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The third-quarter earnings season is underway, and the biggest names in technology will be reporting later this month. Of course, it will give us the latest reading on how much companies are spending and earning on artificial intelligence , which has driven markets to constant all-time highs. Here's more information on what to watch for from Dan Ives, managing director and global head of technology research at Wedbush Securities.
Dan, it's a pleasure to see you as always. We are entering earnings season for these companies at a time when there is a debate about valuations. There is this debate about the so-called circular economy, about how much they are all spending on each other. What will you focus on in these results reports ?
Yes, Julie. I would say that Wall Street continues to vastly underestimate what this technology cycle will look like. I think it's an AI supercycle. And I think these third-quarter results will be much more of a validation moment not only for the chips, but also for the software. And I think the overall picture will keep the bears in hibernation mode.
The last two and a half years have been lost and this bull market, which I believe has another two years ahead, will continue to be lost. It's interesting, because I haven't spoken to that many bass players, have I? Bass players, straight-up bass players, are hard to find in this genre. It's more the message that maybe you should start diversifying a little.
It's not that you necessarily have to sell, maybe take some profits and put them into some of the smaller companies in the sector, or out of AI altogether, because perhaps we are in a small period of respite. What do you think of that argument, Dan? Look, I understand. But my opinion is that we are in the second entry of a cycle of nine entries.
So, talking about moving away from AI is like people moving away from AMD a month ago. From Oracle, six months ago. Or from Nvidia , a year ago. My point is that Wall Street is underestimating what this cycle will be like. And I think that, ultimately, in the next year or two , the figures could be underestimated by between 20 and 30%.
And I think that's why the third quarter results will be further validation, demonstrating that use cases have skyrocketed. At the same time, what do you think of The Information's report on Oracle's margins and that they're simply, uh, not making money on this, or that, you know, the current return on investment calculation is very low on some of these projects?
Yes, I see that as some noise. I mean, to be honest, every time there's a massive sale on items like that, you just buy them. You know, regarding Oracle, because I think that ultimately, as this plays out from both a government and business perspective, look, for the first time in 30 years, the US is ahead of China in technology thanks to this AI revolution.
And I think we'll look ahead and talk about things like the Nasdaq at 25,000 or 30,000, while the bears or valuation-focused investors are going to miss out on this streak. Just as they missed it in recent years, just as they missed it in the last decade. I see this as a kind of fourth industrial revolution, and I think Wall Street continues to massively underestimate what demand is like.
Dan, what would make you doubt? I mean, I've been talking to you for a while. You've been optimistic for a long time. You were right for a while, weren't you? We've seen these stocks; they haven't gone up in a straight line, but they've obviously appreciated a lot. Is there anything that would make you change your mind, or if not change your mind, at least slow down a bit?
Look, 3 million airline miles in the last 25 years, right? I see it all over the world in terms of demand . Many bears refer to this in 2024 as their New York office building because they can't find it on spreadsheets. So, I think if I see demand softening, if I see use cases not exploding, if in the end I see that the demand trajectory in terms of the second, third, or fourth derivative is like our 30% probabilities, then you stop.
But right now it's accelerating and I think that's going to continue; Look, we're in year three of a 10-year cycle in terms of this expansion. Dan, we just put on screen that you are also, of course, the president of a company now called Eight Co, whose ticker is ORBS, because it manufactures these orbs that, what, scan your retina?
It's, it's, it's identity verification. You announced something new today. And I have to admit that I don't fully understand it. So, can you explain this business offer that Aiko has now ? Yes, Julie. I mean, the reality is that as companies go down the AI path, and you eventually see trillions being spent, you're going to need authentication, a single sign-on for companies to verify their employees, their partners, you know, anyone in their ecosystem.
And what we're really announcing today is going down that path of authentication. We're going to carry out a series of pilot partnerships, you know, with many companies that have contacted us, and we hope to finalize them in the coming months. And for me, this indicates that it will play a fundamental role in the human testing infrastructure.
Because when you think about the future of AI, robotics, bots, you're going to need education provided by humans. That's all we're doing at Eko. Um, Dan, it's...so, how exactly would this work? I mean , we just saw the footage of you when you rang the opening bell for that. You were holding the orb, weren't you?
Mhm. So, will everyone have one on their desks in the future? It seems a bit cumbersome when right now I can just put my fingerprint on my computer or, you know, use my eyes to unlock my phone. So, how exactly do you envision that working? Yes, well, almost 17.5 million people have already registered for this.
You know, in terms of, you know, getting the iris scanned close to the eye . And that's something that each person has individually, and that's in the world. Basically, it disappears after 15 seconds, goes straight to your phone, goes to your World app, and that's the verification. Because my point of view , and it's our point of view, is that in the future, Face ID, showing your driver's license, the traditional forms of, you know, identification.
That's not going to be in the world of AI; that's not the path it leads to. And I think when it comes to human testing, we think that the orbs and everything that Sam Altman and Alex have built, that's why, you know, we're such believers that this will be the single sign-on for the future of AI. Um, Dan, when you left your regular job, you're now president of this company that does the same thing, this verification.
What does the path ahead look like for Dan Ives? Look, it's just...it's another hat, right? That is, just like with my ETF and, you know, many of the other initiatives. For me, look, I'm a passionate believer in the AI revolution, from technology analyst to chairman of Eko and Orbs. This is simply the future, this is the future.
I mean, now I think this is really just the beginning of a fourth industrial revolution. Playing a part in it is very exciting on both fronts. And that's how you and I have talked for many years. This remains the biggest technological trend we have seen in the last 40 or 50 years. Dan, I want to ask you something else.
And I ask you this as someone who appreciates and respects you. And obviously we've talked for a long time. How is it not a conflict of interest to be at the head of a company or president of a company that does this type of work and , at the same time, offer this investment research that, you know, clients can trust you to be...
I mean , impartial was the word I was going to use? We know you're not impartial. You love this. You love technology. You are very optimistic. But how do you deal with that when you're wearing these different hats? It's completely separate, Jill. In other words, the work I do as an analyst is completely independent of this.
I mean, this is very focused, you know, on AI, on Worldcoin and everything we've done with Sam Altman, Alex, and my belief that this will be the single sign-on for the future of AI. Actually, it's a completely separate role from my function at Wedbush as head of technology. I think investors really understand everything I do, just like with my ETF, there are many things I 'm really focused on, but it all connects under the same theme.
The AI revolution that, in my opinion, will change the way consumers and businesses will act and transact from now on . Well, Dan, those Orbs shares went up 23% today. Not bad. It's nice to see you. I like your shirt. That's a shirt on another level. It 's not the kind of shirt I've ever worn, is it?
I hadn't even thought about it. That shirt. I could use it for Isles' clothing line, but Julie, that's another level. I'll let you know, I'll let you know and I'll tell you where I got it from . It's great to see you, my friend. Thank you.
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