00:00 Speaker A
let’s dig in to this decision on Microsoft because you just downgraded that one to sector weight. Um, most on the street, Jax, and you know this, most of your colleagues, they they like this name, they got to buy on it, but you you move to the sidelines. How come?
00:22 Speaker B
Yeah, um, thanks for having me, Josh. Yes, we moved to the sidelines overnight, really, I would say, for three reasons. The first is a little bit of worry about artificial intelligence return on investment, just how much money the company is spending in capex related to artificial intelligence. Um, then are our recent conversations around not just cloud demand, but just broader enterprise software demand. We published a survey overnight as well that just frankly had some negative data points, uh, pointing to Microsoft, um, in their ability to to to, you know, I’m not calling a quarter, but their ability to make the quarter. And then, finally, would be, I think, the depreciation expense is probably underappreciated by most investors.
01:54 Speaker A
You know, when you look at how, uh, broad how much hope there is essentially of a AI investment boom ahead, and obviously Microsoft a big beneficiary of that. How much do you think, uh, the policy uncertainty and some of the pullback that we’re seeing from a variety of different companies across the spectrum, uh, is affecting what’s likely to come to fruition over the course of the next six or 12 months when it comes to AI spend?
02:47 Speaker B
Yeah, it’s funny. In the near term, um, I do expect artificial intelligence to take a little bit of a backseat to the macro headwinds and just the regular uncertainty that’s out there. Artificial intelligence could be seen as maybe more of a luxury good in an IT spend or an IT budget stack. And if you’re a luxury good when there is uncertainty, that is not necessarily a good thing. Luckily for Microsoft, they have plenty of other businesses, and it’s not just about artificial intelligence monetization for something like co-pilot. But still, we’ve picked up in our conversations and our checks that AI has faded a little bit into the background in terms of IT budgets, uh, as we’ve gone through the last three to six months.