00:00 Ted
Right now, I think if you look at 26, we’re going to have a tremendous amount of volatility. The AI trade is very well understood, at least through my client base with
00:20 Ted
the you look at the infrastructure build really outpacing enterprise uh adoption. And that’s the issue. Uh we’re going to spend at a 40% clip here for the next couple years. Uh the Sox is up, the semiconductor index is up uh almost 48% year to date. And if you look at the IGV or the software index that’s been the big laggard, only up 7.8%. So all I think of this is understood. As we uh as we look into 26, there’s there’s three issues that I’m uh looking at very, very closely and we can go in that if you’d like to.
00:54 Speaker B
Yeah, I’d like to go into that. And maybe Ted, on that on that point you just brought up, I just want to drill into that. This this mismatch as you say between the the data center build out and the the real enterprise AI adoption. When would you expect Ted then to see that enterprise AI adoption story play out? Is is is that a 2026 story, Ted? Is it 2027? What do you think?
01:21 Ted
Right now, that’s a it’s hard to nail down, but I don’t think it’s 26. The enterprise, there’s only roughly 30% of the Global 2000 that’s ready to move to Gen AI. 70% is still going through data cloud migration and uh data cleansing to get into an LLM. So, we’ve got, you know, enterprise it always takes so much longer than the street is looking at. That mismatch probably goes into 27, 28 is my guess.
01:54 Speaker B
And and how what are the signs and signals Ted as investors I would be looking for to say, okay, now we’re really saying seeing AI monetization, not just AI marketing. I mean, am I looking at software spend? Am I watching the cloud businesses? Like what should I be looking for, Ted?
02:22 Ted
I think I think it’s it’s well understood that the cloud Titans are going to see it in token growth as well as just their their overall cloud growth. Where I think it’s really instrumental to see enterprise adoption is uh via your last few guests, is in the software area. Specifically on the agentic plays, whether it be, you know, a CRM, a ServiceNow, a hubspot, um, you know, and then the whole security sector is moving to AI. I think if you see robust, um, uh net new ARR, that’s that’s going to be a very good indication of enterprise uh adoption.
03:22 Speaker B
You you another theme Ted, I want your take on which you wrote about was obviously, you know, the massive uh CAPEX by tech giants. But of course we’ve seen these concerns creeping up at least with some names Ted, financial stress, you know, debt loads, and I’m just curious how you’re thinking through that dynamic.
03:52 Ted
Well, my clients do not want to play names that are negative free cash flow. Uh this is one of these cycles because of this mismatch in infrastructure, it’s very capital intensive on this infrastructure build. So the only real names that really have the the the businesses behind it to really uh fund the capX is Microsoft and Google and that you know, Google’s up 87% uh year to date. Um so with with that, um I I think uh there’s a propensity to just watch and have some dry powder. Um I don’t have a lot of interest in some of the negative free cash flow names at this point. And it’s obvious I think as we go forward that you’re getting indications that whether it be Anthropic or whether it be Open AI or SpaceX, that the debt market is tapped and the it’s not big enough quite frankly to fund the infrastructure build. So all of these next generation companies are going to have to tap the equity market. And my worry there is very simple after doing this for a few decades is when you have four or five major tech companies that have to raise just a boatload of capital. Open AI has been rumored a hundred billion dollars. My worry is that we get some time in the in in 26 where all these guys come public at the same time and we drain quote unquote the equity liquidity lake, if you will. And my PMs are going to be forced to sell some of their winners to to fund some of these uh positions in these new companies.