How to play the AI trend

muho today initiating coverage on the IT services sector calling it The pcks and shovels of AI analyst Dan DOA recommending three stocks to buy in that space joins us now at Post 9 it's good to have you here he go these are names beyond the bright lights so to speak um names like Accenture epam systems and globant is that how you glant yeah GL um you have buys on all why are you looking here so yeah I want to give credit to my uh partner Sean Kennedy on this one too so we we put a 100 page repor

t on it and and I think that what people don't appreciate is everyone's like talking about the AI hype but someone needs to do the work and these guys do the work right I think you said it on the podcast yesterday you know when Pepsi hires um needs to get into AI they're not going to go directly to Microsoft they're going to go to someone who's going to implement Microsoft Implement ASAP those guys are the pcks and shovels they're at the they're in the engine room of the boat I you wrote about t

his in your latest newsletter right yeah I wanted to ask you I think one of the most positive uh features of these types of companies is how uh capex light they are so they have thousands of employees and they're technical employees but they're not building data centers to meet this opportunity so when there's a big wave of spending on AI a lot of the money drops right to the bottom line they become very profitable could you speak more on on how that works and what we could expect here with thes

e three names in particular yeah it's a good point and those are people heavy businesses and I think that's why you know there has been so much controversy AI is going to take them you know it's to take them out of business Etc we see this differently those you know people heavy businesses when demand picks up they can very quickly like increase or decrease you know the amount of workers they have and this is what gives them sort of that you know sort of the edge there uh in terms of like the ab

ility to work on AI so that's how we see this happening they're much better at protecting margins than someone who's capex heavy and has to you know build all this stuff are these stories do you are do you make the case that these stories are largely unknown related to AI cuz over the last few months these stocks have rallied a lot so somebody must know something about the role that these companies are going to play in the building out of of AI yeah I think it's sort of because if you go back to

last year to the AI hype in Nvidia and stuff the big bare debate on these names was that you know they're going to get disrupted by and then people are starting to wake up to this and are looking let me give you an example uh 10 years ago people worried about the cloud Center's Cloud business went from 1 billion in 2012 to 32 billion you know last year so these Guy this is like the best example the correlation between software and AI is like the r squar is like or software and like it Services

is 68% so I think that's what people are waking up to and that's why these stocks have started doing better in the late L part of last year and early this year is the demand coming from large corporations government where is it coming first and then where do you see it going to so it's it's both it's it's it's the beauty of it it's across the board right you've got anyone anywhere from Pepsi like Disney is glob B's largest customer so had you know we did some analysis X Disney they would have do

ne even better cuz Disney had some issues so it's literally across the board it's like an ETF on AI like that's the way to think about it you on you actually own Accenture which is a buy from Dan with a price target of $426 yeah look I agree with you our we've own extension for a long time and the idea was you get the huge operating leverage because when they get the demand come in it's variable costs exactly and and then can pass that cost on and then once they're in there they're in there for

a long time and globally ex centures everywhere so we like that when you said it was cloud and then they do the B as well so you have that offset of of a company that is is really asset like I I wanted to uh ask you about one other aspect of this people trading AI they've been forced into Mega cap stocks Nvidia is a trillion dollars uh alphabet meta these are gigantic stocks managers like people that have a style box they have to conform to they want to be in AI but they're a midcap manager or a

small cap manager these names work for them and they're aren't a lot of them so there's not a lot of competition for Capital amongst let's say midcap managers look at a globant what is it 11 billion in in market cap speak so this is like in the Wheelhouse of managers that have been watching this AI trade go crazy and they've been on the sidelines do you think that'll be a big Catalyst for why these stocks will work this year yeah I would agree with that I think it's sort of waking up to that ne

xt wave I think what you're describing Josh is sort of the next wave of AI okay I can't you know I I'm I'm too late on these names but here exactly and and by the way you don't have to take you know company specific risk or you know when you when you're buying these companies it's like the ETF thing you don't have to take company specific risk they'll Implement n Nvidia they'll Implement Microsoft they'll Implement you know anything that's Ai and that's kind of the the lower risk to getting expo

sure to Ai and that's kind of the Crux of our work Weiss you have it under the radar name that you have your eye on too right well I I've actually owned it for a while it's vered VRT so the uh the new data centers and you need new data centers for AI that the racks which ver makes the racks and they make more importantly the cooling system so the racks run a lot hotter because they'll use 60 Kow of power you know per rack versus 5 to 10 for traditional data centers there were also three stor is

tall the data centers so I was looking for a PIX and Shuffle way to play data centers data centers cap rates of 3% that's great for Sovereign some institutions but not for me so Verve is a$2 billion market cap the chart looks phenomenal Josh look at it and I think it's actually a pretty good takeout candidate but the future for them is extremely bright it's not compellingly cheap but I think the scarcity value is very meaningful there so I've owned that for about a month and a half or so and loo

k Bill report in mid Monon uh maybe you know they're over the skis a little bit I doubt it if the stock comes in I'd definitely buy more