Apple’s AI Intelligence, And European Elections’ Impact On Markets 6/10/24

0:04That was a very strange sound effect. I don't know if you guys heard it. Live from the Nasdaq markets right in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. Apple's big reveal from its new AI product launch to partnerships with ChatGPT, the latest operating systems to, yes, new custom emojis, everything the tech giant unleashed and what it could say about the AI race. Plus, election impact, elections in France and Germany over the weekend yielding a string of victories for far-right parties, what it means for the markets in those regions and what it could mean for relations with the U.S.

0:34And later, does Nvidia's gain lead to AMD's pain. Why a rising tide for the world's biggest chip company isn't lifting all boats. Eli Lilly closes in on$1 trillion market cap and GM quietly climbs to a more than two-year high. I'm Melissa Lee. Come to you live from Studio B at the Nasdaq. On the desk tonight, Tim Seymour, Dan Nathan, Guy Adami, and Katie Stockton, founder and managing partner at Fairleaf Strategies. And we start off with Apple's big AI reveal at its Worldwide Developers Conference, the tech giant unveiling its game plan, headlined by Apple Intelligence, Chat GPT integration with Siri, iOS and 18 and other updates for the Apple Watch, AirPods, Max, TV and more.

1:12Apple closing the day down almost 2 percent, though, the worst performer in the Dow. So what was it that had investors pulling back? Let's get straight to Steve Kovach, who just got off a call with the CEO. Steve, what's the latest? Hey there, I did not just get off the call with the CEO, but I will tell you what happened here at Apple today. Before today, now Apple was behind on AI. Now it's caught up. Apple showing off a slew of AI features that are now integrated across Apple's operating systems, like you said, for iPhone, iPad and Mac. They're not calling it artificial intelligence, though.

1:43This is Apple intelligence. That's the marketing power at work there. Now, some of the highlights, deeper voice controls for apps. That means you can just tell your apps what you want to do in natural language. Right now, it only works with Apple's apps, but it's also going to happen with third party apps to tap into that intelligent system. That's super important. And then, of course, the OpenAI partnership, ChatGPT, is going to be an optional feature. Siri will prompt you if it thinks ChatGPT can provide a better answer for you. You can also use it instead of the ChatGPT app. It's built right into Apple software.

2:14And you don't need to make an account. Just have an Apple account and you can start using it. And then, of course, there's privacy. It's Apple, after all. Biggest difference here between other AI visions. Lots of the tasks are going to be handled on the device privately. Others will go to the cloud, which Apple says will be done in a private fashion. And plus some fun stuff like image. And this is going to be Guy Adami's favorite emoji creators. But what you really need to know, Apple intelligence will only be available on newer Mac models and the iPhone 15 Pro or later. So if folks find these features compelling enough, then this could spur a big upgrade cycle for iPhones in the fall.

2:51Melissa, send it back to me. I'm not even sure Guy knows what an emoji is. At the very top, Steve, you said that Apple is all caught up. Is that really what you, I mean, is that sort of the feeling on the street? Because the feeling that I get from analysts is that it was largely disappointing. It was a disappointing event. And if people want to upgrade because they think this is so amazing, they have no way of trying it if you don't have that iPhone 15. Disappointing in the respect that, Melissa, that it's basically catching up to features that we've already seen. You know, I'm calling, if you're familiar with Microsoft's Copilot, like I mentioned earlier, this is like Copilot but built into the iPhone.

3:27So not a lot of novel use cases here. It does things like summarize emails, can write emails for you, helps you pick better notes, image generation. These are all things we've seen before. They're just now integrated into the iPhone. So what I think is important here to know that just a lot of people are going to be using these kind of features for the very first time because it's going to be built into the devices they use every day instead of kind of going out there and finding their own app that works better for them. Is there any indication at all that you got from WWDC that this will be monetizable?

4:00The only thing that I can see monetizable, by the way, this is all free. Everything I just said is going to be available free of charge when you upgrade iOS. So the real question is, it doesn't matter what you and I think about these features. It matters what normal folks think and if it's going to require or cause them to upgrade earlier than normal, Melissa. Because remember, you have to have an iPhone 15 Pro or Pro Max in order to use everything that was announced today. So if you have a 14 or older, you're out of luck. You're just going to get some new iOS features, but you're not going to get all that artificial intelligence stuff.

4:32So if you watch today's event and you really like it, you're going to have to upgrade. All right. Steve, thanks. Steve Kovac. I think we're normal people. I don't know if I would upgrade, though. Nobody will upgrade for this because at the end of the day, most of America who are buying iPhones and thinking about upgrading are not even using chat GPT or perplexity or, you know, Gemini right now. Gemini actually has a very good shot because it is integrated into Google across a lot of these things that we use every day. I watched this thing today. It was a real snooze fest. And it was about a lot of stuff.

5:05It's interesting that he mentioned emojis in Gaia. Most adults don't use emojis. They don't care about, you know what I mean? Like if that's the best thing that they got going on. So it was a lot of goofy stuff. I think the most important thing is obviously the review on privacy. We'll talk a little bit about what Elon Musk just tweeted out about banning Apple devices at Tesla or any of his companies. So he's not buying in what Tim Cook is selling as it relates to privacy. So to me, I just don't think it's particularly compelling. We've heard this year after year about what is the thing that's going to cause this massive super cycle of upgrading.

5:39We haven't seen it. If you think about Apple's revenues, which 50 percent or a little more are iPhone, they've just been flat for years now. So to me, this wasn't it. Yeah. We are just showing the tweets or the ex post that Elon Musk just released there saying that he doesn't trust effectively the security of open AI on an Apple device. And visitors as well as employees will have to check their Apple devices at the door if they actually have one on them. So that's another sort of wrinkle in this whole thing. But putting that aside for now, Guy, what do you make of this in terms of the AI wars?

6:11I think it's well, it doesn't matter what I think. I don't think they meant the opportunity that was in front of them without question. What was that sound at the top of the show? Did you hear that? What did it sound like to you? Like you want me to make the sound? It sounded like a little bubble. It sounded like a little. Thank you, Tim. And by the way, we haven't rehearsed this. I mean, I can make this sound like cheap. How can we reverse this? No need to. Yeah, thanks. And indulge me for a second, because there was obviously a huge, big buildup into this thing. First season of Happy Days, if you recall, Richie and Potsy had this big thing they were going to go to.

6:40They were going to go to a club where, let's just say people started. It was Bubbles McCall they were going to see. And they're all excited about it. See what I did there? They get there. It was a complete letdown. And they realize, you know what, sometimes the buildup is really the important stuff. And then the event itself really sucks. And that's what this is. With that said, in October, the stock went from$165 to$199 and failed. And look what happened over the last three or four months. down to 165, back to those current highs, and seemingly, I don't want to say seemingly, failed. And I'll say that because today, traded close to 100 million shares, typically trade 60.

7:13So when you have an event like this that everybody's waiting for, when you have that kind of volume, that kind of reversal, I think it should give you pause. You were saying earlier, Katie, that you think Apple's in a proving ground right now. Yeah, it definitely is. And you just defined the range right there. I mean, the upside is 198, and a breakout above that, to me, is needed to make it a more attractive investment from a technical perspective because breakouts tend to generate more upside momentum. We've already had good upside momentum ahead of this meeting. We've had very good relative strength behind Apple, not long term, but short term.

7:45So I think folks held some hope that this could break it out. But it's been in that range for a year. And if it stays that way, I would just avoid it. Are we selling Apple short, Tim? Well, I mean, first of all, to bring back Guy's happy days metaphor. Bubbles McCall, you want to go back there? I would just go with the greatest happy days metaphor that people use every day. Jump the shark. They jumped the shark. Apple jumped the shark two years ago. If you think about it, and Katie knows this better than any of us, but I mean, that Apple chart really from almost January of 22 has done zero. I mean, it was$185 stock.

8:16And so they kind of jumped the shark in terms of where we were. What I think is interesting about today is my expectations. Who could have expected something extraordinary today? Seriously, I mean, we knew they had nothing up their sleeve. All they really were here to do was tell us that every other major technology in the company in the world can't wait to work with Apple because they know Apple's installed basis someplace they have to be. Leave Elon Musk aside. The bottom line is you've got Microsoft and Google falling all over Apple. Everybody knows Apple's delivery system, but that also the app based nature of owning an iPhone and where it'll be that much more a part of our daily lives if we have someone better than Siri.

8:54You know, I think that's the story. By the way, pretty shocking. And part of the reason why the stock's down two percent when, you know, when Siri's out there quoting Mark Twain about the, you know, the the exaggerations of my or the death, the rumors of my death are greatly exaggerated or whatever it is. I mean, we would have liked to have seen Siri put put to bed here. So I think when you start hearing about how Siri is going to have a major role in 2.0, that doesn't help the share price. But I didn't expect after a 20 percent move from Apple in April into this event that there was anything they could deliver.

9:26We still know they're going to refresh. And I think that's the reason to buy the stock. Would you even say that down less than two percent is not bad? I think it's fine. I think it's fine. I mean, did anybody think that they had something up their sleeve in terms of an AI product or, you know, a new assistant that was going to be? I did. Well, here's the you asked the question of Steve. What about monetization? And so this is a worldwide developers. That's the key word. Conference. OK, so you get all these developers there. They go all the time. And so really, this can be monetized, if you think about it, through the apps that are going to be created using these tools.

9:59But I don't think right now in this fall, when they introduce the iPhone 16, it's going to be a thing that you have to rush out and get because it's going to take a while. So if you're Apple and you take 30 % of the apps that are sold on there, you want to keep people on those devices, right? This is probably a good first step. But to these guys' point, it's like there's no there there right now. It's a bunch of gimmicky little things. And so I think that for all of us who in the past sometimes we've heard about hardware here, sometimes we've heard major sea changes as it relates to iOS, this is just not one of them yet.

10:30And I do expect them to get better at this and make an iPhone a better experience, but it's not going to be this year. It's going to be a 2025 thing. All right. For more on Apple's Worldwide Developer Conference, let's bring in Deepwater Asset Management's Gene Munster. Gene, what'd you make of this? Melissa, I felt like I was watching a different event just here in the lead up. I've got a ton of respect for your esteem panel. I had a totally different takeaway. True. Check the box. All these features were to be expected. But Apple's doing two things here. And I think Steve framed this in. Number one is that they are allowing basically 20 % of the world's population to access AI for the first time.

11:10We talk about it all the time. Most people have never experienced it, and they just made it that you can access in a personalized way that gets to your text, your photos. Elon may have a different view about Apple's privacy. It's a lot better than Meta or Google. So that's piece number one. Piece number two is just that, taking the friction out of access to it. You don't have to sign up for a ChatGPT account. It just comes with your device. I thought the demos that they showed, again, it was expected, but for the average person, this is must-have. If you don't have AI-powered, if Apple didn't do this, they would be totally out of luck over the long term.

11:47They did it, and I think that this will ultimately, the punchline here is they're going to grow next year faster than the street thinks. The street's looking for 6 % growth. I bet it's going to be 10 % plus. Next year, meaning for fiscal year 25? It's going to take time. I agree with Dan. I think Dan was talking about it's going to take time for this to build momentum. It's going to, you know, this won't happen overnight, but this is a big deal. You're if you don't have these features, it's it's the fabric that's going to run the devices. If you don't have it, you're going to feel like you're on a flip phone.

12:22So, Gene, when when you think about sort of how this is monetizable, is it initially mostly going to be on the hardware side? In other words, when you're upgrading your iPhone, you're thinking about getting the more expensive version as opposed to the less expensive version, and eventually it turns into a services stream? I think that's right. The first chapter, and I put that chapter over the next one to three years, is going to be the slow rising tide of upgrade, iPhone returning to 5%, 7 % growth. I think the second phase is probably some specific services that they'll have around kind of higher feature AI.

12:59They didn't talk about agentic AI, agent AI. This is basically the ability, we've talked about this in the past, of AI actually doing tasks for you, complicated multi-layered tasks, contacting people, organizing things. That's a big opportunity longer term, but you are correct, Melissa. This is about getting people to recognize that their current phone isn't nearly good enough, and I think that they hit it. This is the biggest day for Apple since the iPhone, a full stop. So, Genius Tim, I'm going to kind of repeat my view because I think I'm more in agreement with you. And that's not what I'm here to do is say, hey, we're.

13:34But what I'm hearing is that every major technology company, including Microsoft and ChatGPT and Google, know they have to work with Apple. And that this is still this installed base is the ticket to implementation for the biggest AI companies in the world. But it doesn't happen without Apple. And so the question really is, because if we all agree that the refresh isn't that compelling or necessary until 25, what are they going to do? What is it going to require for them from a technology perspective to get that phone in shape to be able to support all this? So this year, the phone, their overall business is going to be up about 2%.

14:12Calendar 24 is not going to be a particularly good year. It's going to be better than the down 2 % over the past year and a half. But so to answer your question, there's not a lot that they can do now. This really comes down to what's going to happen in the fall. And I predict there's going to be 10%, 15 % of the base is going to get these devices. They're going to show it to their friends, and they're going to want to move to upgrade. So I think this is a very real upgrade cycle. I do caution. My one cautionary piece is I'm talking about one to three good years. I think the stock goes up on that.

14:44There is an underlying question about where does the core competency of AI lie. Apple did two today. They're working with GPT. They're doing some of their own, but you really have to have all of your AI under your control for your destiny. That's a challenge longer term for Apple. It's a challenge for Google. It's a challenge for Microsoft and Amazon. So I think that from a technical standpoint, Tim, what do they need to do? They need to do all this stuff themselves. They can't rely on a third party to power these insights. What do you make of this, Gene? If Apple integrates open, I'm reading, so apologies.

15:16He's open AI at the OS level, then Apple devices will be banned at my companies. That's Elon Musk, who seems to have some problem with Apple. I mean, is there any does that make any sense? Are other people going to have those same concerns? I would be I think highly of Elon. It's hard to read what he's thinking there. I would say this when it comes to privacy. Apple is not perfect, but they're better than definitely better than Google when it comes to privacy or meta. and those are really some of your other choices. And so I think that this is, I think Elon's kind of grabbing, surfing the headlines today and trying to poke the bear.

15:56And I don't think there's going to be any substance. I don't think outside of China, you'll definitely see this in China, but outside of China, I would be very surprised if you see organizations starting to ban Apple devices based on access to generative AI. Gene, it's Dan. I consider you a great friend. You've been a great friend of the show for a very long time. I respect your work tremendously, but I want to give you the opportunity to take back that comment that this is the biggest day for Apple since they launched the iPhone in 2007. I've thought hard a lot about it since March 26th. That's when Greg Jaws put the text out that said this is basically saying this is going to be an AI event.

16:35I thought about what the iPhone brought. Really what the iPhone did is it added touch. Why that's so important is that opened up the whole concept of having apps on your device. It changed a phone to a computer in your pocket. That was through touch. That was a huge deal. It took years to fully realize that potential. When it comes to AI, the ability to infuse intelligence throughout all the products to make you, allow you to do things different, in my view, is a bigger step forward than touch. And I think touch was the last big one with the iPhone. So have a ton of respect. I love you, Dan. I'm going to stand behind that.

17:12I think this is the biggest day since 2007. All right. Gene, thanks. Always good to see you. Thank you. Gene Munster. Tim, I want to go back to a comment that you made in terms of Microsoft needing to work with Apple because Apple has the base and that's the ticket. Do they or can Microsoft own the enterprise and Apple owns the user? Okay, that's fair, except for, you know, I think that's kind of the world we live in today, isn't it? I mean, Microsoft and Apple are coexisting and they're fine. This is a This is a case where chat GPT seems to be more than an enterprise dynamic. And bringing it to the consumer, until proven otherwise, Apple is the conduit.

17:51They are the distribution channel for every one of these major tech companies. That includes Meta, who a lot of people are doing all. I mean, how much interaction are people doing on a PC? So my expectation is that we still have to be using Apple products until they didn't change that. Meantime, NVIDIA wrapping up its first trading day post-split. Shares closed up three quarters of a percent to just over$121 after the company's 10 for one split took effect. But not all semis were in the green. Shares of AMD dropping four and a half percent after a downgrade at Morgan Stanley. Analysts cutting its rating to equal weight, saying the AI bar is very high.

18:24Software stocks also getting hit. Snowflake, Workday, Trade Desk, all lower. Katie, what do you make of this action? You know, with Nvidia, I think it's widely known that a split does not improve the value of the stock, right? But I understand how it does affect the sort of impression of it being cheaper. And to me, you know, it could foster a little additional momentum behind NVIDIA just from a sentiment perspective. But NVIDIA has been such the driver of this market. And if we do see it enter a consolidation phase, which there are some indications of that from our countertrend indicators, you know, we feel like that's going to be a big drag on the broader market.

19:05And just, you know, near term, the uptrend is very, very strong there. There is still good long-term momentum. But for NVIDIA, it worries me that there's so much hyper-focus on it that if it cracks a little bit, we'll have a problem. Yeah. The Morgan Stanley note was interesting. The analyst was saying also that, you know, if you want to invest in picks and shovels, everybody's going to NVIDIA and Broadcom. They're not going to AMD. No. And AMD, remember, it was January 30th, they reported they rode the coattails of NVIDIA from$170 up to$227 on the back of nothing but multiple expansion. We talked about that.

19:40So this is probably the right price. You know, it's interesting. I think they remain$176 on the price target. AMD, I think you're looking for a place to buy it. And that should come at the prior all-time high. If you go back and look, I think it was$155 in the fall of 2021. That should be huge support. Yeah, and we got Taiwan Semi Sales last week, and we know where they play. And so they're clearly benefiting from this. They're going to benefit from chip players outside of NVIDIA here, too. But that thing is on a runaway breakout. I just think that this has been a really unchecked sort of move.

20:13And Katie talks about a consolidation maybe in the offing. I mean, to me, I think you could kind of fill in that gap from earnings last month. It wouldn't be anything. You know what I'm saying? And so I just wonder, when you think about the customer concentration, it's Apple, it's Google, it's Meta. and it's Amazon, 40 % of sales. At some point, as we get to late July and we start hearing Q3 guidance or start extrapolating what it might look for Q4, I just wonder that if this company is not going to be able to guide above what is consensus for the first time in a very long time, and then you start to get a corrective sort of phase.

20:44Right, but then does that mean that the weakness in SaaS names is overdone if there's going to be a reversion? Maybe. Andy's underperformed the entire semi-space by 35 % since that actually marked 7th. I just say that the argument for a lot of people with AMD is that they're a very distant second, but they're one of the few that has the scale, and they're going with an open system, open compute, holistic. And that's kind of the whole story. They're going across AI, and there's no one else really in second place. All right. Coming up, everything you need to know about Lilly, what the FDA is saying about the company's Alzheimer's drug, and the latest trisepetide trial results, all that next.

21:18Plus, green lights for GM as the automaker jumps to a new high. What is driving those gains, and can the recent run-up continue? Don't go anywhere. Fast Money's back in two.

21:34Welcome back to Fast Money. Eli Lilly closing almost 2 % higher at another all-time high as an FDA advisory panel weighs the drugmaker's experimental Alzheimer's treatment. Advisors voting unanimously in favor of the drug's safety and efficacy. Angelica Peebles joins us now with all the details. Angelica. That's right, Melissa. Eli Lilly's Alzheimer's drug getting a unanimous vote of support from an FDA advisory committee. The panel today saying that drug is broadly effective for early Alzheimer's disease and that the benefits outweigh the risks. Remember, the FDA doesn't have to follow the recommendations of its independent advisors, but it usually does.

22:08Now, Lilly's drug is not a cure, and it's only meant for people in the early stages of the disease, but it does slow progression of the disease by 29 percent, excuse me, compared to nothing at all. And the panelists heard from some of the clinical trial participants. They talked about how they're living relatively normal lives despite having Alzheimer's. The committee had to weigh that against potentially deadly brain swelling and bleeding. They decided those risks would be managed with education and monitoring. Now we have to wait to see how the FDA moves forward with these recommendations. Melissa?