Google and apple in talks to use the ai engine in the iphone. Thats showing signs of life in the ai trade. Joe . This potentially reeignites the mag 7. Fundamentally this is interesting, and i am not sure who will be paying who in this scenario. Obviously we know they pay apple in terms of search. This is also a little bit puzzling to me for apple. Is this an admission maybe they could not bring forth their own ai or gemini ai fast enough, and then the regulatory risks for this as well. Clearly this is a significant positive for alphabet. I think its something that probably has been circulating for the last week, because alphabet has had a strong period. Apple had open talks about open ai in the bloomberg report. Maybe this is a look at apple and maybe they didnt have that ai together in time for the Worldwide Developers conference in june. Google is a default Search Engine for apple, and this deal makes sense from this standpoint. Its no secret, clearly, that the gemini rollout has not been strong, so i think its obviously a major positive with the price of google today. To joes point, its interesting to see apple not having developed this on their own, with all the resources they had on the buildout. I think it could be a shortterm deal, we dont know. We could get a lot from this deal and see how it develops over the longterm. And you think that its ai Search Engine is fixable. Thats why you bought this thing. This could openbillions of users potentially for its ai Search Engine . Yeah, and that is why i added on the decline based upon the poor launch of their ai tool. Look, i mean, the question is, you know, does apple feel they are behind and has to outsource it . Guess what . Apple is not an innovator. If you go through any of the tech companies, go through the largest tech companies, apple has by far the lowest rnd expense, and you can look at the others that are at least double. Of course they are a follower. Of course they need somebody else to innovate for them, and google who is already a partner is a natural partner and a mystery. Apple will have to lower what google pays them right now, which is like 19 billion a year, or they will have a separate line where they pay google for using their search. To me its a great deal for alphabet. Its a fixable problem they have, and there are only two companies out there, maybe three if you include meta, that have these Search Engines others can use, one being google and the other being microsoft. I think its a great move. They still have to fix their problems, though, joe, and thats an outstanding issue, even if they are potentially unlocking billions of potential users, they have to have a Search Engine people want to use and that its accurate. Yeah, people want it to be credible and its a reliable source, and the circumstances over the last month have called that into question. You wake up on a monday morning its like when you wake up on a monday morning and you have a big mega deal, and thats where the market is and it took it away from where it was on friday, and it reignited some of the positive momentum. Again, i think the single most important from a Strategic Perspective element of the story is now do we have the mag 7o outperforming once again. We have the lag steve, you want to but in . Go ahead. I do want to butt in. Sure you do. Were talking here like microsoft and open ai have flawless products, and thats so far from the truth. The distance they have created in the launch between alphabet and themselves is not that great, and easily transversed. That just has to level the conversation. Open ai is not a perfect product. Microsoft is open ai joe, i didnt hear anybody mention open ai in the first five minutes. Shannon . I think joe hit the nail on the head in terms of what the importance is here. I wouldnt be surprised to see a little more of a tail on this for alphabet, and the Second Derivative for apple longer term is if theres a rational for users to upgrade hand sets in order to access ai technology, thats where you will get the lift from apple for this type of deal. On the credibility side, google has been looking for credibility in terms of the ability for them to show that gemini can be, you know, a strong competitor or substitute for microsofts product. I think across the market, though, i think one of the things we have been grappling with over the last several weeks is the dispersion in the mag 7, which in our view is a positive, and its also a opportunity for lift in other sectors. I would not say its at the expense of the mag 7. It doesnt need to happen its not a binary trade, if you will. Some of the strengths we have seen in energy, industrials and materials, that feels more as a response to some of the Economic Data we are getting outside of the u. S. , for instance. I dont think its a binary trade. I think the lift on the mag 7 helps on the concentration perspective but i dont think it negates momentum we have seen in other parts of the market. What does it mean for apple . Lets bring in steve kovach. At the end of the day what we have to think here is what is most important to apple is selling more phones in the new upgrade cycle coming in the fall, and basically convincing folks that whatever ai features they do announce, tim cook says they are going to, and this is quoting him, break new ground in ai, and we have some kind of hints, i guess, at what gemini can do. Google already started gemini in a couple phones, and samsung is using google ai in its latest phones that came out a couple months ago, and they can do live translation between languages, and they can take a voice recording and scribe it on your device, and erasing objects in pictures, it can do that. Its not the break through that tim cook teasing, so the question is what else can gemini do for apple for them to leverage the language model, and like so many folks were saying here on the panel, it speaks to apples inability so far, if this is true, at least, to come out with their own ai model and that should cause concern as well, because five or sex ix ye ago, they hired somebody to run that operation, and this is his baby, and right now it seems to be more leveraged on the google side and a rival more than it is building in house. If theres a partnership, do you think it will be an apple branded Search Engine or gemini . Thats the biggest question. Apple has siri on the phone and a lot of ai stuff going on under the hood but if they need to inject Google Technology in there, what does that do . Does that mean its no longer an apple product . I will note the best analogy we have now is the search deal, when you open up the Safari Browser on your iphone, and the search bar is a google experience, and its not an apple experience, and thats what google is paying for, and like some other folks just mentioned, the big question is going to be paying apple . Or is it going to go the other way, and apple is licensing this from google. Either way its great for google. Steve, thanks. Steve kovach. I am curious, what is your take on the up 1. 6 for apple . It seems like a ah kind of response . Yeah, the most important thing is i think it helps with the upgrade cycle going forward. What is the new news and catalyst, and all the points are welltaken in terms of they have been slow to innovate, and weiss made that point, and thats not their game, and its the user base and User Experience is what makes apple special, but its not getting the lift that maybe some would have imagined because this deal is more leveraged towards google and thats where the opportunity is. The interesting thing is, and steve mentioned the lack of innovation at apple, but the bigger question is apple scrapped the electric vehicle emissions which is billions of dollars a year, and what do they do with all that cash . If they are not paying alphabet for the ai, what are they doing with the cash, and so steve is on something, and at some point the market punishes you for sitting on all that cash. They cant sit there and continue to buyback stock. Thats not enough for the market. The regulatory forces are hard at work at this point against acquisitions in tech. The other big story we are watching is nvidia. Kristina is there live in san jose with what we can expect from ceo jensen fong in a matter of hours. Kristina, the bar is high here . Reporter its incredibly high. This is a developers conference, and they are going to want to hear first and foremost about the latest products, specifically specs of the latest ai gpu, how much memory will it have and how does it compare with amds latest chip. We will want to know details about going beyond gpus to ethernet cables and storage and that entire ekecosystem as well and the fact that 11,000 people are coming to the big arena behind me is something new that we have not seen in the last five years. We should hear details about partnerships, and examples, and microsoft earnings are out on wednesday. They eluded to a collaboration on nvidia, and we could hear more about the chips and see the impact on some of these shares, like supermicro, and you can see that is up 2 just today. Lastly, the theme, demand sustainability and invisibility 2025 and beyond. Many Large Language Models are trained and how will that expansion into other sectors continue to grow, like finance, government, sovereign wealth, and that could help show that the pace of growth is going to continue. Much of these points, to come full circle, melissa, are priced into the stock, and there has been a lot of volatility just within the last week and a half or so and it was down four out of the five sessions last week, and its the total addressable market, and jensen said it would grow from 1 to 2 trillion in the next five years. Any type of details on what that means per year for them could reinforce this ai trade and provide confidence in demanding sustainability beyond 2025, which is a key theme here. In other words, the best of the golden ai age is yet to come, or as jensen said, we are still in the early innings. Same thing, right . And when you talk about the market number, does that also include software . This is a developers conference. Nvidia has to convince people they are not just slinging gpus, its a system they offer, and amd made progress with their own software but not as far along nearly as nvidia. Yeah, and the developers are already using this type of software, and they are switching costs and learning what would be difficult to go on to any other type of software ecosystem, and it inkpcampuses, the entire datacenter infrastructure. They believe every infrastructure out there that data centers will need to be revamped to accommodate the processing for ai. Thats why the number is so high and can go from 1 to 2 trillion. What would swing the stock is if we hear a number per year, and if its 500 billion per year for them, that would be a big mover, and reinforce the trade that ai is sustainable, and it will not be just a shortterm thing, and fixed cost will be diminished in the next two years. Kristina, thanks. Do not miss nvidia huang interview on squawk on the street. The stock tumbled to 874. Something somewhat similar this morning, 946, and the talk was op at 924, and it got down to a low of 878. 37. The thing is the importance of nvidia on the market. Nvidiahas a little rollover this morning, and you saw the market pull back with it. Nvidia is still at the center of the universe, and as goes nvidia will go the market. Its interesting, because jensen huaug has more impact on the market, and it speaks towards the market is able to overcome some of the friction and inflation and treasury market because it sees the opportunity and the Revenue Growth in the ai story. The impact on tech, like semiconductors, since the launch of chatgpt last year or in the early part of 2023, semiconductors outperformed the s p 500. I think we have run out of adjectives for nvidia, and i think about datacenter growth and it has quad gtkpwau wyear or year. Are we going into 2026, because we know what the price action has been over the last year and a half. That will be a question. We have seen those cycles in the Semiconductor Space before, and nobody would debate what is going on in the shortterm, but how much have we priced in. What concerns you about the stock, if anything . Well, the valuation. I think they will grow into it, in terms of what we saw today, the stock was up 35 points at one point, which is not tremendous when you consider what base its operating off of. To me it would be more of the same, and not in a bad way, and it will be nvidia is the leader and it has new products coming out and will raise prices. I think everything is fine for now, and if i were there i would probably fall asleep during it because i fall asleep during twohour movies. Heres what i would say. Every large tech company, microsoft, apple, meta, are incentivized to build their own chips, and they will, and they will do so through taiwan semi, and competition is coming and you have such expediential tpw growth in ai. I think there will be multiple winners, but i would not dip down to the large cap companies. The ripple effects are immense, and for every dollar spent on the h 100 trip, theres 1,200 to support that chip, and its not just the chips but the whole array of goods that kristina went through, the ethernet and software and et cetera. I think the concern is too, melissa, when people are talking about valuation, what they are concerned about is the shorter term, over estimation of ai, and longer term theres likely an under estimation in terms of not only Revenue Growth that could be derived from ai, and if you think about it from a longer term perspective what you are hoping for from a market is that we are still cresting that first wave and we dont hit that inflexion point where there starts to be perhaps disappointment in what is happening on the enablers from an ai perspective, and we start to see the modernization come through, and the concern is the shorter term concern that we dont see the pickup on the second wave, and longer term, there are a lot of analysts likely underestimating the longterm impacts and they could offset some of the higher structural costs we are likely to see over the next few years. This is an open question for everyone. Thinking of this, theres blue skies for the semiconductor industry, and at what point does the mark price in the risks . Is there election risks surrounding the supply chain for semiconductors getting weaponized if the election went in a direction surrounding tariffs . Do you think the market doesnt see that risk sitting here months and months before the election . Maybe if i could see it, maybe everybody else would see the same thing and they are not concerned about it, but i just wonder if its not what are you worried about, joe . Specifically, what risks are you worried about specifically . Does the supply chain get weaponized in response to an elevated environment where we Start Talking about tariffs so maybe tsm gets cut off no, thats a taiwanese company, and we are looking to support taiwan, and china is a net semibuyer, and i am not worried about that at all. What may be a worry, but i dont think it should be, is cutting back on the funding that we have seen so far for building the chip plants in the u. S. , because that was bipartisan, very clearly bipartisan. I dont see any weaponization of that, other than potentially being positive. I would say that i am certainly not worried about what steve is not reasonably worried about that either in terms of pulling back on the chips, and i think about the political aspects of this, on joes point, you know, i think more about just look at what we have seen from a supply shock perspective over the last few years. The impact of supply shocks in general i think is much more known and a reasonable concern for investors at this point. Its something that feels much more uncontrollable, and if you will, less able to forecast than changes on the demand side. I think what we are seeing with shipping, i think there could be political concerns as it relates to chips, and all of those are impacting costs. From my perspective, if you look at supply shocks versus demand shocks, supply shocks are harder to forecast in the next couple of years. Speaking of the ai trade, Goldman Sachs has a list of ai names that may not be on your radar. Check out that story right now. You can scan the qr code. Coming up, we will hit calls of the day. Were back in two. Business. Its not a ninetofive proposition. Its all day and into the night. Its all the things that keep this world turning. Its the gotos that keep us going. The places we cheer. Trust. Hang out. And check in. They all choose the advanced Network Solutions and round the clock partnership from comcast business. Powering more businesses than anyone. Powering possibilities. Personalized Financial Advice from ameriprise can do more than help you reach your goals. You can make this work. We can make this work. It can help you reach them with confidence. No wonder more than 9 out of 10 of our clients are likely to recommend us. Ameriprise financial. Advice worth talking about. When i was your age, we never had anything like this. Ameriprise financial. What . Wifi . Wifi that works all over the house, even the basement. The basement. So i can finally throw that party. And invite shannon barnes. Dream do come true. Xfinity gives you reliable wifi with walltowall coverage on all your devices, even when everyone is online. Maybe well even get married one day. I wonder what i will be doing . Probably still living here with mom and dad. Fast reliable speeds right where you need them. Thats walltowall wifi on the xfinity 10g network. Welcome back. The calls of the day starting with netflix, and netflix remains the streaming leader. Its hitting a 52week high in the session. Weiss, you own this one. Yeah, they are the winner, spao sp pure and simple. I bought it on one of the days where the stock was dislocated, and i wish i would have bought more because it has done well. Its not cheap, and theres only such a large multiple i am willing to pay for anything. And its interesting in creating sporting events and not getting into the bidding wars, and weiss will probably fall asleep during it because its more than an hour its because he is old. The mike tyson flight will be an interesting one. Netflix has been an amazing winner here. To weisss point, i think they have been the undisputed winner. The wwe deal, we will see what happens with the mike tyson story, fight, i think that will be fun. Pay sharing and margin expansion, i lik