Podcast Summary: The Compound and Friends

Episode: Dan Ives: Still the First Inning for AI
Release Date: January 31, 2025
Hosts: Downtown Josh Brown, Michael Batnick
Guest: Dan Ives, Managing Director and Senior Equity Research Analyst at Wedbush Securities

Introduction: Dan Ives Appreciation Day

The episode kicks off with a celebratory tone as Downtown Josh Brown and Michael Batnick introduce Dan Ives, highlighting his extensive experience as a tech equity analyst on Wall Street for over two decades. The hosts express their enthusiasm for having Dan on the show, emphasizing his expertise in the rapidly evolving AI landscape.

Notable Quote:

Josh Brown [00:00]: "Today is Dan Ives Appreciation Day at the compound."

Deep Seek and Chinese AI Competition

Dan Ives delves into the recent surge in AI developments, particularly focusing on Deep Seek, an AI model that has generated significant buzz. He discusses the timing coinciding with major events like CES in Las Vegas, where Chinese tech players prominently featured, indicating China's strong push in the AI sector.

Notable Quotes:

Dan Ives [00:44]: "There was a lot of Chinese tech players at CES this year."

Josh Brown [01:06]: "It was wise and thought. I felt like Joe was a week before everyone."

Dan emphasizes that the recent AI advancements are a "shot across the bow from Beijing," highlighting geopolitical implications, especially concerning companies like TikTok and ongoing tariff negotiations. He reassures listeners that, despite market fears, AI investment remains robust.

AI’s Impact on Big Tech and the Stock Market

The conversation shifts to the broader impact of AI on big tech companies and the stock market. Dan underscores that focusing solely on financials misses the transformational potential of AI. He argues that generational tech names thrive by looking beyond near-term numbers to the long-term AI-driven revolution.

Notable Quotes:

Dan Ives [04:04]: "If you just focus on financials and just near term sort of numbers, you've missed out on every transformational tech stock the last 20 years."

Dan Ives [05:23]: "When things are tough and you're going through white knuckle moments in our 25 years, that's how we've separated ourselves."

Dan categorizes the current market turmoil as a "white knuckle weekend," comparable to significant historical market events like Black Monday, but more intense due to fundamental reasons.

MAG7 Earnings and Valuations

The discussion turns to the MAG7 (a group of top seven tech stocks), examining their earnings growth and valuation multiples. Dan presents a nuanced view, suggesting that despite high forward Price-to-Earnings (PE) ratios, the expected growth justifies these valuations. He believes that the street is underestimating the long-term AI-driven revenue potential.

Notable Quotes:

Dan Ives [29:00]: "My view is double, double."

Josh Brown [40:50]: "Valuation has nothing to do with what's going on because we have chart 8..."

Dan Ives [41:12]: "Numbers are going from 50 cents to $5."

Dan argues that companies like Nvidia and Microsoft are positioned to capitalize on AI, predicting substantial earnings growth that surpasses current market expectations.

Apple and Meta’s AI Strategies

Dan and the hosts explore how Apple and Meta are navigating the AI revolution. Dan is particularly bullish on Apple, citing its App Store ecosystem and strategic partnerships as key advantages. He contrasts this with Meta's focus on AI-driven services and massive user base, predicting significant monetization opportunities.

Notable Quotes:

Dan Ives [19:59]: "It was a shot across bow from Beijing... AI will benefit Apple because they own the consumer AI revolution."

Josh Brown [21:33]: "They could be building a generative AI app store for Apple in the coming years."

Dan highlights Apple's strategy of integrating AI into its vast ecosystem, enabling developers to build generative AI apps that leverage Apple's hardware and software synergy. Similarly, he praises Meta's ability to monetize its 3.3 billion Daily Active Users (DAUs) through AI-enhanced services.

Tesla’s AI Ventures: Autonomous Vehicles and Optimus

A significant portion of the episode is dedicated to Tesla's ambitious AI projects, including autonomous vehicles and the Optimus humanoid robot. Dan discusses Elon Musk's vision of transforming Tesla into a leader not just in electric vehicles (EVs) but also in robotics, predicting that Optimus could surpass the car business in scale.

Notable Quotes:

Dan Ives [55:18]: "Autonomous and robotics will dwarf the EV valuation."

Josh Brown [55:11]: "Elon could basically do whatever he wants now. His earnings were not good."

They debate the feasibility and timing of Tesla's projections, with Dan expressing confidence in Tesla's ability to innovate and scale its AI-driven products despite current financial setbacks.

Bear Cases and Market Reactions

Dan addresses common bear cases against AI-driven tech investments, such as skepticism about capital expenditures (CapEx) and the sustainability of high valuations. He dismisses concerns about AI models being a fleeting trend, arguing that AI CapEx is firmly entrenched and will drive long-term growth across various sectors.

Notable Quotes:

Dan Ives [37:45]: "The best bear case is having a window where you need SLA use cases to launch killer apps."

Josh Brown [38:15]: "The bear case that I hear most about is there's a warehouse filled with GPUs..."

Dan emphasizes that the bear cases are often based on unrealistic scenarios or misconceptions about AI’s role in corporate strategies. He maintains that real use cases and sustained investment in AI will validate the market's bullish stance.

Final Thoughts: The Future of AI and Tech Investments

In the concluding segment, Dan reiterates his bullish outlook on the AI revolution, emphasizing the transformative potential of AI in both enterprise and consumer sectors. He anticipates increased market concentration, with leading tech firms expanding their dominance through strategic AI investments and acquisitions. The hosts and Dan also touch upon the importance of understanding the broader ecosystem and the multiplier effect of AI-driven CapEx.

Notable Quotes:

Dan Ives [43:16]: "The first two years of this build out is enterprise AI."

Dan Ives [44:22]: "If you combine your bullishness on these tech names, you have to be bullish on energy as well."

Dan predicts that the AI-driven expansion will lead to significant advancements in areas like autonomous vehicles, robotics, and enterprise solutions, further solidifying the roles of tech giants like Microsoft, Apple, and Nvidia.

Conclusion: Looking Ahead

The episode wraps up with the hosts and Dan sharing personal interests and future plans, maintaining a light-hearted and engaging atmosphere. Dan mentions his upcoming trip to Asia to gain ground-level insights into tech developments, while Josh and Michael share their own anticipations for upcoming events.

Notable Quote:

Dan Ives [74:32]: "I'm looking forward to that trip because everything we're talking about here, that's feet on the ground."

Closing Remarks: The hosts extend their gratitude to Dan Ives for his insightful analysis and encourage listeners to follow his research for a deeper understanding of the AI-driven tech landscape.

Key Takeaways:

• AI Continues to Surge: Despite market volatility, AI remains a core growth driver for top tech companies.

• Enterprise vs. Consumer AI: The initial phase focuses on enterprise applications, with consumer AI ecosystems like Apple’s App Store poised for significant expansion.

• Bullish on Big Tech: Companies like Nvidia, Microsoft, Apple, and Meta are well-positioned to capitalize on AI advancements, justifying their high valuations through expected long-term growth.

• Tesla’s Ambitious AI Goals: Tesla’s ventures into autonomous vehicles and humanoid robots highlight the broader AI revolution's potential to redefine industries.

• Market Resilience: Bear cases against AI stocks are often based on misconceptions, as sustained investment and real-world AI applications continue to drive tech market strength.

For a deeper dive into these discussions and more expert insights, listen to the full episode of The Compound and Friends.