Demand Is Robust Despite 'White Knuckle Environment' For Tech, Says Dan Ives

Why It Matters

Robust component demand and rising cybersecurity budgets signal growth pockets in a volatile tech market, urging investors to recalibrate between hardware, undervalued SaaS, and security plays.

Key Takeaways

• Demand for Taiwan memory and components remains robust
• Tech environment described as “white‑knuckle” amid geopolitical tensions
• Investors favor hardware over software despite SaaS growth potential
• Cybersecurity budgets expected to double as AI expands attack surface
• Microsoft’s free‑cash‑flow multiples suggest undervaluation despite market skepticism

Summary

Dan Ives told listeners that despite a “white‑knuckle” market, demand for Taiwan‑made memory and other components remains surprisingly strong, underpinning the outlook for hyperscalers.

He noted that investors are currently fixated on semiconductor hardware, sidelining software‑as‑a‑service stocks even though use‑case growth from Microsoft to Salesforce is accelerating. He highlighted that AI‑driven models like Anthropic could disrupt pure‑play software firms, while entrenched platform players retain resilient install bases.

Ives cited Microsoft’s free‑cash‑flow multiples—trading at 12‑month forward P/E around 21—as evidence of a “massively disconnected” valuation, and warned that cybersecurity spend could rise from 5% to 10% of IT budgets as AI expands the attack surface, benefitting firms such as CrowdStrike and Palo Alto.

The takeaway for investors is to balance exposure: maintain positions in hardware and cloud infrastructure, seek undervalued SaaS opportunities, and allocate to cybersecurity leaders poised for budgetary tailwinds in the AI era.

Original Description

Dan Ives, Global Head of Tech Research at Wedbush Securities, discusses the tech sector's resilience amid conflict in the Middle East.

Microsoft Corp. unveiled a four-year, $10 billion investment package for Japan, a major pillar of its Asia-wide artificial intelligence push.

The early OpenAI backer will develop cloud and AI infrastructure alongside Sakura Internet Inc. and telecom operator SoftBank Corp., with the two Japanese entities supplying graphics processing units and other computing resources. Sakura Internet’s stock jumped 20% on the news Friday, while shares of SoftBank, the telecom arm of investment group SoftBank Group Corp., rose 1.6%.

As part of the package, Microsoft, whose Copilot has struggled to keep pace with OpenAI’s ChatGPT and Google’s Gemini, will invest in cybersecurity partnerships and train a million AI engineers through 2029. But the biggest outlay would go to expanding the company’s cloud computing capacity and building new data centers, President Brad Smith said in an interview with Bloomberg and Japanese broadcaster TBS.

“We don’t build these things simply on the basis of a hope and a prayer. We build them on the basis of clear demand and demand signal,” he said, following a meeting with Japanese Prime Minister Sanae Takaichi. Acting too slowly would either mean losing market share to competitors or holding Japan behind, he said.

“We obviously have to keep our feet on the ground even as we move fast. And we do that.”

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