Welcome to Market Overtime. I'm Oliver Renck. Today's guest has been covering tech for over two decades, but since the COVID era, he's become a bastion of unwavering bull market confidence. Of the 40 stocks he covers, not a single has a sell rating. You might call him a perma-bull, but if you've faded his analysis, you'd be perma-broke. His staunch support for controversial tech trades like Tesla and Palantir, despite an entourage of haters, has delivered an average 16% excess return over his peers according to Bloomberg data. He's been so right that not only does he get away with the most flamboyant wardrobe on TV, he's been lauded for it as Wall Street's best-dressed man. None other than Dan Ives is here with us from Market Overtime, the Global Head of Technology Research at Wedbush Securities. Dan, great to have some of your time, sir.
Oh, great to be here and thanks for the introduction. Appreciate it.
Absolutely. I wore my most extravagant pocket square for you.
I'm touched, seriously. That is like that.
But look, I can't even pull off a pocket square, so like, but you, but you, but you can. Well, we appreciate the time. We've got a lot of good stuff to talk about. You got a new role too, so Global, I mean, you're moving around the world too right now. So how does it change the way you view things or any additional scope for how we should think about your coverage?
Yeah, I think it's more scope. I mean, in terms of coverage, I mean, it expands a little, but I think the big thing is just having more coverage, especially when it comes to Asia, China, and some of the other parts of the world we, along with our team here at Wedbush, does.
Do those markets stand any chance next to U.S. big tech, Dan? How much real kind of potential variance arises between the U.S. leadership versus the rest of the world in the new administration?
Yeah, look, I mean, U.S., I think, strong gets stronger. So I actually think that's something that's even just more of an accelerant. But I do think those markets, it's enabled us to maybe get an edge when it comes to supply chain and just brought some of the demand that's going on within tech. You know, when you think about what's happening across Asia, across Vietnam, Malaysia, and others. But look, I think under Trump, I mean, this is a Cinderella story for big tech. Regulation essentially gets defanged, more deal-making, Musk with a, you know, big seat at the table. It's very, very bullish for big tech.
How much of it is new narrative, how much of it is just kind of a cherry on top? If we stretch the timeline back, basically, it seems like for a proper big tech conversation, we got to go back to basically COVID. It seems like kind of the fertile soil that began a lot of this latest thematic movement. Take me through that, Dan, because it feels like if we rewind the clock a little bit, we get some answers as to when this started, which is when we're dumping money and cutting rates, basically, right?
Well, no, I mean, like, and look, me and you talked, you know, throughout many of the years, and I think it was the start of a seminal, a new foundation. You know, when you think about what happened in tech, you could say some of them, like Zoom and some of the sort of COVID names that obviously started to come down, you know, once lockdowns and everything came out. But from a shift to the cloud, hyperscale, foundational, I mean, that's really the start of what I view is almost a 10-year cycle, and I think we're only kind of three, four years into it. And then I think what changed everything was the combination of what we've seen from Godfather of AI Jensen, NVIDIA GPUs going back 2022, what we saw from OpenAI, and of course Microsoft. And that combined is essentially creating a fourth industrial revolution when you think about AI.
How much do you think about COVID as a catalyst in the way it forced businesses to adopt technology at the time? In my newsletter, I wrote it as a time machine that COVID basically sort of opened a portal, if you will, to this future demand that was going to get there eventually, but kind of fast-forwarded it. To your point about some of the one-off things that fizzled, but then it also did really usher us into this new age, it seems like.
Oh, no doubt. I mean, I think that nails it in terms of what it ultimately did because it accelerated the shift to the cloud. I mean, like, when you start COVID, let's call March 2020, you had about 30% of workloads in the cloud. Today, we're about almost 50% and going to 75%. So it just shows what ultimately happened there, Oliver, is that we're talking about the beginning of what was ultimately now trillions of capex dollars toward tech. That's why big tech continues to get bigger, Mag 7, everything else, and that's not stopping, especially with regulation essentially defanged. You know, Trump administration, Khan will be out at the FTC and others. So this is going to be a really golden age for big tech.
I do want to talk about how things are changing on the margin, and at the risk of zooming out too far, but kind of the one other point there, Dan, on the origins of this, is how much do you think kind of the just whole system was proven out? The way we lowered rates, we put money into capital markets. For anyone who kind of doubts that prosperity stems from innovation, can we attribute some of this to the money that was injected into the economy to get these ideas flowing, right? Isn't that like how tech revolutions happen?
Of course, that's how revolutions happen. I mean, it goes back no different than you could go back to when I covered tech out of the financial crisis and TARP and everything else that created the next level of innovation from 2010 to probably 2016, 2017. That's how the system works, how it should work. And I think when you look at essentially, you know, Fed engineering, Pillsbury Doughboy, soft landing, and that's why a lot of times the bears, you know, they sound smart with their spreadsheets and valuations, but they've missed every transformational tech name in the last 15 years.
Okay, so then where we're at right now, do we need any additional economic stimuli, or are the wheels and the gears kind of turning themselves now that we've had the AI and the breakthrough from NVIDIA, particularly on powering all this stuff? How much is kind of self-moving now, Dan?
I think 50% self-moving, 50% you still need. And that's why, like, lowering of taxes, deregulation, essentially, when it comes to Khan, FTC, Gensler, and others. I think when it comes to where money is being spent, Inflation Reduction Act, that's going to be massively shifted. I think Musk is going to play a huge role there. It's not necessarily kind of like the red tape poster childs like Intel. It's going to be much more focused on the AI. I think hyperscale is going to benefit the likes of Amazon, Microsoft, Google, Palantir, and others. Look, I think the reality is that we are on the cusp of really an unprecedented revolution. But that's what, when you combine that with Trump getting in, a red sweep, it's a Cinderella story for big tech. And I think that's why we've even seen that significant rally since Trump got in.
Dan, how would you score the current AI product offerings? We obviously know there's all this trillion-dollar capex happening in terms of consumer product, and I guess business product too would be a fine answer. But when I think about like the existing consumer stuff, Google Gemini on Google phones, Apple Intelligence coming, Microsoft Copilot, obviously the ChatGPT functions and such that some are now generating revenue, how would you score the quality of our AI output so far in terms of product?
I think it's jaw-dropping. I mean, I see more from the likes of Palantir, we see from Oracle, Microsoft. I think enterprise, enterprise, now enterprise is where consumer, get the popcorn out. I mean, the point is like this has just started. The consumer revolution will ultimately go through Apple, iPhone 16, iPhone 17, everything that we're seeing with Apple Intelligence. But that's why it's not just about Mag 7. This is the second, third, fourth derivatives about to play out across software, across cybersecurity, across infrastructure, across consumer tech. And I think that's where now it's setting up for, you know, over the coming years.
The hardware versus software trade-off has been so stark, but it seems like now that has shifted a little bit to your point in the last couple months. Salesforce breaking out to highs, the cloud complex coming back, a group that had been lagging significantly compared to all the big hardware build-out. Is that going to be as broad of an AI lift, or will we see again winners and disruptors in the space? How specific do you think that gets, like business to business?
I think 2025 software is going to be the trade because the second, third derivatives of everything playing out. Salesforce, ServiceNow, Oracle, Workday, and other Adobe, now the use case starts to play out. That's why Palantir is clearly the messiah of AI, which has been early sort of leader there. So I think now as it goes from kind of the capex build-out, now we start to see use cases, and that's going to benefit software. The other thing is deal-making is going to accelerate with Khan done, so that's going to be also bullish for software, SaaS, and a lot of these names that maybe have underperformed.
Mhm, that one's a big one. I mean, if there was one real economic or policy hallmark of this administration, it's probably the FTC and the antitrust stuff. So I mean, that's got to be a huge one removed already for at least a premium applied to some of these stocks if, you know, to your point, Khan is removed.
Oh, I mean, there, I think there's a better chance of me playing in the NFL than her not being removed at the FTC. And I think ultimately, look, that's what big tech needs to see. You can't have this spiderweb of regulation as we're going through a fourth industrial revolution. Trump comes in, red sweep, now you see all those agencies essentially defanged from crypto, you know, to obviously FTC and others. And look, if you're a tech bull, that's drinking rosé, you know, lobster.
One of the areas, as you mentioned it, as a brief aside before I come back to some of the big overarching stuff, is in your coverage, there's not a lot of like blockchain, crypto-related stuff. And generally, you haven't spoken too much on that compared to the equities. I know part of that is just your background in equities, but what is your feeling on that? As I mentioned, obviously, you know, a stalwart of bullish themes in general.
Sure, yeah, and obviously, like, you know, and Tom Lee and others have talked about from a Bitcoin perspective. I think now regulatory that gets thrown out, you have to be bullish on Bitcoin and overall crypto because I think the other that's going to happen over the next three, six, nine months, I think a big thing that you're going to see more and more companies that maybe were not going to invest in Bitcoin or crypto, now will. You're going to see more and more of their cash going toward that given the regulatory framework has dramatically changed. So I think that's something that just speaks to just a broader view of where we're heading. That's good for crypto, it's good for big tech, and I think we're, you know, we're in our opinion going into what's probably going to be a bull market that lasts through the end of 2026.
Dan, what do you see as having greater technical prowess or productivity prowess, the blockchain or the AI stuff? How do you compare those two?
Look, I think blockchain is still more of a derivative of cloud, and as we see in software, and then that's all going to play, and that's probably going to be a maybe like a slower build-out, but still very strong from a blockchain perspective. AI is going to be, it's parabolic. Like, if you looked at an AI versus a blockchain, I mean, AI is meteoric. Yeah, because of the capex, because remember, you had 500 billion of capex just related to tax, that's not even related to sovereigns, other companies, and everyone else starting to play. And you could say together that could be a trillion and a half, two trillion of capex just for AI.
Yeah. Then again, I don't want to get too far outside your coverage because I, you don't cover like the fintech stuff, at least some, you know, the crypto-heavy ones. But it just kind of seems like when we've gone through this investment cycle in the last, you know, we had sort of this blockchain investment cycle. When you think about allocators, like these big tech companies, I imagine it's going to skew super hard to AI, or is there a feedback mechanism of crypto price that just, you know, brings interest, or are all these big tech companies just full-on AI?
I think full-on AI, but crypto, I mean, I'm not necessarily as dramatic as that, but you will start to see crypto start to become, you know, more in the vocabulary, especially as the regulatory environment is so dramatically changed. And these companies say, look, you have over a trillion dollars of cash from big tech, you know, in terms of where that all sits, thinking about the big hyperscalers that have led us.
Dan, what do they need to show here over the next couple months? How their investments are paying off? Can they get a free pass? Because I think about Microsoft last quarter, it looked like it stopped kind of getting a free pass a little bit by the market on the capex stuff. But then obviously you've got others that are closer to highs. But then you've got like a kind of spread opening up a little bit where Alphabet, Microsoft seem like the market now maybe needs some fresh justification.
