Tech's Big November Rally, Apple's Path Forward, The State of Tesla — With Dan Ives

0:00A leading tech analyst joins us to talk about tech's November rally, the state of Tesla, AI, Apple, and more. All that coming up right after this. Booklet and Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. And today, I am excited to welcome Dan Ives to the show. He's the Managing Director and Senior Equity Research Analyst at Wedbush Security. He has his finger on the pulse of so many important tech companies, including Tesla and Apple. We like to go back and forth a little bit on CNBC. I think I'm a little more negative on Apple, and he's pretty positive.

0:33So far, he's gotten the best of me in those debates. Dan, great to have you. Welcome to the show. Oh, it's great to be here. And just to be on with you, I think you're one of the best technology minds out there. So I'm really looking forward to this. Thank you, Dan. And likewise, I'm reading all your notes. You write prolifically about the tech world, and it's always fun to talk with you on CNBC, and I'm grateful that you've chosen to spend some time with us here today. So thank you so much. Oh, yeah. It's my pleasure. So just to set the table, let's talk a little bit about what's happening in the market.

1:06So, you know, we're hovering with pretty high interest rates, right? So you would imagine that there would be a slowdown, but the S &P 500 is up 20 % on the year. And not only that, it closed November up 9 % and the NASDAQ was up 11%. So it was this very large rally. I mean, the year is unbelievable right now in the S &P, powered almost counterintuitively by big tech. What exactly do you think is going on there? Look, I remember we went to lunch right before earnings season. Look, I think the biggest thing is that institutionally, very negatively positioned into 3Q earnings season, expecting soft guidance, soft numbers, a macro where a hard landing, I think, was still being baked in.

1:57And it's actually the opposite. I mean, we've seen tech be as resilient as really any other phase that I can remember going through a choppy macro like this. I think AI has gone from just NVIDIA to now hitting the shores of tech in terms of real spend that we're seeing across from Microsoft to Amazon to Oracle and others. and when you go into next year it's like look i think now we're gonna have a fed that cuts you get so much money on the sidelines unless you have a telescope from a planetarium it's hard to find that recession and i think investors are are now focused and be like okay like is this the start of the new tech bull market and i believe it is i'm not saying we're not going to have some choppiness going into January, but I believe tech stocks will be up another 20 % in 2024.

2:59You now think that we're about to enter this big bull market in tech. And in fact, you have a note out Tuesday talking about how we're on the way. The subject line is heading into 2024, we see a new bull market for the tech sector. And one of the things that really drives your thesis here is that you think that we might not see a lot more spending in enterprise, but cloud and AI-driven spending, this might be up 20 % to 25 % over the next year. Here's the thing that I really want to seize on, though. You say that there are use cases that are now exploding across the enterprise and consumer landscape.

3:38So, Dan, what are the use cases that you're seeing? Because I think for people on the ground level here, one of the big questions about AI is we're hearing so much about it, but we're not seeing it actually put into too many products outside of the big Microsoft co-pilot type of thing. So where are these use cases that you're seeing? We've done surveys the last few months. We have over 80 use cases right now. And these are enterprise. I just want to differentiate. I think it's head-ax the amount of spending in enterprise as the consumer landscape. So when we look what's happened across financials, insurance, hospitals, regulates on the government side, on the cybersecurity side, it's what I view as probably the biggest transformation we've seen ever.

4:34I just heard Gene Munster, who's another analyst, talk about how like this is a 99 and the web is a 50 in terms of a 1 to 100 importance scale. I think maybe FIRE is 100 or something like that. I'm just not convinced this isn't big data 2.0. Like big data was this big revolution where like you all of a sudden could make sense of things that you couldn't before and it would provide clarity and allow organizations to do what they couldn't do previously. So why is this so different? But I don't think you're wrong. I don't think you're wrong in that view. Like my view, it's somewhere in between. So in other words, let's say I'm going after Alex as a customer.

5:18For 10 years, Alex is just paying maintenance. And, you know, every once in a while I buy a new module. Alex is a billion-dollar company with an IT budget that's, let's say, 30, 40. That's an accurate description of big technology, by the way. No, but... I'm kidding. And I know you're... Hypothetically, yeah. And I know at big technology, yours is a lot bigger. But let's just say, hypothetically, you know... Okay. So now all of a sudden, Alex is calling me the vendor, being like, show me how I could spend. Where are the use cases for my company? So now Alex, that was just paying maintenance, a few modules a year, incremental.

6:11I come in for a bake-off once a year. Now you're calling me. I'm a vendor. I come in. that's why when you look at salesforce adobe oracle you know name your pit these install based plays it's your point like with the big data 2.0 it's opening the door to now conversations deployments beta that was not there because and now you actually have the functionality to present much more compelling ROIs than you had before. So I think it's somewhere in between. And I don't think you're wrong at all. And I think there's many that have that view, but it doesn't... It could be a 1995 moment, or the way Gene puts it, or the way that you put it.

7:09But either of those, that's going to be a huge talent to enterprise spent, like regardless of which word it is. I think at the end of the day, that's really the difference. It's like, it doesn't, like Tom Brady is not going to be Tom Brady every game. But over the course of a season, what does it look like? Yeah, no, and I definitely allow for the fact that like it might look like Big Data 2.0 right now. but this technology has this opportunity opportunity to be exponentially more impressive than anything we've seen before if it keeps improving at the rate that it has been improving and you're saying that of all these companies just microsoft is kicking butt dude they're like it's like look it's just it's actually unbelievable just their ability to just win what eight of every ten nine of every ten big ai deals yeah because also like their their microsoft shop it's foundational on azure the app copilot you got to open it look that's also why like for jazzy and for curry and at google for what we see in oracle with safra it's playing catch up.

8:36Right. Yeah. And I definitely wanted to go deep into this with you because Dan, one of the things that I love about the work that you do is you go meet the customers, you go to China when you want to talk about, you know, what's going on with Apple. And it's very interesting to hear your perspective on this is especially as it relates to where the tech stocks are going to go next year. So let's just talk a little bit about the biggest tech stock, which is Apple. I mean, you make these trips out to the manufacturers to talk a little bit about what demand is going to look like. I'd be curious to hear your perspective on the state of the company today.

9:17iPhone 15 has released. It's in market. I have one. I like the phone. But the thing that Apple's coming up against is the fact that the phones work well enough that people don't want to replace them as often as they used to. So, and we've seen, what do we see? How many quarters of declining revenue has Apple had? Like maybe four or five in a row. And, you know, iPhone makes up such an important part of the company's revenue makeup that you just kind of wonder, like, what is the trajectory of this company? You're a bull on the company, obviously. What do you think the answer is? look at my again I've always like I always really take issue with everybody people like odds declining whatever and I always be like look you have 600 bicks of currency had one right so like in actual outage you know cons currency growing but Mac iPads that's not the focus right now iPhone units are growing the the asps you're going further and further upstream after selling price yeah 9 25 9 50 maybe a year ago 8 25 8 50 and services is a key part to the monetization right i think service is now going back double digits i think services is worth 1.4 1.5 trillion look you hit on like no doubt like the biggest issue is that like people become 99 % keep their iphone they upgrade they were upgrading every two years now it's close to every call it three and a half to four years you're going through a cycle here that clearly is going to be better than i think expected at least you know going into it but it's like what's next and that's why i think like look I think for Apple, what's next is you got to continue to hold a lot in China.

11:17They gain share. Huawei comes in essentially what's called an iPhone 12 from a technology perspective. Huawei's come in it with you got a whole court. That's essentially what they've had to do in China and so far so good. Right. But I think from a stock perspective, because I see on Twitter all the time or from institutional investors, where I think people have miscalculated or underestimated is that when you have an install base like that, the ability to monetize is unparalleled. It goes back to Blackberry, Nokia, everyone got to the user growth, they were warning where Mod has it, services, software.

12:02I think we're just in the next phase of the Apple growth story from a monetizing the install base. Right. I think it would be worthwhile to just talk a little bit about, this is a bit of kind of inside baseball, but I think it would be worthwhile talking to folks about how you come to your beliefs in terms of how many iPhones are going to ship. I mean, you just said that you have belief in this iPhone 15 and that it's going to be a better cycle than people expected. You know, some people, when they say that, they guess, right? Like they triangulate based off of like five friends and they're like, well, three out of 15.

12:46So it seems like it's going to hit the number. But you actually go out to the manufacturers in China and Taiwan, I think. I mean, you talk a little bit about your process because, you know, even though it's inside baseball, I think it's pretty fascinating. And that's across Wall Street. I mean, if you look like for any technology analyst, semiconductor analyst, typically they go to Asia four times a year, sometimes more. And it's really trying to understand, you know, and you could, if you look at the component parts, let's say the iPhone, there's basically a food chain. I mean, it's really, it's a bottoms up, it's essentially a bottoms up way to come up with a guesstimate of where you believe demand is.

13:30So if you talk to suppliers and suppliers are not positive or they're not building out and they're actually cutting production, that's a negative. so i always view the checks that you do in asia as directional but not exact right so let's just go back to like um the yeah everything that happened with the whole like the shadow ban like that was going with the iphone remember like when everything happened like government shadow ban like going into iphone 15 well let's actually no no no let's talk about what what happened there articles come out that there's a shadow ban that basically government employees within china are not being allowed to buy iphone like they can't bring them into work now now this just goes back like i'm just walking into like my so i wake up in the morning see it i'm like i'm like how's that like i'm like in my mind like just being around the region for my whole career i'm like as a government employee you'll never bring an iphone into a duck you typically leave it at home you have another phone that's always been like that frapp like they're always trying to like within china and like i haven't heard of anything like that so i was like that's one where like we have to spend the day doing our work you know within the region to see if this is something that changes their thesis.

15:11And five, six hours later, I'm like, I'm not saying there can't be some sort of headwind, but I viewed it as kind of a fictional story. This was a Wall Street Journal story. I mean, how could they get it so wrong? I think they're right. I think they were right in terms of the premise. okay but wrong that it's not new that's and then people said aha there's a ban and there always a bit of policy in place it's like look like but that even still dan that's a just that's a terrible story to publish if that's the case yeah but look when you look it is always just like as an analyst just like a journalist it is so hard that's like me calling a stock into that's always difficult right so there's always gonna be times where like you could be right directionally wrong maybe in the thing and look that but that's what me but just going back to like that's what makes covering tech and covering these names so exciting is that there's all different opinions right because that day everyone there there might be someone that's been super negative on apple and be like you know i mean like when that happened do you know how many emails and twitter and calls i got being like told you right it was it was gonna happen it's it is interesting that it's coincided also though with the fact that huawei has overtaken apple inside China, right, as the number one phone.

16:59And, you know, I don't know, maybe this wasn't something new, but it does seem like, A, there's two things that are happening that might be a cause of worry. One is the Chinese economy is struggling and you might want to go to a cheaper model there. It seems like it would favor Huawei. And two, maybe this isn't brand new, but, and who knows, maybe this has been reversed after she came to san francisco and hung out with biden but um there has been a move away from globalization in china so that you know it seems like you take those two together and it is a moment of worry for apple but then also but then i would go back to like and this is why like look if i called stocks from my 12th floor on uh you know in new york city midtown yeah i would have gotten 90 of my stocks wrong because i would just sit here on my spreadsheet right it's talking trips yeah so by by by spending so much time in the region you understand like china like apple is one of the most important employers in china right especially mid to high-end chinese they all want iphones right and it comes down to like you know there's always going to be a push pull okay if you want to call like that but it um it's going to be a worry it's not going away i just think at least now for iphone 15 the worry was maybe much more pronounced than the reality damn when when you go to these suppliers do you just like walk up to the factory be like hey like how many components are you producing I mean, how did these meetings come together?

18:44No, I think that's all part of, you know, a lot of times these are investor meetings. These companies meet with investors, you know, all around the world. Right. And it's all, you know, I view it as a puzzle that you're trying to put together. Like one data point is in itself doesn't give you directional. but you have to listen to so many of these conference calls. You've got to really follow Foxconn. I think Foxconn, you know, clearly as a supplier is one of the most important ones, you know, in terms of trying to understand what's happening there. And that's also why we spend so much time in Malaysia, Vietnam, a lot of these other countries.

19:36You know, there's a lot of component players that play there. And it's not trying... I also think it's not always just trying to get numbers right. It's trying to understand where the trends are going. I can go back to years ago where we viewed a foldable phone. There was not... There was not a groundswell that wanted a foldable phone within the whole supply chain. So when there was a view that Apple was going to come out of the foldable phone, we viewed that as something that was not going to likely happen. Right. What is it for these components, manufacturers, to speak with folks? I mean, it seems like they would put their relationship with Apple in jeopardy if they were to share, let's say, bad news.

20:31So how do you sort of take their incentive to speak with you and their motivations and their angle in terms of like you're you're then uh trying to process that and get to the truth yeah i think you try to take it all with a grain of salt because a lot of it you're trying to because remember it's not even you're doing it it's not like apple is just one piece of it right you're trying to understand where where the technology is going that's true When it comes to like, so that's actually, to me, I think that's, that's probably the most important thing in terms of where it all heads, like in terms of where the technologies are going, 5G, 6G, like within, within Apple or in their own Silicon.

21:24are they are there other areas that they're gonna maybe try to bring further in what does that mean for samsung what does that mean for huawei i think the biggest issue look i i also think probably one of the biggest issues is just trying to understand like apple in china taiwan how much do they try to bring to india how much they try to bring to vietnam yeah what is the state of their supply chain right now, are they diversifying away from China? I think they're diversifying, but not quickly. Very carefully. Okay. I see. Because even like, you know, it's easy for someone sitting on their lounge chair to be like, oh, they should just diversify from China to India.

22:12Well, I mean, they have probably one of the most complex supply chains like in the world. Right. Exactly. Okay. So why don't we take a break and then talk about Tesla on the other side of this? Because I know you have a lot of thoughts about Tesla and I teased it at the beginning. So we'll be back here right after this with Dan Ives, managing partner at Wedbush Securities, also a senior equity research analyst. You've heard a lot about how he researches the equities. On the other side of this break, we're going to be talking about one of the more fascinating companies in the tech world this moment, Tesla.

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24:02And maybe you are too. I'm Katie Drummond, the Global Editorial Director of Wired. And I'm hosting our new podcast series, The Big Interview. Each week, I'll sit down with some of the most interesting, provocative, and influential people who are shaping our right now. Big interview conversations are fun. I want a shark that... That eats the internet. That turns it all off. Unfiltered and unafraid. So in a lot of ways, I try to be an antidote to the unimaginable faucet of reactionary content that you see online, to the best of my ability. Every week, we're going to offer you the ultimate luxury of our times.

24:38Meaning and context. True or false, you, Brian Johnson, the man sitting across from me, one day, at some point, as of yet undefined in the future, you will die. False. Tell me more. Listen to The Big Interview right now in the same place you find Wired's Uncanny Valley podcast. Subscribe or follow wherever you get your podcasts. And we're back here on Big Technology Podcast with Dan Ives, the Managing Director and Senior Equities Research Analyst at WebBush Security. Dan, let's talk about Tesla. I mean, it's kind of interesting. You are very pro-Apple. I think you're generally pro-Tesla, but they have been discounting the cars.

25:23And the last earnings call, their margin came down in a real way. And I think that you had some perspective on it that you sent out, basically like this is the opposite of a good earnings call or just like this is the devastation, disastrous thing. because basically what's happening is Tesla's giving away the margin and giving away kind of like the fruit of their business, trying to sell more units. And you were not very happy with that. So either way they are selling more units. And the Cybertruck is out. So where do you stand on Tesla today? Look, I mean, it's been one of our long-term bullish favor needs.

26:03But like a kid, where you're going to yell at the kid and if they don't do their homework, you're going to be honest, right? And I think that's always been our DNA. We're going to call like we see it. That was a disaster conference call. The communication, especially around margins, was very unclear. Because the big issue here is, okay, you cut costs. We wanted them to cut prices in China. You're in a price war. This is a time where their margins are here. Everyone else's margins are here. It's a time you could squeeze, squeeze, squeeze, focus on units. That was the right poker move. That's why the stock went from 100 to 200.

26:45Okay. Now, it's like, okay, well, how much more do you cut? Because investors need to get to a point where it's like, okay, line in the sand. We're not cutting anymore. And you didn't get that. And I think now, ironically, look, our whole view is we're 95, 98 % there. And if you look so far since earnings, since end of October, that evidence would support that. It was like you've actually had price increases rather than price decreases. So far, China numbers look very strong. so it's our view like look the the electric vehicle industry it's like price discovery that's essentially what they're going through we talked about apple before it was like trying to figure out how much to charge for their cars exactly and it was like hey look and realistically like at 70 80 000 you're never going to get mass market you need to be 30 35 40 000 now they've been able to produce the cars so much cheaper obviously in an interest rate environment you could cut prices interest rate rise to consumer there's really no impact right i mean so it's like that's that's the problem that all automakers been going through but my view on tesla is it's much longer term my view is like we're still in the second inning of electric vehicles.

28:21Now, there's definitely a moderation relative to me where we thought this was going to go. But they're going to own more and more from a battery technology perspective, from FSD, supercharger, some of the parts. I've always viewed them as a disruptive technology player, not an auto company. And I view this as more of an air pocket period. for Tesla rather than like that. I view it more as like, okay, you're going to go hyper growth, air pocket, and then I think. Right, quick drop and then back up to altitude. Look, and I think the reason you see the stock, you're like, well, why does the stock continue to move higher even though we had those margins?

29:09It's because investors, they're looking through to Q4, into Q1, into 2Q. You talk about Cybertruck. Look, the fact that they're actually producing this at mass, on a trajectory, that started knowing that they were never going to be able to do this. Austin, that's why Austin is so important in terms of the broader build-out. But Alex, a year from now, they need to have a sub$30 ,000 vehicle. I think they'll get there. look I think that's why Mexico is so important I mean Mexico meaning the modern Mexico factory that they're going to build are you a Cybertruck fan look I'm personally a Cybertruck fan do you drive a Tesla I plan to buy Cybertruck you gotta come by Dan we gotta swing around Brooklyn together and hang out in that Cybertruck.

30:15I think it's a cool truck. Yeah, definitely. When I get it, I'm going to pick you up, Brooke. Sounds good. Put your shades on. Yeah, perfect. Okay. But look, with Cybertruck, my view is like, take a view of the market where F-150 is.

30:34$950 ,000 per year. The number one selling truck in the U.S., car or auto in the U.S., right? Can you start to just chip away at that? I mean, that's really, that's what they're going for. And also they're going for like, okay, if you had a Tesla, do you buy a Cybertruck? It's a market opportunity that Rivian, I think, successfully has gone after. But even Rivian, obviously the big issue is that they're actually producing. Oh, so by the way, I mean, I mentioned this on the show on Friday, but I just took a Rivian. they lent me the truck and drove it up to Boston over Thanksgiving and then back.

31:16I thought it was a great ride. It was super fun to drive that thing. What color exterior was it? Limestone. Oh yeah. It's nice. I don't know. It felt like driving a small car and it was a pretty big pickup. It was just a very smooth ride. The way you are I could see you in the room. You person out. I could definitely see you in a Ravian. I think I'm a Ravian guy and not a Cybertruck guy. Dan, I don't know. I think you could be both. Yeah. But I definitely could see you driving around in those sunglasses, doing your big tech podcast on the Ravian. Yeah, no, I thought it was a great truck. We're going to have RJ Scarinj on.

32:01But it's very hard to park in the city. So I don't think I'll be buying it anytime soon. do you do you so when you said there's a production issue for them um what do you mean by that on the rivage they just can't ramp is that what's happening i mean that's the biggest issue and i have huge respect for rj and the right team the biggest issue since the ipo it's just there's there's always been dog eat the homework excuse look it's hard to produce cars right right totally and i think when they come out since the since their ipo it's been a constant production issues I think they've resolved a lot of that.

32:38Clearly, they're building out a new factory in Atlanta. That's going to be key as we go into the next few years. Look, the demand's there. They've created a phenomenal vehicle. You have that Amazon relationship on the commercial side, even though it's changed a bit. It's now just capitalizing on the opportunity. Yeah. All right. Well, we're nearing an end of the show, and we're also nearing an end of 2023. You got any hot 2024 predictions you can throw at us? I think we are going to have a tidal wave of M &A in software. Oh. I think massive M &A. I think financial strategic M &A. I mean, right now, FTC, Khan, no one fears anymore, given it's black eye after black eye, post-Microsoft Activision, others.

33:30I think you're going to see a lot of big deals, strategic as well as financial. I think it's due for consolidation. So probably that's going to be one big prediction. Two, I think we sit here a year from now and I think tech stocks are up another 20%. Really? Okay. Yeah. And then I think third is that I think AI, because right now everything we're talking about is like, okay, the exploratory, like kicking the tire, beta deals are now maybe starting to get sized out. a year from now and you're probably gonna be at the forefront of this it's really realizing like just how big and real the monetization is yeah and and fourth fourth would be Mets make playoffs Mets make the playoffs they better man at this point there's a fourth three Mets make but I'm a big believer in Cohen and everything he's doing and we've been through battles obviously uh as Mets fan, but I do believe Mets made playoffs 24.

34:39Okay. Well, if all this comes true, it's going to be a great year. Okay. Two more things about next year I'm curious to hear your thoughts on. Does Elon Musk still own X at the end of 2024? He owns X, but he probably has others that have now get a bigger ownership stake as he probably is going to have to sell pieces of it. That would be my just give it it's an upside down structure in terms of the loans that have been taken out it's probably worth less than 10 billion today so there's definitely gonna have to be probably i think some change ownership structure he still will own it but i think probably uh others will have to you know i would imagine like the banks just get mad and demand the money well also it's It's upside down, right?

35:26Like in terms of the need. It's like meaning I have a million dollar mortgage on a two inch thousand dollar house. Oh, yeah, yeah. Exactly. That's not a good issue. Yeah, no, the banks tend to say something about that. So we'll see what happens there. All right. I don't know if you're into crypto and anything like that, but I am stunned that Bitcoin is above 40 ,000. Maybe I shouldn't be. Do you think that's sustainable? Where do you think it ends next year? I don't know about like price point. I do believe the use key because I'm a big fan of blockchain, like in terms of like the use. So I do believe the fact that after all the disasters we've been through with Bitcoin, you know, in terms of SPF and everything else and Bitcoin doing what it's doing, it's noticeable.