The Apple Paradox, Trump’s Impact on Markets, NVIDIA Demand — With Dan Ives and Stephanie Link

Channel: Alex Kantrowitz

Published at: 2024-10-23

YouTube video id: tDAXJyBuKXk

Source: https://www.youtube.com/watch?v=tDAXJyBuKXk

two All-Star stock Watchers join us to
talk about Apple's fascinating State of
Affairs plus plenty more on Nvidia
Amazon meta and others that's coming up
right after this we're joined today by
Stephanie Link the chief investment
strategist and portfolio manager at hi
Tower advisor Stephanie welcome thanks
for having me Alex great to have you and
Dan Ives is also here he's the managing
director of equity research at wedbush
Securities Dan great to see you thanks
for coming back on the show awesome yes
and uh great to see you both both repeat
guests and we're going to take the show
on the road in Savannah at the high
tower conference Stephanie looking
forward to that that's going to be on
Thursday right yeah Wednesday and
Thursday and we have uh over 250 advisor
teams and we're going to be doing lots
of videos with both Dan and you
hopefully uh to uh to talk to and and
show our how smart you are to everyone
in the
technology great so um we're going to
get into the uh the state of big Tech
espec Apple I have so many questions
about Apple for both of you because it's
like one of the most puzzling companies
to me Apple is up
42% since April 42% and it's like a$
three and a half trillion dollar company
and so I'm like okay well what is going
to make apple so special and I'm looking
at the bets Apple intelligence to me I
don't want to say it's a dud but it
really is not that impressive
objectively looking at like the advanc
in technology The Vision Pro is nearing
dud territory I don't know maybe it has
a long long-term path but I don't see it
as that impressive and then of course
the company has had slowdowns in China
so why are the headlines and the like
action in the stock so different Dan
what do you think look me and you have
talked about this one for years right
and I know like we we've differed in our
views I mean my look my fundamental
thesis it's really three-fold
one there's 300 million iPhones that
have an upgrade in four years so
regardless of what you want to say about
Apple intelligence if it's going to be
rolled out in October November January
febru in the next for this fiscal year
this will unless some Black Swan event
happens be the strongest iPhone unit
year ever historically so I think over
240 million in terms of units the second
is that it's our view regardless of
timing next 12 18 months 20 % of the
world ultimately is going to access AI
especially as more developers build apps
through an Apple device so so just as
Nvidia and Jensen control Enterprise AI
along with Microsoft my view is from a
consumer AI perspective the mization
here we think could be ultimately an
incremental 10 15 billion per year of
services and the third is look I think
from and stely talk about from
evaluation and I I just continue to view
this is more and more it's it's
essentially a Services Company a
software services multiable and that
Services piece that at one point was
valued 500 billion I think it's going to
be closer to 2 trillion in terms of the
valuation as that reaches 125 150
billion per year that's that at the core
is our thesis okay one quick followup to
then we're going to go to Stephanie but
you know there have been all these
people with old iPhones that are like
you know posed to upgrade or posed to
upgrade and it seems like that pool has
not upgraded as fast as everybody's
expected and that's why the service has
become so important but didn't Apple
have like five of six or four or five
quarters of Revenue de uh yeah Revenue
uh
deceleration and the company is just
like it this it is an iPhone company
it's reliant on the iPhone people are
hanging on to them longer which is okay
great company's making a good product
we'll celebrate that but the services
Revenue hasn't exactly made up for the
fact that people are hanging on to these
phones for so long yeah it's a great
point I what I'd say is is that first
off they've gained about 300 bips of
market share in China in the last two
years so despite all the sort of
Doomsday scenario they've gained about
300 bips of market share from essential
Android users or Huawei to Apple clearly
over the last year that's been a
decline but Alex if you look at comps
the next year China's going to be up 15
20% and that's why like the Bears when
they come out of hibernation mood with
iPhone mathematical gymnastics trying to
scare people the reason the stocks not
doing anything because institutional
investors are reading through it and
seeing ultimately numbers probably have
to come up 105% for the year right are
you calling me one of the Bears doing
the gymnastics or well I don't think
you're a bad I think I think there's
many that have been bearish on this for
the last two trillion yes and every
iPhone cycle they come out with pre I
mean we've been we've been to Asia what
two times in the last eight weeks so the
point is I feel pretty good with our
supply chain checks and that's why I
always say like it's hard for the Bears
to find AI in their spreadsheets right
I'm going to talk about uh China in a
bit but let's go to Stephanie I mean
Stephanie is it not puzzling at all to
you that we have like again these kind
of bad headlines but unbelievable growth
well Alex I think it's all about
positioning uh first and foremost in the
S&P 500 this is about a 6.4% waiting
it's a big waiting right if you're going
to own the waiting you have to have 6%
of your portfolio in this thing and I
would say the majority of people
especially in the spring were way
underweight by the way myself included
totally myself included I've had like a
1% waiting in the beginning of the year
and then all of a sudden like April and
May came and it was gloom and doom and
downgrades and numbers were getting cut
and there was no line of sight of any
growth of any kind for Apple in the
springtime and that's actually when I
thought okay I got to start adding to
this position because it was so people
are so negative and so offside and maybe
they had a reason to be somewhat
cautious because the last the prior four
quarters for really nothing to be so
excited about it was a transition for Q
four quarters so I added to it because I
kind of felt like I wanted to be the
other side I wanted to be the contrarian
and everybody was on the other side of
the boat so that was number one um and I
totally believed at the time that AI
would be certainly a positive would it
be the super cycle is 16 going to be the
Super Cycle I'm still not convinced of
it but it would be the beginning of a
change of tone so that was number one
number two as Dan mentioned you've got
300 million people around this world
that haven't upgraded an iPhone in four
years so I mean my goodness even if you
took half of that number that is still
more than what what people at the time
in the spring were forecasting because
they really did cut numbers and at the
same time I totally believe what Dan
said in terms of China oh my goodness it
was the the sentiment was was terrible
China was never going to grow an iPhone
again and they were losing all kinds of
market share and so I thought the setup
was pretty good in the meantime during
all of the kind of malays of the prior
four quarters gross margins and
operating margins Rose in every single
region except China this company has
done a masterful job we know the free
cash flow and the buyback that they had
in place back in the spring that's all
Serv right set up fast forward to today
we're up 37% since May since when I was
adding to it and that's a heck of a move
that's a heck of a move and everybody
now got has gone the other way of like
iPhone 16 is going to be the
Revolutionary phone um I'm not quite
sure I think that maybe 17 and 18 I I
feel really good about those phones I'm
not so sure that 16 is going to be the
blowa away but the expectations are
still kind of muted um but I'm going the
other way and I'm been taking some
profits in it only because when I have
apple now trading at 35 times forward
estimates with a 37%
rally I think that there are other names
out there to to be more excited about
and in fact I know we're going to get
there but Amazon is actually cheaper
than Apple at this point in time and has
majorly lagged so I'm kind of looking
for where is a little bit of the offset
now longterm Services I do think is
going to be a home run I think AI is
going to be an absolute Home Run for the
apps business uh so I think you just
have to be patient but I don't know if
you necessarily need to be overweight
this stock relative to The Benchmark um
at this just given the run that it's had
and maybe higher elevated more exp now
if it comes back I might add add some of
it back but I think uh I feel pretty
good with a slight underweight in the
name for now right but as soon as your
investment got maybe not as soon as but
when your investment in apple did really
well and it started making up more than
the typical percent in the S&P 500 you
sold off I mean so you clearly think
that there's a a ceiling to the way that
this company can perform so I was a 1%
position in May I I I added 500 basis
points to it in May it rallied it got to
be a 9% position in my portfolio now as
a portfolio manager with 40 stocks
that's in my mind risky that's not a
good thing to have a one name be that
big in your portfolio so that was number
one so I took it down to a market weight
and then we kind of continued to rally
and again it's like it feels a little
euphoric at this point to me so that's
why I took it down so yeah I mean am I
as excited as I was back in May when
everybody hated it um no but do I think
there's a disaster Brewing absolutely
not I will say though there is this one
thing and I'd love for you guys to chime
in there's been a couple of changes on
the management on the margin right the
the chief people officer and the Chief
Financial Officer it's all normal I
don't think that there's anything wrong
with that but I have found like when you
have new management in place it just
takes a couple quarters to get your
groove back or get your groove on I
don't know what you guys think well it's
interesting I mean you could think about
the apple turnover and then you think
about the Tesla turnover just like oh
apple is a beacon of stability I mean I
don't know if losing uh the chief people
officer and some folks on the finance
side is going to make all that big of a
difference inside Apple which seems to
just kind of uh chug along in its own
institutional way because it really is
an institution Now versus like you know
traditional company that will just like
kind of bounce up and down with
volatility yeah I mean I I would just I
would just add I I think they have such
bench even when they bring people on
they've been there for 15 17 years so I
don't I don't view as much disruption
but yeah if you compare it to Tesla it's
uh it gets the HR uh sort of world award
that's right so have have either of you
used Apple intelligence or either of you
impressed with
it Dan go ahead because you're the
expert I I just play I just play around
with it because I'm a novice at it but I
I think it's pretty cool I'm actually I
mean I'm I'm on an iPhone 16 now I think
look to me I mean I've obviously played
around with it but I think the big thing
when 181 hits right I me I think this
the best is ahead of us as these
features get rolled out and I think
especially developers build more and
more apps on top of Apple intelligence I
think that's really the game Cher in in
my view so so you know to that point I
think it's I think if you if you're if
you hear what what both Dan and I are
saying it's it's what is your
timeline and as a portfolio manager I'm
Mark to Market every day and I got
between now and the end of the year to
outperform and could it outperform the
market certainly but I just think it's
already outperformed so much that there
might be other quote unquote surprise
stories positive surprise stories that
maybe are less appreciated but if you um
if you if if if we talk in a year from
now I'm there's no question in my mind I
will be bigger Apple because I think
we're closer to the time frame where
we're going to see a real inflection I'm
not sure we get it next quarter that's
it let me just put this out there are
people buying this the Apple stock
because of Apple intelligence because if
they are I don't know I think that's a
mistake because it's not as good as as
advertised and does the company end up
with some sort of blowback because the
stock has run up what 42% in the last 6
months on the basis of this intelligence
um
search I mean I I think that people got
very jazzed up on on AI remember their
analyst day and and that whole thing I
mean everybody got you know really uh
bowled up um and off of a very low
expectation and off of a very lower much
lower valuation I think the stock got as
much as low as 26 times forward
estimates and today we're at 35 times
forward estimates so I think I think the
the risk reward haded into the analyst
day and learning more about Ai and all
of that that uh set it up pretty well
that was your Catalyst short term um I
think it's not hard to get bullish on
the 300 million folks in this world that
haven't upgraded in four years so that
you get a shot at that at the very least
you get easy comparisons so China is
going to look better oh by the way China
just put in place the best stimulus
since covid so maybe you get some sort
of resurgence in their consumer because
that's been kind of Dead on Arrival
since they opened Co um and and so I I
don't think it's hard to to to see why
people have gotten more positive but
again I think it's a lot about
positioning and where it is in in a
waiting perspective from a portfolio
management point of point of view but
Dan is it is it we've talked about this
like in this conversation and let's just
kind of put a point on it is it Apple
intelligence or is it just the fact that
like Apple's poised for an upgrade cycle
because maybe the headline is that is
Apple intelligence but the upgrade cycle
might be the thing I think that's always
been our that's always been our
contention right like other words like a
lot of people you know we hear so much
negativity oh you're wrong a I'm like
look this upgrade cycle in itself
without AI the Stock's going to work
yeah the AI piece is ultimately the
start of how Moose consumers in the
world are going to eventually interact
with AI and I think look WWDC me and you
were there together right like stocks
190 investors like oh this is so
disappoint think about that's you know
in
June and I remember like we would talk
right like our whole view is like apple
basically said we now will be the castle
for AI and if you want access to it you
got to come through Apple intelligence
clearly open AI I eventually think meta
Google are going to have to make the
same move I think Alex in my opinion I
think that's more right call I hear what
you're saying I'm not fully buying it
but I think that we could debate it
forever and we won't really know until
this stuff starts to get you're like
you're right get into the hands of and
you have great View and you have great
every time like we talk you'll say
things where I'm like that's you know no
because that's I think it's very
important a name like this you always
want to like you want to hear different
points of views I think a lot of times
that's that's sometimes big people
biggest downfall right you want to
understand like both sides of it right I
could be wrong so let's see but let's
talk about I'm just going to you know
keep on this line of questioning um
because we've talked about China a
couple times in this conversation and
Apple's had like quite a decline in
China in terms of Revenue there and
China makes up what 20% of Apple's
Revenue so the numbers came in and and
they looked quite good for the first 3
weeks of the iPhone 16 the iPhone 16
according to Counterpoint research is
selling 20% more than the last cycle of
the last uh iPhone iPhone 15 and uh
that's great it's looks like apple is
going to be reversing this trend but
then you look at the total sales of
apple and Counterpoint says that Apple
has still dropped 2% in China because
the older models are not selling as well
because Huawei phones are starting to
take that share so Dan I've heard you
say that the state-of-the-art Huawei
phones are as good as an iPhone 14 and
that sort of computes right because if
you're you know deciding between a
Huawei and an older iPhone seems like
people in China are going with the
Huawei which is hurting Apple's total
sales what do we think about that yeah
that I mean look we've seen that share
shift over the last year but goes back
to the last two few years they've gained
300 bips of market share they could give
back 100 bips but if you look the
biggest opportunities you have 100
million
iPhones in China that are in a window of
an upgrade
opportunity and then I think the big X
variable does buou and apple strike a
deal where Buu becomes ultimately the AI
partner if that like if you said to me
the biggest catalst that could happen on
the name it's
that okay see I actually think a big a
big opportunity for apple is India I
mean we can worry all you want about
China I get it I understand it's a big
part of their business y but you know
Tim Cook makes one iPhone for every
seven in India and his goal is to get
from one iPhone to every four in India
and they have 1.46 billion people and
40% % of those people have are are 25
years old and younger who's your iPhone
buyer 25 years or younger maybe yeah um
but the point of it is the consumer is
going to double between now and
2030 and you know we can talk about
other things I know we all we want to
talk about technology in general but I
got to say like Prime Minister Modi is
is is pro growth in every way and he is
pro consumer in every way and so to me
you have on the margin companies that
are leaving China and going elsewhere
that's part of this whole onshoring
reshoring thing that everyone's talking
about now they weren't talking about it
a year ago but that's what you're
whenever you talk to these companies
they'll tell you that they don't want to
be in China as much they don't want to
be as dependent on China they want to be
more Diversified and so I think when Tim
Cook goes over to India oh by the way
once a month like that's pretty cool and
I think that that's where your
opportunity is it's not going to be next
year it's not so we have to think more
like three to five years down the road
but to think of that many people people
in a country they're going to be the
third largest country in the world by
2030 so I think they want to have a
piece of that pie for sure yeah that's
an excellent point and this idea of
companies hedging away from China I mean
one of the questions I had written down
before we hopped on is is Apple
intelligence ever going to be available
in China because China reviews uh very
closely what uh AI products roll out and
maybe not by the way maybe it will never
be available in Europe because of
European regulation
I mean you're the way Europe's going I
mean you're going to have uh every
country in the world's going to be ahead
of Europe when it comes to AI yeah so
scare scare their own shadow but it is
also one of those things that Computing
phones are going to become more
important we're not in the AR AI world
right now phones are going to be
important and as more of the world
becomes you know comes online and you
know decides that it wants the
state-of-the-art phones it's good news
for the state of the art phone maker to
have massive effectively yet to be
saturated markets like India that they
can growing and it's funny Alex I think
when I think of AI and how powerful it
is it makes me actually even more
bullish on cyber security I mean I think
that those are your two themes you talk
to you guys talk to CTO more than I do
but I talk to my own company CTO and
they only have a budget a finite budget
and they actually are spending in two
places it's AI because they have no idea
what it means for their business and
it's cyber because they can't wake up
one day and lose their business and so
you're going to see double digigit
growth in both Ai and in cyber I hope
somebody gets it right in cyber because
so so far you have way too many vendors
and no one's talking to each other and
you got cyber security companies getting
cyber attacks in in of itself so I
actually think that people talk about AI
as you know this whole it's huge total
addressable Market it is but cyber
security is just as big and if not
bigger because of AI and so I think
that's another area another theme that
should be owned within the next decade
or so yeah now just on that point and I
know huge fan of crowd strike and and
like we've talk I think like pal Alto
zc I think the other thing that's
starting to happen we've seen it happen
over the last few months based on all of
our checks and cyber you're now starting
to see as more and more workloads move
to the cloud more and more of these llms
even on the experimental side you got
protect it AI is going to be a direct
beneficiary for cyber call it second
third derivative that's just going to
add cyber Arch po zscale or crowd strike
o to others and I think you're going to
also see massive consolidation because
as what I mentioned like was for such a
long time CTO wanted to have a variety
of different vendors because they didn't
want to be captive to one vendor the
problem is none of the vendors talk to
each other and so so I think you're
going to see massive consolidation of
like the big five get even bigger and
bigger over time because they need to
offer more services and products to
their customers that do talk to each
other and so I do so all the names you
mention yep and I am a crowd strike fan
I have been a foret fan was wrong on
that one but I do think that is a theme
that um it's yeah it's on the like the
kind of the the the back end of the the
AI
excitement sad in a sad kind of way yeah
I will say that um I'm working with a
company right now to that's taken some
of my podcast episodes and has
effectively cloned my voice so it can
read like narrate some of my newsletter
articles oh my and that's a good use I
mean that we we have a deal there's a
you know we it's consensual right but
like there's a negative side of that
which is that um you know what if a
company I don't even want to give speak
this into the universe but what I should
speak to my family about this right now
a company takes my episodes clones my
voice and like calls uh you know one of
my relatives panicked on the side you
know saying I'm on the side of the road
and I need you to send me money right
now uh it could happen so there's a
negative and that's why I think you know
cyber security becomes important but I
really shouldn't give but Alex idea if
if all of a sudden I heard your voice
and it wasn't a 516 area code I'd hang
on that's right I know they'd have to
spoof Long Island so thank you for
sharing that data it's about 516 right
so the point if it's not 516 not Alex so
let's just be clear let's do it so
scammers stay away from the Long Island
area code because I will I will find you
and they'll be a price to pay um last
thing about Apple because how could we
have this conversation and not mention
it uh what happens to Apple if Donald
Trump is elected because he is going to
start a trade war with China and you
know maybe over time this India thing is
going to be fine but they still need
that 20% of Revenue coming in from China
what do you think Stephanie wow I think
it's not going to just be apple
unfortunately I think it's going to be I
think the initial knee-jerk reaction
will be sell Apple sell
semiconductors um and and in Spades
because they've all done so well over
the last several years uh even with the
President Biden's tariffs because we
know that he kept a lot of tariffs on
but you know you listen to what what uh
what Trump is saying and he's talking
about doubling and tripling the tariffs
over there so and it's not going to just
be technology I mean I think one of the
reasons why today and you know you guys
focus a lot on Tech I focus on a lot of
the market in general I don't know if
you saw but like consumer disc Scrat got
hit so hard today because of that all of
a sudden the if Trump gets in how are
these companies going to get goods and
it's going to be more expensive it's
going to be across the board probably
for a lot of consumer companies and that
is really Apple it's at its true core it
is a consumer company so it will get hit
maybe that's your opportunity that's why
say you know when everybody goes from
one side of the boat to the other and
the stock rallies it's not bad to take
some off the table again from an active
portfolio management basis but if you're
a long-term holder you're going to
survive it maybe the Trump tariffs are
more of uh just kind of like a threat
and a bargaining chip I don't know he
seems to be pretty serious about it but
the level we just won't know but I think
that is uh that certainly starting to
creep into to the marketplace because it
will not be good news right Dan I I want
you to weigh in on that and then also
there's this notion that the stock
market tends to accelerate and do quite
well after the presidential election no
matter who wins because this area you
know these these months of uncertainty
that you finally have certainty the
market likes certainty there's a new
president that's going to be the
president stocks go up I'm curious like
again like think it tell us a little bit
about what you think the impact of a
trump election will be but then also
more broadly is this going to be like
one of those elections that bucks that
trend no matter if it's Trump or if it's
kamla because we all know a lot of part
big portion of the business Community is
in favor of trump and probably betting
that he's going to win with their
Investments um if it's kamla do they end
up pulling out of the market so could we
end up seeing a a very different result
than we've seen in previous elections
yeah and I'd say like especially just
getting back from a few weeks in Asia
like on the investor stuff that's always
like a like a top two or three question
look we view it pretty simplis Bally
where Trump gets in if he gets
in it is very negative for the AI trade
initially semis tariffs retaliatory for
Apple Tesla JD Vans like likely keeps
Con in right from an antitrust I think
the view is Harris gets elected despite
all the you know sort of antics I think
con's out so which would be bullish for
TCH from an FTC perspective so know that
like I don't when you said the biggest
risk to the mark from a tech trade it's
not like inflation earnings Dem to me
it's really Trump gets in at Stephanie
talked about that jolts the trade
because the fear what's
ahead I would say this um so just be
careful because and that's why you want
want to look for opportunity because if
Trump gets in and you got to mix
Congress he's not going to be able to
get as much as he wants to get done if
you have a if you have a red or a blue
sweep that's problematic for the overall
markets just general so that's why it's
more Congress in my mind and then I
would just simply say without getting I
don't not want to get into politics but
I would say this whoever gets
in they are both Spenders they just
spend it differently so if you think
that we are going to address the deficit
which is another big question when I
talk to clients uh as are we ever going
to fix this thing I don't think you're
going to fix it for quite some time I
think my 17-year-old and our
17-year-olds are going to probably have
to deal with it uh later down the road
because we kicked the can but for sure
tariffs are a headline risk but watch
the mix to see exactly if that's an
opportunity or not I think if it's a mix
it is an opportunity down long term and
the split nothing gets done in the B way
which is bullish that's right can can I
just let's just pause there and talk
about that because it's so interesting
to me that the market just doesn't want
the government to operate I mean you
would think it would be the opposite
right why why is that good for markets
and is it Market doesn't like surprise
the market doesn't like to go we do
climb a wall and worry on a lot of
things but we always climb a wall of
worry in fact I worry when we don't
worry because that means we're
complacent but if you have a split
Congress and not a lot gets done it's
gridlock there's only a few things that
the president can really address now
tariffs are one of them for sure but you
do need approval and you you do need um
uh and a process has to be put in place
they'll they'll also be able to deal
with immigration a little bit more and
that sort of things so there things that
can get done but for the most part
overarching sweeping changes will be
very very difficult to get done and
that's what the market likes because if
if it is a sweep then we have no idea
what's going on we have no idea what's
going to get pasted yeah uh okay last
thing about this let's say we do end up
in some sort of trade War we've seen
China be quite aggressive uh in the Seas
especially uh around Taiwan and there's
some fears maybe that they're could be a
blockade there I mean obviously that
could be go even further to a takeover
but um what do we think about that in
terms of uh in terms of the what would
happen actually to the US economy if
if that situation played out and is at a
risk that people should be thinking
about yeah I just I mean just being like
just come back from Taiwan and the area
I I think there's a view that that's
just very low likelihood that that's
going to happen look in Hong Kong you
definitely sense some seat changes in
terms of what we see but look we're
always going to have these sort of
Stephanie talks about a lot Black Swan
tail event I just continue to view it as
just a just a very low possibility but I
look I get it's a risk and if that
happens it definitely becomes a little
more pronounced what happens is
also business capex and Investments free
and consumers go into hiding because we
just don't
know if something were to happen it
depends on how severe it is it depends
on the circumstances the situation how
long that it does it last what does it
lead to so there's a lot of questions
but that's why businesses will all of a
sudden say uhuh G to cut back my
spending and consumers are going to say
I don't really know what's going to
happen so maybe I'm not going to go to
the mall or I'm not going to go out to
the restaurant or certainly not going to
go traveling internationally that is a I
think a shortterm view uh but we just
don't know and it's like so hard like I
kind of find I don't know about you guys
but I find it very hard to try to invest
on politics number one and any kind of
War number two I kind of like to look at
which just just from an investment point
of view I don't mean to be in sensitive
but when things like that happen and
stocks pull back hard I'm trying to
think three five years down the road I
know you guys are too and it's like okay
can I get apple back to 160 can I you
know like wow love to get apple back to
160 right no I I I wouldn't like it but
but I get your point from an investor
you know what you have to buy low and
sell High most people say they do and
they don't they buy high and sell low
because it's hard to do I mean Al I I
will tell you Alex I'll tell you a story
like I remember when meta and then like
a lot of people like revision is like oh
I like the stock NOW like what you hated
to be Stephanie we're sitting there and
meta legitimately added to low the day
like the disaster maybe stocks 85 and I
I I mean it will always be like a vivid
memory where you're like there's just
I'm there's just no way that you don't
make big money here you pound the tape I
always remember that in terms of that
day that's sweet hard do but thank you
it wasn't my only buy unfortunately of
course but that's how you but that's how
you actually make money it's like you
Tred a dollar cost average you know
Kramer used to talk tell me and I worked
for him for seven years you want to buy
a stock and then you kind of sort of
Hope if you really have conviction you
hope it goes down so that you can keep
buying a little bit a little bit a
little bit because you don't know when
it might reverse but meta was really a I
mean a just a wow talk about everybody
got on the same boat wow they got really
negative on that right yeah well I I do
hope that we um we come out of the cycle
and we're we're in good shape but I'm
I'm planning to visit Beijing for the
first time in January so fingers crossed
the flights are booked uh let's just
everybody chill till February and I got
to go see the wall and then we can
figure it out after that so you're
saying wait for like if the us if Trump
gets in tariffs you got to wait till you
fly back to then we could then at least
we do whatever you need to we're going
right before inauguration of whoever it
is because we're going to get a new
president everybody has to relax until
then and then duke it out I got to go
see the wall all right we're going to
talk about Nvidia and some other
companies on the other side of this
break we'll be back right after this and
we're back here on big technology
podcast with Dan Ives the managing
director of equity research at wedbush
Securities and Stephanie Link the chief
investment strategist and portfolio
manager at hi Tower advisers well we
have 20 minutes in so many companies to
talk about why does it always happen
like this um so let's just quickly go
through Nvidia Amazon and Google and see
where we get after that um Nvidia big
new chip the Blackwell chip uh is
apparently selling like crazy despite
the fact that so many folks in the tech
world have said you can custom create
chips to do the AI workload and you
won't need to spend 40 Grand on Nvidia
chips Dan what do you think about the
state of this Blackwell chip and why is
it selling so well despite all these
claims that people could do what Nvidia
did better and those claims I mean I'm
going to play in the NBA this
season I mean the point is like I'm
pushing back on this though they
are my view is just no exactly you're G
put it's like we in Asia we just it was
15 to one demand to supply really months
ago it was 12 to1 so I just view it as
like you're probably going to be looking
at 6 of earnings for NVIDIA and then
like what you put a 30 multiple on it I
mean the point is like you could easily
start to get to a stock with a two in
front of
it which would put the valuation
at I mean I think you're looking at$
four trillion Mar like in in the next
three to six month I mean that's I think
them and apple they battle it out for
that finish one to get the four trillion
if you're right on $6 the stock trading
at 24 times but I think that's but I
think most investors that we talk to
it's like you know numbers are sandbag
you you look at you four two four more2
billion doll beats Blackwell they said
billions it's probably going to be 1520
X that I mean you start to run through
some
numbers $6 of earnings is not ridiculous
it's actually somewhere maybe like
within the Baseline Stephanie are you
concerned about all this with all this
AI talk um that people are spending a
lot of money investing a lot of money in
the AI trade but the return on
investment is not quite clear yet in
terms of what you're getting for all
this money yeah you know and it's a
really good question it's hard to answer
but I would say this I feel and I don't
own Nvidia but I own broadcom and I own
lamb research and uh I got plays I got
ways I'm playing it so it's fine um I
think there's a lot of ways you can play
it semis kind of seem to be the ones
that are monetizing it the the fastest
so far but what I would say is because a
lot of people compare this to the dot
bubble and we didn't have earnings in
the dot bubble we were we were we were
valuing companies on eyeballs which is
absurd um in retrospect but we actually
have real earnings and if Dan is right
and earnings continue to go higher then
these stocks aren't nearly as expensive
are they o over owned yes they are there
is no question I was buying broad common
traded at 14 times forward estimates
it's now at 27 times which makes me a
little worried well it's also changed it
stripes a bit in terms of software and
diversification and they have the AI and
they're the number one the number two
player um so I think that's important
number one number two if we didn't see
these hyperscalers spending as much
money as they are spending on this
effort then I would be worried but
you've got the hyper the big
hyperscalers that are actually going to
invest $241 billion this year that's up
41% and next year up to 78 billion
that's up 177% so that that's real
that's real money are they double
ordering of course they are of course
they are they can't get anything so at
some point we may like have to just
recalibrate but for the time being the
demand is there the earnings trajectory
for all of these companies is there it's
higher and so you know do you want to
put all your eggs in in in in in Nvidia
um I I don't think so I think there's a
whole ton of ways you play Ai and by the
way it goes
way over the gamut into the industrial
space right if you if you believe in AI
you need data centers and that's fine we
all understand that you if you need
double the data centers triple the data
centers you need power that's why
everyone's talking about natural gas and
nuclear power wind and all so that's a
totally different way of playing it
however the grid has not been invested
in incrementally in the last 50 years
and so for all of this to work for AI to
work you need to invest in the grid and
that we are going to spend $4 trillion
between now and 2050 on the whole energy
part of the cycle so that's another way
of play I think you just spread H this
is pun intended spread your chips around
in various different in various
different socks but all this money
that's being spent and all these
earnings that we're talking about these
are again these are in the component
parts it's in the chips it's in the
servers it's in the power it's in the
Amazon and the microsofts that are
selling this compute to companies the
problem is the companies haven't quite
figured out what to do with it and maybe
that's controversial but if you think
about the way that openai we just took a
look at open ai's financials on a recent
episode and they expect chat PT not the
API to be the main driver of of of
revenue for them in the future so I am I
mean maybe maybe this is provocative but
uh
Dan provoc I love it man it's um folks
for those who are listening I just saw
quite a look from Dan being very mad at
me right now but I have ask questions no
it's I love it that's why I love the way
you do but the one thing I'd say is look
at the messy of AI paler I mean that is
the perfect
example in terms of use cases on
Enterprise that are exploding look at
what MC's doing it service now I mean so
I think for the most part I think I it's
still in front of us but the use cases
are happening I mean we you know we talk
to customers all the time and that to me
is what makes us the most bullish when
we see the use cases
exploding okay and what what do we think
it's GNA take a long time for us to
really get comfortable with the
monetization of all of this I don't
think though if if we just wait for that
to happen I think you're going to lose a
lot of money in the meantime where
you're going to miss out on a lot of
things and I'm not saying again own
everything in Nvidia I'm not I'm saying
find some spots where you want to have
exposure and oh by the way the other
industry that's exploding higher is
utilities for the same reason as
Industrials the same reason as AI so
there are plenty of ways to play this if
we wait for these companies to show Su
Supreme results I just I think that's I
think you're going to miss some I think
you are well because to some extent like
you focus on trying to draft Brady six
round ad Michigan 2000 draft yeah not 10
years later right like in other words
like a few super blls and already the
goat that's the hard part right it's
like it's meing those bats I mean I got
Aaron Rogers you know like what does
that got me here so sorry but there so
many draft picks don't pan out ifon
coming out of coming out of C to Green
Bay now more Legacy let's called like a
Del in HP there was a point oh for sure
for sure yeah yeah okay let's let's go
to Amazon um so Amazon on
uh cultural issues there don't we we
think there's some cultural issues
they're trading cheaper than most folks
we had Josh Brown on last week said
there's no coherent story on it uh which
I think is right Stephanie you just uh
bought a bunch of Amazon and by the way
I think it's a good point in the show to
say this is just for informational
purposes not investment advice but I'm
curious what you see in Amazon that
others don't so it goes back to
sentiment so since Amazon reported last
quarter it's up
1.9% the NASDAQ is up
6.9% all of a sudden we have some
downgrades some lowering of numbers
there's now cultural issues that came
out of left field um that jasse went
from hero to to dud uh he doesn't know
what he's doing he's overspending now I
look a lot of a lot of the concerns have
to do with the fact they are spending a
lot especially on this remote Broadband
which I would love to get both of your
opinions on if you think that really
makes sense but if I look at the numbers
in terms of what they're spending on
remote Broadband satellite internet is
what I'm talking about um it's going to
be like $338 million in the second half
of this year and it'll be about a
billion next year that's less than 4% of
Opex they are going to generate free
cash flow this year of $48 billion so
let's just put that to bed right there
now I think retail is certainly not
struggling but certainly not doing Barn
Barn Burner numbers but I think it's
because you have an uneven consumer you
have the halves and the have knots you
have Walmart Costco Target Amazon the
halves and you got dollar stores and you
got department stores the Have Nots you
won't want to touch those I don't care
how cheap they get so if I don't think
they're going to spend crazy and I think
they're going to spend but it's not
going to be that crazy and I think
retail is going to hold in and the
margin side North American margins can
get to like upper single digits which I
think they can um that's okay but I
think the real story of Amazon is AWS
growing 19 20% with 33% margins you have
advertising growing uper uh low double
digits with 50% margins and collectively
those two businesses are go right now
they are about uh 24% of total revenue
that's going to get to 31% by the end of
this decade and I know a lot can happen
between now and the end of the decade
but just hear me out like you're going
with your two highest margin businesses
expanding as a percentage of the total
pie and I think you're going to see a
Kar of about 20% for the next 5 years at
this company versus at 133% and versus
Google at 12.8% so I think the growth is
there the expectations are really low
the stock always goes from hated to
loved to hated to loved and right now
it's hated so the on the advertising
thing I'd like to hear both of you chime
in on this first so that was I just want
to say that would if if she had a mic
just drop it that was a drop to mic type
I mean that was like it's hard it's
actually hard to follow that that was
that was a little almost shed a tear in
terms of how good that was right there D
you're so funny amazing Dan I learned it
from you my friend come on that was that
was unbelievable okay but let's talk
about this advertising side of things
because it seems to me like Amazon has
built an advertising business out of
nowhere and it's like one of the most
successful like if it was a standalone
business it would be one of the most
successful ad businesses it's
contributing so much to Amazon profit I
mean how important is this ad business
and how do they do
it Stephanie oh okay so how do they do
it well I mean I think number one a lot
of it is AI behind the scenes um and I
think it is uh you you know a lot of the
technology that they have put in place I
think they have talk about eyeballs we
know how many eyeballs they have in a
lot of their different businesses and so
I think there's a couple of ways that
you can win to be honest with you so
advertising is still very small and it's
very cyclical so let's not forget that
let's remember that during covid it fell
dramatically over
50% everybody's advertising business
but if you believe like I believe the US
economy is actually a little bit
stronger than expected and will stay a
little bit stronger than expected
clearly this is where the eyeballs are
going to they're not going to Legacy TV
I mean that we haven't even talked about
you know kind of all the prime and NFL
and all the other things that are
happening but there's so many ways to
win on the adver advertising front in
into a strong economy and I think maybe
even if we do slow if we get back to 1
and a half% growth in GDP maybe you'll
see a slow down but I think some of
these other businesses they're getting
so entrenched with people and so that's
why I think business can grow I mean
margins are crazy town at 50% yeah Alex
I would just add this first of all
jasse in my opinion it's a top three or
four individual in the world that
understands Cloud okay yes to to
anyone built it from the ground up so
build from ground up I mean so the point
is jasse plays chess others Checkers in
terms of overall AWS and cloud two to
Steph advertising Street's giving no
credit here and I think incrementally
this is something that could actually as
a percent of rev really start to
increase in the model the AI story yeah
go ahead go ahead finish finish and the
AI story given no CR to me risk reward
here RIS reward I mean I think this is a
stock that could be up 25
30% maybe caught 5% type down the risk
reward here is a table pounder in our
opinion and I think New York City cab
driver is bearish on Amazon relative to
LGE cap Tech well it is trading cheaper
than Apple it's a 32 times forward and
Apple's a 35 times so that's CRA that to
me was crazy and I don't it's a little
crazy it's a little crazy time I don't
really look at it on a PE basis because
if I did I would never buy it because it
would be too expensive for me but if you
look at iida they traded about 14 times
the average long term is almost almost
18 times so yeah I I yeah I mean I think
it's you can get your arms around it I
might be wrong it might might not be a
great quarter but I do think the next 6
months 12 months are going to be good
for them and then on the ad side um Dan
just to you how much does data the fact
that Amazon has this like unbelievable
treasure trophy of retail data that's
the gold that's the goal like I mean it
just goes back to like no one ever gave
Apple any credit for services look where
we are now yeah Amazon it's going to be
the same thing in my in my view okay all
right couple minutes left let's talk
quickly about this antitrust thing which
we touched on briefly uh but I think
it's antitrust is factoring more with
big Tech than I think it has in the past
I mean in the past I would kind of laugh
at it being like they're never going to
do anything the government's weak the
companies are strong but Google did just
lose this antitrust case and now the
remedies include potentially a breakup I
don't know if it's going to go that far
but all of a sudden antitrust matters a
lot more uh than it did previously and
like yes the breakup might get the
headlines but this is going to me
meaningfully changed the way companies
like Google for instance which lost the
case do business don't you think Dan I I
mean just as someone like doj querly you
know a trophy case they won in terms of
that case they got SE legs but I mean
the press's there with Microsoft I mean
in covering Microsoft back then
ultimately they won that on appeal I'm
not there's going to be business model
tweaks but my view is this is not going
to dramatically change the the business
model of Google because then eventually
it's going to be apple also and others
coming down the Pikes I'm just this is
going to be fought out in court for many
years and I think it would be
settlements and business model tweaks
not massive changes Dan how long did
Microsoft uh the big case that they had
how long that 12 years yeah right I was
going to I thought 12 years 12 years I
mean this is going to take such a long
time who the heck even knows who's going
to be at at you know the doj and the EU
and you haven't even you have no idea
what how it's all going to play out
there's no question it's an overhang but
I feel like we we said this on Microsoft
and look what Microsoft has done over
the years yeah they figured it out but
the other side of it is that but I do
agree with you Alex it is becoming it's
not just like oh EU cup of
coffee it it is more legit because doj
yeah and like all right I'm just going
to use one one analogy it's not the same
thing or anywhere close but when Elon
signed uh the deal to buy Twitter and
the courts forced him to go ahead and
make that make that purchase or they
were going to and he just said okay I'm
going to do it despite the lawsuit um it
seemed at that up until that moment that
Tech big Tech was sort of uh impervious
to the law and now it's starting to seem
like governments are going I mean the
Europe thing is becoming big it's
changing the way these companies operate
and then the US government is also
winning cases against them it's it seems
to me like it's a new chapter I don't
know maybe if Google were to spin off
some of their businesses that actually
the Su of the parts could be more than
worth oh hundreds I know
right even if they spin out and the and
the growth isn't the same which I
totally don't wouldn't buy because I
think spin outs work brilliantly just
ask General Electric but spin out if
they spin it out then you don't have
that overhang and then you have
managements that are focused solely on
those businesses and growth can actually
accelerate just on that alone yeah Dan
Stephanie thank you so much for coming
on and I can't wait to see you both in
Savannah thank you guys can't wait thank
you okay see you thanks so much okay
thanks everybody for listening we'll see
you next time on big technology podcast