Less than 5% of companies in the US, they've gone down the AI theme. Europe, zero. Physical AI hasn't even started. For every dollar spent on capex, it's a 5 to $6 multiplier across the rest of tech. That's just not being factored in here. It's year three of an 8 to 10 year buildout.
My guest this week is the predominant AI analyst on the street. Dan Ives has put in the long hours and done more channel research than anyone I know. He has amassed over 3.5 million air miles over the last 30 years. When OpenAI launched ChatGPT in 2022, Dan had the context to know it was time to go all in and has been pounding the table on the AI revolution since. What's the best call now? What's around the corner?
Now you think about their ability to ultimately monetize, call it 3.5 billion users or subscribers like that, that could change the whole financial profile of Meta. 20% of the world will access AI through an Apple device. I almost view them as like a toll collector on the consumer.
I have to ask you about Anthropic. The range was cut to 1.5 trillion from 2 trillion.
They're at the centerpiece of it. The appetite will be extremely strong.
Hello and welcome to Pitch the PM. My name is Doug Garber. After a decade at Citadel and Millennium, I interview top PMs on their highest conviction ideas. Be sure to subscribe to our Substack for more research updates. Dan, welcome.
Great to be here, Doug. It's great to see you and congrats with everything that you've done.
Thanks. And congrats to you. I'd like to start with just catching up on your career since we worked together at FBR. I was there for five years, same floor, sixth floor research. And what have you done since then? Obviously Wedbush, and now you're doing your own entrepreneurial thing. I'd love to hear the update.
Yeah, I mean, look, my career started at FBR. I mean, if you go back to the late 90s, you know, for me that was covering tech stocks in that environment. Really, look, that created the launching pad for me, you know, to obviously almost 20 years at FBR and eight years at Wedbush, and then you're here at Yorkville Lives, you know, which we founded in July. Look, I mean, it's always sort of morphed, but for me it's always just been the passion of covering tech, trying to be behind the names that maybe others weren't seeing at the time. I think obviously it's like a skill set or a craft that you build over time, right? And I think, you know, when me and you worked at FBR, I mean, the amount of successful people on Wall Street throughout research, sales, trading, bankers, hedge funds that we worked with is pretty wild, right? Because I think it was a launching ground for just an entrepreneurial spirit, which I think is why so many successful people came out of there.
Yeah. I mean, we were definitely punching above our weight. I mean, doing billion dollar 144As or private placements. You don't see that. That was pretty incredible. And I remember you had always be gone off in Asia. You'd come back from like two week channel checks. Must have been a lot of traveling, but you were really putting in the leg work then. And semis then were not very popular, right? You know, you stuck with it, you did all the work, but it wasn't a very popular space, right?
I mean, AMD was like a sub $10 stock or $20 stock. I mean, like, look, but I think just going back to like those days, it was also the foundation that we have today. A lot of that was built in like early, mid 2000s, like so much of the industry contacts, so much of the relationships. And it all, you know, when it came like the AI revolution and seeing around the corner early, whether it was Nvidia or Palantir, Microsoft or whatever it may be, and Tesla and others, it was all sort of built brick by brick. Because I think it just shows like you have to, especially in a market like this, and you know this well given your experience, you got to tune out the noise, tune out sometimes the narratives. And ultimately, it's like it's really your own work, your own due diligence that gives you the confidence.
Yeah. It's that confidence, right? You can hear a line or a recommendation, but when it goes against you or to size it, right, it's that conviction from putting in the hundreds or thousands of hours that you've done for decades.
Well, even go back to like last week, right? Like CoreWeave and just what's happened in terms of like the tech trade and AI and worries about CDS spreads and debt and what. But I was in Korea last week, like talking to memory players, understanding the food chain, comparing what that was versus three, four months ago, along with everything else. So I'm just saying like I think that gives you sometimes like a flashlight in a tunnel because a lot of the bears that have called 10 of the last two downturns, they, you know, they can see AI in the spreadsheets from the 20th floor of the New York City office building and they do three trips to San Francisco a year. So I just think it's like three and a half million air miles the last 25 years, because I think like that's given me, I think, some of the advantage maybe.
I think it is. You've got the main street view, the on-the-field level view, and Wall Street is even more emotional than before with all the crowded and risk-on, risk-off stuff. You know, with AI now, you kind of have more emotions, right? That's the key, is separating emotion from reality of what you're hearing from, you know, the actual participants.
Well, even like the SaaS apocalypse, like if you go back to early, like in the spring, like let's say just like March, I mean, we're talking to CIOs across the board, and like you recognize, like I'm not saying there weren't structural issues, Adobe, Intuit, and Salesforce, and what we've seen, but like the concept that like these software companies are going to be like eradicated was a false narrative. But the stocks were down like 50, 60%, now reflecting that cybersecurity is a theme that was, you know, going to be eaten by Anthropic, which was exactly opposite, right? That was our whole view of CrowdStrike and Palantir and Zscaler. So I think some of it sometimes is like the due diligence, but it's like sometimes you have to understand narratives, of course, that are happening. You can't just be blinded like by your biases in terms like positive. You have to understand what's happening, but you have to at the end of the day, like it comes down to like your work that you do in the field.
Yeah. It's the leg work, the investigative journalism that you do. Are you still going over to Asia every quarter for a week or two, or are you doing other things now?
Yeah, I mean, part of it is just like the last few years it's become so global, like just in terms of the themes and investors and so much of the stuff that we do. So we do all the Asia trips, but so much of it between Middle East and Europe and Australia and of course across the US. And I think it gives you, like it gives me, like a very good insight too, because your ecosystem, you have so many investors, so many companies, so many people from around the world. I think it gives you a good pulse to what's happening.
Yeah. Just comparing notes with someone else who was there that week and just building out those tentacles.
One of the core pillars of the deep research we do is field research and using expert networks. I always start with AlphaSense. They have a great expert library and they also have AI technology that allows me to get to the information a lot quicker. They allow me to access local periodicals and uncover information that I otherwise wouldn't have access to. They are used by 75% of the world's top hedge funds and 85% of the S&P 100. Not only do you have access to the library, but they'll also go find experts for you based on what you're looking for. It is one of my go-to ways to do primary research. Make sure to check it out with the link in our show notes. In 2022 or so, I think that's when you made the AI revolution call. We were in the market, it was a little bit off post-COVID, you know, now obviously it's very well known. We're a couple years into it. What did you see then that were the clues or the early signposts to allow you to make this call?
Yeah. And if you go back then, like the two worst years in my whatever 26, 27 year stretch are '08 and 2022, just because remember 2022 was like macro, Fed, interest rates, you know, no matter what, tech stocks got crushed. It was really meeting with, it was like late 2022, meeting with like a bunch of developers, a bunch of private companies, and kind of putting it all together where it was like, okay, the technology's there, like not just for like, it was my view like from Nvidia to what was going to happen on hyperscalers and Microsoft. But once Microsoft did the OpenAI investment, I think it was like January '23, that's where we called it like the AI revolution, right? And it's kind of funny like when you do that, like if you think about how negative it was back then, I think maybe they put like 10 billion or something in, which is now worth like 20x. But it was my, once that happened, I'm like, that's it. It was like once Microsoft did that, that combined with what Nvidia is doing on the GPU side and chips, that was going to unleash it. But obviously it took time, but it was trying to keep staying ahead, right? Even like on software, it was like, okay, that's why we got so bullish on Palantir because it was my view like on the commercial side where they stood, that could be like a generational name. But obviously at the time it didn't, stock's like 10 bucks or everyone hates it, the whole thing. So I think sometimes like it's like it's not necessarily going against the grain just to go against, but you have to just have conviction. And I think that if you don't have that and you don't do the work, it's hard to just navigate this market.
Because everyone saw the Microsoft OpenAI deal, but to you that clicked in your head that this is all, it's risk on, it's time to put your chips in because the reaction was emotionally negative. Like if you go back then, it was like, why are you putting like that? That's crazy, 10 billion, this is like eye off the ball. Like just go, if you go back to the narratives back there from like a lot of analysts. What did you see at that time that led you to believe, hey, this is go time?
Because it was the view you needed a hyperscaler to fully bet on it. So once they did, I knew then Amazon and Google would have to follow, and the technology was such, given where Microsoft plays in the enterprise, that that was the moment.
Let's fast forward now. Now we have 300 NeoClouds in addition to the hyperscalers, and now you can access this technology or the tokens without the hyperscalers. How does that change the landscape today? And what does that mean for token prices?
Token prices will go down over time. You need token prices to go down. That's why some people be like, token price going down, it's like a negative. I disagree. Over time, the models will become more commoditized over time. Competition will continue to increase. Even like when it comes to like NeoClouds and the worry what you're seeing with CoreWeave and others, there will be ones that are crowded out. Not CoreWeave, Nebius, I think they're going to be just more consolidators. But you only have less than 5% of companies in the US that have gone down the AI theme structurally and strategically build it out. Europe, zero. China, obviously in terms of the buildout. Middle East just starting, India starting. I'm just saying around the world it's US versus China. The consumer theme hasn't even really started. Physical AI hasn't even started. I mean, it's all beginning. So that's why when it comes like the 800,000 data centers are getting built, even if you assume like 10% of them don't get built based on like getting voted down or funding or whatever it may be, for every dollar spent on capex, it's a five to $6 multiplier across the rest of tech. And that's just not being factored in here. And I think that's why like it's year three of an 8 to 10 year buildout that could be 12 to 14 years that we're seeing.
If you had to summarize that, what inning are we in in the AI revolution?
