Closing Bell - Closing Bell: Mega-Cap Tech Earnings 4/30/24

Episode Date: April 30, 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, welcome to Closing Bill. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. And this make or break hour begins with a countdown to Amazon earnings, whether that report is just what this unsettled market needs. We'll ask our experts over this final stretch what to expect from the company when it delivers in just a short period of time in overtime. In the meantime, the scorecard. With 60 minutes to go in regulation, a hotter than expected employment cost index, well, that sent yields up, stocks down right from the jump today.

And it's been hard to recover all the majors under pressure. Russell 2000 is the biggest decliner this afternoon. And all of this happening, of course, just as the Fed meeting gets underway and the chairman expected to carry a hawkish tone tomorrow afternoon. We shall see as we lead up to that. It does take us to our talk of the tape. These next critical 48 hours, beginning with those Amazon numbers, yet another mega cap stock with a very hard buy to get over. Let's bring in our panel. Mark Mahaney of Evercore ISI, Jason

Snipe of Odyssey Capital Advisors, a CNBC contributor. Kate Rooney getting ready for that print. I'm going to throw a little bit of an audible, admittedly off the top. Mark Mahaney, I'm going to come to you first because we're going to talk about Amazon in a second, but I want to talk about Alphabet right now because I just got Dan Lobes, Daniel Lobes of Third Point, his new investor letter in which he discloses a new position in Alphabet and says that during the first quarter, the funds made a substantial investment in that company. And Mark, I want your take on what he says was really a capitalizing on the disruption that this stock faced amid that swirling narrative around Alphabet that they had missed out on AI.

Here's what he says, quote, The concern that in an AI world, changes in the way consumers will eventually interact with their personal devices and with the Internet can result in risks to Alphabet's core business search is not entirely unfounded. Alphabet, however, has both a substantial distribution and technology advantage over competitors and is positioned to use its AI capabilities to unify, enhance, and better monetize the entire suite of its products. He calls what happened with the Gemini rollout, he calls it a blunder, but a small operational misstep. I'm wondering what you think about this new position, the points that he makes, which is both pretty interesting and the timing of which as well. Well, I don't think I could agree more. So I made this one of our top picks. I switched it

with Meta earlier this year for some of these exact same reasons that Dan's bringing up. I thought there were too many overhangs on Google. They would never control cost. They would never pay a dividend. They disproved both of those. Their fastest revenue growth days, you know, were kind of behind them. I think they disproved that. They got YouTube back up to 20 percent growth. And then they were perceived as Gen AI roadkill. And, you know, sure, they had a few snafus. But I mean, the Gemini product is really impressive. I've been using it for some time. Of course, they're going to be snafus, little problems here or there. But they can work through those. And I just think they've got such a, as Dan said, and I've sort of written to it, they've got these huge distribution brand advantages. Everybody focuses on Microsoft

as the play for the digital AI assistant, the gen AI assistant. I've got a great gen AI assistant for you, too, on the consumer side. It's Google, given the entrenched position that they have. So I couldn't agree more with what Dan did. I mean, he calls the noise, that's my word, the noise around the Gemini blunder. Again, that's the word that he uses in this investor letter dated today, that it demoted the fact that the company has been building world class capabilities in AI for over a decade, and that that simply created an attractive entry point for a longer-term investor, that Google stands to benefit from the megatrend of AI. Again, megatrend is the word he uses, and that search is going to be increasingly important as a search of truth. Amen, hallelujah. I think that's absolutely

true. It's possible that Google gets disintermediated. I understood the bearish concerns on Google. They've got this extremely strong dominant position in search. Nothing could ever upend that unless you had a technology shift. Gen AI potentially is that technology shift. It's just that Google has been investing in Gen AI. You know, Sundar Pichai has been talking about this being an AI-first company for, I think, about seven years. So they weren't late to the party. I think the party kind of got started, and they needed a little bit of a kick, and they got it. And I think this kind of fired up Google a little bit.

So I think all of that setup is correct. I like Google here. Now the risk-reward is pretty even, Stephen, with Meta. But I think earlier this year, it definitely favored Google for smart, savvy investors like Dan. I mean, to be clear, he points out as well that Third Point returned 7.8 percent in the flagship fund during the first quarter. Meta, a big contributor to that. So he has that, too. Amazon, a big contributor to that, as well as Microsoft. And by the way, he also reveals a adding to their position in TSMC.

That's Taiwan Semi. We can throw that up there as well, again, around AI. So Daniel Loeb's betting big on AI, as many investors have been doing. So let's do this. Let's turn our attention now to Amazon, because that's really where we were going to begin today before we had this news, which we wanted to bring you as soon as we possibly could. We have Kate Rooney, of course, I mentioned already, who's covering this earnings report after the bell with so much anticipation, Kate, about it. What should we keep an eye out for most of all? Yeah, Scott. So I think the AI story is key. You talked about that a little bit with Google. Amazon has really been using earnings as a way to showcase what they're doing in AI. You saw

this morning they announced their chat GPT competitor is going to be more widely rolled out. That's called Q. Last quarter, they rolled out Rufus, which is sort of the consumer facing AI assistant on their e-commerce platform. So you'll expect to hear a lot about AI and how they're going to monetize it and how they're going to manage CapEx. That's been a huge conversation around big tech earnings. They are sort of walking this tightrope of, yeah, analysts, investors are going to want to see the spending happening in AI. That's widely expected. But you can't go the MetaRat and you can't overspend and they want to see monetization. So that will be sort of a tightrope that executives are going to have to watch. AWS, that is by far and away the most important number to watch. That

growth rate, 14.7 percent, is the number to beat. So you're going to want to watch that just in terms of the stock reaction is really what I'm hearing from analysts. I also spoke to Mark Mahaney yesterday. So shout out to Mark. Hello again. So that is the big one to watch. And then aside from that margins, this conversation about all of the spending that Amazon has done over the past few years, that's starting to be reflected in improving margins. And that's going to be one of the big stories. And then the sleeper here, Scott, I would say is advertising. And that's been another high margin part of the business. The prime video ads really rolled out in this current quarter or the quarter that we're going to get today, the first quarter.

So expect a little bit of detail around that and it could factor into results. So we'll see. But big day here. Yeah. I mean, the news doesn't wait on any front, which is why I'm going to make you have a hard turn here. We are getting some news on your beat as well as you cover finance and the fallout here. What can you tell us as we learn about the sentencing here? Yeah, Scott, so this is big news. Changpeng Zhao, widely known as CZ, one of the top executives in crypto,

was sentenced to four months in prison, not years, months. This is for violating bank secrecy laws. CZ is the founder and the former CEO of the global crypto exchange Binance. That is the largest global crypto exchange out there. He pleaded guilty to enabling money laundering back in November as part of that DOJ plea. He agreed to step down as CEO. So Binance, as I said, largest crypto exchange in the world. It does continue to operate amid some of these legal issues for CZ. That sentencing happened in

Seattle today. It comes after months of deliberation in that district by the judge. The guidelines were 12 to 18 months, so this is lower than expected. U.S. prosecutors actually recommended a sentence around three years, and they said in this memorandum that the sentencing, they wanted that to reflect some of the gravity of the crimes, and prosecutors called this unprecedented. They essentially said he was operating on a Wild West model, which is one of the big criticisms you hear.

You know, he was ordered to pay and the company was ordered to pay about four billion dollars in fines. He's going to pay 50 million himself, but he is estimated to be worth about 33 billion dollars. Of course, Scott, this is the second top crypto executive sentenced just this year. We had the founder of Rival Exchange, FTX, which is now bankrupt, and its founder, Sam Bankman-Fried, of course, sentenced to 25 years. That was on fraud and conspiracy convictions. But he was found convicted. And the second big name in this industry that is now sentenced to prison, Scott. All right, Kate, I appreciate it on all fronts there. I'm going to let you go. I'm going to let you get ready for this big earnings report coming in overtime as I keep our conversation going with Mark Mahaney. I mentioned also we have our contributor, Jason Snipe. He's a shareholder

in Amazon. All right. So, Jason, good to see you as well. How are you feeling here? I mean, look, stocks up 72 percent in the past year. There are those who say the bar is high and maybe what happened last week with the earnings reports from Alphabet and Microsoft just raised the bar a little bit more. I would agree with that, Scott. I think the bar is high to your point. I mean, Google and Microsoft did hit it out the park. They delivered from an earnings perspective. But I think as we look at, you know, what are we looking for with the Amazon report? I think it's going to be on this high margin business. I think Kate alluded to it earlier.

Advertising. Advertising is a $50 billion business. The addition of ads on Prime Video, which just was announced on January 29th, you know, is expected to be an $800 million business in 2024. So we're going to look at that. Obviously, all the talk about AWS and the acceleration there, we saw around 13 to 14 percent last quarter. I think we'll see around 15 to 16 percent this quarter in growth. So I like the trend where we're going. And I think also Amazon is just a beacon for the read on the consumer. So I think, you know, they deal with all of them, low end, middle end and the higher end consumer.

And we've seen reports from Visa and AXP and the like. You know, we're hearing good things. So I think this will be a good print to kind of see where is a consumer and how are they doing and how is spending behavior been. Back to you, Mark. AWS is obviously the key here. The growth estimate there is 13%. But, you know, let's be honest. If they post 13, this stock's not going to be happy after they do that

because the whisper number is up towards 15, 16 from what I gather. No, you're right, Scott. You're right. So, look, they did 13% last quarter. You've got to show acceleration, especially after Azure just gave you material acceleration, citing AI, and Google Cloud gave you acceleration, too. So they've got to do at least 15% year-over-year growth

for AWS just to kind of hold water. I think the market wants three things fundamentally out of Amazon this year. I think they'll get it, that material acceleration in AWS growth, record high operating margins, record high operating margins for the North American retail business, and record high company-wide free cash flow margins. I think they'll get all that. The only reason you wouldn't, having covered Amazon forever, is if Amazon decides it's enough of this harvest mode, we're getting back into investment mode.

That day is coming. I just don't think it's going to come this year. But but just be careful about that. But I mean, that's a key point you raise. These are, you know, AI hopes and AI dreams and AI expectations from investors who at the same time don't want to revert back to just spend at any cost, no matter what the pot of gold at the end of the rainbow might be. Well, the nuance here on Amazon is that the good news for the free cash flow investors is that their retail capex was actually down last year for the first time in I don't know when, a decade. And it's likely to stay flattish for the foreseeable future. They overbuilt still from COVID days. So they don't need to ramp that up. But the AWS spend, CapEx spend, is going to rise. It's just that that's, you know, crudely, it's about half of

their CapEx spend. So you're not going to have the big, you know, increased burst in CapEx spend overall for the company that you have had for the kind of the pure digital names. that that's one thing that actually works in benefit for the benefit of free cash flow investors jason how are you thinking about that question yeah no i think i think it's very important and i think mark really pointed out they they've really done a really nice job and with jassy at the helm and focusing on operating income the bottom line of the story not the timeline they've They've invested in the fulfillment centers. They've invested in supply chains. And to Mark's point, I mean, that capex spend will be flat and margins have increased. So I think they're early on in the story in terms of increasing margins. We're

expecting around close to 9% in margin increase this year. So I think that has been a strong focus for Jassy at the helm. And I think that puts them ahead of some of the other players in the space. Mark, do you still feel like the mega cap story is intact? Well, yeah, sure it is. If you look at the largest mega cap names, I mean, I'm sorry, their fundamentals have gotten stronger this year. The end market demand trends, whether it's advertising, I think retail, cloud, like the three biggest verticals out there, at least the consumer Internet name that I look at, the Internet name that I look at. I mean, those are all showing accelerating growth. You've also got these companies that are largely giving you a margin expansion because they fired last year and nobody's rehiring like it's 1999. And then they're getting more responsible, more shareholder friendly with their capital allocation strategies.

I mean, everybody's buying back stock aggressively with the exception of Amazon. The major ones that I look at are paying a dividend to with the exception of Amazon. I hope that changes, but I don't think it's going to happen near term. So I just think from an investor perspective, these are fundamentally stronger assets. And I know we've had a kind of a rise in these stocks. Just check yourself. You know, Meta and Google are still trading, quote, a couple of turns higher than the market, two to three turns higher on a PE basis for what is much longer and stronger, sustainable earnings growth. So I think their valuations are just fine. Amazon's a little more stretchy. But there you look at on free cash flow,

25 times free cash flow for Amazon still gets you 25, 30 percent upside from here. So I think this is the one that still can do a lot of re-rating. And that's why it's our top pick. Yeah. Jason Snipe, how are you thinking about that issue, whether this trade is still alive and well? To be quite honest, like last week, you know, we had this upset over inflation and growth. And then lo and behold, we had some mega caps come along with their earnings. And so, you know, save the day, so to speak. Are we setting ourselves up, do you think, for a similar scenario? You know, not only this afternoon, but who knows what Apple is going to bring within the next couple of days as well. Absolutely.

No, and I think their earnings growth remains, obviously, in the mega cap space. And we talked earlier about what Google and Microsoft delivered. And obviously, we're talking about Amazon as they report after the bell. I think the print will be strong. I think there's follow through going forward. Again, as I mentioned earlier, they're in the early stage of some margin improvement on the retail business. And the retail business is obviously a very expensive business, but they've done really well there, you know, respecting about 12% net improvement in sales this quarter. So I think there's a lot to like. There's a lot of levers that they can pull. And they're still decreasing headcount, which I think is an important lever for them, you for them as they move forward.

So I continue to like the Megacat tech space. I think cyclicals obviously will play a role as well. But I like the Megacat techs. And we'll see. We'll hear from Apple, to your point, later on this week, which has some other idiosyncratic issues. But I like what we've heard from the other ones that have already reported. Let me finish with you, Jason, if I may, just to bring it back full circle to where we started this program and news from Daniel Loeb of Third Point that he's got a new

position in Alphabet, which you hold as well. So I'd love your opinion on having this level of company, if you will, in the name. And I'll just reiterate what I've said on numerous occasions of late narrative relative to performance. Mr. Loeb cites the narrative giving him an attractive entry point. Well, if a lot of people saw the same thing, they made some money because the narrative was they're the losers. Microsoft is the winner. But then if you look at the 12 month performance of both of those stocks, really, since the heart of the AI argument started to be on everybody's dinner table, Alphabet's done just fine. It's outpaced Microsoft. A hundred percent. I mean, Alphabet's up 52 percent over the last year.

And if we look at the print from last week, I mean, operating income is up 46%. I mean, revenue growth was up 16%. And we talk about the fumble with Gemini early and the AI arms rate. I mean, obviously, the AI arm rate is well in play. And we're going to see more investment, more CapEx there. But as I see kind of the default search engine, Google being the default search engine, and the opportunity that they have with their community and their user base, you know, I continue to like Google. I think that, again, there's a lot of leverage to pull here. And I also like what's happening with the advertising business as it continues to grow sequentially quarter over quarter.

And then, obviously, you know, what they're doing in the cloud business. Obviously, the cloud business is up 30 plus percent in over quarter. And then obviously, you know, what they're doing in the cloud business. Obviously, the cloud business is up 30 plus percent in this quarter. So there's a there's a lot of things to like about Google. And I and I continue to own this stock for some of the upward potential here. Guys, I appreciate it very much. The dance, too, at the top here, Mr. Mahaney, as we brought you this news of this new position from Third Point and Alphabet. I appreciate it so very much. We'll see you both soon. To Christina Partsenevelis now for the biggest names moving into the close. You know what? I should throw you a curveball, too, because you cover the chips, Taiwan Semi, right? Loeb, you know,

adding to the position there, they just initiated it about a year ago. He says he sees a combination of cyclical recovery plus structural growth and AI demand fueling substantial earnings growth for that company. You want to just opine on that, if you would? It reiterates what they said in their earnings call. They warned that non-AI segments would not do well in Q1 and Q2, but they do see the back half of this year being very strong. So 2H, second half of this year, is going to be the recovery period for a lot of these non-AI plays.

So I can understand. Plus, they make the chips for all of NVIDIA, every single player out there. So they can stand to benefit from both sides of the equation. I appreciate it. You can tell me the other stocks you're watching, too, if you'd like to.

Yeah, so it's not chips. It's fun every once in a while when I don't get to talk about chips. And this one's going to be about GE Healthcare. Unfortunately, I'm smiling where the shares are down 13% today after posting revenues that came out behind what Wall Street was expecting. Imaging and ultrasound revenues for the medical device company actually declined year over year, posting decreases of about 1% and 4% respectively. To make matters worse, revenues declined 11% specifically in China, and that contributed to the 1% drop overall in revenue that we saw in the quarter.

The CEO, though, keeping his cool, saying growth will be weighted towards the second half of the year. It seems to be a theme, Scott, right? And that the company is on track to deliver its guidance. Eli Lilly, though, having a much better day after topping the streets estimate, or EPS, I should say, and profits expectations. The drug company also hiked its full-year guidance, which the company partly attributes to the strong performance of, guess what, weight loss and diabetes drugs, Manjaro and Zepbound. Shares up almost 6%. I love the curve balls. Keep them coming. I will. You handle them well. Handle them well. Knocked it out of the park, shall we say. And I'll be back to you soon.

We're just getting started here. Up next, the S&P's five-month win streak in jeopardy on this final day of the month. So what is next for this rally? We will discuss that. Get set up for the Fed decision tomorrow as well. We'll do it just after the break. Welcome back. I just want to show you what stocks are doing here because we are worsening a bit in this final stretch. We have about 35 minutes or so to go.

Dow's now approaching a 500-point decline. All of this, of course, starting this morning with that hotter-than-expected employment cost index. Yet another hotter inflation read unsettling investors. We have a Fed meeting tomorrow, the news conference following, more key earnings obviously coming up. So let's bring in Lauren Goodwin of New York Life Investments and Marcy McGregor of Maryland Bank of America Private Bank. Ladies, it's great to see you. Lauren, thanks for being here on set. That's what this is about, right?

I mean, we just get another, we're only going to be able to stand so many of these hotter than expected inflation reads, right? I have a slightly different take on it. I think that the market can withstand hotter inflation as long as a couple things are true. First is that the reason we're seeing this back up in rates and tightening in financial conditions is in part because growth is good, right? Earnings results are good. That's supportive for the market. The second reason I think this is a Fed that though they are not able to cut right now, the data is not allowing that, they're eager to cut. And so I expect actually we'll see a less hawkish than expected Fed to win. Wow. I hear a new tone from Lauren Goodwin. Are you more positive on the market now than you've been in a while? I'm positive on the

market. I'm still. Come on now. You've been pretty cautious for a while, OK? Right? I mean, you have been. I hear somebody who's suggesting that this market, this rally can resume. That's right. I think that's the case. Now, the challenge is that the uptick in growth that we're seeing, it's on the verge of overheating, right? And that's always been the top risk from my perspective to financial conditions to this economy. And so it's not something that makes me think we get to then avoid a recession, but it's not here right now. And so I don't see any reason to dwell on it. I don't think it's the right thing to do. Okay. How about you, Marcy? Well, I mean, I think the market has been having this tug of war between inflation concerns, stagflation fears and earnings, right, which have been better

than expected. And our view is that trend continues for the balance of the year. I don't think the last five months of this rally was just Fed enthusiasm, right, because we've seen better than expected earnings. We now are on the verge of our third quarter of positive year-over-year EPS growth. And I think that's the fundamental anchor to this market. So, yes, all eyes will be on the Fed when the Fed tells us they're data dependent. The market hangs on every data point. And of course, this last mile of inflation has proved stickier than Powell would like. But I think you're going to hear Powell tomorrow kind of reiterate that policy needs time to take effect. Our view is you get your first cut later this year.

And the market continues to watch every data point. But I think this rally, after a little bit of this April digestion period, resumes based on strong fundamentals, primarily earnings. Lauren, you think this is just the market trying to get ahead of what is expected to be a more hawkish chair? I think that what we've seen in the last couple months really is a change in a market fundamental, which is when the Fed can ease off of the plateau, but really hiking cycle that it's been on. And I think it's a very important market fundamental.

Marcy's right to point out a bit of the tug of war between earnings and backup in financial conditions. But the reality is, from my perspective, that earnings and the labor market are the two things that matter most for the market. Because those are the two economic indicators, market indicators that tell us that we're not yet in recession. When those flip and we're already in recession, then I'm worried about the rally. But we're not there on either of those indicators. OK, but can we put back up Lauren's key points? Because the one at the top is the one that really sticks out to me. Whether Powell is going to be more hawkish or not

tomorrow, you suggest that maybe the market is overdoing it on the worries that he's going to be super hawkish. There you go. Good one on the Fed. Powell may not be as hawkish tomorrow as markets fear. What makes you believe that, just given what the inflation reads of late have been? Well, inflation is telling us that the Fed can't cut now. And frankly, even in January, when the market was expecting cuts to start in March, our view was that the data was telling us the Fed can't cut now. The difference in the past several weeks has been that because the market has caught up to this idea that the data just really isn't showing us what the Fed needs, market financial conditions have tightened. That's already doing some of the Fed's work for it and I think that Chair Powell

is going to say look progress on disinflation has stalled but we are seeing these tightening financial market conditions. They use the same idea in reverse in the fall to avoid having to hike further. I think they'll use it this time to give some calm to the market tomorrow. Marcy, where do I best want to be right now, just given this changing dynamic of further pushed out rate cuts? Maybe inflation is going to just remain stickier than we thought for a while. I could say, hey, growth is going to be pretty good. Earnings are going to be pretty good. But in the whole backdrop, what does that mean? Look at this market. The VIX is the market's not panicking. The VIX is down about 30 percent from the peak a couple of weeks ago. It's really subdued. This is a market that I think wants to refocus our Our view, so we are slightly overweight equities driven by

U.S. equities. I would use weakness as an opportunity to reposition if you have cash to put to work. And I think the big story, if we look ahead later in this year, is going to be one of rotation and a broadening of this market. So I would put money to work probably. I still like tech. I still like the trends in trends in artificial intelligence clearly this earning season is all about ai spend and cap x um but i would also put money to work in the other 493 you know energy quietly a really strong sector still has a lot of momentum i like defense stocks they've underperformed the s p we are unfortunately in a world with rising global defense spending. The geopolitics are just red hot. I like health care and I like

consumer discretionary from here. So I would tilt up in quality for now. But I think earnings broadening out is going to be the key story for investors in the balance of this year. Lauren, do you agree? Do you think we're gonna get a more broad market? I mean, we may be reminded over the last week and the remainder of this, why we invested in mega cap tech in the first place, but do we think we're gonna get more broadening like Marcy thinks?

We're not positioning for a full broadening of the market. And a lot of that has to do with the uncertainty that we're still seeing on the economic outlook. Marcy pointed out the tug of war. It's an environment where, frankly, one of the key mistakes we're seeing investors make is not being decisive. And so I agree with being decisive, but we take a slightly different spin on it. We're fully invested in equity, but not overweight because we're taking gains, an idea that you

and I have talked about, and putting them to action in high-yield corporate credit, and specifically the short end of the curve, because although the Fed likely isn't cutting in June, from my perspective, the most likely next move, couple of months, is still going to be a cut. And so we're moving into the short-duration part of the curve in credit in order to lock in higher rates. All right, we'll leave it there. Thank you, Marcy. We'll see you soon.

And Lauren, of course, we'll see you back here post nine. Sometimes you and I know. Up next, AMD earnings. They hit the tape at the top of the hour as well. That stock seen a big run over the last six months, gaining more than 60 percent. However, it's underperformed a lot of the big names of late. Starship analyst Stacey Raskin standing by with what he is expecting, and he'll tell you next. All right, welcome back, AMD. They're preparing to report results after the bell as well. My next guest calling for the print to be a, quote, show about nothing.

Let's bring in Stacey Raskin of Bernstein Research. All right, that's a creative headline. And by the way, I'm sorry I missed you when you were here in person at Post 9. That's okay, next time. A show about nothing. In what sense? To be fair, that was an Intel AMD preview. The title more referred to Intel than AMD.

I don't think AMD will be so much about nothing. AMD is going to be about their AI story, the MI300. That's really going to be all that matters. You kind of noted in your intro that the stock's been a little weak recently. There have been some current concerns about potential order pushouts from some supplier issues on that part. And so people are going to be looking for, are they actually causing issues? Can AMD actually take the forecast for that product up for the rest of the year? What does it look like next year? That's what people are going to be focusing on. So it won't be quite about nothing, not for these guys.

But, I mean, the stock's been crushed, certainly this year, by Broadcom. You know, I'm just certainly looking at, at like the key AI players, if you will. Obviously, NVIDIA has blown it out of the water. But why so much if we keep hearing more and more about aspirations for AI from Lisa Su? Yeah, again, that's part of it. They've been aspirations, right? And, you know, I've said this a lot, but in semiconductors, there's a lot of like AI narratives. There's only two companies that have like truly meaningful AI revenues right

now. And AMD is not really one of them. Not, not yet. Right. I think if you go back to last earnings expectations for AMD's AI aspirations this year, we're getting a little bit out, out over their skis. People were thinking they might do $8 to $10 billion in MI300 AI parts this year. They took the guide down to three and a half. I think up until a few weeks ago, expectations were still that they might do six. I think given some of these concerns about pushouts,

those expectations have come down to maybe a buy side is maybe closer to four to five. I think on the positive, lower expectations in some sense are a good thing. It lets them take things up as they go, but that's why the stock has been weaker. I think the dangerous thing for AMD on this, though, if they are actually in fact pushing things out some, is that their window is not that wide. You've got NVIDIA that's launching new products through the end of the year.

Not only are the current NVIDIA parts very competitive, but the new ones will be much more competitive. And so they just don't have a whole lot of runway to actually start to really build scale. And you really don't want to see them push out. So we'll see what Lisa can pull out of her hat this afternoon. Can she actually take that number up meaningfully enough to drive upside to where I think expectations had already been a few weeks ago? You really highlight what is a potential issue for many of these chip names that are not, if not exclusively AI players, ones that are principally, let's call it that, principally AI players,

in which AMD is not. It's PCs, which you say are anemic. It's gaming, which you say is impaired. It's data center outside of AI, which you qualify as spending not being great. Yeah, and it's all true. And again, you can look at Intel's results from the other day. They play in all of those markets, and their results were not great, right? A and B also, you have to remember, their core business, the non-AI stuff has actually been weak for a while.

They've actually missed either numbers or guidance seven quarters in a row, if you can believe it. And I know the stock's been weak recently, but you go look at where it is now versus, you know, a year and a half ago, it's much higher, right? The stock has powered through seven consecutive rounds of estimate cuts as investors have really latched onto this AI story, this AI dream for them. We're getting to the point now where they need to really start showing it, though. It's got to start showing up in the numbers. And if the core business is remaining weaker, that AI story has to be even stronger, I think. Well, you raise another interesting point then about a possible comeuppance of sorts for all these other chip names that have had incredible runs but are not NVIDIA and they're not Broadcom and they're not at the top of the AI list. When you look at the semiconductor index, for example, it's up north of 23 percent year to date. Presumably there are many names in

there which might not qualify as, I don't know, true, real, now AI players. A lot of them are not. And that's OK. So you're right. The stocks in general have been quite strong this year. And by the way, this is as estimates. The stocks in general have been quite strong this year. And by the way, this is as estimates have been cut. You have to remember, this will be an upcycle this year, but it's not like a really great upcycle. Memory in general should be better. It was horrible last year. PCs and smartphones, a little bit they'll be better.

Again, they were horrible. They'll be better. And most of these companies were draining inventory out last year. That will be a little better this year, but not stupendously better. AI is very strong, as we know, but outside of AI, data center spending is not great. Industrial spending has been very weak. Auto is starting to roll over. You have a lot of these companies that have been influenced on all of those trends. Now, that being said, investors have shown a wide willingness so far this year to buy estimate cuts. You have to remember, ordinarily in

semiconductors, people like to buy cuts. The best time to buy the stocks in general usually is right before the last downward revision in earnings. And people are starting to play these stocks for like a recovery into the back half and beyond. We'll see if we actually get it or not. But that's why the sector as a whole has been strong. It actually hasn't all been AI related. All right. Good. Good setup. Stacey, thank you. I appreciate it very much. Stacey Raskin. You bet. My pleasure. All right. Up next, we're tracking the biggest movers into the close. Pippa Stevens is standing by with that. Pippa. Hey, Scott. Well, one company is about to lose its status as a dividend aristocrat.

We've got the details coming up next. We're about 15 out from the bell. Let's get back now to Pippa Stevens for the stock she's watching. Pippa. Hey, Scott, 3M is in the green after first quarter results beat on the top and bottom lines. The company pointed to volume growth in automotive and electronics, but said organic sales declined 3.9 percent year over year due to continued softness and consumer discretionary spending. 3M will also cut its dividend following the solventum spinoff. And Marathon Petroleum is sinking after Q1 results. The refiner saw lower throughputs during the quarter amid its largest turnaround activity in history, which brought utilization down to 82 percent. But the company

said that sets it up well for the summer driving season. Scott. I appreciate that. Thank you. Still ahead. Pinterest numbers. They're coming out in overtime as well. Stock having a slow start to the year. Can tonight's results kickstart a turnaround? We will discuss. Closing bells coming right back. Your earnings set up straight ahead. Amazon, AMD, Supermicro, Pinterest among the big names reporting an OT. Bring a rundown of what to watch for when we take you inside the Market Zone next. We're now in the Closing Bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day.

Plus, not just Amazon earnings out in OT. Christina Partsenevelos on what to watch for from Chipmakers, AMD, and Supermicro. Julia Borson as well on what to watch for when Pinterest reports. Mike, I come to you. Session lows down near 500 on the Dow. NASDAQ's off near 1.5%. Everything pretty heavy today. You see selling in stocks, bonds, oil, gold, Bitcoin.

So there's just a little bit of a draining of conviction out there. I think if you were a disinflationary optimist, you got incrementally less to work with today. You're getting tested. If you're an economic resilience person, you say, wow, Chicago PMI looks a little bit ragged. Consumer discretionary stocks are weak. Obviously, also have other things that seem as if we should at least question the resiliency of the economy. Now, all that said, the S&P is back to Thursday levels. You had this kind of decent reflex bounce, didn't have a lot of horses to take it up through certain levels. I also have been going on for months around this 50-50 level in the S&P. It seemed like the

destination of the October rally that started there. It's also where we were for the first time, February 12th. That's before the January CPI. That's before we got, uh-oh, inflation might not be cooperating. Since then, earnings estimates up 4 percent 12 months forward, and you have treasury yields up 40 percent. So you can find an equilibrium, but it's tenuous. I think that's what the action says. What do you think of some of the suggestions, at least one by Lauren Goodwin here at the top of the show, that the market's just getting a little too over its skis of sorts on the idea that Powell's going to be super hawkish tomorrow? I think it makes sense that we are clenched up for it. Yeah, as I was saying at around noon today with you, Scott,

that yes, we've gotten hawked up because the data have pointed us there. It's not as if I think that there's going to be an effort by Powell to sort of put the market further on notice beyond what the numbers have told us. But it is a little bit of, you know, it's a cold shower on anybody who thought you were going to have rate cuts into a careless economy with a perfect soft landing in stocks at record highs. That has seemingly gone by the wayside. All right. So we said it's not just Amazon, obviously, and OT. Christina Partsenevel is now on these chips, AMD and Supermicro. Yeah, AMD really just showcases this dichotomy between cyclical segments like gaming, PC, traditional server,

and then it's more AI-exposed segment, which encompasses the MI300 series. It's an AI chip series that's going to compete with NVIDIA. TSMC warned anything non-AI is weaker. Intel warned PCs and CPUs would continue to be flat in Q2. So there are concerns that that demand slowness will continue for AMD into the next quarter. But the focus will really be on the forecast for its MI300 series, that AI chip. Previously, it was at 3.5 billion

for revenues in 2024, total revenues. The street is hoping that it goes as high as $5 billion, with eventually hitting 10 billion next year. The recent, what, $140 billion in CapEx spending promises from Microsoft, Meta, Google is helping this AI demand narrative, especially as firms look for alternatives to Nvidia's GPUs, and that's where AMD would benefit. Another AI CapEx beneficiary is server assembler Supermicro, and they focus on high performance computing. They currently have about 6% of the AI server market. KeyBank betting that jumps to about 23%

just in the next year, given that focus on AI infrastructures. They didn't pre-announce positive earnings when they normally do so. So that spooked investors last week. You can see that dip in the stock chart on your screen. But this name is still considered an AI darling. Let's see if they actually provide a good guide, because that's the concern right now. Yeah, we'll see. Christina, I appreciate that. Thank you, Christina Parts and Novelists. AMD of sorts, Mike, as we were talking about with Stacey Raskin a few moments ago, is kind of a cautionary tale, at least of late, because the stock's only up 8%, 9% year-to-date relative to some big boomers elsewhere, of talking a lot about AI,

not doing a lot as it relates to AI. Well, last year, the market decided to give AMD an abundance of credit for the leverage to the AI story that maybe hadn't shown up yet in the business. I think it gets a bit more benefit of the doubt because it's considered to be obviously well managed and in the right places. And they've obviously had some great market share wins across other categories. So, yeah, I agree with that. High stakes. The other piece of it is we have so many single day, I don't want to say overreactions, but extreme reactions to these reports. It's not just meta. It's not just Tesla.

It's the echo effect of these spring-loaded expectations and moves from past quarters and how big these are in the indexes. You know, yesterday was the first day NVIDIA moved less than 3% in like a week and a half. That's wild for the top three stock in the market. We're going to go. There's the two-minute warning. Guys, can we get an intraday, please, of the 10- and then let's get an intraday of the two year. I'd like to see the yields on that because we're going to go out around the highs of the day for these yields. As you see here, Mike, we're now pushing back for 70 on the 10 year and the two years almost, you know,

pushing towards 505. So Two years now above five. It's not far from the highs of last September, October. So that's why, you know, you have the market on edge. And real 10-year yields, right, if you consider the market implied inflation expectations, it's pushing two and a half. We haven't been at those levels much at all since the global financial crisis. So in theory, on paper, that's your restrictiveness. That's what the Fed is essentially pointing to, that basically the economy and the markets maybe

should be restrained. Credit seems fine with all this. We've made our peace with varying levels along the way up in yield. Let's remember, the two-year yield two years ago was at two and three quarters. So two years ago, it wasn't doing a very good job of telling us where the Fed was going to be in two years, which is how people treat 5% right now, as if it's some oracle about Fed intentions. We don't want to be surprised tomorrow by Chair Powell on the idea of whether we're restrictive enough, because they've made it clear that they think we are, unless something is now pivoting a little bit. Their framework says that, and that should move slowly. If they're going to reassess what they consider to be the economic growth,

potentially the economy and where neutral rates are, that happens over many, many months and quarters. It shouldn't happen at a meeting where they don't even have the summary of economic projections out there. So I would imagine he's still going to say, we believe policy is restricted. We want to find a way to normalize it over coming months. I suppose we're preparing for the worst tomorrow.

There's no other way to describe a Dow that's going to close at the lows of the day, near 600 points down, about 570. I'll see you. We've got big earnings in OC with Morgan and John.