James Cakmak, CIO at Clockwise Capital, tells "Worldwide Exchange" Alphabet and Tesla are long-term plays, with AI and robotaxi potential justifying current CapEx and market volatility.

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

Analyst Cakmak shared insights on the current state of major tech companies, focusing on Alphabet and Tesla. He noted that Alphabet's performance will be closely watched, particularly its cloud and ad businesses, and believes meeting current growth estimates should be sufficient for a positive outlook. Cakmak also addressed concerns about overinvestment in artificial intelligence, stating that AI's impact is likely to be even more profound than most expect, justifying ongoing capital expenditures.

Regarding Tesla, Cakmak acknowledged recent declines in deliveries and heightened market volatility. He suggested that while short-term results may be disappointing, the long-term potential in areas such as robotics and robo-taxis remains a key reason for investment. He emphasized the importance of a long-term view for Tesla amid ongoing competition and fluctuating market sentiment.

Cakmak: AI is going to be even more profound than most expect

All right. Why don't we start with Alphabet. I think a lot of people see Alphabet as potentially a tipping point in this market year to go further to the upside or maybe even kind of take a leg on the downside. I'm looking at the estimates for the cloud business. The estimates about 26 percent growth year over year for the ad business. It's around 7 percent. Is it good enough for Alphabet to meet those metrics or do you need to see not only a beat but also a raise of guidance. No I don't think so. I think meeting those estimates should be good enough. Really it's going to be a test on the health of the economy. You know so long as ad dollars are flowing and the health of the semi market in terms of where the capex spend is. So you know the real question for Google is you know what is going to happen with their search business. Are they going to be able to reaccelerate that business with their effort. So I think a lot of the qualitative commentary around that front will be even more critical than the numbers themselves. So I think that set up is pretty good year for Alphabet. You know we own it and we like it. All right. So you're mentioning capex. Are they going to be benefited for spending. Are they going to benefit from spending a lot on capex or is maybe are we starting to see maybe some signs that people feel like there's an A.I. overbuild if you will. We had Jeff Sonnenfeld from Yale with the Yale CEO caucus. He said about 40 percent of CEOs believe there might be too much hype and there's an overinvestment there. Yeah I really don't think so. I think that A.I. is going to be even more profound than most expect. So I think the investments are justified. I think the real question is I think a lot of investors also expect you know the capex numbers to be elevated. I think the real question is will that pace remain elevated or will it start to gradually come down. So less to less about Alphabet itself and more about the semi industry as a whole and the growth rates that they can achieve. Let's move on to Tesla. We already know Q2 deliveries. They're down 14 percent. Is all the bad news already priced into this stock or can it move lower on these results. And what do you think happens on this conference call. Can that just kind of reinstill confidence in this name. Is there something that Elon Musk can say about the robotics business or the robo taxi business that can kind of turn his fortunes around. Yeah I mean this is an interesting one. You know when we look at Tesla I think with the I think when you look at the market broadly speaking you know volatility has increased and will continue to increase higher from here. And you've got to take shorter duration outlooks on a lot of these tech names. And I think Tesla is one that is an exception to the rule where you have to take a longer term horizon. Obviously you have the Elon factor and the headline risk associated with that. I think the numbers are expected to be poor. I think everyone knows that. I think the optionality around robotics robo taxi is why you invest in the stock. This competition is certainly not letting up on the auto front. You know we own it for the long term. There is going to be volatility with this. I think the quarter the results and the interpretation of the results is going to be polarized. You know the bulls pointing to the pointing to the the optionality and the bears pointing to the declining estimates over the short term. So you know you're here I guess is as good as mine how the stock reacts. But you know we own it for the long term.

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Cakmak: AI is going to be even more profound than most expect

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Rise of AI