00:00Dan Ives of Wedbush maintaining his $3.25 price target on Salesforce and raising his year-end forecast for Snowflake
00:06to $2.80,
00:07writing, there is growing speculation that enterprise software budgets have started to shift towards AI initiatives,
00:13cannibalizing software spend, but these results represent an important gut punch to the AI ghost trade.
00:18Dan joins us now for more. Dan, good morning, good to see you.
00:20Great to be here.
00:21What is separating the winners and the losers right now in this space?
00:24Look, I think, I mean, at least they did a great job of talking about it comes down to monetization
00:29of AI.
00:30Now, look, it started off Palantir, then you saw Datadog.
00:35Snowflake, I view, is really a seminal quarter for the software.
00:38Just describe what they do and why they're in the sweet spot right now.
00:40So if you think about the data layer, what this is really showing is LLMs, the models are ultimately getting
00:45deployed,
00:46you know, the data warehousing, the middle layer.
00:49As companies go down the use case path, you need a Snowflake.
00:55So the point is, is that you're trying now to find companies in the second, third, fourth derivative who are
01:01actually going to benefit.
01:02You have chip players over here.
01:04You have the hyperscalers over here.
01:06In the middle is a Palantir, is a Snowflake, is a MongoDB.
01:10And I think what this shows, I call it the AI ghost trade, you can't just paint every company with
01:16the same brush saying that Anthropoc is going to destruct software.
01:19Snowflake's basically saying, you know, this is a Jalen Brunson-like quarter.
01:23Just to sort of frame this in a more comprehensive way, when you take a look at Salesforce versus Snowflake,
01:29how do you identify a moat that is enough for a software company to be sustainable in an AI era?
01:34Yeah, and bending off of back against the wall, right?
01:37And you're talking about 150,000 customers.
01:39Now you have to show, Asian forest crew is what I view as a pretty big step in the right
01:44direction.
01:45But we're still talking 3%, 4% of revenue.
01:47It's not significantly moving the needle.
01:49Now you guys show over the next 2, 3, 4 quarters that they're able to monetize 15%, 20% of
01:57the customer base.
01:58And that is right now, I wouldn't call it a race against time,
02:01but that's why there's so much pressure on Salesforce, pressure on Oracle, pressure on Adobe.
02:07Look what happened to Intuit.
02:08And I think that's why it's investors, winner's bracket, loser's bracket.
02:13CrowdStrike, Powell Alto, winner's bracket on CyberScare.
02:16Zscaler, obviously got put in the loser's bracket.
02:18I'm just trying to figure out if there's some sort of generalities we can mean that we could make
02:22about what these brackets of the winners look like and what these brackets of the losers.
02:26I mean, I can have the LisaBot do my taxes, which is why Intuit is struggling.
02:29You can potentially have different kinds of homegrown bots do a lot of the different functionality.
02:35You can't have somebody manage your cloud data in a comprehensive way,
02:38the way that Snowflake is going to do in tandem with Amazon Web Services.
02:41So is there some kind of characteristic of what the winning feature really is for software today?
02:47It's one word.
02:48It's data.
02:49I mean, data is the new oil, the new gold.
02:53And who has control over that data?
02:55That's what's going to separate winners from the losers.
02:58Snowflake, front and center on data.
03:01Palantir, front and center on data.
03:03LLMs, the models, they're not going to commoditize data.
03:06They can commoditize pieces of software.
03:08We see a UiPath and some others.
03:10You see it on Intuit.
03:11So that's why investors are trying to figure out which bracket.
03:15If you're in this bracket, stock's up 30%, 35%, and I think going higher.
03:19On the other side, like a Salesforce, they need now to prove it over the next six, nine months.
03:25And Benioff, who used to be in Mount Rushmore, obviously at the top of the mountain,
03:29this is, I think, for the first time a true test.
03:33I think they'll ultimately succeed.
03:34But this is definitely a pressure environment.
03:37So for Snowflake, if it was a Jalen Brunson quarter, was for Salesforce this like a James Harden quarter?
03:43Oof.
03:45Maybe that would be a little too harsh.
03:48You just said he has six months to prove himself.
03:51Yeah, look, I'd say it's one where if you look at Salesforce right now, they're in a situation where, let's
03:59go,
04:00it's a Cleveland Cavaliers situation where, you know, you had definitely green shoots, but now you've got to prove yourself
04:07out.
04:08And I think Benioff understands the challenge there, what they need to do.
04:12But it comes down to investors need to see execution, monetization.
04:17That's going to be front and center.
04:18What wouldn't you touch in tech right now?
04:20Well, look, to me, I think you want to...
04:23What's to sell?
04:23What would you avoid?
04:24You want to continue to own chips.
04:26You want to continue to own software.
04:27I think the areas, like if I look at, like, where Adobe plays into it, I think IT services is
04:33the areas you want to, you know,
04:35right now I think avoid in terms of, you know, some of those components.
04:38And I think it's really, it's the legacy names, specifically in software and infrastructure,
04:44that you don't think that they're going to be able to turn around.
04:47And I think it is, it's truly a stock picker's market in terms of what we're seeing here play out.
04:52Can we finish on Tesla?
04:54SpaceX IPO later this year.
04:56It's going to be a blockbuster, massive numbers we're talking about here.
04:58And then an additional sideline conversation, whether Tesla becomes one with SpaceX.
05:04What do you think about that as an analyst?
05:07I think that is, we've talked about it, it's the no-brainer move.
05:10We think 80 to 85% chance that we're sitting here a year from now, SpaceX and Tesla have gone
05:17down the aisle in terms of matter.
05:19Because to me, that is one, in SpaceX clearly being from an IPO perspective, you had the XAI, you know,
05:27integrated there.
05:28But when it comes to Tesla, from a data perspective, from AI, from an engineering cross-pollination, I think that's
05:35the grand vision for Musk.
05:38And I just continue to view, this is a step process.
05:41But I think that there's extremely high chance that that's emerging.
05:46What does SpaceX get out of it?
05:47Well, for them, you get the data, you get the engineering, you get ultimately what I view as autonomous physical
05:54AI, combined with what SpaceX bring obviously on the space and when it comes to Starlink and the foundation.
06:00And look, there already is cross-pollination between Tesla and SpaceX.
06:05But I think this would really be more of an official sort of combination.
06:09I think it's all part of the grand vision of Musk in terms of he's almost building out his own,
06:16just like NVIDIA and the Godfather, they're making stakes in companies.
06:20Musk has almost done it, you're really step by step here.
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