Why the AI Sell-Off Is a Buying Opportunity: Tengler

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Bloomberg Sep 15 09:13 · 16.4k Views

AI stocks are under pressure as fresh safety warnings revive fears that the trade has run too far. Is the AI boom cracking, or is this the dip investors have been waiting for? Nancy Tengler, Laffer Tengler CEO and CIO, says the latest sell-off is more “hiccup” than collapse. She argues the AI buildout is still a once-in-a-generation opportunity. She breaks down where the winners could emerge and when to start buying.

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Transcript

00:00 See, when I talk to you, you're always one of the people most bullish on AI.
00:04 How have the weekend events altered?
00:06 Maybe your view and you wrote in your note the three amigos writing we have Mike Shepard earlier saying that they are in unison.
00:12 Does this change anything for you?
00:15 Well, I, I think Isabel, thank you first of all for having me
00:19 and congratulations on stepping in for the team.
00:22 I, I actually think that this is more likely to be a hiccup than it is to be an end to the AI trade.
00:29 The, the AI genie is out of the bottle.
00:31 We're hearing it across sectors in our,
00:34 in our
00:35 earnings calls and theme development.
00:37 My team puts together a list of themes
00:40 based on what they're hearing from
00:42 cross industry, cross
00:43 sector
00:44 companies that
00:46 employing AI and to what advantage.
00:48 I do think this is,
00:50 I don't want to say it's a PR move, but I think it is a timely
00:55 pause, which
00:56 can't hurt.
00:57 I don't think a correction would hurt this market either.
01:00 We've, we've run pretty hard, pretty fast over the last few years.
01:04 So I, I think if as investors let the, the dust settle
01:08 and, and I think investors still believe in the trade, I think traders are the ones that are driving the short term volatility.
01:14 So
01:15 let it settle and then step in and buy the high quality names.
01:19 The the AI build out backlog is in place
01:22 and and these
01:23 data centers are being built
01:26 that that will continue to drive growth for some time.
01:29 What the market is concerned about obviously is where are we two to three years out?
01:33 I think we will still be in a build out that's a once in a generation
01:37 technological revolution.
01:40 Nancy, I want to hinge on what you said earlier that this may be a kind of like APR move because we do have Anthropic posting their first court
01:47 profits and we also have them.
01:49 I mean, of course we know that they have their much awaited IPO.
01:53 I mean,
01:54 if competitors also pays back releases, does that protect Anthropics newly won margins or do you think that's lower I duration in general will risk losing the momentum that it got?
02:04 Well,
02:05 so I'm going to answer that backwards, Isabel.
02:07 I think
02:07 open AI was not going to do an IPO this year anyway.
02:11 So this gives them some cover.
02:13 I think Anthropic will move forward and will continue to be a leader in the space.
02:18 And we know that Elon has always expressed concern, which is prudent.
02:22 I'm, I'm not Pooh poohing
02:24 the potential
02:26 problems or difficulties that AI will present, but I do think this gives the companies a chance to pull back,
02:32 put in place some guardrails, which may or may not have much of an impact, but will
02:38 soothe fears.
02:39 And then I, I do think
02:41 Anthropic continues to go forward
02:44 and will continue to have one of the highest margin businesses
02:47 because their mode or their
02:51 flavor of AI is much more sophisticated.
02:53 And then you're seeing the hyperscalers as potential winners today.
02:58 Google will continue to be an AI leader.
03:00 I I'm less impressed with Meta, but this will cause them to have to spend less potentially.
03:06 So there, there is good news in the bad news
03:09 definitely.
03:09 And
03:10 let's go to the
03:11 quote, bad news first.
03:12 If this pacing actually holds, Nancy,
03:14 who is more to lose?
03:15 Is it the labs raising for frontier capability or the hyperscalers?
03:18 Although you just noted that the hyperscalers may be having a good day soon.
03:23 Yeah, I think it's always the emerging technology companies where investors are more likely to pause.
03:28 But I, again, I don't think that'll be permanent.
03:30 This feels a lot like DeepSeek where we had the initial, initial hysteria and then people step back and said, OK,
03:38 this is an opportunity to buy these names.
03:41 There was lots of sighting of Javon's paradox.
03:44 And so I think that
03:46 what will happen is
03:47 this will
03:48 will force the naysayers and most of the naysayers in Washington,
03:52 These are people who also read the headlines, don't have a deep understanding of the technology, don't live in the same world that we live in.
04:00 And
04:01 and this gives them a platform
04:03 opposing AI.
04:04 That is, I think this will cause them to have to step back.
04:08 AI leaders are saying, yeah, all right.
04:10 We think there are some
04:12 areas where we can improve.
04:14 Heard them all say it.
04:15 It's this.
04:15 Yeah, this weekend was not the first time.
04:17 And I think that will continue to benefit the big players.
04:21 The little players will still get funding, but maybe not
04:25 across
04:26 sort of massively across the board.
04:28 And I actually think that's good
04:30 for the development of of AI and just a general technological innovation.
04:37 If this pacing call turns into real legislation rather than some voluntary
04:41 restraint, which part of your coverage universe do you think will be affected the most?
04:45 Because it sounds like everything's modeling this.
04:47 Everyone's modeling this as maybe noise
04:49 more than policy risk so far.
04:52 Agreed.
04:53 I think we would see the market down a lot more.
04:55 Well, first of all, I don't think legislation is possible in this Congress.
04:59 I don't.
05:00 I think you'll get agreement on any meaty kind of legislation.
05:03 You may get something where
05:05 you know, they can slap a, a label on it that we saved
05:08 humanity from AI, but it, it won't be meaningful.
05:11 I think that the obvious losers initially are the infrastructure names.
05:17 And by that I don't just mean the, the Qantas services or GE Vernovas of the world, but I mean the chip makers and the memory
05:24 providers.
05:25 I actually think that's an opportunity.
05:27 If weakness prevails, we'll, we'll be adding to some of those names where we don't have full positions.
05:32 But I, I don't think there's any need to chase
05:35 the downtrend.
05:36 Isabel, I think you want to step back, let it settle and then pick your way through
05:42 as as things kind of calm down a little.