What to Buy When the Tech Sector is On Sale — ft. Mark Mahaney
May 1, 2025
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Mark Mahaney, Senior Managing Director and Head of Internet Research at Evercore, shares invaluable insights. He argues that Google is currently the most undervalued big tech stock. Mahaney discusses the exciting strategic potential of Waymo and breaks down Uber’s market prospects. The conversation also touches on Netflix's and Spotify's recent successes amid shifting consumer behaviors and streaming dynamics, offering a comprehensive look at the tech sector's investment landscape.
Huawei's new AI processor development signifies China's intensified commitment to self-reliance in technology amidst ongoing US-China tensions.
Apple's strategic shift to produce iPhones in India by 2026 not only impacts global supply chains but also challenges the efficacy of trade tariffs.
Spotify's robust user growth despite stock fluctuations highlights the importance of innovation and strategic engagement in the competitive streaming market.
Deep dives
The AI Race Between the US and China
Huawei is working on a new AI processor aimed at competing with NVIDIA's H100 chip, signaling a heightened commitment from China to achieve self-reliance in AI technology. This announcement comes on the back of President Xi Jinping’s declaration that AI development will be prioritized nationally, marking a significant shift in the US-China technological tension. Analysts point out that while Huawei has previously made similar claims without success, the current geopolitical climate makes this endeavor particularly noteworthy. The potential implications of this development are profound, as the US is taking steps to restrict chip shipments to China, thereby intensifying the race for dominance in AI and related technologies.
Apple's Shift from China to India
Apple intends to transition all iPhone production from China to India by the end of 2026, a move that exemplifies the profound economic impact of recent trade policies. This shift will not only create around 150,000 jobs in India but will also affect the global supply chain, particularly as costs in India are higher than in China. The decision reflects a strategic pivot away from China, which has been Apple's manufacturing hub for years, and underscores the unintended consequences of tariffs aimed at reshoring American jobs. Ultimately, the shift appears beneficial for Indian economic growth while leaving the U.S. without the anticipated job gains or benefits from such tariffs.
Spotify's Strong User Growth and Market Position
Spotify has experienced a 10% increase in monthly active users, despite a 7% decline in stock value following disappointing forecasts, indicating robust growth potential. Analysts argue that Spotify's user acquisition strategy, particularly through improved algorithms and engagement features, has positioned it as a leader in the streaming sector, distinguished from competitors like Apple and Amazon. Despite challenges such as inflated stock valuations and industry competition, Spotify's continued investment in innovation and content diversification solidifies its competitive edge. This suggests that while the stock may face short-term corrections, the fundamentals of the company remain strong and promising for long-term growth.
The Complex Landscape of Internet Stocks
Earnings reports from major internet companies such as Meta and Amazon are creating significant interest among investors as valuations remain dislocated in the market. The fundamentals for these companies are solid; however, external factors like tariffs and economic concerns are complicating investor outlooks. Meta, for example, is perceived as resilient due to its strong ad platform, while Amazon faces challenges related to rising costs prompted by tariffs imposed on Chinese imports. The current economic climate suggests that investors require a careful approach, weighing both the upside potential against the looming risks inherent in market volatility.
Potential Future Trends in the Tech Sector
The tech landscape is poised for shifts driven by factors such as regulation, tariffs, and economic downturns, which are now considered critical wildcards in market performance. With the possibility of a recession looming, companies within the internet and tech sectors must navigate these challenges carefully to maintain growth and profitability. Analysts highlight that while some companies might flourish amidst these conditions, others may find their growth stunted by economic pressure. As trends in user behavior continue to evolve, especially among younger demographics, there is an increasing importance placed on adaptive business strategies that leverage technological advancements.
Scott and Ed discuss Huawei’s new challenge to Nvidia, Apple shifting U.S. iPhone production from China to India, and Spotify’s Q1 earnings report. Then Mark Mahaney, senior managing director and head of internet research at Evercore, returns to the show to share his top internet stock picks. He explains why he believes Google is the cheapest of big tech, highlights the strategic value of Waymo, and offers his insights on Uber. He also breaks down what’s driving market enthusiasm around Netflix and Spotify.
