Looking ahead, Wang argues Apple's AR-focused Vision Pro headset slated for February unveiling is more of a long-term play unlikely to see the frenzy of other launches initially.
Ray, it is good to see you. Let's get right to this watch news, Ray. So Apple halting sales of its newest watches. The ITC saying Apple violated patents. If you're an investor in Apple, you're watching right now, Ray, analysts estimate the watch probably accounts for about 5% of total company revenue. So this is a serious business. How worried should you be if you're an investor?
So I think you're going to see a temporary blip for Christmas sales. But would the watch come back? I think it's highly likely to see it come back, because it looks like a very, very interesting lawsuit. At first, it looks like a patent infringement lawsuit, but it also looks more like an interesting patent-- predatory patent lawsuit. And I think that's what investors should realize.
There's two sides of that story. One is there may be a patent lawsuit coming from Massimo, but there are also did it in a way that was seen very, very predatory to the market. And so I think that's what will ultimately be found out when the judge looks at this.
RAY WANG: It ultimately will end up-- I don't think the White House is going to rule on that. Typically, when the White House rolls in on something like this, they'll do it for a foreign adversary or a foreign organization. They rule typically in the favor of a US company.
Here we have a case where it's two US companies that are going at it. It's probably going to be taken out in the courts outside of the US ruling. And I think they're going to have to work that out. Or potentially there'll be a licensing agreement, as sometimes settlements work out. But I don't think it's a big blip. And I feel like that the investors, I don't think they believe that as well. The Street's saying the same thing.
JULIE HYMAN: At the same time, Ray,-- Julie here-- the Vision Pro seems like it's going to be coming to market, according to some reporting here, maybe a launch sometime in February. But, you know, just like when they announced it, I struggle a little bit to see what the appetite for it's going to be. I mean, what do you think the sales of Vision Pro-- how important of a product is this going to be for Apple?
RAY WANG: I think it's an important product in the long run. In the short term, you're not going to see much of a sales blip or sales gain from the Vision Pro in the way that we'd see in a watch wants or for an iPhone launch or for a new Mac. But I think you have to understand that, and you probably do, that it is a replacement for computing, the ability to actually have no screens, no keyboards, use gestures, use voices, look at eye control. That's going to change the way we look at computing forever. And it's a replacement in the long run for a keyboard and a laptop. And I think that's the important part to look at.
And so just as they start, it's going to take some time. But I think the estimates are half a million in the first year. And then as more software and more applications roll into the ecosystem, that eventually will take over and become a core product in the Apple lineup. But at this moment, no, it's not going to replace the watch or replace the Mac or replace an iPhone in terms of the volume of sales or the revenue side on the sales side.
JOSH LIPTON: And, Ray, as part of your long-term kind of bullishness on the Vision Pro, is that because you also think Apple is going to get to work and introduce a relatively less expensive version of the device?
RAY WANG: That's exactly right, Josh. I think there's going to be different price points, as Apple normally does. There's a high end, there's a mid end, and, of course, there's an entry point. And you see right now it's an Apple M2 chip. Part of the miracle of Apple is really the fact that they go from chip all the way to the end consumer experience.
And because they can put their own chips in there, like the Apple M2 at this point, they have the ability to actually dictate how the pricing is going to work, how the cost structure is going to work over the long run, and how that supply chain is going to work out. And I think that's really what the difference is-- their ability to be able to manage that process, drive down the cost structure, and, of course, take a market to the consumer.
JOSH LIPTON: And one-- you know, Ray, it's kind of fun to think about all the use cases with the device. I mean, people talk about obviously gaming. I was also thinking, Ray, about sports, because I think about how Apple-- listen, they've already got these partnerships with these big sports leagues, Major League Soccer, for example, EDQ, who runs services at Apple. You know, he's a sports nut. I say that as a compliment.
I wonder if that's going to be potentially a big end use case here. If they could really marry the tech and the sports agreements they have, that seems like a potential win there.
RAY WANG: You know, the ecosystem opportunities are amazing, as you're saying, Josh. I mean, the ability-- I mean, you've got the compass magnetometer, the gyroscope, the ambient light sensor, all that allows you to actually have interactive sports interactive collaboration. And that's just the consumer side.
On the enterprise, think of the ability in terms of how learning and education is going to be. Think about what happens when you're collaborating on a design and design project, and you can just move things in minority report fashion. That spatial computing explosion. Isn't here yet, but you can see and you can feel that it's just right at the cusp. And a lot of it's going to be getting battery weight down, getting components down, and actually driving down the cost structure.
JULIE HYMAN: Minority report fashion, I love it, Ray. You know, looking through ahead of this, some of your holdings right now and what you're bullish on for next year, you're bullish on everything. I'm exaggerating a little bit. But you're still pretty excited about big-cap tech going into 2024. But do you think we're going to still have the same momentum that we have had this year for these stocks?
RAY WANG: So it's a great point, right? It looks like when your tech is up, right, it's a risk on environment. When tech is down or the market's down, this is kind of a flight to safety. The reason the Magnificent Seven are there and the common stocks that we talked about, it's the AI play. That's really the upside that we're betting on here.
It's also the monetization. That's going to happen. Companies that were in goods and services suddenly have ads, like Amazon. Companies that were just selling hardware suddenly built out a services business. That's a quarter of their business, like Apple, right? And companies that were not seen as a laggard in tech come out of nowhere on the other side like Microsoft. And so that's really where we're seeing, double-digit growth in the middle of a bad environment and double-digit growth in the middle of a great environment. There's still a lot of room to move. And so take Apple, for example, they could hit 4 trillion in 2024.
JOSH LIPTON: What do you think, Ray-- I'll end it here. You know, as the AI market evolves next year, Ray, we-- listen, we know about the big names that have clearly benefited from that boom of interest. You think of Nvidia, you think of Microsoft. Are there other names, Ray, on your radar looking now ahead to next year that you think, listen, these are also names investors should be paying attention to, that's potentially also benefiting from that big mega trend?
RAY WANG: Yeah, definitely, Josh and Julie. Take a couple here. Salesforce, definitely, you're seeing them embed AI across the board. That gives them an uplift. Oracle is a big player. Their ability to access and get two GPUs at a much lower rate than everyone and getting in early in the market with Oracle Cloud Infrastructure and, AI those are big play for them as well. So cloud and AI for them.
Adobe, it's a great way to get in. You see Adobe Firefly has been taking creatives by storm and the ability to show where the generative AI plays a role in just not just the images, the videos, the graphics, but every part of Adobe's portfolio. And, of course, ServiceNow is also playing a role in terms of the world of automation and work. And, of course, lastly C3 is a great one, because they've been in this enterprise AI space for quite some time.
JULIE HYMAN: Ray, great to see you. Thank you so much for being with us. And happy holidays.
RAY WANG: Happy holidays.
