Big Technology Podcast - Tech's Big November Rally, Apple's Path Forward, The State of Tesla — With Dan Ives

Episode Date: December 6, 2023

Dan Ives is the managing director and senior equity research analyst at Wedbush Securities. He joins Big Technology Podcast for a broad discussion of the state of tech today. We cover: 1) Tech's November rally 2) Whether generative AI is Big data 2.0 3) Microsoft winning 80-90% of big AI deals 4) The state of Apple 5) How analysts like Ives estimate iPhone sales 6) The state of Tesla 7) Rivian's pickup truck 8) The Cybertruck's chances 9) 2024 Predictions 10) Elon Musk's future at X 11) Bitcoin madness returns. -- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Questions? Feedback? Write to: [e-mail]

A leading tech analyst joins us to talk about tech's November rally, a state of Tesla, AI, Apple, and more. All that coming up right after this. Bookin and Big Technology podcast, a show for cool, edit, nuance conversation of the tech world and beyond, and today I am excited to welcome Dan Ives to the show. He's the managing director and senior equity research analyst at Wed Bush Security. He has his finger on the pulse of so many important tech companies, including Tesla and Apple.

We like to go back and forth a little bit. on CNBC. I think I'm a little more negative on Apple, and he's pretty positive. So far, he's gotten the best of me in those debates. Dan, great to have you. Welcome to the show. Oh, it's great to be here. And it's just to be on with you. I think you're one of the best technology minds out there. So this is just, I'm really going forward to this. Thank you, Dan. And likewise, I'm reading all your notes, you write prolifically about the tech world, and it's always fun to talk with you on CNBC. And I'm grateful that you've chosen to spend some time with us here today so thank you so much oh yeah it's my pleasure so just to set the table let's talk a little bit about

what's happening in the market so you know we're hovering with pretty high interest rates right so you would imagine that there would be a slowdown but the smp 500 is up 20% on the year and not only that it closed november up 9% and the nasdaq was up 11%. So it was this very large rally I mean the year is unbelievable right now in the s&P power Howard, almost counterintuitively by big tech, what exactly do you think is going on there? Look, I remember we went to one try for our earnings season. I think, look, I think the biggest thing is that institutionally, very negatively positioned into three-kewerning season, expecting soft guidance, soft numbers, you know, a macro where, you know, a hard landing, I think we're still being baked in. And it's actually the opposite.

I mean, we've seen tech be as resilient as really any other phase that I could remember going through a choppy macro like this. I think AI has gone from, you know, just Nvidia to now hitting the shores of tech in terms of real spend that we're seeing across from Microsoft to Amazon to Oracle and others. And when you go into next year, it's like, look, I think now we're going to have a face. that cuts you get so much money on the sidelines unless you have a telescope from a planetarium it's hard to find that recession and i think investors are now focused and be like okay like is this the start of the new tech bull market and i believe it is i'm not saying we're not going to have some choppiness going into january but i believe tech stocks will be up another 20 percent in 2024.

You now think that we're about to enter this big bull market in tech. And in fact, you have a note out Tuesday talking about how we're on the way. The subject line is heading into 2024, we see a new bull market for the tech sector. And one of the things that really drives your thesis here is that you think that, you know, we might not see a lot more spending enterprise, but cloud and AI driven spending. this might be up 20 to 25% over the next year. Here's the thing that I really want to seize on, though. You say that there are use cases that are now exploding

across the enterprise and consumer landscape. So, Dan, what are the use cases that you're seeing? Because I think for people on the ground level here, like one of the big questions about AI is we're hearing so much about it, but we're not seeing it actually put into too many products outside of the big Microsoft co-pilot type of thing. So where are these use cases that you're seeing? So we've done surveys, the last few minutes, we have over 80 use cases right now.

And these are enterprise. I mean, I just want to differentiate. I think it headaxed the amount of spending in enterprise as the consumer landscape. So when we look what's happened across financials, insurance, hospitals, regular on the government side, on the cyber security side, it's what I view is probably the biggest transformation we've seen ever. I just heard Gene Munster, who's another analyst, talk about how, like, this is a 99 and the web is 50 in terms of a 1 to 100 important scale. I think maybe fire is 100 or something like that. I'm just not convinced this isn't Big Data 2.0. Like, big data was this big revolution

where, like, you all of a sudden could make sense of things that you couldn't before and it would provide clarity and allow organizations to do what they couldn't do previously. So why is this so different? But I don't think you're wrong. I don't think you're wrong in that view. Like, my view, it's somewhere in between. So in other words, let's say I'm going after Alex as a customer. For 10 years, Alex is just paying maintenance.

You know, every once in a while buying a new module. Alex is a billion-dollar company with the IT budget that's let's say 30, 40. That's an accurate description of big technology, by the way. No, but with you... And I know you're...

Hypothetically, yeah. And I know big technology yours is a lot bigger, but let's just say hypothetically, you know... Okay, so now all of a sudden Alex called me the vendor

being like, show me how I could spend where are the use cases from my company. So now, Alex, that was just paying maintenance, you know, few modules a year, incremental. I come in, you know, for a bake-off once a year. Now, you're calling me. I'm a vendor. I come in. That's why when you look at Salesforce, Adobe, Oracle, you know, name your P.

These install-based plays, it's your point, like with the big data 2.0, it's opening the door to now conversations, deployments, beta. That was not that. Because, and now you actually have the functionality to present much more compelling ROIs than you had before.

So I think it's somewhere, like, I think it's somewhere in between. And I don't think you're wrong at all. And I think there's many that have that view. But it doesn't, it could be a 1995 moment or, you know, the way Gene puts it or the way that you put it. But either of those, that's going to be a huge talent to enterprise spent, like, regardless of which word it is. That's, I think at the end of the day, that's really the difference. So it's like, it doesn't, like, Tom Brady is not going to be Tom Brady every game,

but over the course of his season, what does it look like? Yeah, no, and I definitely allow for the fact that like it might look like Big Data 2.0 right now, but this technology has this ability, opportunity to be exponentially more impressive than anything we've seen before if it keeps improving at the rate that it has to improving. And you're saying that of all these companies just, Microsoft just kickin' butt. They're like it's unbelievable

like look it's just it's actually unbelievable just their ability to just win what eight of every 10 9 of every 10 big AI deals yeah because also like

their their Microsoft shop it's foundational on Azure you have co-pilot you got to open it look that's also why like for Jazzy and for Curry and at Google for what we see in Oracle Safra it's

it's playing catch up right yeah and I definitely wanted to go deep into this with you because damn one of the things that I love about the work that you do is you go meet the customers you go to China when you want to talk about you know what's going on

with Apple and And it's very interesting to hear your perspective on this, especially as it relates to where the tech stocks are going to go next year. So let's just talk a little bit about the biggest tech stock, which is Apple. I mean, you make these trips out to the manufacturers to talk a little bit about, like, what demand is going to look like. I'd be curious to hear your perspective on the state of the company today. iPhone 15 has released. It's in market. I have one.

I like the phone. But the thing that Apple's coming up against is the fact that the phones work well enough that people don't want to replace them as often as they used to. And we've seen how many quarters of declining revenue is Apple had, like maybe four, four or five in a row. And, you know, iPhone makes up such an important part of the company's revenue makeup that you just kind of wonder, like, what is the trajectory of this company? Now, you're a bull on the company, obviously. what do you where do you think the answer is look at my again i've always like i always

really take issue or everybody people are odds declining whatever and i always be like look you have 600 bics of currency had one right so like in actual out it's go you know con currency growing but mac ipads that's that's not the focus right in it was like now iPhone units are growing. The ASPs, you're going further and further upstream. Hard selling price. Yeah, 925, 950, maybe a year ago, 825, 850. And services is a key part to the monetization, right?

I think services now going back double digits. I think services is worth $1.4, $1.5 trillion. Look, you hit on, like, New Adel, like, the biggest issue is that, like, people become 99% keyed their iPhone. They upgrade. They were upgrading every two years. Now it's close to every, call it three and a half to four years. You're going through a cycle here that clearly is going to be better than, I think, expected, at least going, you know, going into it.

But it's like, what's next? And that's why I think, like, look, I think for Apple, like, what's next is, like, you got to continue to hold a line in China. You know, they gain share while he comes. in essentially what's called an iPhone 12, you know, from a technology perspective or Huawei's come in it with, you got a whole court. That's essentially what they've had to do in China and so far so good. Right.

But I think from a stock perspective, because I see on Twitter all the time, or from institutional investors, where I think people have miscalculated or underestimated is that when you have an install base like that, the ability to monetize is, It goes back to like Blackberry, Nokia, you know, everyone got to like the user growth Gillian, they were warning to monetize it, services, software. I think we're just in the next fees of the Apple growth story from a monetizing the install beast. Right. I think it would be worthwhile to just talk a little bit about, this is a bit of a bit of,

kind of inside baseball, but I think it would be worthwhile talking to folks about how you come to your beliefs in terms of how many iPhones are going to ship. I mean, you just said that you have belief in this iPhone 15 and that it's going to be a better cycle than people expected. Um, you know, some people, when they say that, they guess, right? Like, they triangulate based off of like five friends and they're like, well, three have 15. So it seems like it's going to hit the number. But you'd actually go out to the manufacturers in China and Taiwan, I think. I mean, you talk a little bit about your process because, you know, even though it's inside baseball, I think is pretty fascinating. And that's across Wall Street. I mean, if you look like,

for any technology analysts, semiconductor analysts, typically they go to Asia four times a year, sometimes more. And it's really trying to understand, you know, and you could, if you look at the component parts, let's say to iPhone. there's basically a food chain. I mean, it's really, it's a bottoms up. It's essentially a bottoms up way to come up with a guesstimate of where you believe demand is. So if you talk to, if you talk to suppliers and suppliers are not positive or they're not building out and they're actually cutting production, that's a negative. So I always view the checks that you do in Asia as,

directional but not exact right so do so let's just go back to like um the yeah everything that happened with the whole like the shadow ban like that was going with the iphone remember like when everything happened like government shadow ban like going into iphone 15 well let's actually no no no let's talk about what what happened there articles come out that there's a shadow ban that basically government employees within China are not being allowed to buy iPhone. Like they can't bring them into what. Now, now this just goes back.

Like, I'm just walking into like my, so I wake up in the morning, see it. I'm like, I'm like, how's that? Like,

I'm like in my mind. Like, just being around the region for my whole career. I'm like, as a government employee, like, you'll never bring an iPhone into a dark. You typically leave it at home.

you have another phone. That's always been like that frapp. Like they're always trying to, like within China. And I haven't heard of anything like that. So I was like that's one where like we have to spend the day doing our work, you know, within the region to see if this is something that changes our thesis. And five, six hours later, I'm like, I'm not saying there can't be. be some sort of, you know, headwind, but I viewed it as kind of a fictional story. This was a Wall Street Journal story. I mean, how could they get it so wrong?

I think they're right. I think they were right in terms of the premise. Okay, but wrong that it's not new. And then people said, aha, there's a ban, and there's always a bit of policy in place. Because like, look, like. But that even still, Dan, that's a, just, That's a terrible story to publish, if that's the case. Yeah, but look, when you look, it is always, just like as an analyst, just like a journalist, it is so hard. That's like me calling a stock into, that's always difficult, right?

So there's always going to be times where, like, you could be right directionally wrong, maybe in the thing. And look, but that's what me, but just going back. to like that's what meeks covering tech and covering these names so exciting is that there's all different opinions right because that day everyone there there might be someone that's been super negative on apple and be like you know i mean like when that happened do you know how many emails and twitter and calls i got being like told you right it was it was going to happen it's it is interesting that it's coincided also though with

the fact that wawa is overtaken apple inside china right as the number one phone and you know i don't know maybe this wasn't something new but it does seem like a there's two things that are happening that that might be a cause of worry one is um the chinese economy is struggling and you might want to go to a cheaper model there it seems like it would favor wawa and two for maybe maybe this isn't brand new but and who knows maybe this has been reversed after she came to San Francisco and hung out with Biden but um there has been a move away from globalization in China so that you know it seems like you take those two together and it is a moment of worry for Apple but then also but then I would go back to like and this is why like

look if I called stocks from my 12th floor on uh you know in New York City midtown I would have gotten 90% of my stocks wrong because I would just sit here on my spreadsheet Right It's why you make the trips Yeah So by by spending so much time in the region You understand like

China like Apple is one of the most important employers in China Right Especially mid to high end Chinese They all want iPhones Right And it comes down to like You know there's always going to be a push push pull. Okay, if you want to call like that, but it's going to be a worry. It's not going

away. I just think at least now for iPhone 15, the worry was maybe much more pronounced than the reality. Damn, when you go to these suppliers, do you just like walk up to the factory, be like, hey, like, how many components are you producing? I mean, how did these meetings come together. No, I think that's all part of, you know, a lot of times these are investor meetings. These companies meet with investors, you know, all around the world. Right. And it's all, you know, I view it as a puzzle that you're trying to put together.

Like, one data point is in itself doesn't give you directional, but you have to listen to so many these conference calls you got really follow foxcon i think foxcon you know clearly as a supplier back is one of the most important ones you know in terms of trying to understand what's happening there and that's also why we spend so much time malaysia vietnam a lot of these other because there you know there's a lot of component players that play there and it's not trying I also think it's not always just trying to get numbers right it's trying to understand like where the trends are going right like I'm actually go back to years ago

where I reviewed like okay like a foldable phone there was not you know there was there was not a groundswell that wanted a foldable phone within within the whole supply chain so when there was a view that Apple was going to come out of the foldable phone you know we viewed that as something that was not going to you know like we have right what isn't it for these components manufacturers to speak with folks i mean it seems like

they would put their relationship with apple in jeopardy if they were to share let's say bad news so how do you sort of take their incentive to speak with you and their motivations and their angle in terms of like your you're you're then trying to process that and get to the truth yeah i think you try to take it all with a green and salt because a lot of it you're trying to because remember it's not even you're doing it's not like apple is just one piece of it right you're trying to understand where where the technology's going that's true when it comes to like so that that's actually to me i think that's that's probably the most important thing in terms of where it all heads like in terms of

where the technologies are going 5g 6g like within within apple or in their own silicon are there other areas that they're going to maybe try to bring further in what does that mean for samsung what does that mean for walway i think the biggest issue look i i also I probably weren't the biggest issues is just trying to understand like Apple and China Taiwan how much do they try to bring to India

how much they try to bring to Vietnam Yeah what is the state of their supply chain right now Are they diversifying away from China? I think they're diversifying But not quickly Very careful Okay I see

Because even like You know It's easy for someone sitting on their lounge chair to be like, oh, they should just diversify it from China and India. Well, I mean, they have probably one most complex supply chains, like in the world. Right. Exactly. Okay.

So why don't we take a break and then talk about Tesla on the other side of this? Because I know you have a lot of thoughts about Tesla and I teased it at the beginning. So we'll be back here right after this with Dan Ives, managing partner at Wedbush Securities. Also, senior equity research analyst. You've heard a lot about how he researches the equities. On the other side of this break, we're going to be talking about one of the more fascinating companies. In the tech world, this moment, Tesla. Back right after this. Hey, everyone. Let me tell you about The Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending.

More than 2 million professionals read The Hustle's daily email for its irreverent and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily show where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So search for The Hustled Daily Show and your favorite podcast app like the one you're using right now. And we're back here on Big Technology podcast with Dan Ives, the managing director and senior equities research analyst at Webbush security. Dan, let's talk about Tesla. I mean, kind of, it's kind of interesting. You are like very pro Apple. I think you're generally pro Tesla. But

They have been discounting the cars. And the last earnings call, their margin came down in a real way. And I think that, like, you had some perspective on it that you sent out basically, like, this is the opposite of a good earnings call or just like this is the devastation disastrous thing. Because basically what's happening is Tesla's giving away the margin and giving away, like, you know, kind of like the fruit of their business trying to sell more units. you were not very happy with that so either when they are selling more units

and the cyber truck is out so where do you stand on Tesla today look I mean it's been one of our long term bullish favorite name but like a kid where you're going to yell at the kid and if they don't do their homework

you're going to be honest right and I think that's always been our DNA like we're going to call like we see it like that was a disaster conference call the communication especially around margins was, you know, very unclear. Because the big issue here is, okay, you caught, look, we wanted them to cut prices in China. You're in a price war.

This is a time where, like, their margins are here. Everyone else margins are here. It's a time you could squeeze, squeeze, squeeze, focus on units. That was the right poker move. That's why the stock went from 100 to 200, okay? Now, it's like, okay, well, how much more do you cut? Because investors need to get to a point where it's like, okay, line in the sand, we're not cut anymore, and you didn't get that. And I think, now, ironically, look, our whole view is we're 95, 98% there.

and if you look so far since earnings since end of October that evidence would be would support that it was like you've actually

have price increases rather than price decreases so far China numbers look very strong so it's our view like look the electric vehicle

industry it's like price discovery that's essentially what they're going through we talked about Apple before it was like

I'm trying to figure out how much to charge for their cars. Exactly. And it was like, look, and realistically, like, at $70,000, you're never going to get mass market. You need to be $30,000, $30,000, $30,000, $40,000. Now, they've been able to produce the cars so much cheaper. Obviously, in an interest rate environment, you could cut prices, interest rate rise.

To consumer, there's really no impact, right? I mean, so it's like that's the problem that are all automakers been going through. But my view on Tesla is it's much longer term. My view is like we're still in the second inning of electric vehicles. Now, there's definitely a moderation relative to me where we thought this was going to go. But they're going to own more and more from a battery technology perspective, from FSD, supercharger, some of the parts. I've always viewed them as a disruptive technology player

not an auto company and I view this is more of an air pocket period for Tesla rather than like I view it more as like okay you're going to go hyper growth air pocket

and then I think right quick drop and then back up to altitude look and I think the reason you see the stock you're like well why is the stock continue to move higher, even though we had those margins. It's because investors, they're looking through to Q4 into Q1, into 2Q. You go about Cybertruck. Like, look, the fact that they're actually producing this at mass, like on the trajectory, that started knowing that they were never

going to be able to do this. Austin, that's why Austin's so important in terms of the broader a buildout. But Alex, like a year from there, they need to have a sub-30,000 $30,000 vehicle. That's... I think they'll get there. I, look, I think that's why Mexico is so important. I mean... Right. Mexico... If you go back to the money, Mexico factory that they're going to build out. Are you a cyber truck fan?

I'm a... Look, I'm personally a cyber truck fan. Are you going to, are you, do you drive a Tesla? What's the type of car? I plan to buy a cyber truck. You're going to, okay, you got to come by, Dan. We're going to, we got to swing around Brooklyn together and hang out on that side of truck. I think it's a cool truck. Yeah, definitely.

When I get it, I'm going to pick you up, Brooklyn. Sounds good. Put your shades on. Yeah, perfect. Okay. Nobody's like, but look, but with cyber truck, my view is like, take a view of the market where F-150 is. 950,000 per year. The number one cell eight truck in the car auto in the US, right?

Can you start to just chip away at that? I mean, that's really, that's what they're going for. And also they're going for like, okay, if you had a Tesla, do you buy a cyber truck, it's a market opportunity that Rivian, I think, successfully has gone after, but even Rivian, obviously the big issue is that, you know, They're actually producing. Oh, so, by the way, I mean, I mentioned this on the show on Friday, but I just took Oryvian. They lent me the truck and drove it up to Boston over Thanksgiving and then back.

I thought it was a great ride. It was super fun to drive that thing. What color exterior was it? Linesomed. Oh, yeah. Yeah, it's nice. And I don't know, it felt like driving a small. car and it was a pretty big pickup it was just like very smooth ride the way you are like

you're i could see you in rick you person out i could definitely see in a raving think i'm a rivian guy and not a cyber truck guy den i don't know i think i think you could be both yeah but i definitely could see you driving around those sunglasses doing your big tech podcast on the rvian yeah no i i thought it was a great truck we're going to have r j scour and john um but it's very hard to park in the city, so I don't think I'll be buying it anytime soon. Do you, do you, so when you said there's a production issue for them, what do you mean by that on the Rivian side? They just can't ramp, is that what's happening?

I mean, that's the biggest issue, and I, you know, huge respect for RJ and the Ripon team, the biggest issue since the IPO, it's just there's, there's always been doggie at the homework, excuse, look, it's hard to produce cars, right? Right, totally. And I think when they come out, since. to, since their IPO, it's been a constant production issues. I think they've resolved

a lot of that. Clearly, you know, they're building on new factory in Atlanta. That's going to be, you know, key as we go into the next few years. Look, the demands there. They've created a phenomenal vehicle. You have that Amazon relationship on the commercial site, even though, you

it's changed a bit. It's now just capitalizing on the opportunity. Yeah. All right. Well, we're nearing an end of the show, and we're also nearing an end of 2023. You got any hot 2024 predictions you can throw at us?

I think we are going to have a tidal wave of MNA in software. Oh. I think massive MNA. I think financial, strategic I mean, right now, FTC con, no one fears

anymore, given you it's black eye after black eye, post Microsoft Activision, others, I think you're going to see a lot of big deals, strategic as well as financial. I think it's due for consolidation. So probably that's going to be one big prediction. Two, I think we sit here a year from now, and I think tech stocks are up another 20%. Really?

Okay. Yeah. And then I think third is that I think AI, because right now everything we're talking about is like, okay, exploratory like kicking the tire beta deals are now maybe starting to get sized out a year from now and you're probably going to be at the forefront of this it's really realizing like just how big

and real the monetization is yeah and fourth would be Mets make playoffs Mets make the playoffs say better man at this point there's a fourth to be Mets make but I'm a big believer in Cohen and everything is doing and we've been through battles, obviously, as Mets fan, but I do believe I do believe Mets made playoffs 24.

Okay. Well, if all this comes true, it's going to be a great year. Okay, two more things about next year. I'm curious to hear your thoughts on. Does Elon Musk still own X at the end of 2024? He owns X, but he probably has others that have now get a bigger ownership stake, as he probably is going to have to sell pieces of it. that would be my, just give it, it's an upside down structure in terms of the loans that have

been taken out. It's probably worth less than $10 billion today. So there's definitely going to have to be probably, I think, some change ownership structure. He still will own it, but I think probably others will have to, you know, Canada. I would imagine, like the banks just get mad and demand the money. Well, also, it's upside down, right? Like, in terms of the need. It's like, meaning, I have a million-dollar mortgage on a two-inch-thousand-hour house. Oh, yeah, yeah. Exactly. That's not a good issue.

Yeah, no, the banks tend to say something about that. So we'll see what happens there. All right, I don't know if you're into crypto and anything like that, but I am a stunt that Bitcoin is above $40,000. Maybe I shouldn't be. Do you think that's sustainable? Where do you think it ends next year? I don't know about, like, price point, Bitcoin.

I do believe the use key, because I was, I'm a big fan of blockchain, like, in terms of, like, the, so I do believe the fact that after all the disasters we've been through with Bitcoin, you know, in terms of SBF and everything else and Bitcoin doing what it's doing, it's, it's noticeable. I'm not, I'm not a huge believer in terms of, like, maybe where the price could go from here, but I do think the use cases are expanding across from a blockchain perspective. okay well we'll see what happens uh it'll it is astonishing to see what's happened with that although i don't know it's had it's ups and downs so it's up again all right dan is thank you so much you there's so much growth to hang out with you always always great to see you so glad that you came through really appreciate your time thanks for being here oh great to see you and you do excellent work like great to be a part of it likewise thanks again oh where can people if

people want to follow you online where's the best way to um yeah so uh twitter diads tech LinkedIn haters, lovers I like engaging with everyone so just hit me whenever okay

sounds great all right thank you Dan thank you everybody for listening and we will see you next we'll see you on Friday for a show

breaking down the news and then stay tuned next Wednesday Intel CEO Pat Gelsinger will be here to talk a little bit about what's going on in that world

all right thanks again for listening we'll see you next time on Big Technology Podcast Good job.