Closing Bell - Closing Bell: Has the Tech rebound Run its Course? 6/7/23

Episode Date: June 7, 2023

Can tech’s incredible run last? Marko Kolanovic from JP Morgan gives his take. Plus, star venture capitalist Rick Heitzmann weighs in on AI and how it could impact the future of the workforce. And, Sofi CEO Anthony Noto breaks down how the student loan payment restart and how it could impact the company’s bottom line.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9, right here at the New York Stock Exchange. This make or break hour begins with another new high for NASDAQ. Yes, it's turned negative now, but it did open strong. It's on track for its longest weekly winning streak in four years. Now questions over whether it's too stretched and if the hype and hope over AI has pushed some of those stocks to the limit. We'll ask our special guest today, Marko Kalanovic of JP Morgan. He's with us in just a moment. In the meantime, your scorecard with 60 minutes to go

in regulation looks pretty good for the Dow. It's good for near triple digits, one-third of 1%. S&P's a modest loser. NASDAQ, obviously a winner of late, as I said, is a loser by near 1%. Tech, well, it tried to jump today. And there's the Russell 2000.

Another good day for small caps up 2%. Leads us to our talk of the tape, though. The incredible run for Tech, whether it can last. Let's ask Marko Kalanovic. He does join us now. He's grown more positive himself on Tech. It's good to have you back. You call the rally in Tech, quote-unquote, exceptional.

I guess my question to you at this point, is it too exceptional? Thank you, Scott. So I do think it's too exceptional. You know, it's been sort of the breadth of that rally has been pretty narrow. Some of the largest companies, you know, tied to the artificial intelligence, AI team, has been sort of rallying tremendously tremendously and valuations are very stretched. You know, it's hard to, you know, say that it cannot go more, but we think it's in a sort of a little bit in a bubble domain already now. So I think it's too late.

And, you know, I would think that we could see the pullback there. A little bit what you're seeing today now with the Nasdaq down one and a half percent. Why do you think it's a bubble? I mean, you can make two different arguments here. You can say, yes, I think that these stocks have just run too far too fast. But to go to the bubble step appears, you know, to some maybe a little extreme. You know, perhaps, you know, perhaps, look, when we look at the sort of some of the valuations, you know, expanded tremendously, if you have a sort of P's of 100 or 200, of course, it can go more. But it's not something that value investors should feel comfortable.

I do have a little bit of personal value bias. So, of course, we cannot say that it can go more. But one do need to acknowledge the multiples. And also the fact that these stocks went up, technology went up in parallel with interest rates. You know, so interest rates move higher and tech move higher, which, you know, typically doesn't happen. So that also is a little bit of a worrisome signal. So you hit the whole nail on the head here. Value investors, the ones who've been run over in large part by this move. At what point do you just say,

you know what, this value move that I thought was legit isn't, and this is where the action is, AI is where the spending is, AI is going to drive earnings, and thus that's going to justify the reason why these stocks have not only come where they are now, but why they can even go further from here. No, so that's a theme. That's a narrative. That's a sort of best-case scenario, I would say. My argument a little bit would be that AI is not a new thing. It's sort of at least five to ten years' development and will be for many years to come.

But there will be sort of winners and losers. Some of the sort of shifts may be a little bit of a zero-sum game. So my counterargument would be that it's not a new, it's not something that happened sort of three months ago, and it's not 100% clear how it's going to play out. So when you see sort of every company that mentions AI rallying, you know, that kind of, again, a little bit as an investor tilted on a value side makes me a little bit sort of worried. Why aren't you more optimistic about the market overall in the face of, you know, let's face it, it's been a stronger, more resilient market than I think you've expected it to be. And you're not alone. There are many who did not see the magnitude of this move coming. I've got the Dow Jones Industrial Average at 33,680. I've got the S&P 500 on the doorstep of 4,300. No, so the reason why we are not more positive, and I just said this resilience is sort of remarkable and inflows are remarkable.

The reason why we were not, you know, primarily because of sort of interest rate shock, you know, over the past year roughly we had a sort of 500 base points increase in rates. We are going to have a sort of QT, you know, and that's not even to sort of mention markets clearly don't care about geopolitics. They don't care about sort of energy crisis, you know, but just the sort of increase in interest rates should have a negative impact, not just on a multiple, but also an economic activity. Fed at the end wants to create engineer slowdown, you know, like, so we don't see this as a new cycle. We think this is the last innings of an old cycle, which needs to end if Fed is going to keep rates this higher and keep rates in a quite restrictive area. So that's why it's hard for me to get excited. Of course, we need to acknowledge that markets show this resilience. Market is at the higher end of this

range. I'm not yet convinced sort of that it's going to be breaking towards new high. I think we are probably at the higher end of the range. And over time, I think it's going to be very, very hard to market to move higher from here before Fed cuts the rate. And so... Yeah, no, I was going to say, what about what would be just an amazing ending to this story? There's no recession and inflation actually does come down and the Fed actually is done and economic growth remains pretty strong and the consumer hangs in there. I don't think that's that far fetched of a story to try and put together. So it's possible. You know, I think it's I would say it's in my view, it's a far fetch. It's not impossible. I agree with that. You know, that sort of inflation just goes away

on its own and the Fed decides to to start cutting the rates. You know, as I said, I'm not in that camp as the you know, this resilience persists. You know, of course, we are sort of soul searching and asking ourselves, you know, did we sort of misjudge the possibilities? But again, when that, you know, then you look at all the different indicators, you know, sort of leading indicators, inversion, yield curve inversion, you look at the sort of geopolitical setup and this rate shock that still didn't, I think, percolate into economy. And I think that's been a very positive, that's a very optimistic interpretation that everything will play out just perfectly and cycle will sort of reemerge and reaccelerate. And again, we'll see probably in the next few months, but I doubt that's going to be the scenario. So you've liked bonds and you've made that clear in most all your notes. At what point do you say it's time to move out of that trade and think about whenever it's going to be ready to move for a rotation into equities,

but at least out of bonds? When is that? Yeah. No, so we have been, you know, bearishly moving even out of bonds into cash because, you know, cash yields you around 5%, you know, bonds like, you know, 10 years is quite a bit lower than that. So we have been going sort of even more defensive where you pick up more yields and effectively waiting for the correction and, you know, fully acknowledging correction didn't happen yet. But so far, you know, in the cash, you're annualizing 5%. You know, this whole equity move called from 4,000 to 42.50, you know, that's about 5% or a little bit higher, you know. So I don't think right now you are missing a lot. You know, if the equities were to make another leg higher, you know, then clearly that would be the wrong assumption.

But right now, 5% in cash plus optionality that if the sell-off or when the sell-off happens, then you can actually step in and get some more upside. So the cash or bond positioning is not just its yielding, but it's also give you optionality to buy in if the pullback happens. Would you? Go ahead. No, no, no. Go ahead. Finish your statement. No, if the pullback doesn't happen, then yes, we will be proven wrong.

Okay. What part, if any, of the equity market would you buy right now? Would you buy anything? So, you know, maybe some of the defensive exposures, but it's not a clear cut. Again, when you look at the defensive, like utility, staple, health care, and then compare that to cash yield, risk-re reward, again, seems to be, in my view, a bit better in the cash. You know, now with your cyclicals and with your growth stocks, as I said, growth, I think, rallied and tech rallied at the back of the AI team. So I wouldn't buy it.

You know, and cyclicals, you know, they are cheaper. But if this recession happened, it's hard to see cyclicals rallying into recession. I think they will rally once when the Fed starts cutting and when we can see sort of, you know, the other side of the cycle. So both on a value or on a growth side now, you know, I'm a little bit skeptical. So what you're then left with are defensives. And, you know, one can have some exposure there. You know, a little bit contrarian also, maybe in emerging markets, China. You know, China has been underperforming significantly, both Japan and Europe. So, again, as a little bit contrarian, a little bit of value investor,

maybe China can have a bit of an uplift from here. So that's something I was looking recently. I know, but as you say, you know, defensive, that's exactly why people have been going into the Apples, the Microsofts, the Metas, the Alphabets, and those kind of names. They view those as defensive, defensive against earnings deterioration. Their balance sheets are good. It's where the action is. So there is a quality, there is a quality element, but I do think there is a cyclical element there. Well, there's valuation.

I mean, if you look at these stocks that you mentioned, the multiple have gone up quite a bit. So they are less of the value or less of a buffer of safety now than before. Second, there's a cyclical element. If we do start losing jobs and get in a recession, you know, the tech spend, you know, the buying sort of, you know, highly priced electronic gadgets, gadgets like advertising, a lot of these things would be hit. So there is a sort of hidden cyclical element in these tech companies that that's why I don't perceive them really as a safe haven. But I agree with you. There is a quality element that probably will give them some resilience. You know, and one also point, if the interest rates were to drop, that would also a little bit support the multiple. But multiple is already

pretty high. So I have a little bit of mixed feelings about viewing these stocks as a defensive. Understand. You always make us think. That's why I like talking to you. Marco, thank you so much. Marco Kalanovic of J.P. Morgan joining us once again, getting some news out of the FAA over this reduced visibility from this incredible wildfire smoke in our area and elsewhere in the eastern seaboard. Phil LeBeau has the latest for us. Phil, what's going on? Scott, the FAA is now slowing down flights from the Midwest and the East Coast into Philadelphia. Earlier, we reported that the FAA announced it would be slowing down and briefly paused flights into LaGuardia. Now they have resumed some flights coming in, but they have slowed down the rate at which they're coming in. They are also slowing down the number of flights coming into Newark.

And let me see if we have the picture of Newark right now. Visibility is about a half mile. Now there are some flights that are still leaving from Newark as well as from LaGuardia, as well as Philadelphia. But as you can imagine, if you're not getting that many flights in, you don't have the aircraft then to turn around and to take off. And this is very fluid, Scott. Within the last hour, it's gone from a pause to slight traffic coming in at Newark. And when we've reached out to the airlines, they've essentially said, look, we are at the mercy of what happens with the smoke and whether or not the air traffic controllers feel it is safe enough for the traffic to resume to normal levels. But it's going to be some time before we see that. Yeah. Incredible story.

I feel thankful, frankly, that I got in when I did late last night because we're still having this issue. But call your carrier. I think that's the bottom line. If you have a flight in or out of this area. Phil, thank you. And you keep us updated. I know you will. Let's fill the bow with the latest there. Let's move the conversation back to the market. Bring in Courtney Garcia of Payne Capital Management. John Mowry of NFJ Investment Group here with us at Post 9. It's great to have both of you with us. John, I'm going to go to you first. I mean, Marco is not willing to say all's clear. It's time to be positive. You've been overwhelmingly positive, arguably the most positive person who sat on this desk with me. Are you moved at all by what he said? A little bit. What I would say is particularly large growth is looking less attractive. There's

no way around that. Semis in particular look rich to us, but it's not just technology. In the value space, home builders look egregious too. We've exited all of our home builders and we've reduced semis. What I would say in terms of the AI frenzy, this could go further. I had one of our analysts go back and look at what Intel got to as a percentage of the S&P 500 in 2000. And the answer is 3.8%. If NVIDIA gets to 3.8% of the S&P 500, that's another 40% to go. That would take it to a $1.4 trillion market cap. So there's precedent for the semis continuing to move higher if you look at Intel. But what I would say is that investors should be relaxing exposure to

large growth, technology, and those areas. What I would pivot to is there's a gift. We have a gift, Scott, and that's value, mid-value and small value. You've got steep discounts. The Russell 2000 value is trading at just 10 times earnings. The S&P is at 18. The Russell mid-cap value is at 13 times earnings. We just looked this week and we said, okay, let's go back historically to the late 80s and see every time that the triple Qs on a three-month basis have beat the Russell mid-cap value by 15%, which is what just happened, what is the subsequent returns for the mid-cap value space? And they kill it. 88% of the observations, which there were 16 total, you saw the mid-cap value space, and they kill it. 88% of the observations, which there were 16 total,

you saw the mid-cap value space handedly outperform on an average basis of 15% per year for the next three years. Yeah, but you want people to make a leap of faith that there's not going to be a recession, that the leading economic indicators are wrong, and that we're not going to have a more dramatic economic slowdown because otherwise, why in the world would I want to buy any of that? On the contrary, I think a recession is entirely plausible.

If you look at the inversion between the two-year bond and the Fed funds rate, you've got that as wide as you've seen historically. And that's typically been associated with a recession. But there's a lot of discounting that's already occurred, Scott. If you look at the banking sector, you've got the recession priced. If you look at consumer discretionaries, you have the recession priced. If you look at real estate. Consumer discretionary is like the third best sector of the year. What do you mean it's priced? Not at the value arena. You don't have Tesla and Amazon. I mean, that's in the growth bucket. If you look at apparel, if you look at some of the other areas like mobile home, Winnebago, Thor,

those are steeply discounted. So you've got opportunities. I mean, Lululemon is one that reported very well. That was very beaten up. So you're seeing opportunities in the discretionary space. But I would point to REITs. I would point to banks. I think those are particularly interesting here. The yield premiums on those, Scott, are material relative to the 10-year, and you're getting dividend growth. So we're bullish on those cyclical value areas. I would be moving away from large growth and tech at this stage of the cycle. I don't think that's as attractive. Court, the floor is yours. Yeah, and I'm kind of going to build on this too, but I do agree with that.

We're really what you're seeing right now are these stretch valuations. I mean, they're essentially at nosebleed levels right now. You have Amazon trading at 70 times earnings, Nvidia at 50 times earnings. Apple looks better than that at 27 times earning, but even that's 50% above its 10-year averages. And just realistically, I don't see that continuing, even though people are rushing into this as the safety trade, so to speak. But really what we want to see is not just these top eight companies outperforming the markets. We need to see a larger breadth in the stock markets and other categories doing well. And last week, we finally saw that, which actually I think is a

really good sign. We were seeing general sectors doing well. So I do think there's plenty of areas. I do like value just to kind of hone on that and especially to with the banking sector got hit really hard with the banking crisis, which does seem to be subsiding. I think you're probably going to start to see that leading some of the other charges here. And there's plenty of opportunity even in international or emerging markets. Let's let's debate this, because on the idea that John puts forth of REITs and financials, there are many people who say that the shoe hasn't even dropped yet on the commercial real estate issue. That's not going to be positive for the banks, nor is a slower growing economy. So I'll throw it to John first. I mean, why don't you defend

that call? Because it sounds like in some respects, Courtney agrees with you. Well, there's no question that some of the real estate portfolios are going to be in trouble, particularly in office. I think you have to be very choosy. I know one name we talked about before is Alexander Realty. That's an office REIT that caters primarily to life science companies and cannot move its labs easily. And it's on the East Coast and the West Coast in strategic locations. So you can't just blanketly say like you just did then REITs. You're very selective. Well, of course. I mean, I'm an active manager. So I mean, we're going through and identifying where we think the most attractive opportunities are. Not all REITs are created equal. Not our banks are created equal. But I do think specifically,

if you move to banks for a moment, I would argue that the super regionals are particularly attractive. They've had to deal with higher regulatory costs historically, so they know how to handle that. And they, I do believe, will be beneficiaries of what's going on. And you're seeing the widest dislocations between those and J.P. Morgan going back historically. So I do think you're being paid to step in, not unlike you got paid to step in to homebuilders and semis. Let's not forget, six, nine months ago, nobody wanted homebuilders.

Nobody wanted semis. Nobody was talking about AI. This is a new theme that's pushed these higher, but the rally's been going for almost a year. This is a year-long rally that's occurred, particularly in home builders. So I would argue that investors should be stepping into those areas where it's uncomfortable. I do get worried when the crowd's there. If you go to Google Trends, I like to play around on Google, go to Google Trends and type in artificial intelligence and look at the spike and go back historically to 04, it just goes parabolic.

So everyone is obsessed with AI, and it is a great theme. It's going to be integrated in a lot of technologies, and it's going to permeate value and growth companies. But I think that investors are paying a lot for that. And what also concerns me, Scott, is people are looking past the elevated interest rates, and then they're paying the same multiples for the growth names, and it was the reason they sold them. So you step back and say, wait a minute, you sold these names because rates were high. Now you're willing to buy them at the same valuation with the rates higher. Because they suggest that the valuations are justified now,

potentially based on the earnings growth that we didn't know before the AI mania happened, right? Their earnings potential has increased dramatically for some of these companies like NVIDIA. They told you that, where their guidance just shocked everybody. And the stock was cheaper after earnings as the stock went up 100 bucks. And I think to a certain extent, that is going to be true. I think that's the big benefit of AI is it is going to increase productivity and it is going to justify a higher

valuation on these companies because of that. But I also think a lot of this, there's over excitement that's already been priced in, especially with something like a NVIDIA, which has done extremely well and very well could continue to do so. And I'm absolutely not having investors not have that exposure. We absolutely want it there, but I'm also not actively throwing a ton of money at it because it's just getting such sky high prices. I just don't want you to be overexposed. That is something I do caution to, especially investors who do things on their own. They might say, oh, well, I don't want you to be overexposed. That is something I do caution to, especially investors who do things on their own. They might say, oh, well, I don't have too much money in NVIDIA or Netflix or Amazon. But you'd be surprised when you look at that.

They take up 26% of the S&P 500 right now. And a lot of people, you look at the ETFs, mutual funds you own, you are overexposed there. And it's just a good cautionary tale. Take a look at what you own. Make sure you don't have 26% to 50% in those seven stocks because you may. I've got to go, but in 10 seconds, cash, more cash or no. Marco Kalanovic says cash is the best right now. What do you think? Some cash, but no, I would stay invested here.

All right, guys, it's great. I loved it. Thank you. Courtney Garcia, John Mowry joining us right here. Post nine. Let's get to our Twitter question of the day. We want to know what is the better buy right now. Large cap tech or cyclical value. You can head to at CNBC closing bell on Twitter to vote. The results are later on in the hour. We're just getting started right here. Up next, star venture capitalist Rick Heitzman's back with us, breaking down the big risks,

potential rewards as well surrounding all of this AI hype. What he thinks the rise of artificial intelligence could mean for the workforce, for your portfolio and more. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. The rise of artificial intelligence raising all sorts of questions now about the risks and rewards of this groundbreaking technology, especially when it comes to the future of work. DeepMind co-founder Mustafa Suleiman telling me yesterday on Closing Bell out in San Francisco just how much things might change. I don't think we are prepared and I think it's important for us to be super aware that this is going to be a dramatic transformation. The benefits are going to be unbelievable.

I mean, we are on the cusp of unleashing an intelligence revolution. There are huge efficiencies to come here and those efficiencies will definitely change jobs. There's gonna be a reshuffling of who does what and when. And I think the challenge for society is trying to make sure that we make that transition in as smooth as possible way. Let's welcome back Star Venture Capitalist, Rick Heitzman of First Smart Capital.

It's good to see you. Welcome back. Good to see you. Thank you. Very interesting to hear the co-founder of DeepMind suggest we're in for a wave, and it's not necessarily going to be one that's going to be easy to surf, so to speak. Do you agree? Disagree? It'll be choppy. I think it's going to be fits and starts. Like any new technology revolution, people are going to be scared. People are going to wonder about what happens to jobs. People are going to wonder about what happens to them. And then people are going

to wonder about how do you make money from that? And all of those things in the early innings are very much up in the air. Mark Andreessen tweeted yesterday, why AI will save the world. The era of AI is here. Boy, are people freaking out. He said, fortunately, I'm here to bring the good news. AI will not destroy the world and in fact may save it. So, you know, what do you make of what he says? Do you think the risks around it are being overstated? How do you view this as somebody like really connected in the tech universe? Yeah, so we spend a lot of time on AI. We've been looking at investing in the sector for over a dozen years. And so I think he maybe overstated what's going to happen. I'm not sure if it's going to save the world, but I think it's going to be a transformational technology. You know, 20 years ago we said software and

digitization is going to change every industry, and that's happened. Now the next 20 years is going to be AI, and whether it's existing companies changing their business models around that fundamental technology or new technologies being formed. So I know exactly what's happening now with you and other VCs in the Valley and otherwise coast to coast, whatever. Phones beating down the door, calling you up, I got this great company and it's all about AI and we're going to do this, that and the other thing and it's going to change the world. And you say what? How are they going to change the world?

I mean, going back to the software analogy, we like software that did jobs. We like software that really created productivity. We invest in a lot of AI companies that are doing the same thing. What's the return on investment? What's the job that the artificial intelligence is doing? And it's not a science project. It's a job. It's actually you're buying something or you're selling something that's really going to be transformational. And we're seeing companies doing that. We're seeing companies are scaling very quickly, selling generative AI. We're seeing companies doing workflow, artificial intelligence that are powering other applications. And we're seeing some really transformational stuff, even in the early innings. Leads to the inevitable questions as to whether

AI, everything under the sun, is meant to bubble in a part of the market. I want you to listen to what Brad Gerstner told us out in California as well on that very question. Now in 1999, are there real comparisons? Greatest disservice we could do for investors, right, whether you're playing at home or whether you're a professional investor, is to compare this moment to 1999.

In 1999, you had valuations of make-believe revenue and profits. It was the promise of what may come. We had 30 million people connected to the internet via broadband, right? It was a tiny fledgling industry without real businesses, without real free cash flow, and it was trading at dramatically higher multiples. You want to take that on? Sure. I think it's going to be similar to 99 in that there'll be some speculative companies, there'll be some real companies. You know there was companies that were selling books on the internet in 1999 that turned out okay and there's a lot of companies that went away. The same thing's going to happen now. There was companies in the 20s when TV came around. Some of those companies went bankrupt. Some of them became the biggest companies in the world. You're going to see the same transformation now by both incumbents and as well as new company

formation. Does it feel right now like a bubble to you or just excitement, hype, in some cases justified? You know, the valuation differences now between now and let's say in 99, Yahoo is like 600 times forward earnings. So we're seeing even the generative AI companies, which is the, you know, the most hyped of that hype cycle within AI, you know, still trading at, you know, 10 to 30 times revenue. So very heady multiples by any estimate, but not 600. And growing at a pace where they could grow into those multiples over time, you are seeing the speculators who are saying, I have two guys who worked at Google.

They're going to think about a project, and they need $100 million, and I think that's where people might get a little bit overly excited. But we're seeing enough companies solving real problems, doing real jobs that we're excited about. You always help us better understand all of this. That's why I enjoy talking to you. Thanks for being here again. Thank you. That's First Mark's Rick Heitzman here at Post 9. Up next, SoFi stock surging more than 40% over the last few weeks alone. This is student loan payments are set to restart. We'll hear from SoFi CEO Anthony Noto

with how this change could impact the company's bottom line. Closing bell right back. SoFi shares coming off their best week in nearly two and a half years. The stock surging as the newly signed debt ceiling deal included a restart to student loan payments. Our Bob Pisani live at the Piper Sandler Global Exchange Conference for an exclusive interview right now with SoFi CEO Anthony Noto. Bob, take it away. All right. Hi, Scott. Good to see you. Anthony, thanks very much for joining me.

I just want to follow up on what Scott said right there. Congress has ended the student loan pause. Students are going to have to start repaying their loans. What does this mean for you? Well, first of all, it was really important that we gave people the relief over the last three years not to have to pay their federal student loans. They could deal with COVID and the pandemic, but that's been over for about a year. So we really thank the representatives in Washington for making that bipartisan decision. I think now what it means is consumers that have federal

student loans should look to refinance. We can really help them out. If they have interest rates that are in the high sixes, high seven percents, we can save them money. If they have a term of 10 years, we can help them lower that payment. So as an example, if someone has $70,000 of student loans, which is our typical student loan refinancing, and they have a 10-year term at a 6% rate, their monthly payment's going to be about $775. Now, they haven't been paying that $775 for the last three years, so it's going to be an incremental burden for them, likely, in this environment. If they want to extend that to 20 years,

they could lower that payment at 6% to $500 a month. Now, 20 years will cause them to pay a lot more than 10 years, but they can still pay at the same rate that they want and have that flexibility. So people can save by refinancing at a lower rate. If they have high rates, they could save on a monthly basis to look for a chance to refinance at lower rates by spreading out over the term. And we think people will do both. We're already seeing people do the second of extending the term. You were founded years ago to provide more affordable options for student loan payments, essentially. But you've

expanded now. You're in personal loans, student loans, home loans. What is the state of the consumer right now? You have a view into a lot of loan business. Tell us what the consumer is doing right now. Sure. For the viewers that don't know, we're in the loans that you mentioned. Plus, we do checking and savings account. We are a bank. We also have a brokerage account. We have insurance and we have credit card. And in the most recent quarter ended in March, we grew about 43 percent year over year. So there's a lot of demand in revenue. There's a lot of demand for our products. And we're continuing to see really strong deposit growth. We'll continue to see members pay their loans on time. We're continuing to see them spend at a high rate. You're not seeing an increase in

loan losses, for example. We are still below the rates that we saw in 2019. There is a move towards normalization, but they're still below the levels that were back in 2019. And I'd say our consumer, important for the viewer to understand, is more of a high-end consumer, $100,000 of household income or more, and FICO scores above 680, but so far stable activity across paying loans, deposits, and spending. You mentioned that you could save money to help people refinance their loans out there, particularly students' loans. The curve seems to imply that rates might be coming down. What does that mean? What happens when rates go down? How is that going to help you and how is that going to

help consumers? Yeah, for consumers that are looking to buy homes, as rates come down, they'll be able to do that at more affordable prices. For consumers that have homes and need to refinance their mortgage, they'll be able to refinance at lower rates. And then those that have student loans, they can refinance with SoFi as many times as they want without penalty and without cost. There's no frictional cost, no closing cost. So they could refinance now and spread the payment out over a longer time period to lower the monthly payment. but they also could then refinance when rates go lower, as they're anticipated to do as we go into 2024 and 2025. The other thing that's important to note is as rates go lower, there will be less to make in checking and savings accounts, but we'll likely be able to continue to provide a

really attractive rate for them. My colleague Scott Wapner has a question. Scotty. Anthony, it's so good to have you on Closing Bell. Welcome back. You know, I just had a conversation about sort of where we are with all of this AI mania and the hype around it and the hope that has sent a lot of these stocks higher. And I'm going to I'm going to send you back to your younger days to 1999. You're the Internet analyst at Goldman Sachs, and you had a front row seat to how all of that led up in some respects and then how it dramatically ended. So do you view anything from this period right now with similarity to back then? I'd love it through the prism of your eyes. Yeah, there's definitely a lot of hype around AI. There are companies that are changing their names to AI and companies changing their URL addresses

or finding some way to put it in the description of their company. And consumers need to watch out for that. They need to protect themselves. The question they should ask a CEO or a management team that's prognosticating about AI is how much revenue do you think you'll generate incrementally from AI?

What's the specific amount of cost that you're going to generate from AI? And really get to tangible results that will impact the performance of that company? I think from a consumer perspective, they're going to benefit a tremendous amount. The question remains, will that translate into better revenue or better profits for a company? For SoFi, we use it in our chat bot, which allows us to use natural language AI to better answer consumers' questions, which does result in faster resolution times, lower contacts per customer, and also the ability to be able to provide more comprehensive answers across other areas of the company. Talk about a trip down memory lane.

You were the COO of Twitter. I don't know how many people know that about you, but you were the COO of Twitter. Tell us about what you think is going on there. You know, Elon Musk has said he wants to turn Twitter into a super financial app using Twitter. But that's what you're trying to do, actually. So are you competing with Twitter? And what do you think is going on with it right now as the old CEO? Well, the first thing I'd say is the thing that was always attractive to me about Twitter is it has the best content in the world and that content's largely for free. So the first priority should be how do we make this product easy to use for the mass market so the mass market adopts it. As it relates

to SoFi, here's what I'd say. When I came to the company in 2018 and talked about this grand vision of going mobile first and being a one-stop shop for all your needs, helping people borrow better, save better, spend better, protect better, everyone else said they're going to do the same thing. Well, guess what? Five and a half years later, we're the only company that does all those things, only company that's a one-stop shop on a digital mobile app. 10 seconds on Twitter. What do you think of that? Yeah, and what I'd say is Twitter should stick to its knitting. The distance between us and everyone else is only going to increase. We're the super app of financial services. We just added SoFi Travel. And the number of things we're going to do in the future

to help you across all those areas will really distance us from the competition. And I only think the distance is going to get longer. You have been a survivor. That's for sure. Anthony Noto, thank you very much for joining us. Appreciate it. Thank you, Bob.

Scotty, back to you. All right, Bob, thank you. Anthony, good stuff. Appreciate you being on Closing Bell as well. Up next, we're tracking the biggest movers as we head into the close. Christina Parts and Nevelos is standing by with that. Christina. Okay, the company doesn't make a profit and was once part of the meme mania,

but shares are surging right now ahead of earnings. Can you guess the name? I'll have the name after the break. Thank you. Got about 15 to go before the closing bell. Let's get back to Christina Parts and Nevelos now for a look at the key stocks she's watching. Christina. I want to talk about shares of payment name Affirm because they're still up about 3%,

but well off the earlier double-digit highs. The company announced earlier this morning a new partnership with Amazon Pay. So Affirm's adaptive checkout, which offers customers pay over time, or really buy now, pay later plans, will be an option for all merchants through Amazon Pay. And so the stock is up a little bit over 2% right now. Did you guess the name? GameStop, obviously shares rallying into earnings out after the bell because this name is known for its big pop after earnings. Quarterly losses are still expected, but they're expected to narrow to about 15 cents a share from 52 cents a share just a year ago. So that's an improvement. GameStop is not

expected to provide guidance for the next quarter and the earnings call tends to be really, really short. But management recently has been focused on cost cutting, especially in Europe. So let's see how that goes. Shares are up almost 5 percent. Scott. All right, Christina, thank you so much. Christina Partsenevelos, last chance to weigh in on our Twitter question. We asked, what is the better buy right now, large cap tech or cyclical value? Head to at CNBC Closing Bell on Twitter. The results are right after this short break. Let's get the answer now of our Twitter question.

We asked, what is the better buy right now, large cap tech or cyclical value? The results are split with cyclical value slightly in the lead at this very moment, 51%. Up next, playing chess while others play checkers. Star analyst Dan Ives, he joins us to explain his fresh take on Apple, his new price target. That and much more when we take you inside the Market Zone. We're now in the closing bell Market Zone.. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of the trading day. Plus, Dan Ives of Wedbush, he just hiked his price target on Apple. He is here to tell us why he did that. He'll also make the bull case for Tesla.

That stock shaking off NASDAQ weakness today. Let's begin with Mike Santoli. So, 4,200 was resistance. Now, maybe 4,300 is a little bit of resistance. So we climb the ladder step a little bit. Yeah, that's actually you probably want the S&P 500, the large caps, to cool off a little bit, take a break, and allow for some of this re-rotation. That's been the most profound trend in the market over the last six days, really since last Thursday.

So it's not even five trading days, the Russell 2000 has outperformed the NASDAQ 100 by six percentage points. It wants to make it all up at once. It's not going to keep going at that pace. It seems a little bit forced and mechanical, but the transport's up 2 percent. So you're seeing the broadening out, or at least people trying to grab for stuff that hasn't participated, feeling forced to participate. And I do think it makes sense for the large caps to allow themselves to just sort of ease back and not stay so overbought. All right. Well, speaking of one of those, Apple is pulling back today, Dan Ives, by not too much, three quarters of one percent. Can't go up every day,

but you think it's going to go up more times than not. You raise your price target to 220 from 205. Why? Look, I think right now it's about iPhone units. more times than not. You raised your price target to $220 from $205. Why? Look, I think right now it's about iPhone units. And in terms of our Asia checks over the last week, we're actually seeing stability to actually optics. And this is all the drumroll to the iPhone 15. We think now we could be looking at units $235, $240 million with ASPs that are increasing. You put that together, I mean, numbers would have to come up, I think, modestly significantly for the street. And I still think right now Apple's playing chess, others are playing checkers in terms

of what's happening on services, and some of the parts that I view $3.5 trillion, I think $4 trillion markup in the next 18, 24 months. Do you think the services revenues are going to pick up again to where they were before? What are we talking about here? I think we're getting back to double digits for services. I mean, you've talked about that's really the key from a valuation perspective. Now we're starting to see more and more upticks from App Store to what I believe in terms of over the next few quarters, you'll be looking now towards a trajectory for $100 billion of services revenue. And we think the valuation of that is $1.4 trillion as it all starts to play through. So they introduced Vision Pro.

I was out there. There were, as we showed yesterday, a clip from TikTok, gasps in the room, some chuckles at the $3,500 price tag. Your reaction to all this is what? My reaction is that this is about the developers that they're going after. There's a battle royale. There was the developers who were like the ones who were gasping and laughing in some respect. Sure. The small sample that we saw, that's what that was. Yeah, and what I would say, my conversation with developers, you have some skeptics,

but I think overall what they're essentially building here is a moat that's starting with AR, VR, and it's actually going to lead to really an AI ecosystem that they're going to be building out within the App Store, which is why I view this from an Apple perspective as just leading to the next generation of growth around services and next devices. And Tesla today, I mentioned it, down tape, but that stock was sort of bucking that trend, right? What's going on there? I think it's all about units in China.

I mean, a lot of worries about that earlier. You know, if we think about this year and now, even after the price cuts, we're seeing demand continue to increase. I think this is one that margins stay where they are. You have units start to uptake, battery technology that I think has come down from a price perspective. I mean, Scott, you could be looking bull case, $250 as this all starts to play out. Do you have a take on this? I think the other thing that's going on is there is a little bit of a bid for the dented toys in the market. So Tesla, everyone would have looked at that chart and said, looks toppy, looks like a top, can't get above 215. Now it did.

Now you're reaching for beta in areas that have not been one of the seven stocks that have been carrying the market for a while. So that's the, I think, the portfolio dynamics around it. But I'm not going to deny that it also feels as if every time you talk about, you know, the players in EV, it all comes back to who's the incumbent, who's got the head start. And people rediscover that from time to time. Back to Apple. I mean, so you, you know, as this stock continues to go up, it's like, OK, 25 times and 28 times and 30 times. At what point do you say, even as an objective observer, like, okay, that's a little too rich, a little too rich. Yeah. I view it as some of the parts. I view it as if the services business, which we believe now starts to get back

toward that $100 billion trajectory annual. And ultimately, from a units perspective, you look at 235 million units, you're looking at numbers that could come up 5%, 10% with margins that actually show an uptick because of the chip ecosystem. And that's why I believe you could start to rationalize a valuation, even at these numbers, $3.5 trillion. A skeptic would say that you keep increasing your sum of the parts valuation to justify the valuation as the stock continues to escalate. And the earnings, by the way, the earnings growth is not what it was. Sure. And to that point, I would say it's all about really services. I view the

value of that services as the growth continues to uptick and more and more developers, I think now you're really seeing them double down. The overall app store and ecosystem of Cupertino, that's what really ultimately is the value that separates them from every other tech company. Did you expect $3,500? Give me your honest view right here with the microphone on on television. Oh, $3,000 was our estimate. $3,500 obviously was more than we

expected. But again, right now, it's all about developers. 150K units, we think, coming out of the gate. But Scott, two years from now, I think there's 1,500 hours in terms of what the second, third versions will be. I appreciate you being here. Dan, as Mike Santoli last to you, we've had the two-minute warning. We've got about 90 seconds or less. These stocks weren't going to go up every day, as we said. But the Russell, you pointed it out. Russell was up more than 2% earlier. It's come off a little bit, but still, that's where the strength is. This is the inverse of the pattern we got used to coming into the end of last week,

which is breadth on the New York Stock Exchange is 2 to 1 to the positive. You have 160 new 52-week highs versus less than 10 new lows. So you're getting a little bit of those that were left behind. They're catching up a little bit. You know, you can't necessarily extrapolate this. I do think the overall market probably has some digestion to do. You're also seeing some selling in the traditional defensive. The food stocks are really weak today.

Campbell's volume declines. Yeah, they reaffirmed guidance. But they were an inflation beneficiary. And you're seeing money come right out of that group as people get more comfortable with the economies not falling away very quickly after that jobs number on Friday. And all of a sudden it feels like, well, we can maybe own some of the cheaper cyclicals here as opposed to paying up for defense. So I just think a lot of it is the regulatory, relatively normal ebb and flow of risk appetites. It's just been very pronounced in terms of how dramatic the swings have been inside the market in the last, let's say, three months. Let's see what happens over the, you know, days or so if NASDAQ does fall to a little bit. What happens to the broader market? Dow's trying

to be a triple-digit winner. NASDAQ is going to be a triple-digit loser.