Closing Bell - AI, Cybersecurity and Capital Flows Shape the Market 6/2/26

Episode Date: June 2, 2026

Investors digest cybersecurity earnings, AI developments and shifting risk appetite. Mandy Xu of Cboe explains how options traders are positioning and where speculative activity is building. Palo Alto Networks headlines earnings. Saket Kalia of Barclays breaks down the results and what they signal for cybersecurity spending, enterprise demand and the broader software landscape. Ulta and GitLab add fresh reads on the consumer and technology spending. A major conversation on AI in healthcare: our Kate Rooney sits down with Microsoft AI CEO Mustafa Suleyman and Mayo Clinic CEO Dr. Gianrico Farrugia to discuss how artificial intelligence is transforming medicine, research and patient care. Sunhaina Sinha of Raymond James discusses the capital raising environment and whether funding conditions are improving for companies and investors. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The bell's bringing an end to the trading day at the NYNC, Victoria's Secret, bringing the bell, as that stock jumped 40%. And at the NASAC, it's WSFS Financial. Welcome to closing bell overtime. We're live from studio be at the NASAC market site. I'm Melissa Lee, along with Mike Santoli. Sox flattish on the day. The Dow up 250 points, the S&B 500, setting another record high close, and rising for the ninth straight session. The NASAC just barely in the green, but that's also a closing high in a nine-day winning street.

More in the markets than some of the big moves in individual stocks coming up. You have big moves. Palo Alto is up 60% in just a month. Earnings do out momentarily. Will the numbers keep the rally going or will it be a sell-the-news event? We're also waiting for results from Alta on a day when both consumer sectors were lower, travel food and even beauty stocks down today. Flat on the day overall, Mike, but it was within the technology. Again, chips, big movers, right?

Even software, IGB taking a breather, but still, that was a big mover. Without a doubt, I mean, I think investors keep or traders, Keep slamming the same button here. So ninth straight up day within a streak of nine straight winning weeks. It just sort of shows you that we're essentially pressing the same bets. So semis up 5%. They've almost doubled off the March 30th low. So you have a new record high in the S&P 500 on a day when only 5% of S&P 500 stocks made a new 52-week high.

So this has been the dynamic for a little while. It's one of those things where it's not so much, you know, oh, it's got to be danger. We're falling off a cliff. But you have to recognize that not a lot of new information is getting into the price on a given day. Exactly. And we're going to talk a little bit about this later. But the big moves that we're seeing on some of this news, HPE for instance, today. I mean, the reaction immediately on the earnings release yesterday, carried over today's session. And keep in mind, we've said this yesterday.

It moved higher on the back of Dell. And then Dell moved higher in the back of HPE again. It's just amazing. And Oracle was up 10% yesterday and why. And yes, exactly. HPE, fascinating instance here of a kind of a cheap stock forever. People just wanted to forget about it. And now it demands attention because there was Micron.

There was memory. There was the whole hardware food chain going down the value chain and back in time. Now, however, Hewlett-Backer did close nine bucks off its intraday high. So there was this huge kind of Roman candle spurt in the morning. And then we had a rethink. So I think you have to watch it, the degree to which, you know, the pressing of the same bets. goes into overplaying somebody's hands. So that's what we're up for.

Let's head to Christina Parts of Neville. It's for a look at some of today's biggest movers. Hi, Christina. Hi, guys. Well, you talked about it. The rally did roll on. The S&P 500. The NASDAQ is sending its winning streak

to nine states straight sessions. And the NASDAQ eking by. I wasn't sure if it was going to get in. But small caps did lead the way today. The Russell 2000 up just under 1%. Tech, though, still doing a lot of the heavy lifting. And one name really stealing the spotlight, Marvell.

Those shares surging 32% after Nvidia. CEO Jensen Wong said the chipmaker could be the next trillion dollar company. That optimism spilling into the broader optical trade, momentum, coherent, corning that does the glass for all these optical players, all sharply higher double digits. I shouldn't block it over here. And then you've got AI infrastructure. A massive theme in this market.

HP, you guys, talked about it, jumping roughly 19% after a standout quarter citing massive server demand and a record backlog as well as strong networking. That lifted networking competitor, Cisco as well. but not Dell, which was down about 6%, but keep in mind when you zoom out, it's after a huge run-up just over the past month or so. Elsewhere, there was some pressure in software. Sometimes we see that mix with chips and software, the IGV pulling back after its best three-day stretch in more than two decades. Outside of technology, though, deer got a boost after tariff relief on agriculture equipment. Caterpillar, also closing higher on a bullish analyst call.

And then lastly, ShakeShack. Did fall under pressure about 8% lower after cutting its outlook and citing six. still high beef costs. Christina, thanks. Christina Parts and Nevelas. That move in HPE, that Christina mentions just one example of what has been an earning season that saw extreme moves post results. In fact, according to bespoke, since the start of April, 120 companies have initially popped 15% or more post earnings.

31% of those stocks are from the tech sector. HP, as we mentioned, up 17% Dell rallying 32% post results. Snowflake, Service Now, Super Micro, also seeing double digit percent moves on earning, snowflake, a whopping 36%. Of course, they haven't all been blowout moves. Traditional big tech companies like Microsoft, Apple, and Vidia, they were muted despite beating on the top and the bottom lines. Joining us now is Sibo Global Markets, Head of Derivatives, market intelligence, Mandy Shoe. Mandy, great to have you with us. Great to be here. You're actually seeing this play out as well when you take a look at single

stock volatility. Exactly. So we have a measure called VIX EQ. Think of it as the VIX for single stocks. It measures the average weight of single stock volatility. What's been notable is that over the past two months, even as the broader index, VIX index has fallen, VIX EQ has actually remained very elevated. In fact, yesterday it closed at a one-year high. So the spread between what single-stock options are pricing in for like moves at the single-stock level versus what the VIX index is pricing and what is, you know, expected at the S&P index level, that's at a record high. So a lot of volatility at the single-stock level is not translating to the index level because these stocks are moving on idiosyncratic risk factors, earnings,

you know, the AI thing, et cetera. So historically low correlation, suppressing the VIX, but seeing plenty of volatility, realized as well as expected going forward in the options market. What does that tell us in terms of when that dynamic, I guess, breaks? Or historically, what does it mean when you have extreme low correlation among individual stops? Sure. One thing, one takeaway from me is that there's just very little macro risk being priced in.

So everyone is focused on kind of the AI story, the earning story, very little in terms of potential weakness coming from, you know, high oil prices, the impact on, you know, demand, what does it mean? Like the macro geopolitical backdrop, that's all kind of been pushed to the background, right, since March, as we've seen. So everyone kind of focusing on the single stock, the idiosyncratic factors, not much being focused on terms of the macro. And if that ever changes, that would put upward pressure on index volatility, all else equal.

All right, hold on, Mandy. And we're seeing a big move in Palo Alto, up 10 percent on the back of its earnings. Seema Modi's got the numbers. Seema. Hey, Melissa, third quarter numbers are out. Coming in better than expected at 85 cents, the street was looking for 80. Quarterly sales growing by 31% year-over-year to $3 billion, which is also ahead of consensus. And remaining performance obligations also higher than street consensus at $18.4 billion. So that tells us the demand story, guys.

It continues to accelerate the Paula Alto's Q4 revenue outlook above the street. CEO Nakeshaara comments here in the press release, says, latest advancements at the AI frontier have increased the level of urgency around cybersecurity and redefined the shape of the industry for the coming years. We'll want color on the earnings call, guys, on just how Mythos has created a bigger opportunity for cybersecurity and what type of tools they're leveraging and providing their customer as concerns continue to grow. Shares are up about 12% here.

All right, Seema, thanks. Seema Modi. Do not miss an exclusive interview tonight with Palo Alto Network CEO, Nikesh Aurora. That's on Mad Money, 6 p.m. Eastern time. Mandy, back to you. We're seeing this happen in real time. How are investors then using the options market to bet on single stock options since volatility is so high? We're just seeing a lot of optimism.

That's across the board. So not just in tech, as you might expect, but really across sectors, one of the metrics we track is looking at retail flow on our exchanges, and what percent of that flow is bullish versus bearish. And what we're seeing now is a record percentage of bullish flows. And that's defined as retail investors buying calls to open or selling puts or. open both trades really taking a positive directional view of the underlying stock. So about two-thirds of all opening trades are bullish trades that we're seeing from retail investors. And that is at its highest since the 2021 meme stock era. And right, I was going to say, I mean, that was when we kind

of learned how this kind of activity can feed on itself and perpetuate itself for quite a while and the urgency with which retail traders are willing to pay up for upside, you know, call exposure relative to, you know, hedging demand. Yeah, with one difference I would note, though, from today versus 2021, we're seeing the same euphoria at the single stock level. The difference is this time around we're not seeing any caution being priced at the index level. So in 2021, retail investors were getting very bold up, but institutional investors were actually putting out a lot of hedges in 2021.

Part of the reason I think why 2022, the sell-off was pretty moderated, you know, in terms of volatility. This time around, if you look at SPX index positioning, it's all bullish as well. very little demand for protection. So that is one area that gives me a little bit of concern because you'd expect in this environment, given the stretch positioning that we're seeing, people starting to look at hedges, right?

Buy hedges when they're cheap, you know, not when you have to. We're not really seeing that at this moment. Right. I mean, that could really be a trap. I mean, somebody could buy, right, a NASDAQ, use the NASDAQ as a hedge, and then find out later on that that was a terrible hedge

because there's no correlation between the next level and the single stock. Exactly. So right now the focus on the single stock, you know, idiosyncratic. So in that case, yes, you would not be looking at the index hedges. But when really, if there's a macro-negative macro-catalyst, all stock sell off, that's when you should be looking at, you know, index hedges. Right. All right. Mandy, great to see you. Thank you for coming by Mandy Shoeh. All right. Well, back to Palo Alto. Shares sharply higher right now after the company topping expectations for its guidance on earnings and revenue.

Let's bring in an analyst for more on this move. Joining us is Barkley's equity analyst, Socket Kalia. He is overweight. the stock with a 220 price target on Palo Alto networks, but of course, 220, I mean, the stock's kind of left it in the dust. So how are you thinking about this number today that they've reported in the context of what you've been expecting from the company? Well, thanks for having me. You know, when I look at the numbers today, it's really the NGS AOR number that really jumps out at me, as well as the guide here for Q4. You know, I think one of the things that came out in the press release, that CEO Nakesha Rora, mentioned, was that AI advancements are driving more of an urgency around cybersecurity spending. And I think we certainly see that with the Q4 guide. So with with ARR going up, with RPO going up,

that's not a metric that Palo Alto usually raises at this point in the year. I think you're going to see consensus numbers go up. And of course, that's going to drive price targets. But overall, a much better than expected result here from Palo. You mentioned NGS. You mean next-gen security? What does that tell you specifically? Thanks for the question. So the next gen security portfolio really includes some of Palo's fastest growing products, whether it's the XIMM product or the Prismas Sassy product or cloud security. These are really products outside of the firewall, much faster growing markets. And that base, I think, in total grew 60%. On an organic basis, it's added about 400 million in net new ARR. That's well ahead of what we are expecting about 350 million, I think even higher than some buy-side expectations. And so I think what that tells you is you have a healthy core business and network security, but this growing sort of this growing next-gen kind of portfolio that is that's adding

and boosting that growth. We were just showing the stock action in some of the other security names as well, CrowdStrike Z-Scaler Fordnet, following higher, following Palo Alto shares higher. Does that make sense? Is this sort of an affirmation of this subcategic? being in a good position here. It would seem as if, you know, some of the conventional wisdom is being confirmed that cyber is immune to AI disruption to a large degree, maybe a beneficiary, as well as sort of data infrastructure software, which we saw last week.

Yeah, I think I totally get those moves. I mean, particularly around the comment around AI driving more urgency around, around security spending, you know, I think that's going to be a rising tide that's going to lift all boats. Now, that said, I think one of the things that names like Palo and CrowdStrike have going for it is more of a platform play. And so, you know, I think one interesting question for the call is going to be how mythos is maybe changing the conversation with customers and whether that's going to drive them towards, you know, consolidating the number of vendors that they work with. If that's the case, that's really going to benefit a vendor like Palo and or Crowdstrike a little bit more, but not surprising to see sort of the rising tide across

security spending overall. specifically for Z-scaler. I mean, they had some Z-scaler sort of specific issues in the quarter. And so I'm wondering, when you see the move higher after hours, if this blowout quarter from Palo make Z-scaler look even worse, so to speak, relatively speaking, as an investment in the space, or if it just shows you that there is that market out there once they get their sales force issue in line. Yeah, so going back to the NGS line, one of the components of NGS ARR is going to be Prismiss Sassy. And that's a product that's directly competitive with Z-Skaler. I think what you saw with Z-Skaler was some company-specific issues, but what I'm hearing from investors more is just fears around competition. We still need to hear the call and what Pallow will say about Prisma Sassy. But that was a business last quarter that actually accelerated for Pallow.

They've also talked about seeing more competitive displacements. So I could see investors look at this both ways for Z-Scaler, particularly, you know, a little bit of a rising tide in terms of overall security spending, but also a little bit more competition in that sassy space. What do you have to believe or what's your premise if you're buying it at 326 right now? I'm looking at the free cash flow yields pretty much at a, you know, a decade low or something like that. So how do you build a case for it at this point? Is that on Z-scaler, do you, that you're asking now? I'm sorry. No, I'm sorry, Palo Alto. On Palo? So on Palo, listen, this is the largest pureplay security company out there. And if Mythos really is creating this increased urgency around security spending, this is really just the beginning. And so, again, I think a key question for the call is going to be how the conversation with customers is changing in the wake of Mythos. And so I think that's one broader perspective. As you think about valuation, though, I think a number that's really,

important to investors is the path to 40% free cash flow margins in fiscal 28 that Paolo's talked about. That, I think, is something that helps really underpin valuation, as well as the growth that we're seeing. I mean, Q4AOR here is going up by a pretty meaningful amount. It's going to be interesting to see how fiscal 27 numbers evolve here as we think about that organic and inorganic mix. But overall, I think that even with the after-hours movement, arguably we're still at the beginning of this kind of AI-driven urgency. Socket, great to have you with us. Go jump on that call. Sackett, Kelly and Barclays. And we do want to show you the closing bell, the Sibo in Chicago. And that ends the regular trading day for options there.

All right, Alta Beauty results are out. Earnings of $7.74 a share that easily topped the forecast of 686, also baiting on revenue and same-source sales, raising its full-year earnings guidance. But by less than the size this first quarter beat. The stock is higher after hours up about four and a half percent. Well, there's growing fear and backlash against AI over possible negative outcomes, but up next two beamets in their fields getting together to use AI for good. Microsoft and the Mayo Clinic, our teaming up, we'll talk to them about their efforts. You're watching closing bell overtime live from the NASDAQ market site. Some big moves in biotech to show you.

ABAVAC's down 40 percent, although it's drug to treat ulcerative colitis, met the goal of the trial. There were some safety concerns, which were scaring investors. Salkuities, breast cancer drug, did extend survival when combined with two other drugs, but the results were not quite as good as an earlier testing. And lastly, Praxis, its drug to reduce seizure frequency failed to meet the endpoint of the trial. Sticking with healthcare, AI, is already helping researchers develop drugs faster and helping doctors analyze patient data.

Now, Microsoft is partnering with a giant in the medical field, the Mayo Clinic, to try and advance diagnoses and treatments. Joining us now in an exclusive interview from Microsoft Build and San Francisco is Microsoft AI CEO Mustafa Suleiman, Mayo Clinic President and CEO, Dr. JNrico Ferrujia, along with our Kate Rune. Melissa, thank you so much. Gentlemen, it's great to see you both. Thank you for being here on a big day for Build. So you guys announced this joint partnership.

Mustafa, maybe we could start with you. And for our audience, you are sort of a household name in San Francisco in a You were a founder of Deep Mind and sort of a founding father of this technology. What is the importance of having a exclusive AI model for healthcare? Why does it matter? And tell us a bit about this partnership. I mean, healthcare is perhaps the most important application of AI. This is why we create AI models.

We want to do the best that we can in the world, make all humans healthier and happier and live longer. And so partnering with the Mayo is a lifetime dream for me personally. It means that we're going to have access to perhaps the most valuable, the most integrated, longitudinal patient data set in the world. And I think together we'll be able to build something really incredible. And Dr. Faruja, for you, I wonder how you measure success here. It's different than a lot of the Fortune 500 companies we talk to when they talk about financial metrics. The outcomes in healthcare are a bit different, but the criticism has been that the technology

investment hasn't paid off. What does it look like for you? And are you seeing the actual results, positive results and the outcomes you want? based on the spending that you've had to do? Sure. First of all, Mayo Clinic is a not-for-profit. We're driven by primary value, the needs of the patient come first. We provide outstanding care. We're rated as number one healthcare system in the world,

but we also know that most people will not have the opportunity to visit us. So for us, a big return would be if more people get access to Mayo Clinic. We have over the past seven years built our Mayo Clinic platform. We can reach about 100 million people. This working with a like-minded company like Microsoft that focuses on excellence allows us to reach much further. And we're already seeing in some other models we have deployed that we can see both an increase in our ability to create diagnostic efficiency,

but also to reduce the burden on our staff. And therefore that is a measurable outcome that we keep in mind, which is our patient outcomes actually better. And Lushapha, who do you anticipate using these models? Is it for consumers? Is it a medical question that somebody might ask about their kids, or is this really for doctors? I mean, the number one goal here is to put the patient first

and do whatever is necessary to improve patient outcomes. Sometimes that's going to mean going direct to the patient, which we will certainly do through our own co-pilot health experience, but also through the digital front door that Mayo have created. But of course, we also want to make the job of a physician easier, faster, give the more accurate information, more real-time information, improve the diagnostics that they can do too. So both sides are going to be just as important.

I think anecdotally, a lot of people probably already use chat GPT and others. Absolutely. For medical advice. I want to ask you, Mustafa, about that question of cost. And we've talked about tokens. And Uber, for example, today said that they were sort of cutting off Claude Code because it's getting so expensive. How are you balancing that at Microsoft when the cost of building on AI is so expensive? How do you manage it?

Well, I think the other way of seeing that is that usage has gone through the roof. And that's why, you know, the demand is what's causing a constraint on supply. We're actually very proud to be the largest buyer of NVIDIA GB 200s and 300s in the world. So we have an incredible capacity pool. And we know that when we do get product market fit inside of the Mayo Clinic and many of the other hospitals, demand is going to go through the roof again. And so we're really expecting a moment where this becomes the number one place that you get access to health information. Well, in addition to the healthcare model that you announced, you announce a suite of other AI models. I wonder about competing at the frontier lab level.

Is it worth the investment that you need to make to compete with Anthropic and Open AI at this point? Yeah, I mean, absolutely. Today we announced seven new frontier models on behalf of Microsoft AI, three of which are absolute state of the art. They're the best in the world. We have four more that are coming up super strong.

And so it's critical for a company of our size and scale that we can design pre-trained, post-trained models that are absolutely exactly what we need. You know, really prioritizing reasoning or thinking, which is the new modality of these models, but then also specializing them for healthcare, which we're very passionate about. Is it worth the investment, though?

I would think, at this point. I mean, this is just the tip of the iceberg. We have many, many more years of investment to come, and I think that what we're starting to see is the first glimmers of this new AI wave. By 2030, we're going to see these kinds of models in production absolutely everywhere. And so I think it's a fraction of the kind of investment that we're going to see in the future. And Dr. Faruja, it seems like healthcare is really the silver lining. I mean, you've written about this in books as well, we should say.

But when we talk about AI, there's a lot of doom and gloom. There's a lot of risk, but there's also a lot of opportunity. What do you think AI is capable of? And what is the best case scenario? I've been focal about saying I would not want to be treated for certain diseases without AI. That, indeed, AI plus humans, will result in better outcomes. And that's what I see happening. And that's what we're passionate about.

There's too much pain. There's too much suffering in the world. We now have, for the first time, an ability to singularly change that and make it available at scale. So for healthcare AI is a tool that done in a patient-centered way will give better outcomes. And we have to remember that unlike other sectors, you can never get too healthy. So it is extremely unlikely that there's going to be a market decrease in the need for healthcare workers in the future. And Mustafa, does that help change the conversation around AI? I mean, there's protests right outside the gates here.

It doesn't seem to be an overwhelmingly popular technology. There's a lot of worry about what it means for jobs. Is that a headwind for AI, an AI adoption of people just, there's a fear around it, people are thinking about job loss, how do you think the potential upside in healthcare maybe adds to that conversation? Yeah, I mean, look, I think there's a lot of understandable uncertainty, right? The technology is still in development. We haven't quite seen the full impact that it's going to have around the world.

And so naturally, people are anxious because we're not sure exactly how it's going to turn out. But what I do know is that if we make the right investments and partner in the right ways, we really can do the best we, you know, possibly could for doctors and nurses and clinicians around the world and give them access to the very best tools to do their jobs. This has got a question back in the studio. Dr. Fergiat's Melissa Lee back at the NASDAQ, and I'm wondering you're talking about AI plus humans, and that's a very powerful combination, and that you wouldn't need fewer health care workers.

But I'm wondering if you can sort of walk us through because it seems like you wouldn't need as many health care workers potentially. You wouldn't need as many doctors in a radiology department. For instance, if AI can go through a certain number of films, maybe don't need as many radiologists in the long run to look through. Can you explain how your thinking is? Yeah, so the fallacy, the argument is that if you solve today's problem, you've solved all problems. And that could work if you're building something. But in healthcare, you'll always need something else.

You will always need the ability to deal with something else to keep people healthier for longer. and there will always be the need for a human to help you do that. So I think there is a significant difference between the healthcare sector and other sectors. I will also say that we're facing a shortage of healthcare workers globally. And if we were to reduce the burden of providing healthcare, we'd encourage more to enter the sector and more people that experience joy giving care to others. And therefore, to me, it's a very different equation than in other places.

And Mustafa, the last quick question, there was an executive order on AI. How are you thinking about regulation? Are you supportive of any sort of oversight before some of these models are released? Yeah, I think it's very sensible. I mean, these are very uncertain technologies. They're clearly incredibly powerful.

And, you know, we welcome it. We're very happy to operate by the new guidance that's been issued by the Trump administration. And we think they're sensible first steps to have more oversight and control by the state. Terrific. Well, thank you both Mustafa Soleiman and Dr. Gianrico Faruja. We will send it back over to you guys in the studio.

Thanks so much. Kate, thank you very much. Yeah, pretty interesting case for it's going to create more efficiency, which is something that's been the holy grail in health care forever, which is that there's too many layers, too much friction, and yet it's going to be kind of additive to the effectiveness and not pull from jobs. Yeah, I mean, I think his point about the shortage of health care workers,

that is one factor that you really have to put into the equation here in terms of allowing people to do other things and to treat patients on a more one-to-one basis. If you sort of alleviate the burden of sort of the bureaucratic, the more sort of perfunctory functions of health care. I do wonder about the kind of everything has kind of legal and regulatory implications and how much we're going to have to stick to the old procedures for now. I mean, who has a malpractice insurance if AI is the one.

Exactly. There you go. All right, well, space stocks continuing to take off like rocket chips ahead of next week's SpaceX IPO. It is just one example of the momentum investors seem to be chasing. More on that coming up in overtime. Welcome back to overtime. Checkout shares of AST Space Mobile up almost 12% after falling nearly 7% yesterday and 14% on Friday. No particular catalyst for the bounce today, but the space stocks, they've seen wild moves

as we get closer to that SpaceX IPO. Similar pattern for Rocket Lab ended the day, higher today after a 14% drop on Monday. And Mike, you're taking a look at some of these aggressive flows into these areas. Yeah, the context is its own catalyst, right? Everybody's waiting for the same deal. And this really is a six-month picture of this activity, which is high beta. That's the most volatile stocks in the S&P 500, along with momentum. Those are the best performing.

I mean, they're the same chart, and they're up at a steep angle. That's better than 30 percent on a six-month frame. And here you have consistent dividend players. That's SDI. And then, of course, low volatility. The SPLB is, like, more than 25 percent utility stocks for all the talk that utilities could be an AI beneficiary. That's been asleep.

So it just sort of shows you where the risk appetites. are. And I think the thing to keep in mind is the risk of crowding. And so when you have a lot of crowding and the highest volume, highest volatility, highest performing and often most expensive stocks, that's when things can get brittle. Yeah. For momentum for some of these stocks, are they like, they're like quantum. They're like the gravity parts in the market that we were talking about. Yes. They really, well, I mean the overlap is semis in almost all of these. So for sure. And this is components of the S&P 500. So you're not going to catch the real kind of lower reaches of the more speculative stuff. So that's which might be.

We've seen only in the biggest, bigger cap stuff. Yeah, quantum is up huge today. Yeah. Time now for CNBC News Update with Julie Borson. Julia. Melissa, testifying in front of Congress for the first time since the start of the Iran war, Secretary of State Marco Rubio today told the Senate Foreign Relations Committee that the U.S. has not offered Iran any sanctions relief in exchange for the opening of the Strait of Hormuz

and said any sanctions relief would only be tied to Iran giving up its nuclear program. Meanwhile, Iran claimed responsibility today for, an attack on a ship owned by MSC, the world's largest container shipping company. The cargo ship was hit as it left in Iraqi port and video shows a gaping hole in the ship's hull. The company says all crew members are safe. Iran's Revolutionary Guards Court says it was in response to a recent U.S. strike on an Iranian vessel in the Gulf of Oman. And Jeff Bezos' blue origin said today that the damage caused by a spectacular launch pad explosion last week isn't as bad as first thought. And the company says it plans to resume New Glenn rocket launches by the end of the year.

There's no word yet on exactly what caused the explosion during the rocket test. Back over to you. Julia, thanks, Julia Borson. Shares of Google down nearly 4%. It's raising $80 billion. Cost the company nearly twice that in market cap. But Google and all of AI's big spenders hoping it will pay off in the long run, add to that spending to all the cash chasing private companies and soon to be IPOs. Will the money dry up eventually? That's next on closing bell overtime. Welcome back to closing bell overtime, live from the NASAC market site. Small gains, but good enough for record highs.

Record closes for Dow, S&P 500 and NASAC. S&P and NASAC now on nine session winning streaks. Turning to the after-hours action, Palo Alto, adding to its recent gains beating on earnings by five cents a share revenue of $3 billion, also better than expected. Shares a GitLab, also moving higher after hours after reporting better than expected EPS and revenue. The company is saying it will reduce its full-time workforce, by about 14% and exit 22 countries.

It expects to incur $30 to $35 million in pre-tax restructuring charges. That stock is higher as well. Well, Alphabet, ending the day with losses after saying it plans to raise $80 billion through stock sales to fund its AI build-out. The company has now raised more than $11 billion in new capital this year as Hyperscalers raised to keep up with each other. So what does this latest round tell us about the state of the capital markets? Joining us now is Senana Haldane. She is global head of private capital advisory at Raymond James. It's great to see you.

You too. So does this mean it's a seller's market in terms of, you know, all these private companies lining up to do tremendous offerings, as well as, you know, the public companies needing to do their own capital rates? Indeed, it is a two-speed market. Those that have balance sheet resilience, strong profitability, and a great story behind them, AI resilience as well, those are the ones that are able to get exited, whether it's in an M&A process, whether it's in a secondary continuation vehicle, or quite frankly, in the IPO market. It's the mediocre companies.

The bar is very high for them. They're finding that there aren't many takers, despite there being really strong corporate balance sheets out there. Part of that two-speed market in terms of, you know, like a hyperscaleor, for instance, I think that fits into that first bucket of good balance sheet, et cetera, can issue as much as it wants is the demand. And it shocked me how much private, high-net worth individuals are under-allocated. to private capital right now and how much they want to be allocated. Indeed. There's a lot of phoma out there in general, but certainly as private wealth builds out its entire asset class allocation, they found themselves under-allocated to private markets in general.

All right, lagging up 2, 3, 4-X, what they were five years ago, into private market opportunities. That's fed the boom in private capital, whether that's venture capital, growth capital, buyouts, private credit, and more. An investor who is under-allocated to private capital, what are they exactly are they missing out on? In other words, if people are concerned about the liquidity of certain private debt vehicles, if, as you say,

private equity has a lot of trapped assets, what specifically are the attributes of the private markets that you think should be accessed? Well, the reason the investors want to go there is because it's a relative valuation game. Think about entering the S&P these days at the top of the market here. Same thing with commodities like gold written up really high. So investors are saying, where can I get relative value creation?

And generally private equity's been a game of buy low, sell high, add some value along the way. Right now, buy out funds are still able to buy businesses somewhere in the low teens type of EBITDA multiples. Whereas you look at the, you know, the K-Shiller PE and the index in the 20s. There's a big arbitrage there. So there has to be an illiquidity premium that's paid for them to look at. lock their capital. That exists. Now, there is a logjam of companies that are stuck in private market portfolios from the 21-22 era. We haven't seen that clear yet, but there's a bet that investors is taking, especially retail investors, that it will clear over time. How about the appetite

for private credit? Has the fear around private credit abated at all with the return of software stocks in the public markets? It has a bit. You know what has mostly abated is the fear factor. For years, private credit was trading and there was entry and exit in private credit as if it was a zero risk asset class. And that's what's been re-rated here because of all the private credit noise that we've seen over the last six months or so. What we're seeing is that defaults are, there's no such asset class with zero risk and zero defaults. Now investors are saying, okay, private credit does have defaults somewhere in the single digits, 8%, 10%, some are saying 6%, but it's not zero. So that re-rating has occurred. I think the issue with private credit has been the way that's been struck.

into 40-act interval funds, BDCs, promising quarterly liquidity. That's where the rubbers met the road with miseducation and perhaps not full understanding with some investors as to what kind of paper they were buying. I mean, we've kind of surrounded this point, but is AI as a general theme essentially dominating all capital raising at this point? And does that therefore create some kind of neglected areas that would represent an opportunity? Well, I'll go straight to the neglected areas. There's been nothing hotter than industrial's business.

See what Caterpillars just today. Industrials is back and back in the boom because if you talk about AI defensible categories, there can be no better one than industrials. But other than industrials, if you're in tech, you're in services, then AI is the first question on investors' minds. You better have a great answer, and I mean a great answer, not a good answer. You better be on the front foot as taking that. Otherwise, you're probably not going to have the ability to have issuances.

For investors, though, individual investors in particular, Is there a fear on your part that maybe they're way over indexed to the AI build out through equities and then also on the private market side? Indeed. Now, private markets, it depends on where you play. If you play in early stage private markets, then yes, you probably hold too many of the big five, seven private companies in your portfolio, and you are worried about that AI overend this indexation. So those folks are now thinking about, I should have more pure play buyouts, perhaps industrial focus, health care's focus, buyout funds in my portfolio, private companies. credit underwriting that is not so software heavy with some of those that sort of shy away from putting more than 10 or 20 percent of their funds and software. So the answer is depends where in private markets they play. They play in the early stage.

They certainly are thinking about overexposure. All right. Cena, great to speak with you. Thank you. Coming up in overtime, one company tells its employees to stop spending so much on AI. We've got all the details. Plus, do not miss Sarah Eisen's exclusive interview with Israeli Prime Minister Benjamin Netanyahu That's live from Israel tomorrow, 10 a.m. Eastern Time.

Closing bell overtime is back right after this. A news alert to bring you the Wall Street Journal reporting that Kevin Warsh has named two conservative policy associates as advisors. The advisors include Paul Winfrey, former White House domestic policy specialist in Daniel Hyle, policy fellow at Stanford's Hoover Institution. What's notable here is that Paul Winfrey authored the chapter on the Federal Reserve in Project 2025, a policy blueprint spearheaded by the Heritage Foundation. foundation in it, Winfrey discussed overhauling the Fed and recommended eliminating the bank's

dual mandate to just focus on price stability alone. The policy paper also heavily endorsed the shrinking the Fed's asset portfolio and limiting its role as a lender of last resort in crisis situations. And I think that's interesting because it would more match up with what the ECB's mandate is, which is just price stability. It would, although an act of Congress 50 years ago said you also have to consider maximum employment. So obviously it would create the need for other changes, not just now. Could the committee or could the chair emphasize much more prices? What's sort of interesting about it here is

that what would that mean for rates right now? It wouldn't mean a hike. Exactly. Or at least keeping them where they are. And also, they're willing to grow the balance sheet again right now in certain ways. Well, anyway, a lot of dissonance. Exactly. Well, Bitcoin sliding again down 5.5% today. The crypto briefly dipping below 70,000 for the first time since April 8th, but it's not just Bitcoin. Ether and Solana also pacing for their worst, worst half to a year since 2022. Flows are telling a story, too. U.S. Spot Bitcoin ETS recently saw $733 million in net outflows in one session, led by BlackRock's I shares Bitcoin Trust at 527.8 million. Its second largest daily outflow since launch, still not everyone is bearish. Funds' trust Tom Lee remains

hot on Bitcoin describing the selling as a classic market bottom that always happens at the end of a crypto winter, saying on CNBC this week that the slump is triggered by rage quitting among investors, partly in reaction to Mark Cubans reported Bitcoin selling on the argument that the crypto had failed to act as a hedge against inflation and that gold was the better option. I think also worth noting is that there are so many other ways to play Bitcoin without being in Bitcoin at this point. Oh, for sure. And recently, the CFTC approved perpetual futures contracts on Kalshi. That's yet another way of participating in Bitcoin without investing in Bitcoin.

Sure. And without the price momentum, I mean, it's been dead money since October or so last fall. There is just not that much interest. And it became institutionalized. You had ETFs. All the initial flow kind of got into the market that way. And then, of course, we had the micro strategy. The strategy news where that company's average cost of Bitcoin is like in the mid-70,000.

Prices below that right now. they were a small net seller. And so what are we actually buying here at a time when there's so much excitement about other parts of the innovative economy? I mean, we're talking about HP up 19% today. So that's the kind of volatility these types of traders are looking for. Coming up, we'll get you ready for another busy day of earnings, including the six biggest company in the S&P. And the retail results continuing to roll in. We'll dig into Dollar General's report next on closing bell overtime, live from the NASAC market site. We'll be right back. The S&P 500 with another record high today as tech continues to be the driver,

but consumer concerns are popping up. Brandon Gomez diving into Dollar General's numbers for us. Brandon. Hey there, Melissa. Yeah, Dollar General delivering stronger than expected earnings, beating on profits, raising its full-year earnings outlook as shoppers look for value. Still, not enough to lift shares today. I really want to bring you what was said on the call and explain why shares were down.

CEO Todd Vosos highlighted the company's core lower-income customer remains under pressure, saying there's a lot of distress right now with persistent inflation and sustained higher gas prices above $4. At the same time, the company said it's seeing an accelerating trade in effect with higher-income shoppers increasingly turning to discount retailers, Vosos signaling out household earnings with more than $100,000 a year. So I reached out to Consumer Edge with their credit and debit card data to back that up. And if you focus in on the green and gray bars here, you see that for the last several quarters, that income group has been driving broader dollar store spending. Still, management did not raise sales outlook in deep warnings of more volatility ahead.

Definitely spooked investors today. As you can see, the shares were down. Melissa? You know, Brandon, I think it's close to 45% of households are $100,000 or more. So that would seem to widen out sort of the target customer base for a dollar general. On the other hand, maybe it doesn't help them pass along their prices when wholesale inflation is still. raging. Yeah, I mean, you also have to think about who, again, is their core consumer, right? And they're really filling the cost pressure. What you're talking about is a broader band of income consumers

that do turn to these discount retailers in times of economic uncertainty. Again, this trade-down behavior might be short-term, might be long-lasting. We've seen this behavior before. Yeah, we have. And, of course, Walmart's been telling that story for quite a long time. Brandon, thank you very much. Well, as use of AI by companies expand, so has the cost. The C-suite is starting to take notice of all that. Uber is just the latest company to set usage caps on some AI power tools used by employees, saying, will limit staff and its monthly token spending. The move is seen as a measure to cut costs with the company saying in April it had already maxed out its full-year AI budget. Goldman Sachs CEO David Solomon saying today that building and adopting won't go at the same pace as a result of these costs.

It's really hard to know how much of it is just, you know, experimentation, let's blitz. you know, the models and just see what they spit out. Yeah. I mean, token costs have come down, what, 60 to 70 percent or so since the beginning? Yeah. But the usage has gone up, you know, a magnitude much greater than that. I mean, to code something takes tens of thousands, not hundreds of thousands of tokens. Exactly.

And it's interesting because all the cloud providers and those investing in AI infrastructure say, as soon as we build it, the demand is there. Right. And so that gives them comfort to kind of raise. all this capital and throw it in the ground, the issue is the demand may just kind of be that kind of heedless, we don't care what it costs type of activity. Walmart, Amazon, Microsoft also implementing those limits. So it's really, it's becoming widespread. We'll see if this is a trend. I mean, at this point, maybe we're supply constrained enough that it's not going to hit.

We'll see. Yeah. Well, let's get you set up with tomorrow's trade today. We will be getting into more retail earnings from Macy's before the bell. The Bell. Then 5 Below, Petco and PVAH after the close after the bell. We'll also hear from Broadcom hit a new high today. Crowdstrike and C3 AI. And on the economic front, we will get ADP, S&P services, PMI, ISM factory, PMI and factory orders, and the beige book. And SpaceX is not the only space stocks going public. Applied aerospace and defense and defense tech companies will begin trading tomorrow. That company's targeting a valuation north of $3 billion, since great timing for that company. I was going to say, $3 billion is a tiny fraction of SpaceX.

On the other hand, have we ever, do we know what they do? Right, exactly. So, no, it's fascinating. Good ADP number tomorrow is a good setup for the jobs number. We got a little bit of an upside surprise on job openings today. So we'll see how that goes tomorrow. That does it for over time. Your favorite indicator, by the way.

It was pretty good. Fastening stars right after this.