WEBVTT - Daybreak Holiday: Big Tech Outlook with Dan Ives and Gene Munster 0:00:01.760 --> 0:00:04.240 Hello, and a very happy new year to you and 0:00:04.280 --> 0:00:07.880 your family. Welcome to this special edition of Bloomberg Daybreak. 0:00:08.200 --> 0:00:11.520 Markets are closed as we ring in twenty twenty six. 0:00:11.800 --> 0:00:14.360 I'm Nathan Hager coming up at this hour. We're gonna 0:00:14.360 --> 0:00:16.560 look at what's ahead for the sector that has led 0:00:16.640 --> 0:00:19.200 the way for the stock market the last couple of years. 0:00:19.960 --> 0:00:24.360 Big Tech. Twenty twenty five was once again bullish for technology, 0:00:24.400 --> 0:00:27.520 but not without its bumps and bruises. A deep sell 0:00:27.560 --> 0:00:30.920 off in April, followed by a powerful rally, then another 0:00:31.000 --> 0:00:33.440 sell off of many of the biggest names in the 0:00:33.440 --> 0:00:36.479 final quarter. So what could be in store for twenty 0:00:36.560 --> 0:00:39.360 twenty six? Who better to ask than two of the 0:00:39.360 --> 0:00:43.000 most prominent analysts on the street. Gene Monster, managing partner 0:00:43.040 --> 0:00:46.160 in Deepwater Asset Management, is with us along with Dan Ives, 0:00:46.200 --> 0:00:49.440 global head of Tech Research at web Bush Securities. 0:00:49.120 --> 0:00:50.040 For the full hour. 0:00:50.120 --> 0:00:52.199 It is great to have both of you back on 0:00:52.240 --> 0:00:56.360 what has become a semi annual tradition here on Bloomberg Daybreak. 0:00:56.400 --> 0:00:59.000 But before we look ahead to twenty twenty six, let's 0:00:59.040 --> 0:01:00.760 look back at what both that you had to say 0:01:00.760 --> 0:01:03.160 about tech the last time we were all together here 0:01:03.600 --> 0:01:07.600 back on the fourth of July. Gene, let's start with you. 0:01:07.600 --> 0:01:09.120 You were pretty enthusiastic. 0:01:09.680 --> 0:01:13.360 I actually am so bullish on AI. I think that 0:01:13.400 --> 0:01:17.600 it has the power for these companies to continue to 0:01:17.600 --> 0:01:20.959 move higher over the next three to five years, despite 0:01:20.959 --> 0:01:23.280 what is going to happen, what could happen with the 0:01:23.280 --> 0:01:25.679 overall macro And I don't like being out on a 0:01:25.720 --> 0:01:29.399 limb that farart and the right approach is that AI 0:01:29.959 --> 0:01:32.039 is just much more impactful. 0:01:32.280 --> 0:01:36.080 Of course, Gene, that was before the rotation at the 0:01:36.200 --> 0:01:39.320 end of twenty twenty five. Are you still as enthusiastic 0:01:39.440 --> 0:01:41.360 about big tech as you were then? 0:01:43.000 --> 0:01:46.280 Yeah, nothing has changed in that optimism. I still think 0:01:46.319 --> 0:01:50.600 we're going to see the AI trade outperform the Nasdaq 0:01:50.680 --> 0:01:52.640 for next year. I think that the Nasdaq is going 0:01:52.720 --> 0:01:56.640 to be up call it five ten plus percent. So 0:01:56.840 --> 0:02:00.240 still optimistic, still believe we're I'd put it in the 0:02:00.280 --> 0:02:03.480 second inning of all this and understand that that may 0:02:03.600 --> 0:02:08.359 come across as seemingly out of touch with reality, given 0:02:08.480 --> 0:02:10.639 I think some of the towards the end of the year, 0:02:10.760 --> 0:02:13.120 some of that, some of that concern that has poked 0:02:13.160 --> 0:02:17.040 its head up around the AI trade, some issues that 0:02:17.120 --> 0:02:19.880 investors have had about the amount of investment that have 0:02:19.919 --> 0:02:22.839 been made in the market at times just shrugging off 0:02:22.880 --> 0:02:26.760 good news. But Ayden, I think that this is still intact. 0:02:26.760 --> 0:02:30.360 I think the transformation really hasn't even begun, and I 0:02:30.360 --> 0:02:33.280 think that patients will pay off when it comes to 0:02:33.480 --> 0:02:35.400 wealth creation over the next few years. 0:02:35.720 --> 0:02:37.560 All Right, I want to turn down to you, Dan 0:02:37.680 --> 0:02:40.320 over at Wedbush. I think I have a feeling what 0:02:40.400 --> 0:02:42.760 you might say. But let's listen back to what you 0:02:42.840 --> 0:02:44.239 told us back in July. 0:02:44.600 --> 0:02:48.919 This is a fourth Industrial revolution, this tact bull market. 0:02:49.080 --> 0:02:51.880 It's another three years ahead. And that's why I think 0:02:51.919 --> 0:02:55.880 it's the popcorn get the Champagne Islands handing slowing it down. 0:02:56.440 --> 0:02:58.200 Do you see anything slowing it down since then? 0:02:58.280 --> 0:03:03.040 Dan, Look, I'm more bullish on the theme today than 0:03:03.040 --> 0:03:06.760 I was back in the summer, given my monization, given 0:03:06.800 --> 0:03:11.840 what we've seen with the spend, given themes like Pallentier 0:03:11.880 --> 0:03:14.240 and others. Is the use cases are built out and 0:03:14.280 --> 0:03:18.560 now going into robotics and autonomous. To me, look, it's 0:03:18.600 --> 0:03:20.839 two more years left this technical market. I'm not gonna 0:03:20.840 --> 0:03:22.360 say we're not gonna have white knuckles as me and 0:03:22.400 --> 0:03:26.880 you always talk about. But nothing in any way makes 0:03:26.960 --> 0:03:30.240 me get off as AI train to some extend. It's 0:03:30.320 --> 0:03:31.000 more in bolden. 0:03:32.280 --> 0:03:34.839 I want to turn back to you, Gene. You say 0:03:34.840 --> 0:03:38.839 it's the second inning in the AI trade. I think 0:03:38.840 --> 0:03:41.960 in the times that we've spoken before, it's kind of 0:03:42.000 --> 0:03:45.480 been where it's been before, right, I mean, I think 0:03:45.520 --> 0:03:47.120 I've heard you say we're in the second inning for 0:03:47.480 --> 0:03:49.720 quite some time. When do we get to the third? 0:03:51.440 --> 0:03:53.360 Well, earlier in the year, I guess at the beginning 0:03:53.360 --> 0:03:55.280 of twenty five, I thought we're in the third inning, 0:03:55.920 --> 0:03:59.440 and so I guess what happened to make me believe 0:03:59.440 --> 0:04:01.560 that we're in this second inning? Just like to put 0:04:01.600 --> 0:04:03.920 some specifics on it, and it's this is what I 0:04:03.960 --> 0:04:06.680 love about this the year end is we can look 0:04:06.720 --> 0:04:08.520 back and just look at the kind of the arc 0:04:08.560 --> 0:04:11.480 of what's happened. At the beginning of the year, the 0:04:11.520 --> 0:04:15.240 street was looking for in Vidia to have eighteen percent 0:04:15.320 --> 0:04:18.600 growth for calendar twenty six. If you look at what 0:04:18.600 --> 0:04:22.640 they said at the end of November. This excludes anything 0:04:22.720 --> 0:04:26.240 from the H two hundreds in China, but they're going 0:04:26.320 --> 0:04:29.880 to do somewhere around the mid sixty percent growth. So 0:04:30.760 --> 0:04:33.800 this is a company that this is not a one 0:04:33.800 --> 0:04:36.400 to two billion dollar revenue company. This is a two 0:04:36.480 --> 0:04:38.760 hundred and fifty three hundred billion dollar company that's seen 0:04:39.200 --> 0:04:42.640 an acceleration. And why in Vidia, of course is so 0:04:42.760 --> 0:04:45.599 important when it comes to kind of gauging what inning 0:04:45.640 --> 0:04:48.479 we're in is this is the brain that think of 0:04:48.520 --> 0:04:51.320 the hardware piece, what in Vidia powers is the size 0:04:51.360 --> 0:04:55.000 of the brain. And when you think about this accelerating 0:04:55.120 --> 0:04:58.120 spend around the size of the brain, it makes me 0:04:58.160 --> 0:05:01.800 more optimistic that the output, this is the critical piece, 0:05:02.360 --> 0:05:06.080 the utility that brain will kick out eventually will be 0:05:06.279 --> 0:05:09.640 more powerful, which makes me have higher confidence that were 0:05:09.680 --> 0:05:11.760 earlier than what I thought at the beginning of the year. 0:05:12.480 --> 0:05:14.400 I want to ask you Dan, where you think we 0:05:14.520 --> 0:05:16.840 are in the AI race, and to talk a little 0:05:16.880 --> 0:05:19.920 bit more about in Nvidia, because just in the last 0:05:19.960 --> 0:05:22.360 few months, we've seen I think it's safe to say 0:05:22.480 --> 0:05:25.599 quite a bit more at least chipping away or at 0:05:25.680 --> 0:05:29.520 least attempts to at Nvidia's dominance. When you think about 0:05:30.200 --> 0:05:36.159 Google's TPUs and this investment by open ai or by 0:05:36.360 --> 0:05:40.400 Amazon into open Ai, with its potential competitor to the 0:05:40.520 --> 0:05:45.000 Nvidia chip, does in Nvidia continue to keep this motor 0:05:45.040 --> 0:05:47.640 around itself that it's had over the last couple of 0:05:47.720 --> 0:05:49.680 years now in the AI chip space. 0:05:50.480 --> 0:05:52.719 Look, I love what how Gene puts it with the 0:05:52.760 --> 0:05:55.200 brain and the utility, because I think that's so true 0:05:55.800 --> 0:05:59.720 in terms of where in Vidia. Please look, coming back 0:05:59.720 --> 0:06:03.400 from me three weeks there demand the supplies twelve to 0:06:03.480 --> 0:06:06.960 one for in video chips. The reality is Nathan like, 0:06:08.120 --> 0:06:11.000 customers can't get enough that they have to go, whether 0:06:11.200 --> 0:06:14.800 it's AMD, whether it's Google on TPU, whether it's others. 0:06:15.040 --> 0:06:17.800 But that's not a bad thing. It speaks to our 0:06:17.920 --> 0:06:21.320 view that like the lms are going to get cheaper. 0:06:21.640 --> 0:06:25.000 You got more competition when it comes to AI chips, 0:06:25.720 --> 0:06:27.480 but at the end of the day, in video continues 0:06:27.520 --> 0:06:30.159 to be three to four years maybe, you know, like 0:06:30.279 --> 0:06:32.880 in terms of a head of competition, and that's why 0:06:32.920 --> 0:06:35.120 I think it's still a very cheap stock. Two fifty 0:06:35.240 --> 0:06:38.680 two seventy five, you know, twenty twenty six is where 0:06:38.720 --> 0:06:40.560 I see this stock playing out. 0:06:40.920 --> 0:06:43.520 We're speaking with Dan Ives, global head of Tech Research 0:06:43.560 --> 0:06:47.200 at web Bush Securities and deep Water Asset Management Managing 0:06:47.279 --> 0:06:51.479 Director Gene Munster. Gene, that's a very interesting point that 0:06:51.560 --> 0:06:53.839 Dan just made there. The idea of Nvidia being a 0:06:53.960 --> 0:06:57.880 cheap stock because there has been all this discussion over 0:06:57.880 --> 0:07:02.279 the last few months about the value of the Magnificent seven, 0:07:02.480 --> 0:07:05.760 How do you view Nvidia's valuation right now along with 0:07:05.839 --> 0:07:09.920 the rest of the mag seven? Are these still stocks 0:07:09.960 --> 0:07:13.480 that can keep getting into these sky high valuations? 0:07:14.840 --> 0:07:16.480 I mean Dan's doing the right thing. I mean he's 0:07:16.520 --> 0:07:21.160 looking beyond the appreciation that we've had and asking the 0:07:21.280 --> 0:07:24.800 question like what is on the come And ultimately that's 0:07:24.840 --> 0:07:27.760 the question, the central question we all have to answer. 0:07:28.400 --> 0:07:31.080 And I think when we get to the question about 0:07:31.320 --> 0:07:35.240 like valuation and where this market potentially go, it can 0:07:35.320 --> 0:07:38.840 boil down to something as simple as your just your 0:07:38.960 --> 0:07:42.040 view on how the utility of AI will play out. 0:07:42.120 --> 0:07:45.840 So if you take the perspective that we've had a 0:07:45.840 --> 0:07:48.160 good run and that AI is going to be impactful, 0:07:48.160 --> 0:07:50.680 but it's not going to be a total game changer, 0:07:50.760 --> 0:07:53.600 it's not going to exceed the high expectations that are 0:07:53.600 --> 0:07:55.080 out there in terms of how it's going to impact 0:07:55.080 --> 0:07:57.800 the world. If you take that approach, there's little that 0:07:58.320 --> 0:08:00.600 I think anybody could say that is to get you 0:08:00.680 --> 0:08:04.200 optimistic about where this is ultimately going to go. If 0:08:04.200 --> 0:08:07.560 you're in the camp where you believe that these companies 0:08:08.160 --> 0:08:11.000 you know, Dan mentioned Comes like Palenteer. You think about 0:08:11.280 --> 0:08:13.400 some of the MAG seven, some of the small caps 0:08:13.440 --> 0:08:17.560 as well. If you believe that ultimately that that we're 0:08:17.600 --> 0:08:22.440 still early, therefore their their valuations are are going to 0:08:23.120 --> 0:08:24.840 be lower in the future because they're going to have 0:08:24.920 --> 0:08:29.000 faster earnings growth. And so that's I mean, is I mean, 0:08:29.000 --> 0:08:32.959 that's effectively what we're faced with is this question about 0:08:33.760 --> 0:08:36.439 the degree the pace of this and how it impacts. 0:08:36.440 --> 0:08:38.440 If you look at NATA, just the numbers, like let's 0:08:38.480 --> 0:08:40.360 let's forget about that and forget about where we're going 0:08:40.400 --> 0:08:42.680 and just look at where the stocks are. They are 0:08:42.720 --> 0:08:46.280 trading higher than a normal if you look at, for example, 0:08:46.320 --> 0:08:49.320 the MAG seven kind of over the next twelve months 0:08:49.320 --> 0:08:53.880 trading around a twenty seven times multiple excluding Tesla, that's 0:08:54.000 --> 0:08:55.240 as a. 0:08:54.880 --> 0:08:56.200 One hundred plus multiple. 0:08:56.720 --> 0:09:00.600 But so they are higher, but it's not like easy high. 0:09:00.840 --> 0:09:05.240 As a reminder, back in two thousand, the Nasdaq was 0:09:05.280 --> 0:09:08.840 trained at one hundred times next twelve months. Now, the 0:09:09.000 --> 0:09:12.160 dynamic of the market's different today because these megacaps were 0:09:12.160 --> 0:09:15.480 not going to ever unlikely we'll ever see that hundred x. 0:09:16.000 --> 0:09:19.960 But I think it's reasonable that a twenty seven x 0:09:20.040 --> 0:09:24.280 on what potentially could be multiple years of fifteen twenty 0:09:24.280 --> 0:09:25.680 percent growth is positive. 0:09:26.559 --> 0:09:29.200 Dan, how do you answer some of the critics who 0:09:29.679 --> 0:09:33.559 point out a lot of these companies, you know, spending 0:09:33.679 --> 0:09:39.840 hundreds of billions of dollars into this technology that is 0:09:40.040 --> 0:09:45.439 then getting you know, more circularly invested into the companies themselves. 0:09:45.440 --> 0:09:48.600 The idea that you know, open Ai and others are 0:09:49.160 --> 0:09:52.080 getting all this investment from companies that are going to 0:09:52.120 --> 0:09:56.040 be benefiting from their business, like the hyperscalers. 0:09:57.160 --> 0:09:59.280 Yeah, but I would say, and G and I have 0:09:59.360 --> 0:10:02.800 talked about a bunge. I don't view this like a 0:10:02.920 --> 0:10:06.280 vendor financing circular financing late nineties that we both saw. 0:10:06.360 --> 0:10:10.319 I mean, my view is open Ai for every dour 0:10:10.440 --> 0:10:14.880 that they invest, every dour and video vest, they're getting ten, twelve, 0:10:14.960 --> 0:10:18.080 fifteen dollars back over the course of the next five 0:10:18.200 --> 0:10:21.120 ten years. And that's a bet that they'll meet because look, 0:10:21.520 --> 0:10:24.679 they're building out a new economy for consumers and new 0:10:24.720 --> 0:10:28.160 economy for enterprises. So I don't view it as sinister 0:10:28.400 --> 0:10:33.920 red flag the circular financing concept to some extent, I 0:10:34.040 --> 0:10:36.720 view it as you want to be associated with open Ai, 0:10:37.559 --> 0:10:40.280 not away from them. And even though right now those 0:10:40.320 --> 0:10:43.680 stocks are you know, really have a huge sort of 0:10:43.720 --> 0:10:48.440 black cloud over them. It's like is it bad. No, 0:10:48.800 --> 0:10:51.000 it's actually good because they are at the epicenter of 0:10:51.000 --> 0:10:51.960 this AI build out. 0:10:52.800 --> 0:10:56.840 Is it important, though, Gene, for open Ai to turn 0:10:56.880 --> 0:11:00.760 a profit in twenty twenty six to justify all this spend. 0:11:01.840 --> 0:11:04.080 No, it has I mean, this is the beauty of 0:11:04.160 --> 0:11:07.960 everything that's going on is that you have very rational 0:11:08.000 --> 0:11:11.160 people that say profit is important, and there's other rational 0:11:11.160 --> 0:11:13.840 people that say it's just about building the framework. And 0:11:13.920 --> 0:11:17.640 so the key question about this cash burn with opening 0:11:17.720 --> 0:11:21.000 and we can talk about the rumor around this eight 0:11:21.080 --> 0:11:23.800 hundred and thirty billion dollars round that's rumored to be 0:11:23.840 --> 0:11:28.480 going on, but the key question ultimately is eventually call 0:11:28.520 --> 0:11:31.200 it twenty thirty, can they be profitable? And part of 0:11:31.240 --> 0:11:33.960 that is to dance point like can they continue to 0:11:34.480 --> 0:11:40.679 raise money to fund this impressive expansion and impressive expansion 0:11:40.679 --> 0:11:42.160 I just want to put some numbers around it. It's 0:11:42.160 --> 0:11:45.600 one hundred percent growth expected next year, in the year 0:11:45.640 --> 0:11:47.400 after and the year after for the next three years. 0:11:47.840 --> 0:11:50.920 And so I think that when you think about the 0:11:50.920 --> 0:11:54.000 profitability question when it comes to Opening Eye, like that 0:11:54.000 --> 0:11:56.920 that really doesn't matter. What matters is do they ultimately 0:11:57.000 --> 0:12:00.680 can they get enough financing? Can they raise enough equity 0:12:01.440 --> 0:12:03.439 to the tune of about one hundred to one hundred 0:12:03.440 --> 0:12:06.480 and fifty billion of the next three years to continue 0:12:06.480 --> 0:12:09.360 to build out to get to that profitability piece in 0:12:09.360 --> 0:12:11.760 twenty thirty And I think the answer is overwhelmingly yes. 0:12:11.760 --> 0:12:15.600 It's just too big of a prize. And you know, 0:12:15.720 --> 0:12:17.280 Dan and I are well ware what's going on in 0:12:17.320 --> 0:12:21.120 the private markets. There's just a ton of investor demand 0:12:21.679 --> 0:12:24.320 to participate in this, and so they're going to be 0:12:24.320 --> 0:12:27.959 able to have the money to power through this cash 0:12:27.960 --> 0:12:29.640 burn that they're going to have for the next few years. 0:12:29.800 --> 0:12:32.640 We're going to continue this conversation take an even closer 0:12:32.640 --> 0:12:36.560 look at the Magnificent seven stocks as this special New 0:12:36.640 --> 0:12:41.560 Year's Day Tech Hour continues with Gene Munster, Managing Partner, 0:12:41.600 --> 0:12:45.960 Deepwater Asset Management and Webbush Securities Global Head of Tech Research, 0:12:46.120 --> 0:12:49.679 Dan Ives on the special edition of Bloomberg Daybreak for 0:12:49.920 --> 0:12:54.080 the New Year. I'm Nathan Hager, and this is Bloomberg. 0:13:04.760 --> 0:13:07.840 Welcome back to the special New Year's edition of Bloomberg Daybreak. 0:13:07.840 --> 0:13:10.600 I'm Nathan Hager, and even though markets are closed. On 0:13:10.600 --> 0:13:12.640 this first day of twenty twenty six, we got a 0:13:12.679 --> 0:13:15.880 high tech power Hour going. We're speaking with Dan Ives, 0:13:15.960 --> 0:13:18.720 global head of Tech Research at wet Bush Securities and 0:13:18.800 --> 0:13:22.840 Gene Monster, managing partner at Deepwater Asset Management. Dan, let's 0:13:22.840 --> 0:13:24.640 pick up where we left off in the last segment 0:13:24.679 --> 0:13:27.840 talking about some of the valuations, some of the financing 0:13:27.880 --> 0:13:32.400 that's going into these startups that are possibly getting into 0:13:32.640 --> 0:13:36.200 really really big valuations like open Ai. Do you see 0:13:36.320 --> 0:13:39.720 that continuing when you know there is still so much 0:13:39.760 --> 0:13:43.199 competition along among some of these large language models that 0:13:43.240 --> 0:13:44.320 are competing with open Ai. 0:13:44.679 --> 0:13:48.360 Look, I'm not saying that you won't have a bubble 0:13:48.480 --> 0:13:51.720 or maybe frof in ensuring the areas of the market 0:13:51.760 --> 0:13:56.520 over the next twelve eighty months. But to look at 0:13:55.840 --> 0:14:00.640 the core winners and to say that they're expensive and 0:14:00.760 --> 0:14:03.400 just kind of painted with a brush, I think's the 0:14:03.440 --> 0:14:05.400 wrong way to view it. Because my view is like, look, 0:14:05.440 --> 0:14:07.720 I have three to four trillion being spent next few 0:14:07.800 --> 0:14:10.560 years in terms of the build out to ripple effect. 0:14:10.600 --> 0:14:13.040 Every dollar spent on videoship, there's an eight ten dollars 0:14:13.080 --> 0:14:16.480 multiply across the rest of the tech. So investors like 0:14:16.920 --> 0:14:20.240 they're looking non next one two years, they're looking beyond 0:14:20.320 --> 0:14:23.080 that to understand who the core winners are and will 0:14:23.120 --> 0:14:26.040 they grow into valuations. I mean it goes back to like, 0:14:26.640 --> 0:14:28.360 you know, if you go back to some of the 0:14:28.400 --> 0:14:32.800 Amazon days, some of Meta somewhere in video was twenty 0:14:32.880 --> 0:14:35.600 twenty one two down twenty two, you know. I think 0:14:35.680 --> 0:14:38.160 that sort of the view in terms of this transformation 0:14:39.120 --> 0:14:43.360 that we continue to believe, like you only have three 0:14:43.400 --> 0:14:45.480 percent of companies in the US that have fully gone 0:14:45.520 --> 0:14:48.920 down the AI path, and for the first time globally 0:14:49.480 --> 0:14:51.840 in thirty years, the US is headed China when it 0:14:51.880 --> 0:14:52.520 comes to tech. 0:14:52.800 --> 0:14:55.360 I think I heard Dan talk about the idea of 0:14:55.400 --> 0:14:59.600 winners and losers here in the large language models. Gane, 0:14:59.640 --> 0:15:03.120 how are you thinking about winners and losers right now 0:15:03.160 --> 0:15:03.840 in that space? 0:15:04.320 --> 0:15:08.280 Well, I think that there's basically four or five depending 0:15:08.320 --> 0:15:12.360 how you count Meta as the large language models, and 0:15:12.440 --> 0:15:16.960 I think that when there's this let me just take 0:15:17.000 --> 0:15:21.480 a step back, is there is a view that ultimately 0:15:21.520 --> 0:15:24.800 it's a race to the bottom, that these companies are 0:15:24.840 --> 0:15:29.680 creating intelligence and therefore they will that the pricing is 0:15:29.720 --> 0:15:31.280 going to go down to a level where we're going 0:15:31.320 --> 0:15:34.000 to have five losers. Essentially, they're going to spend all 0:15:34.040 --> 0:15:38.400 this money. And our belief is that actually what you'll 0:15:38.440 --> 0:15:41.640 see is even though the pricing will come down, the 0:15:41.840 --> 0:15:46.040 value will increase to a point where the pricing. This 0:15:46.240 --> 0:15:48.960 gets back to this Gevins paradox that's been talked about 0:15:49.000 --> 0:15:52.560 for the past year or so, that yes, pricing comes down, 0:15:52.560 --> 0:15:55.640 but the value increases. Therefore, the usage increases that more 0:15:55.680 --> 0:15:59.640 than offsets that decline in pricing. And so I think 0:15:59.680 --> 0:16:03.920 that all these two different degrees are going to be winners. 0:16:04.520 --> 0:16:07.160 One piece that is kind of like below the surface 0:16:07.200 --> 0:16:09.760 that doesn't get talked about as much as the personalities 0:16:09.800 --> 0:16:12.080 of the models, and the way we think about it 0:16:12.120 --> 0:16:16.080 is the world isn't doesn't run on one personality, and 0:16:16.080 --> 0:16:18.720 that's what these models are. They have personalities. You ask 0:16:18.880 --> 0:16:22.760 one model, you ask five different models, five different questions, 0:16:22.760 --> 0:16:25.320 and you get slightly different answers. And so I think 0:16:25.320 --> 0:16:28.240 that there is something to be said about This isn't 0:16:28.280 --> 0:16:32.040 a political statement, but some models lean right, some models 0:16:32.440 --> 0:16:35.560 lean left. Organizations are going to want to build on 0:16:35.640 --> 0:16:39.880 top of models that align more with their personality, and 0:16:39.920 --> 0:16:43.119 so I think that that is going to create an opportunity. 0:16:43.160 --> 0:16:45.720 It's probably you're probably going to see a couple on 0:16:45.760 --> 0:16:48.800 the right and a couple on the left, and so 0:16:49.000 --> 0:16:51.040 it's hard really at this point to say, you know 0:16:51.080 --> 0:16:53.520 which one is the losers. I think I look at 0:16:53.560 --> 0:16:57.320 it more of the conversation about them all being losers, 0:16:57.400 --> 0:17:00.120 about this race to the bottom misses the fun a 0:17:00.120 --> 0:17:03.880 mental point, which is, as value comes from the intelligence, 0:17:03.960 --> 0:17:06.520 people will pay out for it. I realized that that 0:17:06.520 --> 0:17:09.719 that is a bold statement, but I think that's the 0:17:09.760 --> 0:17:12.639 piece that is missing in terms of how these companies 0:17:12.720 --> 0:17:16.480 continue to how Opening Eye, for example, can be a 0:17:16.560 --> 0:17:17.800 choin and a half dollar company. 0:17:18.080 --> 0:17:20.280 Well that's a really interesting idea, And I wonder Dan 0:17:20.320 --> 0:17:22.480 if that's something that you've thought about as well, whether 0:17:22.560 --> 0:17:26.240 there could be a scenario where companies are using multiple 0:17:26.320 --> 0:17:30.280 large language models as opposed to settling on just one look. 0:17:30.359 --> 0:17:34.679 I think what Ginge just said there is gold, because that, 0:17:35.640 --> 0:17:40.280 to me, that summarizes the whole the crux of everything 0:17:40.320 --> 0:17:44.520 we're seeing in terms of this AI build out, Winners, losers. 0:17:45.000 --> 0:17:47.600 You could pick your open A, I pick your Gemini. 0:17:48.080 --> 0:17:51.159 Pick you know whether even in China some of the 0:17:51.160 --> 0:17:52.920 models there. To me, it's all going to be about 0:17:53.000 --> 0:17:56.680 hyperscalers and the data that it's built on. That continues 0:17:56.720 --> 0:18:00.240 to be such a core piece of this AI, which 0:18:00.280 --> 0:18:03.800 when you do about the hyperscoalurs and the infrastructure, it's 0:18:03.800 --> 0:18:06.040 about the data the infrastructure to build out. 0:18:06.160 --> 0:18:08.680 I want to talk about the theme that has really 0:18:08.800 --> 0:18:10.880 driven this market for the last few years, of course, 0:18:10.920 --> 0:18:13.400 that is the Magnificent seven, and take a look at 0:18:13.440 --> 0:18:17.960 where those stocks in particular could go in the next year. Gene, 0:18:17.960 --> 0:18:21.520 do you see the mag seven continuing to drive the 0:18:21.640 --> 0:18:25.400 rally all boats lifted together in that space? 0:18:25.720 --> 0:18:28.600 I do think simple answer is no. I think that 0:18:28.680 --> 0:18:31.119 we're going to see some pockets. Some of them are 0:18:31.160 --> 0:18:34.399 going to outperform really well, and some of them won't 0:18:34.440 --> 0:18:38.239 perform as much. I mean, my sense is that the 0:18:38.280 --> 0:18:40.920 small cap piece is going to continue to be an 0:18:40.960 --> 0:18:44.400 important part. I want to be clear that I think 0:18:44.440 --> 0:18:47.280 you should own many of the mag seven. I think 0:18:47.280 --> 0:18:50.560 that they're going to continue to generate a better return 0:18:50.600 --> 0:18:53.600 than just being in the queues, for example. But I 0:18:53.640 --> 0:18:56.119 think that there is a little bit of a dynamic 0:18:57.280 --> 0:18:59.520 when it comes to the mag seven, the two that 0:18:59.640 --> 0:19:02.680 I'm focus most on. This wasn't your question, but I 0:19:02.760 --> 0:19:03.760 do want to Highlight. 0:19:03.800 --> 0:19:04.440 This is sure. 0:19:04.480 --> 0:19:06.480 I'm kind of split in airs here in terms of 0:19:06.520 --> 0:19:08.720 how to think about the winners in the MAGS seven 0:19:08.800 --> 0:19:12.000 four for calendar twenty six. I think Apple I'm putting 0:19:12.000 --> 0:19:14.720 that as the top performer for the front half of 0:19:14.720 --> 0:19:16.800 the year just because I think there's going to be 0:19:16.880 --> 0:19:19.440 multiple expansion going into the new series, which is code 0:19:19.520 --> 0:19:23.359 named for the new Apple Intelligence, and they land that 0:19:23.560 --> 0:19:28.280 after being i think more or less viscerated over what's 0:19:28.280 --> 0:19:31.320 happened so far with AI, they land that the multiple 0:19:31.320 --> 0:19:32.840 on Apple is likely going up. So I think that 0:19:32.920 --> 0:19:35.840 Apple's going to have be the best performing MAG seven 0:19:36.840 --> 0:19:38.280 through the first half of the year, and then if 0:19:38.280 --> 0:19:41.680 you look at the full year, I think Google is 0:19:41.680 --> 0:19:44.360 in a unique place just given you know, they're really 0:19:44.359 --> 0:19:49.560 doing a great job of taking this the search traffic 0:19:49.600 --> 0:19:52.520 and starting to find ways to get people to interact 0:19:52.560 --> 0:19:55.159 with their products more, which obviously more shots on that. 0:19:55.280 --> 0:19:58.679 It's good for the revenue growth within search, and of 0:19:58.680 --> 0:20:01.399 course they've got their cloud, and so those are the 0:20:01.440 --> 0:20:05.320 two that I would focus on most. Again, I'm not 0:20:05.720 --> 0:20:07.640 it doesn't mean that the other ones won't do well, 0:20:07.680 --> 0:20:08.959 but I think those are the ones that will do 0:20:09.000 --> 0:20:09.399 the best. 0:20:09.680 --> 0:20:11.639 Dan what are you looking at in the mag seven? 0:20:12.280 --> 0:20:14.560 Do you see winners and losers in there? 0:20:14.880 --> 0:20:18.320 I mean Gene preaching to the quiet, like what did 0:20:18.359 --> 0:20:21.320 he say about Apple? And Look, and it's been a 0:20:21.359 --> 0:20:24.639 battle because they've essentially been invisible with the AI strategy. 0:20:24.680 --> 0:20:28.639 But now with Google when the DOJ, that queers a 0:20:28.720 --> 0:20:31.879 path for a bigger geminideal that comes out in the spring. 0:20:32.440 --> 0:20:37.399 And I think there's no multiple for Apple given because 0:20:37.440 --> 0:20:39.760 of AI with the biggest install based in the world, 0:20:39.760 --> 0:20:42.160 I could already add seventy five hundred hours to share. 0:20:42.680 --> 0:20:45.679 So I think I agree one hundred percent. And me 0:20:45.760 --> 0:20:48.879 and Gene it's a very small Apple fan club. You 0:20:48.920 --> 0:20:52.280 stick together there, okay, all right? And then and then 0:20:52.320 --> 0:20:55.760 i'd also I agree with Google, but I think Microsoft, Look, 0:20:55.800 --> 0:21:00.639 I think Microsoft here is so over sold. Just feel 0:21:00.640 --> 0:21:03.280 like best is in the rear view mirror. It's now 0:21:03.359 --> 0:21:06.679 about Google, Amazon, They're in the enterprise, the enterprise market 0:21:06.760 --> 0:21:09.280 it's in that's Redmond's do me and I'm telling you, 0:21:09.359 --> 0:21:12.240 like to me, that's the one that I focused on. 0:21:12.280 --> 0:21:13.720 It just a table pounder here. 0:21:13.920 --> 0:21:16.800 Interesting because it does seem like there is a pretty 0:21:16.840 --> 0:21:21.040 more heated competition in the cloud space as well, Gene, 0:21:21.040 --> 0:21:22.879 how are you looking at that? When it comes to 0:21:22.920 --> 0:21:28.320 the competition between Microsoft, Azure, Google Cloud, and Amazon Web Services, 0:21:28.720 --> 0:21:29.560 I think the bar. 0:21:29.520 --> 0:21:33.440 Is lowest with AWS just because the growth has been lowest, 0:21:33.520 --> 0:21:36.000 and you know, they just haven't seen that breath taking 0:21:36.080 --> 0:21:39.119 into the thirty almost forty percent growth that Azure and 0:21:39.200 --> 0:21:43.080 Google have experienced more recently off of a bigger number 0:21:43.160 --> 0:21:45.719