April 26, 2024 • 12 mins
Microsoft and Google parent Alphabet are both on the rise after delivering results that suggest their investments in artificial intelligence and cloud computing are starting to pay off. For more on the results Bloomberg's Nathan Hager caught up with Gene Munster, managing partner at Deepwater Asset Management and Dan Ives, Senior Equity Analyst at Wedbush Securities.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. You are listening to
Bloomberg day Break. We want to get right back to
the tech earning story. Microsoft and Google parent Alphabet are
both on the rise this morning, delivering results for both
companies that suggest investments in artificial intelligence and cloud computing
(00:23):
are paying off. Now for more on these results. Are
really pleased to be joined by Gene Munster, managing partner
at Deepwater Asset Management, and Dan Ives in our studio
this morning, the Interactive Broker Studio, senior equity research analyst
at Webbush Securities, for a roundtable discussion on these results.
It's great to have both of you back on with
(00:44):
us this morning. Gene, I'll start off with you. Is
the AI narrative back on track now?
Speaker 2 (00:52):
Absolutely?
Speaker 3 (00:53):
I think the only off track was what happened with
interest rates, and I think it kind of spooks some
tech investors. But this is a pretty unique dynamic We're
seen not only in terms of the demand side, whether
it's Nvidia or AMD, they're just breathtaking reacceleration, but also
on the demand side for the actual products, not just building,
(01:15):
but what we saw with Google Cloud and Azure growth
thirty one percent versus thirty percent in December twenty nine percent.
That is an acceleration by definition. The same thing is
going on with Google Cloud. We'll wait to see next
week from Amazon. But I think the big picture here
is the building blocks of AI are coming nicely into place.
(01:37):
We're still a year, two, three years out before the
applications really take off, but this is I think still
the first stage of a three to five year bowl
market that's going to ultimately end in a bubble. Dan.
Speaker 1 (01:48):
I think I saw you on Bloomberg Television earlier this week,
after we got the disappointing results from Meta platforms. You
were saying, the knives are out between the bulls and
the bears. Are we going to be on a continued
dispersion between where some companies go with tech, like Microsoft
and Alphabet, and where companies like Meta go with it.
Speaker 2 (02:10):
Yeah. Look, but when you look at Meta, they're spending
like nineteen eightys rock stars, but where they spending on AI?
And I think the AI revolution is here. I think
gene As always did a phenomenal job summarizing if you
look at these results last night, this was a drop
to mic movement for AI from Alphabet from Microsoft. This
(02:32):
nineteen ninety five moment is just starting, and that's why
I think the bears for tech continue to go in
their caves into hibernation mode.
Speaker 1 (02:42):
We are seeing from both these companies, though Gene, that
they are expecting that they're going to have to continue
ramping up spending on this technology. Could that potentially pose
a headwind if we continue to see a ramp up
in capex.
Speaker 3 (03:00):
Let's put the capex. The simple answer is investors need
to get their heads around what this is going to
cost for an investment phase and agree with Dan, this
is the right move to be making these investments. Just
to put some quick context on this, as Google's capec
screw ninety one percent the year over year in the
March quarter, the CAPEX number was twenty one percent higher
(03:23):
than analysts were looking for for March, and yet the
stock is up and the reason is last quarter they
said three times to expect a significant acceleration capex. So
they did a good job of explaining to investors and
I think this is the absolute right move for these companies.
A question I had for Dan is just ultimately, well,
(03:47):
might well will Apple as they start to talk about
their AI initiatives have some moment coming up, maybe on
May second, where they start to talk more about their
capex and how do you think are going to do that?
Speaker 2 (04:01):
I look, I think Gene summarises right now with Apple
because the AI story is going to becoming a Coupertino
and you know, g and I will both be you know,
focused on WWDC. This is just the next phase now
of Cooper Tina betting on AI, and that is going
to create a ripple effect where we believe this is
a trillion dollars of incremental spend over the next decade.
(04:24):
Betting against that, in my opinion, it's like betting against
the Knicks in his playoffs.
Speaker 1 (04:31):
Still the ways to go on both those counts though,
But looking ahead to the whatever announcement we get from
Apple next week, I mean, we saw the disappointment from
Meta platforms. They're focused as well on some of the hardware,
the Quest device and what that could mean in terms
of applying artificial intelligence into that. How high is the
(04:54):
bar for Apple to show that? You know, there's been
so much question about whether they're actually implementing AI quickly
enough to put it into their vision pro product.
Speaker 2 (05:04):
Dan look, and I think actually right now, expectations are
very very low and extremely negative. I think New York
City cab drivers, Parish and Apple. And that's why I
love to hear Gene's view. My view is in terms
of this renaissance of growth, it will be on the horizon.
(05:24):
They're navigating challenges. But as AI's coming to the services
as well as iPhone sixteen, that is not what I
view as sort of a small moment. I think this
could be a big moment. I like to get Gene's
thoughts there.
Speaker 3 (05:39):
Yeah, I'm on the same page. I think investors are
largely dismissive of what Apple's going to do in AI,
and they've got just a wonderful opportunity ahead of them.
Specifically related to this agent or personalized AI or Zuckerberg
referred to it on the call as agentic AI, but
because of Apple's forward view on privacy, I think that
(06:01):
gives them an opportunity to build this next generation of
AI agents that basically will get things done for you.
We're not going to see that in a WWDC. Agree
with Dan, that's going to be a big event for
AI and Apple, but that will probably be more related
to Syrians. Some improvements there. But I think this concept
(06:21):
of agentic AI and what it can mean for Apple's
business longer term is grossly underappreciated by investors.
Speaker 1 (06:29):
Speaking with Gene Munster, their deep water asset management managing partner,
along with Dan Ives of Webbush Securities, the senior equity
research analyst, in terms of what we saw guys from
Microsoft and Alphabet, I mean there's a lot of focus
as well on the enterprise customer. The application of this
technology in the cloud is that where the growth is
(06:51):
as opposed to some of these more consumer facing products
like what Meta is offering in the Metaverse, or perhaps
Vision Pro from Apple.
Speaker 2 (07:00):
I mean to me, it's all about the enterprise and
in the near term, this AI revolution is playing out in
front of our eyes, and now the second third fourth
derivatives across software arrest attack we're seeing play out. Of course,
it starts with the godfather of AI, Jensen Nvidia. But
when when Redman and the Della talks, everyone listens, and
that's why I think it was another drop to mic quarter,
(07:22):
not just for Microsoft, but of course Alphabet now getting
in on the AI party.
Speaker 1 (07:29):
So this sets us up as well for what we're
going to get from Amazon next week in terms of
their offerings in the cloud, Amazon Web Services, GENE. How
high is the bar now for Amazon to deliver the
kind of results that we did see from Microsoft and
Alphabet last night.
Speaker 3 (07:48):
It's pretty high. I mean it's last quarter. They grew
their AWS at thirteen percent. That compared to twelve percent
in September, so they saw a slight uptick. Again, we're
talking twenty nine thirty one one percent for average for
Azure in Google Cloud. So AWS, even though they have
leading market share, they've been losing share. They've got to
(08:08):
show an acceleration. The street estimates are for fifteen percent
growth in AWS, and I think they need to exceed
that to kind of comfort investors that AAWS has a
seat at the table. And the other piece to all
this is, of course Google has what they're doing Gemini
that helps feed GPC their cloud GCP, and separately, of
(08:30):
course what Opening Eye is doing with Azure. All that benefits.
But when it comes to AWS, they have a relationship
with Anthropic, but they still just don't have that punch
when it comes to really integrating AI. And so I
think that investors they always scrutinize the AWS number. It's
going to be hyper scrutinized next week.
Speaker 1 (08:51):
Gene. I'm glad you mentioned Gemini product because there was
that stumble over how it depicts race of some people.
They had to pull back on that, Dan. Did Microsoft
get past that in terms? I'm sorry, did Google get
past that in terms of what they're offering on Gemini.
Speaker 2 (09:09):
Look black eyed moments that they saw. They're past it,
and I think this is the mood jo now returning
to Google. I think you're really starting to see a
new phase in terms of AI. But it comes down
to in this AI party, they're no longer outside in
the cold waiting online to get in. They're now in
the party with nadellagens and a video.
Speaker 1 (09:31):
And speaking of Nadella and Microsoft, you recently, Dan raised
your price target on Microsoft to five hundred. Are you
thinking things might need to go up even further after
these results?
Speaker 2 (09:44):
I think it's get out the popcorn movement. This is
just getting started. I think a year from now to
four trillion dollar markp.
Speaker 1 (09:51):
Where are you on that? Gene? I mean, the growth
of these companies has been so staggering. I mean, just
in this quarter they deliver for investors what's the runway
for big tech over the next several years.
Speaker 3 (10:04):
I think you have to ask yourself the question, do
you believe that AI can be transformative? And to what
level you believe that? And you listen to Dan and
I you can sense the optimism we have around this.
If you have that level of optimism, these companies are
going to continue to go higher because they have data,
because they have infrastructure. The small companies aren't going to
(10:25):
come out of nowhere. We do private investing, and it
is really hard to compete with the big dogs. And
so I think despite all the value the creation over
last decade from some of these big companies, we're going
to see a next wave because what's happening in AI
puts what happened on mobile internet and PC. Those are
small paradigm shifts relative to what's going on, and these
(10:48):
companies got the pole position.
Speaker 1 (10:50):
I'm going to close this out with you.
Speaker 2 (10:51):
Dan.
Speaker 1 (10:52):
Of course, with this kind of growth, it raises the
questions for a lot of critics about whether this technology
is growing too fast, whether it could be dangerous. Your
thoughts on.
Speaker 2 (11:01):
That look, I mean, I think even to really show
how strong this technology is, you see it last night
the technology is going ninety five miles an hour left
lane or ferrari. The regulatory is in a beat up
minivan going forty five miles an hour in a right
land with no radio. The point is that it's going
(11:22):
to be an issue, but it is not stop in
this free train, and that's something that's going to be
more self regulation. But to me, it's all about the growth.
And I think when you look at last night, it
was a droping mic moment for tech.
Speaker 1 (11:35):
And we are seeing that certainly reflected in the price
action this morning. Both companies leading tech shares as a
whole hire, with Microsoft leading the I'm sorry with Google
parent Alphabet leading the way again of more than eleven
and a half percent following results for the Google parent,
and Microsoft is higher by nearly four percent as well
(11:57):
this morning. Guys, both of you, thank you so much
for giving us some insights on these earnings. Dan Ives
senior equity research analyst at Webush Securities, along with Gene Munster,
managing partner at Deepwater Asset Management
Bloomberg Audio Studios, Podcasts, radio news. You are listening to
Bloomberg day Break. We want to get right back to
the tech earning story. Microsoft and Google parent Alphabet are
both on the rise this morning, delivering results for both
companies that suggest investments in artificial intelligence and cloud computing
(00:23):
are paying off. Now for more on these results. Are
really pleased to be joined by Gene Munster, managing partner
at Deepwater Asset Management, and Dan Ives in our studio
this morning, the Interactive Broker Studio, senior equity research analyst
at Webbush Securities, for a roundtable discussion on these results.
It's great to have both of you back on with
(00:44):
us this morning. Gene, I'll start off with you. Is
the AI narrative back on track now?
Speaker 2 (00:52):
Absolutely?
Speaker 3 (00:53):
I think the only off track was what happened with
interest rates, and I think it kind of spooks some
tech investors. But this is a pretty unique dynamic We're
seen not only in terms of the demand side, whether
it's Nvidia or AMD, they're just breathtaking reacceleration, but also
on the demand side for the actual products, not just building,
(01:15):
but what we saw with Google Cloud and Azure growth
thirty one percent versus thirty percent in December twenty nine percent.
That is an acceleration by definition. The same thing is
going on with Google Cloud. We'll wait to see next
week from Amazon. But I think the big picture here
is the building blocks of AI are coming nicely into place.
(01:37):
We're still a year, two, three years out before the
applications really take off, but this is I think still
the first stage of a three to five year bowl
market that's going to ultimately end in a bubble. Dan.
Speaker 1 (01:48):
I think I saw you on Bloomberg Television earlier this week,
after we got the disappointing results from Meta platforms. You
were saying, the knives are out between the bulls and
the bears. Are we going to be on a continued
dispersion between where some companies go with tech, like Microsoft
and Alphabet, and where companies like Meta go with it.
Speaker 2 (02:10):
Yeah. Look, but when you look at Meta, they're spending
like nineteen eightys rock stars, but where they spending on AI?
And I think the AI revolution is here. I think
gene As always did a phenomenal job summarizing if you
look at these results last night, this was a drop
to mic movement for AI from Alphabet from Microsoft. This
(02:32):
nineteen ninety five moment is just starting, and that's why
I think the bears for tech continue to go in
their caves into hibernation mode.
Speaker 1 (02:42):
We are seeing from both these companies, though Gene, that
they are expecting that they're going to have to continue
ramping up spending on this technology. Could that potentially pose
a headwind if we continue to see a ramp up
in capex.
Speaker 3 (03:00):
Let's put the capex. The simple answer is investors need
to get their heads around what this is going to
cost for an investment phase and agree with Dan, this
is the right move to be making these investments. Just
to put some quick context on this, as Google's capec
screw ninety one percent the year over year in the
March quarter, the CAPEX number was twenty one percent higher
(03:23):
than analysts were looking for for March, and yet the
stock is up and the reason is last quarter they
said three times to expect a significant acceleration capex. So
they did a good job of explaining to investors and
I think this is the absolute right move for these companies.
A question I had for Dan is just ultimately, well,
(03:47):
might well will Apple as they start to talk about
their AI initiatives have some moment coming up, maybe on
May second, where they start to talk more about their
capex and how do you think are going to do that?
Speaker 2 (04:01):
I look, I think Gene summarises right now with Apple
because the AI story is going to becoming a Coupertino
and you know, g and I will both be you know,
focused on WWDC. This is just the next phase now
of Cooper Tina betting on AI, and that is going
to create a ripple effect where we believe this is
a trillion dollars of incremental spend over the next decade.
(04:24):
Betting against that, in my opinion, it's like betting against
the Knicks in his playoffs.
Speaker 1 (04:31):
Still the ways to go on both those counts though,
But looking ahead to the whatever announcement we get from
Apple next week, I mean, we saw the disappointment from
Meta platforms. They're focused as well on some of the hardware,
the Quest device and what that could mean in terms
of applying artificial intelligence into that. How high is the
(04:54):
bar for Apple to show that? You know, there's been
so much question about whether they're actually implementing AI quickly
enough to put it into their vision pro product.
Speaker 2 (05:04):
Dan look, and I think actually right now, expectations are
very very low and extremely negative. I think New York
City cab drivers, Parish and Apple. And that's why I
love to hear Gene's view. My view is in terms
of this renaissance of growth, it will be on the horizon.
(05:24):
They're navigating challenges. But as AI's coming to the services
as well as iPhone sixteen, that is not what I
view as sort of a small moment. I think this
could be a big moment. I like to get Gene's
thoughts there.
Speaker 3 (05:39):
Yeah, I'm on the same page. I think investors are
largely dismissive of what Apple's going to do in AI,
and they've got just a wonderful opportunity ahead of them.
Specifically related to this agent or personalized AI or Zuckerberg
referred to it on the call as agentic AI, but
because of Apple's forward view on privacy, I think that
(06:01):
gives them an opportunity to build this next generation of
AI agents that basically will get things done for you.
We're not going to see that in a WWDC. Agree
with Dan, that's going to be a big event for
AI and Apple, but that will probably be more related
to Syrians. Some improvements there. But I think this concept
(06:21):
of agentic AI and what it can mean for Apple's
business longer term is grossly underappreciated by investors.
Speaker 1 (06:29):
Speaking with Gene Munster, their deep water asset management managing partner,
along with Dan Ives of Webbush Securities, the senior equity
research analyst, in terms of what we saw guys from
Microsoft and Alphabet, I mean there's a lot of focus
as well on the enterprise customer. The application of this
technology in the cloud is that where the growth is
(06:51):
as opposed to some of these more consumer facing products
like what Meta is offering in the Metaverse, or perhaps
Vision Pro from Apple.
Speaker 2 (07:00):
I mean to me, it's all about the enterprise and
in the near term, this AI revolution is playing out in
front of our eyes, and now the second third fourth
derivatives across software arrest attack we're seeing play out. Of course,
it starts with the godfather of AI, Jensen Nvidia. But
when when Redman and the Della talks, everyone listens, and
that's why I think it was another drop to mic quarter,
(07:22):
not just for Microsoft, but of course Alphabet now getting
in on the AI party.
Speaker 1 (07:29):
So this sets us up as well for what we're
going to get from Amazon next week in terms of
their offerings in the cloud, Amazon Web Services, GENE. How
high is the bar now for Amazon to deliver the
kind of results that we did see from Microsoft and
Alphabet last night.
Speaker 3 (07:48):
It's pretty high. I mean it's last quarter. They grew
their AWS at thirteen percent. That compared to twelve percent
in September, so they saw a slight uptick. Again, we're
talking twenty nine thirty one one percent for average for
Azure in Google Cloud. So AWS, even though they have
leading market share, they've been losing share. They've got to
(08:08):
show an acceleration. The street estimates are for fifteen percent
growth in AWS, and I think they need to exceed
that to kind of comfort investors that AAWS has a
seat at the table. And the other piece to all
this is, of course Google has what they're doing Gemini
that helps feed GPC their cloud GCP, and separately, of
(08:30):
course what Opening Eye is doing with Azure. All that benefits.
But when it comes to AWS, they have a relationship
with Anthropic, but they still just don't have that punch
when it comes to really integrating AI. And so I
think that investors they always scrutinize the AWS number. It's
going to be hyper scrutinized next week.
Speaker 1 (08:51):
Gene. I'm glad you mentioned Gemini product because there was
that stumble over how it depicts race of some people.
They had to pull back on that, Dan. Did Microsoft
get past that in terms? I'm sorry, did Google get
past that in terms of what they're offering on Gemini.
Speaker 2 (09:09):
Look black eyed moments that they saw. They're past it,
and I think this is the mood jo now returning
to Google. I think you're really starting to see a
new phase in terms of AI. But it comes down
to in this AI party, they're no longer outside in
the cold waiting online to get in. They're now in
the party with nadellagens and a video.
Speaker 1 (09:31):
And speaking of Nadella and Microsoft, you recently, Dan raised
your price target on Microsoft to five hundred. Are you
thinking things might need to go up even further after
these results?
Speaker 2 (09:44):
I think it's get out the popcorn movement. This is
just getting started. I think a year from now to
four trillion dollar markp.
Speaker 1 (09:51):
Where are you on that? Gene? I mean, the growth
of these companies has been so staggering. I mean, just
in this quarter they deliver for investors what's the runway
for big tech over the next several years.
Speaker 3 (10:04):
I think you have to ask yourself the question, do
you believe that AI can be transformative? And to what
level you believe that? And you listen to Dan and
I you can sense the optimism we have around this.
If you have that level of optimism, these companies are
going to continue to go higher because they have data,
because they have infrastructure. The small companies aren't going to
(10:25):
come out of nowhere. We do private investing, and it
is really hard to compete with the big dogs. And
so I think despite all the value the creation over
last decade from some of these big companies, we're going
to see a next wave because what's happening in AI
puts what happened on mobile internet and PC. Those are
small paradigm shifts relative to what's going on, and these
(10:48):
companies got the pole position.
Speaker 1 (10:50):
I'm going to close this out with you.
Speaker 2 (10:51):
Dan.
Speaker 1 (10:52):
Of course, with this kind of growth, it raises the
questions for a lot of critics about whether this technology
is growing too fast, whether it could be dangerous. Your
thoughts on.
Speaker 2 (11:01):
That look, I mean, I think even to really show
how strong this technology is, you see it last night
the technology is going ninety five miles an hour left
lane or ferrari. The regulatory is in a beat up
minivan going forty five miles an hour in a right
land with no radio. The point is that it's going
(11:22):
to be an issue, but it is not stop in
this free train, and that's something that's going to be
more self regulation. But to me, it's all about the growth.
And I think when you look at last night, it
was a droping mic moment for tech.
Speaker 1 (11:35):
And we are seeing that certainly reflected in the price
action this morning. Both companies leading tech shares as a
whole hire, with Microsoft leading the I'm sorry with Google
parent Alphabet leading the way again of more than eleven
and a half percent following results for the Google parent,
and Microsoft is higher by nearly four percent as well
(11:57):
this morning. Guys, both of you, thank you so much
for giving us some insights on these earnings. Dan Ives
senior equity research analyst at Webush Securities, along with Gene Munster,
managing partner at Deepwater Asset Management
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations.
The Nikki Glaser Podcast
Every week comedian and infamous roaster Nikki Glaser provides a fun, fast-paced, and brutally honest look into current pop-culture and her own personal life.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.