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[ you are listening to Bloomberg Daybreak we want to get right back to the tech earning story Microsoft and Google parent alphabet are both on the rise this morning delivering results for both companies that suggest investments in artificial intelligence and cloud computing are paying off now for more on these results we're really pleased to be joined by Jean monster managing partner at water asset management and Dan Ives in our studio this morning the Interactive Broker Studio senior equity research analyst at wedbush Securities for a Roundtable discussion on these results it's great to have both of you back on with us this morning uh Jean I'll start off with you is the AI narrative back on track now uh absolutely I think the only off track was what happened with interest rates and I think it kind of spooked some tech investors but this is a pretty unique Dynamic we're seeing not only in terms of the demand side whether it's Nvidia or AMD they just breathtaking re acceleration but also the on the demand side for the actual products not just building but what we saw with Google cloud and Azure Azure growth 31% versus 30% in December 29% uh that is a acceleration by definition the same thing is going on with Google Cloud we'll wait to see next week from Amazon but I think the big picture here is the building blocks of AI are coming nicely into place we're still a year two three years out before the applications really take off but this is I think still the first stage of a 3 to five year bull market that's going to uh ultimately end in a bubble Dan I think I saw you on uh Bloomberg television earlier this week after we got the disappointing results from meta platforms you were saying the knives are out between the Bulls and the Bears are we going to be on a continued dispersion between where some companies go with tech like Microsoft and alphabet and where companies like meta go with it yeah look but when you look at meta they're spending like 1980s rockstars but where they spending on AI and I think the AI Revolution is here I think Gan as always did a phenomenal job summarizing if you look at these results last night this was a drop to mic moment for AI from alphabet from Microsoft this 1995 movement is just starting and that's why I think the Bears for Tech continue to go in their caves into hibernation mode we are seeing from both these companies though Jean that they are expecting that they're going to have to continue ramping up spending on this technology could that potentially pose a headwind if we continue to see a ramp up in capex it let's put the capex the simple answer is investors need to get their heads around what this is going to cost for an investment phase and agree with Dan this is the right move to be making these investments just to put some quick context on this as Google's capex grew 91% the the C that year-over-year in the March quarter the capex number was 21% higher than analysts we're looking for for March and yet the stock is up and the reason is last quarter they said three times to expect a significant acceleration capex so they did a good job of explaining to investors and I think this uh is the absolute right move for these companies a question I had for um for Dan is just uh ultimately uh will M will will Apple as they start to talk about their AI initiatives have some moment uh coming up maybe on May 2nd where they start to talk more about their capex and how do you think investors are going to view that I look I think Jean summarizes right now with apple because the AI story is going to be coming to copertino and you know G and I will both be you know focused on WWDC this is just the next phase now of copertino betting on AI and and that is going to create a ripple effect where we believe this is a trillion dollars of incremental spend over the next decade betting against that in my opinion it's like betting against Knicks in his playoffs still the ways to go on both those counts though but uh looking ahead to uh the whatever announcement we get from Apple next week I mean we saw the the disappointment from meta platforms they're focused as well on some of the hardware the the quest device and what that could mean in terms of applying artificial intelligence into that how high is the bar for Apple to show that you know there's been so much question about whether they're actually implementing AI quickly enough to put it into their uh Vision Pro product Dan look and I think actually right now expectations are very very low and extremely negative I think New York City cab drivers bearish an apple and that's why I'd love to hear Jean's view my view is in terms of this Renaissance of growth it will be on Horizon they're they're navigating challenges but is AI come into the services as well iPhone 16 that is not what I view as sort of a small moment I think this could be a big moment I like to get Jean's thoughts there yeah I'm on the same page I think investors are largely dismissive of what Apple's going to do in Ai and they've got a uh just a wonderful opportunity ahead of them specifically related to this agent or personalized AI or Zuckerberg referred to it on the call as a gentic AI but because of Apple's forward View on privacy I think that gives them an opportunity to build this next generation of AI uh agents that basically will get things done for you we're not going to see that in at WWDC agree with Dan that's going to be a big event uh for AI and apple but uh that'll probably be more related to Syrian some improvements there but I think this concept of agentic AI and what it can mean for Apple's business longer term is is grossly underappreciated by investors speaking with Jee mster their deep water Asset Management managing partner Along with Dan iives of W bush Securities the senior equity research analyst in terms of what we saw guys from Microsoft and alphabet I mean there's a lot of focus as well on the Enterprise customer the application of this technology in the cloud is that where the growth is as opposed to uh some of these more consumer facing products like uh what you know what meta is offering in the metaverse or perhaps Vision Pro from Apple I mean to me it's all about the Enterprise in the near term this AI Revolution is playing out in front of our eyes and now the second third fourth derivatives across softw rest Tech we're seeing play out it's of course it starts with The Godfather of AI Jensen Invidia but when when Redmond and the Dela talks everyone listens and that's why I think it was another drop to Mike quarter not just for Microsoft but of course alphabet now getting in on the AI party so the this sets us up as well for what we're going to get from Amazon next week in terms of their offerings in the cloud Amazon web services Jean how high is the bar now for Amazon to deliver the kind of results that we did see from uh Microsoft and alphabet last night it's pretty high I mean it's uh last quarter they grew their AWS at 133% that compared to 12% in September so they saw a slight uptick again we're talking 29 31% for average for Azure and Google Cloud so AWS even though they have leading market share they've been losing share they've got to show an acceleration the street estimates are for 15% growth in AWS and I think they need to exceed that to uh kind of comfort investors that AWS has a seat at the table and the other piece to all this is of course Google has what they're doing with Gemini that helps feed GPC their Cloud GC p and separately of course what openingi is doing with Azure all that benefits but when it comes to AWS they have a relationship with anthropic but they still just don't have that punch when it comes to uh really integrating Ai and so I think that investors they always scrutinize the AWS number it's going to be hypers scrutinized next week and Jee I'm glad you mentioned uh Gemini product because there was that stumble uh over you know how it depicts race of some people they had to uh pull back on that uh Dan did Microsoft get past that in ter I'm sorry did Google get past that in terms of what they're offering on Gemini look black ey moments that they saw they're ped it and I think this is the Mojo now returning to Google it's I think you're really starting to see a new phase in terms of AI but it comes down to in this AI party they're no longer outside in the cold waiting online to get in they're now in the party with nadela Jensen Nvidia and uh speaking of nadela and uh Microsoft you recently Dan raised your price Target on Microsoft to 500 are you thinking uh things might need to go up even further after these results I think it's get out the popcorn M this is just getting started I think a year from now it's a $4 trillion Mark cap where are you on that Jean I mean the growth of these companies has been so staggering I mean just in this quarter they deliver for investors what's the runway for big Tech over the next several years I think you have to ask yourself the question do you believe that AI can be transformative and to what level you believe that and you listen to Dan and I you can you can sense the optimism we have around this if if you have that level of optimism these companies are going to continue to go higher because they have data because they have infrastructure uh the small companies aren't going to come out of nowhere we do private investing and it is really hard to compete with the big dogs and so I think despite all the value of creation over the last decade from some of these big companies we're going to see a next wave because what's happening in AI puts what happened on mobile internet and PC those are small um Paradigm shifts relative to what's going on and these companies got the poll position I'm going to close this out with you Dan uh of course with this kind of growth it raises the questions for a lot of critics about whether this technology is growing too fast whe could be dangerous your thoughts on that look I mean I I think even to to to Really show how strong this technology is you see it last night the technolog is going 95 miles an hour leftway in a Ferrari the regulatory is in a beat up minivan going 45 mil an hour in a right lane with no radio the point is that is going to be an issue but it is not stop in this free train and and that's something it's going to be more self-regulation but to me it's all about the growth and that and I think when you look at last night it was a Dro in mic moment for Tech and we are seeing that certainly reflected in the price action this morning both companies leading Tech shares as a whole higher with uh Microsoft leading the I'm sorry with Google parent alphabet leading the way a gain of more than 11 and a half% following results for the uh Google parent and Microsoft is higher by nearly 4% as well this morning guys both of you thank you so so much uh for giving us some insights on these earnings Dan Ives senior equity research analyst at white bush Securities along with Gene mster managing partner at Deepwater Asset Management
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