Closing Bell - Closing Bell: Fed Minutes & Nvidia Earnings 2/21/24

Episode Date: February 21, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

All right. Thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with a countdown to the most important earnings report in months. NVIDIA in overtime. So much riding on that for tech, for the mega caps, for the AI trade. And we have our experts standing by from shareholders to the top analyst who covers that stock. We'll get to all of them in just a moment. Take a look at the scorecard with 60 minutes to go in regulation. Well, we've been red all day long. The Russell also sliding today, aside from the majors. Take a look there. The Russell 2000 down near 1%. Interest rates, well, they're elevated. That's one of the reasons why small caps continue to get hurt. And boy, do we have to show you shares of Palo Alto Networks. They

clearly, the stock story of the day, at least right now, ahead of NVIDIA. That massive decline following disappointing guidance. You just don't look at a decline like that. One hundred and five points, near 30 percent. And other cybernames, well, they are selling off in sympathy, too. Take a look almost across the board. CrowdStrike, Zscaler, Fortinet, they're all lower. It does take us to our talk of the tape.

What to expect when NVIDIA reports in less than an hour what it truly means for the record-setting rally. Let's ask our panel. Josh Brown has owned NVIDIA for years. He recently trimmed 20% of that position. Bryn Talkington owns it, too. Also a longtime shareholder. Stacey Raskin, he covers the company for Bernstein. $700 is his price target.

Overweight is his rating. It's good to have everybody with us. Josh, I'm starting with you because you've called this, quote, the whole ballgame for the most crowded trade on earth. Yeah. That pretty much says it all. Going in here. Yeah, no, I think that's right.

Look, this is the stock that, and it's not just a media phenomenon. Everywhere I go in New York, people that are involved in markets, whether they're analysts or they're traders or they're just investors and they have their own portfolio, like there's two things guys want to talk about. The first one is Sidney Sweeney, but the second one is NVIDIA. And there's really no third thing. We're not talking about the Fed. We're not talking about inflation.

This is the story. I think what happened today with Palo Alto was actually relevant to the discussion because I think it demonstrates the extent to which we have set the bar at such a high level. It's going to be really difficult, not just for NVIDIA, but even as we start getting into guidance season, it's going to be really difficult to keep people in these stocks in the size in which they've been playing them. Keep in mind, Palo Alto is losing a third of its market cap today, billions of dollars. Do you know what they actually said? They gave guidance of $8 billion for the full year. The previous estimate was $8.15 billion. The math on that is astonishing. And I think, again, it has nothing really to do with Palo Alto.

It's a signpost for all of us that are in high beta, high valuation tech to just understand this is not the same game it was a year ago. The expectations on Wall Street have caught up on the sell side, on the buy side. And now it's like, well, what are you going to tell me today? Because yesterday was really exciting, the day before was really exciting. What's left in your bag of tricks? NVIDIA is the type of company that does have a sizable bag of tricks. I just hope they have enough.

So, Stacey Raskin, on Josh's point, he set it up absolutely perfectly. That's what I do, Scott. How high is the bar? The bar is high. I mean, let's be honest. The bar has been high like every quarter. It's not a new thing. I do think NVIDIA is in kind of a unique position in the sense that I don't think that there's any question that numbers today are going up. I don't think that they're going to be missing at least the sell-side consensus. Demand is still very, very strong.

We know it seems like supply is starting to get better. That's one of the questions is, does demand get worse as supply gets better? And it seems to be going the other way. Demand is getting better. Supply is getting better. We've got a catalyst coming in March. They've got their GTC event in about a month. Presumably, they're going to sound incredibly bullish there. We've got new product cycles that are coming through the rest of the year. This is a company that I think still does have the goods. I know expectations have been high. I think it's going to be OK.

I think it's one where you still need to be there if you're going to be playing this thing. How much of what you just said is already in the stock price, which is ominously sitting at 666 point whatever? I couldn't help but notice that, Stacy. Well, you know, you look at the last few earnings reports, right? And look, they've had great numbers and the stock has tended to sell off a bit and kind of consolidate and then take another leg higher.

Now the stock's actually sold off a bit over the last couple of days into the print. Maybe that's actually a good thing. Maybe it's kind of healthy if there's some profit taking like in front of it. You can kind of reduce the expectations a little bit. So I'd say there's less price into the stock today versus, say, a week ago when it was in the mid-700s. And I keep saying this. I've said it on your program more than once.

NVIDIA is still not expensive. It's actually still the cheapest of all of the AI stocks. It's way cheaper than expensive. It's actually still the cheapest of all of the AI stocks. It's way cheaper than AMD. It's cheaper than Marvell. It's even cheaper than Intel at this point, right? So I still think there is room for expectations to continue to go up. I think so. All right, Bryn.

I'm sorry, Stace. Bryn, how nervous are you? Not nervous at all. I mean, I agree with Stacey that they're going to deliver the goods. I think what's interesting the last two days, the stock price has been very weak, but actually in the option markets, it's just the opposite. And there's a lot of speculation, obviously, going on in the option market, but very bullish. So today, the most active NVIDIA contract is this Friday's $1,300 strike price at $0.21. And there's been 36,000 contracts traded.

So to me, that's like retail speculation. And so you do see a ton of call buying, which is like juxtaposed to the stock price. But I think that, don't forget, they're going to have a China-compliant chip this year. Their margins, I think on the GPUs, Stacey can correct me, are like close to 80. Their gross margins in general in the mid to high 70s. I mean, this company's operating on all cylinders. I think, you know, Josh's point, which is very good on Palo Alto, I think investors need to understand the algos are alive and kicking. And if you have a company, if you come out and just slightly beat, but you guide down, the market's going to cut your knees off right there. And so I think that

the original print will come out and we'll get a reaction. The option market's saying 10 to 11%. But to me, it's all going to be about the earnings call and what Jensen and team talk about guidance and where they're seeing the trajectory. But they have so much product. And to me, they're still in pole position. It's like, you know, Josh, in some respects, you wonder what more does Jensen Wang, the CEO, need to do? Does he need to, you know, parachute in from outer space, do a cartwheel as he lands, say something fabulous on the call?

I mean, he's made the bar so incredibly high. At some point, you have to wonder whether he can live up to the own hype that he has created for this company. Well, let's start with this. How about next quarter? So twenty two billion dollars earnings per share of five dollars and two cents. That would represent two hundred and eight percent revenue growth and three hundred and sixty one percent earnings growth. And again, that's next quarter. So what's the guidance? Can we hit those numbers? Can we exceed those numbers? So that's one thing that Jensen can and maybe will do. My question for Stacey, can you hear me? Okay. You have a $700 target. The stock is fairly

close to that. You've been at 700 for a while. It sounds to me like you're more bullish on the company than on the stock price in the short term what would it take for you to upgrade nvidia into year end take your target to 770 800 like what are you looking for to pull the trigger because i'm looking in your eyes and i know you want to so look we've talked about this on this program as well don't read too much into like target prices like like target prices. Target prices don't get updated every hour of every day. The target price is a function of two things.

It's the multiple and the earnings. And as those things evolve, then the target price will evolve. Stacey, what about competition? Look, Josh was in AMD, and the stock was up like 80% percent in three months and they want to be competitors to NVIDIA. And there are others who want to be competitors to NVIDIA and their stocks have gone up a lot, too. How do you see the competitive landscape challenging what NVIDIA already has and what it still hopes to do? Yeah. So look, NVIDIA is still the 800 pound gorilla here.. And, like, you can look at some of the numbers for AMD. And I'm not knocking AMD.

Like, they've got a narrative there. People have been willing to buy that narrative. They're talking $3.5 billion in AI sales this year. And maybe it'll be more. Maybe they're being conservative. Maybe it's four or five or even six, right? I mean, I can't even remember where the sell side is on NVIDIA, but it's probably $80 billion, like, for data center or more. We'll see where it goes tonight.

But in that context, like AMD, whatever they do, even though it can be meaningful for AMD, it's a rounding error in the context of the size of the industry and in the context of what NVIDIA is likely to be delivering. I think that gives you some feeling for the competitive environment as it stands today, right? You always need second sources and people will be interested in that, but the bulk, the vast majority of the dollars

are going one way. On the idea that, you know, as Wolf Research put out today, this I'm quoting from their notes, Stace, momentum is deteriorating in semis following a sustained overbought environment. Let's just say that NVIDIA better deliver. I mean, does the broader chips trade hinge on what happens in less than one hour? It may. Right. I mean, for at least for parts of the chip trade that we've had other companies that have reported like like analog devices reported this morning. And like those kind of markets, like industrial and auto

are maybe a little separated from some of this. And they don't look good, like from, you know, the guide was very weak. And that stock is up though today. Like the semiconductor investors in those spaces have been buying cuts. But I'd say for some of like the high flyers in the compute space

and maybe even outside of semis, like, you know, some of the other peripheral names that are getting driven by this and some of the other more momentum names. Yeah, I mean, clearly, like it will have an impact when we're the other on those. I'm sure it will. Brent, is that how you're thinking about this, too? You're not just looking at NVIDIA.

We don't even need to get into the ramifications for the mega cap trade in and of itself. I'm just thinking of semis, which, you know, I'm looking at the Philadelphia Semiconductor Index is up 51 percent over 12 months. I mean, a lot of these stocks have been up a lot in a reasonably short period of time. It's been a rising tide. NVIDIA lifting a lot of boats, everyone else. I think that this quarter, NVIDIA will continue to separate itself from not only the rest of the semiconductors, but also, I mean, the hyperscaler and the cloud service providers are spending billions of capex, of which NVIDIA is capturing the majority of it. And so I think that we're in such early innings here. If you go back and look at the cloud service providers in 2012, cloud was a tiny part of Microsoft's revenues back then,

but it actually was able to monetize that, and now it's the majority. And right now, I think the challenge for investors is NVIDIA is, like, capturing all market share from a revenue perspective today. And I think there's a ton of speculation in a lot of these names that people are, like, betting on the come, betting on the future. And I think that's where you're going to see a lot of the air come out of the tire as NVIDIA actually delivers the goods, but the other companies really aren't. So I still think there's a ton of FOMO, a ton of speculation in other names outside of NVIDIA. Down 10 percent or so, Josh, in a couple of days, this stock to the points that have been made about, you know, maybe it's a good thing in some respects that the stock has been under a little bit of pressure going into the number rather than ramping even further ahead

of the results. How do you view that? I like that setup better. I don't love going into earnings at a max six-month return, like of all time, and trading at an all-time record high. It really doesn't leave any room whatsoever for people to act rationally in almost any outcome. So I do agree having the stock cool off a little bit, not just in terms of price, but looking at relative strength. You don't want your companies reporting earnings at an 83 RSI. To Bryn's point, and I think it's an important one, one of the parlor games we tend to play on Wall Street in the presence of a massive winner, like an NVIDIA or even a second name like an AMD is who's next? Or what's the 2025 NVIDIA?

How can I get ahead of that? And it almost never works. Like it might be good for a trade, but NVIDIA is NVIDIA. And I think Stacey would probably agree with that statement. There are other great semi names. Broadcom is a good example. They actually grew earnings over the last three years at a faster CAGR than NVIDIA. The only one, 73%.

But like that's a very specific situation. I don't think what we want to do here is look at NVIDIA and then buy 10 more chip names and expect something similar. It's very unlikely. Even AMD, I think they've made the case that their new chips are going to be maybe better at training than NVIDIA's, but then NVIDIA will own inferencing. I've heard all of these things. I don't believe that that's the reality on the ground. I think they're just theories that investors are using to justify higher and higher multiples.

I'd love to hear Stacey's take on that, though, because I think it could probably save people a lot of heartache and aggravation. Stacey? I'm sorry. What was the question in terms of where the multiples are going? Do you believe the story that AMD's got this specialization going in training and maybe in video? What AMD said actually is not training. They said that they think they're better in inference. They've been pointing to latency. Training, they said they're charity. If you look at some of the things

they always cherry pick. Everybody does. I'm not knocking AMD. People cherry-pick these benchmarks. I think that the best thing to do is to look at, like I said earlier, where are the dollars going? How many dollars are going where? That tells you what people want to spend money on. The vast majority of the dollars are going to NVIDIA. It doesn't mean that you don't need a second source. And again, AMD is capturing some of that.

And they have, to their credit, they've got a reasonably credible roadmap with reasonably credible products on it. And they've got some other players in the space where you don't even have that. And so AMD does have that. But again, the bulk of the dollars right now are going in one direction. How do you feel, Stacey, about the current multiple of NVIDIA, which is a topic of broad conversation, obviously? It's cheap. It's low 30s uh if you believe the consensus numbers and by the way those numbers probably go up tonight presumably right um like i said it's it's the cheapest of

all i'm amd if you look at like sort of the the general kind of ai semi-names that are thrown out there. AMD is the most expensive. Marvell is up there. Intel is even right now more expensive than NVIDIA is. Broadcom is a little cheaper. I like Broadcom too. It's got its own story around some of the stuff. But I don't think the multiple is egregious at all. Everybody talks about NVIDIA as like it's expensive.

They tend to look trailing. You have to look forward, like not backwards. And on a forward basis, the stock is way cheaper than it's been in a long time. It's an 88 trailing multiple, but it's 25 on the next four quarters. The problem, though, Bryn, is people who look at the multiple, they just have a problem with the fact that the stock has gone up so much. They have a problem with the price. And the way that the price has gone up almost unabated is just startling to some who maybe can get around the multiple but say, oh, my gosh, the stock just,

there was that period of time where it just seemingly went up almost every day. I know, but like I've said this so many times, first of all, PE is a horrible metric to use over like one year period, because once again, it just tells you nothing really. But I think what people are missing is the E has gone up just, actually the E has gone up more than the P because the stock has gotten cheaper over the last year.

And so I think that this has all been so just like unique that I really haven't seen a stock in a long time that has had this type of return in one year, really two years. But the E has actually gone up commensurate with that. Usually you get the P is much more ahead of the E. This has not been that case. And so I think the price is just just ignore the price and just look at the overall scenario. And this is like one of those interesting names that is growing just gangbusters and continues at 30 forward P.E., which is, you know, what Bloomberg shows right now. That is not expensive even remotely for the type of growth and moat that they have currently. Let's let's just say, Josh, there's an upset. They, you know, doesn't have to be a Palo Alto-like upset,

but what kind of floor do you think is under this name? Given everything that Stacey said and the way you feel and Bryn feels about the stock, the thought that any upset here in the stock price, dip buyers are going to come right in in a hurry. That's what I think. And I'm not saying people should jump into earnings ahead of time based on this. But I would be surprised if they have a great quarter. I would not be surprised if they have a great quarter. There's some sort of knee jerk lower because some or other algorithm picks up on something that maybe wasn't as good as what they had programmed into their own expectations.

And then that were to trigger some sort of narrative that something's wrong. And then by midday tomorrow, we're talking about the stock going green after opening at a gap down. Like I could totally envision that scenario happening. And that actually fits really well with the history of NVIDIA. And I went through this yesterday on the air with you, Judge, but let's all keep in mind, I know that there's a very big move being priced in by the options market right now. But truthfully, the last two reports, one day was negative 2 percent. The other day was plus three, which means a lot of the betting activity is taking place in advance of the print, not just on the heels of the print. And so it's not in the stars that we're destined to see this massive rally or sell off. You might not get that.

How would you, Stacey, view the potential floor into the stock, dip buyers and how you judge the overall price action in how this may trade post earnings? Yeah, I mean, I always joke sometimes like you could probably hand me the earnings report right now. I'm not sure I could tell you what the stock would do like, you know, posts in the aftermarket. It's one of those. It tends to move on, how did they sound? How bullish were they? Did they give us any incremental color going forward rather than the numbers themselves? Because the numbers should be fine. In terms of talking about a floor on the stock,

it kind of depends. If it goes down, it sort of depends on why, right? Because then you start to wonder, what is the narrative? Is there something that breaks the narrative or is there not? If there's nothing that breaks the narrative, I don't think it's probably, like I said, if it's 30 times earnings now, the trough multiple for the stock when things are good is not that much lower than that. If the narrative breaks, then, yeah, you have a big problem. But I don't think we're anywhere near something like that at this point. Stacey, you said, quote, at this point, China is out of the model.

Anything from China is upside. Is that an example of something that they could say where they're reengaged and they're back in the Chinese market and they have resolved some of the issues? Do you see that as like a meaningful example where people could get shocked and say, oh, wait, look, China's back? Or do you think it's not that big of a deal? I think it depends. So China is out of the numbers right now in the sense that they can't ship anything yet. They have new products that they're developing for the China market. I think it's an open question how many of them they will sell. The problem is that they were forced, due to the sanctions, to very much

haircut the performance of those products. There are local products in China that, at least on paper, have better performance because they're not constrained by those same kinds of thresholds. At the same time, you have software compatibility and everything else with the NVIDIA parts that may make it easier. So you get some uptake, but I don't know how much we will get. However, there's nothing in there now. It's like whatever they get would be upside. And I'd love it if they could sort of, at someone's size for us, you know, how much is China? China used to be 20% give or take of their data center revenues. Like what is it now? Or like, where do they expect that to be like at the end of the year? Like, that might be something

that they could shape for us, potentially. Two quick things. One from Josh, one from Bryn. The mega cap trade. We've talked about the chips, what's riding on it. How should investors in these stocks feel going into this number?

Perilous position? Okay. What do you think? Well, I think the big thing is that all of the other mega caps have already reported, and the street has largely liked what they heard. I know Microsoft and Alphabet didn't get the warmest reception on the heels of their reports, but they they've since gained back most most of that loss. Amazon is now a Dow component. Hallelujah. So they they seem to like almost kind of not be reliant on NVIDIA from a sentiment perspective. However, you do have a lot of overlap in terms of the story that we're telling about all these companies.

The growth is going to come from AI, and they all need to buy and sell from each other. So there is that interrelatedness, and I don't think that that will be completely ignored if there's a huge reaction in NVIDIA in either direction. Bryn, lastly to you, same question but quick please apple looks weak on the chart microsoft starting to look weak as well meta looks good so i think you're continuing to see dispersion and you will continue to see dispersion within these names all right guys i appreciate it uh very very much stacy thank you uh you're gonna be busy. And these folks are going to be, I don't know, it's going to be a little nerve-wracking when these numbers hit. And as I said, 40 minutes or so. Stacey Raskin, Bryn Talkington, Josh Brown, of course.

Thanks so much for being here with me here. Let's send it to Kate Rooney now for a look at the biggest names moving into the close. Kate? Hey there, Scott. Yeah, let's start with Teladoc out with disappointing quarterly results and some mixed guidance. The online health care company posted a smaller than expected loss, but revenue missed. Its better help segment, which includes virtual therapy, was flat. And then yearly revenue guidance was disappointing as well. And then a gloomy outlook over at SolarEdge is hitting shares. As KeyBank analysts put it, the solar company's results and commentary, quote,

call for a longer road to recovery than peers have discussed. Stocks down about 70 percent over the past year as demand for solar panels gets hit by higher rates. There's also been a shakeup to California's rooftop solar incentives and a drop in European demand. Scott, back over to you. All right, Kate, appreciate that. Kate Rooney, we're just getting started here. Up next, former Dallas Fed President Robert Kaplan is with us. We'll get his first reaction to today's Fed Minutes. Bond auction, too, was pretty sloppy. We'll get his first reaction to today's Fed Minutes. Bond auction, too, was pretty sloppy. We'll find out whether he thinks the recent hot inflation reports have shaken up the Fed's rate cut calculus.

We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. We're right across the board today, headed for their third straight decline for stocks. Yields are higher and took another leg up after a pretty sloppy bond auction midday. The Fed also releasing the minutes from its latest meeting about an hour ago. Our senior economics reporter, Steve Leisman, joining us now with the juicy details. And they were pretty juicy, Steve. Yeah, juicy and hawkish, if we can mix a couple of metaphors.

Those minutes show most officials were concerned, Scott, about inflation turning hotter and concerned about cutting rates too quickly. Even before the January upside inflation surprise that the government reported a couple of weeks later. The minutes emphasized the risk of cutting rates too quickly, showed concerns about inflation progress potentially stalling, said there was upside inflation risk in stronger demand and loosening financial conditions, and in geopolitical risks that could undo the progress from the supply chains normalizing. Only a handful of committee members shaked out what you could even call dovish positions that showed greater concern for an economic downturn, but none appeared to argue for near-term rate cuts. The chance of that May rate cut now trading at the lowest probability

of the year, just 32 percent, with more confident bets now on rate cuts centered on June and July. Officials said it would be appropriate, this was the one dovish part of this whole thing, to begin discussion of slowing and ending the balance sheet reduction at the next meeting. That's the one coming up in March. But a few said, you know what, this balance sheet runoff may continue for some time even after the Fed begins cutting interest rates. If the Fed was this hawkish before the poor January inflation data. There seems little doubt that their positions have hardened since. They all note, many of them note, considerable inflation progress, but it doesn't look like it's motivated them, Scott, to take any policy action in response to that progress.

Yeah, because they feel like they have some insurance policy in their back pocket called a strong economy. Steve, I appreciate that very much. That's Steve Leisman, our senior economics reporter. For more reaction, let's bring in Robert Kaplan. He's the former Dallas Federal Reserve president. Robert, it's good to have you on our program. Thank you for being here. Good to see you, Scott. Steve perfectly summed it up. So some were concerned that inflation progress

could stall. Do you share those concerns? Yes, I do. I think if I were sitting at the Fed, I'd want to see more evidence that this inflation improvement is going to continue. And the reason that I'd be very cautious is substantial amount of fiscal spending. Inflation Reduction Act spending, Infrastructure Act, unspent ARPA money. I think while monetary policy is very restrictive, fiscal policy is very stimulative. And so I would be on guard about that if I were at the Fed. How much more evidence is warranted before they actually make that first move to cut rates. They've already suggested that they're going to cut before inflation gets down to target anyway. What's the magic evidence or

the magic number that allows Jay Powell to do that? They're expecting continued disinflation on goods, even with the supply chain issues in the Middle East, the sector I'd be watching, and I'm sure they're watching, is the service sector, where inflation's been sticky. I don't think you need to see a lot of improvement, but you need to see the numbers heading in the right direction. And I think the fear would be you could even see a backup in inflation here in the near term. And so I don't think you need to see a lot of improvement. You just need to see the numbers not going backwards. I feel like they almost have a conundrum on their hands.

And part of what they suggest in the minutes today. Some saw inflation risks in strong demand. The premise there being, well, if the economy remains now this strong, much stronger than we expected it to be at this point, then that could cause even higher demand, which could cause inflation to go either back up or just remain sticky. But yet inflation is clearly coming down towards target. It's a real delicate needle thread. It is. And so getting down to the low threes was always going to be, I think, very doable. The issue is how do you get from the low threes down into the twos? And the issue for the Fed is what they don't want to do is start lowering rates and then have negative reports where they have to stop or even go backwards. But the reality is there's likely to be room to cut.

But I think it's dicier when you have this size of fiscal stimulus. I don't think it's being talked about nearly enough, the amount of fiscal stimulus being pumped into the economy in these major projects around the country, which are the type of stimulus you typically do post-recession, not pre-recession. And I think that's what they're dealing with. Well, in part because of that, you don't think we's what they're dealing with. But in part because of that you don't think we're

going to have a recession I know that soft landing think seems to be the. The prevailing thought for many at this point you share that. I do as long as you remember we're running deficits last year's deficit was over 7% of GDP. That

that's the kind of deficit you might see in a recession. And even in past recessions, the deficits haven't been that high. It's historically very unusual to run a deficit that high when you've got full employment. And so, yes, I don't think you're going to see a recession. The issue is how much longer can we keep leveraging up at the fiscal level? Debt to GDP is over 100 percent. And so the issue is this soft landing isn't free. It comes in the cost of interest expense in the federal government heading toward a trillion dollars, not this year, but next year. And I think that could turn out to be a bigger problem for us to deal with.

But that's a longer road problem, obviously. Nothing in the near term is going to deal with the deficit in any way. You see, you know, bond auction today is a good example of what is needed to be done to fund this ever increasing deficit. The Fed is obviously going to cut interest rates most likely several times, irrespective of the deficit issues that you suggest. So I'm trying to figure out how that colors the current picture for what the Fed thinks about doing in the next, you know, I don't know, six to eight months. The fiscal spending makes it more likely that service sector inflation is going to be sticky. We have a very strong job market. These projects increase demand for workers. And so it makes it less clear when they can cut. The one positive for the Fed is, remember, they have a dual mandate,

full employment and price stability. They can be confident that their full employment mandate is being met. That gives them the luxury of time to wait to lower rates. And I think they're going to take advantage of that luxury. So I think most would admit, I think Chair Powell has already, that they waited too long to begin hiking rates in the first place. Right. What is the risk at this point that they waited too long to begin hiking rates in the first place. Right. What is the risk at this point that they wait too long to cut? And do you share those risks? You've got to be worried a little bit about the banking sector.

I think the real estate sector is obviously an area to watch. Anything interest rate sensitive is weak. I think I'd be worrying that the organic strength of the economy is actually weaker than it appears. And it's being artificially improved by fiscal spending. And so this is why if I were at the Fed, I'd want to wait longer. But once I saw sustained improvement by, say, June or July, I would like to be able to cut the Fed funds rate two or three times. And my guess is their estimate back in December of three cuts this year, that's still not a bad estimate. But they need to wait longer before they can begin on that. OK, so maybe this summer, but you still think we'll get cuts. I get your point.

Yep. Mr. Kaplan, appreciate it very much. Thank you for being here. Thanks, Scott. That's the former Dallas Fed President Robert Kaplan. Up next, we're tracking the biggest movers as we head into the close. Kate Rooney is standing by for us today. Hi, Kate.

Hey there, Scott. So one stock has seen its best performance in more than four years, thanks to a boom in its fitness division and then the end of an era for a pharmacy chain getting booted from the Dow. We're going to tell you who that is coming up next. We're about 20 from the closing bell. Let's get back to Kate Rooney now for a look at the key stocks she's watching. Hi, Kate. Hey, Scott. So Garmin shares are on pace for their largest percentage increase in more than four years. The device maker beat estimates and unveiled a dividend increase and share buyback plan.

Fitness was the top performer among the company's five product categories, with sales there rising 22%. And then Walgreens shares getting hit after being replaced by Amazon in the blue-chip Dow Jones industrial average. Walgreens had been the Dow's worst performer this year. The switch-up was prompted by Walgreens' decision to split its shares. It had also cut its dividend in half this year as it looks to conserve cash. Scott, back over to you. All right, Kate, appreciate that. Also on the move today, natural gas and Chesapeake Energy both getting a big bounce today.

Pippa Stevens is here to explain why. What's going on here, Pippa? Well, Scott, nat gas is popping 11 percent after Chesapeake said it would cut production. This market has been hammered by oversupply, and they're the first ones to really talk about lowering output. Nitin Kumar from Mizzouho told me the key here and what's different from other companies is Chesapeake is going to drill and frack wells, but not complete them until there's a demand signal. So in other words, they won't be turned on until prices rise. So without new wells, base decline is going to take over, and so production could be 30% lower by the fourth quarter, based on Mizuho estimates.

Despite today's pop, NatGas still down 30% in a month. Scott? All right, Pippa, appreciate that. Pippa Stevens coming up, getting in the game. Apple announcing a new app that has sports fans cheering today. But will the company's latest push into sports content be enough to move the needle downfield? Does the needle go downfield? Maybe this one does. Closing bell's coming right back.

All right, welcome back. Apple's releasing a new iPhone app for tracking sports scores. Julia Borson has those details for us. Hi, Julia. Hey, Scott. Well, Apple's new free sports app for the iPhone is designed to track sports scores. It launches today, and this is Apple's latest move to elevate its role as a go-to for sports content and sports news. Now, users in the U.S., Canada, and the U.K. can starting today download the app, which is called Apple Sports. It's not preloaded on phones. And with this app, you can access scores from all the major teams and leagues. Apple Services Chief Eddie Q saying that the app is designed to

be fast and simple for users to be able to check back frequently rather than trying to engage them for long sessions every time they open up the app. Now, Q saying that Apple Sports has an advantage of not being biased by the fact that they would represent a team or a league. So saying that they're sort of more agnostic here. Now, they also say it will show betting odds, which users can turn off, but it will not allow users to bet through this app. This builds on Apple's investments in sports rights, about rights to Major League Baseball and Major League Soccer. And it added sports journalism to its news app. And it does feature sports related documentaries on Apple TV Plus. So now Apple's expected to make a bid for NBA streaming games. When those rights come up for grabs, the negotiation should start in just a couple of months.

Scott? All right, Julia, big news. Thank you, Julia Boorstin. Still ahead, the toughest test yet for the AI trade, when NVIDIA reports earnings in overtime in a little more than 15 minutes. We'll talk about what's at stake, the key numbers you need to watch. We'll do it next. But first, a quick message as CNBC celebrates Black Heritage. We often talk in our community about keeping it real. I, for one, want magic. You see, magic is what Black history is all about. It's about celebrating people who achieved magical feats.

Our ancestors did not focus on their reality. Instead, they dared to dream and then acted on those dreams. During this Black History Month, our community, particularly our young people, should commit to making magic. All right, coming up, another critical day of earnings after the bell. NVIDIA results hitting the tape in just about 30 minutes or less. We'll bring you the final setup ahead of that print when we take you inside the Market Zone next. All right, we're in the closing bell Market Zone. Christina Partsenevalos on the earnings report.

Everybody's waiting for NVIDIA out in overtime. Phil LeBeau on EV maker Rivian also reporting in the next hour. Plus, Bob Pizzani sitting next to me to break down the crucial moments of the trading day as we do head into the close. Christina, we will start with you because all eyes are on NVIDIA. Yeah, all eyes on NVIDIA and the actual high earnings bar that NVIDIA has set. What we do know from this earnings report, and hopefully we can keep going with the elements and the prompter in here, but what we do know is that shares have dropped about 2% today and has also fallen just yesterday too after some profit taking. So these are two blowout quarters that we just saw. And expectations are especially high, especially yesterday after Google said

that their new AI model will use less compute. So when you're using less compute, that implies less chips from Nvidia. The biggest takeaway though for Nvidia's earnings, Scott, is demand sustainability beyond this year. So it reassures investors to hold NVIDIA for the long run. There are concerns that GPU lead times are coming down because supply is improving. And that means demand gets filled sooner than expected and leads to a

possible slowdown. So again, that points to GPU demand sustainability beyond 2025, a big issue. We'll also want details on the launch of their next AI chip. And lastly, details on chips for China, given export restrictions. China contributes roughly, what, 20% of data center revenue. So they need to maintain steady demand from that country and that region. The street is expecting revenues of $20.6 billion, with the buy side whisper, you can see on your screen, much higher at $23 billion. Expectations for the following quarter guidance is actually $25 billion. So you can understand

how high this bar is. And it's really just led by data center revenue. For this upcoming quarter, we're expecting 20% quarter over quarter growth. So can we hit that? Options market is implying an 11% move in Nvidia shares. Outsized impact will be felt on the NASDAQ as we saw today. Any stock downside, though, I'm going to say, could be short-lived since NVIDIA has its next big AI event March 18th. And shares tend to move higher after that event. All right. We'll see in just a bit in overtime. By the way, NVIDIA shares are off their lowest levels. So we'll keep watching that stock.

Phil LeBeau on the other earnings report that we're watching, Rivian. Scott, we'll make this much quicker. Look, when it comes to Rivian, just a few key numbers that people are going to be focused on. The fourth quarter, what happened in terms of cash burn? We know the market for EVs is softening up a little bit. And then there's the 2024 guidance. And what's crucial here is the number that they are forecasting, either in terms of production or in terms of guidance. I can tell you that the street is expecting 66,000 vehicles to be delivered this year.

They delivered 51,000 last year, produced a little over 57,000. So those are the key numbers to look at. And on the analyst call coming up later on this afternoon, liquidity will be in focus. By the way, Scott, don't forget, must-see interview tomorrow morning on Squawk Box. Rivian founder and CEO RJ Scaringe. We'll be talking with him not only about the Q4 results, but more importantly, where they are heading into 2024 as they have a lot of big things coming up here preparing for R2 production over the next couple of years. All right, Phil, we look forward to that. Thank you very much.

Phil LeBeau covering Rivian. Bob Pisani joining me now. S&P has gone positive. The Dow has gone positive. All S&P sectors are positive except for tech, which is modestly negative. NVIDIA is lower. Microsoft is lower. Meta is lower.

But Amazon, Tesla, Alphabet, Apple has now turned green too. It's broad. Microsoft's lower. Meta's lower. But Amazon, Tesla, Alphabet, Apple has now turned green, too. It's broad. And a health care rally, too. It's a fairly broad rally. But tech is just below break-even here. I just want to show you, people like to believe stocks trade on individual merits. But this is very momentum-driven. Look what Palo Alto Networks has been doing to the cybersecurity sector today. I mean, the big names here are Zscaler, CrowdStrike, and Palo Alto Networks. They are 25% of most of these big cybersecurity ETFs. When they're down like this, it just takes out the entire sector. Cloudflare as well.

Take a look at BUG, B-U-G. This is a big cybersecurity. There's a bunch of these that are out there. But it's been down recently. Look, it's down 7% today. Because that's because it's 25% Palo Alto, Zscaler, and CrowdStrike. When they're down, they fall apart. Palo Alto is not bouncing at all.

In some of these stocks that have bounced and turned into the green, Palo Alto is down almost $105. More than 28%. So let's ask you. What's hinging on NVIDIA? Well, what's hitting on NVIDIA is whether or not they can continue to show that they're going to be trading for roughly what they're trading for now, which is 30 times forward estimates. So take a look. I just want to put up the VanEck Semiconductor ETF, SMH.

You want to see how big these stocks have become. NVIDIA, this is the biggest ETF semiconductor. This is the one everybody talks about. SMH. You want to see how big these stocks have become. NVIDIA, this is the biggest ETF semiconductor. This is the one everybody talks about. SMH. NVIDIA is 25% of this right now. So as NVIDIA goes, so goes this. NVIDIA's been down the last two days, and so has the VanEck semiconductor ETF. And look today, Taiwan Semi, Broadcom, AMD, these are the biggest stocks there. They're all down. So as long as they can continue to show that their earnings are going to grow commensurately with their stock prices, that's going to matter. 30 times forward right now is what we're looking at for NVIDIA. Bob Fasani, thank you very much.

Oh, man. It is almost game on for NVIDIA. I'll see you tomorrow. Can't wait to see what happens in a few minutes in overtime with Morgan and John.