0:00

Join Capital Group CEO, Mike Gitlin,

0:02

on the Capital Ideas Podcast. It's

0:05

your look inside one of the world's most

0:07

experienced active investment managers. Invest

0:09

30 minutes in an episode today. Subscribe

0:11

wherever you get your podcasts. Capital

0:14

Client Group, Inc. Join

0:16

Stacey Abrams, Liev Schreiber, Gina McCarthy,

0:18

and more of the planet's environmental

0:20

leaders and problem solvers for the

0:23

Bloomberg Green Festival in Seattle, July

0:25

10th to the 13th. Capital

0:28

sponsor, Amazon. Official airline,

0:31

Alaska Airlines. Supporting

0:33

sponsor, Providence. Contributing

0:35

sponsor, We'reHouser. Get

0:38

40% off using promo

0:40

code RADIO40 at bloomberglive.com/Green

0:43

Festival. Thank

0:47

you so much for joining us for

0:49

this special edition of Bloomberg Daybreak. U.S.

0:51

markets are closed for the Independence Day

0:53

holiday. I'm Nathan Hager. Coming

0:56

up this hour, they correctly predicted

0:58

the artificial intelligence boom that led

1:00

to record highs for several tech

1:02

companies this year. Now

1:05

they're back to assess whether this high-tech

1:07

bull has more room to run or

1:09

whether it's headed into bubble territory. Joining

1:12

us for the entire hour are Gene

1:14

Munster, managing partner at Deepwater Asset Management

1:17

and Wedbush Security's Senior Equity Research

1:19

Analyst, Dan Ives. Gentlemen, thanks once

1:21

again for joining us for this

1:24

special roundtable discussion on all

1:26

things tech. And Dan, I want to start with you

1:28

because you really have been out front on the bull

1:30

case for AI over the last, well

1:32

really a couple years now. So here's

1:34

what you had to tell us around

1:36

this time last 4th of July. My

1:39

opinion, it's a fourth industrial revolution that's

1:42

playing out in front of our eyes.

1:44

We believe this is the start of

1:47

a new tech bull market, which is

1:49

why we think second half of the

1:51

year tech could be up 15%, potentially

1:53

20% in a much

1:55

broader rally because of what's happening from

1:57

a growth perspective. I think it's AI.

2:00

tip of the iceberg. And since

2:02

then the magnificent seven stocks tracked

2:04

by Bloomberg are up 50, 5,

2:09

0% on the total return in- Way to go, Dan. Can

2:12

these mega cap tech names keep up

2:14

that kind of momentum? Look, it's 9

2:17

PM still in this party,

2:20

this AI party that I believe goes to

2:22

4 AM. I mean,

2:24

this is the start of a

2:27

two-year tech bulb

2:30

cycle because it's something

2:32

where it's the multiplier. For every dollar

2:35

spent on an Nvidia chip,

2:38

there's an 8 to 10 multiplier across

2:40

software, across infrastructure, across the rest of

2:42

tech. That's why this is a 1995

2:44

moment, not a

2:47

1999 moment. Get out the popcorn. We see

2:49

the tech bulb market continues. So

2:52

let's bring you in on this, Gene. Here's what

2:54

you had to tell us about Big Tech's potential

2:56

this time last year. There's going

2:58

to be some ebbs and flows

3:00

in terms of the stocks in the near term,

3:02

but I think that it will ultimately meet,

3:05

exceed, will comfortably exceed all of the

3:08

hype. And the hype is

3:10

just intense. I mean, this universal

3:12

optimism around it seems hard to

3:14

believe, but I think it is.

3:16

There is substance behind it. On

3:19

your later, Gene, is the substance still

3:21

backing up the hype? It

3:24

is, and that's the part that Dan and I keep

3:27

a close eye on is every quarter. And in

3:29

the middle of the quarters, tracking

3:31

how these companies are doing, is it

3:33

ultimately exceeding, meeting, disappointing to what

3:36

those bars are? And so far, it's

3:38

just been exceeding really

3:40

across the board. Invidious

3:43

numbers, of course, is the

3:45

bellwether. Dan talks about the chips piece, that

3:47

being the front end of it and that

3:49

multiplier effect. But that's where I'm

3:51

focused heavily on is just what's going on the

3:53

hardware side. Micron had

3:56

exceeded estimates guided in line for

3:59

the for the September

4:02

quarter, for their August quarter, which

4:04

in AI world that may

4:06

be viewed as a slight disappointment, but

4:08

it did include an acceleration in revenue

4:12

growth. So, it's going from 82%

4:14

to 90%. So, Nathan, this is

4:16

all intact. And my

4:18

view that the substance will exceed the

4:21

hype continues to

4:23

be confirmed as we progress.

4:26

Well, let's talk a little bit

4:28

more about Nvidia because obviously there

4:30

has been so much attention on

4:32

the AI chip, darling. Dan, you've

4:34

called Jensen Wong the CEO, the

4:36

godfather of AI, but

4:39

godfathers often have targets

4:41

on their backs. I mean, how

4:43

big a target is Nvidia right

4:46

now when it comes to the overall chip

4:48

space? Look, they're a target, but it's their

4:50

world and everyone else is paying rent in

4:52

terms of where we are. I mean, they're

4:54

chips, they're GPUs, and we've seen this across

4:56

the board in our trips

4:58

to Asia. It's the new oil,

5:00

the new gold. And at

5:02

the top of the mountain, it's the

5:05

godfather of AI, Jensen, and Nvidia in

5:07

that Mount Rushmore of AI along with

5:09

Nadella and others that want

5:11

to join. But this is, they're

5:13

miles ahead of the competition. It will ebb

5:15

and flow a year from now. I think

5:18

we're looking at three, four trillion dollar mark

5:20

caps, Apple, Microsoft, and

5:22

Nvidia. And as Gene's talked

5:24

about throughout the year, it's

5:27

far as through the trees. You don't get too

5:29

caught up with sometimes the gyrations, wheat to wheat,

5:31

quarter to quarter. It's where this is

5:33

all going. Well we have seen

5:36

gyrations just in recent weeks since the

5:38

10 for 1 stock split for Nvidia.

5:40

Gene, where do you see Nvidia going

5:42

at this point? I

5:44

mean, that's exactly it. This is just gyrations

5:47

and I believe it's going

5:49

higher. I think it could go materially

5:51

higher. And it comes to a basic

5:53

question that investors have to ask themselves

5:56

and it's, do you believe? If

5:58

you believe that We're in a

6:01

currently a generative AI

6:03

inspired world that hasn't really taken impact

6:05

on most of our lives But a

6:07

generative AI inspired world and if you

6:10

believe that eventually that leads to artificial

6:12

general intelligence Which is a light

6:14

year ahead of? Generative

6:16

AI and if you believe

6:19

that super intelligence is somewhere on the horizon

6:23

5 10 20 years on the horizon if you

6:25

believe that that is the future which

6:27

I hold those then

6:30

Invidia is going a lot higher in Invidia

6:32

if AI works Invidia has

6:34

to work speaking

6:37

with Jean Munster the Managing partner

6:39

at deepwater asset management and Dan

6:41

Ives a senior equity research analyst

6:44

at Wedbush securities joining us in

6:46

studio Jean is joining us Via

6:49

zoom Dan. Where do you see

6:51

the trajectory for Invidia? I mean

6:53

you've talked a lot about how

6:55

the the the run seems like

6:57

it has legs what? Turns

7:00

in video from the kind of growth

7:03

that we've seen over the last several months

7:05

to something of more stability. I Mean

7:08

the use cases are just starting

7:11

So when you look at numbers

7:13

the street is still behind where

7:16

the demand and where numbers actually go

7:19

so we could go through intercorpial saying

7:21

and type and stocks

7:23

sell off but it

7:25

all comes down to demand and We

7:27

are still in from a baseball

7:30

perspective we're in the top of

7:32

the second bottom of the first in

7:35

terms of where this is all heading and They're

7:37

the only show in town in

7:39

terms of those chips. That's why I believe

7:44

This is one where they continue to

7:46

defy Show numbers

7:48

that I think are jaw droppers and

7:50

now the second third fourth derivatives hit

7:52

across the rest attack Well

7:55

when it comes to that demand piece

7:58

gene, I mean can Invidia meet

8:00

the kind of demand that we've seen

8:03

from a lot of its

8:05

enterprise customers, can the suppliers

8:07

that Nvidia relies on meet

8:10

that kind of demand? The best thing,

8:12

the simple answer is no, because

8:14

everything that Dan's talking about, this

8:16

early innings and we're just starting

8:18

to build this infrastructure despite the

8:21

breathtaking growth that Nvidia's had, we're

8:23

just still early. And

8:25

we're going to see a whole new class,

8:27

it has been the hyperscalers, we're going to

8:29

see a whole new class of enterprises, there's

8:32

the industrial AI, there'll be sovereign AI from

8:34

countries. And so they will start to be

8:36

buying these chips. And ultimately, I think it

8:38

will be very difficult for TSM to

8:40

keep up with Nvidia's demand. It's a

8:43

great thing for investors, because of course,

8:45

when they have good numbers, and they

8:47

say, we can't keep up, that allows

8:50

investors to kind of continue

8:52

to maintain a lot of their optimism. And

8:55

so I think it's actually okay that

8:57

it'll be fine for the stocks that

8:59

Nvidia can't keep up with this demand.

9:01

And I had a question for Dan.

9:03

And when I think about this kind

9:05

of evolution and what's going on now

9:07

is generative AI, and then how

9:10

would you, I described there's a light year

9:12

gap between generative AI and general intelligence, because

9:14

this is where you and I

9:16

were focused. The reason why we're

9:18

not worried about quarters is we're thinking two, three years down

9:20

the road. And how do you

9:22

think about that piece of it, the

9:25

general intelligence piece of it, relative

9:28

or just in terms of the applications

9:31

that could present

9:33

themselves and the opportunity for

9:36

wealth creation around? Yeah, it's a great question.

9:38

And look, Gina, I think from

9:40

everything, all the work we've done around

9:42

the world, we think about 60% of

9:45

data that's never been able

9:48

to be cracked or used by

9:50

enterprises and ultimately by consumers is

9:53

now going to get unlocked. And

9:55

you're going to have on the consumer side, hundreds

9:58

of apps, a lot of them through Apple. that

10:01

is how most consumers are going to interact

10:03

with AI in a way that they couldn't

10:05

even imagine today. Enterprise is the

10:07

same thing. As much as it's scary,

10:09

sci-fi, 21st century, I think

10:12

the reality is is that enterprises

10:14

are finding massive use cases,

10:16

ROI, and that's why we

10:19

believe there's a lot of these companies.

10:21

Ten dollars in earnings could be

10:23

14 to 15. In

10:26

terms of the advances that

10:29

we could see, it raises a lot of

10:31

questions when you talk about a leap from

10:33

the kind of large language models that we're

10:35

seeing now to this general

10:37

intelligence. It raises the questions about

10:39

whether artificial intelligence is advancing too

10:42

fast for companies and people

10:44

to keep up with, the

10:46

moral questions as well. I

10:49

wonder how, Gene, you

10:51

think about some of those questions as

10:53

a lot of these big tech companies

10:55

do try to get to some of

10:57

these massive leaps that used to be

11:00

science fiction but do seem like they're

11:02

becoming that much closer to science fact.

11:05

Yeah, the numbers are supporting it just in terms

11:07

of the breathtaking expansion and

11:10

intelligence of these models just to put

11:12

some perspective around it. OpenAI

11:14

GPT-3 had about 120 billion parameters. They haven't

11:20

given the numbers for 4.0 but

11:23

it's estimated to be about a trillion. That's

11:25

kind of a simple way to think about how smart the

11:27

model is, is to look at the number of parameters. Think

11:29

of this as it's over a period

11:32

of a year it's getting going almost

11:34

a 10x improvement in intelligence.

11:36

These are kind of growth

11:38

curves that are just we

11:40

haven't seen. Makes the internet growth

11:42

look JV. I think when it

11:45

comes to the positives, Dan and

11:47

I have talked about the benefits,

11:49

the benefits for companies

11:52

to continue to build into this. I appreciate

11:56

your point about how can this be,

11:58

what are the negative sides. just my

12:01

view is this, you can debate a lot of

12:04

angles around how can this be negative

12:06

or positive. I think the one piece

12:08

that cannot be debated is

12:10

it's gonna get harder for people to

12:13

distinguish what is truth and fiction. And

12:16

all the ramifications around that, I think

12:18

you can you're gonna see more tribalism.

12:20

I think people just

12:22

because you're gonna get progressively easier to get

12:24

fed what you want

12:26

to hear. And so I think that that

12:29

side's the most actually concerning part of me.

12:31

Just think about like global stability is just

12:34

how AI is going to be used to influence

12:36

how people think. I'm not worried about robots shooting

12:38

people up or anything like that. I

12:40

think it's this is just about how

12:42

AI influences how we think. Now I want

12:45

to get deeper into those questions as we

12:47

get deeper into the program. But Dan just

12:49

to close out this segment, I mean we've

12:51

seen these massive multiples for Nvidia and other

12:53

companies like it in terms of you know

12:55

the levels, the valuations that they're trading at.

12:58

Is that a new normal these kinds of

13:00

massive price to earnings ratios that we're seeing

13:02

for companies like Nvidia? I mean that's been

13:04

what we've talked about. It's a new norm.

13:06

I think how many have

13:09

missed this, they go back to

13:11

their historical DCF spreadsheets while

13:13

they're in their hibernation mode as bears. It's

13:16

a new error. And

13:18

we'll continue this roundtable discussion with Dan

13:20

Ives of Wedbush and Gene Munster of

13:23

Deepwater Asset is this special 4th of

13:25

July edition of Bloomberg Daybreak continues. It's

13:27

20 minutes past the hour. I'm Nathan

13:29

Hager and this is Bloomberg. Capital

13:53

Client Group Inc. The

13:56

Bloomberg Sustainable Business Summit returns

13:58

to Singapore on July 35.

14:00

for solutions-driven discussions on unlocking

14:02

growth in times of increased

14:04

ESG scrutiny and competition. Join

14:07

global business leaders and investors to

14:09

drive innovation and scale best practices

14:12

in sustainable business and finance. Learn

14:15

more at bloomberglive.com/Sustainable Biz

14:17

Singapore. That's

14:19

bloomberglive.com/Sustainable Biz Singapore.

14:26

Welcome back to this special edition of

14:28

Bloomberg Daybreak. I'm Nathan Hager. US markets

14:30

are closed for the 4th of July,

14:32

but we're breaking out the fireworks for

14:35

a high-tech power hour. We're back with

14:37

Dan Ives, Senior Equity Research Analyst at

14:39

Wedbush Securities and Deepwater Asset Management's managing

14:41

partner, Gene Munster. And guys, we've

14:44

been talking a lot about NVIDIA for obvious

14:46

reasons. I want to get into some other

14:48

names, though, with exposure to the AI space.

14:50

There has been a lot of talk about

14:53

Tesla as a potential AI play. Dan,

14:55

I know you've been bullish on this

14:57

stock for quite some time. How important

15:00

is artificial intelligence going to be, though,

15:02

when it comes to Tesla's longer-term growth?

15:04

It's the linchpin to the bull case,

15:06

because I've never viewed Tesla as

15:09

an auto company, as a car company. I

15:11

view it as disruptive tech. And

15:14

when we think about autonomous and FSD,

15:17

even when some of the things are happening in China, the

15:20

next five, eight, ten years, the

15:22

biggest bull case for Tesla is,

15:24

I could argue, it's probably the

15:26

most undervalued AI name in

15:29

the market relative to use cases.

15:32

That's what we're focused on. It's very easy to

15:34

focus on, okay, they miss deliveries by X amount.

15:37

That's far as to the trees. We're

15:39

focused on AI, FSD,

15:41

autonomous. And I know

15:43

Gene does a ton of

15:46

work here, a ton of great work in terms of autonomous

15:48

FSD. And I

15:50

think this, to me, is a new... It's

15:53

really going to be in transformation that

15:55

we see in the auto industry. Well,

15:57

Gene, is that central to how you

15:59

see Tesla? Tesla right now, I mean

16:02

there have been a lot of promises

16:04

over the years from Elon Musk about

16:06

how the data that Tesla's been able

16:08

to collect from drivers over

16:11

the years is going to feed into

16:13

artificial intelligence potentially. Do you see that

16:15

paying off anytime soon? I do.

16:18

I think what's going to pay off faster than

16:20

what people expect. I think we're going to have

16:22

a GPT moment when it comes to autonomy. And

16:25

you look at the broader auto space. This has

16:27

kind of been a surprising year where there's been

16:29

more investment. Late last year we saw companies

16:32

paring back, some of the big auto paring

16:34

back on their investment in autonomy. We've seen

16:37

more increases this year from

16:39

some of the traditional ones. But that

16:41

said, Tesla still is far and above

16:43

making the most investments in this. And

16:45

really, as Dan

16:47

mentioned, this is really the central opportunity

16:50

to invest in Tesla is around what

16:52

they're going to do with autonomy and

16:55

what I think is beyond. So Nathan, I think it's going to

16:57

come earlier than what we think. My prediction is that if

17:01

you're probably seven, eight years

17:03

old today, you're never going to have the

17:05

need to drive a car. So I think

17:07

within the next five years, I think it

17:10

could be as early as two or three years.

17:13

The legislation piece is going to be the big

17:15

one holding this up. And then one other piece

17:17

to the Tesla AI story. We're going to hear

17:19

more about it, obviously, on August 8th when they

17:21

show their three new vehicles and if he's going

17:23

to be a big part of that lineup. But

17:26

one other piece is related to optimists. And

17:28

it's almost like I don't know how you

17:30

feel about this, Dan, about when

17:33

you talk about optimists with investors. It

17:36

is if there's a sense like you

17:38

almost lose credibility to say that it

17:40

has real potential because it just seems

17:42

so far down the road. If

17:46

something good happens in optimists,

17:49

the stock doesn't move. I think that's another

17:51

big piece. I love your take, Dan, just

17:53

on is optimists something

17:55

that an investor should care about today? Yeah,

17:58

exactly. Jean's point. investor

18:00

meeting. It's like the

18:03

laughter just starts.

18:06

How could you even talk about that? Yeah, because

18:08

a lot of the thing is that there have

18:10

been a lot of promises over the years for

18:13

Elon Musk that Autonomous is going to pay off,

18:15

there's going to be a robo taxi, obviously there's

18:17

the August 8th unveil

18:19

that we're expecting, but there's been

18:21

a lot of expectation over the

18:24

years and not as much payoff,

18:26

arguably, that many investors might be

18:28

looking for. I'd agree,

18:30

but also disagree, because the point

18:32

is there was a point where

18:34

if you said Tesla's going to

18:36

be producing a million units per

18:39

year. Exactly. Gene remembers,

18:42

they'd be like, wow, you must have drank

18:44

a lot of Rosé or had a good

18:46

Friday night. And now we're close

18:48

to 2 million. And look at

18:50

profitability, went and today, how much free

18:52

cash are they, relative to when they

18:55

were losing money? Now, you

18:57

could argue that maybe I'm looking at

18:59

the trees for the forest here, but

19:01

there has been some reporting from Bloomberg

19:03

Green in recent weeks that Tesla looks

19:05

like it's on track to lose something

19:08

that's been a bragging point for several

19:11

years, its electric vehicle market

19:13

majority in the US. Gene,

19:16

just to that point about Tesla

19:18

as its base

19:20

business of electric vehicle manufacture, how

19:23

much is it at risk of

19:25

letting the competition eat into

19:28

its market share? I think competition's in

19:30

a much worse spot than people

19:32

understand right now. And

19:34

I mentioned some of the step forwards

19:36

that some of these traditional auto have

19:38

made around FSD in the past six

19:40

months. But if you look at collectively

19:42

what they've done over the past year,

19:44

absent what Volkswagen's recent investment in Rivian,

19:46

they've taken five steps back.

19:49

They want to protect, largely protect their

19:51

gas business. And making an electric

19:53

car is different than making a gas car. This

19:56

is the difference between making a lawnmower and

19:58

a supercomputer. And I think that what

20:01

you will see is even though there's been

20:03

some improvements in market share here and there,

20:05

their ability to scale at a

20:08

profitable rate is going to be

20:10

challenging. And ultimately, I think it's a

20:12

catch-22. I think Tesla is

20:15

going to end up with 20, 25% market

20:17

share of cars in the US. It's

20:21

down from where it's at today, but that is

20:24

unprecedented in kind of market share. One in four

20:26

cars to be Tesla. But I

20:28

think the reason why is it will be

20:30

the best car for the best price given

20:33

the features. And I don't think other car

20:35

companies are going to be able to largely

20:37

keep up. You're talking about total market share,

20:39

not just EVs. Total market share, correct. I

20:41

think that 20, 25% is, I'm

20:43

talking 10 years down the road here,

20:45

but I think that that is something,

20:47

again, because they can scale at a

20:50

profitable rate. The consumer brand matters in

20:52

cars a lot, but ultimately they want

20:54

the best value. I'm speaking

20:56

with Gene Munster of Deepwater Asset Management

20:58

and Dan Ives of Wedbush

21:00

Securities. And just to wrap things up

21:02

a little bit on Tesla, Dan, do

21:05

you feel like the company is

21:07

back on track with Elon Musk

21:09

after all the rigmarole

21:12

around X, formerly

21:14

Twitter, the pay package, the

21:16

reincorporation, all those questions that went

21:18

Elon Musk's way? Is Elon Musk

21:20

still the guy for this

21:22

company? I mean, look, Tesla is Musk, Musk

21:25

is Tesla. So that's why everything that in

21:27

terms of that Twilight Zone that we saw

21:29

in Delaware with the comp package, even

21:31

their shareholders approved it, the

21:34

point is that we're not talking about

21:36

Tesla being a trillion, $2 trillion mark

21:38

cap without Musk. I mean, you're

21:40

talking about what I'd argue, Mayurin Day, Albert Einstein.

21:43

Of course, has flaws, has issues. We

21:45

all know it in terms of what

21:47

comes with Musk. But

21:50

when you look at Autonomous, you

21:52

look at when you actually

21:54

go through the factors, when you go through

21:57

Austin, you go through Fremont, you're in Nevada

21:59

and you see the... actual battery factory, you

22:01

go to China, you have a

22:03

different perspective what they've been able to do and then

22:05

you look at all these other EV players have fallen

22:07

it's a graveyard because they talk

22:10

a game big game but

22:12

as Jean said perfectly the reality is

22:14

so much more difficult and I think

22:16

even in Detroit they figured out with

22:18

Mary and what Farley seen as well

22:21

how hard is to produce EVs profitably.

22:23

I want to shift to another company

22:25

that both of you follow very closely

22:27

that is Apple and just to stick

22:29

with the artificial intelligence theme as well

22:32

we've got Apple intelligence rolled out at

22:34

the latest worldwide developers conference. Jean I

22:36

know you follow this company very closely

22:38

is Apple back on track when it

22:40

comes to AI? They are and

22:43

this is just going to be the sleeper

22:45

AI story of the next three to five

22:47

years and the AI piece

22:49

isn't going to start impacting probably start

22:51

until the December quarter the

22:54

streets having some nice improvements like going from

22:56

three four or five percent year-of-year revenue growth

22:58

the next few quarters seven percent next year

23:00

I think that number is going to

23:02

be closer to ten percent plus revenue growth for 2020

23:05

for calendar 25 so

23:08

I think that effectively

23:10

and Dan I've I've

23:12

seen your work on this I think you've been

23:14

just spot-on just as this is you

23:16

know the best consumer facing AI company I think

23:18

that's the language that you've used I agree

23:21

with that I think that when you

23:23

think about AI a lot of the

23:25

attention goes to Nvidia kind of on

23:28

the build side when it comes to

23:30

consumer AI Apple is best positioned I

23:32

think to bring hardware software services it's

23:35

their taglines but it's true too nobody

23:37

brings it better together better what that

23:39

means is the average person who today

23:41

has little exposure to AI will have

23:44

a lot of exposure as this gets weaved

23:46

into the fabric of Apple's products and that's

23:49

a revenue opportunity for Apple and I'd say

23:51

that was a drop the mic type

23:53

what Jean just said and I know

23:55

Jean talks about like 20% right Jean

23:58

20% of

24:00

the world, like consumers will interact

24:02

with AI through Apple, through an

24:04

Apple device. And

24:06

it's so true because when

24:09

you look at what they did with

24:11

WWDC, if the initial

24:13

reaction, remember moose in the street, they

24:15

can't see far through trees, right? They've

24:17

missed Apple from 500 billion

24:19

to 3 trillion, they'll miss it 3 to 4 trillion.

24:22

Oh, I didn't see anything big yet.

24:26

You have savant like jean

24:29

and then I follow in terms like the

24:31

way I viewed it being there, I'm

24:34

like, this is it. Because

24:36

every consumer AI is now goes

24:38

to Cupertino and Apple. And guess

24:40

what that means? That's

24:42

going to be a whole nother Renaissance going

24:45

in terms of AI driven upgrade cycle on

24:47

iPhone, but also services, those applications, hundreds and

24:49

hundreds that are going to be built. That's

24:52

for consumers. So how

24:55

long does it take for as soon as

24:57

they turn on Apple intelligence and these new

25:00

phones come out, how long does it take

25:02

for the kind of the word

25:04

of mouth like people handing their phones to

25:06

someone else and showing the generative features

25:08

on it? How long do you think it takes to start

25:10

to accelerate the iPhone growth? Well,

25:13

I think it's going to be quick.

25:16

I think it's actually me within the cycle,

25:18

even going into holiday season. I'd

25:21

say what Jean is talking about, let's say me

25:23

and Jean are at dinner in the six one

25:25

two. OK, we're sitting there

25:27

and Jean show me his new

25:29

iPhone 16 is all these. And

25:31

I'm like, oh, how do I oh, no, I can't do

25:33

that if I have an iPhone

25:35

14 or an iPhone So

25:38

this is going to catalyze the

25:40

beginning of an AI driven super

25:43

cycle. How does that play

25:45

out into some of Apple's smartphone

25:47

competitors like Samsung? Apple

25:50

plays chess, they play checkers because

25:52

it goes back to two point two

25:54

billion iOS devices, one point five billion

25:57

iPhones. I mean, that's the difference between

25:59

Apple. and everyone else. And

26:01

I pose a question to Gene. Gene,

26:04

what's your view of when everyone goes

26:07

to you or they're like, Apple,

26:09

they're late to the game. Like they're

26:11

late on AI. They've missed it.

26:14

So what would you say to that? AI

26:17

hasn't even started. How can you

26:19

be late to something that hasn't started? And

26:21

when I now define that is that

26:23

typical person has heard, probably

26:25

heard about AI, but actually doesn't

26:28

use it. The reason why open

26:30

AI is giving away this incredibly

26:32

intelligent model by the world's smartest

26:36

foundation model for Apple is because the

26:38

power of their distribution. And

26:40

that piece is just that is a

26:42

tsunami that's getting unleashed. That

26:44

Apple has just been waiting to turn

26:47

on to the market. And so my sense

26:49

is that time is in the apples

26:51

favor. They waited, they put together the right

26:54

lineup for AI. And now they're going

26:56

to get a chance for everyday people

26:59

to experience it. And we're going to

27:01

get more into where we are in

27:03

this artificial intelligence cycle as we wrap

27:06

up this hour-long big tech roundtable with

27:08

Gene Munster of Deepwater Asset Management and

27:10

Dan Ives of Wedbush Securities as this

27:12

special edition of Bloomberg Daybreak continues. It's

27:15

37 minutes past the hour. I'm Nathan

27:17

Hager and this is Bloomberg.

27:28

Join Capital Group CEO, Mike Gitlin

27:30

on the Capital Ideas podcast. It's

27:32

your look inside one of the

27:34

world's most experienced active investment managers.

27:36

Invest 30 minutes in an episode

27:38

today. Subscribe wherever you get your

27:40

podcasts. Capital Client Group, Inc.

27:43

Join Stacey Abrams, Liev Schreiber,

27:45

Gina McCarthy, and more of

27:48

the planet's environmental leaders and

27:50

problem solvers for the Bloomberg

27:52

Green Festival in Seattle July

27:54

10th to the 13th. Title

27:57

sponsor, Amazon. Official airline, Alaska

27:59

Airlines. supporting sponsor

28:01

Providence, contributing sponsor warehouse.

28:03

Get 40% off using

28:05

promo code radio 40

28:07

at Bloomberg

28:10

live.com/green festival. Welcome

28:15

back to this special edition of Bloomberg

28:17

Daybreak. I'm Nathan Hager US markets are

28:19

closed for the fourth of July holiday.

28:21

And it's time to close out this

28:23

special high tech roundtable we have been

28:25

spending the entire hour with Gene Munster

28:27

managing partner at Deepwater Asset Management and

28:29

Wedbush Security senior equity research analyst Dan

28:31

Ives and Dan I want to pick

28:34

up on a point that Gene made

28:36

at the end of the last segment

28:38

that you know, we're still at

28:40

the start of this artificial intelligence

28:42

boom and how can companies be

28:44

left behind? If we're just at

28:46

the start of it, do you

28:48

see companies that could

28:50

be left behind in the AI?

28:52

I think many. I mean, I've met with many

28:55

companies, they'll say AI 30 times an hour. And

28:59

I leave the I leave the meeting being like,

29:01

it's gonna be a rough road. So

29:04

the point is like, it's about

29:06

the technology, the software engineers, the

29:08

install base, your

29:11

sales execution. I mean, look, if someone

29:13

told you Dell was an AI play

29:16

six months ago, you say no way. Look

29:18

at Oracle. So the stronger gonna get stronger

29:20

with the losers are going to be like,

29:23

wow, the niche players squeezed out of sales

29:25

cycles, don't have the scale

29:27

lead to the game lose software engineers,

29:29

AI engineers are rare, right in terms

29:32

of where we are today. So I

29:34

do think this is going to be one

29:37

like strong get stronger. And that's just the

29:39

reality. What do you see things Gene?

29:41

Are there companies that could be left behind?

29:44

I think that most companies will have

29:46

a benefit. But yes, there'll be companies that

29:50

will get left behind, they won't be able to

29:52

keep up. And I think that what we've seen

29:54

is that in the hardware world, that is where

29:56

all the action is today, the software software companies,

29:59

the big software companies basically flat. They're down

30:01

a few percent this year, which

30:03

is remarkable compared to the hardware, which is

30:05

up, call it average, 50 percent. So

30:07

I think where the companies get left behind

30:10

is this up and coming class. And at

30:12

Deepwater we focus on, we

30:14

have the benefit of doing both public and

30:16

private. And on the private side there is

30:18

these anointed AI companies. Some of them, some

30:20

of them everyone's heard of OpenAI and XAI,

30:23

but there's other ones that people haven't

30:26

heard of, like Databricks and Andral. And I think

30:28

that there is going to be a class

30:31

that's going to go public in 25,

30:33

26, 27 that is going

30:35

to challenge some of the software companies

30:38

that have had great businesses for the

30:40

last 15 years. And so I think

30:43

I don't have the, these three companies

30:45

are going to be at risk, but

30:47

I would just point out this. I

30:49

think that the private software opportunity around

30:51

AI is, is going to

30:53

be headlines in 25, 26 and 27. Speaking

30:57

of headlines, when we have this kind

30:59

of massive run in the stocks, and

31:01

a lot of these companies that we

31:04

talk about day in and day out,

31:06

there's been a lot of regulatory scrutiny

31:08

as well. I'm thinking particularly about a

31:10

lot of the action that's been happening

31:13

in the European Union when it comes

31:15

to Apple, now Meta platforms. Dan,

31:17

is that a potential risk,

31:20

a potential head risk for, for some

31:22

of these companies, the idea of

31:25

regulatory scrutiny? Look, I

31:27

think right now regulatory is in a

31:29

minivan going 55 miles an

31:31

hour in the right lane. And

31:34

in the left lane is the technology in

31:36

a Bugatti going a hundred miles an

31:38

hour. The point is regulatory,

31:41

I view it as more background. Every, look,

31:44

the certainty is when you wake up at coffee,

31:49

you're going to get delayed

31:51

on some mass transportation train

31:53

plane and the EU is going

31:55

to find a big tech player. So

31:58

the point is this is I think

32:00

the streets almost become immune. And

32:02

I don't see that it spoils the

32:05

AI party, which I

32:07

believe it's still 9pm, and it goes

32:09

to 4am. Gene, do you think

32:12

Europe just falls

32:14

so far behind US, Asia,

32:16

other parts of the world

32:19

because of this regulatory? I

32:24

think that at the highest

32:26

level, yes. I think that their restrictive policies

32:28

are going to have an impact. You need

32:30

to be embracing these. And so I

32:33

do think that there's risk with the

32:35

EU is doing as risk beyond what

32:37

the regulators understand. And

32:40

so my general sense is that they

32:43

need to make some changes. It's not going

32:45

to happen. I love your analogy about things

32:47

you can depend on in life. Yes, the

32:49

EU finding some going after some big tech

32:51

company. And I would just add one

32:54

other piece just around this. It's just a chess match.

32:56

And the reason why, just to put another point on

32:59

what Dan said, the reason why investors don't care

33:01

is because they understand that these

33:03

big tech companies can find ways to

33:05

get around any of the regulations effectively

33:08

dampening what their

33:10

potential penalties are. So I'm

33:13

more confident that big tech can figure

33:15

it out and get around these hurdles.

33:17

Well, what should investors be worried about

33:19

when it comes to the growth that

33:21

we've seen in AI companies,

33:24

Gene? This is

33:26

one of the bizarre parts of

33:28

this piece. And Dan and

33:30

I were around during the internet bubble. And

33:34

the analogy I'd say, the thing that when

33:37

I get asked what's most concerning, it's

33:39

around how it's going to impact how

33:41

we think and how we feel about each other. I talked

33:43

about that earlier. But from

33:45

the standpoint of what's

33:47

concerning to stop

33:50

this, I think

33:52

the only things would be something

33:54

around availability of power and maybe

33:57

something around Taiwan. that

34:00

this rocket is going to

34:03

take off. And I always

34:07

embrace identifying what the real

34:09

risk is and they're

34:11

pretty distant. This is going to happen. We're

34:14

speaking with Gene Munster, Managing Partner,

34:16

Deepwater Asset Management, and Dan Ives,

34:18

Senior Equity Research Analyst at

34:21

Wedbush Securities. You're talking about it

34:23

as 9 p.m. and

34:25

a 4 a.m. party, Dan.

34:27

But do you see any

34:29

potential risks to the AI run?

34:32

Could we be driving

34:34

these companies up into an asset bubble? I

34:37

mean, I think there's a two-year bull

34:39

cycle. I mean, at points

34:41

when we get toward 3.30, 4

34:43

a.m., there will be issues, especially

34:46

for ones that don't actually execute. But

34:50

I see an auto bond. We'll

34:52

have some issues with quarters and

34:55

air pockets and lorries and bears

34:57

that have been negative on tech for the

34:59

last, you know, since 2009 come out, again,

35:02

saying that this is a bubble. The

35:04

reality is it's a fourth industrial revolution

35:06

playing out. And some, look,

35:08

some are going to look at this party from the

35:11

outside and they'll be like, you know what, I'm just

35:13

going to eat ice cream in my room. Guess

35:16

what? Let's meet at 6 a.m. for

35:18

breakfast. I'll go to the party. And

35:21

who had the better night? And the point

35:23

is, I think, is it all plays out? That's

35:25

it. This is a tech bull market. You could

35:27

deny it. The multiplier impacts

35:30

just start with Godfather of AI gents

35:32

in a video. Just

35:34

to carry over the analogy, what's the risk of

35:36

a 6 a.m. hangover? First of

35:38

all, there's after parties at 5 and 6

35:40

a.m. And then even in those, you'll

35:43

have some that fall by the waist, but if

35:45

you focus on the winners and keep the thesis,

35:49

you know, we're going to be talking about 4 trillion,

35:51

5 trillion dollar market

35:53

caps, NASDAQ 20, 22,

35:55

25K. Over the next three, four, five,

35:57

six, seven, eight, nine, eight, nine, eight,

36:00

four, five years in my opinion. Is

36:03

that something that you agree with, Gene? Yes,

36:06

I mean, I like Dan's party analogies much

36:08

more than my baseball analogies, but I'm at

36:10

the third inning of this

36:12

and we think we're in the early stages of a

36:15

three to five year bull market. And I

36:17

don't, I wouldn't, don't worry about the after,

36:19

don't worry about the hangover at this point.

36:21

I think you just embrace that this

36:24

is as the substance will exceed the hype

36:27

and we've got some great years

36:29

ahead of us from the market. Now, obviously,

36:31

we've been talking a lot about the magnificent

36:33

seven stocks and video leading

36:35

the way in lots of aspects.

36:37

But as we close out this

36:39

hour, guys, let's talk a little

36:41

bit about some of the names

36:43

that maybe you'd advise

36:46

investors to steer clear

36:48

of entirely. Start with you, Gene. Well,

36:52

this is one that I've had talked about

36:54

in the past. I've been wrong. I'm going to stick

36:56

with it. It's Netflix. It's

36:58

a bigger company. It's one that

37:01

has a benefit to AI, but it's not

37:03

like a true AI company. It's content. And

37:06

I think that there is a shift going

37:08

on in content to the creator economy. It's

37:10

think of it as what's happened in YouTube

37:12

and TikTok multiplied by many

37:15

times. And I think

37:17

Hollywood is going to get disrupted. I think companies like Netflix

37:19

are going to get disrupted. And

37:21

I think that it's just not that

37:23

exciting of a story on top of it. What's

37:27

your view on where the entertainment industry

37:29

is going, Dan? I

37:31

mean, look, I think you

37:33

could play the scary sort of angle we

37:36

saw with some of the Hollywood strikes in

37:38

terms of how it's going to impact negatively.

37:40

I actually think it's going to create

37:43

sub industries and companies that are massively

37:45

successful. Streaming, there is

37:47

a revolution going on. It's

37:49

content driven. And you're

37:52

going to see more and more entertainment

37:54

companies. Applications going to be

37:56

built on top of watching sports, watching

37:58

entertainment. You're going to be able to

38:00

go into a movie, whether

38:03

it's a Vision Pro or others that you'll

38:05

be bringing in. The point is,

38:08

things are going to be happening over the

38:10

coming years that you never would have imagined

38:12

today. There's going to be winners from that

38:15

and losers. I think that's

38:17

something as it all plays out. That's why

38:19

you listen to people like Gene because

38:22

they don't get nerve on quarters. They

38:24

don't all of a sudden,

38:26

like so many others, just follow

38:28

the herd and go negative. The forest through

38:30

the trees. If

38:32

Gene was a pilot, I'd be in

38:36

3A drinking Cabernet, feeling pretty

38:38

comfortable watching Netflix. Over

38:40

there in first class. What about

38:42

winners? Dan Ives, what

38:44

are your biggest names that you're looking at

38:46

to really do well in the long term?

38:49

I think the Messi of AI, Palantir,

38:51

Front & Center. I think names like

38:53

ServiceNow, Oracle with the

38:56

Renaissance of Growth. I

38:58

look at names like MongoDB. Of

39:02

course, Microsoft being one of our top

39:04

picks. I think what's going to happen

39:06

is in software and even cybersecurity names

39:08

like CrowdStrike, Zscal or Palo Alto, there's

39:10

going to be a massive tailwind in

39:12

terms of these AI driven workloads as

39:15

the Batang attended from SemiSci Software. Of

39:19

course, we know your coverage of Apple

39:21

and some of the other big CapTech

39:23

names. Gene, what are some of your

39:25

biggest winners as we think

39:28

farther ahead into where we could be

39:30

in this tech cycle? Apple

39:33

is going to surprise people over the next few

39:35

years. I think Tesla is going

39:37

to surprise people around these variant vehicles they're

39:39

going to come up with. I think there's

39:42

going to be some legs to Optimus. We're

39:46

also, as I mentioned, spending a lot of time on

39:48

the private side. I think companies like XAI are

39:50

going to be one of the anointed foundation

39:52

models, Databricks, I think is

39:55

another company. I mentioned Andro before. This

39:57

is the future of defense tech. Well,

40:00

those three are difficult to invest in

40:02

today. They soon, in a matter

40:04

of a few years, will be public. Really

40:07

appreciate having you both on to take

40:09

this longer-term view and an hour-long roundtable

40:12

discussion on this massive bull run

40:14

that we continue to see in

40:17

the tech space. Thanks to both

40:19

of you for being with us. Wedbush Security

40:22

Senior Equity Research Analyst Dan Ives, along

40:24

with Gene Munster, Managing Partner at

40:27

Deepwater Asset Management, spending the entire hour

40:29

with us on this special edition of

40:31

Bloomberg Daybreak. We want to thank you

40:33

as well for taking time out from

40:35

your Independence Day holiday to get

40:37

in on this discussion. Hope you have a

40:39

very happy and safe Fourth of July. I'm

40:42

Nathan Hager, inviting you to stay with

40:44

us. The day's top stories and global

40:46

business headlines are coming up right

40:49

now. Join

40:59

Stacey Abrams, Liev Schreiber, Gina McCarthy,

41:01

and more of the planet's environmental

41:04

leaders and problem solvers for the

41:06

Bloomberg Green Festival in Seattle, July

41:08

10th to the 13th. Title

41:12

sponsor, Amazon. Official airline,

41:14

Alaska Airlines. Supporting sponsor,

41:17

Providence. Contributing sponsor,

41:19

Weyerhaeuser. Get

41:22

40% off using promo

41:24

code RADIO40 at bloomberglive.com/GreenFestival.