The reality is it's innovation. It's a fourth industrial revolution that's happening. And when you politicize it, it's dangerous because for every data center that's voted down, China wins.
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Today we have an extremely popular person on Wall Street with us who actually happened to be one of our first guests on a very first inaugural episode of the Bull of Wall Street. Dan Ives. He started his own company, Yorkville and Ives and Company, which is a merchant bank which I want him to talk about in a little bit. But Dan was one of our first guests in November of '24 when we started the Bull of Wall Street. So we want to thank him for that. And before he gets to talk about his new company and what he's up to, a lot of the things that Dan talked about on that first episode came true. So, fast forward, he said, back then we were at 10:00 p.m. in an AI party that lasted till 4:00 a.m. around the second ending of a baseball game analogy. I think you might have extended the investment cycle though based on some research that we've done on your recent talks. I think back then you said it was about a five-year cycle. I'll let Jim and Pacy talk to you more about that, but can you start with just telling us about what your Phil Ives and your new company, what you guys are up to?
Yeah. No, it's great to be here and see you guys and congrats on everything that you've done, you know, over the last few years. I saw the award that you got as well. So, it's great. Look, I mean, Yorkville Labs is a new investment bank. It's really a modern merchant bank that we're creating focused on tech energy infrastructure. Super excited. Launched about, you know, a few months ago. And look, it's really to carve what I believe is a niche out on Wall Street in terms of these key sectors that are going to be key to the AI revolution, the tech build out. I felt like now is the time to do this and I'm just so excited to be launching this, you know, at this time.
You know, and what was interesting about the podcast we did with you a couple years ago almost was that at the time we were focused on hyperscalers and how much money they were spending and what you were saying is look the second, third, fourth derivative companies of these hyperscalers are going to start to benefit and boy were you right. And so we were talking about semis and a lot of things have come true. Jim, you want to open up with the first question around AI, tech, and whatever else you want to ask, Dan?
Well, first of all, great to have you back, Dan. You were episode number one was our first foray and I remember we did that one live, so we've learned a lot. We're still learning, but all the stuff that's happening with AI right now on that...
Dietrich was on there, too.
Yep. So, we haven't had a ton of return guests, but like we're starting to go back to that. We've had him on a couple times, but you are also there. So with regard to AI, I mean, we've there's been all kinds of stuff. Jensen Huang was on this All-In Podcast Summit, I guess. He was talking about whether there's a concern. He says no. But then you get the CEOs of Anthropic, OpenAI and even Elon Musk and there's concern and then you get Alex Karp and we own Palantir. We love Palantir. I know that's one you followed for a while. Then he's saying that maybe we need to nationalize AI. What do you think of all this? Is this just drama?
Look, I believe sovereign AI is a big issue, you know, and that's what Karp and Jensen talk about because the reality is the data. It's like, okay, I want as a company like I want the data protected within my walls. I don't want the frontier models to go get that data and then ultimately replicate my business and, you know, diminish what I'm going to do. So I think the sovereign data piece is very, very important in terms of what Jensen talks about and obviously what Karp talks about. Look in terms of the AI, the essay from Dario, the safety issues. Look I think a lot of that probably backfired relative to how they thought it would because that was almost gift wrapped for Zuckerberg and Meta. I mean, you could argue like that essay probably is a 20% move higher on Meta because it comes down to like you can't get to the top floor and then pull the ladder up. Regulatory capture, however you want to call it, you know, and I think the issue comes down to and this is actually it's not complex. It's just if US slows, China accelerates, they narrow the gap. China's not slowing down. Everyone knows that. US can't slow it down. And those that talk about, you know, the dystopian views and AI is going to destroy mankind. What I mean, look, it just comes down to like I think some of that is way overblown in my opinion. I'm not saying there's not risks, but I think it's somewhere in between that balancing act that we're going to need to see play out.
Maybe a question I have on the back of that then, and I listened in on the live podcast that you guys did at Future Proof with the Compound. One of my favorite quotes that you gave, I think, was like, you don't want your politicians with like flip phones and BlackBerries to determining your policy. So, like let's just get right to the heart of what's on the top of many of our dockets for the next couple months is the midterms. And thinking about where we sit, we'll have a couple years, right, until a new administration steps in. We know where Trump sits on the AI idea. And like to your point, we're in a race with China and we know Trump's not going to want to lose that. Fast forward though for the next election, do we think, you know, Democrat taking office is something that absolutely will slow down the AI trade because essentially it's been unregulated? We've had three and a half years of just like go for it. So are we going to start to see some of this as you know pricing into individual stocks and a little bit more discernment across the sector?
Look, it's a risk and we've like look, it's a just forget like the stock piece. It's almost more like personal in my opinion as someone like myself that's been a technologist, right? That's covered the tech space going back to the late 90s and like I've said like three, four times a year going to Asia. You see the efficiency, you see the build out in Taiwan, you see what's happening in Korea and then like I've said so many times like you land in New York airport fist fight Dunkin' Donuts and then you wonder why I was 17th in math in the world right? So now for the first time US is ahead of China when it comes to tech. And when I go to DC and I met with so many of these politicians outside the talking points and everything, the grandstanding. The reality is it's innovation. It's a fourth industrial revolution that's happening. And when you politicize it, it's dangerous because for every data center that's voted down, China wins. Now the reality is the tech industry they create a lot of these PR issues themselves because when you go out there saying that you're going to like 50% of white collar jobs you're going to take out and this is going to ultimately define the workforce of the future. Remember those were that was a fake narrative like I mean I talked about time that was never the reality for anyone that understands the industry and how these technologies are going to build out. I'm not saying jobs not going to get lost, but ultimately my view is over the next five years more jobs are created by AI than taken away and it's frustrating to see a lot of the politicians like I've said like when you politicize the issues the ones that get hurt it's the innovation in this country. And I think it does look I think it speaks like a very, very third rail type issue going into the midterms.
So Dan, do you think that our administration, just the government and maybe this is where, you know, hopefully there it's not something that is partisan, but we can all agree on, hey, look, we need to really invest in this. China has been investing a lot into infrastructure, into energy. You know, I use a lot of these AI models and the Kimi K3 model is really good. I mean, it's a lot cheaper than Anthropic and it does about 80 to 90% of the job. Do you think we, you know, as a country just need to say, hey, let's just win the race. Let's just, you know, let's do what we can to win the race.
That's my whole view. Like my whole view is that if we don't win it, China wins it. China wins it. Where do you think AI technology in the Middle East is going to go? Europe right now, you know, obviously still, you know, to ultimately they're still trying to focus on like, you know, VCR, some Blockbuster videos, but the reality is like once they actually get some of the stuff that you're seeing in France and Poland where they're trying to eventually they're going to adopt AI, who is it going to be? US, China? What about Australia? India? This is it's us and them. There's no debate. And I think that's why what's happening right now hits at a very core issue. The opening like when you go back to the Dario essay and some of that stuff, the reason I think it backfired is because like the scare tactics to the regulatory capture, it's had the opposite impact. Look what Jensen's talked about. Look what Nadella has talked about and look at Zuckerberg. They'll accelerate when it comes to Meta. And I think that speaks to what's happened with that stock. And it's also why like the SaaS apocalypse, the narrative was really Anthropic's eating the ones. They're gonna eat Palantir's ones. You're not going to eat cyber security companies anymore. Go back to where CrowdStrike, Zscaler, or Palo Alto stock were in April. I'm just saying like it's very easy to get caught up in narratives in this market.
Dan, you deserve a lot of credit. During the springtime when those stocks were getting hammered, you were very vocal in the media. I mean, you're on the media every day, twice a day, it seems like, about a buying opportunity. So, I think you've been very good for investors and for the financial advisor community as well. And so when you think about the investment cycle in AI, has that extended from your belief a couple years ago? Is it longer? Is it going to last longer now?
Yeah. Well, just because the use cases are truly playing out. So, when you go back to like the five-year cycle, it's really going to be a 10-year build out. I expect to be driving through Nebraska and see the data center build out that I saw a few weeks ago. And that's happened throughout the country. I've seen it across the West, Southeast, Midwest. So, and the consumer AI piece hasn't even started. And it goes back to like I still don't think it's fully factored in even a little into like Apple ultimately what the hyperscalers could do with this in terms on the consumer. I look at Amazon Alexa and others. So it's my view like we're year three into a 10 to 12 year cycle. You're only 15% through the spending. And I just think like those that are negative, a lot of those bears that have called 10 of the last two downturns, you know, they're negative because they're trying to call the market from the 14th floor for the New York City office. They can't see AI in the spreadsheets on Metro North. When you're in Asia and you see demand being 13 to 1 for chips, how could you be negative? Like we're not going to hit equilibrium to late '28, early '29. So it's just my view like okay like the risks political midterms like a wholesale New York type of moratorium type stuff like those are risks. And then the other risk is energy because China's built 23 power plants in the last 10 years we've built like one in terms on the nuclear and I'm just saying like that but I could argue energy and utilities will be the next what are called second, third derivative of AI. And then the barriers to entry are really, really high too so you don't probably see other companies getting into memory and so it's SK Hynix and Samsung and Micron right? But what those stocks are still because they're still trading on the concept of like cyclicality. Typical. I just my whole view is that you're in a memory super cycle and in this fourth industrial revolution it takes out some of the cyclicality that's typically in semis.
It sounds like you still like hardware more than software. Sorry, Pacy. Go ahead.
Well, but I think software ultimately could outperform chips the next six, 12 months because where the use case is going to be software. Yeah. Well, and a lot of the software companies are beaten up and they've come back. I still don't think that it's reflective of what you're going to see in terms of the use cases.
Yeah. ServiceNow, Salesforce, Snowflake, MongoDB, obviously Palantir being front and center.
Yeah. Palantir's in a they're playing a whole another game.
Maybe a question I would have and not to zoom us out too much, but this space as we know is just evolving rapidly. It seems like there's now like jokes out there after the Meta launch and kind of Meta popped a couple days ago. People are like, you know, how long until we forgot about Meta because there's another shiny object or toy. So maybe my question for you Dan is like do you think investors are still thinking about opportunity sets, security selection and how we used to think almost like the old economy where it was like we were so hyperfocused on these like longer term themes in the technology sphere right now is like there's new companies, new innovations, new ways that this technology is being used and in order to keep up it feels overwhelming, right? Like I saw something the other day is like to be an expert in AI means you have to quit your job because there's just no way to digest all this. Like is there something that most investors in your opinion are not paying attention to or discounting because they're so focused on what's in front of them today versus what's coming next month, next quarter?
Yeah. I think to your point it's like the models you're going to have many more models whether it's open source or what Anthropic and obviously OpenAI have done but the value is going to be in the data. Data is going to be really software infrastructure, cyber security, energy. See what I think like investors maybe are not like fully factoring in is like physical AI, the consumer embracing AI, you know, is Apple now I think 20% of the world will ultimately access AI through an Apple device. So I think investors are underestimating the scale and scope of AI.
Dan, and how do you think about the geopolitics of it? US versus China. How's this going to, you know, resolve itself when it comes to AI? It seems like the one thing that politicians agree on is we need to beat China, both sides of the aisle. But when it comes to AI, how do you see this playing out over the next five years?
Well, look, China plays a long game, right? I mean China is like they play they think they look at things like hundred years not one, two years and I think you see a government I've seen it firsthand that has gone all in when it comes to this build out. They're behind where Nvidia, where the hyperscalers, where the model players are but it's going to continue to be this sort of it's like a tug of war because the chip restrictions make a ton of sense. You can't have Nvidia's best chip selling into China, but if you have their second or third best chip selling to China, that's I think that's maybe necessary because the problem is is that and it goes back to like Trump, like the meetings, handshakes but nothing concrete. The biggest problem is like if you don't sell into China, it actually helps China, it helps them narrow the gap.
So when it comes to Dan, when it comes to things like disruption, I mean all of these things are very disruptive. Are there certain areas where you see their moats getting disrupted? And I'm thinking about competition within frontier models like I feel like there's a lot of competition with OpenAI and Anthropic but are there certain areas, certain industries or sectors where companies are just not prepared for the coming wave of disruption?
I think well first of all the data centers are the moats. Once a data center is built that I'm just saying like the data centers are significant in terms of the moats but I do think there's a lot of industries that yes are maybe like they're late to embrace AI based on data privacy and other issues or whatever based on the cost but as tokenization ultimately goes down the price like you're going to see just a rapid adoption of AI across industries, retail, financials, healthcare. I the area that's probably going to be the most disrupted as an industry is healthcare. I think that's an industry that is just not prepared because on one side you're going to have like AI labs and doctors that have technology that's as next-gen as you get. And then on the other side, you're going to have someone in some, you know, doctor's office seeing 40 patients, you know, in every 10 minutes seeing another patient going back to the historical model. So, I think healthcare is going to massively disrupt that industry.
That's interesting. How about what are your thoughts on the I mean we haven't talked about Tesla or SpaceX but the whole Optimus robot, it's a bold idea and if you can pull that off I feel like that's a very big moat for either of those companies.
But that's my view like my view is that like that's why SpaceX and Tesla ultimately going to merge and we say over an 80% chance by the end of next year because it's about data. Yeah, like this that's the one thing like this is all about data. Data is the new oil and the new gold. That's why there's companies like let's say like Dell be like oh Dell's not an AI play. They have an install base and data. Michael Dell like one of the biggest turnarounds you know maybe in history in terms of from a corporate perspective. Look at Cisco, data install base. I'm just saying like that's the thing that I think a lot of investors underestimate. I think Meta is a good example like they're spending like a 1980s Rockstar capex you're not seeing it. Stocks like oh it's over like dude they have three and a half billion users and they have data. Like I'm just I think that's a dynamic that I think a lot of investors look Adobe into it like do they have major issues like structurally yeah but they have the install base and they have data.
So maybe my question would be knowing that there's likely a lot of allocators that are listening to this or advisors. I think many would say I have a lot of exposure to the S&P 500 which as we know is tech-heavy. Discerning get more tech heavy. So I guess that's my question is like if we have a big chunk in a passive large cap and it's giving us a lot of tech is it giving us the right exposure is it giving us exposure overweighting those names or those specific industries that you're more bullish on and so if you're an advisor if you're talking to an advisor how would you suggest that they add more tech and like in active versus passive in specific industries within?
