Interview with Janus Henderson Investors Portfolio Manager Denny Fish

0:04We're practitioners and we go out and we talk to all the industry participants and the CEOs of these companies and the people making these decisions. And we just had our entire team down in Arizona for the UBS tech conference and met with pretty much the who's who of technology, you know, over that span. And it's not slowing down by any means. And for those that are skeptical, I would urge you to talk to the practitioners and, you know, forget about all the noise on Wall Street right now and follow the data points.

0:35That was Denny Fish, Portfolio Manager for the Janus Henderson Investors Global Technology and Innovation Fund. I'm Motley Fool Producer Matt Greer. Now Motley Fool Chief Investment Officer Andy Cross and Analyst Asit Sharma recently talked with Fish about the investing landscape, AI, CES, and how to build a resilient portfolio. Enjoy. Welcome to another Motley Fool conversation. I'm Andy Cross alongside here, Senior Analyst and Advisor Asit Sharma. Today, we welcome Denny Fish to The Motley Fool. Denny is a Portfolio Manager for the Janus Henderson Global Technology and Innovation Fund, and he also leads up the firm's technology sector research team, among many things, Denny, that I'm sure you do at Janus Henderson.

1:20Thank you so much for joining us, and welcome to The Motley Fool, Denny. Absolutely. Thanks for having me. Denny, it's great to have a chance to talk to you, and Asit, thanks for joining me because there is a lot of overlap in the styles and the stocks and the holdings as we look through the Global Tech and Innovation Fund, among many of the other holdings of Janus that you all have invested in over the years. And we've been big fans just in following along some of the most innovative investors that I know in the tech space. So it's great to have a chance to talk to you. And maybe we'll just start off, Denny, with an overall thought on the markets and tech investing.

1:52We just wrapped up another great year for the markets, especially in large cap tech stock. So maybe you can start off by giving us your thoughts on the investing landscape to start 2026. Yeah, absolutely. You know, we continue to be pretty optimistic about the tech market in general. I mean, you know, the fact of the matter is kind of the most important decision investors could have made for the last 20 years kind of starting, you know, 2005 ish was to, you know, be overweight tech. And there's a reason for that. You know, the secular trends that we've experienced, you know, it was cloud, social, mobile, you know, for example, that really lasted for almost 20 years, laid the foundation for artificial intelligence and probably, you know, even more profound than the dawn of the commercial internet and what we've seen, you know, since kind of the late 90s.

2:44And so, you know, we have that powerful, the secular theme that's developing that we feel strongly about, you know, we're going to be optimistic by our nature, particularly given we take a longer term view, but also depending on where you're at in tech. I mean, if we rewind, you know, last year was a strong year for tech, you know, so was 24 and so was 23. We've been, you know, pretty exceptional years, but it hasn't been a rising tide lifts all boats by any means. You know, if I was just going to describe what's happened the last three years is you were either on the right side of AI or you weren't or you were perceived not to be.

3:24And so, you know, the AI semiconductor ecosystem has been really, really strong for obvious reasons. And that's because the fundamentals have been very, very impressive and earnings have gone through the roof. And so even though a lot of these stocks are up a bunch, you know, their multiples actually aren't up that much, you know. And in some cases, their multiples are lower than they were a year ago because the earnings have come through. And I'll tell you, like one thing that we do, we're practitioners and we go out, we talk to all the industry participants and the CEOs of these companies and the people making these decisions.

3:56And we just had our entire team down in Arizona for the UBS Tech Conference and met with pretty much the who's who of technology over that span. And it's not slowing down by any means. And for those that are skeptical, I would urge you to talk to the practitioners and forget about all the noise on Wall Street right now and follow the data points. And they continue to be pretty strong. And so we expect the AI infrastructure ecosystem to remain healthy. What's interesting is we did start to see divergence in the mega caps, right? And so when we started the year last year, Google was dead in the water.

4:32Search was troubled or secular issues. Meta was the golden child with llama. Meta had a huge run the first six months. Google did nothing. And now Meta has been a terrible stock the last six months. And Google is on their front foot with Gemini. And so we will expect things to continue to ebb and flow like that this year and see more dispersion, say, for example, in the Mag 7. And then, you know, like software was terrible last year. OK. And the reason that it had just a really difficult time was because where, you know, revenue growth accelerating, you know, earnings going up a lot in the AI infrastructure, you know, most of the mega caps continuing to show really healthy earnings growth.

5:15The software industry as a whole, just kind of what it is, what it is. And, you know, without accelerating fundamentals and this perceived threat of AI disruption across both horizontal and vertical software. And so you've seen a really wide dispersion in the software sector in terms of performance. And so the way I would characterize, you know, thinking about 2026, expect AI infrastructure to remain strong, expect the large caps to continue to do quite well, but more dispersion as we've started to see between them based on fundamentals. And then we actually are starting to get more interested in areas of software because it's underperformed for, you know, effectively three years now relative to semis and AI infrastructure.

6:01And there are some businesses that are going to be just fine as we get to the other side.

6:31Deinen Deal auf sparsim.de.

7:01enhancers and end users. And this is also the framework that's employed by the Janus Henderson Global Artificial Intelligence ETF. We'll just call it JHAI, the symbol for short from here on out. But could you explain this framework and how you're using that to isolate companies that could have promise beyond just this year as we go to three year, five year and beyond periods? Yeah, absolutely. And I appreciate the question. So this product was officially commercialized to the public in August of this year. But I actually seeded this product back in August of 2025. So before the chat GPT moment, it actually went to our product committee at the depths of tech despair in 2022 to convince them that AI was going to be a very, very profound technology shift that we were right on the cusp on.

7:51And my original thesis at that point in time was that there were going to be kind of three buckets of companies that were going to benefit from AI. And to your point, it's not just tech, you know, it's the broader economy. This is going to be very profound and we were going to have phases of adoption. And so we created this framework of enablers, enhancers, and end users. And what we mean by that is enablers are, as the name suggests, so it's semiconductors, you know, GPUs, ASICs, foundry, semi-cap equipment, power producers, data centers, data center infrastructure. So kind of a mix of tech, energy, industrials, kind of all the stuff you need to lay down to actually be able to train these models and then actually perform inference as we actually put these agents and applications into production over time.

8:45And then, you know, our view is there's another set of companies we call these enhancers. These are companies that were strong businesses before AI, and AI is likely to make the businesses even stronger. But the fundamentals and the impact of those businesses are going to lag enablement. And so enhancers, I kind of think about software, for example, you know, companies that have developed really strong businesses, have impressive data moats, are critical to their customers of value teams or business processes, and then can embed AI into those applications to enhance the value proposition to their customers.

9:27Also, on the consumer internet side, for example, companies that have very incredible value propositions, but AI is just going to make their engagement stronger and make both their operations stronger as well, both from a digital and a physical standpoint. And that's what we mean by enhancers. I kind of think about software companies and internet-related companies in that bucket. And then end users, pick your poison. It could be healthcare. It could be financial services, agriculture, insurance. And our thesis here is that there are going to be companies that are already leaders in their industry that are going to extend their competitive advantage because of their aggressive deployment of AI to not only reduce costs, but also drive revenue lift.

10:13And we're big believers that we're going to see companies that are going to benefit on both sides of that coin. And that's why, you know, that's why I'm optimistic about the market. I think there's a lot to be optimistic about because of what we could see with AI. And what we expect is just over the fullness of time, our percentage of the fund that's in each of these buckets is going to ebb and flow based on where we feel we are in the adoption curve of AI. And so that's why we structured the fund that way. Yeah, I just want to follow up with a question on the lines and how they blur. So between enablers and enhancers, the idea that comes to my mind is Amazon.com is sort of an enabler and an enhancer.

10:54Where do the lines blur the most when you're categorizing these companies? Yeah, that's pretty much where it does blur. I would say, you know, the hyperscalers, for example, because, you know, Microsoft is the quintessential enabler because of Azure. But then they're an enhancer if you think about what Copilot does for Office, you know, in their productivity suite and other applications. So those blur the line. Right. You know, and but I think where the most value is being added right now to the companies is in the enablement phase, you know, whether it's Azure or AWS. And so I would consider those more enablement.

11:27But over time, like clearly you think about a company like Amazon, you know, we think about, you know, really what gets all the attention right now is the digital manifestation of AI. When we think about the open AIs and Anthropics and Geminis and, you know, how AI is being deployed. That's just the start. You know, the physical manifestation of AI through robotics and humanoids, full self-driving, automation, you know, things like that. You know, that's going to be really, really profound for companies like Amazon that have a massive physical footprint with fulfillment and distribution. And they should get a tremendous amount of efficiencies from that.

12:02And, you know, like I was talking about this idea of like extending durable competitive advantage. I mean, Amazon has built up an infrastructure that is just probably insurmountable. at this point, you know, just the sheer amount of capital it would take to replicate that. And then if you're able to do what they've done for the last, you know, 25 to 30 years, which is just reinvest that incremental margin into making the business better, that's what we're going to see. And they're just going to continue to extend their competitive advantage on the physical side as well. The Civil War and Reconstruction was a pivotal

13:00Pivotal Era in American History.

13:09Hey, Denny, we are in the middle of the CES time of the year. So I just want to get some reflections on your thoughts on what you heard coming out of CES this week. Yeah, I think the biggest thing is pretty much the biggest thing that we had last year, too. And that was Jensen's keynote. And the reason that is, is because last year he laid out this idea of three separate types of scaling laws that were important to understand that were compounding effects on each other. and why Blackwell was actually going to be able to support the continuation of scaling laws. And this year, it was all about the continuation of that.

13:50And now Verirubin, which is the next version of their GPU systems. And what's really important about that is these systems, they just get more powerful, but more efficient. and it's this whole idea of how do we continue to extend scaling laws while at the same time driving down the cost of tokens for those that are actually then using the models and that's exactly what Rubin is expected to do and you know Nvidia just continues to stack its lead in the GPU space. And I think that was probably the most important thing, just giving people confidence. Like, look, if you thought Blackwell was good, wait till Ruben gets here, okay?

14:36And so, you know, so that was big. You know, CES is, you know, 15 % an auto show too. You know, every year we continue to see more and more on the autonomous side. And I think, you know, I'm in San Francisco and has spent a lot of time in Phoenix. And, you know, I've been using Waymos for a long time. and I don't get in an Uber anymore if I don't have to. You know, I love Waymo. It's an amazing experience. I've used FSD from Tesla. It's not nearly as good, but it's come a long way. Still a long way to go because of the path that Elon's taken with machine vision relative to Waymo. But I was just in London and drove around London in a car by a company called Wave, you know, which is funded by SoftBank, Microsoft and NVIDIA.

15:19And, you know, we cruised around London for 45 minutes. driver didn't have to take the wheel one time and London's pretty tricky, you know? And so I think that's another thing that investors are going to be getting more and more excited about. And, and, you know, so autonomous was interesting and we're starting to see more on kind of the humanoid and robotic side as well that people are getting really interested in. So once again, I mean, they might have to change the name of CES to like CES AI or something. I don't know. They already have moved kind of in that direction, right? Yeah, exactly.

15:49Austin was kind of joking with us on one of our podcasts, like, where's the consumer part to the CES? Totally. I can't imagine what the London cabbie, the upper wars, they're going to make of driverless tech. Oh, my goodness. When Uber came into London, it was a big deal. And I can't imagine the disruption there. It was interesting with the CES, with NVIDIA's pretty prominent show of their driverless technology, then the reaction from Elon on Twitter, kind of commenting a little tongue in cheek on us kind of already doing that. It does start to another showcase of where you see so many of these giants start their frenemies, their competitors in one way, their partners in the other.

16:26And, you know, you already seen it with the chip providers and NVIDIA being big chip providers of the hyperscalers, the hyperscalers developing their own chips and making a lot of progress there, especially in Google and the TPU. So I found that very both entertaining, but also very insightful on kind of how NVIDIA is thinking about building out their stack, especially when you think about robotics. Yeah, completely. And I think that's probably what investors underestimate about a company like NVIDIA. I mean, it's just a GPU story right now. There is so much that this company is working on and the amount of cash that they're reinvesting back in the business to advance innovation in areas like, you know, robotics and autonomous driving and the number of investments that they've made in other companies that are also pursuing this.

17:11And what I also love about Jensen, you know, if he sees something, he'll act decisively. And you look at the deal that they just did with Grok, G-R-O-Q, which was actually founded by a guy by the name of Jonathan Ross, who was the original inventor of the TPU at Alphabet. OK, and I've met with them several times over the years and was actually really excited for them to come public at some point and invest in them as a public investor. But unfortunately, it's part of NVIDIA now. So we're invested that way. So in some ways now, Jensen's cornering the market a little bit in terms of use cases through a deal like that as well.

17:47So it's a fun time to be in tech. There's a lot of change. There's going to be a lot of competition. This is where I go back to we're just going to continue to see more dispersion among the large cap companies based on who's extending their advantage and who isn't. And just look at Alphabet and Meta and what happened in 2025. And I think we're going to see a lot more of that in 26, 27 and beyond. Denny, how do you think about allocation in general? You have some very large allocated positions in both the AIETF and the Global Tech and Innovation Fund. And then you have some smaller ones. Just talk to us maybe roughly about your thinking around allocation strategies.

18:25Yeah, we have this philosophy called resilience and optionality, where we're trying to position 50, 60, 70 % of the portfolio resilient, meaning these are companies we really think we could owned for five years. Not saying we're going to because things can change. We think the range of outcomes are not narrow, but not wide. The returns are going to be high and they're innovative management teams and we want to get behind them. We'll run those as big positions. Strong competitive advantages. Good example, the head of our portfolio is TSMC, right? I don't care what happens. I don't know if Broadcom wins, NVIDIA wins, AMD, whatever, whatever happens, all roads go through Taiwan and now Phoenix, you know, because they're going to have like 12 fabs there.

19:10Right. And so you find things like that, that you can get comfortable with, but then you got to find tomorrow's winners. Right. And, you know, and those are, you know, generally smaller companies that have wider range of outcomes. And so we populate then the bottom portion of the portfolio with companies like that, smaller position sizes. And we're going to call that part of the portfolio more because we're going to be wrong. But the hope is we find enough of those companies that then graduate to resilient companies over time that can have a meaningful impact on the portfolio. That's great. Asit calls that his peanut shell strategy, I think, Asit, to borrow a little term from you.

19:48You got to get started somewhere. Yeah, exactly. Danny, it's been a really wonderful, far-reaching conversation, and you share your many deep thoughts on tech and investing, your experiences in AI. And we really appreciate all that we've learned from you. Thank you for joining us here at The Motley Fool. It was my pleasure. Thanks, guys. That was great. Thanks, Denny. Best of luck to you and the entire Janus team. And we hope you have a great 2026. Great. Thank you. Likewise.

20:18As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for our gifts. so don't buy or sell stock space solely on once a year. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For the Motley Fool Money team, I'm Matt Greer. Thanks for listening, and we will see you tomorrow.

20:54Thank you.