Daybreak Holiday: Big Tech Outlook with Dan Ives and Gene Munster

0:01Hello, and a very happy new year to you and your family. Welcome to this special edition of Bloomberg Daybreak. Markets are closed as we ring in 2026. I'm Nathan Hager. Coming up at this hour, we're going to look at what's ahead for the sector that has led the way for the stock market the last couple of years. Big tech. 2025 was once again bullish for technology, but not without its bumps and bruises. A deep sell-off in April, followed by a powerful rally. Then another sell-off of many of the biggest names in the final quarter. So, what could be in store for 2026? Who better to ask than two of the most prominent analysts on the street?

0:41Gene Munster, Managing Partner at Deepwater Asset Management, is with us, along with Dan Ives, Global Head of Tech Research at Wedbush Securities. For the full hour, it is great to have both of you back on what has become a semi-annual tradition here on Bloomberg Daybreak. But before we look ahead to 2026, let's look back at what both of you had to say about tech the last time we were all together here, back on the 4th of July. Gene, let's start with you. you were pretty enthusiastic. I actually am so bullish on AI. I think that it has the power for these companies to continue to move higher over the next three to five years, despite what is going to happen, what could happen with the overall macro.

1:24And that's, I don't like being out on a limb that far. And the right approach is that AI is just much more impactful. Of course, Gene, that was before the rotation at the end of 2025. Are you still as enthusiastic about big tech as you were then? Yeah, nothing has changed in that optimism. I still think we're going to see the AI trade outperform the NASDAQ for next year. I think the NASDAQ is going to be up, call it 5%, 10 % plus. So still optimistic, still believe we're, I'd put it in the second inning of all this and understand that that may come across as seemingly out of touch with reality, given, I think, some of the towards the end of the year, some of that some of that concern that has poked its head up around the trade.

2:15Some issues that investors have had about the amount of investment that have been made in the market at times just shrugging off good news. But Nathan, I think that this is still intact. I think the transformation really hasn't even begun. And I think that patience will pay off when it comes to wealth creation over the next few years. All right. I want to turn now to you, Dan, over at Wedbush. I think I have a feeling what you might say, but let's listen back to what you told us back in July. This is a fourth industrial revolution. This tech bull market, it's another three years ahead. And that's why I think it's get out the popcorn, get out the champagne.

2:54I don't see anything slowing it down. Do you see anything slowing it down since then, Dan? I mean, look, I'm more bullish on the theme today than I was back in the summer. Given monetization, given what we've seen with the spend, given names like Palantir and others as the use cases have built out, and now going into robotics and autonomous, to me, look, it's two more years left this tech bull market. I'm not going to say we're not going to have white knuckles as me and Gina always talk about. But nothing in any way makes me get off this AI train. To some extent, it's more emboldened. I want to turn back to you, Gene.

3:34You say it's the second inning in the AI trade. I think in the times that we've spoken before, it's kind of been where it's been before, right? I mean, I think I've heard you say we're in the second inning for quite some time. When do we get to the third? well earlier in the year i guess at the beginning of 25 i thought we're in the third inning and so uh i guess what happened to make me believe that we're in the second inning just like to put some specifics on it and it's sure this is what i love about this uh the year end is we can look back and just look at the kind of the arc of what's happened at the beginning of the year the street was looking for uh nvidia to have 18 growth for calendar 26 if you look at what they said at the end of November, this excludes anything from the H200s in China, but they're going to do somewhere around the mid 60 % growth.

4:29So this is a company that this is not a$1,$2 billion revenue company. This is a$250,$300 billion company that's seen an acceleration. And why NVIDIA, of course, is so important when it comes to kind of gauging what inning we're in is this is the brain that think of the hardware piece what nvidia powers is the size of the brain and when you think about this accelerating spend around the size of the brain it makes me more optimistic that the output this is the critical piece the utility that that brain will kick out eventually will be more powerful which makes me have higher confidence that we're earlier than what I thought at the beginning of the year.

5:12I want to ask you, Dan, where you think we are in the AI race and to talk a little bit more about NVIDIA, because just in the last few months, we've seen, I think it's safe to say, quite a bit more at least chipping away or at least attempts to at NVIDIA's dominance when you think about Google's TPUs and this investment by Amazon into open ai with its uh potential competitor to the nvidia chip does nvidia continue to keep this mode around itself that it's had over the last couple of years now in the ai chip space look i love what how gene puts it with the brain and the utility because i think that's so true in terms of where nvidia please look coming back from asia three weeks there demand the supplies 12 to 1 for NVIDIA chips.

6:05The reality is, Nathan, customers can't get enough. They have to go whether it's AMD, whether it's Google and TPU, whether it's others, but that's not a bad thing. It speaks to our view that the LMLs are going to get cheaper. You can have more competition when it comes to AI chips. But at the end of the day, NVIDIA continues to be three to four years, maybe in terms of ahead of competition. And that's why I think is still a very cheap stock,$250 to$275, you know, 2026 is where I see this stock playing out. We're speaking with Dan Ives, Global Head of Tech Research at Wedbush Securities and Deepwater Asset Management Managing Director, Gene Munster.

6:49Gene, that's a very interesting point that Dan just made there, the idea of NVIDIA being a cheap stock, because there has been all this discussion over the last few months about the valuations of the Magnificent Seven. How do you view NVIDIA's valuation right now, along with the rest of the MAG7. Are these still stocks that can keep getting into these sky-high valuations? I mean, Dan's doing the right thing. I mean, he's looking beyond the appreciation that we've had and asking the question, like, what is on the come? And ultimately, that's the question, the central question we all have to answer.

7:27And I think when we get to the question about like valuation and where this market potentially go, it can boil down to something as simple as just your view on how the utility of AI will play out. So if you take the perspective that we've had a good run and that AI is going to be impactful, but it's not going to be a total game changer, it's not going to exceed the high expectations that are out there in terms of how it's going to impact the world. If you take that approach, there's little that I think anybody could say that is going to get you optimistic about where this is ultimately going to go.

8:03If you're in the camp where you believe that these companies, you know, Dan mentioned companies like Palantir, you think about some of the MAG7, some of the small caps as well. If you believe that ultimately that we're still early, therefore their valuations are going to be lower in the future because they're going to have faster earnings growth. And so that's, I mean, that's effectively what we're faced with is this question about the degree, the pace of this and how it impacts. If you look at, Nathan, just the numbers, like let's forget about that and forget about where we're going and just look at where the stocks are.

8:42They are trading higher than a normal. If you look at, for example, the MAG7 kind of over the next 12 months trading at around a 27 times multiple, excluding Tesla as a 100 plus multiple. So they are higher, but it's not like crazy high. As a reminder, back in 2000, the NASDAQ was trading at 100 times next 12 months. Now, the dynamic of the market's different today because these mega caps, we're not going to ever, unlikely we'll ever see that 100x. But I think it's reasonable that a 27x on what potentially could be multiple years of 15, 20 % growth is positive. Dan, how do you answer some of the critics who point out a lot of these companies, you know, spending hundreds of billions of dollars into this technology that is then getting more circularly invested into the companies themselves.

9:45The idea that OpenAI and others are getting all this investment from companies that are going to be benefiting from their business, like the hyperscalers. Yeah, but I would say, and Gene and I have talked about this a bunch, I don't view this like a vendor financing, circular financing late 90s that we both saw. I mean, my view is OpenAI, for every dollar that they invest, for every dollar NVIDIA invest, they're getting$10,$12,$15 back over the course of the next 5, 10 years. And that's a bet that they'll meet because, look, they're building out a new economy for consumers, a new economy for enterprises.

10:26So I don't view it as sinister red flag, the circular financing concept. to some extent, I view it as you want to be associated with open AI, not away from them. And even though right now those stocks really have a huge sort of black cloud over them, it's like, is it bad? No, it's actually good because they are at the epicenter of this AI build-out. Is it important though, Gene, for open AI to turn a profit in 2026 to justify all this spending? No, it has. I mean, this is the beauty of everything that's going on is that you have very rational people that say profit is important and there's other rational people that say it's just about building the framework.

11:13And so the key question about this cash burn with OpenAI, we can talk about the rumored round, this$830 billion round that's rumored to be going on. But the key question ultimately is eventually, call it 2030, can they be profitable? And part of that is, to Dan's point, can they continue to raise money to fund this impressive expansion? And impressive expansion, I just want to put some numbers around it. It's 100 % growth expected next year and the year after and the year after for the next three years. And so I think that when you think about the profitability question when it comes to opening AI, that really doesn't matter.

11:54What matters is do they ultimately, can they get enough financing? Can they raise enough equity to the tune of about$100 to$150 billion over the next three years to continue to build out to get to that profitability piece in 2030? And I think the answer is overwhelmingly yes. It's just too big of a prize. And Dan and I are well aware of what's going on in the private markets. There's just a ton of investor demand to participate in this. And so they're going to be able to have the money to power through this cash burn that they're going to have for the next few years. We're going to continue this conversation, take an even closer look at the magnificent seven stocks as this special New Year's Day Tech Hour continues with Gene Munster, managing partner at Deepwater Asset Management and Wedbush Securities, global head of tech research Dan Ives on the special edition of Bloomberg Daybreak for the new year.

12:50I'm Nathan Hager, and this is Bloomberg.

13:02As markets move and headlines break, what matters most is context. A Bloomberg subscription gives you unmatched reporting, sharp analysis, and powerful tools that help you connect the dots. Visit Bloomberg.com slash podcast offer to learn more. Welcome back to the special New Year's edition of Bloomberg Daybreak. I'm Nathan Hager, and even though markets are close on this first day of 2026, We've got a high-tech power hour going. We're speaking with Dan Ives, Global Head of Tech Research at Wedbush Securities, and Gene Munster, Managing Partner at Deepwater Asset Management. Dan, let's pick up where we left off in the last segment, talking about some of the valuations, some of the financing that's going into these startups that are possibly getting into really, really big valuations like OpenAI.

13:52Do you see that continuing when there is still so much competition among some of these large language models that are competing with OpenAI? Look, I'm not saying that you won't have a bubble or maybe froth in certain areas of the market over the next 12, 18 months. but to look at the the core winners and to say that they're expensive and just kind of paint it with a brush i think it's the wrong way to view it because my view is like look you have three to four trillion being spent in the next few years in terms of the build out the ripple effect every dollar spent on video ship there's an eight ten dollar multiplier across the rest of the tech so investors like they're looking not next one two they're looking beyond that to understand who the core winners are and will they grow into valuations?

14:41I mean, it goes back to like, you know, if you go back to some of the Amazon days, some of Meta, some where NVIDIA was 2021, 2022. You know, I think that's sort of the view in terms of this transformation that we continue to believe, like you only have 3 % of companies in the US that have fully gone down the AI path. And for the first time globally in 30 years, The U.S. has added China when it comes to tech. I think I heard Dan talk about the idea of winners and losers here in the large language models. Gene, how are you thinking about winners and losers right now in that space? Well, I think that there's basically four or five, depending on how you count meta, as the large language models.

15:29And I think that when there's this, let me just take a step back. is there is a view that ultimately it's a race to the bottom, that these companies are creating intelligence and therefore the pricing is going to go down to a level where we're going to have five losers, essentially. They're going to spend all this money. And our belief is that actually what you'll see is even though the pricing will come down, the value will increase to a point where the pricing, this gets back to this Jevons paradox that's been talked about for the past year or so, that yes, pricing comes down, but the value increases, therefore the usage increases, that more than offsets the decline in pricing.

16:15And so I think that all these, to different degrees, are going to be winners. One piece that is kind of like below the surface that doesn't get talked about as much is the personalities of the models. And the way we think about it is the world doesn't run on one personality. And that's what these models are. They have personalities. You ask one model, you ask five different models, five different questions, and you get slightly different answers. And so I think that there is something to be said about, this isn't a political statement, but some models lean right, some models lean left. Organizations are going to want to build on top of models that align more with their personality.

16:56And so I think that that is going to create an opportunity. It's probably, you're probably going to see a couple on the right and a couple on the left. And so it's hard really at this point to say, you know, which one is the losers. I think I look at it more of the conversation about them all being losers, about this race to the bottom, misses the fundamental point, which is as value comes from the intelligence, people will pay up for it. I realize that that is a bold statement, but I think that's the piece that is missing in terms of how these companies continue to, how OpenAI, for example, can be a$1.5 company.

17:34Well, that's a really interesting idea. And I wonder, Dan, if that's something that you've thought about as well, whether there could be a scenario where companies are using multiple large language models as opposed to settling on just one. Look, I think what Gene just said there is gold. because that, to me, that summarizes the crux of everything we're seeing in terms of this AI build-out, winners, losers. You could pick your open AI, pick your Gemini, pick whether even in China, some of the models there. To me, it's all going to be about hyperscalers and the data that it's built on. And that continues to be such a core piece of this AI revolution when you do that, the hyperscalers and the infrastructure.

18:20It's about the data, the infrastructure to build out. I want to talk about the theme that has really driven this market for the last few years. Of course, that is the Magnificent Seven. And take a look at where those stocks in particular could go in the next year. Gene, do you see the Mag-7 continuing to drive the rally, all boats lifted together in that space? I do think the simple answer is no. I think that we're going to see some pockets. Some of them are going to outperform really well, and some of them won't perform as much. I mean, my sense is that the small cap piece is going to continue to be an important part.

18:59I want to be clear that I think you should own many of the Mag 7. I think that they're going to continue to generate a better return than just being in the queues, for example. But I think that there is a little bit of a dynamic. When it comes to the Mag 7, the two that I'm focused most on, this wasn't your question, but I do want to highlight this. Sure. I'm kind of splitting hairs here in terms of how to think about the winners in the Mag 7 for calendar 26. I think Apple, I'm putting that as the top performer for the front half of the year, just because I think there's going to be multiple expansion going into the new Siri, which is codenamed for the new Apple Intelligence.

19:39and they land that after being, I think, more or less viscerated over what's happened so far with AI. They land that. The multiple on Apple is likely going up. So I think that Apple is going to be the best performing Mag 7 through the first half of the year. And then if you look at the full year, I think Google is in a unique place, just given they're really doing a great job of taking the search traffic and starting to find ways to get people to interact with their products more, which obviously more shots on net. It's good for the revenue growth within search. And of course, they've got their cloud business.

20:17And so those are the two that I would focus on most. Again, it doesn't mean that the other ones won't do well, but I think those are the ones that will do the best. Dan, what are you looking at in the Mag7? Do you see winners and losers in there? I mean, look, Gene preaching to the crowd. Like what he's saying about Apple and look, and it's been a battle because they've essentially been invisible with the AI strategy. But now with Google, when the DOJ that clears a path for a bigger Gemini deal that comes out in the spring. And I think there's no multiple for Apple given because of AI with the biggest install base in the world, I could argue to add 75 to a hundred hours a share.

20:59So I think I agree a hundred percent. I mean, me and Gene, it's a very small Apple fan club. We stick together there, okay? All right. And then I'd also, I agree with Google, but I think Microsoft, look, I think Microsoft here is so oversold. Investors feel like, this is in the rear view mirror. It's now about Google, Amazon. They're in the enterprise market. It's in, that's Redmond's domain. And I'm telling you, like, to me, that's the one that I focus on is just the table pounder here. Interesting. because it does seem like there is a pretty more heated competition in the cloud space as well.

21:37Gene, how are you looking at that when it comes to the competition between Microsoft, Azure, Google Cloud, and Amazon Web Services? I think the bar is lowest with AWS just because the growth has been lowest. And they just haven't seen that breathtaking into the 30, almost 40 % growth that Azure and Google have experienced more recently. off of a bigger number because their market share is more, so it's harder to grow at those rates. But I think that this is not the cleanest answer, but I think all of them are going to do well. I think if you go back to kind of where Dan and I are at in terms of just the broader build-out that's going on, if that in fact does happen, all of them are going to benefit.

22:23There's a contrarian piece in me that wants to, I like what Dan's saying about Microsoft. I agree that that's definitely, that's a contrarian on that top pick. Therefore, it probably happens. But the contrarian piece around AWS is that they end up being kind of the surprise. I go back to they had their AWS event. The CEO of AWS said that they may even have his exact quote. I was just looking at up this morning. On December 4th, this is Matt Garman. He said, demand keeps skyrocketing. or only speeding up that infrastructure build out. So, you know, halfway through the quarter, three quarters, two thirds of the way through the quarter, he says that's probably a good sign for EWS.

23:06Dan, your reaction to that? I mean, look, I agree 100%. And I'd almost further and say, I think one of the biggest surprises as we go into 26, I think it's going to start off with Jensen's keynote at CES. which we'll be at, is just about the overall demand that's accelerating across the whole universe. And I think that's something where investors, I think, are underestimating the scale and scope of what this is going to look like and also going to have a huge impact, not just on earnings, but I think even on increased catbacks and on accelerated modernization of the AI theme going in 2026. Gene, are these hyperscalers going to have to continue to find ways to cut costs to keep up the hundreds of billions of dollars they're spending on AI?

24:03Well, I think they will try to continue to cut costs. A lot of it is because they're using, they're eating their own products. They're implementing more. Think about how much they're using whether it's Microsoft and Meta and Google in terms of code creation today. Something like more than half is now generated by machines. So, but the, you know, do they have to, to grow this? If you just some really high level math here, but think about the average Mag 7 excluding Tesla is generating about a hundred billion per year in free cashflow. And so they're spending call it, you know, that's, by the way, that$100 billion includes them spending$50,$75 billion a year on infrastructure.

24:50And so they can increase by 20, 30 % and still be bringing home$50,$75 billion. And so they're a long way away. And that's, I think, one of the big differences that we're experiencing today versus 25 years ago is the cash flow generation. They can just keep feeding this machine. And so inevitably, investors do care in the near term about earnings. Look what happened with Meta. Meta just said after their September quarter that next year that expenses were going to grow faster than revenue. They had very upbeat commentary about revenue. And the stock, I forget what it was down, 15, 20 % over a short period.

25:32And so they do care in the near term. But the reason why I stress that near term, I think the long term, investors will have a sense like this money is going to good use. And even if they're, and they've got plenty of money to continue to invest in the business. And most importantly, that's the right thing for them to do because if they don't make those investments, obviously it poses them at some bigger existential risk, longer term. We're going to keep this conversation going on the mag seven and more of the big tech sector as we continue this special New Year's Day edition of Bloomberg Daybreak with a look at another big piece of the Mag 7.

26:14That would be Tesla. That's coming up. I'm Nathan Hager, and this is Bloomberg.

26:30Thanks again for being with us for this special edition of Bloomberg Daybreak. Markets are closed for the New Year's Day holiday. I'm Nathan Hager. Wrapping up our special high-tech roundtable, we have been spending the full hour with Dan Ives, Global Head of Tech Research at Wedbush Securities and Deepwater Asset Management's managing partner, Gene Munster. We could keep this conversation going for the entire day, but we got to wrap this up. Starting off, guys, with a stock that I know both of you follow very closely. That would be Tesla. Both of you have made some pretty bold calls on the electric vehicle maker, but does it continue to be driven by the EVs headed into 2026?

27:11Dan. I first off just want to say, I mean, I could listen to Gene. If I had some Sour Patch Kids and maybe a Cabernet, I could listen to him talk tech the whole day. Yes. Now with that said, look, Tesla, they're entering the most important year ever. autonomous and robotics. I believe 30 cities will have robotaxis in 2026. And this is the year AI revolution comes to Tesla. And I think when it comes to physical AI, the two best physical AI players in the world are NVIDIA and Tesla. And I think now Musk, wartime CEO, and really is going into the next, such an important chapter in the Tesla story.

27:58A great way to describe him as a wartime CEO, I think, Gene, because Elon Musk has been through a lot just throughout 2025 between the political moves and coming back to Tesla with the renewed focus. Where do you see Tesla going in 2026? I think, you know, Dan summed it up. It's about the robo-taxi. it's about autonomy. I mean, that's, those are the headlines that are going to be of most focus. There is the question, like, I think that's what matters most. There is a question, like, what happens with deliveries? I don't think, I'd be curious, Dan, your take on this. I don't know if investors really care if they beat the numbers a little bit, but just for some context, this is as of a week ago, the street was looking for 16 % delivery growth for calendar 26.