AI trade’s ‘momentum shift’ is fueled by these catalysts

00:00 Speaker A

To me, Dave, one of the most interesting dynamics in the market lately is what’s going on in Big Tech, right? We have seen a pullback in Big Tech. We’ve seen what we’re seeing is an uneven recovery, but there’s also a rotation within Big Tech, or at least a perception that leadership is shifting to some degree. Um and I’m wondering what you think about that.

00:30 Dave

I think there are two types of catalysts happening at the same time. So to your point, the broader environment saw a big pullback from tech to defense in November. In fact, the healthcare sector has surpassed the IT sector by the largest margin in the last 20 years. I think I’m underlining such a big momentum shift. And a lot of the drivers for this kind of macro rotation was the potential for rate cuts, right?

01:00 Dave

So, it kind of started to cook in the market, it really struggled when some Fed governors were against it, and then it came back very hard again and we saw the technology improve. But at the same time, under the covers, there was a leadership change that Nvidia and I would call a sort of Open AI team. So Microsoft, others, and vendors in that space were constantly getting higher and higher, and then the Google news came out.

01:30 Dave

And Google is a triple whammy when it comes to Generative AI. They were thought of as remnants. But they are also hyperscalar, they produce chips, and they have a wide range of language models. And now investors are saying, wait a minute, we forgot about all the other players because we’ve been so focused on Open AI and all their cyclical investments that now we’re seeing investors kind of repositioning and who’s going to be the winner of this next leg going forward? Even Amazon’s news about their chips yesterday gave them a bit of a lead, which we haven’t seen in a while.