Jim Kelleher

[music] Hello I'm Greg Bonnell and welcome to MoneyTalk Live which is brought to you by TD Direct Investing.

every day I'll be joined by guests from across TD many of whom you'll only see here.

Coming up on today's show, we'll discuss the outlook for the tech sector and whether it can continue its recent rebound with Jim Kelleher from Argus research.

And in today's WebBroker education segment, Caitlin Cormier will show us how you can research the tech sector using the platform.

And here's how you can get in touch with us, just email MoneyTalklive@td.com or fill out the viewer response box under the video player on WebBroker. And before we get to our guest today, let's get you an update on the markets.

a bit of a subdued trading day and a bit mixedon TSX in positive territory only moments ago and now it slid slightly into negative territory. 21,093 down a little more than three points. Noticing some strength and some of the energy names including Crescent Point Energy, let's check in on that one.

A bit off the highs of the session but still with some green on the screen of about 1.6%. Noticing a strong US buck today, with gold under a bit of pressure in some of the miners as well. Let's check on Kinross. Nothing too dramatic.

With Kinross down a little over a percent.

A fairly big week as we dig deeper into this week after last week's shortened trading week because of the holiday weekend.

You will get US inflation on Wednesday, the Bank of Canada rate decisions and ahead of everything that's to come, down 22 points and the S&P 500. Pretty modest about half a percent.

It seems the tech names are favouring a little bit today.

Let's check on the heck tech heavy NASDAQ a little bit more the downside and the broader market. Just more than half a percent. And Apple.

Let's check in on that name right now.

Under pressure today along with other MegaCap names down to the tune of 2%. And that's your market update.

While many investors have been focused on rising rates on the risk of a recession, the first three months of this year saw the tech heavy NASDAQ index not just best quarter since 2020.

What's driving this recent performance and where to head from here?

Here to discuss is Jim Kelleher Dir. of research at Argus s research. Great to have you on the show.

>> Thank you for having me Greg.

>> After a rough 2022 across a lot of asset classes including text, of first-quarter performance impressive for some of these names. What is happening there?

>> Going back in 2022, if you recall, the tech sector declined about 20% within the NASDAQ decline.

Actually, earnings were holding up well. Companies were still building their back lots and they performed well.

Now you get to 2023.

The first quarter, earnings were down as reported in January for the first quarter and they will be down again in the first quarter as reported in April and May. And yet, the tech sector is up over 20% year to date and, I guess, the way we explained that is the market is anticipatory.

Investors already have digested all the bad news in the market, including inflation driven weakness in consumer devices like PCs and smart phones. They are skating for the park right? They expect the market to get better as we go along.

There already are a few hopeful signs out there but we definitely have some weakness in the near term. In terms of fundamentals.

At the same time, we have a positive stock environment.

>> Let's talk about that.

Another earnings season on our doorstep. We will be hearing from the tech companies.

You said briefly you expect perhaps, another tough quarter for some of these names. What should we be bracing for?

>> I think the tech sector will have negative earnings overall for the negative S&P 500 in the US in certain areas like semiconductors should be particularly weak.

Other areas like enterprise software Communications equipment will do a little better.

But we are still going through this digestion phase. We have this hyper growth phase in smart phones and PCs in the wake of the pandemic.

The supply chain crisis because companies to overload their inventories. Double ordering in many cases.

So the distribution chain got very clogged and now that's all working itself out.

We do expect PC sales to swing back to something closer to more positive year-over-year. But comparisons will be easier.

It will take a while.

We saw very weak first-quarter PC sales down 29% which is similar to what occurred in the fourth quarter, global PC unit sales down in the high 20% range for two straight quarters.

>> IDC with its latest report today, talking about that slump that they are seeing in PC demand.

Obviously, there is a certain cyclicality to it and things got crazy out of the pandemic.

Everyone in my household, including me.

I was going to exclude myself but even I got a new computer.

How does that cycle play coming out of the pandemic?

>> Well, we are still seeing a filtering back to offices. So there are still overdue upgrade cycles for enterprises and business. PC refresh being pushed out a little bit because the returned offices is kind of mixed to slow. People did, you know, initially everybody was kind of bootstrapping in 2020.

Whatever you had on hand you may do with. 2021 and early 2022 were the years in which you upgraded your hybrid home work environment and so, everyone is sitting in a better position there.

But those products, we need to upgrade to. Because the demands of the modern workspace keep going up and every software upgrade puts more strain on your existing PCN device.

Also, we see other factors, growth in the global middle class. Maybe the best growth in PCs is not going to be North American base.

Probably Asian, South American based. But we do see the cycle playing through as it always does.

>> We started off by talking about what a strong quarter the NASDAQ had.

The best quarterly performance since the early days of the pandemic.

The first year of the pandemic.

We take a look at the chart and we are still well off of the highs. I know some people watching the show were thinking "okay, it was one thing to see that rally after the losses for the sector but they are in the positions where they are wondering if they ever get back to where we were?" What would that take?

Will the market have to look like to reclaim those highs?

>> For the market overall, first of all, you need to get out of this cycle of rising rates. You need to have a global stabilization rate.

Markets can handle a higher level of rates but they can handle movement in rates.

Once we get to his studying in rates, that probably means we get to his steadying and lower-level inflation.

Inflation is the one thing the stock market can handle.

I think, I will speak from the technology perspective now, we are seeing a traditional cycle here where PCs and smart phones are driving the weakness in that tech sector and that's what always happened.

But there are so many more drivers in technology now.

Tech companies use to sell one another.

Now they sell the world. We see technology sensors, automation, electrification vehicles… Semiautonomous and autonomous driving.

All these things are driving great demand for technology components, semiconductor software outside the traditional tech industry.

So coupled with AI and the cloud, we are going to see, as we get the traditional drivers to recover, that is PCs and smart phones, those other parts of the markets to take off, the tech sector will get bigger than it ever was in the demand should come back on another strong cycle coming out of this.

I think that's a question.

>> The argument that makes a lot of sense, Jim, going through cycle right now, we are seeing weaknesses in certain areas.

Technology is not going anywhere. Longer-term with investors looking at the longer horizon and now we will turn around and say "I don't think we need all this technology anymore thanks." We will go back to where you are.

>> I do also think the tech selloffs and cycles are shorter and shallower because we did see a hyper growth phase in PCs and smart phones. The harder we came the harder we fell.

But the demand, for example, industrial automotive's and semiconductors is really smoothing the semiconductor cycle out and taking out some of that cyclical factor. Certain names we will talk about later we think are really well-positioned to serve those markets.

>> Interesting stuff is always in a great start to the show.

We will get your questions for Jim Kelleher about technology stocks in just a moment's time. I mean a reminder that you can get in touch with us any time by emailing moneytalklive@td.com or Philip that video response box under the video player on WebBroker.

Now let's take a look at how the markets are trading.

Teck Ressources is calling global mining giant Glencore's unsolicited bid for the company a "non-starter" in a presentation to investors today, Teck says it's plan to split into two separate companies is the "optimal" way to maximize shareholder value.

And the Vancouver-based miner says Glencore's takeover offer would expose Teck shareholders to significant risk.

Today the stocks down a little shy of 3%.

Shares of Tesla are in the spotlight today. The markets are catching up to developments over the holiday weekend, namely another round of price cuts for some Tesla vehicles as the company looks to stoke demand.

While sales were modestly stronger in Tesla's most recent quarter, some observers are raising concerns about profit margins. Tesla is also laying out plans to build another battery factory in China.

the stock right now down a little shy of 3%.

The Bank of Canada is on deck for another rate decision this Wednesday. Our central bank is expected to hold the line on its trendsetting rate. And TD Securities say it does not expect any change in the bank's guidance. Investors will also get a fresh read on the US inflation – with that report also do on Wednesday.

And here's how the main benchmark index in Canada is trading.

Right now down about 10 points.

Modestly in positive territory.

Just before which started to show. That tells you what kind of a date is right there.

… Almost 3/4 of a percent down.

We are back now with Jim Kelleher from Argus research taking your questions about technology stocks. Let's get to them.

First one, what is your view on Amazon?

>> >> So we like Amazon here. They have gone through a rough phase. Obviously we downshifted from the peak pandemic time when everybody was buying products and services markets were pretty much shut down and now people have overdue vacations and overdue trips etc.

They are less focused on product purchases.

But Amazon has a really diversified business model.

They are the lead in cloud infrastructure business.

They get most of all of their products from that business.

In terms of their retail business, the private model is quite strong in North America. It makes people do their one click shopping and tend to buy a lot on Amazon.

Just for the convenience of it.

Additionally, Amazon has really shifted a lot of its revenue to third-party merchants. They can make money on a lot of ways with third-party merchants. Delivery with third-party merchants, they do more delivery than with organizations, invoices and inventories.

So it's a very integrated model.

They do have a lot of, they have a big investment review which is hurt the company which eventually they hoped to go to fully electric vans but the value of that asset keeps going up and down. It is really hurt their capital earnings.

So they will actually have a nice swing back to positive earnings growth in the first quarter based on the trouble they had last year with that asset.

Overall, Amazon is a little bit dinged and diminished but by far the leader in its base.

>> When investors are looking at a name like Amazon, you just laid out the different business streams… When I think about Amazon I think about, you know, stuff I buy for my phone.

You talked about the cloud services business, electric vehicles. A lot going on.

Investors taking a look at these names and parts through all those divisions?

>> I think you do have to get back to the basics of core North American profitability.

That has been a little trouble.

They have reduced their personnel somewhat.

They have obviously shaped it back a little bit this is a company with 1,000,000 1/2 employees.

I think they will have to run a little bit leaner.

Again, we have to get through this phase were interest rates are rising inflation is directing consumer spending into necessities.

Once we get to stability on inflation, stability and interest rates, people can go back to making discretionary purchases… Amazon will deliver positive earnings growth which, giving the large numbers is quite impressive.

They will have positive revenue growth in the first quarter. And they should be profitable.

>> Is the biggest risk to Amazon about the interest rate environment? Saying the bond market thinks that the Fed is going to be cutting before the end of the year… Maybe as early as the Summer. If that didn't happen, the Fed goes a few more times and holds there for a while, our Amazon of the tech company submitted risk in that environment?

>> If the Fed is still raising it probably means inflation is misbehaving and if inflation is misbehaving that will delay the recovery in consumer purchases but, simultaneously, in the background we have this enormously unfolding AI revolution and AWS is very leveraged to the AI revolution. That will be a leading provider of AI and services going forth.

That business is going to quietly start in the background. It will be nice, yes, to get stronger profitability from retail and I do think that does require some stability in the inflation rate environment.

>> Another question. This will now but a Canadian name.

Please comment on Shopify in your near-term growth projections for the company.

>> So the thing about Shopify is they are a provider of Internet retail solutions but also integrated physical solutions for small merchants.

There are tons of small merchants on the Amazon platform but there's really nothing quite like Amazon.

They are sometimes described as the rebel alliance against Amazon's evil Empire.

They also were a child of a pandemic. They had a free service. Many, many merchants on their platform. They grew too fast for what they were.

What the available market was.

But they now kind of downsized a little bit there really is no other company like them. The other people in this space of enabling merchants are specialized.

They tend to work in small, niche markets. Shopify is the clear number one player in this space at one time they were Canada's buy market.

… Running more efficiently now. I think it's a little prick premature to say when they get back to growth. We have to look at the actual numbers and orders but we will say they will be unprofitable for a little while longer but they will get their revenue growth back in shape long before they get to gap profitability or even non-gap profitability. It's very much a viable enterprise.

They are in enabler and again, another company that is going to really thrive in the long term.

>> One of the biggest challenges in the short and near term, medium term, if someone is looking at this name?

>> I would say they are going to be unprofitable and some investors will be uncomfortable with buying unprofitable companies.

That said there profitability is easier for a software company to get back to profitability than an industrial company because your costs are more scalable and extensible across existing software. After all, a software company, when you get down to it, so much like Amazon, which ran on profitability for so long rather unprofitable and then jumped into profitability, I think it's similar to Shopify.

They just have to get the merchant buyer stronger. They are fairly strong now.

Coming off the bottom and continue to sustain that growth.

I do think we are looking at a good strong recovery in this company in terms of the second half of the current calendar year.

>> Interesting stuff is always at home make sure you do your own research before making any investment decisions. We will get back to your questions with Jim Kelleher in just a moment's time. A reminder you can get in touch with us by emailing moneytalklive@td.com.

Now let's get to our educational segment of the day.

We are of course talking about technology today and if you are interested in the space, doing a little more research, WebBroker has tools which can help.

Caitlin Cormier, Client Education Instructor with TD Direct Investing has more.

>> Today we are hopping into WebBroker and doing a little bit of research within the technology sector. So what we are going to do is we are going to hop right into our research page.

We are going to go to "market overview". So click right there on "overview".

We are going to go through and scroll down midway down the page. We are going to see an area where we have sectors and industries. A lot of sectors we can see here. We can see the current change in those sectors.

We can see the declines in some verses and advances and see how they are performing overall. We have both Canada and the US and can swap back and forth between the two different markets to see what they are doing.

But again today, we will focus on technologies.

When I click on the bottom here, that will take us to a page that is dedicated entirely to the technology sector.

The first thing we will see here is an industry analyser, a bit of a chart to give us a bit of an overall view of some different metrics.

We can actually clip click up here and change what we want to see. We have a couple of different options.

Let's just switch it over to this one here. Earnings yield versus earnings growth.

We can also change the size to be something different.

So let's just go ahead and choose market cap for today and have a completely different chart than a moment ago. Right at the bottom, this tells us exactly what this chart is telling us. High earnings yield in high earnings growth are most desirable therefore industry located in the top right quadrant, of the chart are more attractive on this criteria. So giving you a bit of wheat meaning to what that particular chart means.

The bottom here, we can see some different industries within the sector. If you want to focus on the specific area of technology rather than technology as a whole, we can dive a little deeper into those areas.

We can also see performance within those areas as well.

And on the right hand side, we are getting a little bit of information about other sectors. What the technology sector actually covers. We have an insider reporting of the tells us a bit of that insider trading peace whether there is net buying or is selling within this industry.

We can also see top companies and bottom companies. We can see the performance on both ends of the spectrum as far as performance goes.

Finally at the bottom, it doesn't we can actually filter through within this sector and see different strategies that these companies have. So this is showing us the high dividend companies within this area.

We can see the high earnings per growth companies in the highest price discount to book value companies as well.

Again, getting an idea of what that actually means.

The last thing on the cover is if you find a company as you're going through and you'd like to do a bit more research, you can similar click on the company. You'll get a quick little chart here and if you want to go to the overview on this company, you're just going to hit that button of overview and it will take you to the main page of that company and you can dive a little bit deeper and do some more research. Solve hopefully this helps you with creating some more research on technology sector stocks and you are able to use this going forward. Thanks so much.

>> Our thanks to Caitlin Cormier, Client Education Instructor at TD Direct Investing.

Make sure to check out the learning centre on WebBroker for more educational videos, live, interactive master classes and some upcoming webinars.

Before we get back to your questions on technology stocks with Jim Kelleher, a reminder of how to get in touch with us.

Do you have a question about investing or what's driving the markets? Our investors are eager to hear what's driving the markets our investors are eager to hear your questions so email us anytime at moneytalklive@td.

com or use the question box right below the screen here on WebBroker.

Just write in your question and hit "send". We will see if one of our guests can get you the answer you need right here at MoneyTalk Live.

>> Now with Jim Kelleher taking your questions about technology stocks. Let's get back to them.

How do we play the US chips in science act?

>> That was signed in 2022 signed by the Pres. in August.

A variety of incentives, over $50 billion in total.

Certainly a lot of tax incentives in their. Search and crêpe tax credit incentives and direct manufacturing grants.

I think tax and science act came out during the supply chains and now worsening relationships with China and Russia… A realization that we needed to treat… Not just in the United States but in all countries, we need to treat semiconductor production as a national security issue rather than just a convenience.

The delicate supply chains put in place were first disrupted by the trade wars and then by the supply chain crisis and that meant that we see flights to Taiwan another manufacturing from overseas.

One key take away is that a lot of production that will be done is not going to be cutting edge. The kind of chips that go into your phone and PCs.

Those have to be ever smaller, ever tinier. More power efficient and they are still a massive amount of semiconductor production going into those chips.

But a lot of those chips are over technologies that are using mission-critical applications than industrial automotive, aerospace defence, healthcare, these things, sitting in larger factor chips because the devices they are going into, whether that's a plane or a car, they are larger form factor themselves. And they need to be mission-critical and recognized.

The advantage of the chips, for the chipmakers who make these chips, the advantage of the chipmaker serving industrial, automotive and aerospace etc.

, they have contracts with many, many companies. The contracts are long. The products are higher margins.

So overall it's good for both the chip industry and good for the nation, as it were, to encourage productions of these mature and specialized the specialized non-technology markets that are going very fast.

> You talk about this production being bought back domestically for security reasons and trade reasons.

How long is that ramp uptake? What is it look like over the next little while in terms of trying to build the manufacturing capabilities to build these chips?

>> Well, the discussion around semiconductor chips act went back not to 2022 and two 2020 or earlier.

Companies began planning around that.

Intel has planned in Arizona and Ohio.

They have built instruments in Texas… Micron is building the first memory in the US in over 20 years.

Probably in the headquarters in Idaho. And there are many other examples.

So, you know, well over $200 billion in total investments related to expanding because of the expanding market for these nontechnology applications.

And a lot of it is tied directly or indirectly to the chips act.

So the momentum got going early knowing this act probably would be passed.

Then you have the cyclical weakness… Filling with machine tools for a year or two until they seal the market shakes out. But they will go ahead to the less expensive part of the plan which is to build the shells of these facilities and then fill the men as the market demand rises to meet the production.

> I had not thought of that aspect. Fascinating stuff.

Plenty of questions coming from the audience.

Jim what are your thoughts on Alibaba?

>> It's a bit like Amazon. I don't have as much of a curtain from the cloud business. It's smaller. Less profitable.

So they rise and fall on the retail. Also, they don't have Holy owned operations.

They are reliant on third-party merchants mainly.

Recently they announced plans to, it's a little confusing, to say they are not really splitting into six companies but they are kind of, remaining a holding company for six companies and giving those six companies, besides their core commerce business, the opportunity to engage with outside investors and consider spinoffs.

The so there's a little confusion about what they're actually doing. They are not really splitting into six companies but they are giving more autonomy to their their divisions.

Actual profitability… They are in a situation where they were the only game in town for a while.

And what they did was, they basically got accounts of many of the people who would be their core customers and many rivals arose to chip away at their business.

So they do face a lot of internal competition. So they are trying to defray differentiate themselves on different parts of the business.

Like logistics, team wall (…) And possibly engaged with external investors and consider IPO. They are trying to be proactive in hell they operate. But so far, you know, it's very early days and we have not seen any change yet.

>> One of the operating environment for them in China?

I feel like a while ago, trying to read in terms of how the Chinese, politically, the chip actually fell into the tech sector.

I feel like this has for the headlines I'm reading but I'm not close to the situation?

>> Greg I would say that ^...¸was really trying to cement his power and really raining down on the so-called tech titans.

To cement the power of the government.

But given the combination of this political pressure, along with zero-tolerance covid policy, the Chinese economy really stalled in 2022. It's a risky proposition and simultaneously there has been an easing in the zero COVID policy and an easing on the pressure of these technology leaders client trying to give everyone a little more free reign and get the economy reenergized again. But it's a stop – start process.

It's only coming back gradually but I think the pressure is, as you said, off the tech giants a little bit.

>> We mentioned AI a couple of times talking but other companies. One viewer wants to know if this current AI buzzes just type?

Is this the beginning of the change of everything? Or is it just type?

>> My opinion is it is absolutely not hyped because there is been some significant developments in the space.

I think the reason people think it is type is because of CHAT GPT. It was Lou it was began last year.

Degenerative pretrade model. This can simulate speech, write poems or paint pictures or generate ideas and not just fill in blanks, like when you are on your iPhone or something. They can actually generate.

The technology to do so is really pretty impressive.

The ability to teach or train a large language model is exceptionally impressive.

It's highly complex to describe. But, for example, there is something called … A network which gives every word, a vector, meaning 50 numbers. Every word has a value and so that value of the 15 numbers rather 50 numbers in man and 50 numbers and "boy" have some similarities. All down the line, what large language models do is not just a sign each word of value but they assign each word a relationship, a cosigning relationship.

What it requires is massive amounts of computing power.

Massive amounts of software power. It's not simple stuff. But it represents great opportunity for the technology industry and not just the software industry but the semiconductor and computing industry as well.

So noxious type.

But really exciting stuff.

>> I grew up on the Terminator movies and talking about AI, they like to make that kind of reference.

Mostly tongue-in-cheek but what about real world application?

I feel everyone is trying to figure out what it means for journalism, the legal industry, the investment industry.

We have any clarity on that yet or is everyone still just trying to figure it out?

>> Well, I think I have heard that there is, you know, all kinds of intelligence in the human mind and AI into a simulation of some of them and not all.

Really, they are not, if you're using generative AI to produce something, you're not producing something original. The human mind can always?

in an unpredictable direction. So I don't know that AI is ever going to catch up with real sentiments.

It is certainly cognitive meaning it can learn. But whether it can actually conceive itself to something pretty far out of line, I know there is been a call by some of the OPEN AI people to slow development of AI.

That cat is out of the bag. The development will be slowed.

The important thing will be to try to make sure we have sufficient guardrails on an AI developing so that they don't become nefarious and harm us quite simply. But I do think, as much as we teach… AI is taught. It's a training model.

Much as we train children not to shoot their parents, maybe we can teach AI's also to be well behaved.

>> We Hope so. Interesting times indeed. For the viewers asking about Caitlin's WebBroker tutorial that we showed you 10 minutes ago, to get to the page she was on, you go to the "research" tab in the markets call and you can find the sectors and industries button.

And on the next screen you should be able to find technology on the left.

Hope that helps.

We will get back to your questions with Jim Kelleher in just a moment's time.

As always make sure you do your own research before making any investment decisions and a reminder of getting in touch with us anytime. If you have a question about investing or what's driving the market, our guests are eager to hear what's on your mind.

Send us your questions. You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker.

Just writing your question and hit "send".

We will see if one of our guests can get you the answer right here, at MoneyTalk Live.

>> A quick check in on the markets coming off of the long holiday weekend. Things are a bit mixed.

Right now, back modestly in modest territory with the TSX Composite Index. Nothing outperforming really to the upside or downside.

Keeping us on either side of that "breakeven" line.

Six full points, up three ticks on the TSX. Check on some of the energy names. Let's see if they're still hanging in.

Suncor a little off the highs of the session.

Just shy of about a percent. Shopify, we were discussing that name earlier, tech stocks a bit of caution there. You have Shopify at 60 bucks and $0.47 a share down a little more than a percent.

South of the border let's check on the S&P 500.

A read on US inflation, you always think about the labour report being the big one it is.

The big one on both sides of the border. So much focus on inflation in the past year.

Basically raising the cost of borrowing the central banks are, to tamp inflation down.

Doubt about half percent. The tech heavy NASDAQ was pretty much keeping pace.

It down a little bit more the broader market.

Hundred and 20 points to the downside, about a full percent.

And Taiwan's is semiconductor, its first monthly revenue drop in almost 4 years.

That piece of information coming out of the quarterly report and that stop, 815 right now down a little more than 2%.

Back now with Jim Kelleher from Argus research. Someone wants to know if this is a good time to get into semiconductor stocks?

Markets are tough to time but what we think overall Jim?

>> So it's a big space.

I think semiconductor stocks are always attractive because what we have seen in technology, there was a time where technology investors would buy things like big computers from IBM. But now, you know, the people that operate cloud forms, Meta and Google etc.

, they tend to build lightbox server is what's important is the semiconductor content on those devices.

So semiconductors are always in demand and overall, that industry has become a massively important part of the technology landscape and I think I was pointing out earlier that there has been tremendous growth in sales of semiconductors outside of technology applications.

Traditional technology applications.

Some of the names we like here that cell more than 60% or even 70% of the production, industrial automotive, healthcare, airspace defence, etc.

To those industries, that would include Texas Instruments, TX then, a lot of devices, take your ADI.

A company we like called microchip which provides embedded micro-controllers that are essentially tiny computers without a lot of bells and whistles that you would normally see in a CPU from Intel or AMD. But these three companies, microchip, Texas Instruments and… Devices are well-positioned because the markets they are selling to her growing. Those companies, unlike Intel or micron which is seen their sales go up very sharply because of the weakness of PCs, those three companies have actually seen their sales and earnings continue to rise.

>> What's the risk for these names? The three you mentioned.

Or the sector as a whole.

Is it recession risk, competition?

What can stand in their way?

>> The risk is probably related to recession because it recession comes it's going to affect all markets. What we do is delay the recovery in the so-called edge devices.

That just means smart phones, tablets and PCs.

So recession would delay recovery there. But more than that, recession would also cut into the budgets of the industrial, nontraditional technology markets for technology products.

Like we have just been discussing. That would push out a cyclical recovery across the semiconductor industry.

You know, for quite some time.

The duration of the recession are a little bit thereafter. Because technology spending is normally, the top of everyone's wish list. But when times are tight, you have to pay the bills and sometimes technology spending moves to the bottom of the list in a difficult or recessionary environment. So it's a little slower.

Normally it's growing fast but it recession can grow little more slowly.

>> Important things to keep in mind there. We have a viewer Jim, who wants to know your take on Microsoft.

>> Microsoft has really done a fantastic job diversifying their business, from a reliance and a couple of PC, the Windows operating system and the office for conductivity suite.

They really diversify.

They have a massive presence in every business all over the world.

They were able to leverage that residence into developing the number two cloud infrastructure as a service company and Microsoft du jour.

Where they are positioned, they also have a very important initiative in AI.

I think they call it Bard, the CEO out of the gate was so anxious to showcase it.

I'm sorry that's the Google product. Microsoft is very involved with OPEN AI and CHAT GPT. So Microsoft has come across well here.

Google is the one who is looked a little ham-handed in introducing their AI. Where is Microsoft has invested something like $13 billion in the OPEN AI responsible for CHAT GPT, CHAT GPT three, CHAT GPT four… All the leading AI's out there.

So they are well-positioned in cloud, well-positioned an enterprise.

Still a big player in personal systems. But you know, we just saw in recent quarter, more personal computing business down in mid-teen percentages on revenue but they, with their cloud and their business productivity businesses up in the mid teens on revenue. Slight revenue growth in the quarter. So they really have > Argus does expect the economy to either avoid recession or even a mild recession. That's in North America anyway. We think the cyclical recovery and technology will begin will be really tuned into names like Nvidia on the semiconductor side which is very, very much a great play on this whole AI universe. I mentioned semiconductor names that are serving nontraditional tech markets. We like those as well.

Then we do see by year end, the beginnings of a recovery and smart phones and cheat PC sales.

Barring a really bone shaking recession, we think technology is positioned for kind of a second half upsurge. Timing is a little tough to call. But we are still feeling reasonably good about the sector as we come into the second half of the year.

Argus did upgrade the technology sector to recommend back at the beginning of this year.

So far that's kind of work out for us.

>> Jim, always good to have you on the show and thanks for joining us.

Look forward to the next time.

>> Thanks for have me Greg. Appreciated and see next time.

>> As always at home make sure you do your own research before making investor decisions. Arctic our thanks to Jim Kelleher director of research at Argus research for joining us today.

Stay tuned on Tuesday with Benji Gallandar.

That's all the time we have thanks for joining us.