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And they need to ultimately make these steps because it does speak to the broader software trade. When you think about Palantir, Snowflake, Salesforce, call it a step in the right direction, now Oracle, you know, definitely better days ahead from the SAS apocalypse that we saw, you know, even a few months ago.
Dan Ives says to buy software stocks and Tom Lee says that if the Fed raise rates, it will not hurt the AI boom. I'm Andy and welcome back before we start, let's check out this video from Dan Ives explaining a little bit more in depth. earnings as well as the broader tech trade, let's bring in Dan Ives.
He is a partner and senior managing director of Yorkville. Ives, Dan, it's always good to see you. Great to be here. Um, do you like Oracle here? Look, I do in my view, when you think about the RPO and really like the revenue that they have in the backlog, I think the street is almost assuming 50-60% that never happens.
So they think they're going to be able to build out the data center and the conversion of revenue. I think this was a big step in the right direction. And look, this is a penalty box stock. I mean, New York City cab drivers are embarrassing Oracle and they need to ultimately make these steps because it does speak to the broader software trade.
When you think about Palantir, Snowflake, Salesforce, call it a step in the right direction, now Oracle, you know, definitely better days ahead from the SAS apocalypse that we saw, you know, even a few months ago. I'll ask you the following question. Is Is it not necessarily all clear for software, but you got to get some tailwinds now on the back of a couple quarters, Adobe and some other names notwithstanding.
Well, so institutionally, investors, they're caught offsides. So they're going to have to definitely adjust to owning more software because the software has really been a do not enter zone. And when you think about earnings and what we've seen across the board, the data points are now lining up where I wouldn't say it's an all clear because Adobe's a good example, but still a lot more work to chop, but definitely huge step and you're going to see software I think outperform as we go into the rest of the year.
So Dan, what gets them out of the penalty box? I mean, cuz again, I I thought these numbers were good enough, um, especially with the sentiment. What do they have to do? Look, Rome wasn't built in a day, so they're going to have to show a few more quarters cuz I think investors, going back to what Nathan talked about, you know, when you had the open AI at 300 billion, now they want to make sure that these data centers are going to get it built.
So I think they they did a great job in the conference call and speak solely like terms of what they're sort of navigating, but now they got to show it a few more quarters. Street's not going to give them credit for just one quarter. So, if if we don't really think of Oracle as a proxy necessarily, who what would be?
Who would be? Who's the most important? Is it Nvidia or someone else at this point? Yeah, I think from a software perspective, I think I think what you're Yeah, so I think I think the biggest dynamic change was from Palantir to Snowflake cuz that really showed that software trade is now on. The use cases are starting to happen, the second, third, fourth derivative.
But it all does it starts and ends with the Godfather of AI, Jensen Huang Nvidia. They have the best perch. And I think when you actually see what demand and supply is it's playing out, now you're going to start to see second, third, fourth derivatives play out across software, infrastructure, cybersecurity.
Go back cybersecurity, when you look at CrowdStrike, Palo Alto, those are good examples. Hey, so Dan, the SOX really um had that move, right? It doubled from I want to say mid-spring to, you know, the end of Q3 uh Q2 in the end of June, and you know, it's really chilled out, it's down about 20-so percent.
It's really gotten stuck in the mud here, but we just mentioned Nvidia, it really did find its way back towards those prior highs. And when I think about what's going on here, that bifurcation doesn't make me more bullish about semis. How are you thinking about semis? I I Listen, I think that a lot of folks have been on this Nvidia train, Karen, never got off of it.
You've been on that same way. Um but it seems like right now, it seems to be a safer place to be than companies like AMD or Intel right now given where their positioning is relative to, you know, like, you know, trying to take on Nvidia. Yeah, no doubt. And I think you're going to start you're going to see more investors make that sort of bet.
Look, the reality is demand and supply today in chips, based on what we see in Asia, is 13 to 1 in terms of demand and supply. So, that spillover effect is of course not just Nvidia, it's going to be Intel, it's going to be AMD. And I think what you see on the semi side, and there's always the question, could semis and software, could they actually both outperform?
I think part of what you're seeing now, the hyperscalers from Microsoft really being front and center, you've seen a lot more money rotating to that. But you put it all together, we're in the third inning of the AI revolution trade, but they're not all winners. I think Adobe is a good example when they're going to have to prove it more and more.
But software now, it's we'll call it somewhere between a green, you know, a light green relative to how investors are viewing your color of your jacket? Kind of like this. It doesn't say a bright green, but now investors feel more of an all clear you can go after software. Like a chrome street. It's not that easy it's not that easy.
It's not easy. It's like a lime green actually. Software stocks might be making a comeback so be on the lookout especially for stocks like Adobe and Palantir. Now let's take a look at what Tom Lee has to say regarding a potential interest rate hike. Uh it might actually help quite a lot more in cuz we know the AI uh infrastructure build is really asking a lot of the debt markets, right?
As a percentage of total issuance it's growing and we know this is ultimately, you know, a 30 trillion dollar infrastructure build. So it is quite inflationary and the bar is high. I mean these companies probably can justify their spend even if the Fed raises rates 100 basis points. I think that's the challenge that the Fed raising rates is is probably not going to solve or slow down the AI spend.
Uh so it's good to see the industry sort of take other reasons to actually slow their expansion. So according to Tom Lee a little rate hike will not stop the party and in fact it might pump it up a little bit more. So I have this article from Barron's that actually confirms this, right? So let's take a quick look at it.
So let's take a look at this article guys where the title is why a rate hike could actually be bullish, right? So it's pretty much saying rate hike could be bullish for the stock market. Well it says this spike certainly hasn't been helpful for the stocks which is about flat since June even as analysts have ramped up earnings expectation for 21 straight week, right?
So it hasn't been a catastrophe either but concerns over rate um destabilizing equities are real but uh the tech euphoria creates a high bar for macros, right? Benjamin Bowler the head of global equity derivatives research at Bank of America. So in other in other words, right? I'm going to go ahead and highlight this for you so you can see better.
So in other words, excitement over artificial intelligence is such a big driver that investors are shrugging off the rate rise. But I'll also point that this happened in 1990s as well when the 30 year yield rose 2% and the Fed hike by more than 1% as the Nasdaq partied hard, right? So, um So, you know, highlight this one for you, too.
So, it say equities um to bounce hard from any pullback as it didn't do in the dot-com era and more recently, so he advised. So, whatever pullback that actually happened in the stock market is going to really incentivize um you know, people to come back in and buy actually more, keep buying the dip because the AI boom, the AI wave is still pushing strong and the rate hike is not going to stop it just because it's it's so bullish right now.
So, if the downward if the downward pressure resumes, right, buyers might come out of it my in force um Let me Let me say this one again. So, if the downward um So, if the downward pressure resume, the buyers might come out in force, right? And they will certainly won't be the swayed by slightly higher short-term rates, right?
So, normally when interest rate um go up, right, stocks are supposedly to cool down, they supposed to slow down, right? As as how that's that's how the market works. Essentially, but right now, the party is so strong, the you know, the AI crave is so strong, people want to get in the AI, they want to make money, you know, investors, um retail traders, everyone want a piece of that.
So, the the the the the uh stock market will continue to be strong even if there is rate hike because of the CPI inflation number that came out to my inflation is a little higher than normal uh higher than expected. So, regardless of what happened, guys, rate hikes or not, the party will continue to be strong.
Um but be mindful there is going to be probably a drop soon, right, around mid-term election and then things will kind of reverse and go up again. But yeah, that's all I have for today, guys. Uh thank you. So, guys, I own an accounting firm that offers business tax preparation and bookkeeping services to business owners, right?
So, at the moment for bookkeeping, I'm offering 2 months free. So, make sure you take advantage of that. I'll go ahead and add the link down below so you can book a free consultation with me and my team. I am an enrolled agent with the IRS, which is basically a certification that specializes in business taxation.
So, thank you guys for tuning in. Um, I'll put I'll put the link down below. That's it for today, folks. anything. Thank you for tuning in and see you next time.
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