‘NO SLOWDOWN’: Market expert doubles down on AI boom amid market selloff

Key Concepts

• Artificial Intelligence (AI): The development of computer systems that can perform tasks typically requiring human intelligence, such as learning, problem-solving, and decision-making.
• Wall Street Sentiment: The general attitude or feeling of investors towards the stock market or specific assets.
• Bullish: An optimistic outlook on the market, expecting prices to rise.
• Earnings: The profit a company has made over a specific period.
• Valuation: The estimated worth of a company or asset.
• Capital Flow: The movement of money into and out of investments.
• Oversubscription: When the demand for an investment offering exceeds the available supply.
• Initial Public Offering (IPO): The first time a company offers its stock for sale to the public.
• Liquidity: The ease with which an asset can be converted into cash.
• Cloud Providers: Companies that offer computing services, such as storage and processing power, over the internet.
• Azure: Microsoft's cloud computing service.
• Enterprise AI: The application of AI technologies within businesses to improve operations, efficiency, and decision-making.

Market Performance and AI Outlook

The market is experiencing a significant downturn, with the Dow Jones Industrial Average down 370 points and the Nasdaq Composite down 360 points. Despite this "red ink," Daniel Newman remains bullish on AI stocks, a stance he has held since the emergence of ChatGPT. He points to consistently strong earnings reports across the AI sector as evidence of continued growth, stating, "Have you seen a bad print this quarter? Really go down the list."

Investor Sentiment and Capital Flow in AI

Newman highlights that despite some market "wobbling," there is no slowdown in AI investment. He notes that even on days when the market sells off, there are reports of substantial new deals, such as "$70 billion more in new deals." When discussing the potential for OpenAI's valuation to become too high for further investment, investors he spoke with indicated that this point is unlikely to be reached. They believe that the idea of OpenAI running out of money or being unable to raise capital for its "trillions of dollars of obligations" is unfounded due to the immense "investment" and "oversubscription" to investment opportunities in the AI space. This strong sentiment and robust earnings make it difficult not to be bullish on AI.

Microsoft as a Top AI Pick

Despite a recent dip in Microsoft's stock price to $497 per share, Newman reiterates his position that Microsoft is his top AI pick. He argues that Microsoft's performance, particularly its cloud computing service Azure, is exceptional. Azure reported a "40% Azure growth number," indicating strong demand and successful capacity building. Newman emphasizes that everything Microsoft is building in AI is "going to be used" due to high demand.

The OpenAI Deal and Future IPO

A significant factor in Newman's bullishness on Microsoft is its settlement of the OpenAI deal, securing a "27% stock" in the company. He predicts a "trillion dollar IPO" for OpenAI in the future. He estimates that Microsoft's current "$12 billion investment" in OpenAI could translate into approximately "$270 billion of liquidity" at the time of the IPO. Newman believes Microsoft's stock can "go higher" due to its strong execution, diversified business model, and its presence in the enterprise sector.

The Nascent Stage of Enterprise AI

Newman stresses that the "enterprise AI" market is still in its very early stages, stating, "WE'RE NOT EVEN 1% INTO IT RIGHT NOW. IT IS JUST BEGINNING." This suggests a vast untapped potential for AI adoption and growth within businesses.

Conclusion

Daniel Newman maintains a strong bullish outlook on AI stocks, citing consistent strong earnings, robust capital flow, and significant investor interest, even amidst broader market declines. He identifies Microsoft as a leading AI player due to its exceptional performance in Azure and its strategic investment in OpenAI, which he anticipates will lead to a massive IPO. Newman concludes that the enterprise AI market is poised for substantial growth, having only just begun its development.