Not Interested in Apple or Amazon: I/O Fund’s Kindig

Key Takeaways

What will you be looking for, Beth? >> Great to see you, Ed. Uh, there's many reports tonight and when I think of Qualcomm very briefly, what I would say is being hung up in you in that mobile market. This is not the biggest growth market for AI right now. You can see that evidenced many places whether it's Apple, Qualcomm, pick anywhere really in the mobile stack. Um, for me, Qualcomm is more of an automotive story. I would look more closely at Qualcomm toward the second half of this um decade. So your 2028, your 2029, your 2030 uh especially as AI moves more toward the edge and and when you see AI move more towards the edge, um Qualcomm would become more interesting at that time. >> More interesting in the longer term. in the near term. Talk to me about the valuation of ARM because it has basically risen above where most analysts think it should be be currently priced at. >> Yeah, you know the that's a great point that the one thing about ARM is this valuation for me is not justified. um the royalty rates, they've doubled with V9, the architecture V9. But ultimately, why would I pay more on the sales valuation for ARM than I would Nvidia, Broadcom, these massive design companies that are taking market share uh versus a royalty rate somewhere in the 4% range? Uh to me, it it just makes much more sense to participate directly, and we've already seen that during the mobile era. Would you have rather owned ARM? It was a private company, but would you have rather owned ARM or Apple? Apple, of course. And I think something very similar is going on with, you know, AI. >> Okay, let's talk about the here and now in what's happening in AI and what we're about to hear after the bell as well because I know you have a very keen focus on the metro and the Microsoft story as well. Look, are these companies going to vindicate the amount that they are currently spending on their underlying infrastructure? When I look at these companies, I think Microsoft is the one putting forward uh you know putting its best foot forward. This company um the last time it gave us a number, it was 13 billion on Azure with a 175% growth rate. Sometime in 2026, I wouldn't be surprised if Azure reaches 40 billion contribution from AI. That is a massive number. And then keep in mind it's not just the size of that number for Microsoft, it's the rapid ascent in reaching that number. And that piece I think really does separate Microsoft as the enterprise AI juggernaut. >> Be I really appreciate that explanation because what Microsoft does right says here is a percentage point growth figure for Azure and here is a points contribution specifically from AI. It's a different way of communicating than say Alphabet does or Meta does. But is it enough for an investor like you to say I understand where all this investment has gone, what's coming out the other side. When we are talking about 40 billion potentially in 2026, I would say yes, we are reaching a scale that is very meaningful. Reached it very quickly. And again it is that contrast that you pointed out Ed which is that many of the peers are not discussing specifics in terms of dollar or growth rate from AI. Uh and it is that contrast where Microsoft stands apart. >> I'm going to ask you something which uh might be a little unfair but if we put Meta and Microsoft as direct competitors in an AI race and let's just throw open AI in there as well and Anthropic how would you rank them? You know, Meta has been putting out a lot even this morning about their vision for super intelligence, but where would you rank the competencies and leadership in the marketplace? >> You on the public markets, uh, I have to go with Microsoft because of the real revenue that is there. Meta is my number two um, out of those bigger tech companies. So, Amazon, Alphabet, they would rank much lower. Uh, I don't like Meta's valuation. This valuation is has is is at a historic high. Meta has has participated in very explosive trends such as mobile and social media. I I can't justify Meta's valuation either right now. Um Meta lower though is easily my number two second to Microsoft. >> And then let's look a little further a field if we may. So Microsoft Meta tonight, Apple and Amazon tomorrow. Which of the evenings are you most excited about? >> I will be bold and say I'm not interested in Apple or Amazon at this time as an AI investor. I want to see more from these companies. Uh AWS needs to get up off the floor a little bit here and start to accelerate. Apple similar to Qualcomm, you know, they are the smartphone market. They are the edge AI. There will be a moment when that will lead. It's not right now.