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

Episode Date: October 23, 2024

Dan Ives is the managing director, equity research at Wedbush Securities. Stephanie Link is the chief investment strategist and portfolio manager at Hightower Advisors. The two all-star stock watchers join Big Technology Podcast to discuss the fascinating state of big tech stocks, particularly Apple's surprising resilience. Tune in to hear why Apple's stock is up 42% since April despite mixed headlines about Vision Pro and AI, and whether its $3.5 trillion valuation is justified. We also cover Nvidia's dominance in AI chips, how a potential Trump presidency could impact tech stocks, and Amazon's cultural challenges. Hit play for an insightful discussion about where the biggest names in tech are headed and how to think about investing in them. --- 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]

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. Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. We are going to go deep into the state of big tech, especially Apple, but also Nvidia, Amazon, meta, and others. And we have such a great group here with us today because we're joined by Stephanie, Link, the chief investment strategist and portfolio manager at Hightower advisors. Stephanie, welcome.

Thanks for having me, Alex. 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. Great to be here. Awesome. And 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 over 250 advisor teams, and we're going to be doing lots of videos with both Dan and you, hopefully,

to talk to and show how smart you are to everyone in the technology world. Looking forward to it. And now I want to talk about Apple because Apple's a paradox to me. Apple is up 42% since April, 42%. And it's like a $3.5 trillion 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 advance in technology. The Vision Pro is nearing dud territory. I don't know. Maybe it has a 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 action in the stock so different? Dan, what do you think? I look out, me and you've talked about this one for years, right? And I know like we've differed in our views. I mean, my, look, my fundamental thesis, it's really threefold. 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, February, in the next, for this fiscal year, this will. And, let 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 just as Nvidia and Jensen Control Enterprise AI along with Microsoft, my view is from consumer AI perspective, the monetization here, we think it would be ultimately an incremental 10, 15 billion per year of services. And the third is, look, I think from, and Stefan Lutobai from evaluation, I just continue to view this as more and more. It's essentially a services company, a software services multiple. 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 billion per year. That's that at the core is our thesis. Okay, one quick follow up to them. We're going to go to Stephanie. But, you know, there have been all these people with old iPhones that are like poised to upgrade. And it seems like that pool has not upgraded as fast as everybody's expected. And that's why the services become so important. but didn't Apple have like five of six or four or five quarters of revenue deceleration?

And the company is just like, it is an iPhone company. It's reliant on the iPhone. People are hanging on to them longer, which is, okay, great. Companies making a good product will celebrate that. But the services revenue hasn't exactly made up for the fact that people are hanging onto these phones for so long. Yeah, it's a great point. What I'd say is that, first off, Dave, Dean, about $1,000.

300 bips in market share in China in the last two years. So despite all the sort of doomsday scenario, they've gained about 300 bips in market share from essentially 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 stock's not doing anything because institutional investors are reading through it and seeing ultimately numbers probably have to come up 10 15% for the year right are you calling me one of the bears doing the gymnastics or oh i don't think you're a bear 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 easier 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 China in a bit, but let's go to Stephanie. 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. 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 weighting, 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% weighting 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 spring. 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 were really nothing to be so excited about. It was a transition for Q, four quarters. So I added to it because it 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. 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, the sentiment 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 malaise over 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. And so I liked the setup. 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 has gone the other way of like iPhone 16 is going to be the revolutionary phone. I'm not quite sure. I think that maybe 17 and 18, I feel really good about those phones. I'm not so sure that 16 is going to be the blowaway, but the expectations are still kind of muted. But I'm going the other way, and I've been taking some profits in it, only because when I have Apple now trading a 35 times forward estimates with a 37% rally, I think that there are other names out there 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, long-term services, I do think is going to be a home run. I think AI is going to be an absolute home run for the app's business. So I think you just have to be patient. But 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 it's 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, in other words, like, a lot of people, you know, we hear so much negativity, like, oh, you're wrong. I'm like, look, this upgrade cycle in itself, without AI, the stock's going to work. The AI piece is ultimately the start of how most consumers in the world are going to eventually interact with AI. And I think, look, WWDC, me and you were there together right like stock's 190 investors like oh this is so disappointing thing 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 i 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 to 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 developers. And you have great, and you have great. Every time, like, we talk, you'll say things where I'm like, that's, you don't know, because that's, I think it's very important in name like this. You always want to like, you want to hear different points of views.

I think a lot of times that's sometimes big people big as downfall, right? You want to understand both sides of it. Right. I could be wrong. So let's see. But let's talk about, I'm just going to keep on this line of questioning 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 they looked quite good for the first. three weeks of the iPhone 16, the iPhone 16, according to Counterpoint Research, is selling 20% more than the last cycle of the last iPhone, iPhone, iPhone 15. And that's great. It 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, 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, it seems like people in China are going with the Huawei, which is hurting Apple's total sales. What do we think about that? Yeah, I mean, look, we've seen that share shift over the last year, but it goes back to the last few years,

they've gained 300 bips of market share. They can give back 100 bits. 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 Bidu and Apple strike a deal where Bidu becomes ultimately the AI

partner. If that, like if you said to me the biggest catalyst that could happen on the name, it's that. See, I actually think 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. 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 are 25 years old and younger. Who is your iPhone buyer? 25 years or younger, maybe. But the point of it is the consumer is going to double between now 2030. And, you know, we can talk about other things. I know we want to talk about technology in general. But I got to

say, like, Prime Minister Modi 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 onshoreing, 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 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 very closely what AI products roll out.

And maybe not. By the way, maybe it will never be available in Europe because of European regulation. I mean, the way Europe's going, I mean, you're going to have, every country in the world is going to be ahead of Europe when it comes to AI, 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 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 grow in. 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 cybersecurity. I mean, I think that those are your two themes. You talk to you guys talk to CTOs more than I do, but I talk to my own company's 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-digit growth in both AI and in cyber.

I hope somebody gets it right in cyber because so far you have way too many vendors and no one's talking to each other. And you've got cybersecurity companies getting cyber attacks and 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 cybersecurity is just as big and if not bigger because of AI. And so I think that's another area and another theme that should be owned within the next decade

or so. Yeah, now, just on that point, and I noticed having a huge fan of CrowdStrike, you know, and like we've thought I think like Pal Alto, Z scale, I think the other thing that's starting to happen, we've seen it happen over the last few months based in 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 to protect it. AI is going to be a direct beneficiary for cyber. Call it second, third derivative. That's just going to add CyberArk, Palo, Z-Scler, Crowdstrike, Act to others. Yeah, I will say that I'm working with a company right now 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 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 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 you know one of my relatives panicked on the side you know saying i'm the side of the road and i need you to sending me money right now. It could happen. So there's a negative. And that's why I think cybersecurity becomes important. But I really shouldn't give this idea. If all of a sudden I heard

your voice and it wasn't a 516 area could, I'd hang up. That's right. I know. They'd have to spoof Long Island. So thank you for sharing that. I know. I mean, it's about 516, right? So that's true. 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 find you and there'll be a price to pay. Last thing about Apple, because how could we have this conversation and not mention it? What happens to Apple? 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, and in spades, because they've all done so well over the last several years, 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 Trump is saying, and he's talking about doubling and tripling the tariffs over there. So 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. general, I don't know if you saw, but like consumer discretion got hit so hard today because of that. All of a sudden, 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 I say, you know, when everybody goes from one side of the boat to the other and the stock rallies, it's not bad. It takes them 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 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 that certainly was starting to creep into the marketplace because it will not be good news. Right. Dan, 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 months of uncertainty, that you finally have certainty, the market-like certainty, there's a new president, that's going to be the president, stocks go up.

I'm curious, like, again, like, 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 where no matter if it's Trump or if it's Kamala, 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. If it's Kamala, do they end up pulling out of the market? So could we end up seeing 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, I mean, that's always like a top two or three question. But we view it pretty simplistically where Trump gets. in. If he gets in, it is very negative for the AI trade initially. Semis, tariffs, retaliatory for Apple, Tesla. J.D. Vance 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 cons out, which would be bullish for attack from an FTC perspective. So no doubt, like, I don't, when you say the biggest risk to the market from attack trade, it's not like inflation, earnings, to me, it's really like

Trump gets in. Stephen talked about that jolt the trade because of the fear what's ahead. I would say this, so just be careful, and that's why you 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 red or a blue sweep, that's problematic for the overall market. It's just as 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 as, are we ever going to fix this

thing. I 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 later down the road because we kick 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 the long term. And despite nothing gets done in the belt way, which is bullish. That's right. 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 is that good for markets?

Because the market doesn't like surprise. The market doesn't like to go. We do climb a wall of 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 are 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 do need a process. to be put in place. He'll also be able to deal with immigration a little bit more and that sort of things. So those are 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 it is a sweep, then we have no idea what's going on. We have no idea what's going to get past. Yeah. 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 in the seas, especially around Taiwan. And there's, some fears, maybe, that there could be a blockade there.

I mean, obviously, that could be go even further to a takeover. But what do we think about that in terms of what would happen, actually, to the U.S. economy if that situation played out? I just, I mean, just being, I just come back from Taiwan in the area. 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, as Stephanie talks about a lot, like Black Swan, Tale event.

I just continue to view it as just a very low possibility. But 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 freezes. And consumers go into hiding because we just don't. no. If something were to happen, it depends on how severe it is. It depends on the circumstances, the situation, how long that it doesn't last, what does it lead to? So there's a lot of questions. But that's why businesses will all of a sudden say, uh-uh, going 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, I think, a short-term view, 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 from an investment point of view, I don't mean to be insensitive. 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?

You know, like, wow, I would love to get Apple back to 160. No, I wouldn't like it. 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, I will tell you, Alex, I'll tell you this story. I remember when meta, and then a lot of people like revisioners, like, oh, I like the stock down. You're like, what? You hate it to be. Stephanie, we're sitting there. And meta legitimately added to, whoa, the day, like, the day. the disaster, maybe the stock's 80 fat.

And I, I mean, we'll 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. Hard to do, but thank you. I wasn't my only buy, unfortunately. Of course. But that's how you do, but that's how you actually make money. It's like you try to dollar cost average.

You know, Kramer used to 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 Mena was really, I mean, just a, wow, talk about everybody got on the same boat. Wow. They got really negative on that. Right. Yeah. Well, I do hope that we come out of the cycle and we're in good shape. But I'm planning to visit Beijing for the first time in January. So fingers crossed, the flights are booked. 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 U.S. if Trump gets in tariffs, you got to wait until you feel. 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 invidia and some other companies on the other side of this break we'll be 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 two 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 Hustle 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 of equity research at Wedbush Securities, and Stephanie Link, the chief investment strategists and portfolio manager at Hightower Advisors.

Well, we have 20 minutes in so many companies to talk about. Why does it always happen like this? So let's just quickly go through invidia, Amazon, and Google, and see where we get after that. Invidia, big new chip, the Blackwell chip, 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, in Asia, we just, it was 15 to 1 demand to supply. Really? Four months ago, it was 12 to 1. So I just view it as like you're probably going to be looking at $6 or earnings for NVIDIA. And then like, 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. Wow. Which would put the valuation at.

I mean, I think you're looking at $4 trillion mark at. I get in the next three or six months. I mean, that's, I think them and Apple, they battle it out for that finish line to get the $4 trillion. Stephanie, are you concerned about all this with all this AI talk 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 know on NVIDIA, but I own Broadcom and I own Lam research. And I got plays, I got ways I'm playing it.

So it's fine. I think there's a lot of ways you can play it. But what I would say is because a lot of people compare this to the dot com bubble, and we didn't have earnings in the dot com bubble. We were valuing companies on eyeballs, which is absurd 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 overowned? Yes, they are. There is no question. I was buying Broadcommona train at 14 times forward estimates. It's now at 27 times, which makes me a little worried. Well, it's also changed. stripes a bit in terms of software and diversification and they have the AI and they're the number one, the number two player. 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 big hyperscalers that are actually going to invest $241 billion this year. That's up 41 percent. And next year, up 278 billion. That's up 17%. That's up 17%.

So 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 Invidia? 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 believe in AI, you need data centers. And that's fine. We all understand that.

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 la-la-la-la. 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 playing.

I think you just spread, this is pun intended, spread your chips around in various different stocks. 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's and the Microsofts that are selling this compute to companies.

The problem is that companies haven't quite figured. out what to do with it. And maybe that's controversial. But if you think about the way that Open AI, we just took a look at Open AI's financials on a recent episode. And they expect ChatCHIPT, not the API, to be the main driver of revenue for them in the future. So I mean, maybe this is provocative, but Dan, I like it. I like it. It's provocative. I love him. 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 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 Palantir. I mean, that is the perfect example in terms of use cases on enterprise that are exploding.

Look at what McDermott's doing at service now. I mean, so I think for the most part, I think it's still in front of us, but the use cases are happening. I mean, 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. I think it's going to take a long time for us to really get comfortable with the monetization of all of this. I don't think, though, 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 Vindia. 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 supreme results, I just, I think that's, I think are you going to miss some. I think you are. Because to some extent, like, you focus on trying to draft Brady six round out of Michigan 2000 draft, not 10 years late. Right? Like, in the words, if you shoot bulls and already the goat, that's the hard part, right? It's like it's making those bets. I mean, I got Aaron Rogers, you know? Like, what has that got me here? No, so sorry, but there's that. Yeah. Yeah. Okay, let's go to Amazon. So Amazon, uh, cultural issues there. Don't 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, which I think, is right. Stephanie, you just 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, so lowering of numbers. There's now cultural issues that came in a left field. that Jassy went from Hero to Dudd. He doesn't know what he's doing. He's overspending. Now, look, 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. 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 0.4% of OPEX. They are going to generate free cash. below 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 burner numbers. But I think it's because you have an uneven consumer. You have the haves and the have-nots. You have Walmart, Costco,

Target, Amazon, the haves. And you got dollar stores and you got department stores, the have-nots. You don'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 America margins can get to like upper single digits, which I think they can. That's okay. But I think the real story of Amazon is AWS growing 1920 percent with 33 percent margins. You have advertising growing up low double digits with 50 percent margins. And collectively those two businesses are right now. There are about 24 percent 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 Kager of about 20% for the next five years at this company versus meta at 13% versus Google at 12.8%. So I think the growth is there. The expectations are really low. This stock always goes from hated to loved to hated to loved.

And I know it's hated. 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 did 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.

and I think it is, 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 did.

But if you believe, like I believe, the U.S. 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, 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 advertising front into a strong economy. And I think maybe even if we do slow, maybe we get back to one and a half percent growth and GDP, maybe you'll see a slowdown. But I think some of these other businesses, they're getting so entrenched with people. And so that's why I think that business can grow.

I mean, margins are crazy town at 50%. Dan. Alex, I would just add this first of all, Jassy, in my opinion, it's a top three or four individual in the world that understands cloud. Okay. Yes. I would hope so. I mean, you ran AWS, built it from the ground up.

It built it from ground up. I mean, so the point is Jassy, please, Chesell those checkers, in terms of overall AWS and cloud. Two, to stemming advertising, streets give a new credit here. And I think incrementally, this is something that could actually, as a percent of rev, really start to increase the model. The AI story, given no credit. To me, risk reward here, risk award, I mean, I think there's a stock that could be up 25, 30 percent, maybe call it 5 percent type down. The risk award here is a table pounder, in our opinion.

And I think New York City cab drive is barish on Amazon relative to archcap tech. Well, it is training cheaper than Apple. It's a 32 times forward, and Apple's at 35 times. So that to me was crazy. And I don't really look at a crazy town. 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 EBITDA, it's traded about 14 times.

The average long term is almost 18 times. So, yeah, I mean, I think it's you can get your arms around it. I might be wrong. It might not be a great quarter, but I do think the next six months, 12 months are going to be good for them. And then on the ad side, Dan, just to you, how much does data, the fact that Amazon has this, like, unbelievable treasure trove 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 and incredible services. Look where we are now. Yeah. Amazon, it's going to be the same thing in my, in my view. Okay. All right.

A couple minutes left. Let's talk quickly about this antitrust thing, which we touched on briefly. 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 than it did previously. And, like, yes, the breakup might get the headlines. But this is going to meaningfully change the way companies like Google, for instance, which lost the case, do business. Don't you think, Dan? I mean, just as someone, or DOJ clearly, you know, a trophy case, they won in terms of that case, they got C-Legs. But, I mean, the precedent's there with Microsoft. I mean, in covering Microsoft back then, ultimately, they won that on appeal.

There's going to be business model tweaks, but my view is this is not going to dramatically change the business model of Google, because then eventually it's going to be Apple also and others coming down the pike. I'm just, this is going to be fought out in court for many years. And I think it will be settlements and business model tweaks, not massive changes. Dan, how long did Microsoft's, the big case that they had? 12 years. Yeah, right? I was going to say, I thought it was 12 years. I mean, this is going to take such a long time.

Who the heck even knows who's going to be at, you know, the DOJ and the EU? And you have no idea how it's all going to play out. There's no question, it's an overhang. But I feel like we said this on. Microsoft. And look what Microsoft has done over the years. Yeah, they figured it out. Yeah, they'll figure it out. But I do agree with the Alex. It is becoming, it's not just like, oh, EU cup of coffee. It is more with you because DOJ. Yeah. And like, all right, I'm just going to use one analogy. It's not the same thing or anywhere close. But when Elon signed the deal to

buy Twitter and the courts forced him to go ahead and make that purchase or they were going to and he just said, okay, I'm going to do it despite the lawsuit. It seemed at that up until that moment that tech, big tech, was 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 U.S. government is also winning cases against them. 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, actually the sum of the parts could be more that worth more. Yeah. Like, you know, by the way. Even if they spin out and the growth isn't the same, which I totally wouldn't buy, because I think spinouts work brilliantly, just ask General Electric. But if spin out, if they spin it out, and 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. 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. Thanks everybody for listening. We'll see you next time on Big Technology, podcast.