Navigating AI's Next Wave After GOOGL & TSLA Raise CapEx

back to the opening bell. Want to get you ready for the trading day. David Wagner, head of equities and portfolio manager at Aptus Capital Advisors, is joining me now. So glad you're with us. We've gotten in the news here from alphabet, Google and also Tesla. And it looks like the CapEx spend is going higher. Much like folks anticipated. I mean, we talk about the mag seven people had some wild numbers for the year ahead 1.2 trillion 1.7 trillion. So I don't think it comes as a surprise to folks to hear that these companies will be spending more. But somehow the reaction is, oh my goodness, they're spending more. I'm going to sell off. What do you what do you make of it? Yeah. Nicole, I think a lot of people want to point to the CapEx number as to why Google's down this morning. I actually think it's a more from what's going on with Gemini 3.5 Pro. If you go over the last two earnings phone calls for Google, like all the questions that you got was just so optimistic for everything surrounding the stock. But the cadence and tenor of this call that we had last night, it was a little bit different. I think, you know, there wasn't as much focus on the positives for the business. It was more just on the delay of Gemini 3.5 Pro. So I think that's why the stock's down today. But on the CapEx numbers Nicole I think that should make investors sit up. I mean alphabet they're not slowing down their spending at all. They've basically doubled down over the last year. Now at the midpoint of CapEx like $205 billion aimed squarely at AI infrastructure. I mean, on one side, the bears are going to call it reckless. But Nicole, I call it conviction. I mean, when you have search printing money, cloud accelerating, YouTube humming, you don't play it safe. You build the moat deeper while you can. So if alphabet keeps converting its cloud backlog into real revenue at this pace, at the 82% level, this isn't just a good quarter, it's a signal that alphabet has fully arrived in the AI era, not as a follower, but as a leader. And look, everybody was so worried at one point about search, right? And that, you know, Google might be left behind. Or maybe it wasn't as advanced in the AI, you know, narrative. But now that doesn't seem to be the case. So we'll continue to follow that. I wanted to ask you about your thoughts on Tesla here. You know we did see the earnings miss. They raised the full year CapEx spend. The deliveries were up 25% year over year. I did see notes about how space is now more intertwined with Tesla. What are some of your thoughts? You know Nikola Tesla's earnings last night. It kind of highlights this core tension between short term financial realities and a pretty large, ambitious long term AI vision. While to your point, like recent delivery bounds have demonstrated, you know, steady vehicle volume, but heavy margin pressure from global price cuts and massive capital expenditures on AI compute chips infrastructure, they're just absolutely squeezing free cash flow right now. But, you know, I think what we're trying, at least here at after just trying to look past the standard EV sales to judge Tesla as kind of a real world AI and robotics enterprise, where it's ultimately, you know, valuation hinges on commercial execution of FSD, cyber cabs. Optimus, you know, the Megapack energy storage. But it's kind of tough to get that narrative when the stock's down 16% heading into today, which is only going to get worse. But ultimately, at the end of the day, if you're an investor in Tesla, you know, you got to recognize that Tesla's asking you to to help fund an aggressive infrastructure cycle. And basically, if it has the opportunity to pivot its autonomous fleets and physical AI like opportunities to succeed, like the long term, you know, upside for the stock, it's absolutely massive. But any type of regulatory or technological delays that, you know, is definitely going to leave the stock vulnerable in the future. Full self-driving, where do we think, where is that? Is that going to be a monumental moment? You know, I think that it's been more smoke and mirrors over the past few years. But I think, you know, they they've had had adoption, I think like 6 or 7 cities in Florida over the past few months. But that's definitely going to be a focus, at least for the near term benefit, as some of the bull case for their newfound technologies a little bit more, longer term play. Yeah. Understood. I mean, Tesla went from 404 down to 341. Oppenheimer puts a target of $400 outperform rating. But that $400 comes down. That new price target of 400 is down from 445. So that that call came out this morning after we've gotten more information. Any thoughts on space or the future of Tesla Space X a tie up? Maybe it's too soon to tell. We'll be hearing more about space X, and the lockup period will come more. Now, you know, the the lockup period ends a little more quickly than people thought when it comes to space X. Any final thoughts there? Because then I want to get to your thoughts on the semi space overall. Yeah. You know when it comes to space X I think, you know if you talk to many investors you're expecting some type of, you know, payoff from an M&A perspective between Tesla and SpaceX. I actually have a few bets out there, Nicole, right now that, you know, Tesla and SpaceX won't be a company merged together over the next year. But, you know, obviously there's still a lot of optimism. Space X, you got the price below its IPO value. I mean think about it. You know Nicole the Tam for space X is basically infinity. But I just don't think I want to be fully invested until we get a little bit more price discovery with what's going on with the lockup period, especially in regard to current price and the next three quarters of EPS expectations. Right. So, you know, why not? I mean, you know, you're saying that you don't think they're going to have a tie up. Many people do think that at some point Tesla gets incorporated into space X. You're in the no camp. You want to give a final thought why. It's just not that's not going to be the play in the next couple of years. I don't think in the next year. That's where I have a lot of my bets there. I think you definitely have to let that space dust settle a little bit before you get that. The merger of equals or the merger, whatever, between the two companies, it's ultimately likely going to happen in the future. I just don't see it in the next 12 months. Yeah. You also said I don't want to be underweight the semis space. You do think Qualcomm looks undervalued as a pure play old economy. You're saying let's go back to basics for investors. Tell me about some of your your themes. You know Nicole you probably think I'm pretty crazy for liking Qualcomm. You know, at Aptus and myself, we started dipping our toe into owning the stock. But to your point, like everyone still thinks that Qualcomm is a smartphone chip company. And I think that's exactly why it's mispriced. I mean, look at their earnings day. I think it was on like June 24th. You know, Qualcomm just didn't tweak its guidance. They actually nearly doubled their 2029 non handset revenue target from $22 billion to $40 billion. And at the centerpiece of that story is something called high bandwidth compute. Nicole. It's basically a new architecture that stacks processing power directly underneath memory. Instead of relying on that expensive HBM stacks and interposer that everyone else in the AI infrastructure is really fighting for. So this, you know, transition is playing to kind of Qualcomm's strengths. I mean, they've had decades of building low power, small footprint, small footprint chips, pardon me, for phones, that translates directly into bandwidth bandwidth per watt efficiency for data centers. And I think that's exactly what hyperscalers are starving for right now. So this could kind of be, you know, Nicole, the new, cheaper way for investors to play, you know, kind of skate to where the puck is going on the fourth leg of this kind of AI trade that we have. And you could get in right now at a pretty cheap valuation of 15 times forward earnings. And your big picture is that dips are buying opportunities. You do see some headwinds for the market, but you should be buying the dips. You want to elaborate on some of that. Yeah I absolutely would be buying the dips right now. I feel like anywhere you look most investors, they tend to be pessimistic. And it all has to do with the geopolitics going on over there. With the conflict with Iran. Obviously, there is a lot of news coming out this morning. To your point, what you made about ten minutes ago with the Houthis. But we're trying to reconcile, you know, a lot of the tailwinds that we saw in the first half of this year, whether it's from the one big, beautiful bill and tax cuts, whether it's from AI spend moving forward. You know, I think they could potentially turn to headwinds in the second half of this year, not from a fundamental perspective, but more from a sentiment perspective. I mean, just look at AI data centers in the year where we have a midterm election, I think there's going to be a politicalization of data centers. Obviously, you have, you know, a lot of jargon out of Virginia and Vermont, where it's kind of the epicenter of data centers. But even from Governor Abbott down in Texas, where it could create a sentiment drag or headwind for data centers moving forward, I don't think it's going to be a problem. I think there's so many bottlenecks already in the data center side of things that, you know, that trumps kind of what's going on in the politicalization of it. But from a sentiment aspect, I think that could allow investors to think that AI CapEx spending could potentially slow down in the the interim, which could cause, you know, a 7 to 8% pullback, which I definitely would be a buyer of. But, you know, moving forward, I want to own risk assets. I want to own stocks. You know, fundamentals are so great for the market here domestically right now from an earnings and profitability standpoint, I wouldn't want to be short the market and I wouldn't want to be short semis right now. All right. Well David W