00:00How much is tech going to still be leading the charge in next year?
00:03I think tech is going to be good again next year.
00:05I honestly think the setup for 2026 looks quite similar to this last year.
00:10We'll see another year of Fed rate cutting.
00:14Generally, economy looks pretty strong.
00:16Labor is a watch item for next year, but labor has been weakening for the most part of this year as well.
00:21And then we'll also see fiscal stimulus next year, and that'll come from existing stimulus continuing, such as the IRA, but also the tax bill.
00:28And then AI is going to be a tailwind next year.
00:30So I think it sets up well for tech and growth generally.
00:33What needs to be proven out in 2026?
00:35Because I feel like 2025, we've all needed to understand the infrastructure needs, and then we've questioned the ability to afford all of them.
00:41But 2026, we're starting to see real needs to show signs of productivity and actual growth here.
00:47Yeah, yeah.
00:47I think we're just starting to see the use cases build for AI, and we're starting to see it across the economy, right?
00:52Certainly tech is one of the early adopters for AI, but we're seeing it across the consumer space, across financials as well.
00:57And I think as that continues to build, that continues to increase the use cases and the proof that AI is going to be ubiquitous across the economy.
01:05But also, I think, similar to a bit of the concerns we had earlier this year, we need to see that companies still continue to invest in AI,
01:12and they still see the returns from that being beneficial to continue the spending.
01:16Have you done much analysis on what that actually means for the labor outlook?
01:19Because you've had Howard Marks saying this is sort of a disaster, basically, for the labor market, all of this AI focus.
01:25But we've had perhaps what people call AI washing, and people are liking to blame job cuts on AI, but we're trying to actually discern how much it really is happening.
01:32Yeah, I think it's hard to say right now how much of the job cuts so far have been related to AI.
01:36There's some surveys, certainly, that suggest that some of the AI, some of the job cuts have been specifically related to AI.
01:43I do think there will probably be a period of digestion in the workforce.
01:47It's hard to say over the near term what the displacement is going to be.
01:51Over the long term, I imagine, like many sorts of technology innovations we have over time, that this will probably be a net positive over a longer period of time for jobs.
01:58So you're looking at your portfolio, aligning it for 2026. Is it going to be the same winners?
02:04Is it going to be the infrastructure play, the NVIDIAs, the chip makers, or is there more of a shift for your mind's eye of getting into where the productivity actually happens, where the applications happen?
02:14Yeah, I think we're very positive on the infrastructure spending as well, more so on the hyperscalers and some of the electrical equipment names that are involved in sort of the physical infrastructure spending.
02:23And then also some of the companies that are involved in helping to make AI scalable.
02:28So thinking of technology companies that enable, you know, the usage, the deployment, the security around AI.
02:35So I think that's where we might see some leadership.
02:36Like Palo Alto Networks?
02:38Yes, like Palo Alto, a MongoDB, something like that.
02:42So the companies that allow AI to be scalable, that allow companies to, you know, clean up their data to get it ready for AI.
02:48So that's something that we've heard from a lot of companies is that the process of getting your data cleaned up and ready to be put into AI is very difficult and something that a lot of companies are working on.
02:57I don't know that the productivity benefits, I think that's something that's probably still a little farther out, but it will be very widespread when it happens.
03:04What about the end of year concerns around circular financing, about exposure to open AI and whether or not it can hit the revenue run rate that it's going to, and indeed our desire to be more discerning, really, about specific names?
03:19Yeah, I actually think that the, you know, the market being discerning about these names is a good indication that we're not sort of in a bubble territory right now, right?
03:28If we think about what happened back in the late 90s and 2000s, we were not concerned about whether or not companies were generating fee cash flow, what the returns were on their investments.
03:36The fact that we're concerned about these, I think, means that the market is pretty healthy in the way it's thinking about investing in AI.
03:42And also, I think over the next couple of years, if you look at sort of the hyperscaler group in general, the amount of capex that's expected to be spent on AI infrastructure and broadly on AI, their free cash flow dwarfs that by several times.
03:55So, I think that there's plenty of, you know, of return and cash flow available to keep the spending going.
04:01We've been talking a lot about the impact of the private markets.
04:04Are you expecting that they will become public next year?
04:07And how have your own clients been navigating exposure to big private companies?
04:11Yeah, it's possible that we will see a number of these companies come public next year.
04:14I think that's going to be very interesting, especially for large cap investors.
04:17Certainly, it's going to pack the indexes because these will most certainly be included in a number of the indexes, possibly in size,
04:24which will have implications for large cap investors who may need to hold some of these names.
04:30And, you know, we'll see where the funding comes from out of other parts of the economy.
04:33So, we've got less than 30 seconds left.
04:36Do you want more diversification globally or across different companies as well right now?
04:41I think we're still very comfortable.
04:42The U.S., you know, I think growth in the U.S. still looks much better than lots of other parts of the globe.
04:49Certainly, corporate earnings growth does as well as GDP growth.
04:51So, I think we're still very comfortable with the U.S.
04:53And then, again, you know, we still think the tech and other names related to AI infrastructure look very appealing for next year
04:59as well as consumer spending on the back of some of that stimulus we'll see early next year.
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