We couldn't let the biggest week for tech earnings pass without checking in with one of the biggest bulls on Wall Street. Dan Ives joins us now. He's managing director and senior equity research analyst at Wedbush Securities. Dan, always great to have you on.
So Dan, you said this quarter was a prove it moment for AI. What specifically did it prove to you?
It proved that monetization is just starting in terms of the AI revolution. If you look at the cloud growth numbers, Amazon, Google, Microsoft, I think that was as robust as we've ever seen relative to expectations. And I think when you look especially at Microsoft, that shows from the enterprise in terms of what adoption looks like. And then cherry on top of the Sunday is Apple, where you know, New York City cab driver was bearish on Apple and now look at that quarter, look at the growth next quarter. So, I think when you put it all together, bulls go into the weekend very happy. The bears, they'll be in hibernation mode in their caves looking for some bad news over the weekend.
If it's early innings for the AI trade, what is it for the stocks though? Because obviously stocks are forward looking. Are we earlier or are we later than that?
I look, I mean it's year three of an 8 to 10 year buildout in terms of AI revolution. So I get that we're going through some bifurcation in terms of some of the stocks, but the reality is that we believe tech stocks are up another 12 to 15% rest of the year. And I think you have a lot of money coming off the sidelines that's going to start to go to derivatives, second, third, fourth derivative. That's why you see names like Intel doing what it's doing or Cisco doing what it's doing. I think you're going to continue to see this play out over the coming months.
But to your point, there has been this bifurcation with even within the Mag 7, we have Tesla, Microsoft, Meta actually all lower year to date. So if the AI trade just got reconfirmed, where does new money go today?
Yeah. But to that point, you also need to see monetization. And like if you look at Tesla, they're just building out their physical AI strategy when it comes to autonomous robotics and obviously Cybercab. You look at Apple just starting the AI strategy in terms of, you know, go at WWDC and obviously I think that's going to be a golden era for them. But you want to put money in Google, in Microsoft. I believe Meta is way oversold here. And of course, Nvidia, this is all just leading up to what's going to be just a robust quarter for Nvidia. And I continue to think that's a $6 trillion market cap 2027.
Outside of the MAG 7, what stocks should definitely be in an everyday investor's portfolio at this point?
I think it's, look, it's derivatives of chips, right? We talk about from AMD to Micron. From a software perspective, you talk about Palantir, Snowflake, Salesforce. I think ServiceNow way oversold in terms of what we saw last week. But Dan, it's about the derivatives, right? In terms of energy, the Generative AI, the irons. I think you're just starting to see what to me are going to be the sort of second, third, fourth derivatives of the AI revolution playing out.
Where could investors get hurt chasing this though?
I think investors could get hurt trying to understand where there's fraud. Just because a company says that they're doing AI doesn't mean that they're an AI company, right? So, I think it's separating out what the demand, what the modernization looks like, and who are going to be the winners, especially when it comes to infrastructure, software. Look, and I think, and we have our, our AI power authority, you know, research that we put out. To me, it's about derivatives that are going to continue to play out across software, across infrastructure, across power. But that's also why I believe, like, like me and you've talked about, we talk about NASDAQ 25,000, we're going to be talking about NASDAQ 30,000 in the next 12 to 18 months.
When you were last on in March though, when oil was in the 80s, you said if this war goes into late April, May into the summer, it could start to dent some growth. So now with oil above 100, is that risk starting to show up? I mean, it certainly doesn't look it, as I see the S&P 500, you know, at well over now 7,200 right now. But when does that risk start showing up? Have you moved your timeline out?
Well, count for me it was being in Asia for two weeks. I mean, we didn't see any really major supply issues, and I actually think it extends out further. I mean, you'd have to see this go into June, July to really make a dent from a supply perspective. And I also think investors are kind of gaming out being like a ceasefire ultimately will lead to some resolution. The long curve when it comes to oil is still, you know, I think call it sub-80, sub-90. And then it just, you look at the tech, the AI revolution, the spending you cannot deny. And I think that's the one thing from this week, it's about the monetization, the validation of the thesis.
What's the one thing that could break the AI trade over the next 6 to 12 months?
The power shortage. It's, it's that local communities vote down data centers. They don't want to see their electricity bills go up. There's a lot of, you know, whether it's a real estate worries or, you know, things on the local side. I think those are probably some of the biggest risks because right now when it comes to AI, you need data centers, you know. So that's why a lot of times we would talk when we were in DC and there'll be politicians that we meet with and they'll say, 'Well, we don't want a data center in our state or in our municipality.' The reality is the data centers are the hearts and lungs of the AI revolution.
Okay. All right. What name looks closest to fully valued right now, Dan?
Look, I think some would say Intel, you know, in terms of that, but look, I still believe it's like when you see that second, third derivative, that's one. I don't think you could say it's fully valued. You got to see if they're able to continue to execute how they ultimately would, what I believe, become a bigger player in the sort of second, third derivative trades on chips. I mean, look, you know, in terms of Musk and Tesla and obviously we're looking at Intel. So, look, it just speaks to my view. You can't just look at these stocks and say they're expensive. You can't just say SanDisk is expensive because of historical because you're in a memory super cycle.
So, if a retail investor is buying an AI stock today, are they early, are they late, or are they right on time?
I'd say it's third inning, two out in terms of the game, but obviously it depends where because look, software is still, you know, I think obviously software still been pretty way oversold relative to what we've seen. So I think software is going to be a huge derivative trade as it plays out.
Okay, before we get to this or that, Dan, we have some audience questions and we're going to have to do those rapid fire as well because I want to make sure we hit all of them. So let's do these. Little side note too, us coordinating, us coordinating, I think is very, is very, is very interesting.
I knew I had to wear color, but we did hit the nail on the head there.
Dan, does Alphabet have more room to run? How much more room to run?
I mean, I think it could have 30 to 40% upside from here as the cloud and the advertising strategy plays out. Gemini, we're not, we are not done with this. I mean, I think we're still early days.
Single best way to play AI. Give me one name.
Who has the best AI strategy?
Right now, it's Google relative to what they've done on the consumer side on Gemini, Capex. I think they're firing on all cylinders.
Okay, we have another question saying, 'Give me three undervalued midcap tech stocks.'
I'd say Pega Systems, which I view is actually a derivative sort of AI name. I think on security, I look at a name like Fortinet is one that kind of sticks out a bit. And then, you know, I look, I continue to think in cyber security, I think some of these names have been oversold like names like Tenable, Varonis would be examples.
Is Palantir still a buy here?
It's, it's in my opinion going to a trillion dollars next year or three years. The look, Palantir is in software as to what Nvidia is to chips as to what Jaylen Brunson is in the mix.
There's a question about Tesla. When do investors see returns?
I think by the summer into the fall is where you start to see this turn as robo taxi scale. It's my view, like I think SpaceX's IPO is be a positive event for Tesla ultimately and the physical AI strategy plays out going into the rest of this year, 2027.
Okay. And then a rapidfire way to answer, how do you navigate volatility in software stocks?
Haters hate, right? So you have to understand who the winners are and what's oversold. ServiceNow oversold, Salesforce oversold. I think Workday you could argue oversold. So I think you have to navigate, and it's my view to Oracle, that's a potential double in the next 12 to 18 months.
And final audience question, Hound AI, is it a sleeper stock or is it hype?
No, I think it's, they, it's a real strategy. They just have to execute. It's not hype, but they have to execute on the strategy.
