The current AI landscape, according to Deepwater Asset Management's Gene Munster, is still in its "very early stages." This sentiment underscores a critical period for tech giants and emerging players alike, as the foundational shifts brought by artificial intelligence continue to unfold. Munster recently joined CNBC's 'Closing Bell Overtime' to offer his insights on how Apple is navigating this transformative era and to identify where the next wave of tech outperformance might originate.
For Apple, a company often perceived as trailing in the generative AI race, Munster believes their strategy centers on managing expectations while quietly building capabilities. He noted that Apple's post-WWDC messaging was a deliberate "media blitz to tell people, 'judge our AI chops on what that new Siri is going to look like.'" This approach, he argued, effectively "reset the bar" for investor expectations, lowering the pressure on immediate, dramatic AI product launches and providing Apple with valuable time to innovate. This strategic lowering of expectations could ultimately prove beneficial for the stock in the latter half of the year.
Beyond internal development, Munster highlighted a significant, often "under-appreciated opportunity" for Apple: strategic acquisitions. He specifically pointed to Perplexity as a potential "home run." Such an acquisition would not only provide Apple with an advanced generative browser to "supercharge what's going on with Safari," but also offer a competitive search product, a vital counter to Google's dominance.
Apple's conservative capital expenditure, at roughly $10 billion last year compared to $50-60 billion by other hyperscalers, indicates significant untapped financial capacity. This substantial dry powder positions Apple uniquely to make strategic, impactful acquisitions in the AI space.
Looking beyond the mega-cap tech players, Munster posits that the real outperformance in the second half of the year will come from smaller, more agile companies. While the established giants continue to fare well, he suggests that investors should consider shifting focus to those sub-$500 billion market cap entities. These smaller firms are uniquely positioned to capitalize on the early, yet rapidly evolving, phases of AI development.
The current tech resurgence, propelled by AI, is far from mature. As Munster succinctly put it, "it's hard to believe, but I still think we are in the nascent phases." This perspective suggests that while the initial AI surge has benefited large incumbents, the long-term opportunities, particularly for those with the foresight and capital to invest strategically, are still vast and largely untapped.
