Apple Stock Catalysts: Duo & Servers — Full Breakdown & Transcript

[00:00] Two reasons Apple stock is set to rip. One, they're now in talks to get into servers to use their own chips and essentially compete with NVIDIA using NVIDIA's networking hardware in Apple servers.

[00:19] So, of course, we had to use AI to come up with a beautiful mock-up of what those servers could look like. And I gotta say, they look great! I literally asked Google Gemini to come up with what an Apple server would look like

[00:35] if Steve Jobs and Johnny Ives had a baby. I actually think they could do even better than this. This looks a little bit like they borrowed from Ubiquiti, honestly. Ubiquiti's got some really great sound hardware for home entertainment that looks kind of like that.

[00:49] But anyway, we've got to talk about that and what that could do to the price of Apple stock. Second, we've got to talk about the Apple-iPhone duo. A lot of folks have been asking, Kevin, we need practical reasons why we need the iPhone Duo.

[01:04] I'll start with those, but then we're also going to look at why a portion of Apple's business that is suffering makes the Apple Duo so primed right now for Apple stock. Okay, so let's first focus on quick little notes on Duo and whether or not this is potentially a product you should buy.

[01:23] my take on this is this is the salesperson dream now I'm not here to throw a bunch of beautiful b-roll up I'm just going to give you straight facts I think a salesperson loves this product

[01:36] because a salesperson as I have been for a very long time uh in real estate that's how I started that's how I started my career uh it is very inconvenient to have to carry around a sales presentation in a larger format, iPad that can be able to stand on its own and you have

[01:53] to carry around the cases for it, or a laptop. It's a little frustrating, especially if you're knocking door to door, like you're selling solar, you're selling pest control or whatever. This product is a game changer for this.

[02:06] For sales, this is a game changer. Whether you're meeting your attorney, a salesperson, a banker, a real estate agent, a mortgage lender, an accountant. This is a fantastic tool to, over a coffee meeting, not some silly Zoom presentation chair, sit down and actually show or share a sales idea, presentation, or strategy together with people that you were trying to meet face-to-face with.

[02:31] And it is integrated to your phone. It's already in your pocket. You can't fit an iPad in your pocket unless you have really big cargo shorts you can fit an iPad mini in there, but that's awkward anyway. You sit down and break the screen. It's a disaster.

[02:43] This is a game changer for salespeople, and I think every salesperson should buy this product. I am highly bullish on this for salespeople. I also think it could be used in healthcare for, you know, presenting information inside of a hospital setting and otherwise, but that'll take longer.

[02:58] I will say one downside is that it doesn't appear that there's going to be a mounting point for the Apple Pencil. So you could kind of go back to, like, mounting it on your ear, but that's not super convenient. I'm sure there'll be case options that come out and solve that, though, because the Apple Pencil support for this is huge, and now you actually have an Apple Pencil-able presentation device in your pocket, which you don't have with a phone.

[03:21] And again, with an iPad, you really only have your, you're carrying it in a briefcase, which is inconvenient, or in a backpack. A lot of folks, there was a particular YouTuber, I won't mention his name, but a particular YouTuber was making fun of how dystopian it would be to hold up the iPhone Duo and have that kid screen, basically, where you could hold it up and the other end of it while you're taking a photo could potentially distract or entertain your children, you know, whatever, because it could put up a photo on the backside.

[03:55] I actually find that that is probably one of the greatest selling pitches to parents. It's called Kid Q. Here it is.

[04:07] Kid Q is this. The other YouTuber said this is dystopian. But this other YouTuber must not have seven children like I do. I have five two-year-olds. When they see a phone, all they do is,

[04:23] Can what Can what and they totally zone out of being the fun little happy humans that they being Playing something here is a brilliant move

[04:36] Parents should love this product. Big fan of that. We've already historically talked about how useful I think this is also for portable kids entertainment. I know that a lot of parents, well mostly people who aren't parents,

[04:48] but a lot of people have this impression that, oh, you don't want your kids to be an iPad kid. This is fine, there are limits and time frames for all of this, but there are just some times you just want to sit and have a damn quiet glass of wine at dinner at a restaurant

[05:05] and you don't want the kids freaking out like they always do, tearing down the blinds, throwing bread, whatever. And you can spank them silly, I suppose, if you're into that, or you can hand them the iPhone Duo.

[05:19] I think this is brilliant, especially if two parents each have one, because now you've got equipment for the average household size of two children. Obviously, it turns problematic if you have seven children.

[05:31] Still have to figure that out, probably not buying seven duos. From a professional point of view, historically, we've talked about the duo, how I believe that this is a monopod killer. Historically, I have to travel with a monopod for the phone, so I could put it on a monopod, and then I could record a video,

[05:45] because, well, that's what I do for a living. A little bit more niche, but I think there's functionality in being able to set this device up on its own without needing a monopod or worrying about your phone falling over or whatever. So I find that relatively useful.

[05:57] I believe that this could end up being a briefcase killer. Like, if I was considering investing in the briefcase market, I would not because of the iPhone Duo. The core reason to have a briefcase is to put a laptop, an iPad, or a notepad in it.

[06:14] all three of those on sales presentations, poor work, I get it, you still want your laptop, you want your agentic AI running, whatever. That's okay, I'm a big fan of having the full stack.

[06:26] But you basically just killed that business. The briefcase business, it might be. Might be two bearish briefcases here. But a lot of people are like, Kevin, isn't this cannibalizing to the iPad's growth?

[06:39] And to that I raise you one. What growth? The iPad segment of Apple's business is literally shrinking. It is the only sector that's shrinking by 6% per year.

[06:54] Wearables are going at 6%. Mac is going at 28%. We literally have Mount Thor, which is a startup, basically selling AI compute only on Mac minis.

[07:06] We believe they're selling that compute on M4 Mac minis because we went to their website, grabbed some of their specs, and the specs on their website, this is their website, docs.mountstore.com,

[07:21] and the specs on their website suggest that they are using the M4-24G, which just so happens to align perfectly with the fact that Apple sells this, the Mac Mini 2024 M4 chip 24GB of unified RAM.

[07:37] It's actually pretty good. nothing like the new studios they've got. The new studios are pretty incredible, which is the whole reason you're probably seeing as much growth as you are over in the Mac Studio division at 28% of the Mac division.

[07:51] That's remarkable compared to iPhone at 21%. Really remarkable potential over here, but we'll talk more about that in just a moment. Continuing on just the dual discussion, talk about presentation. I also think this is quite useful for students,

[08:05] especially if you ultimately pair this with a keyboard. Now, unfortunately, carrying around a keyboard sucks just as much as carrying around a laptop. I believe in the longer term, there will be really good foldable keyboard accessories

[08:22] that you can essentially unfold, Bluetooth pair with your Duo, it can stand on its own, and then you can type freely. I will say, this is not going to be functional for two-handed typing. This is great for dual thumbs, single-picking,

[08:36] but I consider myself a typist. I'm usually about 110, 115 words per minute. Realistically you need a keyboard that has a decent size. The smallest iPad I

[08:49] could realistically type on is an iPad mini I sorry an iPad medium I call it the iPad medium There the iPad mini too small can do your hand to type on that The iPad medium which is like the normal iPad and then there the iPad Pro which is the bigger

[09:01] 12.9, now 13-inch screen to play. I can two-handed type on that. And I can actually type two-handed on the screen without a keyboard pretty well. The Duo is going to have that problem where you're going to need

[09:14] some kind of foldable keyboard. Theoretically, still fits in your pocket. But any kind of keyboard case, it ain't gonna work. Not gonna work at all. And that's honestly, if you even want to type. These days, with AI doing voice annotation, you honestly probably don't need it anyway.

[09:30] I just think back to when I was in college, I used an iPad, and I would type directly on the glass, and I was really fast at doing it. So, you know, but that was a long time them. Anyway, as far as reading, huge. Annotating PDFs, huge. I would be bullish on Substack

[09:50] if Substack was a stock, because I think the iPhone Duo will lead more people to read on Substack and annotate articles. It's not that easy, in my opinion, to just use a phone for reading. It's nice. It's a decent size, but it's like a crutch size. So I think this is

[10:05] an incredible tool for salespeople, professionals, travel, you know, being on a plane, whatever, less to carry. You already carry enough crap when you're traveling. This just reduces the amount of devices you have to have.

[10:18] I think it's great. I do think it's not the best tool for the highest quality video photography, videography or photography, whatever. But I think the cannibalization fear is frankly overblown. I think people are bagging on the fact that the front camera

[10:32] is under display and therefore it's not going to be as high quality for your FaceTime conversations is an overblown complaint. It's hard enough right now to get people to upgrade the iPad, and therefore, I think the Duo is a huge growth vertical for this business in both, I mean, it's going to be in the iPhone

[10:48] category, but it'll absorb, you know, iPad will go even more negative, but it'll be more than offset, I think, by over here with high margin iPhone sales, thanks to the Duo, and these will sell out for a very long time.

[11:00] Now, as far as the data center piece, I find this incredibly fascinating. The data center piece is from the information, and now it's essentially being reported all over the place,

[11:12] but I find it very interesting, because just a few weeks ago, the information reported how companies were buying Mac hardware, that NVIDIA actually sees Apple as a gate competitor in local AI,

[11:26] because they have the DGX Spark, an AI desktop computer, which isn't even as good as just having a workstation with like a Blackwell 6000 or a 5090 in it. But the most advanced models of Mac menus and Mac studios,

[11:40] which have the chips and memory configurations most appealing to AI developers, have been out of stock for months. That's sort of where this started. But this whole information piece now introduces a whole new vertical for Apple

[11:53] that kind of makes them seem like a potential high-margin Dell play. Dell's margins have basically doubled, and the stock has skyrocketed. Dell's stock on doubling their net margins has literally taken them from like $130 to $570.

[12:11] And it's absolutely insane. Honestly, there's probably too much momentum in this. This probably needs to chill out just because it's a momentum boom right now. And as much as I love that their margin has gone from 4% to 8%, this is a little bit excessive on the Dell side.

[12:26] but, you know, this is not a video about Dell. This is about Apple, and so let's focus on Apple. Apple, with a considered return to server market, has talked to NVIDIA about using network tech.

[12:39] Basically, Apple would use the ND-Link Fusion, which is the same technology that ASIC designers like Marvell or Qualcomm are using to integrate with NVIDIA stacks,

[12:53] because NVIDIA is a manufacturer really of the whole data center array, the whole thing, top to bottom. And if you bring your own ASIC, how do you connect that to the switches? How do you connect that to the fiber optics?

[13:06] Whatever. You need products to make all these connections. Now you have more nodes. Now you have more connections, more points of failure, more products that you have to buy. That's why NVIDIA has such a huge moat in the server stack. That's why they're getting into CPUs, top of rack.

[13:19] It so brilliant But Apple now wants to compete with their CPUs their GPUs and then use NVLink to partner with it Which NVIDIA already sees Apple as a threat for on

[13:31] But now they could even be a threat in data center. Now, I'm still bullish on NVIDIA. I still think it's an over $300 stock. But this is a catalyst for Apple. And my estimates are probably too conservative for what this could end up doing.

[13:48] But this product is expected to hit the market in 2029, unless, of course, they cancel it. The new CEO has been a backer of this project when it started about a year ago.

[14:01] Apple's overhaul of Siri is a game changer. You can already try the Siri AI beta. I think it's pretty good. It's just slow. On-device AI processing is still slow. So that's where these Apple-centric secure data center plays.

[14:18] We're going to be a big opportunity for Apple, whether they have their own or they need license from Apple-authorized data center folks, or people just want these Apple data centers themselves because it works and it's cost-effective, which sounds crazy for an Apple product.

[14:34] The point is it could generate substantial sales in the Mac division for Apple. Now, Apple does have a big services division, so that does kind of compress some of the upside potential.

[14:48] But here are my thoughts. I bet the Apple margins for this kind of product would be close to 50%. NVIDIA sits at about 75%. Product margins right now are about 40%, and they are up from last year,

[15:01] in part because of this shift towards Macs, which are more expensive, a little bit because of tariff refunds, and I think they had a whole last year that they were comparing to. But their margins are up 5.6% technically quarter compared to last year's same quarter.

[15:16] I think that right now this is very hard to value. If I value them at like 15% of NVIDIA sales, this is probably like a $75 to $100 billion product. At 50% or bring it down to 30% net margin, this adds about $22 to maybe $30 billion to their bottom line in 2030.

[15:34] That's about 15% higher than the current estimates from analysts, but I don't think analysts are pricing in how this changes the growth trajectory after that.

[15:46] Current pricing trajectory for Apple is that their growth rate is going to average about 9%, which actually makes them look like an expensive stock. Between servers and the iPhone Duo, I think they can easily exceed a 20% growth rate.

[15:59] And if I look at a company like this, and I take them at their current multiples, which is it's trading for 333, I divide them by their earnings of 883, that's trading for 37 times.

[16:13] But if their growth is 25%, especially as they scale servers into the 2030s, assuming there isn't some major crash, obviously, any stock does totally in that.

[16:26] But in that case, at those sort of margins, you probably even bump Apple to like a 2-6 peg, you could be looking at close to a $600 stock. Which means a company that is as big as Apple,

[16:39] you know, essentially a $5 trillion company, could essentially double within the next maybe even three years once that gets priced in. Which is pretty remarkable.

[16:52] So maybe it's ludicrous, but for a $4.86 billion stock, I've got a tiny exposure, you know, in total we've got a tiny exposure to Apple, so it's not like this is like, oh, talk to book or whatever. It's too small of a position.

[17:04] But I'll just be honest, I would buy more Apple in anticipation of their growth well exceeding 9% and their margins remaining durable. I think the iPhone Duo is excellent. I think the server thesis is on point.

[17:20] And who knows? Maybe I'll be wrong, which in the case of me being wrong, you know we'll have to go back to the good old song oh man oh that's okay

[17:33] I am with you why not advertise these things each other here I feel like nobody else knows about this we'll try a little advertising and see how it goes congratulations man you've done so much people love you people look up to you

[17:45] Kevin Passerfass by Nutslamus and you too but me Kevin always great to get your take