Starbucks CEO talks company turnaround, Dan Ives weighs in on Apple Q1 earnings

Good Friday morning and welcome to Opening Bid. I'm Yahoo Finance executive editor Brian Sozzi. We are moments away from our big interview with Starbucks chairman and CEO Brian Niccol, which comes right after the company's closely watched New York City investor day. Brian just left Yahoo Finance's HQ. Here's a sneak peek on what he told us about their turnaround.

I almost forgot doing that interview, then I realized I just did it moments ago. But before I hit go time on that one, we have a few housekeeping items. First, President Trump is set to announce, or he did announce, former Fed Governor Kevin Warsh as the next Fed chairman possibly, which he came out and said this morning as potential to succeed Jerome Powell. Warsh isn't seen as the most dovish of the picks Trump had teed up, and we are seeing bullish bets on gold and stocks unwind a bit. But I really want to dig into tech because there are two themes emerging into the weekend. One, if you are a big tech player hyping up AI and don't deliver in a big way come earnings time, you will be punished. Microsoft and ServiceNow getting served up lessons on this front. Microsoft had a staggering $357 billion in market cap sliced off on Thursday following a quarter where cloud sales fell short and guidance was not perfect. Not perfect at all. ServiceNow was also shellacked because its quarter failed to press through and through. Talk about ServiceNow. Bolt stocks still acting weak today. In fact, all the ServiceNow quarter did was fuel the view that software companies will be eaten alive by AI. This narrative has hammered software stocks in recent months. From ServiceNow to SAP to the mighty Salesforce. Check this out. The S&P 500 software and services index is now at a 9-month low. On the other hand, not all tech stocks are being treated equally. If you are a big tech company showing you can make money off AI, you will be rewarded, like Meta post earnings this week. If you are a big tech company with some major fundamental catalyst that the street is discounting and say as much on earnings day, you will be rewarded. Enter Apple, which had a blowout quarter for the iPhone. Think on this for a second. Apple's iPhone business added more than $16 billion in sales year-over-year. It's huge. I like the Apple earnings call, too. Far less corporate jargon than Microsoft's call and more bullish on the outlook for margins for the first quarter and the new AI deal with Google. Memory stocks like SanDisk and Micron are on the move after Cook warned, Tim Cook warned of higher prices and supply chain constraints. Here's what Big Tim said on that new tie-up with Google.

You should think of it as a collaboration. We'll obviously independently continue to do some of our own stuff. But you should think of what is going to power the personalized version of Siri is a collaboration with Google.

You could just hear the excitement in Tim Cook's voice on that deal. Yeah. All right. Here on the opening mid-round table, Dan Ives, Wedbush Securities Managing Director, global head of technology research, Melissa Otto, Visible Alpha head of TMT research, and our very own senior reporter Ines Ferré. Dan Ives, coming to you. Apple, you like this quarter.

Look, it was a phenomenal quarter. I mean, if you think about what we saw specifically with iPhone in China, I mean, that was robust tailwind, services strong. Look, but I think the issue with the stock, I mean, investors, it's all about AI. Investors want to see what the strategy is, what the monetization. Obviously, it's Cook keeping it, you know, sort of close to the vest, but I think that ultimately is really going to be the key to why, you know, we're bullish. And I think what you see is this is almost a sweeping, sort of pretty massive upgrade cycle that's taking place.

Dan, are you in a Wedbush office? I've never seen you in the office before. This is a lot for me to take in, Dan.

Look, it's, there's a lot going on, so I had to, you know, I wanted to kind of blow your mind. So, I'm definitely, I'm in the office today and you know, again, it's Friday. Who knew?

Well, count my mind is blown. Melissa, over to you. Dan brings up a good point talking AI and Apple. How much AI initiatives for Apple, AI the broader environment, how much of that is priced into Apple stock, you think?

Yeah, it's a tricky one. First of all, happy Friday. Thanks for having me on. I mean, there's a couple of interesting things going on from the quarter. I mean, they beat Visible Alpha consensus on the top line pretty nicely and also at the gross margin. But what really stood out to us was China. China beat consensus by over 20%. So I think, you know, when we think about AI and we think about the second half, the question's going to be is what is going to be the catalyst for those numbers? What's going to drive topline? What's going to drive further upside in the gross margin? Is China going to be sustainable? And are they going to pull something magical out of their hat in the second half around AI?

Is that magical thing, and you think it's this Google Gemini? I mean, Big Tim, he didn't want to get into the financial ramifications of this tie-up at Google, but I mean, it's hard to tell how excited he was. That's just Tim. That's just Tim Cook, but he sure seemed excited and he sure seemed to think this could be a big lift to Apple over time.

Yeah. And it may be the perfect partnership for them at least for the time being, and them having such a massive quarter, this could give them the runway, so to speak, for an even broader AI strategy later on. So even though investors were so concerned about AI last year, this could be a stopgap measure as Dan Ives had been mentioning earlier, and this could be the perfect fit for right now. I thought that what was interesting was the memory comment on the earnings call because that seems to be sort of a bifurcation that we're seeing now in the market with respect to some of these memory names that have been skyrocketing and the demand, the bottleneck when it comes to memory.

All you're seeing there around the screen, that move in SanDisk, Dan. I mean, holy smokes. I mean, I don't know, how do I put it? I mean, do you, if you have missed this run in SanDisk, I would even say Micron, do you buy or is this just going to end badly?

No, look, it's a super cycle in memory. I mean, that's the reality. I think if you look what's happening, and we see it with like SK when we're there in Korea, you know, Micron's part of the AI 30 list, you know, in terms of that we focus on. Look, I think this is one, it's picks and shovels, right? In other words, like this is a fourth industrial revolution. And I think investors, what you see in SanDisk today, what you've seen these numbers, it shows, you know, still early days in this just massive cycle.

Melissa, what really impressed me with Apple, a lot of things, the iPhone revenue, but Tim Cook got on that earnings call and he said, you know what, we're going to drive higher margins in the first quarter, higher than the street expected, even with these memory price, these higher memory prices, these memory chip complaints. Isn't that the ultimate buy signal on Apple?

I mean, ultimately what was a surprise was the gross margin, especially coming into the outlook. I mean, they guided 48-49% gross margin. Visible Alpha consensus was 47.5 and we're currently at 47.5 for the second half. So, that's what the market has priced in. So, as my other two guests alluded to around memory, this is the question. Is Tim Cook going to be able to manage the supply chain and memory prices in a way that enables them to maintain and sustain those 48-49% gross margins? Or is the 47.5% the real number?

And as I promised, I'm going to get you on precious metals in a second. You know, hold on just a moment. And while we're cheering Apple here, you know, Google's in report soon, probably good quarter for them. I'm going to talk up Gemini. On the other side, this move lower in software stocks, SAP, Salesforce, ServiceNow, this has been abysmal. I mean, do you try to pick a bottom here or do you just stay with the winners like an Apple and a Google?

Look, software, it's a guilty till proven innocent. And I think ServiceNow and obviously Microsoft and others, I mean, this is just on the street right now. It's almost a do not enter zone. Now, I think a lot of that maybe is overdone specifically for some of the cybersecurity names, for even Salesforce and others. Look, it comes down to modernization phase and that's what the street wants to see here. And I think what you're seeing is really a bifurcation in tech. It's kind of the haves and the have-nots and that's really what's playing out across tech earnings season.

And as wild moves in precious metals the past 24 hours.

Incredible what we've seen with the moves in precious metals. We're looking at now gold that's down about 5%. It's at around $5,000 per ounce. Just, I mean, you just had a, yesterday morning it was touching around 5600. So it's a massive move to the downside. Silver as well down 13%. Mike McGlone over at Bloomberg is basically saying you may have just seen the top on silver and this could be for years now that you won't see those same silver prices as you've seen. He's basically, he's been warning about this massive speed in this rally that we've seen. And we're also looking at other metals as well that are down. I mean, you're looking at copper also. Copper was up around above 14,000 per ton in London, and that has also moved lower. That doesn't take away from sort of this narrative that we've been hearing about is the demand for these metals, for the demand for copper that you're going to need for data centers, for electrification, etc. But look, there's inelasticity when it comes to that because a data center is not going to stop being built just because you've got higher copper prices. But nevertheless, a lot of this has to do also with China speculative trading as well. So, analysts had been warning this parabolic move. You can't have these types of parabolic moves without having some type of a downturn at some point.

Melissa, humor me on this. We started this session today with news that President Trump has nominated Kevin Warsh to be the next Fed chairman. If you're out there, and I'm going to get this question for people, so I'm going to put it right to an expert like you. No pressure, right?

No pressure.

No pressure. Does Kevin Warsh, is he, how much of a factor should he be when you're trying to pick a tech or media stock to invest in? Should you even be thinking about who the next Fed chair will be? Why or why not?

I mean, ultimately, it's going to be about policy and their view about interest rates. Interest rates are an important dimension to the way that the market thinks about asset allocation. So, I, you know, I think if his view is to lower interest rates and take a much more dovish stance around rates, that may be a signal for small cap. It may be a signal for some of the riskier, more, you know, unique areas of the market. It may also be pretty bearish for the dollar. We've been in an environment where the dollar has been very strong and so if we see that start to reverse, it could change some of the dynamics in the market.

All right, we'll have to leave it there. Stay warm, y'all. Thank you so much for this fiery analysis to kick off today. Appreciate it.

Thanks.

All right, coming up, Starbucks CEO Brian Niccol is in the Yahoo Finance House. We'll be right back.

Starbucks sent a message to Wall Street this week with its earnings and follow-up investor day. You would be wrong to bet against our turnaround. Here's what Starbucks chairman and CEO Brian Niccol told us moments ago at Yahoo Finance HQ. Starbucks investors have been waiting for clear signs of a turnaround under restaurant turnaround magician chairman and CEO Brian Niccol. This week, those signs percolated. Positive same-store sales in the US in the most recent quarter. Strong growth in China again. At a New York City investor day, Starbucks signaled it could keep the turnaround on track through new drinks, new food, an upgraded rewards program, and even remodeled restaurants. Brian is here with me at Yahoo Finance HQ. Yahoo Finance senior reporter Brooke DiPalma is here as well. Brian, there's no coffee. I mean, you didn't bring any coffee behind us. Come on, man.