Gene Munster on Mag 7 Growth, Microsoft, and AI Chip Policy

Mag 7 Revenue Growth Outlook

• 💡 The street expects 13% revenue growth for the Mag 7 companies (excluding Nvidia) this year, with similar growth anticipated for 2026.
• 🚀 Munster believes calendar year 2026 will surprise to the upside, noting that these companies are effectively extracting more value from existing businesses and adding new growth avenues.
• ⚠️ While acknowledging market enthusiasm, Munster emphasizes focusing on the fundamentals driving this sustained growth.

Microsoft's Position in Big Tech

• 🎯 Microsoft is seen as having less dynamic upside compared to other major tech companies, despite its attractive predictability and AI-driven cost savings.
• 💰 Investors are anticipating margin expansion for Microsoft due to its use of AI in coding, projecting potential annual savings of $500 million.
• 📈 While Microsoft might grow at 14.5%, Munster suggests other Mag 7 companies, like Apple, could see higher growth rates (e.g., 8% for Apple vs. mid-single digits expected by the street).

AI Models and Nuances

• 🧠 Munster highlights that different AI models (like GPT, Grok, Gemini, and Anthropic) have distinct strengths and personalities.
• 🔬 Deepwater Asset Management is actively testing these models, noting that while broad benchmarks exist, real-world performance and specific use cases vary.
• 💡 The world is unlikely to center on a single AI personality; rather, a diverse ecosystem of models will likely emerge.

US AI Chip Policy and Nvidia

• ⚡ The US government's decision to allow Nvidia and AMD to ship certain advanced AI chips to China is significant news.
• 📉 Nvidia had previously factored in a 15% revenue impact from these curbs, but the street's reaction is more muted because some analysts had already anticipated this policy shift.
• geopolitics around chips and rare minerals remain unresolved, tempering the immediate stock impact despite positive news for Nvidia.

Apple's Near-Term Potential

• 🍎 For the upcoming September quarter, Apple is identified as having the most likely upside potential among the Mag 7.
• 📊 The street is forecasting flat revenue growth for Apple in the September quarter, but Munster anticipates upgrades and benefits from previous growth cycles.
• ✅ While not as flashy as AI, Apple is expected to perform well in its upcoming earnings report.