All right, Dan. So, we had a brutal week for tech. White-knuckle moments, as you say, and we're seeing a bit of a rebound today. Actually, a pretty substantial rebound for some of these names. Do you think the worst is behind us? Are we in the clear to start buying tech stocks again?
Look, I think it's just a nervous period. I mean, last week was definitely a disaster for tech investors. Then the earnings, I think, were pretty mixed, right? Because the hyperscalers — you saw the strength, you saw the strength in terms of cloud, but it's the disruption that's happening right now that I think is causing just this panic. But we've said it — look, it goes back to even like the SaaS apocalypse earlier this year. These are not the times to panic. You have to own ultimately the winners and then navigate the storm, and that's essentially what this storm is.
Well, you said that big tech earnings would be the real test of the AI trade. So now that we've seen a lot of these results, did they deliver?
I think it's mixed. I think to some extent, like the capex, the hyperscale, the cloud growth — that's a huge check. But I think the part that was surprising, I think, to the market, and you know, and we talked about it, I think it's the level of disruption that's happening across the whole tech ecosystem — from the security side with Fortinet, what you saw with ServiceNow, the memory side with Intel, the advertising with Alphabet. I mean, Karen, I think that's the thing that shocked investors, just the level of disruption that's happening.
So, after the shakeout that we've seen, Dan, do you see more upside in software stocks from here or chip makers?
Well, I think I see more upside in chips just relative to — I don't think you have equilibrium till late 2028, early 2029. But I do think also like 2027 is really going to be the year for software. I mean, to some extent, like software stocks from cybersecurity to the application to the infrastructure layer should actually be the ones that could really start to see that monetization ramp.
Reclaimed the title of the world's most valuable company from Nvidia on Friday. Do you think that Apple is really the best AI investment, though? Does it deserve that top spot?
Look, I think it's one of our top picks perennially, you know, relative to my view where tech's heading over the coming years. But I still think Nvidia is the best-positioned AI play in the market, and especially where that stock's trading, you know, at 11, 12 times earnings. I think the market is significantly discounting, I think, what numbers could look like for Nvidia over the coming years.
But if you could only buy three tech stocks after earnings, which would they be?
I think it's Nvidia, it's Microsoft, and it's Apple. I mean, those to me are just the three.
As we think about risks, what worries you more right now — that companies are spending too much on AI, or that the returns won't justify the spending?
It's probably — if there was anything that worries me, it's the time that they have to show the spending resulting in monetization, because as investors, the patience wears thin, credit spreads have increased, there's more nervousness. It gives them maybe a smaller window to prove it, and I think that's probably what makes me the most nervous.
