00:00Dan Ives of Wedbush writing, there is some added nervousness on the important memory chip trade.
00:04We continue to believe that in this market, we will continue to go through a number of gut check moments.
00:10Dan Ives of Wedbush joins us now for more. Dan, good morning.
00:12Great to be here.
00:13Is this one of those gut check moments?
00:14It is. Look, and I think you saw it with the Cosby down 10%.
00:17It looked like the golden child of this tech boom.
00:22A lot of it's in Korea in terms of memory chips.
00:24When you think about what's happened with SK and obviously Samsung and SK overtaking Samsung,
00:29Micron, such an important quarter relative to what we see in terms of demand, ripple,
00:35what does that mean for NVIDIA, hyperscalers.
00:37But I continue to look, our checks in Taiwan, in Korea, no cracks in the armor.
00:43And that's why I just continue to believe third inning, one out in terms of the AI game.
00:48Further downstream, though, you're starting to see some pushback to price increasingly.
00:54Does that upend some of the story?
00:55Look, I think on the edges that could, but look, right now, demand supply, call it 12,
01:0215 to 1 in terms of where we are relative to chips.
01:05So my view is like you still, even if you had some events to even take some demand off,
01:12you don't have an equilibrium probably for another year and a half, two years, which in
01:17my view just continues to believe.
01:19Like the chip trade is what you continue to own.
01:21And look, hyperscalers, obviously, right now, those were kind of in the penalty box to some
01:25extent, but you will see some push against price.
01:30But it's our view, like over time, price comes down.
01:33It's all part of what we're seeing with tokens.
01:35Profit margins, though, kind of a key point here, because profit margins have been just
01:38going to the moon.
01:39They've been incredibly, incredibly robust at some of these semiconductors, in part because
01:44they can charge whatever they want.
01:45And that's changing.
01:45You are seeing some competition with Google and with Amazon coming into the fore.
01:49At what point do you start to see those margins really compress?
01:53Look, I think right now, if there's a pressure point, you probably don't see that for another
01:57nine, 12 months.
01:59But just like you said, like competition's coming across the fore.
02:02It's an arms race, you know, really, when you think from what Meta's doing to Amazon to
02:06Microsoft.
02:07You have software companies, and now they'll start to produce chips.
02:11Look what's happening even on the Intel side with Apple.
02:13So that will definitely start to pressurize the situation.
02:18But in my view, it just continues to be like, we are still so early relative to the build-out.
02:24And that's also, you're going to have these gut check moments.
02:27You'll have these white knuckle periods.
02:29But we continue to view these as opportunities where you own the AI winners.
02:34Well, the AI winners, though, is the key point here.
02:36How do you know who they are when they're shifting around so quickly?
02:39And I say this, I thought one of the most interesting stories was when Microsoft came out and they
02:43said that they were going to be using DeepSeek to lower the cost of deploying some of their large language
02:49models.
02:49I mean, is this indicating that cost is now a much higher factor on the list for a lot of
02:55these big tech companies
02:56when it comes to who they're going to go with?
02:58Yeah, I think it's obviously technology, scale, but cost clearly plays in.
03:04There's also the models.
03:05Over time, the models are going to get cheaper and cheaper.
03:08I mean, the value, if you actually start to think about it, it's in the data.
03:12It's in the chips.
03:13Less about the models, which is why ultimately Anthropic, OpenAI, they're so focused on enterprise, compute.
03:20They're focused on all these partnerships.
03:22Because essentially what's happening is everyone's building out their own moat or their own fort.
03:26And that's why it's a game of musical chairs, because eventually someone's left without a chair.
03:32Now, who are those losers?
03:33Look, that's our job.
03:35That's other people's job in terms of trying to understand who the winners are.
03:38Because you are starting to see a separation in terms of you can't just own the space.
03:43You can't just own.
03:44It speaks to our view.
03:45You have to be selective relative to owning the winners and making sure that you're not sitting in a loser.
03:51When it comes to enterprise, though, isn't Anthropic way ahead of OpenAI?
03:55Look, I think Anthropic, clearly, from a model perspective, I mean, it's their world.
04:00Everyone's paying rent relative to what they've done.
04:03But that gap could be narrowed quickly.
04:06I mean, OpenAI is just not going to sit there on a treadmill.
04:09So OpenAI, they had their bullseye on their back.
04:12Anthropic, but you see what's happening with Anthropic in terms of going after talent from Google.
04:20It's this arm, because a lot of it is going to be, it's about the engineers.
04:23It's about compute power.
04:25And that's going to drive more and more debt raises, equity raises.
04:29And that will be also tests for the market in terms of how it handles it.
04:34I haven't seen you since the president briefed me and a few reporters looking into, you know, maybe doing something.
04:39Public-private partnerships in these companies.
04:40What do you make of that?
04:42Government taking a stake.
04:43Look, I think it's selectively, it's important if it's done the right way.
04:49Because you could argue, if you think Intel, Intel now, I mean, they're, you know, they're obviously in a glorious
04:55situation.
04:56Look where they were a year and a half ago.
04:58If government doesn't take a stake there, which ultimately led to NVIDIA and more.
05:03Now you look at LIP and Intel, they're core in terms of the trade.
05:07When it comes to quantum, I think that's really important in terms of some of the government initiatives.
05:11And I think IBM and Arvin have been kind of front and center there because what's happened in China because
05:17of this arms race.
05:18Can we finish on two losers, Meta and Microsoft?
05:20What do I do with those names now?
05:22They're in bear markets.
05:23Everyone's getting all bulled up on the tech story.
05:25Two of the biggest tech names on the planet are in a bear market.
05:28What do you do with those names now?
05:29I think you have to separate them out.
05:31Microsoft, I think, is the most oversold large-cap name.
05:34Just my view, have they made stumbles on Copile and some other areas yet?
05:38But in terms of enterprise, their backyard, Azure growth, compute, supply issues, I think that's ultimately a stock that, you
05:46know, $550 stock.
05:48So I actually think that continues.
05:49Just like a year ago, the narrative on Google was so negative.
05:52Look where we are now.
05:54From Meta, look, it's a prove me.
05:56Like, right now, like, they're going up Mount Everest without, you know, oxygen or whatever.
06:01What they're trying to do, that will be the prove-it moment for Zuck as he ultimately tries to go
06:07and change the model.
06:09I think they're going to be successful at doing it.
06:11But they have to—you can't just spend on CapEx and not show any results.
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