Speaker 1: Thanks for joining us for this special edition of Bloomberg Daybreak.
Speaker 1: I'm Nathan Hager Pay Happy New Year, everybody. Of course,
Speaker 1: markets are closed as we kick off twenty twenty four. Well,
Speaker 1: they're back. Last summer, you may recall we brought you
Speaker 1: a special high tech roundtable with Gene Munster, managing partner
Speaker 1: at Deepwater Asset Management, and wet Bush Securities senior equity
Speaker 1: research analyst Dan Ives. This was about halfway through the
Speaker 1: trading year. Well, now, we thought we'd bring the guys
Speaker 1: back to see how their stock picks fared since they
Speaker 1: last joined us on the fourth of July, and we'll
Speaker 1: look as well at some of the trends that could
Speaker 1: shape the tech sector well into twenty twenty four. Well,
Speaker 1: let's start things off with you, Dan and remind our
Speaker 1: listeners just what you liked and didn't like when it
Speaker 1: comes to tech stocks back in the summer.
Speaker 2: Listen, Apple and Microsoft to me are the table pounders
Speaker 2: here along with Tessa.
Speaker 3: Because of the growth themes.
Speaker 2: That are going on for Cloud, Microsoft and the Della
Speaker 2: continues to be the core Cloud and AI name the
Speaker 2: names right now. If you looked up disaster in the dictionary,
Speaker 2: you'd see the tickers, lift and Snap.
Speaker 3: Those are names under new circumstance.
Speaker 2: What I focus on despite maybe the stocks that have
Speaker 2: obviously sold off significant.
Speaker 1: Okay, so since the fourth of July, Dan Apple's gained,
Speaker 1: Microsoft's up about ten percent, Tesla's down about ten percent.
Speaker 1: Kind of nailed it on the Apple Microsoft story. But
Speaker 1: Tesla's been a little more complicated.
Speaker 3: Yeah, it has. I think they've essentially gone through a
Speaker 3: price war, especially in China, and I think what we're
Speaker 3: starting to see with electric vehicles is this is I
Speaker 3: still viewed as an air pocket period for Tesla, but
Speaker 3: no doubt for the first time they're going through some
Speaker 3: challenges and you know, I think right now for twenty
Speaker 3: four it's about standing firm on margins, no more price cuts,
Speaker 3: and starting to ramp unit volume. That's going to be
Speaker 3: the name of the game for Tesla. But is Geneo
Speaker 3: as well when you look out this is still second
Speaker 3: third inning of a nine inning game in terms of
Speaker 3: this gross story.
Speaker 1: Well, gene can't let you off the hook here. Let's
Speaker 1: take a listen to your July fourth picks.
Speaker 4: Now, on the standout side, is Google still not getting
Speaker 4: the credit what they've done in AI remember in twenty
Speaker 4: seventeen they said they're an AI first company of some
Speaker 4: of the smartest people on it. Yes, there's going to
Speaker 4: be some sort of a bump in the road related
Speaker 4: to their revenue, but I think we haven't even seen
Speaker 4: the beginning of what they're going to.
Speaker 3: Do in AI.
Speaker 4: And then I would put Apple in there. I think
Speaker 4: Vision Pro is one that is going to surprise investors
Speaker 4: over the next few years. And a third one, a
Speaker 4: much smaller one, is Zillo. They can use AI to
Speaker 4: finally fix this estimate. I think that's going to benefit Zilo.
Speaker 4: And on the ones that we're a little bit more
Speaker 4: cautious on, We're negative on Lift. They've obviously had some problems.
Speaker 4: Don't want to pile on that, but I'll put Lift
Speaker 4: in that category.
Speaker 1: We're going to have to pile on Lift just a
Speaker 1: little bit. But first Gene, you'll be happy to know
Speaker 1: Google parent Alphabet up about fifteen percent since the fourth
Speaker 1: of July. We mentioned Apple as well, it's higher. Zillow's
Speaker 1: up about ten percent. That AI call does seem like
Speaker 1: it had some pretty decent rethrow.
Speaker 4: We're getting some tracks that I mean it is. This
Speaker 4: is a theme that Dan and I operate in on
Speaker 4: a daily basis, which we're seeing where the world's going
Speaker 4: the next few years. It takes time to get there,
Speaker 4: and Zillo is starting to do that. The zestament has
Speaker 4: been broke for a long time. It's just starting to heal.
Speaker 4: I think that that's going to add better transparency, better
Speaker 4: accuracy to what people is. The largest part of their
Speaker 4: net worth is is their home and I think that
Speaker 4: taking some of the friction out of understanding the value
Speaker 4: of your home I think is valuable. And on top
Speaker 4: of that, you get a natural boost which I think
Speaker 4: is going to come to some of these real estate
Speaker 4: tech companies in the next year, just because raids as
Speaker 4: they even stabilize and maybe they get better, maybe they
Speaker 4: go down stabilization. I think it's going to be benefit
Speaker 4: just across the board and Zillo. Other companies beyond zill
Speaker 4: in real estate tech that have been to say they've
Speaker 4: been obliterated over the last couple of years as an understatement,
Speaker 4: but I think they're due for a bounce back. Now.
Speaker 1: I want to talk about both the really good calls
Speaker 1: that you both had, but you both mentioned Lift as
Speaker 1: a stock that you didn't like. You might be surprised
Speaker 1: to hear that since that fourth of July call, Lift
Speaker 1: has gained about fifty five zero percent. Dan any regrets.
Speaker 3: I mean, look, you're going to see maybe people talking
Speaker 3: about could this get acquired? Could it be a restructuring
Speaker 3: story activist. So that's definitely some of the stuff that's
Speaker 3: happened with LYFT. But the reality is they have averaged
Speaker 3: like uphill challenges, and this is one where Uber continues
Speaker 3: to be our table pounder. You focus on your flowers,
Speaker 3: not your weeds. That's how you lift. It's the little
Speaker 3: brother Tuber.
Speaker 1: How about you, Gene, you still love sour on Lift?
Speaker 4: Yeah, it's painful to hear that that it's up to
Speaker 4: fifty five percent since I was negative on it, and
Speaker 4: I have a similar type of view, is that wish
Speaker 4: we would have been more positive on it six months ago,
Speaker 4: and then all the way we like to think about
Speaker 4: it deep waters that there's no rear ver mirror and
Speaker 4: we have to look forward. And I'm on that same
Speaker 4: page that Dan is. I think that Uber is by
Speaker 4: far and away orders a magnitude better positioned, and I
Speaker 4: think that going forward, wish I would have gotten it
Speaker 4: right going forward, still think this company is going to
Speaker 4: be structurally challenged in the next few years.
Speaker 1: So going forward, let's talk about the names that did
Speaker 1: really well, those calls that you both had. Microsoft Alphabet
Speaker 1: part of those Magnificent seven that have really driven the
Speaker 1: rally this year. Dan, When we see the kind of
Speaker 1: games that we've seen from those names, in particular Microsoft Alphabet,
Speaker 1: at what point do the megacaps start to look stretched
Speaker 1: to you?
Speaker 3: I mean, I still believe we're in the be just
Speaker 3: the beginning of this AI revolution. So when I look
Speaker 3: at Microsoft, you know, we spend so much of our
Speaker 3: time traveling around the world trying to understand the monization
Speaker 3: of AI from Microsoft. For every one hundred dollars of
Speaker 3: cloud spend on Azure Wen, there's incremental thirty five to
Speaker 3: forty of AI spend. You put that together, a year
Speaker 3: from now, we're looking at a mark cap that's probably
Speaker 3: closer to four trillion than three trillion. So I think
Speaker 3: the golden story under Nadella is just starting to take
Speaker 3: place in terms in Redmond.
Speaker 1: You still piling in to Microsoft as well, Gene.
Speaker 4: We do own it. We think that they're well positioned,
Speaker 4: and you know, I just want to put a little
Speaker 4: bit of A. I guess my view on what Dan
Speaker 4: said related to where AI is and where it's potentially going.
Speaker 4: And you know, we've been struggling over the past year
Speaker 4: to try to put context into the significance of this.
Speaker 4: There seems to be this tripping over each other in
Speaker 4: terms of what are the adjectives to describe it. So
Speaker 4: I'm going to take a shot at it. Here is
Speaker 4: that I would put electricity in a scale of one
Speaker 4: to one hundred, one hundred being most transformative. Electricity is
Speaker 4: at one hundred. I would put AI at ninety or
Speaker 4: ninety five, the Internet at fifty, the smartphone at thirty
Speaker 4: three d TV if you're curious, as a negative five.
Speaker 1: Been a while since we thought about shot correct.
Speaker 4: The reason why I put that into context is it
Speaker 4: I think illustrates how bullish we are and we think
Speaker 4: we're going to see We're in nineteen ninety five and
Speaker 4: we haven't even started to see the enthusiasm around A
Speaker 4: and we think we're gonna get a point where the
Speaker 4: optimism around it in three to five years is going
Speaker 4: to be deafening and it's gonna be a bubble. Good
Speaker 4: news is going into this. I think you are owning
Speaker 4: companies like Microsoft and Google and Apple are going to
Speaker 4: benefit from this massive run up. You gotta be careful
Speaker 4: on the opposite side of it. We learned that. But
Speaker 4: I'm agree with this thought that Microsoft is one of
Speaker 4: those foundational AI companies, thanks obviously to their partnerships, and
Speaker 4: they're gonna benefit from it.
Speaker 1: Interesting that you say it's gonna be a bubble, Gene,
Speaker 1: because when you have the kind of valuations that we've
Speaker 1: seen for these companies and so much focus this year
Speaker 1: on this Magnificent seven, a lot of folks are wondering
Speaker 1: whether we might be in the bubble already. Dan, I'm
Speaker 1: guessing that's not your view just yet.
Speaker 3: Why look, I think it look a lot of the
Speaker 3: work that even Gene, you know, Dug and his team
Speaker 3: done in deep water, it just shows similar to our work.
Speaker 3: We are in their early days of monization. So I
Speaker 3: don't view it as a bubble. This is not a
Speaker 3: nineteen ninety nine two thousand movement. It's a nineteen ninety
Speaker 3: five movement and the monization of AI is just starting.
Speaker 3: We viewed as a trillion dollars of incremental spend over
Speaker 3: the next decade. As at his the shores of tech.
Speaker 3: I view this not the time to go deep into
Speaker 3: the caves like a lot the bears have done this year,
Speaker 3: missing out. This is the time to basically get the
Speaker 3: popcorn and get ready for what we've used a new
Speaker 3: tech bulmarket.
Speaker 1: Are we at the start of a bull market in tech?
Speaker 1: For you, Geene?
Speaker 4: I think so. I think that to put there where
Speaker 4: we're currently in terms of evaluation, where we were in
Speaker 4: two thousand, call it the Nasdaq is twenty five or
Speaker 4: so multiple or twenty twenty five multiple, and at the
Speaker 4: peak of the bubble it was almost a two hundred
Speaker 4: multiple earning it's multiple, and so we it's just a
Speaker 4: very it's just a lot to go. I agree with Dan.
Speaker 4: I just love the way he can just capture exactly
Speaker 4: how to think about these getting a popcorn and sitting
Speaker 4: back and just watching this happen, because it's going to happen.
Speaker 4: And so I think we're just have We're at a
Speaker 4: point right now. I've been for the last two years.
Speaker 4: I've been more on the cautious side, and I am
Speaker 4: just extremely excited about how this AI is going to
Speaker 4: impact and bring a lot of just generate a lot
Speaker 4: of wealth for investors in the next three to five years.
Speaker 4: I do I actually have a question Nathan again for
Speaker 4: Dan on this topic around Okay, and.
Speaker 1: Well, let's get to that question in just a moment,
Speaker 1: because we do have a lot more to unpack here
Speaker 1: when it comes to the Magnificent seven and the AI story.
Speaker 1: So we'll let you pose that question to Dan as
Speaker 1: we continue this conversation on big tech in the new
Speaker 1: year on this special edition of Bloomberg and Daybreak. It
Speaker 1: is now eighteen minutes past the hour on Nathan Hager
Speaker 1: and this is Bloomberg. Welcome back to the special edition
Speaker 1: of Bloomberg Daybreak. The markets are closed for the New
Speaker 1: Year's holiday. I'm Nathan Hager. We are back with Gene
Speaker 1: Monster managing partner, Deepwater Asset Management and Wetbush Security senior
Speaker 1: equity research analyst, Dan Ives and Gene Before we were
Speaker 1: so rudely interrupted by the break, you had a question
Speaker 1: you wanted to post a Dan, So go ahead.
Speaker 4: It feels like Dan, you know, on the same page
Speaker 4: in terms of how impactful AI. It's going to be
Speaker 4: a massive impact. There's an opportunity of the next three
Speaker 4: to five years for wealth creation as the synergies and
Speaker 4: the revenue opportunities start to emerge from these companies around AI.
Speaker 4: It sounds like in general we're on the same page.
Speaker 4: And my question is this more about twenty twenty four.
Speaker 4: Do we think we're actually going to see some of
Speaker 4: the monetization for AI in twenty twenty four or is
Speaker 4: it going to be more just announcements and building towards
Speaker 4: better products that start to have an impact on revenue
Speaker 4: in twenty five, twenty six, twenty seven.
Speaker 3: H Gee, I think you nailed that. I think that's
Speaker 3: the biggest question. And to our point, there all the
Speaker 3: research we've done, I think we see monization front and
Speaker 3: center from copile, it from some of the hyperscale players,
Speaker 3: starting as early as March and April, and I think
Speaker 3: that is going to be the tip of the iceberg
Speaker 3: to this broader trend we're seeing right now. We have
Speaker 3: over eighty use cases based on our survey work four
Speaker 3: or five months ago, bay less than fifteen. And I
Speaker 3: think that you filew like Nathan Gene knows this so well.
Speaker 3: You follow the use cases. That's the yellow brick road
Speaker 3: to the winners and who you want to play.
Speaker 1: Okay, Well, if you've got eighty use cases Dan, and
Speaker 1: you've narrowed it down to that a dozen or so,
Speaker 1: what do you think of the most likely use cases
Speaker 1: that we could see start to bear fruit in this
Speaker 1: new year, Because, like as GEDD was saying, the big
Speaker 1: question is there's so much prompt around AI, you got
Speaker 1: to think that maybe this is the year that a
Speaker 1: lot of these companies are going to have to show
Speaker 1: that the promise leads to results.
Speaker 3: Yeah, And I think where you're seeing it first areas
Speaker 3: of financial some of the regulatory insurance. There's massive use
Speaker 3: cases around that actuaries are using that we're seeing from
Speaker 3: an unstructured data perspective. Banks are going after, they're diving
Speaker 3: to deepend the pool. The use cases are massive, and financials,
Speaker 3: life insurance. I also think we're seeing massive use cases healthcare, hospitals.
Speaker 3: Science is a very very big focus. And then ironically, government,
Speaker 3: which usually is so far behind, we're seeing a lot
Speaker 3: of use cases when it comes to on DoD and
Speaker 3: on defense and military and some of the agencies. And
Speaker 3: that's why we view this as probably the biggest transformation
Speaker 3: that we've ever seen, especially going back to mid nineties.
Speaker 1: That's really fascinating because we have seen a lot of
Speaker 1: the big banks, in particular Gene is trying to get
Speaker 1: ahead of the trend on AI and getting those use
Speaker 1: cases implemented. Where do you see the most promising use
Speaker 1: cases for AI right now, Well, it's.
Speaker 4: In twenty twenty four. I agree with Dan on this
Speaker 4: concept of copilot, and I think that when he talks
Speaker 4: about those eighty features, that's like real substance. There's real
Speaker 4: utility that's being delivered next year. When I saw some
Speaker 4: of these products previewed by Microsoft in twenty twenty three
Speaker 4: around copilot, my sense was we're going to see these
Speaker 4: in five years, and then they start talking about them
Speaker 4: being available in two months. It just hit home how
Speaker 4: fast things are moving. So I think that you will
Speaker 4: see an uptake small uptake and Microsoft revenue next year.
Speaker 4: I think another company that's going to benefit from this
Speaker 4: is you know, outside of the banking don't spend as
Speaker 4: much time on the banking side specifically, but we spend
Speaker 4: a lot of time on social side. And I think
Speaker 4: companies like Meta and even though it's not the AI
Speaker 4: quote AI product, I think AI making content easier to
Speaker 4: generate and really making the algorithms more I would say
Speaker 4: for lack of a better word, addictive and to increase engagement.
Speaker 4: I think you're going to continue to see where it
Speaker 4: actually presents itself is the growth in daily active users
Speaker 4: and time spent the metric they don't give out, but
Speaker 4: daily active users continues in this two three percent year
Speaker 4: of year, which is a hard number to grow and
Speaker 4: it's close. It's over two billion. I think that that
Speaker 4: is going to be how I think we're going to
Speaker 4: see AI impacting these businesses and that's real and we're
Speaker 4: going to start to see. Of course, obviously the hardware
Speaker 4: side and video will continue to be a big beneficiary,
Speaker 4: maybe a little bit with amw AMD and then play
Speaker 4: it forward. I think twenty five twenty six is when
Speaker 4: things really get and when it comes to monetization around AI.
Speaker 1: No I want to ask you Dan to think about
Speaker 1: AI getting more implemented in social media. There's so much
Speaker 1: question around social media, whether it's too addictive right now,
Speaker 1: and then when you think about artificial intelligence getting wrapped
Speaker 1: into it, whether that could create even more of a
Speaker 1: backlash around social media and AI more broadly. There's still
Speaker 1: a lot of concern, isn't there that artificial intelligence has
Speaker 1: the risk of getting to and meshed in our lives.
Speaker 2: Yeah.
Speaker 3: Look, it's been a concern and that's not going away.
Speaker 3: But I think with Jane's talking about, I think is
Speaker 3: a very important issue because when you look what's happened
Speaker 3: in social media and you look at Facebook, and you
Speaker 3: look at Google and snap TikTok and everything else, I
Speaker 3: mean AI, the monization's real in terms I mean from
Speaker 3: better words, essentially targeting, advertising, ramping. The regulators right now
Speaker 3: are in the right lane in a minivan going twenty
Speaker 3: five miles. The technologies a ferrari left ling going ninety
Speaker 3: five and the reality is regulatories despite all the noise,
Speaker 3: it's not stopping this free graine.
Speaker 1: But that's the thing though, If the regulation stays in
Speaker 1: the slow lane, it raises the question once again about
Speaker 1: whether artificial intelligence has a risk of outrunning itself and
Speaker 1: getting two out of control. What's the concern Do you
Speaker 1: have that concern, Jane.
Speaker 4: Well, I think that there's the companies know. I think
Speaker 4: the companies are really defining and driving AI, know of
Speaker 4: what the risks are, and I think, as I agree,
Speaker 4: I love that analogy. Dan, You are just wonderful at
Speaker 4: these analogies that far they're in the Ferrari and ripping along,
Speaker 4: and they know that I'm going to try my best
Speaker 4: to stick with this Ferrari example, but they know that
Speaker 4: if you go take it to one hundred and eighty
Speaker 4: miles an hour, you could crash and then you're done.
Speaker 4: And I believe that these companies know about the existential
Speaker 4: risk from AI, and there is, and they know that
Speaker 4: the risk is can be pretty it could be a
Speaker 4: significant negative to humanity. I'm not an alarmist, but I
Speaker 4: think that people when we talk to you know, Doug
Speaker 4: from our team, Dan mentioned him. He is the smartest
Speaker 4: guy on AI and he does a ton of interviews
Speaker 4: with founders and AI, and that's something that's on their mind.
Speaker 4: And so Nathan, I think that they're going to there's
Speaker 4: going to be this actually self regulation piece sounds bizarre
Speaker 4: when it comes to tech and not in regulating to
Speaker 4: be nice and not you know, for the greater good
Speaker 4: of all humanity, regulating AI to make sure that humanity
Speaker 4: stays around. I think that that is as bizarre as
Speaker 4: it is, it's a real topic, and I feel that
Speaker 4: the knowledge of the existential risk will prevent very bad things.
Speaker 4: As Dan said, the regulars are going to try to
Speaker 4: keep up with AI and they're just they're not going
Speaker 4: to have a chance to keep up with it.
Speaker 3: And Nathan I would just say one, Dan Jean, sounds
Speaker 3: very important when you talk about what's happened in self regulation.
Speaker 3: The other overarching theme is US first China. For the
Speaker 3: first time in years, US is ahead of China. So
Speaker 3: the issue from a belt way to a two perspective,
Speaker 3: where you are do you shoot yourself in the foot
Speaker 3: at a time that you're in arms race with China?
Speaker 3: Where right now we have the golden Child's Nvidia, Microsoft
Speaker 3: Open AI in the US And that's the balance.
Speaker 1: And that's the thing. I mean, we're right at the
Speaker 1: start of how to think about this technology and twenty
Speaker 1: twenty four really could be the year that things really
Speaker 1: start to come into focus when it comes not just
Speaker 1: to how to apply artificial intelligence, but how to keep
Speaker 1: it under control. And we're going to carry on this
Speaker 1: conversation focused on tech with a Gene Monster of Deep
Speaker 1: Water and Dan Ives of web Bush. Take a closer
Speaker 1: look as well at this mag Magnificent seven, those seven
Speaker 1: tech stocks that have really driven the stock rally this
Speaker 1: year that says this holiday edition of Bloomberg Daybreak continues.
Speaker 1: It is thirty five minutes past the hour. I'm Nathan Hager,
Speaker 1: and this is Bloomert. Welcome back to this special edition
Speaker 1: of Bloomberg Daybreak. The markets are closed on the New
Speaker 1: Year's holiday. I'm Nathan Hager, and we are back now
Speaker 1: with Dan Ives, senior equity research j analyst at Wedbush Securities,
Speaker 1: and Gene Munster, managing partner over at Deepwater Asset Management.
Speaker 1: It's been such a fascinating discussion so far, guys, about
Speaker 1: artificial intelligence, and so much of what's driven this excitement
Speaker 1: around AI is these seven stocks, the so called Magnificent
Speaker 1: Seven in Nvidia's one of them, along with Alphabet, Amazon, Apple, Meta, Microsoft, Tesla.
Speaker 1: Think I got them all? Those seven stocks altogether doubled
Speaker 1: in value in twenty twenty three on the Bloomberg Magnificent
Speaker 1: seven Total Return Index. So I want to ask you,
Speaker 1: first off, gene was AI alone the biggest driver of
Speaker 1: these gains? And do you see it continuing in the
Speaker 1: next into this year.
Speaker 4: I think AI was a quarter of the of the gains,
Speaker 4: and some companies, more like Nvidia was one hundred and
Speaker 4: fifty percent of it. In Google's case, it was there's
Speaker 4: a lot of debate where investors stand on Google relative
Speaker 4: to AI, but I think the biggest driver in twenty
Speaker 4: twenty three. We came off of twenty twenty two where
Speaker 4: tech was a four letter word, and now we go
Speaker 4: into twenty three where there's just this optimism that rates
Speaker 4: are going to start to stabilize or go down, and
Speaker 4: then so you have not only the benefit of wanting
Speaker 4: to have growth, but there's still this flight to quality,
Speaker 4: and so I think that that benefits some of the
Speaker 4: Magnificent seven. I think company like Apple, world's greatest company
Speaker 4: you have, they've been pretty quiet when it comes to AI,
Speaker 4: and the stocks at fifty five percent this year, well
Speaker 4: ahead of the NASDAC, and so I think that I
Speaker 4: think that AI has played part of it, but also
Speaker 4: the bigger part is just our lives are becoming more
Speaker 4: dependent on these companies.
Speaker 1: How do you see it, Dan? What drove the Magnificent
Speaker 1: seven rally and does it continue?
Speaker 3: I think a big part was these tech companies, after
Speaker 3: spending money like nineteen eights rock stars, you know for
Speaker 3: many years, they started cut costs. I mean that was
Speaker 3: the Zuckerberg your turnaround. I think you say the same
Speaker 3: thing at Google and others, So they prepared for a
Speaker 3: hard landing, but instead we got a Pillsbury dough Boys
Speaker 3: soft landing numbers were ahead expectators. I think that was
Speaker 3: a big piece. And then AI, it's the gold rush.
Speaker 3: You put that in there. Combined that creates what we've seen,
Speaker 3: especially where so many investors, institutionally speaking, we're yelling fire
Speaker 3: in a crowded theater. Now into twenty twenty four, now
Speaker 3: the real monization starts to happen. So I view it
Speaker 3: as kind of again, this is in ninety five going
Speaker 3: into what I've used a three year stretch.
Speaker 1: Geene, you mentioned that twenty twenty two was the year
Speaker 1: when tech was a four letter word. Obviously this past
Speaker 1: year much different story. What's to say that we don't
Speaker 1: see cyclicality in twenty twenty four that we could see
Speaker 1: up and downs once again for tech?
Speaker 4: You know, people like Dan and I we obsess about
Speaker 4: where the world's going, what the next three to five
Speaker 4: ten years look like, how it's going to change our lives.
Speaker 4: And when it comes to markets, there's this other piece
Speaker 4: to it, which is around interest rates and money flows,
Speaker 4: and it's something that we're not experts on and we
Speaker 4: don't we're not economists, but unfortunately it does have an impact.
Speaker 4: And so when we think about twenty twenty four and
Speaker 4: think about you know the impact of money flow and
Speaker 4: and rates and the market saying there's going to be
Speaker 4: rate cuts next year, if that happens, it's going to
Speaker 4: be really positive for even though they're anticipated, it will
Speaker 4: be positive for these tech socks. I believe even a
Speaker 4: stable rate environment. This is contrarian, but I believe even
Speaker 4: a stable rate environment, so the FED doesn't really move
Speaker 4: rates in twenty twenty four, I actually think it's going
Speaker 4: to be okay and positive for tech stocks, and because
Speaker 4: we've been through such a crisis over the past twenty
Speaker 4: four months related to uncertainty around rates. Even though they're higher,
Speaker 4: even though they're not necessarily going down, the fact if
Speaker 4: they stay stable, I think that's going to allow more
Speaker 4: inflows into tech just because the discounting mechanism that interest
Speaker 4: rates have on it. And so I'm really optimistic about
Speaker 4: tech and twenty four, even though it's had a great
Speaker 4: run in twenty three, I think it's going to be
Speaker 4: the first year of that three to five year ramp
Speaker 4: going into what's going to be Again, I believe it
Speaker 4: will be a bubble, but we got a long way
Speaker 4: to go from where we're at to the top of
Speaker 4: that bubble.
Speaker 1: And clearly, Dan, you're bullish, megabullish on tech. I mean,
Speaker 1: the stocks that we've been talking about have managed to
Speaker 1: power through despite massive rate hikes from the Federal Reserve.
Speaker 1: How does it keep going? How does that monetization continue
Speaker 1: into twenty twenty four.
Speaker 3: Well, first, I think street numbers are under estimated by
Speaker 3: five ten percent for twenty four, so as numbers are
Speaker 3: going to move higher into twenty four and twenty five
Speaker 3: fed despite all the jaw booning boy that cried wolf.
Speaker 3: They're cutting whether it's two or three times, probably starting
Speaker 3: in the spring, and then you start seeing more and
Speaker 3: more of this monization that happens not just with mag
Speaker 3: seven but across broader tech. And what that's also going
Speaker 3: to do, it's going to stimulate M and A. I
Speaker 3: think there's going to be just a tidal wave of
Speaker 3: M and A the FTC con that's kind of us
Speaker 3: a mosquito now that I mean, it's black eye after
Speaker 3: black eye, especially in Microsoft, Activision and the others, Big
Speaker 3: text free daymore so you can see a lot of
Speaker 3: big deals you probably have. You know, the markets is
Speaker 3: really gonna, I think, go into this next phase of
Speaker 3: this modernization and what that does. It creates this bull
Speaker 3: market that we've already begun in tech.
Speaker 1: It's an interesting idea to think about these big tech
Speaker 1: companies getting even bigger through M and A. Is that
Speaker 1: something that's on your radar as well, Gene.
Speaker 4: I think we're gonna see more M and A. I
Speaker 4: think the biggest I love to have the conversation with
Speaker 4: Dan around Apple and AI and how they're thinking about
Speaker 4: leveraging other models or building their own foundation model. To me,
Speaker 4: that's kind of the topic of the breakouts we're gonna do.
Speaker 4: We usually wait till the I would recommend checking out
Speaker 4: Dan's projections predictions for twenty twenty four. We always does
Speaker 4: such a good job on it from our perspective. I
Speaker 4: think that a huge topic is going to be you know,
Speaker 4: what is Apple going to do relative to AI? And
Speaker 4: I think that there could be some M and A
Speaker 4: related to that, whether it's next year or the year after.
Speaker 4: And I think we will see more M and A.
Speaker 4: I don't know if it's going to be Blockbuster M
Speaker 4: and A, but I think there will be some Blockbuster
Speaker 4: M and A related to AI companies like Anthropic for example.
Speaker 1: Interesting raises a question as well, Dan, whether we continue
Speaker 1: to see this kind of outperformance from just these seven
Speaker 1: stocks in particular, or whether we start to see a
Speaker 1: little bit more of a broadening when it comes to
Speaker 1: the tech story. Are you looking at some other names
Speaker 1: that could start to outperform this year?
Speaker 3: Yeah, I think the broadening starts to happen. You look
Speaker 3: at what I've used, the messy of AI poun Teer.
Speaker 3: I think from a use case pure play, it's one
Speaker 3: of the best out there names like Mango, dB, Snowflake
Speaker 3: or just some examples. And then I think the install
Speaker 3: based plays is not just what's happened Redmond in the
Speaker 3: trophy case, what Adobe's doing, what Salesforce dot com is doing.
Speaker 3: Now you're taking AI into these massive installed bases, and
Speaker 3: I think that's why it's really giving a renaissance of growth.
Speaker 3: And I think that's something that you know when you
Speaker 3: go with Gene and I do just like he said,
Speaker 3: and he does a great job in his podcast with Doug,
Speaker 3: we're looking at let's just don't focus on valuations. What's
Speaker 3: focused the next two three, five years, and that's where
Speaker 3: this Fourth Industrial Revolution is happening.
Speaker 1: I want to ask aswell about in video. Obviously it
Speaker 1: was the big focal point for AI chips gene Does
Speaker 1: in Nvidia need to watch its back when it comes
Speaker 1: to that kind of dominance. Are other players nipping it
Speaker 1: its heals?
Speaker 4: Not yet? The key question within video right now is
Speaker 4: what's their growth going to be in twenty twenty five
Speaker 4: The streets looking for fifteen percent revenue growth one to five.
Speaker 4: That growth has been ripping a lot higherbe two hundred
Speaker 4: percent in the or in the quarter that just ended
Speaker 4: ends at the end of this month, at the end
Speaker 4: of January. The As far as comp ddition, we're invested
Speaker 4: at deep Water. We invest in both venture private companies
Speaker 4: and public companies the whole spectrum of tech, and we
Speaker 4: are invested in companies that are building chips to compete
Speaker 4: with Nvidia, and just knowing what their timeframe is, it's
Speaker 4: still a few years out before they get the chips
Speaker 4: taped to a point where they can actually be deployed.
Speaker 4: So I think that AMD Intel aren't going to make
Speaker 4: much of a dent in this and there's just going
Speaker 4: to be such a massive infrastructure build. I think in
Speaker 4: VideA is still in a great place. I think I'd
Speaker 4: rather have my money in companies like Apple or Google,
Speaker 4: but in Vidia still in a great spot.
Speaker 1: All Right, We've still got a little bit of time
Speaker 1: left to continue this tech conversation a few more minutes
Speaker 1: time with Gene Mounster of a deep Water Asset Management
Speaker 1: and Dan Ives over web Bush Securities. So we'll continue
Speaker 1: this tech roundtable with more of a look ahead to
Speaker 1: what's in store for big tech in twenty twenty four.
Speaker 1: As this holiday edition of Bloomberg Daybreak continues, it is
Speaker 1: fifty minutes past the hour. I'm Nathan Hager, and this
Speaker 1: is going to welcome back to this special edition of
Speaker 1: Bloomberg Daybreak. The market is closed for the New Year's holiday.
Speaker 1: I'm Nathan Hager wrapping up this hour now focused on
Speaker 1: tech with Gene Monster of Deepwater Asset Management and web
Speaker 1: Bush Securities. Dan Ives. Guys, since it is the new year,
Speaker 1: let's hear some resolutions. Dan, what are you hoping to
Speaker 1: see out of tech in twenty twenty four?
Speaker 3: I mean, I think tech stocks are gonna be up
Speaker 3: twenty five percent a year from now when the bell
Speaker 3: rings going into twenty five. What I'm really focused on
Speaker 3: is M and A that I think is going to
Speaker 3: really cataize these names, but a really monization of AI,
Speaker 3: the AI party. It's only nine thirty pm, it's not
Speaker 3: two am, so.
Speaker 1: The ball hasn't dropped just yet. What about Eugene your
Speaker 1: New Year's resolutions for tech.
Speaker 4: I think we're going to see some fracturing in the
Speaker 4: Mega seven. I think companies like Apple and Google are
Speaker 4: going to be Microsoft are going to be in a
Speaker 4: great place, and the rest just aren't going to perform
Speaker 4: at that same level. And I think we're going to
Speaker 4: start to see more, I think more performance from some
Speaker 4: of these companies that have been kind of left out
Speaker 4: in part because of just stabilizing interest rates. We have
Speaker 4: a deep water Frontier Tech ETF. It's powered by innovator
Speaker 4: Tickeers Loup, so it invests in these call it sub
Speaker 4: one hundred billion dollar market cap transformative tech companies. But
Speaker 4: that's one segment that I'm really optimistic about how that
Speaker 4: kind of sub one hundred billion dollar tech trade works
Speaker 4: in twenty twenty four.
Speaker 1: Since you mentioned some individual stocks there, Gene and since
Speaker 1: we started this hour with a look back at your
Speaker 1: likes and dislikes. What are some of your likes and
Speaker 1: dislikes when it comes to individual tech stocks at the
Speaker 1: start of this new year.
Speaker 4: So it's Google and Apple on the largest side. I
Speaker 4: think that what Google is doing is I think what
Speaker 4: they've showed it was a heavily edited video, but what
Speaker 4: they showed with Gemini was impressive, and I think it's
Speaker 4: going to really emerge that GPT from open Ai and
Speaker 4: Gemini from Google are going to be the two foundation
Speaker 4: models that are kind of front and center. So I
Speaker 4: have to see that as being a positive. And then Apple,
Speaker 4: people forget there's I mean, Dan wrote the book on this,
Speaker 4: but just to strengthen what's going on with the iPhone,
Speaker 4: I think is going to be a positive. But also
Speaker 4: I think vision Pro is really going to It's not gonna,
Speaker 4: I think, surprise people in twenty twenty four, but I
Speaker 4: think twenty twenty four is the year where investors get
Speaker 4: their hands on these vision pros and the light goes
Speaker 4: on that this is really something different. It's spatial computing.
Speaker 4: Bringing the physical and the real world together is something
Speaker 4: that is magical, and I think they're going to start
Speaker 4: to anticipate that vision pro over the next three five
Speaker 4: plus years is going to be a bigger part of
Speaker 4: Apple's business. I think that's going to be positive for Apple.
Speaker 4: And then kind of in the smaller I just generally
Speaker 4: think about kind of this this group of the sub
Speaker 4: one hundred billion I mentioned our et off that kind
Speaker 4: of plays into that.
Speaker 1: Dan, I know you've got a four trillion dollar valuation
Speaker 1: call on Apple, so you definitely like that stock. What
Speaker 1: other stocks do you like in twenty.
Speaker 3: Four Well, I think this is going to be the
Speaker 3: year for AI. I look at names like Pall and Teer,
Speaker 3: Mango dB, and I think the rerating that happens on
Speaker 3: Google and Amazon it's just starting when it comes to AI.
Speaker 3: But ultimately at the top of that mound is Microsoft,
Speaker 3: and I think that's a four trillion dollar markap by
Speaker 3: early twenty five.
Speaker 1: What about dislike Stan Well dislikes to me, it's really
Speaker 1: low quality.
Speaker 3: I mean that's why I continue you lift, you know, snap,
Speaker 3: if you looked up in the dictionary, disaster continues to be.
Speaker 3: You know, it's dogate the homework excuse quarter after quarter.
Speaker 3: Those are the two in local quality names that stay
Speaker 3: away from.
Speaker 1: How about you're justslike Genemunster.
Speaker 4: My dislikes would be Netflix. I think that Netflix, it's
Speaker 4: just not a compelling growth story, and I think that
Speaker 4: in the midst of and they just don't really have
Speaker 4: a good AI play and so still a large company.
Speaker 4: Is still a two hundred and fifteen billion dollar market
Speaker 4: cap that is in a hyper competitive market with not
Speaker 4: much innovation going on.
Speaker 1: Okay, we'll see if those hold up as we get
Speaker 1: to the rest of twenty twenty four. Here. So great
Speaker 1: to have both the guys for the entire hour, Gene Munster,
Speaker 1: managing partner at Deepwater Asset Management and Dan Ives, senior
Speaker 1: equity research analyst at Webbush Securities. Let's see if we
Speaker 1: can make this a tradition. Happy New Year to both
Speaker 1: of you, and thanks to you as well for joining
Speaker 1: us on this New Year's holiday. But stay right here.
Speaker 1: The day's top stories and global business headlines are coming
Speaker 1: up right now.