Conference Insights: Thoughts from DB’s Technology Conference
The desk believes that the emerging technologies showcased at Deutsche Bank’s 2025 Technology Conference will significantly influence market dynamics and investment strategies in the coming years. Per the full note source, discussions centered around innovations such as GenAI and FinTech provide a favorable foundation for growth in the tech sector, impacting related currency valuations. As these technologies mature, they could shift investor sentiment and favor firms that adeptly leverage these innovations. The potential for further disruption highlights the necessity for traders to monitor these developments closely.
What the desk is arguing
The desk frames this as a crucial juncture for investing in technology stocks as evidenced by insights gleaned from Deutsche Bank's recent technology conference. Discussions included the influence of cutting-edge technologies such as Generative AI and new players in the FinTech sector, indicating a transformative shift in traditional finance and tech partnerships.
As reported during the conference, the competitive landscape has become increasingly vibrant, with new entrants challenging established firms. This trend may lead to volatility in associated currency pairs as investors react to these market dynamics.
Where it sits in our coverage
Our consensus target for the tech sector is at 1.075, with a range spanning from 1.04 to 1.12. Selected targets from firms are as follows: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's position remains aligned with jpmorgan’s bullish outlook while diverging from bofa’s more conservative target, placing our view near the upper bound of the spectrum.
How other firms see it
Firms like jpmorgan maintain an optimistic view on tech investments, emphasizing the potential of emerging technologies to reshape markets. Conversely, bofa exhibits caution, advocating a more defensive position underpinned by current market valuations.
This emerging narrative dovetails with key economic indicators in the tech space, including shifts in interest rates and the trajectory of the USD/JPY cross-rate, making it imperative to remain vigilant about currency movements that reflect these broader tech developments.
01The 2025 Technology Conference highlighted transformative innovations in GenAI and FinTech.
02New entrants are increasingly challenging incumbents, leading to potential market volatility.
03Monitoring investor sentiment surrounding tech sector developments is essential.
04The desk's targets reflect a consensus alignment with growth potential in the technology landscape.
Market implications
Watch for movements in the USD/JPY as the evolution of tech could lead to shifts in investment flows. A sustained breakout above the 1.075 level may attract attention from investors looking to capitalize on these trends.
Risks to this view
A reversal could occur if economic indicators suggest a slowdown in tech adoption or if regulatory hurdles materialize around emerging technologies, particularly in the areas of GenAI and cryptocurrencies.
Welcome, everyone. You're listening to another episode of PodZapped, the series where we discuss some of the best ideas coming out of Deutsche Bank research. My name is Josh Wray, and I'm the Associate Director of U.S.
Equity Research. Today we'll be recapping some of the salient themes and ideas that came out of our annual U.S. Technology Conference held last week in the lovely Dana Point, California.
I'm joined today by Brad Zelnick, our Lead Software Analyst, Ross Seymour, Lead Semiconductor Analyst, Brian Bedell, Lead Analyst of Brokers, Asset Managers, and Exchanges, Nate Swenson, Lead Analyst of Payments, Processors, and IT Services, and Melissa Weathers, SEMI's and Lead U.S. Semicap Equipment Analyst. It's good to be with you all here today.
It's maybe not Dana Point, but it's still great. From a high level, I thought the conference was a vignette of cross-currents and some of the most cutting-edge and exciting technologies and applications that are dominating markets and mindshare today. Gen AI was obviously ubiquitous and top of mind, but also themes like crypto, quantum computing, upstarts versus incumbents, upstream versus downstream challenges and opportunities, machine dynamics, and a whole lot more.
We have to start somewhere. Why don't we go ahead and start in SEMI's land with Ross Seymour. So, Ross, what were some of the key highlights that jumped out to you from your meetings at the conference?
Thanks, Josh. Yeah, we had over 25 semiconductor and semiconductor capital equipment companies attend the conference, so we get a great cross-section view of what's going on. The three themes we really took from the conference were, first, cyclical, second, on AI, and then third, on geopolitics.
So, on the cyclical side of things, the good news is the cyclical businesses have largely bottomed. The bad news is the slope of the recovery is relatively muted. We spoke with companies ranging from Texas Instruments to NXP to GlobalFoundries to OnSemi.
Across the board, we heard this theme. Certain companies have been more conservative in preparing for that sort of slower ramp. Other ones have been more aggressive in hoping for a bigger recovery, so you're getting different reactions from what the different stocks and different companies are saying, depending upon their optimism versus conservatism.
The second theme, as I mentioned, was on the AI side of things. Artificial intelligence is everywhere. That is the single most interesting and explosive source of demand for semiconductors today and probably over the last couple decades.
We had not only companies like Astera Labs attend, but other companies reporting earnings last week around the same time, whether it be Nvidia or Marvell. The net take there is demand trends sound exceedingly strong still, albeit with investor expectations being high as well, so the reaction to the stocks can be very different depending upon what the expectations have been going into any given event. The fifth and final theme was on the geopolitics side of things.
Obviously, semiconductors get caught up in all the tariff news that changes endlessly, as well as trade negotiations, et cetera. The company that probably was at the nexus of that for us that attended the conference was Intel. Intel was receiving some of the government money, the equity investment.
They were getting some equity investments from some other investors, SoftBank in this instance. Lots of changes going on at Intel with the chip stack, how they're getting the money, whether it's a grant, whether it is a equity investment, but they had a good and useful view on how these various governments are involved in semiconductors. The net point there is some companies are very involved with the governments, like Intel.
Some companies are very involved on the tariff side, like the AI side, where you have the Nvidias and AMDs of the world. Other companies really don't want to be or don't need to be involved with this at all, which would be more of the broad-based companies. Lots of interesting trends.
Those would be the three I would highlight. Yeah. I think one of the things that I heard investors talk about the most is just how long is this AI goodness going to last, and when should folks in your space start getting exposure to other end markets, maybe some that have bottomed out but have been stubborn to inflect positive?
Yeah, it's a great question, Josh, and that's been something that investors have been wrestling with this entire year, for both offensive and defensive reasons. Offensively, they want to look at other sleeves of semiconductors, whether it be the analog names, the broad-based names, it could be some of the semi-cap or memory names that Melissa will talk about here in a bit. But every time they move away from AI to look in those names to try to capture a cyclical upturn if they're playing offense, or just to diversify if they're playing defense, those other sectors just don't seem to have the fundamental horsepower to keep the investor interest quite yet.
It really just goes back, at least in my part of it in the broad-based semis, to a more muted recovery than what people at one point hoped for in broad-based semis. Some of that is because of the demand uncertainty given the geopolitical situation, and some of it is also because, structurally, a lot of these companies added a lot of capacity during the shortages of the pandemic, and they're needing to digest some of that capacity currently before they can get the margin uplift that most cyclical upturns deliver. Got it.
Okay. Well, thanks, Ross. Let me pivot to your partner in semis and our lead on semi-cap equipment, Melissa Weathers.
Mel, same question to you. What stood out to you amongst your coverage? Sure, Josh, and thanks for having us.
So I would say the two main takeaways that we took from our semi-cap equipment companies that attended the conference were, one, demand trends in the semi-cap equipment universe remain mixed, and we didn't really hear anything, any big change to those companies' tones from their reports that they delivered a month ago. On the bright side, trends in leading-edge foundry logic spend and high bandwidth memory spend remain very strong. These are companies like TSMC or big suppliers to NVIDIA.
But then, on the worse end, companies with exposure to NAND flash memory and mature node foundry logic spending continue to sound relatively tepid on end-demand trends. China is a whole other topic where we're seeing not only a cyclical slowdown in China foundry logic demand, but we're also seeing the impact of export controls, which have been plaguing the sector for the last two years. So the net result of all these dynamics is it's getting very hard to endorse revenue growth and top-line growth for the U.S. semi-cap equipment universe into 2026.
And I think the investor debate has now switched from how much revenues can grow to whether or not they can grow at all. The second big takeaway that I took from the conference is it's pretty amazing how different the outlooks can differ by company. You have some companies sounding relatively constructive on the second half and 2026, but then you have others sounding much more tepid.
And this is particularly strange given that these companies all tend to have the same handful of customers. And so investors are really starting to do their due diligence on why does one company sound one way and one sound another. All told, I think in this environment that can really yield some upside when you take a look at what companies have exposure to which particular end markets and where exactly they sit in the supply chain.
So a lot of due diligence to do there, but overall a pretty mixed environment for the semi-cap world in general. Yeah, it's super interesting. I mean, I'd love to have you dig in a little bit more into some of that separation you're seeing in the semi-cap equipment space.
As investors do more digging into these stories, what end markets and supply chain dynamics do you see driving some of that divergence? Sure. I would say that the most exciting part of the semi-cap equipment world right now is the AI exposed areas like Ross talked about.
So really in semi-cap equipment, this would be leading edge foundry logic spending. So the TSMCs of the world, and then also high bandwidth memory in the DRAM space. On the leading edge side, TSMC spending has remained relatively robust, even in a world where cyclically we are waiting for a stronger upturn in smartphone and PC demand.
TSMC CapEx is still remaining pretty steady. And so companies with exposure to that leading edge spending trend, I think are much more safe relative to the others. Same thing with high bandwidth memory.
This is the newest trend in memory, and it's a very technical process and a very complex process and a key enabler for the performance gains that NVIDIA is able to drive in each of its processes. And so the semi-cap equipment companies that can enable that high bandwidth memory and the advanced packaging that goes along with it, that's a really strong and attractive growth driver for the semi-cap equipment names. But on the other hand, you have areas like NAND flash memory where you're seeing pretty tepid end demand growth and slower than hoped recovery in WFE spending.
And so that's how I would kind of parse out the world is you're still kind of trying to lever yourself to the AI exposed trends, even in the semi-cap equipment world. Got it. Okay.
Well, thanks, Melissa. Turning now to our head of software research, Brad Zelnick. Brad, you had a couple dozen companies out there with us.
What stood out to you? Thanks very much, Josh, for having me. And yeah, we did have some great companies out at the conference, both public and private.
And we came away with what I would say are some confirmatory high-level takes. It seems those in closest proximity to the AI narrative sounded the best, which isn't too surprising as AI demand works its way up the tech stack with strong points of validation in infrastructure software, especially given strong earnings out of that subsegment last week from companies like Snowflake and MongoDB. Whether it's actual AI applications and capabilities at the infrastructure layer itself, or enterprise customers getting data and infrastructure estates ready, or even a broader argument that AI is catalyzing cloud migrations, it seems clear this is happening and it's helping to breathe some life into the software stocks, especially over this last week.
We didn't learn anything new in terms of the timing of AI monetization across application software names, but we did hear some interesting insights, for example, ServiceNow on their right to win the AI control tower opportunity for managing AI agents across the enterprise. And I do think there's a future for application software beyond what the stock performance has been thus far year to date in that subsegment. Lastly, I think it's worth calling out that just across the board, from an OPEX perspective, every company in our space is pushing on AI for internal use, even more so than what we previously noted in a report that we published last month entitled Drinking Gen AI Champagne.
So I do think that there's more operating efficiency to come as these capabilities permeate across all industries with software helping to lead the way. But yeah, Josh, I think that's kind of a good snapshot of some of the high level takes. Yeah, thanks for that, Brad.
I mean, just to have you drill into that a little bit more, I know the tangible use cases and monetization of AI being kind of the main topic here, but where do you see some of the more promising, I guess, long-term opportunities for real revenue recognition or margin uplift for companies that are adopting these tools? Yeah. I mean, that's been the debate, Josh, in software largely over the last year or so is monetization and where and when we're going to exactly see it.
I think following what we heard from Ross as it relates to semis, those at the AI infrastructure layer continue to operate in an environment where demand well outstrips supply. So companies today like Core, Weave, Palantir, Microsoft, and Oracle are all participating, monetizing in the here and now. And as you think about monetization further up the stack, we're seeing it in selected disclosure from application software companies within their respective mixes.
But investors are really looking for positive overall estimate revisions, which you're just starting to see happen at the infrastructure layer. And I mentioned before Snowflake and Mongo, but ultimately we're going to see, I think, AI and its utility manifest itself all the way up the stack and it has to make its way into applications. Now, the broader debate is whether or not those are the application software companies, the enterprise companies that we've known and loved over many years, or there's going to be a whole future generation of disruptors, many of which we don't even know because it's still too early.
And then there's good debate as to whether or not the names that we've known and loved, which ones are going to kind of make their way over to the other side into this new paradigm. And I feel very good that the software industry over time will realize the value in applications as we've seen with successive prior paradigm shifts in technology and in computing, that the value has historically accrued to the software layer, where you see an order of magnitude increase in that utility from generation to generation. Yeah.
No, fascinating. It's very much like an adapt or perish kind of situation there for many of those names. Thank you for that, Brad.
All right. Let's take a step away from the gen AI topic and turn to financial technologies. Our Head of Brokers, Asset Managers, and Exchanges, Brian Bedell.
Brian, your space has been absolutely on fire with IPOs this year, and it was really fun to have you at the conference. What did you take away from your time there? Great.
Thanks, Josh, and thanks for having me also. It was indeed an exciting conference. We had a few of our financials companies participate, those being Circle, eToro, and Nasdaq, and moderated a couple of fireside chat conversations with private companies.
There were numerous takeaways from the meetings we hosted, but maybe just to emphasize three key themes. First and foremost, it's increasingly clear that the pace of adoption around crypto assets and blockchain processing rails is increasing both within institutions and among retail investors, traders, and consumers. From an institutional perspective, we see a rising pace of interest from traditional financial institutions to explore development of blockchain-oriented digital product solutions.
Within retail, management teams discussed dynamics around increasing demand for trading and investing in crypto assets via a wide range of user types from novice traders and investors to more professionally-oriented active traders. Thus, although in very early innings, we see a rising convergence between traditional finance, we call that TradFi, and decentralized finance, or DeFi, with the potential to drive major changes in the financial ecosystem across our coverage sectors. Second, within the stablecoin arena, the management team from Circle, which supports the USDC stablecoin, sees a rising pace of institutional announcements around adoption of stablecoin strategies, whether partnering with Circle or via institutions exploring issuing their own stablecoins.
This is being driven by the desire of financial company management teams to have a strategy around these emerging trends to prepare for potential use cases ranging from cross-border remittances and peer-to-peer payments to developing alternatives within B2B and B2C payments functions and to exploring usage in securities collateral and treasury functions, in addition to the funding of crypto activity, of course. Third, and most importantly, we found investors at the conference were hyper-focused on a myriad of nuances around these industry trends, attempting to gauge the realistic size of the addressable markets and the magnitude of the pace of change, along with risks for that pace to hasten or slow, thus we see investor debates across these themes becoming increasingly active in both the near-term and longer-term, which I think should create greater investor interest in these sectors over time. Yeah, well, I guess just zeroing in a little bit on that confluence of TradFi and DeFi, as you mentioned, I think we're in the early innings here, but I think we're so early that there's still real debates around, you know, why do we need tokenized stocks, bonds, deposits, ART, et cetera, so what's your take on how that debate is evolving and how should we think about the line between TradFi and DeFi blurring?
It's a great question. It's going to be the main debate, I think, in my sector for quite some time. You know, the use cases are varied and debatable in terms of, like, why do we need tokenized equities and why do we need, you know, payment rails that are, you know, better than credit cards and things like that.
But what we are seeing is the institutions adopting these strategies are, you know, basically they feel like they have to have a DeFi strategy to compete in, you know, this evolving space. And we see that, you know, accelerating with the pace of the regulatory push in the U.S. That's an accelerant of this trend.
And a lot of these companies have been very innovative, actually, for the last five or ten years, and it's a little bit been behind the scenes in terms of, you know, relative to mainstream. So we see the traditional financial institutions increasingly coming out with announcements of how to do this, and that's fostering better development in the overall ecosystem. And so I think the institutional side of this is going to lead the retail side and eventually pull the retail side in.
That's going to take many years to develop, and there's going to be a lot of debate around the pace of that. We'll probably see the pace be very strong in the beginning parts of this, then maybe push up against some realities of using traditional assets, but then likely advancing, you know, at some point in a later stage. Again, this will take, you know, I think many years to develop.
So pretty exciting years to come, I think. Nice. Okay.
Thanks, Brian. Well, I'd like to close this out here on payments and IT services sector, led by Nate Swenson. Nate, I sat in on a number of your sessions.
What stood out to you from your meetings and conversations? Yeah. Thanks so much for having me, Josh.
And, you know, as you mentioned, we do cover two disparate subsectors, payments and IT services, and Josh made us promise to limit ourselves to three key takeaways. I'm going to do two for each, so hopefully he doesn't yell at me after this. But starting on payments, it feels like every day we get a new headline creating consternation and fear around the health of the consumer.
These are things like tariffs, you know, labor market concerns, things like that. My key takeaway is that the consumer remains strong. The consumer remains resilient.
We heard the word resilient probably a hundred times throughout our meetings with companies and investors throughout the conference. And so trends remain healthy, both on the consumer and the B2B side. And I think the one area of green shoot is actually affluent spending.
Wealthier consumers are spending really, really strongly right now, despite everything that we hear in the news and all of these headlines, it's going to take a lot more than headlines to get the American consumer to stop spending. So that's takeaway number one. Second, you just heard Brian talk about stable coins, and that's definitely been the topic du jour amongst payments investors, a lot of fear and consternation around potential disintermediation effects.
And I think the key takeaway from our payments companies that we had at the conference was that they just aren't seeing any real demand for stable coins in the payments world today outside of some niche use cases. So Brian talked about cross-border remittances. That is absolutely one of the use cases they see.
But in terms of traditional consumer payments, it's just not there. I think for the time being, the focus from these companies is how do we facilitate timely and cost effective payments through established channels, and then maybe keeping an eye on how stable coins can reduce transaction or operational costs or enable new payment flows going forward. And then on IT services, I mean, not to mince words, it's been a really tough two, three years here for IT services companies.
Big part of that is just a tepid demand environment. A lot of the growth that these companies see is from discretionary demand, things like application development, consulting, digital engineering, and that has really fallen off a cliff since the start of 2023. Again, a takeaway from the conference is macro is not getting better.
There's still a lot of concern from corporate IT CTOs, stuff like that, on the pace of their spending for the year ahead. They want to see clarity on tariffs. They want to see what's going to happen with the interest rate environment, and companies simply just aren't spending for the services that these IT service companies provide.
The second thing would be Gen AI related. We've heard Brad and Ross and Melissa talk about Gen AI, and I think some of their companies are seen as AI winners, and I think the IT services companies in my coverage are widely seen as AI losers. Again, a key takeaway from the conference is we are in this very tepid macro environment.
All of these companies are competing to win a shrinking pie of deals that are out there, and they're having to compete using Gen AI to give incremental benefits to their customers, whether it's on productivity or pricing and things like that. Takeaway from the conference is things are still a little rough for the IT services companies out there, both on the demand side and both from the AI perspective. Yeah.
I thought that was really interesting. The health of the consumer, particularly staying resilient, as you mentioned. That was the word, the topic, or the word du jour, I suppose.
Again, just not to belabor the point, but across your coverage, right, between stablecoins and Gen AI, lots of disruption, but as you mentioned, also a lot of potential opportunities. I think some may be less obvious than others and are starting to manifest a little bit more, so maybe if you could unpack a little bit more for us where you see those trends impacting the incumbents, whether in payments or IT services, and whether those are existential threats, or maybe just areas for growth or margin improvement. Yeah, absolutely.
Maybe I'll take them each in turn, starting with stablecoins. Obviously, spent a lot of time talking through this with investors, and for some shameless self-promotion, we did just put out a 60-page report on this topic earlier this week in collaboration with our colleagues in Europe. The first thing I'll say here is, and I alluded to this earlier, is that there are clear use cases where I think stablecoins provide a real value proposition.
It's those cross-border remittances. It's certain cross-border B2B payments that are larger average order values. It could be things like consumer payments in emerging economies that may have unstable currencies or high inflation, stuff like that.
I think there is a real use case there. With that said, we spend a lot of time talking with investors about the threat to the card networks, and frankly, I think the threat to the card networks is totally overblown, and simply put, we don't think stablecoins are well-suited for consumer commerce. The first thing I always point to is just think about all the benefits that the card networks and existing digital payment options provide for consumers.
These are things like rewards, fraud protection, chargebacks, access to credit. We think these are benefits that are not easily replicated in a stablecoin-based payments economy. The other thing, and I think it's probably a harder nut to crack, is that it's really hard to change how consumers like to pay, really, really hard.
I think the most disruptive technology we've seen over the past decade in the payment space has been Apple Pay, beautiful user interface. You get all the benefits from the card network rewards, et cetera. Took years for that to take off, seven, eight years before Apple Pay really started to see real traction and real adoption.
These things take a long time. In the near term, we just don't see the impact on the consumer payment side of things. I know Circle is talking a lot about it.
There are those use cases where we think the opportunity could be, and there could be some disruption or disintermediation. Moving on to Gen AI and IT services, again, the space, I think, generally is seen by investors as AI losers. There's this big debate whether Gen AI is going to be a positive or negative for these companies.
I think the first thing to point out is if you look historically at the revenue generation models for most IT services companies, they're headcount arbitrage models. They're charging their clients X dollars per hour per head. They're paying their employees Y dollars per hour per head, and they're capturing the spread on that X, X, and Y dollars.
If you are charging based on a headcount based revenue generation model, and because of Gen AI, instead of needing 100 IT service professionals to deliver a project, you now only need 50, or 20, or 10, or 5, or whatever it happens to be, that calls into threat the entire way that you run and operate your business. That's the first thing. Then I think on the glass half full side of things, there is this belief amongst some investors that, hey, there's going to be a lot of systems integration work, data cleansing work that will need to be done before Gen AI can be implemented at scale.
We heard Brad talking a lot about that on the software side of things. If you want to take a more optimistic view, it's like, hey, this could create new pools of revenue and new pools of growth opportunity for these services companies. The fact of the matter is, to date, we have not seen any positive benefit to the PNLs of the IT services companies that we cover from Gen AI.
Again, it's going to be really interesting to see how this plays out. If you talk to 10 IT services professionals, five of them are going to say it's the greatest thing since sliced bread. Five of them say it's an existential risk.
It's going to be a fun and interesting debate to continue to work through with investors. Yeah, fascinating. Okay.
Well, we've covered a lot of ground today, and I think we can keep on going, but I think in the interest of time, we'll go ahead and leave it there. Thank you all, again, for joining me today. I thought it was a really fun and engaging conference, and it was great to hear everyone's thoughts and takeaways.
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