00:00 Ted
Now, I think if you look at 26, we’re going to have huge volatility. The AI industry is very easy to understand, at least through my client base
00:20 Ted
You see, infrastructure buildout does outpace enterprise adoption. That’s the problem. Well, our spending will be reduced by 40% in the next few years. Well, the Sox are up, with the Semiconductor Index up nearly 48% year to date. If you look at the IGV or Software Index, you’ll see that it’s the biggest laggard, only up 7.8%. So everything I thought was understood. As we uh as we look at 26, I’m looking at three issues very, very carefully and we can discuss this if you like.
00:54 Speaker B
Yes, I want to talk about this. Maybe Ted, I just want to dig a little deeper into this point that you just mentioned. As you said, there’s this mismatch between how data centers are built and true enterprise AI adoption. Ted, when do you expect to see the story of enterprise adoption of artificial intelligence play out? Is this a story from 2026, Ted? Is it 2027? What do you think?
01:21 Ted
At the moment, the number is hard to pin down, but I don’t think it’s 26. In terms of enterprises, only about 30% of the Global 2000 are ready to move to Gen AI. 70% are still going through data cloud migration and uh data cleansing to get into the LL.M. So, you know, our business always takes longer than people think. My guess is that this mismatch may appear in 27, 28.
01:54 Speaker B
As an investor, I hope Ted says, okay, now what we’re really talking about is seeing AI monetization, not just AI marketing. I mean, am I thinking about software spending? Am I paying attention to the cloud business? Like what should I be looking for, Ted?
02:22 Ted
I think the cloud giants will see this in token growth as well as overall cloud growth, which is well known. I think where it’s really useful to see enterprise adoption through the last few guests is in the software space. Especially on the agency side, whether it’s CRM, ServiceNow, hubspot, and then the whole security space is moving towards artificial intelligence. I think if you see strong net new ARR, that’s a good sign of enterprise adoption.
03:22 Speaker B
You’re on another subject, Ted, and I hope your perspective on what you’re writing about is obviously, you know, the huge capital expenditures of the tech giants. But certainly, we’ve seen these concerns creep up on at least some of the names, Ted, financial stress, you know, debt burden, and I’m just curious how you think about that dynamic.
03:52 Ted
Well, my clients don’t want to play with negative free cash flow names. Uh, it’s one of those cycles where infrastructure construction requires a lot of capital because of the infrastructure mismatch. So the only real-name companies that actually have corporates behind them funding capX are Microsoft and Google, and you know, Google is up 87% year to date. Um, so, um, I think uh, there’s a tendency for people to just watch and eat some dry powder. Well, I don’t have much interest in some of the negative free cash flow names at the moment. Obviously, I think as we move forward, you’re going to get signs that whether it’s Anthropic or Open AI or SpaceX, the debt market has been exploited and, frankly, it’s not big enough to fund infrastructure. So all these next generation companies are going to have to tap into the stock market. My concern is simply that after decades of doing this, when you have four or five major tech companies that have to raise a lot of money. Open AI is rumored to be worth hundreds of billions of dollars. My concern is that we’re going to have a period of time in 26 years where all these people are going public at the same time and we’re going to exhaust the stock liquidity lake, if you will. My product managers are going to be forced to sell some of their winners to fund some uh positions in these new companies.
