Dan Ives: AI sell-off is a “gut-check” – 5 tech stocks to buy now

Transcript:

Caroline Woods: Here for a tech check is Dan Ives, tech analyst at Yorkville Ives and Company. Dan welcome back. Great to have, you.

Dan Ives: Know, great to see you as always.

Caroline Woods: All right Dan. So we had a brutal week for tech white knuckle moments, as you say. And we’re seeing a bit of a rebound today actually a pretty substantial rebound for some of these names. Do you think the worst is behind us. Are we in the clear to start buying tech stocks again?

Dan Ives: Look, I think it’s just it’s a nervous period. I mean last week was definitely a disaster for tech investors. And then the earnings. I think it was pretty mixed right. Because the hyperscalers. You saw the trend. You saw the strength in terms of cloud. But it’s the disruption that’s happening right now that things causing just this panic. But we’ve said, look, it goes back to even like the SaaS clips earlier this year.

Dan Ives: These are not the times to panic. You have to own ultimately the winners and advocate the storm. And that’s essentially what the storm is.

Caroline Woods: Well, you’ve said that big tech earnings would be the real test of the AI trade. So now that we’ve seen a lot of these results, did they deliver?

Dan Ives: I think it’s it’s mixed. I think just some extent like the cap backs, the hyper scour, the cloud growth, that’s a huge check. But I think the part that was surprising, I think I think to to the market and you know, and we talked about it, I think it’s still level of disruption that’s happening across the whole tech ecosystem from the security side with what you saw with ServiceNow, the memory side with Intel, the advertising with alphabet.

Dan Ives: I mean, I think that’s the thing that I think shocked investors, just the level of disruption that’s happening.

Caroline Woods: So as you take a look at stock prices now, which tech stock is on steepest sale right now and looks attractive. In which sell off do you think is justified.

Dan Ives: I think alphabet continues to be the one where, you know, if you’re believers like we are, that they’re going to monetize on that advertising side. The cloud is going to continue to be robust, and they’re going to get on to the other side. The risk reward here, you ruin this. Now in terms of like the names that have sold off that, you know, we’re still not necessarily huge believers in yet being bypassing Oracle would probably be the one just because the level of debt that they’re taking on still makes us nervous.

Caroline Woods: Okay. It’s kind of sticking with that. You’ve been really bullish on AI across the board. But your latest note that I saw come through right nearly this morning when I was awake at 5 a.m. as well, acknowledges that AI is already hurting some software companies. So aside from Oracle, which stocks are most vulnerable?

Dan Ives: How do you do into it? I think those would be probably the names that I think would be the most vulnerable relative to those business models. They will click Salesforce like we’re still a believer in Salesforce. I’m still believer in service now. And so but we’re going through I think the level of disruption has been something that caught the market off guard.

Dan Ives: And look, and part of the problem is, is that as a institutional investor, as a retail, I’m not sure it’s it’s hard to get these periods because you know, this webinar volatility there is violent or.

Caroline Woods: And I guess that’s the big question. How do we navigate it as retail investors. You mentioned that you still like Salesforce and service. Now what makes them winners rather than the next victims of AI.

Dan Ives: I think it’s installed. I mean, you’ve talked about before, I think install bases with separate companies and its duties, they’re going to be able to monetize their AI platform. And I believe sales forces one like they relate to the game. But one of my ServiceNow same thing. But when you go through these periods where not just earnings, but just the nervousness that we’re seeing in the market, I think it creates the opportunities.

Dan Ives: But it also speaks to argue like why we’ve done so much work, whether it’s in Asia, whether it’s here in the US, just to try to understand the seams and the data points, where sometimes they don’t always show up in numbers in that given quarter.

Caroline Woods: But doesn’t a name like Adobe have a big user base as well?

Speaker 3: I likes it.

Dan Ives: It does, but it’s on the wrong side. I think of a lot of these trends because I think a lot of their markets can cannibalize a new CEO, you know, obviously new strategy, but the next 6 to 9 months will determine if they’re able to get onto the other side. This.

Caroline Woods: So after the shakeout that we’ve seen, Dan, do you see more upside in software stocks from here or chipmakers.

Dan Ives: Well I think I see more upside in chips just relative to I don’t think you have the equilibrium till late 2028 early 2029. But I do think also like 2027 is really going to be the year for software. I mean, to some extent, like software stocks from cybersecurity to the application to the infrastructure, where should actually be the ones that could really start to see that modernization ramp.

Caroline Woods: With CRM and ServiceNow at the top of the leadership board. Any other names that we should have this or that we should be buying?

Dan Ives: I think like Palantir, snowflake, MongoDB, despite even like the managing changes, I mean, those are probably ones that are probably closest to it. You dated the dog and others like, you know, ones where I think they’re more at the front relative to these sort of build outs that they’re happening. But when you look at Salesforce and service now, there’s probably the two best parameters for ones that you know, I will be able to turn this around.

Caroline Woods: What happened with Oracle? Because I know that was one of your big AI bets earlier this year. You even thought it could double and now you’ve taken it off your AI 30 winners list. Is there a price where Oracle becomes attractive again, or have the risks fundamentally changed.

Dan Ives: Or cool? The big thing was just the level of cuts and the people that have had to, you know, that basically have left over. They’ve cut into muscle and bone. And Carolyn, like that was something where them thinking on that, them going after the opportunity with open AI. You know that that that huge believer in but not the expense of what’s going to happen at their current business.

Dan Ives: And I think that was something that as I started to get my more arms around, just the level of sacrifice in between cuts and everything else, that was one way. I think it’s going to be hard for Oracle’s stock to significantly outperform until they’re able to clear through this period.

Caroline Woods: Meanwhile, Core Weave has been hammered over concerns about debt and financing as well. But you’ve called it a golden buying opportunity. So why are you willing to bet on core weave but not Oracle?

Dan Ives: Yeah. And again I am talking about golden opportunity in terms of broader software. Right. I mean, when it comes to core weave, I think they’re going to be one of the neo clouds that successfully navigate this. I think this is probably in a much better position than their core. So if I think that from a new cloud perspective, I would probably rather nebulous in core weave.

Dan Ives: But core weave is going to be one of the longer term survivors. I mean, they’re going to be able to navigate this period, but there’s going to be a shakeout and you’re seeing it happen in the neo clouds.

Caroline Woods: And I see Irene on your AI 30 list as well. So that’s another name that you think will ultimately survive this.

Dan Ives: I think it’s not just about surviving. It’s like I view them as one that, like, is well positioned to capitalize on this AI 3 to 4 trillion of spending that we’re going to see in terms of the build out. But that’s another one that they’re also going through this gut check movement that they need to navigate to show investors that they’re going to be a winner.

Dan Ives: Because, look, this is it’s a gut check moment for so many of these companies, even though even Iris Gower’s alphabet needs to show that they’re going to be able to monetize the advertising piece, which is obviously the golden goose throughout the disruption has happened the model.

Caroline Woods: And then we have Apple reporting tonight, a company that hasn’t spent all of this money on AI. You have a $400 price target on Apple. I was just taking a look. Currently trading around 340 right now. What do we need to hear from Apple to keep the rally alive?

Dan Ives: Apple. I mean, I continue to believe 20% of the world’s access AI through an Apple device. I think like on the consumer side, they’re going to continue like they will be the one that I think significantly monetize is the consumer air revolution they’re going through, with still a very strong product cycle on the iPhone side. IPhone 18 obviously will be successful as well.

Dan Ives: Services continues to outperform. I think for them in fitness, it’s going to really be about monetizing the AI piece over the next 12 to 18 months. But that’s like another example. I go back to last year and a half. The narrative on Apple for so long was like they missed out on the AI, which is true, but it’s that install base is the reason that if you look where it is today and then you have to spend the CapEx there now in just a massive position of strength.

Caroline Woods: But when does Apple get punished for a Siri that doesn’t really work.

Dan Ives: So I don’t think that happens. I think they basically have probably a year until what I view is the 20th anniversary of the iPhone, which would be probably the first true AI and able device. I think that’s where rubber meets the road for for Apple, but I think in the near term it’s about building up to that moment.

Caroline Woods: Apple reclaimed the title of the world’s most valuable company from Nvidia on Friday. Do you think that Apple is really the best AI investment though? Does it deserve that top spot?

Dan Ives: Look, I think it’s one of our top picks perennial relative to to my view of where tax heading over the coming years buy something in video is the best position a play in the market. And so sure that stocks trading don’t quote 1112 times earnings. I think Mark had significant discounting. I think what numbers could look like for in video over the coming years.

Caroline Woods: We also have Amazon bouncing back today. Our investors right to be buying the dip right now. Or does Amazon still have something to prove.

Dan Ives: No, I think I think I thought that quarter was a very good quarter really across the board. If I go back to you what Jassy and Amazon are doing. I mean, they’re essentially playing catch up to where they maybe should have been a year ago. And I think I think they’re actually in their extremely well positioned. I mean, it’s my view from a hyperscale perspective.

Dan Ives: Microsoft best positioned Google two, Amazon three. But everything we’re talking about with Oracle, the Oracle essentially is turning themselves into the next hyperscale space. That same thing.

Caroline Woods: Go back to the list of three. That was the list of best position for what.

Dan Ives: If you think about the hyperscalers, Microsoft’s the best position hyperscalers because it’s their core enterprise. But what Amazon and Google have done is just so impressive and you’re seeing in the numbers.

Caroline Woods: But if you could only by three tech stocks after earnings, which would they be.

Dan Ives: I think it’s in video. It’s Microsoft and it’s Apple I mean those to me it’s just the three.

Dan Ives: I’d add Palantir and obviously others. But I think that three how does a position I think makes them I think uniquely positioned to to to go after this market.

Caroline Woods: Even though Apple is only 3% away from the highs and we have like an alphabet that’s now substantially below the highs, I was just thinking like 30% off the highs as you think about value.

Dan Ives: Because I think a. I think AI could ultimately add $75 per share to Apple’s valuation. I mean, that’s my so I know we’re we’re believers in alphabet as we talked about. But I’m just saying the AI piece I don’t think is really been factored in to where Apple can go.

Caroline Woods: Is there an AI stock you think investors are paying too much for right now?

Dan Ives: I think a lot of like, look, I mean, you could argue maybe like, you know, this selloff that we saw last week, I think a lot of that’s reflected. I mean, it’s hard to look at a name right here that hasn’t been significantly cut. And I think in this sort of self across the board that we saw, I think it’s great opportunities for those that want to play this AI revolution.

Caroline Woods: I noticed that you also added Dell and Space to your AI 30 winners list. Why specifically those names, I mean space. We know you love Elon. I guess. Why Dell?

Dan Ives: And because I think Dell I think like Dell because of these. When I think about data center and GP, you build out someone tapping the 800 to 1000 data centers are going to get built in the US. There’s 12 to 18 months. I think that was incrementally well positioned from an infrastructure perspective. Then I think what Michael Dell and the team have done is phenomenal the last few years.

Dan Ives: But it’s my view like as this all as this build out happens, I think Dell is going to be the one that’s you’re going with Microsoft. And so many of these core infrastructure players are just extremely well positioned.

Caroline Woods: I saw that, you know, and this is something you’ve been talking about for quite some time now that you’ve assigned an 80 to 90% probability to a Tesla space merger by the end of next year, if you’re right, which stock is the better investment today? Tesla or space.

Dan Ives: With Tesla? I think just because that would have to probably happen at 500 or above as a stock, you know, like we love space X. I just think Tesla in that situation is the better one to open.

Caroline Woods: Okay. As we think about risks, what worries you more right now that companies are spending too much on AI, or that the returns won’t justify the spending?

Dan Ives: It’s probably if there was anything that worries me, it’s the time that they have to show the spending is resulting in my Asian because as investors, the patience wears thin. Credit spreads have increased. There’s more nervousness. It gives them maybe a small window to prove it. And I think that’s by that means Paris.

Caroline Woods: How big do you think that window is?

Dan Ives: I think it’s probably like there’s a six month window that they need to ultimately prove this out. I think that’s why we’re we’re in this period to, you know, I think in the, in this AI race.

Caroline Woods: You’ve made the case though that the AI build out is largely funded and backed by real demand. Which companies are most at risk if that demand doesn’t materialize as quickly as expected?

Dan Ives: I mean, in that situation would probably be the neo clouds, right, relative to what their business model is. But I just think more and more the validation for the AI build out. We’re seeing it by the dev, not just in terms of chips, but we’re seeing in terms of enterprises and in terms of what we’re seeing in terms of really use cases.

Caroline Woods: So if 2027 is sort of this inflection point for AI monetization, what’s the clearest sign investors should watch for that? AI is actually paying off.

Dan Ives: I think it’s the cloud and data center build out. It’s the cap X wrapped and then it’s the use cases building out with names like Palantir, snowflake, eventually Salesforce, ServiceNow may. I think if you’re kind of putting the puzzle together, I think there’s so important.

Caroline Woods: And if we don’t see that happen. Does that change your bullish outlook?

Dan Ives: Of course. But I mean I would just tell him we are more confident in the thesis today than we were six months ago where a year ago. So I just think you and I. But that’s also why like we spend so much of our time with customers, but we are in Korea a few weeks ago anyway, just trying to just understand like where all these trends are heading.

Caroline Woods: Okay, Dan, we have a whole bunch of audience questions. So I’m going to kind of do these as rapid fire. But the first one I want to ask you is something that I sometimes have asked you before. I’ve thought. Do you ever stop to think, what if I’m wrong? What if monetization will hit a wall, and all of this beautiful thesis will come crashing down?

Dan Ives: Of course. But that’s. Of course, I always think about that. But that’s why that motivates me to talk to the incremental customer part from their in other trip to Asia. I don’t just sit here thinking that thesis is right and then just go in the treadmill or peloton.

Caroline Woods: All right. So what time is it at the AI party and what time does it end? Another audience question.

Dan Ives: Evan 11:30 p.m. and it ends at 4 a.m..

Caroline Woods: Okay. And that that’s what inning.

Dan Ives: We’re we’re still third in it. But is that.

Caroline Woods: 30 okay.

Dan Ives: They’re there to be glass on the dance for DJ stops playing music. Hops come to break it out for noise violation, but the party will continue in the bears that have called ten of those two downturns will continue. Watch this party through the windows.

Caroline Woods: Okay, moving on to the next audience question. If you could only own five tech stocks for the next five years, which would they be?

Dan Ives: I would call if I was a Comcast like Tom Hanks castaway type of. I go into an aisle and Wilson with the volleyball, Palantir, Microsoft and video Apple Castle.

Caroline Woods: No alphabet there. Okay AMD or Nvidia video. What’s the best AI memory stock right now? Micron, Samsung or SK Hynix. SK another question how much of today’s enormous chip demand is real, and how much could be companies over ordering to secure a supply?

Dan Ives: I think it’s all I think it feeds for all. I think over ordering these two is fictional.

Caroline Woods: Our NIO clouds over.

Dan Ives: No, I just think there’s winners. It’s a Game of Thrones battle. Winners will emerge and the losers wither. Go away or beat solid.

Caroline Woods: Will, which I know you think is a winner. Hit 300 by the end of 2027.

Dan Ives: I don’t know, but I, I think I if there’s a, if there’s a new card to own that continues to be our favorite.

Caroline Woods: Is Marvell taking over good.

Dan Ives: I think it’s good that it gives them a broader, broader market footprint.

Caroline Woods: And what’s an under the radar AI name that you’re buying?

Dan Ives: Under the radar? I’d probably say.

Dan Ives: I think tenable on the cybersecurity side. And that’s probably also an acquisition.

Caroline Woods: Okay. All right. And now time for my rapid fire questions for you. You know how to play this one. Quick questions quick answers. No hedging. Are you ready Dan.

Dan Ives: It’s good.

Caroline Woods: All right I created this game for Dan Ives. So I’m glad that you’re back to play it. Here we go. Tech sell off first behind us. Wait what did you say.

Dan Ives: No, I’m saying I’m honored you doing this again.

Caroline Woods: I’ve told you that. All right, let’s go. Tech selloff worse behind us. Or more pain ahead.

Dan Ives: More choppiness. Head.

Caroline Woods: Apple near all time highs by now. Or wait for a pullback.

Dan Ives: By now.

Caroline Woods: True or false. Apple deserves to be the most valuable company in the mag seven.

Dan Ives: Falls in video.

Caroline Woods: If you could only buy one here. Microsoft or Alphabet. Microsoft better buying opportunity after earnings. Alphabet or Amazon. Alphabet true or false. The next big AI winners won’t be the chipmakers or hyperscalers.

Dan Ives: I say true because it’s software.

Caroline Woods: Software name poised for the most upside is.

Dan Ives: Still fleek.

Caroline Woods: Most upside from here. Semiconductors, cybersecurity or power?

Dan Ives: Cybersecurity.

Caroline Woods: Memory chip sell off, jump in or wait.

Dan Ives: To jump in I think oversold.

Caroline Woods: More upside from here Dell or Marvell.

Dan Ives: Dell.

Caroline Woods: Salesforce or ServiceNow.

Dan Ives: Salesforce.

Caroline Woods: Workday. Opportunity or value trap.

Dan Ives: Die trap.

Caroline Woods: CrowdStrike or Palo Alto.

Dan Ives: CrowdStrike. But still like. In town.

Caroline Woods: Intel more than 50% off the highs by or stay away.

Dan Ives: I continue to be cautious on that one.

Caroline Woods: So is that stay away.

Dan Ives: Stay away.

Caroline Woods: Sure or false, SpaceX is a serious threat to Alphabet’s AI infrastructure business.

Dan Ives: False.

Caroline Woods: Alphabet or SpaceX?

Dan Ives: Space X.

Caroline Woods: Most misunderstood AI stock on Wall Street today.

Dan Ives: At SpaceX’s.

Caroline Woods: More promising IPO, OpenAI or Anthropic.

Dan Ives: Anthropic?

Caroline Woods: Finish this sentence the highest quality AI company whose stock is most undervalued is Microsoft. The most overlooked AI stock right now is.

Dan Ives: Tesla.

Caroline Woods: Is what?

Caroline Woods: Tesla? If I could own just one tech stock for the next five years, it would be..

Caroline Woods: All right. Dan Ives, thank you so much for playing for following the rules. And we always appreciate you joining us. If you enjoyed this street talk check out our full interview with Dryden Pence. He reveals what chips he’s buying on dips and some other stocks that he’d also buy now. And if you like what you’re seeing. Be sure to like, comment, and subscribe.

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