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