's been a similar view that we've heard
Speaker 1: from Don Fitzpatrick, the CEO of Soros Fund Management. She
Speaker 1: spoke with us about AI last month at the Bloomberg
Speaker 1: invest conference in New York. Here's what Don Fitzpatrick had
Speaker 1: to say.
Speaker 3: It is clear that we're at the beginning of a
Speaker 3: megacycle in spending AI, and the real beneficiaries obviously are
Speaker 3: the applications, so you're SaaS companies and infrastructure, so it's
Speaker 3: it's cloud and your high performing chip companies.
Speaker 1: Jane, let's bring you in on this. Is this the
Speaker 1: beginning of a tech megacycle.
Speaker 4: It is, and there's going to be some ebbs and
Speaker 4: flows in terms of the stocks and the near term,
Speaker 4: but I think that it will ultimately meet, exceed, will
Speaker 4: comfortably exceed all of the hype. And the hype is
Speaker 4: just intense. I mean, this universal optimism around it seems
Speaker 4: hard to believe, but I think it is. There is
Speaker 4: substance behind it. I want to frame in a couple
Speaker 4: data points around that substance. At Microsoft's Developers Conference this year,
Speaker 4: they showed a demo of the new Windows operating system.
Speaker 4: And when I saw the demo again, it was an
Speaker 4: animated demo. Wasn't live, but an animated demo. I thought,
Speaker 4: these features are probably going to be out in five years,
Speaker 4: and then they said it would be out later this year.
Speaker 5: That never happens.
Speaker 4: Usually. What happens is I think some is going to
Speaker 4: take two years and takes five years in this case,
Speaker 4: think it's going to take five in six months. And
Speaker 4: then you look at Nvidia's guide, it's dated. It's back
Speaker 4: when they reported their March quarter. They guide it for June.
Speaker 4: I don't know, Dan, I don't know if you've ever
Speaker 4: seen a guide like that, but going from the street
Speaker 4: was looking for like ten percent sequential growth, they guide
Speaker 4: it to ninety or one hundred percent sequential growth like
Speaker 4: that doesn't happen, and exactly.
Speaker 2: To your Genus always puts it, I think, just phenomenally.
Speaker 2: And it goes back to the Nvidia guidance. I'll call
Speaker 2: it the guidance heard around the world. Okay, that is
Speaker 2: really the start of what we're going to start to see.
Speaker 2: That's why, Nathan, when everyone does hype and and Gene,
Speaker 2: I know you've talked about this a bunch too, it's
Speaker 2: like it's not In other words, this is as real
Speaker 2: of a spending trend as I've ever seen in my career.
Speaker 2: That's why I view it is really the star of
Speaker 2: a new tech bull market.
Speaker 1: Well, I got to ask you guys both because you
Speaker 1: mentioned this sort of having similarities to nineteen ninety five.
Speaker 1: Of course, it was just a few years after nineteen
Speaker 1: ninety five that we saw the nineteen ninety nine dot
Speaker 1: com bubble burst. I mean, what's the risk, either Dan
Speaker 1: Orgin that this huge spend that we've seen into the
Speaker 1: AI space in just the last few months ends up
Speaker 1: creating an asset bubble?
Speaker 4: Yeah, I think what I come back to In nineteen
Speaker 4: ninety seven nineteen ninety eight, was a junior analyst at
Speaker 4: Piper Jaffrey and there was a company k Tel most
Speaker 4: of who don't know who Ktael is. They had a
Speaker 4: record subscription, eight track tapes, cassettes, who'd.
Speaker 1: Vague memory dollar tell yeah, yeah.
Speaker 4: And they announced they put a press release, so it
Speaker 4: came over the facts that said that they're going to
Speaker 4: start selling records online. Sock went from four to forty
Speaker 4: over like a four month period, and it was a
Speaker 4: company that didn't have any substance to it. I don't
Speaker 4: even know if they ever sold anything online. I think
Speaker 4: it was representative of hyping everywhere, and I think this
Speaker 4: is different. Yes, we see what's happened with Nvidia, and
Speaker 4: there is these AI stocks are up, the chip stocks are.
Speaker 5: Up ninety percent this year.
Speaker 4: Yeah, but to me, there is I like what you
Speaker 4: said there, Dan, The guidance heard around the world is
Speaker 4: that we weren't seeing that kind of guidance Back in
Speaker 4: two thousand. There was this ad spend that was kind
Speaker 4: of circulating. There's companies going public, they were getting money,
Speaker 4: they were spending with other internet companies, and so there
Speaker 4: was a little bit of a misleading positive sign back
Speaker 4: around two thousand that ended up just drying up. This
Speaker 4: feels like there's much more substance, and it's much more narrow.
Speaker 4: It's not k tels aren't happening today.
Speaker 2: Look, and Gene to his point, I believe the big
Speaker 2: thing here in Microsoft, we believe for every one hundred
Speaker 2: dollars of cloud spend, partners are talking about incremental twenty
Speaker 2: five or forty dollars of AI spend. That changes the
Speaker 2: whole paradigm of what Microsoft looks like in the next
Speaker 2: five seven years.
Speaker 1: Speaking with Dan Ives of Wedbush Securities and Gene Munster,
Speaker 1: managing partner at Deepwater Asset Management. But to the point
Speaker 1: about how so many companies now when you'll listen to
Speaker 1: earnings calls, see the earnings reports, it seems like not
Speaker 1: a day goes by that we don't hear about one
Speaker 1: company after another just even mentioning AI in their reports,
Speaker 1: and it spikes the stock. What's the risk that we
Speaker 1: see so many companies talking about AI that they don't
Speaker 1: necessarily have the bones to back it up. Geane, let's
Speaker 1: start with you.
Speaker 4: I mean there is a risk, but I always compared
Speaker 4: to what happened twenty five years ago, and I think
Speaker 4: that it's much more limited. I think I was recently
Speaker 4: at a dinner in New York. There were twenty other
Speaker 4: investors in the room, and I asked how many were
Speaker 4: investing twenty five years ago the Internet bubble, and two
Speaker 4: people's hands went up, and that got me a little
Speaker 4: bit worried, like maybe we get a little we get
Speaker 4: a repeat of what happened. But I think it is Nathan.
Speaker 4: I think that the bottom line is I think it's
Speaker 4: still limited that scope. I don't think every company is
Speaker 4: claiming there an AI company. Not every company has had
Speaker 4: an AI bid. Yes, the nasdacs up thirty two percent
Speaker 4: this year, but what happens when you have panemonium is
Speaker 4: when everything's up one hundred percent in six months, and
Speaker 4: so we just haven't seen that kind of across the board.
Speaker 4: It is good to remember, like what is the substance
Speaker 4: of it? And I think that's where you get guys
Speaker 4: like Dan out there who have seen this so many
Speaker 4: times and can kind of parse between the hype and
Speaker 4: the substance when it comes to which companies are going
Speaker 4: to benefit of the long term.
Speaker 1: So Dan is the substance just around in Nvidia and
Speaker 1: that call hurd around the world that you mentioned earlier,
Speaker 1: or is there more substance just beyond that major AI
Speaker 1: chip maker.
Speaker 2: Oh. I think there's as much meat on the boone
Speaker 2: as I've seen of any tech and the last twenty years.
Speaker 2: And I could tell you the last six or eight
Speaker 2: weeks traveling the globe from Asia to Europe to US,
Speaker 2: what we've seen. This is something that alternate we believe
Speaker 2: could be eight to ten percent of budgets next year
Speaker 2: AI today it's less than one percent. And I think
Speaker 2: that's why we're spending all of our time, not just
Speaker 2: myself as a tech group, who are the second third
Speaker 2: worth derivatives? That's what we're spending our time on.
Speaker 1: Where do you see some of those second third, fourth derivatives? Gane?
Speaker 4: I think, well, I think there's a first derivative that
Speaker 4: people aren't picking up on.
Speaker 5: A couple of them.
Speaker 4: Google is one that is not a consensus. At that
Speaker 4: dinner that I mentioned, had a survey before this was
Speaker 4: in a combination with Piper Sandler, and the survey that
Speaker 4: was done included which were the consensus AI stocks and
Speaker 4: Google was not on that consensus. List, which surprised me
Speaker 4: and when I asked about it, it's investors are still
Speaker 4: skeptical or concern that there's going to be a dip
Speaker 4: in their AD revenue and that this basic idea that
Speaker 4: they have a lot to lose. I think they have
Speaker 4: a lot to gain potentially. I do believe that they're
Speaker 4: going to have a speed bump in their revenue as
Speaker 4: they shift to single results driven by AI. But I
Speaker 4: think Google, their twenty years of data, is going to
Speaker 4: create more informed search results even with AI, and I
Speaker 4: think that they, even though it's out, consider that a
Speaker 4: second derivative because I think investors are largely ignored. I
Speaker 4: think one of the companies is going to surprise people
Speaker 4: in the next twelve months about their AI performance.
Speaker 5: Is Meta.
Speaker 4: I think what they're doing is it's just pure adrenaline
Speaker 4: to advertisers to improve ad attribution, and I think it's
Speaker 4: going to invite more ad spending after what has happened
Speaker 4: with some of the changes the IDFA from what Apple's
Speaker 4: put in place a year and a half ago. So
Speaker 4: I think those aren't aren't I think given the proper attention,
Speaker 4: as we deep water, we invest in both public and
Speaker 4: private companies, and so I can say where most of
Speaker 4: our attention is on the private side, it's looking at
Speaker 4: the chip architecture and the basic idea is right now
Speaker 4: video is running away with this and they but they're chips.
Speaker 4: Still it's expensive to train models right now. Open Ai
Speaker 4: trains their models about once every three weeks. It typically
Speaker 4: takes about five million dollars to do it. So there
Speaker 4: needs to be new technologies to enable better chip architectures
Speaker 4: to bring down the cost of training.
Speaker 1: We're going to keep up this conversation talk a little
Speaker 1: bit more about the applications for artificial intelligence as we
Speaker 1: continue this discussion with Gene Monster of Deepwater Asset Dan
Speaker 1: Ives of Webbush on this special edition of Bloomberg Daybreak
Speaker 1: with a focus on Tech. It is eighteen minutes past
Speaker 1: the hour. I'm Nathan Hager, and this is Bloomberg. Welcome
Speaker 1: back to the special edition of Bloomberg Daybreak. I'm Nathan Hager.
Speaker 1: The US stock market is closed for the Independence Day holiday,
Speaker 1: and we continue our focus on tech now with Dan.
Speaker 1: I've senior equity strategistic web Bush Securities and Deepwater Asset
Speaker 1: Management managing partner Gene Munster. I want to pick up
Speaker 1: on this conversation we're having guys about the applications for
Speaker 1: artificial intelligence beyond so much of the investment that we've
Speaker 1: been seeing just over the last few months. Someone who's
Speaker 1: really gone all in on the innovation industry is Kathy
Speaker 1: Wood of OARC Investment Management. Here's some of what she's
Speaker 1: had to say. When it comes to AI, many people.
Speaker 6: Think it's just hardware and software stocks widely advertised. But Tesla,
Speaker 6: many people think, is an auto stock. We don't. We
Speaker 6: think it's much more than that. But we think it's
Speaker 6: one of the biggest AI opportunities out there.
Speaker 1: I want to pick up with with you, Gene, because
Speaker 1: there has been this long running debate about whether Tesla
Speaker 1: is an auto company or a software company. But just
Speaker 1: to take the broader view some of what we've been
Speaker 1: talking about already, is there a case for AI to
Speaker 1: change the direction of other sectors, even outside of tech.
Speaker 4: Definitely, I think Tesla's a outside of the typical companies
Speaker 4: that we talk about that are having an impact over
Speaker 4: the next six months. Tesla's clearly in a spot and
Speaker 4: the lines are are obvious where they're going to benefit
Speaker 4: and this around autonomy I've got a seven year old
Speaker 4: of a five year old, and I have a bet
Speaker 4: with my wife that they'll never drive. And I think
Speaker 4: that autonomy is a piece that obviously Tesla has been
Speaker 4: more active around that. I think we're going to have
Speaker 4: a chat GPT moment around autonomy that in the next
Speaker 4: year where it's really going to leap forward. Humans shouldn't drive.
Speaker 4: There's more than thirty thousand people in the US lose
Speaker 4: their lives in car accidents. People are more distracted, and
Speaker 4: machines can help fix that. And I think AI is
Speaker 4: an obvious opportunity and Tesla's a beneficiary. Not to mention
Speaker 4: the toy store with Optimus Prime don't have any of
Speaker 4: that my model, but it is an opportunity on just
Speaker 4: kind of I think a great example of things that
Speaker 4: Tesla does that no other car company would even touch.
Speaker 1: Interesting thought to bring in the transformers of the autobots
Speaker 1: of the Decepticons. Are you know this idea that there's
Speaker 1: a dark side potentially to AI and the threat that
Speaker 1: it could potentially pose to society. But I want to
Speaker 1: pick up on what we're talking about in terms of
Speaker 1: automation and this idea that artificial intelligence could add to this.
Speaker 1: You know, key that Tesla is trying to crack here
Speaker 1: when it comes to getting cars to drive on their own. Dan,
Speaker 1: I know you've been bullish on Tesla for a long time,
Speaker 1: but this has been something that not just Tesla, but
Speaker 1: a lot of car companies have really been struggling to
Speaker 1: get right.
Speaker 2: Look, I mean FSD, that's that's ultimate, that's the golden goose, right,
Speaker 2: I mean for Tessa. I mean when you think about
Speaker 2: the AI story.
Speaker 7: When when you think about ultimately autonomous, and there's Genes
Speaker 7: talking about I still think there's a chance ten years
Speaker 7: and that Jean's kids maybe you're driving a cyborgalk but
Speaker 7: you know, we'll see how that plays out. I think
Speaker 7: this is really what they need to crack, especially when
Speaker 7: it comes to the Delta Beta version for Tesla, I
Speaker 7: think they're way advanced. You got dam Aroro Wimo and
Speaker 7: that's the holy ground, and I do believe the next
Speaker 7: five six years we're going to get to autonomous.
Speaker 8: That's much I think closer to what many think from
Speaker 8: skeptically that Tassa and others are going to get to.
Speaker 8: And that's why I think it's the biggest transformation to
Speaker 8: the auto industry during the last sixty years.
Speaker 1: Yeah, they have transformative technology, something that really gets investors excited.
Speaker 1: But it raises the question about whether this technology that
Speaker 1: we hadn't been talking about even just a few months ago,
Speaker 1: is developing so quickly that it runs ahead of us. Gene,
Speaker 1: what are the risks to society from AI deep are?
Speaker 4: We spent a lot of time thinking about this, and
Speaker 4: ultimately we have a view of where AI is going
Speaker 4: to impact us the next ten years, and I'd just
Speaker 4: start with I think humanity is still going to be around.
Speaker 4: I don't think this apocalyptic view that even Elon Musk
Speaker 4: has endorsed is anything close to reality. I think that
Speaker 4: this is another wave of innovation and efficiency that's going
Speaker 4: to benefit humanity from just a lifestyle standpoint. But there
Speaker 4: will clearly be jobs lost, and I agree with consensus
Speaker 4: it's going to be kind of lower or maybe more
Speaker 4: customer support types of jobs. They go the way of
Speaker 4: being like a travel agent. Essentially, those will be replaced
Speaker 4: by a but I think other people with high paying jobs.
Speaker 4: I think there's still gonna be a lot of developers
Speaker 4: out there that will be assisting AI, and I think
Speaker 4: those are going to be great jobs. I think another
Speaker 4: piece at decade for now with AI is that truth
Speaker 4: will be much more elusive, and I think that that
Speaker 4: potentially could cause some civil unrest. And recently was watching
Speaker 4: a quick video of a Russian soldier surrendering to a
Speaker 4: Ukrainian drone and we're debating it on our team, and
Speaker 4: the one person on our team felt that it was
Speaker 4: AI driven and it was just a fake And as
Speaker 4: we debated it, I recognized like there was like tension in.
Speaker 5: The room, like is this real? Is it fake?
Speaker 4: And I think it's just a microcosm of what we're
Speaker 4: going to see in the next decade. We're not going
Speaker 4: to know what's real and what's true. I think that's
Speaker 4: a problem related to AI. I think life expectancy is
Speaker 4: going to take a jump up. Look at the curve
Speaker 4: of the life expectancy curve over the last two hundred years,
Speaker 4: took a big jump up when they could start to
Speaker 4: do surgery, penicilla and things like that. But I think
Speaker 4: we're in another stage where life expectancy takes a leap forward.
Speaker 4: And the last piece is we talked about a minute ago.
Speaker 4: I don't think cars, I don't think people will be
Speaker 4: driving cars in ten years.
Speaker 5: That's kind of how I see it.
Speaker 1: It is interesting Dan, the idea that you know, it's
Speaker 1: still relatively easy to see whether a deep fake is
Speaker 1: a fake, but it's getting a lot harder really quickly.
Speaker 1: What's your concern or is there a concern for you
Speaker 1: that artificial intelligence is going to make it tougher for
Speaker 1: a lot of people to know what's real and what's not.
Speaker 2: Yeah, I'm look gene brings up I think great points.
Speaker 2: I think the thing that probably worries me the most
Speaker 2: when it comes to AI is and I think regulator
Speaker 2: You're starting to see at both Brussels as well as
Speaker 2: the belt Way. You know, does tech just get more
Speaker 2: and more powerful, right? I mean the stronger, stronger if
Speaker 2: you look from the chips to the software. I mean,
Speaker 2: even though it's going to be broader, you're going to
Speaker 2: have tech just getting that much more stronger. So that's
Speaker 2: something where what does that ultimately lead to? And then
Speaker 2: I think the bigger issue is potential from a data
Speaker 2: perspective in terms of where AI is taken to make
Speaker 2: sure that there's guardrails in place, and I think that's
Speaker 2: something they're regulators, the White House, you know across the board,
Speaker 2: that's a worry because this is going one hundred miles
Speaker 2: an hour, and the concern is regulatory is going fifteen
Speaker 2: to twenty miles an hour, and how's that all going
Speaker 2: to play out?
Speaker 1: And the thing is Congress doesn't exactly have the best
Speaker 1: track record when it comes to staying ahead of technology
Speaker 1: and putting regulations around it. But we've also heard from
Speaker 1: the likes of Sam Altman of open ai, the parent
Speaker 1: company of chat GPT, calling on Congress and other regulators
Speaker 1: to put guardrails around AI gene. What's your view on
Speaker 1: whether regulators can get it right when it comes to
Speaker 1: keeping artificial intelligence under control?
Speaker 5: Totally agree with Dan.
Speaker 4: I think that we need regulators, we need Washington to
Speaker 4: step in. What's the reality of them being able to
Speaker 4: actually regulate this, I think it's slim to none. I
Speaker 4: think they haven't been able to regulate basic social media
Speaker 4: over the past decade, and you know, they've been talking
Speaker 4: about breaking up big tech. I don't think it's for
Speaker 4: the good of the country, but that you know, basically
Speaker 4: hasn't happened, and so I think there's gonna be a
Speaker 4: lot of talker regulation. I would even point This is
Speaker 4: Zuckerberg has talked, has asked for regulation. This is after
Speaker 4: the Cambridge Analytics tobaccle I forget what year that was,
Speaker 4: five years ago, and asking for more help and it's
Speaker 4: just hasn't happened. I love Dan's analogy there is that
Speaker 4: this is going one hundred miles an hour, and the
Speaker 4: regulars are going ten miles an hour, fifteen miles an hour,
Speaker 4: and that makes sense, and I just think that they're
Speaker 4: not going to be able to keep up.
Speaker 1: Yeah, what about the tech sector more broadly? Could we
Speaker 1: start to see some attention beyond the prevailing narrative. Gina
Speaker 1: Martin Adams has been weighing in on that. She is
Speaker 1: the chief equity strategist at Bloomberg Intelligence. Here's some of
Speaker 1: what she has had to say about the outlook for
Speaker 1: tech beyond AI.
Speaker 9: I think you'll see those gains broadened out to other
Speaker 9: segments of tech and some of this these defensive trades,
Speaker 9: which I would call Apple and Microsoft and the mega
Speaker 9: capstocks largely defensive trades the area of the market that
Speaker 9: investors go to, heiden while nothing else is working. Things
Speaker 9: are going to start to work a little bit better
Speaker 9: later this year and into twenty twenty four, and so
Speaker 9: I would expect tech to broaden out to more constituent
Speaker 9: gains across the board.
Speaker 1: Dan, you're looking for more broad gains beyond the AI story.
Speaker 2: I mean, that's exactly our thesis. I think earning season
Speaker 2: that we see for two Q, you're seeing a stabilizing
Speaker 2: it spending environment on enterprise. I think digital advertising is
Speaker 2: starting to stabilize as well, and especially when it comes
Speaker 2: to software. This is really what I view as a
Speaker 2: period where especially in areas like cybersecurity, cloud infrastructure, big
Speaker 2: data of course AI, which is really leading a lot
Speaker 2: of this. I think street numbers they rip the band
Speaker 2: aid off. I think a lot of these numbers I
Speaker 2: wouldn't call it samdbag guide in but I think they're
Speaker 2: setting up for numbers to go higher. And in my opinion,
Speaker 2: this earning sea, I think the bears just go back
Speaker 2: into hibernation.
Speaker 1: Work interesting. What about you, Gene, I mean the valuations
Speaker 1: have been eye popping this year. Can this kind of
Speaker 1: momentum continue?
Speaker 4: I mean there's a saying that I have here, I
Speaker 4: want my cake and ice cream too, and.
Speaker 5: I think that I think there's going to be a pullback.
Speaker 4: But I also want to be very clear, I'm on
Speaker 4: board with this is going to be a great tech
Speaker 4: rally over the next year. So my general sense is
Speaker 4: that we've had some optimism around the market. More broadly,
Speaker 4: I think that what the Fed's doing, there's been some optimism.
Speaker 4: I just think that this earnings periods, there's going to
Speaker 4: be a natural cooling off. But that's getting cute, and
Speaker 4: I think ultimately you fast forward a year from now,
Speaker 4: I think that these are going higher. I can say
Speaker 4: that we've been cautious with one of our funds and
Speaker 4: we've been just a pointing cash over the last month
Speaker 4: and will continue to do that through the summer, even
Speaker 4: though we think there's going to.
Speaker 5: Be some pullbacks.
Speaker 4: So but I think that nuance kind of misses the point.
Speaker 4: I agree with dyon that this is setting up to
Speaker 4: be just a wonderful year in tech. And as Dan
Speaker 4: said at the top, like these these waves come around.
Speaker 4: There's there's a wave every ten years in tech, there's
Speaker 4: a paradigm shift every twenty thirty years, and we're in
Speaker 4: a paradigm shift phase and that can boost things. I
Speaker 4: mean that that powered fifteen years a tech performance.
Speaker 5: So I think my nuanced.
Speaker 4: About this June quarter and whether it's going to do
Speaker 4: these tech stocks is decide the point. I think that
Speaker 4: a year from now things are going to be higher.
Speaker 1: Think he's been a little bit too nuanced, Dan.
Speaker 2: Not at all. Look, I think the way Jeane is
Speaker 2: always thought about tech stocks, I've just always been so
Speaker 2: impressed by because he's able to see the farest through
Speaker 2: the trees, whether it's Apple, whether it's Meta, whether it's others.
Speaker 2: And I think we are in one of those moments.
Speaker 2: We are in this fourth Industrial Revolution. That's why investors
Speaker 2: will fret about a quarter too. They'll be cautious like
Speaker 2: they have this year. But I really believe tech starts
Speaker 2: to inflect higher second half of the year despite this
Speaker 2: poker game between the market and the Fed and you know,
Speaker 2: everyone watching the ten year. I think that you need
Speaker 2: to be macro aware, micro obsessed.
Speaker 5: I love it. You know we're talking about performance. Ay.
Speaker 5: Then I got to ask a question here, Nathan, is
Speaker 5: that okay?
Speaker 4: And I got to say when I was so excited
Speaker 4: to join Dan here, got so much respect for this
Speaker 4: man and what he's done for tech investors over the
Speaker 4: last twenty years. And I haven't had a chance to
Speaker 4: talk to him about Vision Pro, and I love your
Speaker 4: take Apple's vision Pro yep, Apple's Vision Pro.
Speaker 2: Well, look my view on vision Pro, it's it's just
Speaker 2: the start of what I've view as a broader ecosystem
Speaker 2: that Apple's going to build, which we believe over next
Speaker 2: twelve eighteen months it's going to be its own form
Speaker 2: factor and eventually an AI app store that Apple's going
Speaker 2: to own. So I view Vision Pro as thirty five
Speaker 2: hundred the average investor views is obviously pricing. It's not
Speaker 2: about one hundred and fifty thousand units moving the needle
Speaker 2: because gene Knew is better than anyone pine in the world.
Speaker 2: Two years from now, we believe that's fifteen hundred hours
Speaker 2: seventeen hundred, you'll start to see that demand continued to increase.
Speaker 2: But I believe the golden goose why Apple is playing
Speaker 2: chess and others are plane checkers. This is the start
Speaker 2: of we view as an AI app store for Apple.
Speaker 1: I throw a little cold water on this because their
Speaker 1: price point on vision Pro was so huge when they
Speaker 1: first announced it, and it plays into this whole idea
Speaker 1: of augmented reality, the metaverse that got so much attention
Speaker 1: last year other than Vision Pro hasn't gotten much talk
Speaker 1: now that there's been so much focus on AI, is
Speaker 1: there still room for augmented reality the metaverse? In the Tech.
Speaker 4: Story glad to hear Dan's take on it. My view
Speaker 4: is that investors are grossly underestimating what vision Pro and
Speaker 4: the future products around this family can do for Apple.
Speaker 4: And it's that is investors are just looking at what
Speaker 4: has happened over the past five years related to augment
Speaker 4: reality and virtual reality and the disappointments. And I think
Speaker 4: that this device is spatial computing. It's different, and I
Speaker 4: think there is an opportunity for Apple to create a
Speaker 4: device that we spend one to three hours a day
Speaker 4: in and that can be ten plus percent of their
Speaker 4: overall revenue. I think most investors think this is going
Speaker 4: to be five percent of revenue. I think it can
Speaker 4: be more. If I was going to say where I
Speaker 4: could be wrong, I think that it could be much bigger.
Speaker 4: It could be twenty percent. I mean, I think this
Speaker 4: is one of those devices that people won't fully appreciate
Speaker 4: until they've used it, and I think developers are going
Speaker 4: to get on board. I don't think it's great for humanity.
Speaker 4: I think because it's just such an immersive environment. Even
Speaker 4: though you see the outside world, that's still immersive. But
Speaker 4: Apple's going to build what I think is going to
Speaker 4: be a big business around vision pro and investors are
Speaker 4: going to get surprised in the.
Speaker 5: Next few years. It's going to take a few years,
Speaker 5: but I think it's going to happen.
Speaker 1: Another megacap stock we haven't talked much about is Amazon.
Speaker 1: Of course, they spent so much during the pandemic. They've
Speaker 1: been trying to get past that. Dan, what's your view
Speaker 1: on Amazon obviously one of the biggest megacap tech names
Speaker 1: out there.
Speaker 2: Look, I think the biggest thing missing right now, and
Speaker 2: from an investador conversations, I'm sure Jeans had the time
Speaker 2: as well. They are behind when it comes to AI.
Speaker 2: I mean, if you look what Google and Currion have done,
Speaker 2: are queerly Nedella and Redman at the top of the mountain.
Speaker 2: I think from Amazon, it's really jazzy coming up with
Speaker 2: a defined AI strategy. I think cloud is ultimately going
Speaker 2: to be key from a some of the parts to
Speaker 2: this stock moving higher. I had e commerce, you know,
Speaker 2: obviously comms have gotten tougher and they'll lapters, but This
Speaker 2: is really what I view from some of the parts
Speaker 2: about that cloud story monetizing in AI, because right now Nadella,
Speaker 2: he's starting to flex the muscles in Redmond. They're gaining
Speaker 2: more and more share. You're seeing it from Google as well.
Speaker 2: For the first time, they gotta They essentially have a
Speaker 2: cage match going on.
Speaker 1: Winter comes to Cloud, another cage match besides Elon Musk
Speaker 1: and Mark Zuckerberg. Baby is Amazon getting a little bit
Speaker 1: too far ahead in terms of where it is in
Speaker 1: the cloud and maybe not paying as much attention to
Speaker 1: some of that competition Gene.
Speaker 4: I think there's probably some like natural benefits. Their cloud
Speaker 4: business has been under so much pressure. If it just stabilizes,
Speaker 4: I think investors will view that as a positive. I'm
Speaker 4: not talking about the fundamentals. I'm talking about the stock here.
Speaker 4: They probably will get a bump with some of this
Speaker 4: AI spend and some of this AI infrastructure on their
Speaker 4: cloud business. Amazon is going to go through a transition.
Speaker 4: This is a fundamental piece over the next five years,
Speaker 4: and it really is they're becoming more of a service
Speaker 4: provider to their own retail business and to other retailers.
Speaker 4: And they've talked more about kind of having opportunities for
Speaker 4: their fleet to our traditional brick and mortar to our
Speaker 4: delivery and AWS is an example fulfilled by Amazon. I
Speaker 4: think that we're going to see this infrastructure kind of
Speaker 4: become a bigger part of the story, very similar to
Speaker 4: Apple is a products company and then the services became
Speaker 4: a bigger part. I think infrastructure is going to be
Speaker 4: a part of Amazon story over the next decade.
Speaker 1: Gene Munster of Deepwater Asset Management, Dan Ives at web
Speaker 1: Bush Securities stay with us. We're going to take a
Speaker 1: last look at some of your best and worst tech
Speaker 1: stock picks for the rest of twenty twenty three, as
Speaker 1: a special high tech holiday edition of Bloomberg day Break continues.
Speaker 1: It's fifty minutes past the hour. I'm Nathan Haig, and
Speaker 1: this is Bloomberg. Welcome back to the special high Tech
Speaker 1: edition of Bloomberg Daybreak for the fourth of July holiday.
Speaker 1: I'm Nathan Hagar. The US stock market is closed for
Speaker 1: Independence Day, and we are back with Dan Ives of
Speaker 1: Webbish Securities, the senior equity analysts there. Gene Munster, managing
Speaker 1: partner at Deepwater Asset Management, is with us as well.
Speaker 1: We want to close this out guys, little bit of
Speaker 1: a lightning round some of the best and worst performing
Speaker 1: tech stocks that you're looking at through the rest of
Speaker 1: twenty twenty three. Geene, let's start with you. What do
Speaker 1: you think are going to be a couple of the
Speaker 1: standouts and maybe a couple of the laggards this year.
Speaker 4: On the standout side, it's Google still not getting the.
Speaker 5: Credit what they've done in AI.
Speaker 4: Remember in twenty seventeen they said they're an AI first
Speaker 4: company of some of the smartest people on it. Yes,
Speaker 4: there's going to be some sort of a bump in
Speaker 4: the world related to their revenue, but I think we
Speaker 4: haven't even seen the beginning of what they're going to
Speaker 4: do in AI. So I put Google at the top,
Speaker 4: and then I would put just kind of a surprise,
Speaker 4: put Apple in there. I think vision Pro is one
Speaker 4: that is going to surprise investors over the next few years.
Speaker 4: And a third one, a much smaller one, is Zillo.
Speaker 4: So Zillo is a it's a twelve billion dollar market cap,
Speaker 4: the zestiment is busted, the commer residential real estate market
Speaker 4: is massive, and they can use AI to finally fix
Speaker 4: the estimate. I think that's going to benefit Zillo and
Speaker 4: on the ones that we're a little bit more cautious
Speaker 4: on were investors in ubers. So we're negative on Lift.
Speaker 4: They've obviously had some problems. Don't want to pile on that,
Speaker 4: but I'll put Lift in that category.
Speaker 1: Dan, I heard Gene mentioned Apple there, know how you
Speaker 1: feel about Apple? Is that on top of your list
Speaker 1: as well?
Speaker 2: Well? I mean iView that as a table pounder. I mean,
Speaker 2: in my opinion, we see that going to a four
Speaker 2: trillion dollar mark cap by twenty five. Some of the
Speaker 2: parts services that's worth one point three trillion. Apple and
Speaker 2: Microsoft to me are the table pounders here, along with
Speaker 2: Tessa because of the growth themes that are going on
Speaker 2: for Cloud, Microsoft and the Della continues to be the
Speaker 2: core Cloud and AI name the names right now, if
Speaker 2: you looked up disaster in the dictionary, you'd see the
Speaker 2: tickers Lift and Snap. Those are names under new circumstance,
Speaker 2: would I focus on despite maybe the stocks that have
Speaker 2: obviously sold off significant.
Speaker 1: Interesting to hear Snap in that category given some of
Speaker 1: the continued difficulty we're seeing in the ad space as well.
Speaker 1: Just to take a little bit of a broader view here,
Speaker 1: we came into twenty twenty three, thinking that tech was
Speaker 1: going to have it tough. Obviously, that has not panned
Speaker 1: out in a big way. Gene, why do you think
Speaker 1: the downbeat view on tech that began this year didn't
Speaker 1: fail the material or did fail to materialize.
Speaker 4: I think two things happen. One is Chat gpt fastest
Speaker 4: growing product ever. They've got a billion users after six months.
Speaker 4: Nothing's even come close to that, and I think that's
Speaker 4: reminded investors that innovation is alive and well with owning tech.
Speaker 4: And second is the investors saw that the rates are
Speaker 4: going to slow, the hikes are going to slow, doesn't
Speaker 4: matter if they go down, they just need to slow
Speaker 4: and stop. And I think that was the hammer that
Speaker 4: was down on these tech stocks. And as soon as
Speaker 4: investors started to get comfort that they weren't going to
Speaker 4: go up in infinity, the stocks started to go higher.
Speaker 1: Obviously, Dan, you've been bullish on tech for so long here,
Speaker 1: you've followed the sector for so many years. What is
Speaker 1: the biggest risk to your bull view on tech stocks
Speaker 1: as we look ahead to the rest of twenty twenty three.
Speaker 2: I think it's more just geopolitical, you know. I think
Speaker 2: the China situation in terms of just what we see
Speaker 2: there from a supply chain, and you know, any sort
Speaker 2: of more noise between DC and Beijing, although that's offtening. Look,
Speaker 2: I think the FEDS weave the white flag despite all
Speaker 2: the tough talk this poker game, that they're essentially done
Speaker 2: eighth ninth inning. In my view, it is a green
Speaker 2: light to own tech, and I believe we're at the
Speaker 2: start of what's the next bullmarket in tech.
Speaker 1: We'll leave it there. Thanks so much for joining us
Speaker 1: for the full hour here Gene Munster, managing partner in
Speaker 1: Deepwater Asset Management and web Bush Security Senior equity analyst
Speaker 1: Dan Ives giving us the view on tech stocks as
Speaker 1: we head into the rest of this twenty twenty three
Speaker 1: and a special thanks to you as well for being
Speaker 1: with us on this special edition of Bloomberg Daybreak. Hope
Speaker 1: you enjoyed the fourth of July holiday and stay with us.
Speaker 1: Today's top stories and global business headlines are coming up
Speaker 1: right now.