Dawn of Generative AI: Winners & losers

Investors have been on the edge of their seats as Big Tech companies like Microsoft, Meta, Tesla, and Apple announced their earnings this past week. The anticipation for these earnings has been high, given the significant valuations and record-high share prices of these tech giants. With Alphabet and Amazon set to announce their earnings next week, and chipmaker Nvidia following suit on February 26, the focus on these companies has never been more intense. Seleho Tsatsi, an Investment Analyst at Anchor Capital, joins CNBC Africa to provide insights on the latest earnings reports and the impact of generative AI on these companies. One of the key themes that emerged during the discussions with Tsatsi was the emergence of DeepSeek and its potential influence on the market. DeepSeek, a new AI model, has raised questions about CapEx spend and innovation within the tech industry. However, despite initial market jitters, the earnings calls from companies like Meta and Tesla have reassured investors about the future of CapEx spending. Mark Zuckerberg's announcement during MetaPlatform's earnings call about incorporating DeepSeek innovations into their AI models highlighted the ongoing advancements in technology that could shape future CapEx numbers. When it comes to Tesla, CEO Elon Musk's bold claims about launching robo taxis in the US this year have generated optimism among investors, despite fourth-quarter numbers falling below expectations. The market's view on Microsoft's earnings, which came slightly below expectations, was offset by optimism around the potential cost reduction in inference costs due to DeepSeek. This development is seen as a positive outcome for cloud giants like Microsoft and Amazon. Apple, on the other hand, faced challenges in the smartphone market, particularly in China, where they experienced an 11% decline. However, the company's strong growth in the services segment and expanding margins have provided a silver lining amidst market uncertainties. One of the key points of discussion was the valuation of these tech companies and whether the current prices justify the potential future revenue from AI investments. Tsatsi highlighted that while valuations have been stretched, there have been opportunities to invest in these companies at modest multiples. Looking ahead to Alphabet and Amazon's earnings next week, Tsatsi emphasized the significance of DeepSeek and its implications for businesses, as well as the performance of Alphabet's autonomous driving unit, Waymo. As the conversation delved into Apple's cautious approach towards AI deployment, Tsatsi noted the potential benefits of lower inference costs and the company's strategic positioning in the market. When asked about the top picks among the 'Magnificent 7' tech companies, Tsatsi pointed towards Meta, Alphabet, and Amazon, citing their attractive valuations and growth prospects. As the interview wrapped up, Tsatsi reflected on the impact of DeepSeek on these companies' future strategies and expressed curiosity about Nvidia's upcoming earnings. Despite some uncertainties in the market, Tsatsi maintained a bullish outlook on select tech companies, emphasizing the importance of closely monitoring their performance in the coming months.