Hedge fund manager Dan Niles is betting on Apple and Meta Platforms as two stocks that can ride out a potential U.S. recession. Niles, who runs an actively managed fund of 20 to 40 large-cap U.S. stocks at Niles Investment Management , stressed that while a recession is not his base case scenario, investors should focus on companies capable of navigating challenging economic conditions. He pointed to current economic indicators, such as low unemployment rates , job openings, anticipated Federal Reserve rate cuts , and robust GDP growth, as reasons for his optimism about the U.S. avoiding a recession in the near term. However, Niles expressed a more cautious outlook for the broader tech sector and the market as a whole. “My feeling is, for the market overall, we haven’t seen the bottom in this correction,” he warned, predicting potential market lows in September as companies reassess their revenue streams and growth prospects. Niles highlighted a shift in investor expectations, noting that companies can no longer rely on simply mentioning AI to boost their stock prices. “This quarter that came to a crashing end,” Niles told CNBC’s Squaw Box Asia Friday. “You’re [the companies] actually going to have to show you can generate revenues from all these investments you’re doing versus just talking about how wonderful it’s going to be five to 10 years from now.” “I think you have to try to look for names that can get through if we do have a recession,” he added. Among the so-called “Magnificent Seven,” Niles singled out Apple and Meta as standout stocks. “Only Apple, which really isn’t an AI play right now, and Meta, which does use AI the best, only those two stocks actually beat revenues [earnings per share] and had revenues and EPS go up for the four quarters,” he explained. AAPL 1Y line This contrasted sharply with other tech giants like Google and Microsoft , which showed no growth in quarterly EPS figures. Amazon saw its stock prices decline after issuing lackluster forward guidance , and Tesla shares have been on a downward trajectory since it announced a delay to its robotaxi service . Apple Niles expects strong revenue growth in the coming year as consumers upgrade to AI-enabled iPhones. “Their revenue growth has been minuscule the last three years because people already have a smartphone. They bought one during Covid,” Niles explained. “I think that revenue growth goes to double digits over 10% probably next year, as people upgrade to an AI-enabled smartphone.” Niles’s forecast would place Apple’s earnings at their best since 2018, except for the 33% growth in 2021 over pandemic-linked work-from-home restrictions, according to FactSet data. He noted that this upward trend could persist even in a recessionary environment, albeit at a slower pace, due to the pent-up demand following several years of consumers holding onto their existing devices. Meta Niles expressed particular confidence in Meta’s prospects, praising the company’s effective use of AI in its core business. “Meta is using AI incredibly,” Niles said. He highlighted the company’s ability to leverage AI for content recommendations and targeted advertising, which has contributed to strong financial results. Unlike some other tech giants that have struggled to translate AI investments into tangible results, Niles noted that Meta had successfully integrated AI into its platform. “They’re using [AI] to help recommend what you want to see, and then showing you ads that they think you’re really going to want to watch. And that’s why you saw them beating revenues [and] EPS [expectations], spending more on AI investments, and still having [forecast] numbers go up,” he explained. This strategy, combined with potential advertising revenue from the upcoming U.S. presidential election, positions Meta favorably in Niles’ view.