Don't Miss: AI Stock Picks from D.A. Davidson

If Amazon and Microsoft were to successfully make the case for continued CapEx this earning season, does it make them also the best position to win the next leg of the AI race? Let's ask Gil Luria. He's head of technology research at DA Davidson. I I again, I love looking back at the history of this Gil. Microsoft was first out of the gate. They were the golden child after ChatGPT. They had the open AI collab. They it was all about Microsoft until it wasn't, which was up until about last week. So you think they're going back into the leadership position here? >> Yeah, they have. They have and and part of it is that they actually reported positive cash flow and said that they'll retain positive cash flow where Google and Amazon are already negative and will stay negative. Microsoft said they're going to increase CapEx next year. They didn't use the word significantly, which is why the market had the negative reaction to Google. Now, part of it is that they're not just selling AI compute. They're doing a better job than the other two at selling infrastructure software on top of that. They have all the Microsoft fabric and databases and orchestration layers and control planes and harnesses to upsell their customers, which is why they're doing just as well without those are less capital intensive businesses. So they don't have to match the the CapEx at that scale that Google or Amazon do. So it's a little bit of an advantage they have both in the ability to deliver and the efficiency to deliver that. Having said that, all three are winners. The only difference right now is valuation. Amazon's the most expensive, Google the second, and Microsoft the least expensive. All three are winning. >> What about Meta, Oracle? They're they're a little bit more on the bubble. The investors are a little bit less sure where they and some of the others are going to come out here. >> A lot of it has to do with the on the Oracle front, and decision-making on the meta side. If Mark Zuckerberg decides that he he'll be transparent with the monetization of the data center buildout, and tell us how much he's going to make by renting out that capacity, which could be a lot, investors would have been a lot more comfortable than him saying, "Well, we're not sure yet." Which is the multiple quarters that we've gone to, "Yeah, we could rent out compute capacity, but we're not sure yet." On the Oracle side, it's just execution. They need to get data centers built. They're having a problem with that. They need to raise capital. They're having a problem with that. They said they're going to do an at-the-market equity offering at the beginning of the year. They haven't done it yet. And the stock keeps going down, so now it's even harder to do. So, they have that lingering. This is all execution and messaging. Both of these companies can do well if they do that. >> Is it Is that the only problem, though? Or do they need partner with deeper pockets? Or Or You know what I mean? Should Meta get into the cloud? I don't know how you get into the cloud business up against these incumbents at this point. Should Oracle have some kind of partner with a better balance sheet? >> So, Oracle does have all the cash flow. They'll probably have 25 billion of cash flow from their core software business. So, they can fund some of the debt. It's just that they piled on too much. So, they need to slow that down, build the data centers, get the cash flow in, and execute on that. It's a high-wire act. That's why the CDSs are trading so high. And in Meta's case, again, they also have the cash flow. Selling ads is a fantastic business. They just grew that at 28%. And they they can fund the growth. It's just that investors are saying, "We want to own the ad business until you show us that you can monetize the data center business. We don't want you to keep investing more in that than you're investing in the ad business."