In another article on Yahoo Finance good shopping or goodbye, Matt Higgins, co-founder and CEO of RSE Ventures, joins Josh Lipton to share his insights on iPhone maker Apple (AAPL) and semiconductor company Arm Holdings (ARM).
Higgins designates Apple stock as his own bargain, The tech leader said the stock could be on an upward trend after falling in the first quarter of 2024. Higgins cites Apple's rapid adoption and integration of his AI into its devices as a key catalyst.
“They've been quietly gobbling up AI companies, and I think they've acquired 32 companies,” Higgins said. “It's clear they're working on it, because if they don't, they face an existential threat to their very existence. Apple continues to keep its head down while its stock price slumps. think.”
Arm is the stock Higgins wants to talk about. bargain He said the semiconductor designer was overvalued because early investors were “looking for another way to go after NVDA” in the broader chip industry.
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This post was written by luke carberry morgan.
video transcript
[AUDIO LOGO]
Josh Lipton: It's a big noisy world of stocks out there. Welcome to Good Buy or Goodbye. Our goal is to cut through that noise and help you navigate the best moves for your portfolio.
Today, we take a look at the landscape of artificial intelligence and how the AI boom is spreading beyond the semiconductor industry. Let's bring in Matt Higgins, co-founder and CEO of RSE Ventures.
Matt, nice to meet you. So let's make our first purchase here, Matt. Now, some investors have been skeptical and concerned about this stock since the beginning of the year.
It's Apple. But you say this is something to own. Let's take a look at why. One, you've said that Apple is moving forward with AI acquisitions. Let me explain about it.
Matt Higgins: Well, first of all, I was really tough on Apple last year and said, “What are you doing?” Use Siri. And I feel like the 1990s is screaming for my phone back.
But Apple may be in stealth mode. They are secretly preying on AI companies. I think I bought 32 of them.
And obviously they're working on it. Because if they don't, they will face an existential threat to their very survival. Therefore, I think Apple continues to keep its head down while its stock price slumps.
Josh Lipton: That's a good point. That's because Apple isn't often known for making big, flashy acquisitions. But they've made a lot of smaller acquisitions. The next thing you say is that an iPhone with AI integration is on the way. And you think that will attract upgraders.
Matt Higgins: Yes, a great catalyst is coming. So if you compare Apple to the Magnificent Seven, if you're a shareholder, Apple is like a bad company. That's why it's terrible. S&P is up 25%. It's been flat for a year.
But at the end of the day, Apple has the data. We are close to our customers. When you think about using ChatGPT, it's kind of a terrible experience. You want to be able to access your phone.
Therefore, they can go directly to the customer. They have his 50% market share in the US. So it makes sense for Apple to have the upper hand. But most importantly, Catalyst is coming on June 10th. This is a developer conference.
Josh Lipton: That big software show. And finally, here's another point. Can it provide the fastest path to AI adoption? What does that mean, Matt?
Matt Higgins: Well, when Apple announces something, everyone pays attention to it. That means there are no hot killer features yet that rely on upgrade cycles. But they are planning to release a new phone, iPhone 16, new update, iOS 18. So if they get this right, I think everyone will be integrating AI into their lives instantly.
No, I'm hearing this argument from some Bulls, Matt. And this is a good thing. As AI moves from the data center to the edge, Tim Cook will control software, hardware, and chips as needed. He can move very quickly.
Matt Higgins: that's right.
Josh Lipton: Finally, Matt, what are the risks with this phone?
Matt Higgins: Okay. Well, I'm a lawyer. I don't practice. I graduated from law school. So I'll put on my lawyer hat. This is a terrible case.
But now I could be wrong. The Department of Justice is coming after us. Apple says it has exclusive rights. I think they have considerable market power.
But it's not a monopoly. But you never know. So it's a risk.
Josh Lipton: Okay, let's move on here. Apple, we know you like it. Let's talk about when you don't like your arms.
Matt, you're telling people to avoid this. Let's see why. One is just an evaluation.
Matt Higgins: Yes, I participated in the IPO. I was happy to ride with you. The opening price was $55.
It reached a maximum of 140. But as it turns out, Arm was relatively early on in the AI splash. People were looking for different ways to go after NVIDIA.
As the market becomes more sophisticated, they start to realize, wait a minute, Arm's prices are way too high compared to its peers. 100x forward earnings. There are many better ways to play. Therefore, I am not a buyer at this price.
Josh Lipton: And the second point, Matt, we were talking about this off camera. What you're really trying to say here is that, in your opinion, Arm has become kind of commoditized relative to its rivals.
Matt Higgins: right. That's why there is no moat. Most people don't have a moat. But there are some companies that are actually in a very good position in this case. It's not Arm, it's Taiwan, semiconductor NVIDIA. The microprocessors sold by Arm are IP enablers.
But at the end of the day, they don't have pricing power, as evidenced by the fact that they can't make Apple pay more than $0.30 for a microprocessor license. They have no pricing power. Therefore, that limits their upside room.
Josh Lipton: And the final reason to avoid this, Matt. You're basically saying you're looking to follow NVIDIA's lead.
Matt Higgins: Well, basically what I'm saying is that the enthusiasm led to a bid. The AI phenomenon is very real. You will earn a lot of money in the long run. But as customers become more sophisticated and markets become more sophisticated, they will look for better ways to do things.
The reason I think it's holding up well is because SoftBank owns 89% of Arm. So what happens when SoftBank gets tired of that, needs liquidity, and starts offloading its shares of caution?
Josh Lipton: Yes, concentrated ownership. And finally, Matt, same question. What's wrong with this? What are the upside risks?
Matt Higgins: Yes, there are two. For one, Google just announced a partnership with Arm. The company is relying on Arm to create a competitor to NVIDIA. I won't buy it. But it is possible.
And second, it may take some time for the market to realize that Arm is actually too expensive. So maybe we'll have time to ride together.
Josh Lipton: Okay, Matt, let's summarize this for our viewers right now. You're telling investors to buy Apple because Apple is increasing its AI capabilities through acquisitions. And that impact will potentially drive consumer adoption of AI on an unprecedented scale. But on the other hand, you're saying we should avoid Arm because it's overvalued and more commoditized than its rivals. Just ownership and centralized trading.
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