Apple Will Do Deal With Google's Gemini, Ives Says

Bloomberg

Watch Apple Will Do Deal With Google's Gemini, Ives Says - Bloomberg on Dailymotion

Transcript

00:00What is it that was so good, given the fact that this really is a hardware story,

00:04not necessarily a technology story, which is what's going on with the rest of the tech world?

00:08Sure. I mean, look, if you look services, that continues to be rocket Gibraltar for them. And

00:13that mid-teen growth, I think that's something from a multiple perspective that investors are

00:17really focused on. But look, the reality is we've talked about it so many times in the show over

00:21the years, like other cycles have been disappointing from iPhone. If you look 15,

00:2516, iPhone 17, it almost looks like a surprise upgrade cycle, especially in China. China was

00:33the headwind, now looking like a tailwind. And then also it comes back to Cook. I mean,

00:3710% politician, 90% CEO, playing nice in the sandbox in DC. That's going to have an impact as well.

00:45And this is all the drum roll to AI. I mean, that is what you're playing for here when it comes to

00:50Apple over the next year. Is it? I mean, I guess that that's really the key question. Is this still

00:54the promise of AI? Or is this really a question of, we all have phones that are broken and cracked,

00:58and we've been waiting for a long time, and we're going to now upgrade to the i17. They're

01:02capacity constrained at this point, which was the biggest hamper for them. And it's a completely

01:06different story than the AI spend that we're seeing in the other companies, and a very different kind

01:11of trajectory than maybe what we're seeing in the other space.

01:13And that's been the frustration, right? Because I mean, if you look at Apple, this AI party where

01:18it was 9 p.m., it's now 10.30 p.m., that party goes to 4 a.m. Apple, they've been out on the

01:23outside looking through the windows, right? So now the focus is consumer AI revolution. It's going to

01:31go through Cupertino. Now, how does that happen? It comes down to that Google DOJ win. That's huge.

01:37And now, Candlelight Dinner, Sundar, Cook, I believe it's a matter of time, they're going to

01:43announce a massive AI partnership on Gemini. That's what you're playing for, because 25% of what

01:50you're playing for is the stock's cheap relative to what I think could happen on an iPhone 17

01:55services. But what you're really playing for here is they get to the AI party. They announce that deal

02:01over the next year. This is a $350, $400 stock as AI finally comes to Cupertino.

02:07Doesn't that, though, completely, not illegitimize, but basically challenge this idea that you have

02:14to spend in the AI race to keep ahead? If you have a company like Apple that basically figures we can

02:19partner with people, we don't need to spend, and we can still benefit, does that just show you you

02:23don't need to participate in the arms race for every other company that is?

02:27Yeah. Look, I think for them, it's unique, because there's 2.4 billion iOS devices, 1.5 billion iPhones.

02:33So they've built the mountain, right? The field of dreams. I mean, they've built it. They will come.

02:38So now it comes down to, like, from a consumer perspective, you have to monetize that on the

02:44consumer perspective. I think AI revolution comes through Apple on the consumer side. When you look

02:49what's happening on the enterprise, look, it's a fourth industrial revolution. The reality is that

02:54from this tech earnings, going into eating chocolate tonight and Sour Patch Kids and

02:59whatever else on Halloween, you go in as a bull more bullish relative to everything we've seen

03:05from Hyperscala, Amazon, Microsoft, even Meta stock down. But why is it down? They're spending

03:11more and more. And it speaks to our view this is only second inning of the nine-inning game.

03:16It really changes, though, how you analyze these tech companies. If they are taking on

03:21AI servers and other relatively short-lived assets, it means that depreciation charges

03:26start racking up. How does that change how you think about these companies and the otherwise

03:32cost discipline that they need to exercise?

03:34Yeah. And look, I think that's the debate, right? Because if you look at these companies

03:37over a year, then you've never, you wouldn't have bought even the last few years. But the reality

03:42is it's an AI arms race. You're essentially building out the new economy on the consumer,

03:48on the enterprise front. And that's why you have to be able to look out two, three years

03:53to what this is going to look at. Microsoft, a good example. I mean, you have essentially

03:57have almost built a Microsoft within a Microsoft. You look at what's happened at Google, right?

04:03In New York City, cab drivers bearish on Google. And now if you look back over the last six

04:06months, now when DOJ search, death greatly exaggerated, that's actually a positive

04:12relative to AI. You look at Amazon, finally, Jassy's saying like, hey, don't forget about

04:18us. And that's what, that was a huge pop to champagne moment for them last night.

04:22We saw a huge bulk of the Magnificent Seven report earnings this week. And I want to just

04:26take a look and take stock of what we've learned. And our team put together a fantastic series

04:30of charts, really looking at the CapEx expense and just what this is compared to revenue.

04:35What you can see is that revenues are expected to increase the likes of 5% in Amazon, expected

04:39CapEx rise, 51%. Google, expected revenue rise, 6%. CapEx rise, 43%. A similar story

04:46for Microsoft. At what point does that become a concern, that they have to fund an increasing

04:50amount of this with debt, that it's increasingly going to depend on leverage and the benevolence

04:56of private creditors and all sorts of other investors who are going to finance this?

04:59Yeah. And to that point, that's, I think, also outside Mag7 in terms of companies, everybody's

05:04going to have to raise debt. They're going to compete from a CapEx perspective. When it comes

05:08to big tech, I mean, a trillion dollars in the balance sheet, generate $300 billion to

05:11$400 billion a year. So that's why the reality is they are fueling this AI revolution. But

05:16if you look at CapEx, look, a year ago, CapEx going to this year is $220 billion, $230 billion.

05:22That was the thought. It's actually going to be $380 billion. So I think investors continue

05:26to underestimate the scale and scope. And that's the fuel in the engine. That's what's fueling

05:31all of this in terms of the CapEx cycle. And that's why in his leather jacket, the godfather

05:36of AI, Jensen, continues to be the chip that really fueling the AI revolution. But AMD,

05:42TSMC, Broadcom, it speaks to our view. I mean, I've seen it even like authentication with what

05:48we're doing on Orb side, where you're seeing like authentication, cybersecurity, CrowdStrike,

05:53Powell out. This is where it's all going. Second, third, fourth derivatives.

05:57Yeah, we get Palantir on Monday, and then we get the rest so we can see exactly how that's

06:02playing out. Just taking stock, though, of what we've heard. And people think of Dan Ives,

06:06they think of tech bull. And you've been right. You've been 100% right with a lot of this.

06:10I'm just wondering, what are you seeing that does seem excessive, that does make you think,

06:15hold on a second, there is something here that makes me just a little bit nervous that there's

06:19some good money going after bad in small pockets that are getting a little bit bigger?

06:22Well, to that point, like, I just got back from, you know, basically being gone a month

06:26around the world, trying to understand, like, especially in Asia, what demand the supply looks

06:30like. So for the real ones, demand the supply is 10 to 1, okay? But there, just could you say

06:35AI 30 times in a conference call doesn't make you an AI play. So when you say, what worries me,

06:40that's what, but Lisa, that's like, I focus on, like, we have our, you know, ETF, like, who

06:45are the winners? Who are the fakes? So it just speaks to my view, like that, when you say,

06:50it's like, what worries me, it's just separating out. You need to own the winners. You can't just

06:56own an AI play because they have great power points.

06:59Is Caterpillar an AI play?

07:01There's a, to, there's a better chance of me playing in tonight's, like, Blue Jays, like,

07:07Dodgers game than Caterpillar be an AI play. That's my opinion, but it speaks to the view,

07:13like, you have to be careful about who's AI, who's real, what are the derivatives. And I think as an

07:19investor, that's how you separate, like, look at the spending, who the winners are, second, third,

07:24fourth derivatives, obviously, Messi of AI, Palantir being one of them.

Category

Transcript

Be the first to comment

Recommended