Gene Munster, a renowned investor from Deepwater Asset Management, has emphatically recommended buying into big tech stocks, specifically highlighting Apple and Nvidia as prime candidates for significant gains in the coming years. His conviction stems from a belief that these companies are poised to benefit from a massive bull market fueled by artificial intelligence (AI).
During a recent appearance on CNBC’s “Squawk Box,” Munster argued that mega-cap tech stocks are still in the early stages of a sustained upward trend, comparing it to the first phase of a three-to-five-year bull market. He remains optimistic about the near term, citing multiple upcoming catalysts expected to propel these stocks higher in September.
One such catalyst is the anticipation surrounding Tesla’s upcoming autonomous vehicle event, which Munster believes will begin to garner significant investor interest this month. He also expects investors to reassess their perception of Nvidia, given its pivotal role in the burgeoning AI landscape.
Furthermore, Munster highlighted Apple’s upcoming September 9 event, where the tech giant is expected to unveil new AI features for its smartphones and introduce the iPhone 16. He sees this event as a pivotal moment for Apple, similar in significance to the introduction of larger screens on the iPhone 6, which sparked a substantial upgrade cycle.
Munster believes Apple’s new AI functionality could drive a similar upgrade cycle, boosting share prices. He draws parallels with the iPhone 5 and 6, stating that the iPhone 6, with its larger screen, led to a 52% surge in share prices. If the new AI features are as compelling as Munster believes, he anticipates consumers will view them as essential. He predicts that even a 10% early upgrade rate among iPhone users could push iPhone growth to 15% next year, surpassing the current Street estimate of 7%.
Beyond Apple, Munster maintains a bullish stance on Nvidia, emphasizing its dominance in the AI chip market. He attributed the recent decline in Nvidia’s share price to a misunderstanding of the company’s guidance. While Nvidia’s guidance for the October quarter was up 2.5%, it raised guidance by 5% in the July quarter, leading some to perceive a slowdown. Munster clarified that this apparent deceleration is misleading, as it neglects the impact of Blackwell delays, which account for roughly $3 billion. He asserts that without these delays, Nvidia’s guidance would have been a 12% increase, not 2.5%.
Munster concludes that Nvidia remains reasonably priced at 35 times earnings and has the potential to grow faster than current market expectations. He views the risk of major companies not investing in AI as too significant and believes Nvidia will reap significant benefits from this trend.
In summary, Munster’s bullish outlook on big tech, particularly Apple and Nvidia, rests on the conviction that AI will drive a sustained bull market, and that upcoming events and product launches will solidify their positions as leaders in this rapidly evolving landscape.
